Teacher staffing shortages, rising business investments, and interest rate hikes have strained Foundational Education Group Inc.'s (d/b/a Teaching Strategies') credit profile, causing lower-than-expected revenue growth and declining profitability. We forecast negative free operating cash flow (FOCF) and lower EBITDA margins in 2023 and expect the company to draw on its revolver to fund cash seasonal shortfalls. As a result, we revised our outlook on Teaching Strategies to negative from stable and affirmed our 'B-' issuer credit rating on the company. The negative outlook reflects our view that challenging secular dynamics and uncertain macroeconomic conditions may lead to further profitability and liquidity deterioration over the next 12 months. The negative outlook reflects our view that continued teacher staffing challenges, increased business
