Here's Why Arrive AI (NASDAQ:ARAI) Can Afford Some Debt

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. As with many other companies Arrive AI Inc. (NASDAQ:ARAI) makes use of debt. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Arrive AI Carry?

As you can see below, at the end of June 2025, Arrive AI had US$4.22m of debt, up from US$23.1k a year ago. Click the image for more detail. However, it also had US$607.5k in cash, and so its net debt is US$3.61m.

How Healthy Is Arrive AI's Balance Sheet?

We can see from the most recent balance sheet that Arrive AI had liabilities of US$5.00m falling due within a year, and liabilities of US$6.1k due beyond that. On the other hand, it had cash of US$607.5k and US$89.1k worth of receivables due within a year. So it has liabilities totalling US$4.31m more than its cash and near-term receivables, combined.

Given Arrive AI has a market capitalization of US$211.1m, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. When analysing debt levels, the balance sheet is the obvious place to start. But it is Arrive AI's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

View our latest analysis for Arrive AI

Given it has no significant operating revenue at the moment, shareholders will be hoping Arrive AI can make progress and gain better traction for the business, before it runs low on cash.

Caveat Emptor

Over the last twelve months Arrive AI produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at US$8.7m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through US$4.9m of cash over the last year. So to be blunt we think it is risky. 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. For instance, we've identified 4 warning signs for Arrive AI (3 are a bit concerning) you should be aware of.

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.