Bilibili (NASDAQ:BILI) Has Debt But No Earnings; Should You Worry?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that Bilibili Inc. (NASDAQ:BILI) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

When Is Debt Dangerous?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for Bilibili

How Much Debt Does Bilibili Carry?

The image below, which you can click on for greater detail, shows that Bilibili had debt of CN¥7.56b at the end of September 2023, a reduction from CN¥19.3b over a year. But on the other hand it also has CN¥14.5b in cash, leading to a CN¥6.95b net cash position.

A Look At Bilibili's Liabilities

The latest balance sheet data shows that Bilibili had liabilities of CN¥14.7b due within a year, and liabilities of CN¥3.73b falling due after that. Offsetting this, it had CN¥14.5b in cash and CN¥1.65b in receivables that were due within 12 months. So its liabilities total CN¥2.26b more than the combination of its cash and short-term receivables.

Since publicly traded Bilibili shares are worth a total of CN¥30.1b, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, Bilibili 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 ultimately the future profitability of the business will decide if Bilibili can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

In the last year Bilibili wasn't profitable at an EBIT level, but managed to grow its revenue by 3.6%, to CN¥22b. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Bilibili?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months Bilibili lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through CN¥8.1b of cash and made a loss of CN¥5.0b. However, it has net cash of CN¥6.95b, so it has a bit of time before it will need more capital. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. For riskier companies like Bilibili I always like to keep an eye on the long term profit and revenue trends. Fortunately, you can click to see our interactive graph of its profit, revenue, and operating cashflow.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.