We're Keeping An Eye On Dyadic International's (NASDAQ:DYAI) Cash Burn Rate

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We can readily understand why investors are attracted to unprofitable companies. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So, the natural question for Dyadic International (NASDAQ:DYAI) shareholders is whether they should be concerned by its rate of 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). We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

Check out our latest analysis for Dyadic International

When Might Dyadic International Run Out Of Money?

You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. When Dyadic International last reported its balance sheet in June 2022, it had zero debt and cash worth US$16m. Importantly, its cash burn was US$12m over the trailing twelve months. Therefore, from June 2022 it had roughly 16 months of cash runway. 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.

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NasdaqCM:DYAI Debt to Equity History September 11th 2022

How Well Is Dyadic International Growing?

Dyadic International actually ramped up its cash burn by a whopping 66% in the last year, which shows it is boosting investment in the business. While operating revenue was up over the same period, the 7.1% gain gives us scant comfort. In light of the data above, we're fairly sanguine about the business growth trajectory. While the past is always worth studying, it is the future that matters most of all. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

Can Dyadic International Raise More Cash Easily?

Dyadic International seems to be in a fairly good position, in terms of cash burn, but we still think it's worthwhile considering how easily it could raise more money if it wanted to. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. 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.

Dyadic International's cash burn of US$12m is about 16% of its US$74m market capitalisation. Given that situation, it's fair to say the company wouldn't have much trouble raising more cash for growth, but shareholders would be somewhat diluted.