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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. Importantly, Roblox Corporation (NYSE:RBLX) does carry debt. But the more important question is: how much risk is that debt creating?
When Is Debt Dangerous?
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. 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. 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.
See our latest analysis for Roblox
What Is Roblox's Net Debt?
The chart below, which you can click on for greater detail, shows that Roblox had US$1.01b in debt in September 2024; about the same as the year before. However, its balance sheet shows it holds US$2.32b in cash, so it actually has US$1.32b net cash.
How Healthy Is Roblox's Balance Sheet?
The latest balance sheet data shows that Roblox had liabilities of US$3.44b due within a year, and liabilities of US$3.07b falling due after that. Offsetting these obligations, it had cash of US$2.32b as well as receivables valued at US$401.9m due within 12 months. So its liabilities total US$3.78b more than the combination of its cash and short-term receivables.
Since publicly traded Roblox shares are worth a very impressive total of US$43.3b, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, Roblox also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Roblox'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.
Over 12 months, Roblox reported revenue of US$3.4b, which is a gain of 28%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.