Moodys.com
Close
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

Terms of One-Time Website Use

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

Moody's assigns B2 CFR to NSO Group; outlook stable

12 Mar 2019

Frankfurt am Main, March 12, 2019 -- Moody's Investors Service ("Moody's") has today assigned a B2 corporate family rating (CFR) and B2-PD Probability of Default rating to NorthPole Newco S.a r.l., the top entity of the restricted group of Israeli-based cyber security and intelligence software provider NSO Group ("NSO"). Concurrently, Moody's has assigned a B2 rating to the proposed $500 million senior secured first lien term loan B due in 2026, of which no less than $300 million in US-Dollar with the rest in Euro. Moody's has also assigned a B2 senior secured rating to the proposed pari passu ranking $30 million revolving credit facility (RCF) maturing in 2024. All senior secured first lien facilities shall be borrowed by NorthPole Newco S.a r.l. and Westbridge Technologies, Inc. The outlook on all ratings is stable.

The proceeds from the new facilities will primarily serve to finance the purchase price of Management's and Novalpina's acquisition, refinance the group's existing debt and pay for the transaction fees and expenses.

Today's new rating assignments principally reflect the following factors:

-- High Moody's adjusted leverage at opening, but sound deleveraging capacity

-- Strong revenue and EBITDA growth driven by strong demand patterns

-- Solid free cash flow generation and good liquidity

-- High customer concentration, low product diversification, but improving geographic mix

-- Track record of high conversion and renewal rates in warranty/maintenance contracts

RATINGS RATIONALE

NSO's B2 CFR reflects the group's solid performance in the past years, characterized by strong EBITDA growth and consistently high margins. Earnings growth has led to a step-up in cash-flow generation which Moody's believes NSO will maintain at least at $80 million per annum. The large addressable market in which the group operates, the limited known competition and the material barriers to entry also support NSO's credit quality.

However, NSO's credit profile is weakened by high Moody's adjusted leverage of around 4.3x on a pro forma basis, its product and customer concentration as well as susceptibility to cyber-attacks. In addition, the recurring revenue base is lower compared with enterprise software peers and remains dependent upon the conversion to and renewal of maintenance contracts with a comparably low duration of 12 months, although Moody's acknowledges the high renewal rates of over 90%. Lastly, the rating reflects the challenge to sustain the revenue growth with relatively high profitability levels in light of the limited track record of the company, which requires the defence of the technical advantage of the company's surveillance software product in an industry characterized by rapid technological changes.

NSO operates in the market for mobile surveillance technology, which management estimates is worth approximately $12 billion (excluding the US and maintenance spend) and is largely underpenetrated (below 10%). Moody's expects that cyber intelligence will continue to be a focus point for governments and security agencies, despite the constant strain on public budgets. NSO considers that it is the only player to offer a comprehensive suite of mobile surveillance technology for high value targets (as opposed to mass surveillance/big data collection) even though large defence companies such as Thales (A2 negative), BAE SYSTEMS plc (Baa2 stable) and Raytheon Company (A3 stable) as well as software pure players such as Verint Systems Inc. (Ba3 positive) do offer some cyber security solutions. Moody's does not rule out that there are pockets of hidden competition given the lack of publicity in the market and its attractiveness for existing and new players. The market is in Moody's view also narrowed by proprietary solutions from developed countries such as the US, UK, and Israel.

However, Moody's considers that there are high barriers to entry which help the group protect its competitive position. Qualified workforce availability is scarce and the countries in which mobile surveillance operations can be carried out generally require export licenses, or equivalent forms of governmental approval, in order to sell the group's solutions abroad.

NSO's credit profile is held back by very low diversification due to its focus on mobile end-point solutions, for a limited number of customer types such as intelligence agencies and law enforcement bodies. As a result, NSO's customer base is significantly concentrated in terms of geographies and total number of customers, although improving during the last years.

NSO grew revenues and Moody's adjusted EBITDA by +18% (on a CAGR basis) over the period 2015-2018, with even higher growth in 2017 and 2018. The group's performance mostly reflected new customer additions stemming from a recent investment in the group's sales force. The benefits of these investments in the sales team, as well as continued investments in R&D, are now being seen in margins with Moody's-adjusted EBITDA margin improving to 48% in 2018.

The rating agency expects that the large market opportunity and the group's current position will support revenue growth at least in double digits in percentage terms whilst the Moody's adjusted EBITDA margin will remain in the range of 47-48% in the next 12 to 18 months. Moody's views continuous and increased investment in R&D as paramount to stay ahead of technological developments in network and encryption, which are the backbone of NSO's solutions. In the absence of debt additions, Moody's forecasts that NSO's leverage would reduce towards 3.3x in 2020 from an opening pro forma leverage of 4.3x.

Moody's estimates that NSO generates at least $80 million free cash flow (FCF) per annum, taking into account a full twelve months' interest under the new capital structure. The group benefits from limited working capital and capex needs as well as modest non-recurring cash costs.

RATINGS OUTLOOK

The stable outlook on NSO's ratings assumes (1) no material revenue or customer loss (including as a result of security attacks or technological displacement) and continuation of realising EBITDA-Margins in the 40 percentage range, (2) Moody's adjusted leverage expected to reduce towards 3.5x within the next 12-18 months, (3) free cash flow to debt of at least 10% and (4) adequate liquidity.

WHAT COULD CHANGE THE RATING UP/DOWN

Given NSO's high product and customer concentration and focus on a niche market with political sensitivity and high business confidentiality, upward pressure is unlikely in the near future. However, Moody's could consider a positive rating action should NSO demonstrate a prudent financial policy and absence of dividend recapitalisations in the next 18 months and (1) continue to reduce its customer concentration, (2) further increase the proportion and improve the quality of recurring revenue streams with EBITDA margin levels in the 40 percentages, (3) decrease Moody's adjusted gross debt to EBITDA sustainably below 2.5x, and (4) maintain FCF to debt at least around 20% on a sustainable basis.

Conversely, NSO's ratings could come under negative pressure if the criteria for a stable outlook were not to be met with Moody's adjusted gross debt to EBITDA above 4.0x and if business risk increased or if the group's liquidity position deteriorated. With regard to the very narrow customer base in a niche market and complemented by high event risks, NSO is currently weakly positioned in the B2 rating category.

LIQUIDITY ANALYSIS

We view NSO's liquidity profile as good. It is supported by (1) NSO's cash balance of around $10 million post-closing of the transaction, (2) the $30 million RCF which we expect will remain undrawn throughout the year and, (3) solid free cash flow generation. The RCF has one leverage-based covenant, only tested under certain springing conditions.

STRUCTURAL CONSIDERATION

The senior secured first lien term loan and RCF are the only financial debt instruments in the capital structure, hence they are rated in line with the CFR.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Software Industry published in August 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

PROFILE

NSO Group is a provider of cyber security and intelligence software solutions to government agencies. Its offering is focused on mobile end-point and location capabilities, as well as tactical/field solutions and lawful interception for high value targets. NSO operates primarily out of Israel, Bulgaria and Cyprus, with close to 600 employees, who serve 60+ customers in more than 35 countries. In 2018, NSO reported revenues of $251 million. NSO is majority owned by funds ultimately controlled and managed by Novalpina Capital.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Dirk Goedde
AVP-Analyst
Corporate Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Christian Hendker, CFA
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​
Moodys.com