These 4 Measures Indicate That Twilio (NYSE:TWLO) Is Using Debt Safely

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 can see that Twilio Inc. (NYSE:TWLO) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Twilio Carry?

As you can see below, Twilio had US$991.0m of debt, at March 2025, which is about the same as the year before. You can click the chart for greater detail. But on the other hand it also has US$2.45b in cash, leading to a US$1.46b net cash position.

A Look At Twilio's Liabilities

According to the last reported balance sheet, Twilio had liabilities of US$725.9m due within 12 months, and liabilities of US$1.08b due beyond 12 months. Offsetting this, it had US$2.45b in cash and US$577.6m in receivables that were due within 12 months. So it actually has US$1.22b more liquid assets than total liabilities.

This surplus suggests that Twilio has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Twilio boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Twilio

Although Twilio made a loss at the EBIT level, last year, it was also good to see that it generated US$26m in EBIT over the last twelve months. 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 Twilio'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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Twilio may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last year, Twilio actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While it is always sensible to investigate a company's debt, in this case Twilio has US$1.46b in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of US$658m, being 2,518% of its EBIT. So we don't think Twilio's use of debt is risky. 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 Twilio is showing 1 warning sign in our investment analysis , you should know about...

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.