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Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.
Given this risk, we thought we'd take a look at whether Harte Hanks (NASDAQ:HHS) shareholders should be worried about its cash burn. For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). Let's start with an examination of the business' cash, relative to its cash burn.
View our latest analysis for Harte Hanks
How Long Is Harte Hanks' Cash Runway?
A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. In December 2024, Harte Hanks had US$9.9m in cash, and was debt-free. Importantly, its cash burn was US$6.7m over the trailing twelve months. That means it had a cash runway of around 18 months as of December 2024. That's not too bad, but it's fair to say the end of the cash runway is in sight, unless cash burn reduces drastically. You can see how its cash balance has changed over time in the image below.
Is Harte Hanks' Revenue Growing?
We're hesitant to extrapolate on the recent trend to assess its cash burn, because Harte Hanks actually had positive free cash flow last year, so operating revenue growth is probably our best bet to measure, right now. Unfortunately, the last year has been a disappointment, with operating revenue dropping 3.3% during the period. In reality, this article only makes a short study of the company's growth data. You can take a look at how Harte Hanks has developed its business over time by checking this visualization of its revenue and earnings history.
How Easily Can Harte Hanks Raise Cash?
Since its revenue growth is moving in the wrong direction, Harte Hanks shareholders may wish to think ahead to when the company may need to raise more cash. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Many companies end up issuing new shares to fund future growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.