Large, Persistent Net LossesSubstantial and persistent net losses erode shareholder equity and constrain reinvestment capacity. Over 2–6 months continued losses limit product development and marketing, pressure supplier/customer terms, and increase reliance on external funding or asset sales to sustain operations and strategic initiatives.
Declining Revenue And Margin CompressionFalling top-line and shrinking gross margins point to weakening demand or rising content/production costs. This reduces operating leverage and the firm's ability to achieve sustainable profitability, making a medium-term recovery harder without product mix shifts, cost reductions, or new revenue sources.
Negative Operating And Free Cash FlowConsistent negative operating and free cash flow drains liquidity and limits discretionary investment. Even with low leverage, deteriorating cash generation increases the odds of needing external financing or equity raises in coming quarters, which could dilute shareholders or constrain strategic initiatives.