indie Semiconductor (NASDAQ:INDI) Is Making Moderate Use Of Debt

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, indie Semiconductor, Inc. (NASDAQ:INDI) does carry debt. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

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. If things get really bad, the lenders can take control of the business. 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. 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 indie Semiconductor's Debt?

The image below, which you can click on for greater detail, shows that at March 2025 indie Semiconductor had debt of US$379.0m, up from US$170.2m in one year. On the flip side, it has US$236.6m in cash leading to net debt of about US$142.4m.

How Strong Is indie Semiconductor's Balance Sheet?

We can see from the most recent balance sheet that indie Semiconductor had liabilities of US$72.0m falling due within a year, and liabilities of US$405.3m due beyond that. On the other hand, it had cash of US$236.6m and US$72.6m worth of receivables due within a year. So it has liabilities totalling US$168.1m more than its cash and near-term receivables, combined.

This deficit isn't so bad because indie Semiconductor is worth US$813.9m, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. 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 indie Semiconductor's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for indie Semiconductor

Over 12 months, indie Semiconductor made a loss at the EBIT level, and saw its revenue drop to US$218m, which is a fall of 7.1%. That's not what we would hope to see.

Caveat Emptor

Over the last twelve months indie Semiconductor produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable US$154m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through US$94m of cash over the last year. So in short it's a really risky stock. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example - indie Semiconductor has 2 warning signs we think 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.