Research Update: Pathway Vet Alliance LLC Outlook Revised To Negative On Free Cash Flow Deficit, 'B-' ICR Affirmed

U.S.-based veterinary practice management company Pathway Vet Alliance LLC faces a difficult operating environment due to rising labor costs, the underutilization of its practices, and increasing interest expense. We believe rising labor costs and operational challenges will pressure the company's EBITDA margins in 2023 and 2024, reducing its fixed-charge coverage and leading it to generate free operating cash flow (FOCF) deficits. Therefore, we revised our outlook on Pathway to negative from stable and affirmed our 'B-' issuer credit rating. The negative outlook reflects the potential that we will lower our ratings on Pathway over the next 12 months if its operating performance continues to be challenged by rising labor costs, operating inefficiencies from the underutilization of its practices, and significantly

...- U.S.-based veterinary practice management company Pathway Vet Alliance LLC faces a difficult operating environment due to rising labor costs, the underutilization of its practices, and increasing interest expense. - We believe rising labor costs and operational challenges will pressure the company's EBITDA margins in 2023 and 2024, reducing its fixed-charge coverage and leading it to generate free operating cash flow (FOCF) deficits. - Therefore, we revised our outlook on Pathway to negative from stable and affirmed our 'B-' issuer credit rating. - The negative outlook reflects the potential that we will lower our ratings on Pathway over the next 12 months if its operating performance continues to be challenged by rising labor costs, operating inefficiencies from the underutilization of its practices, and significantly higher interest expense. A lack of significant progress toward improving its operating results could lead to continued cash outflows beyond 2023....

Research Update