S&P turns Press Ganey view to negative

S&P said it changed its outlook for Azalea Topco Inc. (Press Ganey) to negative from stable and affirmed the B- ratings on the issuer and its first-lien debt. The 3 recovery rating is unchanged, indicating meaningful (50%-70%; rounded estimate: 50%) recovery in default.

“The outlook revision reflects weaker than expected operating performance in the first quarter of 2023, leading to our expectation for negative FOCF this year. Press Ganey reported weaker-than-expected margins during the first quarter of 2023 as it integrated the lower-margin Forsta business and fast-tracked associated integration expenses including reducing its workforce and third-party vendor costs.

“At the same time, the company has yet to fully realize potential growth from the acquired Forsta business, especially in the non-health care segment. As a result, we expect a lower S&P Global Ratings-adjusted EBITDA margin (burdened by capitalized development costs) of 24%-27% in fiscal 2023, compared to our prior expectation of about 33%,” S&P said in a press release.

However, the agency said it does anticipate better results in the second half of 2023 and sees FOCF at break even in 2024 from an estimated deficit of about $15 million-$20 million in 2023.

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