Is Definitive Healthcare (NASDAQ:DH) Using Debt In A Risky Way?

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.' 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 note that Definitive Healthcare Corp. (NASDAQ:DH) does have debt on its balance sheet. 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. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Definitive Healthcare's Net Debt?

The image below, which you can click on for greater detail, shows that Definitive Healthcare had debt of US$169.0m at the end of June 2025, a reduction from US$249.7m over a year. However, it does have US$184.4m in cash offsetting this, leading to net cash of US$15.3m.

How Healthy Is Definitive Healthcare's Balance Sheet?

We can see from the most recent balance sheet that Definitive Healthcare had liabilities of US$151.3m falling due within a year, and liabilities of US$207.7m due beyond that. Offsetting this, it had US$184.4m in cash and US$38.0m in receivables that were due within 12 months. So its liabilities total US$136.6m more than the combination of its cash and short-term receivables.

While this might seem like a lot, it is not so bad since Definitive Healthcare has a market capitalization of US$551.4m, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. While it does have liabilities worth noting, Definitive Healthcare 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 Definitive Healthcare'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.

Check out our latest analysis for Definitive Healthcare

Over 12 months, Definitive Healthcare made a loss at the EBIT level, and saw its revenue drop to US$245m, which is a fall of 5.2%. We would much prefer see growth.

So How Risky Is Definitive Healthcare?

Although Definitive Healthcare had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of US$41m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. With revenue growth uninspiring, we'd really need to see some positive EBIT before mustering much enthusiasm for this business. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 1 warning sign for Definitive Healthcare you should be aware of.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.