These 4 Measures Indicate That Integral Ad Science Holding (NASDAQ:IAS) Is Using Debt Safely

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. Importantly, Integral Ad Science Holding Corp. (NASDAQ:IAS) does carry debt. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Integral Ad Science Holding Carry?

As you can see below, Integral Ad Science Holding had US$14.3m of debt at March 2025, down from US$123.8m a year prior. However, it does have US$59.1m in cash offsetting this, leading to net cash of US$44.8m.

A Look At Integral Ad Science Holding's Liabilities

We can see from the most recent balance sheet that Integral Ad Science Holding had liabilities of US$59.4m falling due within a year, and liabilities of US$38.0m due beyond that. Offsetting this, it had US$59.1m in cash and US$137.9m in receivables that were due within 12 months. So it actually has US$99.7m more liquid assets than total liabilities.

This short term liquidity is a sign that Integral Ad Science Holding could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Integral Ad Science Holding has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Integral Ad Science Holding

Even more impressive was the fact that Integral Ad Science Holding grew its EBIT by 578% over twelve months. If maintained that growth will make the debt even more manageable in the years ahead. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Integral Ad Science Holding can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Integral Ad Science Holding has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Happily for any shareholders, Integral Ad Science Holding actually produced more free cash flow than EBIT over the last three years. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

While it is always sensible to investigate a company's debt, in this case Integral Ad Science Holding has US$44.8m in net cash and a decent-looking balance sheet. The cherry on top was that in converted 179% of that EBIT to free cash flow, bringing in US$81m. So is Integral Ad Science Holding's debt a risk? It doesn't seem so to us. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that Integral Ad Science Holding is showing 1 warning sign in our investment analysis , you should know about...

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.