Is Digital Turbine (NASDAQ:APPS) A Risky Investment?

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.' 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. Importantly, Digital Turbine, Inc. (NASDAQ:APPS) does carry debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Digital Turbine's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Digital Turbine had US$408.7m of debt, an increase on US$383.5m, over one year. On the flip side, it has US$40.1m in cash leading to net debt of about US$368.6m.

How Healthy Is Digital Turbine's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Digital Turbine had liabilities of US$222.5m due within 12 months and liabilities of US$436.4m due beyond that. Offsetting this, it had US$40.1m in cash and US$190.1m in receivables that were due within 12 months. So it has liabilities totalling US$428.8m more than its cash and near-term receivables, combined.

This is a mountain of leverage relative to its market capitalization of US$592.7m. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. 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 Digital Turbine'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.

See our latest analysis for Digital Turbine

In the last year Digital Turbine had a loss before interest and tax, and actually shrunk its revenue by 9.9%, to US$491m. That's not what we would hope to see.

Caveat Emptor

Importantly, Digital Turbine had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost US$48m 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$16m of cash over the last year. So suffice it to say we do consider the stock to be risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Digital Turbine (of which 2 are a bit concerning!) 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.