Ascensus Group Holdings Inc.

Overview Key strengths Key risks Recurring revenue and high client retention rates provide revenue visibility. Minimal near-term cash flow generation due to rising interest expense. Regulatory and demographic tailwinds support industry growth. Small-to-midsized customer focus and sensitivity to asset price fluctuations could increase earnings volatility. Acquisition growth strategy yields scale benefits. Very high leverage and financial-sponsor ownership. FOCF deficits have reduced Ascensus' liquidity year to date; however, we anticipate steady cash flow improvement and the repayment of revolver borrowings using proceeds from a recent asset sale will allow Ascensus to maintain total liquidity sources of over $150 million going forward, a level we view as supportive of the 'B-' issuer credit rating. As of June 30, 2023, the company's total

...We believe Ascensus will maintain adequate liquidity for the 'B-' rating despite modest free operating cash flow (FOCF) deficits in 2023. FOCF deficits have reduced Ascensus' liquidity year to date; however, we anticipate steady cash flow improvement and the repayment of revolver borrowings using proceeds from a recent asset sale will allow Ascensus to maintain total liquidity sources of over $150 million going forward, a level we view as supportive of the 'B-' issuer credit rating. As of June 30, 2023, the company's total liquidity position declined as rising interest rates constrained FOCF. About 20% of Ascensus' funded debt is covered by interest rate hedges, and about 60% is effectively hedged by float income earned on client cash in transit. Nevertheless, due to higher interest expense and a larger-than-anticipated seasonal working capital outflow, Ascensus has generated year-to-date FOCF deficits of $23 million as of June 30, 2023. This has caused its total liquidity,...

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