ContextMedia Health LLC' revenues and EBITDA will remain challenged over the next 12 months due to slower-than-expected organic growth and increasing costs.


  • We expect U.S.-based digital media company ContextMedia Health LLC's (doing business as OutCome Health) revenues and EBITDA will remain challenged over the next 12 months due to slower-than-expected organic growth and increasing costs.
  • We are revising our rating outlook on ContextMedia to negative from stable and affirming our ratings on the company, including the 'B-' corporate credit rating.
  • The negative outlook reflects our expectation that free operating cash flow (FOCF) will remain negative throughout 2017 and 2018 and adjusted leverage could remain elevated above 12x because of the increased risk in executing their aggressive growth plans.
  • We could lower our corporate credit rating on ContextMedia if the company is unable to sustain a cash and revolver availability balance of over $75 million, the amount we believe it will require to be able to absorb ongoing negative FOCF over the next 12 -18 months.

The outlook revision reflects our expectation that ContextMedia's free 
operating cash flow (FOCF) will remain negative in 2018 due to increased 
operating costs as the company invests in the business at a faster pace than 
revenue growth is being realized.  Although we don't expect any liquidity 
shortfalls in 2018 due to the large cash balance following an equity injection 
in the first half of 2017, liquidity may become strained over the next 12-18 
months if the company is unable to execute on its growth plan and manage 
operating costs. Additionally, the company's adjusted leverage increased 
significantly to the 14x area as of June 2017 from 9.4x at the end of 2016. 
Absent any material EBITDA growth from the company's investments in its sales 
staff and strategy, we expect leverage to remain elevated, which could result 
in a downgrade of the company. 

The negative outlook reflects our expectation that ContextMedia's FOCF will 
remain negative throughout 2017 and 2018 and its adjusted leverage could 
remain elevated above 12x due to increased risk of the company executing its 
aggressive growth plan following slower-than-expected revenue growth and 
increasing costs. 

We could lower the corporate credit rating if the company's 
weaker-than-expected operating performance continues, resulting in sustained 
cash flow deficits, or if we expect cash balances and revolver availability to 
fall below $75 million.

Although unlikely over the next 12 months, we could raise the rating if the 
company continues to grow and it is able to leverage its operating costs in 
order to improve EBITDA margins, resulting in positive FOCF and a material 
reduction in leverage.