Is Adaptive Biotechnologies (NASDAQ:ADPT) Using Debt In A Risky Way?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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. We note that Adaptive Biotechnologies Corporation (NASDAQ:ADPT) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

We've discovered 3 warning signs about Adaptive Biotechnologies. View them for free.

When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is Adaptive Biotechnologies's Net Debt?

The chart below, which you can click on for greater detail, shows that Adaptive Biotechnologies had US$133.6m in debt in March 2025; about the same as the year before. However, it does have US$193.4m in cash offsetting this, leading to net cash of US$59.9m.

A Look At Adaptive Biotechnologies' Liabilities

According to the last reported balance sheet, Adaptive Biotechnologies had liabilities of US$87.8m due within 12 months, and liabilities of US$232.8m due beyond 12 months. On the other hand, it had cash of US$193.4m and US$45.1m worth of receivables due within a year. So its liabilities total US$82.1m more than the combination of its cash and short-term receivables.

Given Adaptive Biotechnologies has a market capitalization of US$1.52b, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, Adaptive Biotechnologies boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Adaptive Biotechnologies's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

View our latest analysis for Adaptive Biotechnologies

Over 12 months, Adaptive Biotechnologies reported revenue of US$190m, which is a gain of 8.6%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Adaptive Biotechnologies?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Adaptive Biotechnologies lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$89m of cash and made a loss of US$142m. However, it has net cash of US$59.9m, so it has a bit of time before it will need more capital. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 3 warning signs for Adaptive Biotechnologies you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.