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Is Ekso Bionics Holdings (NASDAQ:EKSO) Weighed On By Its Debt Load?

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Simply Wall St
·4 min read
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The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies Ekso Bionics Holdings, Inc. (NASDAQ:EKSO) makes use of debt. But is this debt a concern to shareholders?

When Is Debt A Problem?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for Ekso Bionics Holdings

What Is Ekso Bionics Holdings's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Ekso Bionics Holdings had US$3.08m of debt in September 2020, down from US$3.31m, one year before. But it also has US$14.5m in cash to offset that, meaning it has US$11.5m net cash.


How Healthy Is Ekso Bionics Holdings's Balance Sheet?

According to the last reported balance sheet, Ekso Bionics Holdings had liabilities of US$5.23m due within 12 months, and liabilities of US$9.85m due beyond 12 months. Offsetting these obligations, it had cash of US$14.5m as well as receivables valued at US$4.45m due within 12 months. So it actually has US$3.91m more liquid assets than total liabilities.

This short term liquidity is a sign that Ekso Bionics Holdings could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Ekso Bionics Holdings boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Ekso Bionics Holdings's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year Ekso Bionics Holdings had a loss before interest and tax, and actually shrunk its revenue by 23%, to US$10m. To be frank that doesn't bode well.

So How Risky Is Ekso Bionics Holdings?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that Ekso Bionics Holdings had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of US$8.5m and booked a US$15m accounting loss. With only US$11.5m on the balance sheet, it would appear that its going to need to raise capital again soon. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 4 warning signs for Ekso Bionics Holdings (1 can't be ignored!) that you should be aware of before investing here.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.