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FINThrive Software Intermediate Hldgs, Inc. -- Moody's says nThrive's ratings are unaffected by the incremental debt issuance to finance the acquisition of PELITAS

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Announcement: Moody's says nThrive's ratings are unaffected by the incremental debt issuance to finance the acquisition of PELITASGlobal Credit Research - 22 Feb 2022New York, February 22, 2022 -- Moody's Investors Service ("Moody's") said that FINThrive Software Intermediate Holdings, Inc. (dba "nThrive", "the company", fka "MedAssets Software Intermediate Holdings") incremental debt raise to fund the acquisition of PELITAS is credit negative but it does not affect the current ratings or stable outlook.nThrive intends to raise roughly $175 million of new debt, including first lien and second lien term loan increments, which combined with new preferred and common equity issuances will be used to fund the acquisition. The transaction resets debt-to-EBITDA slightly above post-closing levels after the December 2021 acquisition of TransUnion Healthcare ("TUHC"), and delays the deleveraging timeline. While the ratings incorporate the expectation for aggressive financial policies, pro forma debt-to-EBITDA over 10x is very high and positions the company's corporate family rating ("CFR") weakly in the B3 rating category (Moody's adjusted as of December 2021, net of capitalized software and giving partial credit to pro forma adjustments).The incremental debt balance to finance PELITAS' acquisition is credit negative, but partially offset by the strategic benefits of the transaction and the expectation that the funding consideration will include a material equity contribution (common and preferred). PELITAS will expand nThrive's revenue cycle management ("RCM") solutions with patient registration, eligibility and other front-end offerings that have minimum overlap with nThrive and TUHC's existing capabilities. The acquisition aligns with nThrive's strategy to provide a comprehensive suite of end-to-end RCM offerings as clients seek to consolidate vendors. The company believes PELITAS' eligibility and registration capabilities are superior to other products in the industry, but its front-end solutions will face competitive pressure from much larger healthcare software providers. Cross-selling of PELITAS' and nThrive's offerings will provide incremental growth opportunities and support the company's deleveraging capacity.The ratings are constrained by nThrive's very high debt-to-EBITDA, hefty interest expense burden, relatively small scale, and operational risks associated with the recent separation from Savista (nThrive's legacy services unit), as well as the integrations with TUHC and PELITAS. nThrive needs to achieve sizeable operational savings and increase current growth rates to materially reduce leverage. Pro forma profitability remains uncertain given the limited track-record of the current asset mix. nThrive was separated from Savista and acquired by private equity sponsor Clearlake Capital in January 2021. The acquisition of TUHC, a carve-out from TransUnion that roughly doubles nThrive's pro forma revenue, was completed in December 2021. Large add-backs and a lack of operating history for the combined asset mix result in weak quality of earnings and limited visibility into the long-term profitability and cash flow profile of the going concern.nThrive benefits from highly recurring revenue, supported by long-term contracts that incorporate volume floors, which limits top line volatility relative to other RCM peers. High software profitability rates and a strong market position serving over 3,000 hospitals, 700,000 healthcare providers and 800 payers support the credit. RCM technology solutions are sticky and costly to replace, benefitting incumbent providers, as evidenced by healthy gross retention rates above 94%. Customer concentration is modest, with the top 10 clients representing roughly 14% of revenue. Favorable tailwinds in the healthcare industry also support the rating: Increasing regulatory complexity, shift to higher collections from patients, pressure to cut costs, and vendor consolidation, will drive demand for nThrive's solutions.Headquartered in Alpharetta, GA, nThrive provides healthcare revenue cycle management software-as-a-service ("Saas") solutions. The company's RCM offerings include patient access, insurance discovery, payment estimates, patient clearance, charge integrity, claims management, contract management, analytics, education, and other functions. Moody's expects the pro forma company to generate over $440 million of revenue in 2022E. The company was acquired by private equity firm Clearlake Capital Group in January 2021.This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history. Ignacio Rasero VP - Senior Credit Officer Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Karen Nickerson Associate Managing Director Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). 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