Does Exicure (NASDAQ:XCUR) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that Exicure, Inc. (NASDAQ:XCUR) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

Check out our latest analysis for Exicure

What Is Exicure's Debt?

The image below, which you can click on for greater detail, shows that at June 2021 Exicure had debt of US$16.7m, up from none in one year. But it also has US$56.1m in cash to offset that, meaning it has US$39.3m net cash.

A Look At Exicure's Liabilities

According to the last reported balance sheet, Exicure had liabilities of US$12.7m due within 12 months, and liabilities of US$25.1m due beyond 12 months. Offsetting these obligations, it had cash of US$56.1m as well as receivables valued at US$44.0k due within 12 months. So it can boast US$18.3m more liquid assets than total liabilities.

It's good to see that Exicure has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, Exicure boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Exicure 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.

Over 12 months, Exicure made a loss at the EBIT level, and saw its revenue drop to US$3.7m, which is a fall of 75%. That makes us nervous, to say the least.

So How Risky Is Exicure?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Exicure had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of US$47m and booked a US$48m accounting loss. But the saving grace is the US$39.3m on the balance sheet. That means it could keep spending at its current rate for more than two years. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 5 warning signs for Exicure (2 are a bit unpleasant!) that you should be aware of before investing here.

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.
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