Tear Sheet: Ascensus' Cash Flow Generation Will Continue to Improve in 2025 Due to Strong Secular and Market Driven Tailwinds

While S&P Global Ratings expects leverage to remain above its 7x upgrade threshold in 2025, it forecasts FOCF generation to almost double from 2024 levels because of interest rate declines, continued growth in operations, and the benefits of both the company?s repayment of more costly second-lien debt and its first-lien debt repricing last year. The company likely outperformed our previous 2024 expectations, and we now expect FOCF generation to surpass $100 million in 2025. Outperformance above our base case has been tied to peak higher-margin float income, stock market all-time highs, and operating leverage in the business, which we expect resulted in more than 200 basis points (bps) of total S&P Global Ratings-adjusted EBITDA margin improvement in 2024. This year,

...January 10, 2025 Despite a reduction in float income, free operating cash flow (FOCF) will improve materially in 2025. While S&P Global Ratings expects leverage to remain above its 7x upgrade threshold in 2025, it forecasts FOCF generation to almost double from 2024 levels because of interest rate declines, continued growth in operations, and the benefits of both the company's repayment of more costly second-lien debt and its first-lien debt repricing last year. The company likely outperformed our previous 2024 expectations, and we now expect FOCF generation to surpass $100 million in 2025. Outperformance above our base case has been tied to peak higher-margin float income, stock market all-time highs, and operating leverage in the business, which we expect resulted in more than 200 basis points (bps) of total S&P Global Ratings-adjusted EBITDA margin improvement in 2024. This year, we expect modest EBITDA margin contraction as float income decreases and elevated one-time charges related...

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