Rating Action: Moody’s assigns B1 to Imprivata’s upsized Term Loan, affirms B2 CFR; outlook is stableGlobal Credit Research – 08 Mar 2022New York, March 08, 2022 — Moodys Investors Service (Moodys) has assigned a B1 instrument rating to Imprivata, Inc.s (Imprivata or the company) proposed $383 million incremental first lien senior secured term loan, and upgraded the ratings on the companys existing first lien senior secured credit facilities to B1 from B2. Proceeds from the incremental term loan, along with a new $300 million second lien term loan (unrated) will go towards funding the acquisition of SecureLink and the combined companys acquisition by Thoma Bravo Fund XV. The upward rating action on the first lien debt reflects its more senior position in the capital structure relative to the new second lien debt.As part of the transaction, SecureLinks existing owner, Cove Hill Partners will become a minority owner of the combined company, while Imprivatas private equity sponsor Thoma Bravo will retain majority ownership, with the remaining proceeds of the debt financing enhancing the companys cash balance. Moodys also affirmed Imprivatas B2 corporate family rating (CFR) and the B2-PD probability of default rating (PDR). The outlook is stable.A summary of todays action follows:Affirmations:..Issuer: Imprivata, Inc….. Corporate Family Rating, Affirmed B2…. Probability of Default Rating, Affirmed B2-PDUpgrades:..Issuer: Imprivata, Inc…..Senior Secured 1st Lien Revolving Credit Facility, Upgraded to B1 (LGD3) from B2 (LGD4)….Senior Secured 1st Lien Term Loan, Upgraded to B1 (LGD3) from B2 (LGD4) Assignments: ..Issuer: Imprivata, Inc. ….Senior Secured 1st Lien Term Loan, Assigned B1 (LGD3) Outlook Actions: ..Issuer: Imprivata, Inc. ….Outlook, Remains Stable RATINGS RATIONALE The SecureLink acquisition stands to increase Imprivatas already high financial leverage to around 9x, pro forma for the debt issuance. The companys aggressive financial policies under private equity ownership is a key governance risk. Nevertheless, the affirmation of the B2 CFR reflects Moodys view that the strategic rationale for acquiring SecureLinks product portfolio is sound and will significantly enhance Imprivatas offerings and market position in providing security and digital identity solutions to the healthcare and adjacent industries. The rating also reflects Imprivatas relatively small scale and limited end-market diversification.The B2 CFR is supported by the companys leading position in identity and access management software within the healthcare industry, as well as the companys solid free cash generation profile (about 4% FCF to total debt pro forma for the transaction). The company had excellent gross retention rates (at least 95%) over the last several years, while also increasing revenue through new business wins and by selling more services to existing customers. In addition, the rating is supported by the strong secular trends of Imprivatas core business, with expected high revenue growth from a growing addressable market in security and digital access management, aided by the ongoing consolidation in the healthcare industry. Moodys anticipates that through a combination of revenue and profit growth, and healthy free cash flow generation, Imprivata will reduce its financial leverage to below 7.0x by the end of 2023.ESG CONSIDERATIONSImprivatas governance is a risk to the credit rating. Private equity-owned software companies typically have much more tolerance for higher financial leverage for acquisitions and shareholder returns than comparable publicly traded software peers. Moodys anticipates that Imprivata will continue to be acquisitive to bolster its market presence.Overall, environmental risks are considered low for Imprivata as a software company. The credit risks stemming from social issues are linked to data security, diversity in the workplace and access to highly skilled workers.The stable outlook reflects Moodys expectation that Imprivata will achieve high-single digit percent revenue growth over the next 12-18 months, as the impact of the coronavirus pandemic on the healthcare industry wanes. The stable outlook accommodates a moderate level of acquisitions including debt financed acquisitions.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSMoodys would consider an upgrade if the company significantly increases its scale, while maintaining conservative financial policies, such that leverage is sustained below 5.0x and free cash flow to debt is sustained above 10%. Moodys would consider a downgrade if market share is materially weakened as a result of increased competition, leading to revenue declines or financial leverage to be sustained over 7.0x. A deterioration of liquidity could also lead to a downgrade.The rating is supported by Imprivatas very good liquidity, as evidenced by the companys expected high cash balances and solid free cash flow generation ability. Even after accounting for the increase interest expense related to a higher debt burden, Moodys expect Imprivata to generate about $60 million of free cash flow over the next 12 months. In addition, the company will have an undrawn, upsized $100 million revolving credit facility and over $100 million of cash on the balance sheet to provide additional sources of liquidity.Imprivata is an identity and access management software platform focused on providing solutions to the healthcare industry. Imprivata is majority owned by private equity firm Thoma Bravo. Revenue for the last twelve months ended September 30, 2021 was about $330 million.The principal methodology used in these ratings was Software Industry published in August 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1130740. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moodys key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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Please refer to Moodys Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moodys general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moodys affiliates outside the EU and is endorsed by Moodys Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moodys office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moodys affiliates outside the UK and is endorsed by Moodys Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moodys office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Gerald Granovsky Senior Vice President Corporate Finance Group Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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