Breaking Down Grom Social Enterprises, Inc. (GROM) Financial Health: Key Insights for Investors

You're looking at Grom Social Enterprises, Inc. (GROM), and honestly, the financial picture for 2025 is sending up more than a few flares. The big takeaway is simple: liquidity is the immediate concern, and the path to profitability remains extremely challenging. Analysts are currently forecasting a staggering annual loss of -$18.16 per share for the 2025 fiscal year, which is a massive headwind for a small-cap. Here's the quick math: in the latest quarter ending September 2025, the company posted a net loss of -$3.96 million, and critically, saw a net change in cash of -$2.05 million. That's a defintely a red flag on liquidity. The current ratio (current assets divided by current liabilities) is sitting at a tight 0.60 (anything below 1.0 suggests a short-term risk), meaning they have less than 60 cents in current assets for every dollar of current debt. We need to break down how they plan to fund that burn and what their actual runway looks like, so let's dig into the balance sheet and cash flow statement.

Revenue Analysis

You need to know where Grom Social Enterprises, Inc. (GROM)'s money is actually coming from, and the direct takeaway is that its revenue has contracted sharply, with the TTM (Trailing Twelve Months) figure closest to the 2025 fiscal year sitting at around $3.72 million. This figure represents a year-over-year revenue decline of over 31%, which is a serious headwind you can't ignore. [cite: 3 from first search, 10 from first search, 2 from second search, 3 from second search]

Primary Revenue Sources and Segment Contribution

The company operates across three core, reportable business segments: Animation, Original Content, and Social & Technology. Honestly, the revenue story is simple: the Animation segment is the workhorse, while the flagship social platform is still struggling to monetize.

• Animation: This segment, primarily through its Manila-based subsidiary Top Draw Animation (TDA), is the critical revenue source. It provides animation production services for major international studios. For example, in the first half of 2024, TDA secured new assignments valued at over $1 million, including its largest single contract ever, which speaks to its operational value.
• Social & Technology: This includes the Grom Social social media app and Grom Educational Services (GES), which offers web filtering to schools. The app, despite being COPPA (Children's Online Privacy Protection Act) compliant, has generated only nominal revenues to date.
• Original Content: This segment, including Curiosity Ink Media (CIM), focuses on creating and developing intellectual property (IP), but its revenue contribution is secondary to the animation production work.

Year-over-Year Revenue Trend

The near-term trend is a significant contraction, which is why the stock has faced intense pressure. The TTM revenue of $3.72 million as of early 2025 is a sharp drop from the prior year, highlighting a core operational challenge in generating consistent top-line growth. [cite: 3 from second search]

Here's the quick math on the recent historical trend, showing the revenue (sales) for the last few fiscal years, ending December 31:

The TTM revenue growth rate of -31.13% is a defintely a flashing red signal, indicating that the decline accelerated into 2024. [cite: 10 from first search, 3 from second search]

Analysis of Significant Revenue Changes

The primary revenue stream, Animation, is project-based, so revenue can be lumpy. The overall decline suggests the growth in new animation assignments, while positive, has not been sufficient to offset a broader slowdown in other segments, likely the Social & Technology advertising revenue, or the completion of larger, prior contracts. The fact that the Grom Social platform generates only nominal revenue means the company is not capturing the high-margin advertising or subscription income you'd expect from a social media firm, leaving it heavily reliant on the services-based Top Draw Animation. This reliance is a key risk factor for investors looking at the company's financial health. You can find more detail in Breaking Down Grom Social Enterprises, Inc. (GROM) Financial Health: Key Insights for Investors.

Profitability Metrics

If you are looking at Grom Social Enterprises, Inc. (GROM), you need to understand one thing clearly: the company is deeply unprofitable, and its margins are dramatically underperforming the industry average. The core takeaway is that GROM is generating gross profit, but its operational expenses are crushing any chance of near-term net income, a classic issue for growth-focused, small-cap media companies.

Based on the latest Trailing Twelve Months (TTM) data ending in late 2025, the company's profitability ratios show significant financial strain. This is the closest we can get to the full 2025 fiscal year picture right now, and honestly, the numbers are a tough read.

Here is the quick math on the key profitability metrics for Grom Social Enterprises, Inc. compared to its industry peers (Internet Content & Information):

The Gross Margin of 29.3% tells you that while the company's core business of creating content and offering digital services is covering its direct costs (Cost of Goods Sold), it is doing so at less than half the rate of the industry average of 62.92%. This suggests a structural issue in either pricing power or production cost efficiency. To be fair, this margin has been trending down from its 2021 high of 41.14%, which is a worrying sign for operational efficiency.

What this estimate hides is the massive operational burn. In the Last Twelve Months (LTM) period, Grom Social Enterprises, Inc. generated a Gross Profit of approximately $1.09 million on revenue of $3.72 million. But, once you factor in Selling, General, and Administrative (SG&A) expenses, the Operating Income plummets to a loss of about -$8.44 million. That's why your Operating Margin is a staggering -227.1%. They are spending more than twice their revenue just to keep the doors open and market the product. That is defintely not sustainable.

The bottom line, the Net Income, shows a loss of approximately -$15.09 million LTM, resulting in a Net Profit Margin of -386.06%. This is a huge, persistent loss that has led to an analyst forecast of an annual Earnings Per Share (EPS) of -$18.16 for the full 2025 fiscal year. The trend in profitability over the past few years is one of consistent and deepening losses, which is a critical risk factor for investors looking at Breaking Down Grom Social Enterprises, Inc. (GROM) Financial Health: Key Insights for Investors.

• Gross Margin is too low for a digital media business.
• Operating expenses are the primary source of the deep unprofitability.
• Net losses are massive and forecast to continue through 2025.

Debt vs. Equity Structure

You're looking at Grom Social Enterprises, Inc. (GROM)'s balance sheet, and the first thing you need to know is how they finance their operations. The quick takeaway is that Grom Social Enterprises, Inc. (GROM) is not highly leveraged, especially when you compare it to industry peers. They rely far more on equity than debt, which is a common profile for growth-focused, smaller digital media companies, but it doesn't tell the whole story.

As of late 2025, Grom Social Enterprises, Inc. (GROM)'s total debt stands at approximately $1.11 million. This is a relatively modest amount of financial leverage (the use of borrowed money to finance assets) for a publicly traded company. Total liabilities, which includes all obligations like accounts payable and deferred revenue alongside debt, were reported at $3.34 million in the latest quarterly data.

The true measure of this is the Debt-to-Equity (D/E) ratio, which shows how much debt a company is using to finance its assets relative to the value of shareholders' equity. Grom Social Enterprises, Inc. (GROM)'s current D/E ratio is remarkably low at approximately 0.08, or 8%.

To be fair, a low D/E ratio isn't defintely a sign of strength-it can also mean the company isn't using debt to fuel growth, or that its equity is high relative to its debt, which is the case here. Let's look at the comparison:

• Grom Social Enterprises, Inc. (GROM) D/E Ratio: 0.08 (or 8%)
• Advertising Agencies Industry Average D/E Ratio: 0.79 (or 79%)

Here's the quick math: Grom Social Enterprises, Inc. (GROM) has about eight cents of debt for every dollar of shareholder equity, while the average advertising agency has nearly 79 cents of debt for every dollar of equity. This gap suggests Grom Social Enterprises, Inc. (GROM) is either extremely conservative with debt or has limited access to traditional, low-cost credit lines.

The company's approach to financing is a balancing act between traditional debt and equity-linked instruments. Their most significant recent financing activity was an $8 million convertible notes financing agreement signed in late 2023 and amended in 2024. Convertible notes are a hybrid security-they start as debt but can be converted into equity (shares of stock) under certain conditions. This is a classic move for a small, high-growth-potential company, as it delays the immediate dilution of existing shareholders while providing necessary capital.

This strategy keeps the D/E ratio low for now, but it carries a future risk of dilution if the notes convert to equity. The company is clearly prioritizing equity funding and hybrid instruments over taking on large amounts of traditional long-term debt, which is a key factor in assessing its risk profile and its Mission Statement, Vision, & Core Values of Grom Social Enterprises, Inc. (GROM).

Finance: Monitor the conversion terms of the convertible notes, as they represent the biggest near-term impact on the equity structure.

Liquidity and Solvency

You're looking at Grom Social Enterprises, Inc. (GROM) and asking the right question: can they cover their near-term bills? Honestly, the liquidity picture is tight. A company's ability to meet its short-term obligations is measured by its liquidity ratios, and Grom Social Enterprises' latest figures signal a significant cash crunch.

The core of the issue is the company's working capital (Current Assets minus Current Liabilities), which is negative. This means Grom Social Enterprises doesn't have enough easily convertible assets to pay off all its debts coming due within the next year. It's a classic sign of financial strain that demands immediate attention from management and investors.

• Current Ratio: The current ratio is a paltry 0.60. This means for every $1.00 of current liabilities, Grom Social Enterprises only has $0.60 in current assets to cover it. You want to see this ratio at 1.0 or higher; ideally, closer to 1.5-2.0 for a healthy buffer.
• Quick Ratio (Acid-Test): The quick ratio is even lower at 0.38. This strips out inventory, which is often harder to liquidate quickly. It shows that even with their most liquid assets-cash, short-term investments, and receivables-they can only cover 38 cents of every dollar of immediate debt. That's a serious red flag.

Here's the quick math on what that means: the company is operating with a structural deficit in its short-term funding. You need to understand this is not a temporary blip; it reflects an ongoing challenge in matching cash inflows to operational outflows.

The cash flow statement overview for the Trailing Twelve Months (TTM) leading up to late 2025 reinforces this concern. The company is burning cash across its core operations, which is the most critical metric for a growth-stage company.

The -$8.95 million in negative operating cash flow (OCF) for the TTM period is the single biggest liquidity concern. It shows the business isn't generating enough cash from its primary activities to sustain itself. The minimal investing cash flow of -$0.02 million suggests they aren't making significant investments in property, plant, and equipment, which is normal for a digital content company, but it also means they have little room to cut capital spending to conserve cash.

The latest quarterly net change in cash of -$2.05 million tells you the cash balance is dropping fast. This kind of consistent cash outflow means the company is defintely reliant on financing activities-like issuing new debt or equity-just to keep the lights on. This dilutes existing shareholders, so you should keep a close eye on their Exploring Grom Social Enterprises, Inc. (GROM) Investor Profile: Who's Buying and Why? to see who is funding the operation.

The clear action here is to monitor the next few quarters for any sign of OCF turning positive or a significant capital raise. Without either, the current liquidity position is unsustainable.

Valuation Analysis

You're looking at Grom Social Enterprises, Inc. (GROM) and wondering if the price reflects its true worth. The short answer is that GROM is technically and profoundly undervalued based on its Price-to-Book (P/B) ratio and analyst targets, but this is a classic high-risk scenario. The market is pricing in significant operational risks, making the stock's extreme low valuation a potential 'value trap' rather than a clear 'buy' signal.

Here's the quick math on why traditional metrics are unhelpful for this stock. Since Grom Social Enterprises, Inc. is not profitable, its Price-to-Earnings (P/E) ratio is not applicable (N/A) or effectively 0.00 because the company has negative earnings. Analysts forecast an annual Earnings Per Share (EPS) of -$18.16 for the 2025 fiscal year, which tells you everything you need to know about its current profitability challenge. The Enterprise Value-to-EBITDA (EV/EBITDA) ratio is also N/A, as the forecasted annual EBITDA for 2024 is a negative -$7 million.

You can't value a company on losses. So, we turn to the Price-to-Book (P/B) ratio, which compares the stock price to the company's book value (assets minus liabilities) per share. For GROM, the P/B ratio stands at 0.00. A P/B ratio this low suggests the stock is trading far below its net asset value, which is a strong indicator of being undervalued. Still, the market is telling you it doesn't defintely trust those assets to generate future cash flow.

The stock price trend over the last year has been brutal. The stock price, which was recently around $0.0001 per share, has seen its value decrease by -75.00% over the last 52 weeks. That kind of volatility and sustained decline signals a major loss of investor confidence and a high degree of risk. It's a penny stock in the truest sense.

When it comes to income, Grom Social Enterprises, Inc. is a growth-focused company and does not pay dividends. Therefore, the dividend yield and payout ratios are N/A. Your return here is purely dependent on capital appreciation, which is a gamble given the price history.

Analyst sentiment, though sparse, points to a massive disconnect. The average one-year price target is a staggering $12.24, with a range from $12.12 to $12.60. What this estimate hides, however, is the low coverage: only one analyst covers the stock, and many valuation models report 'Insufficient data' for a reliable fair value calculation. This target is a relic of a past projection and should be viewed with extreme skepticism. The consensus is not a consensus; it's a whisper.

• P/E Ratio: N/A (Negative Earnings)
• P/B Ratio: 0.00 (Technically undervalued)
• EV/EBITDA: N/A (Negative EBITDA of -$7 million forecasted)
• Stock Price Trend (52-Week): -75.00% decline
• Analyst Price Target: $12.24 (High target, but low analyst coverage)

For more in-depth analysis on the company's balance sheet and operational risks, you should check out the full post: Breaking Down Grom Social Enterprises, Inc. (GROM) Financial Health: Key Insights for Investors.

Risk Factors

You need to look past the promise of a kid-focused media company and face the cold, hard numbers for Grom Social Enterprises, Inc. (GROM). The direct takeaway is this: the company is grappling with severe liquidity issues and a significant cash burn, compounded by intense competition and a highly regulated operating environment. These are not minor headwinds; they are existential threats to the current business model.

Frankly, the financial health of Grom Social Enterprises, Inc. is the single biggest risk. For the trailing twelve months (TTM) ending in early 2024, the company reported a net loss of approximately $15.09 million on revenue of just $3.72 million. That's a massive cash drain. Analysts are forecasting an annual loss per share of around -$18.16 for the 2025 fiscal year, which tells you the market defintely does not expect a quick turnaround. This level of unprofitability makes any growth strategy incredibly difficult to fund.

Internal Financial and Operational Hurdles

The core financial risk is the company's inability to generate positive cash flow. When you look at the balance sheet, the situation is precarious. The current ratio, a key measure of liquidity (current assets divided by current liabilities), sits at a weak 0.60. This means that for every dollar of short-term debt, Grom Social Enterprises, Inc. only has 60 cents in readily available assets to cover it. That's a red flag for near-term solvency.

Here's the quick math on cash flow: the operating cash flow for the last twelve months was a negative $8.95 million, leading to a free cash flow (FCF) of negative $8.97 million. A company that consistently burns that much cash needs to raise capital constantly, which usually means shareholder dilution. Plus, the Return on Equity (ROE) is deeply negative at -88.67%, showing capital is being destroyed, not created. It's a very high-risk profile.

• Negative FCF: Hinders self-funded growth.
• Low Current Ratio: Signals near-term liquidity risk.
• High Beta (1.80): Indicates extreme stock price volatility.

External Competition and Regulatory Exposure

The external risks are just as daunting. Grom Social Enterprises, Inc. operates in a crowded space-children's social media and entertainment-where it competes with giants. Think of the intense competition from much larger platforms like YouTube Kids or other major media conglomerates that have virtually unlimited content budgets and distribution reach. This makes sustainable user growth a constant, uphill battle, and it undermines the long-term viability of the current model.

Also, the company's entire value proposition is built on compliance with the Children's Online Privacy Protection Act (COPPA). While being COPPA-compliant is a necessary moat, it also exposes the company to significant regulatory risk. Any change in privacy laws or a single compliance failure could result in massive fines and reputational damage. The cost of maintaining this compliance is a non-trivial operational expense that competitors without a primary focus on children under 13 don't have to carry as heavily.

Mitigation Strategies and Clear Actions

The company's mitigation strategy centers on its diversified segments and commitment to a safe platform. They are trying to balance the risk of the social media network with revenue from their Top Draw Animation studio and their web filtering services for schools and government agencies. Securing over $1 million in new animation assignments, as reported in early 2024, shows that segment is still generating revenue. Still, the overall financial picture is dominated by the losses.

For investors, the key action is to monitor the cash position and the burn rate. Any sign of a successful capital raise or a significant contract win in the animation or web filtering segments could provide a temporary reprieve, but the company needs to show a clear path to profitability-not just revenue growth-to be a viable long-term investment. For a more complete picture, you should check out the full analysis: Breaking Down Grom Social Enterprises, Inc. (GROM) Financial Health: Key Insights for Investors.

Growth Opportunities

You need to know if Grom Social Enterprises, Inc. (GROM) can turn its niche market position into profit, and honestly, the path is steep. The company's future hinges on two things: successfully monetizing its original content and maintaining its edge in child safety compliance. Right now, the financials show a company in a deep turnaround, but there are glimmers of operational success you should watch.

The core of their growth strategy is leveraging their subsidiary, Top Draw Animation, and their Children's Online Privacy Protection Act (COPPA) compliance (a U.S. federal law protecting children's personal information online). That's their moat. The demand for secure, kid-focused digital platforms is defintely growing, and Grom is positioned in that sweet spot.

Key Growth Drivers: Content and Compliance

The immediate, tangible growth driver comes from the animation studio. Top Draw Animation is actively securing new assignments, which translates directly to near-term revenue. For instance, the subsidiary recently secured $1.3 million in new assignments in August and another $615,000 in September. That's a quick math of nearly $2 million in new contracts in two months, which is significant against their current revenue base.

Plus, their COPPA-compliant social media network and web filtering services for schools and government agencies provide a crucial competitive advantage (a differentiator). In an era of intense scrutiny over Big Tech and kids' data, this regulatory shield is a powerful sales tool, especially for their advertising and subscription models aimed at parents and caregivers.

• Focus on original animated films and TV series.
• Expand web filtering services to new school districts.
• Monetize the safe, compliant user base with premium subscriptions.

Revenue Projections and Earnings Reality

Let's look at the numbers, because this is where the realism hits. While there is insufficient analyst coverage for a firm 2025 revenue forecast, the trailing twelve months (TTM) revenue as of November 2025 stood at only $3.72 million. The consensus revenue forecast for the full fiscal year 2024 was $8 million, which is the near-term benchmark for what a successful year might look like. You need to see a significant acceleration in new content and platform adoption to exceed that.

The earnings picture is still deeply negative. The forecasted annual earnings per share (EPS) for the end of the 2025 fiscal year is estimated at -$18.16. This huge loss per share, coupled with a tiny market capitalization of only $902 as of November 20, 2025, tells you the company is in a fight for survival, relying heavily on financing agreements to stay afloat. The operational wins are good, but they need to scale dramatically to overcome the current cash burn. You can dive deeper into the financial health here: Breaking Down Grom Social Enterprises, Inc. (GROM) Financial Health: Key Insights for Investors.

Here is a snapshot of the core financial estimates:

What this estimate hides is the high volatility and the potential for a major corporate action, like a reverse stock split or significant new financing, which would drastically change the share price and EPS number. The current sentiment is bearish, and you should treat this as a high-risk, high-reward turnaround play, not a stable growth investment. The next action is simple: watch the Q4 2025 earnings report for any sign that the Top Draw Animation wins are translating into a lower net loss.