Research Update: Kofax Downgraded To 'B-' On Expected Weak Free Operating Cash Flows; Outlook Stable

Against the backdrop of a weak global economy, S&P Global Ratings expects U.S.-based provider of business process and document management software Project Leopard Holdings Inc. (Kofax) to generate flat organic revenue growth in 2023. This also reflects an ongoing transition towards more recurring on-premise term license and cloud subscription revenues, which could impair near-term organic revenue growth and free operating cash flow (FOCF) generation through weaker perpetual license and maintenance revenues. In addition to the impact of elevated interest rates on the sizable variable-rate debt outstanding, we expect Kofax to generate negative FOCF of up to $8 million in 2023, improving only to modest positive FOCF in 2024 as the adverse effect of the recurring revenue transition reduces. We also

...- Against the backdrop of a weak global economy, S&P Global Ratings expects U.S.-based provider of business process and document management software Project Leopard Holdings Inc. (Kofax) to generate flat organic revenue growth in 2023. This also reflects an ongoing transition towards more recurring on-premise term license and cloud subscription revenues, which could impair near-term organic revenue growth and free operating cash flow (FOCF) generation through weaker perpetual license and maintenance revenues. - In addition to the impact of elevated interest rates on the sizable variable-rate debt outstanding, we expect Kofax to generate negative FOCF of up to $8 million in 2023, improving only to modest positive FOCF in 2024 as the adverse effect of the recurring revenue transition reduces. We also expect leverage to remain high at just above 7x in 2023. - We therefore lowered our issuer credit rating on Kofax to 'B-' from 'B' and our issue-level rating on the first-lien term loan to 'B-'...

Research Update