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We can readily understand why investors are attracted to unprofitable companies. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.
Given this risk, we thought we'd take a look at whether Intellicheck (NASDAQ:IDN) 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). We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.
See our latest analysis for Intellicheck
How Long Is Intellicheck's Cash Runway?
A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. In September 2024, Intellicheck had US$5.7m in cash, and was debt-free. Looking at the last year, the company burnt through US$3.2m. That means it had a cash runway of around 21 months as of September 2024. Importantly, though, analysts think that Intellicheck will reach cashflow breakeven before then. In that case, it may never reach the end of its cash runway. Depicted below, you can see how its cash holdings have changed over time.
How Well Is Intellicheck Growing?
At first glance it's a bit worrying to see that Intellicheck actually boosted its cash burn by 8.1%, year on year. At least the revenue was up 5.2% during the period, even if it wasn't up by much. Considering both these factors, we're not particularly excited by its growth profile. Clearly, however, the crucial factor is whether the company will grow its business going forward. So you might want to take a peek at how much the company is expected to grow in the next few years.
Can Intellicheck Raise More Cash Easily?
While Intellicheck seems to be in a fairly good position, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).