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.

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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.

Harte Hanks' cash burn of US$6.7m is about 21% of its US$32m market capitalisation. That's not insignificant, and if the company had to sell enough shares to fund another year's growth at the current share price, you'd likely witness fairly costly dilution.

Is Harte Hanks' Cash Burn A Worry?

On this analysis of Harte Hanks' cash burn, we think its cash runway was reassuring, while its falling revenue has us a bit worried. Even though we don't think it has a problem with its cash burn, the analysis we've done in this article does suggest that shareholders should give some careful thought to the potential cost of raising more money in the future. Separately, we looked at different risks affecting the company and spotted 2 warning signs for Harte Hanks (of which 1 is potentially serious!) you should know about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.