Steep Revenue DeclineA >50% revenue contraction is a structural red flag: it undermines scale economics, reduces fixed-cost absorption, and weakens bargaining power with suppliers and customers. Persistent top-line shrinkage strains margins and limits the firm’s ability to stabilize operations within months.
Sustained Losses And Margin CompressionReporting negative net income and compressed gross margins reflects structural profitability issues, likely from cost pressures or lower-priced volumes. Ongoing losses deplete equity, constrain reinvestment, and increase reliance on external funding, impairing medium-term strategic options.
Negative Free Cash Flow Due To High CapexPersistent negative free cash flow driven by heavy capex creates a recurring funding requirement. Over several months this can force dilution, higher leverage, or curtailed investment in commercial initiatives, weakening growth execution and operational resilience if not addressed.