The credit rating of PJSC Positive Group (hereinafter, Positive Group, or the Company) stems from its strong operational and financial risk profiles. ACRA notes the Company’s strong market position and business profile, a very high assessment of geographic diversification, as well as a high level of corporate governance. The financial risk profile assessment is determined by very low leverage and a very high debt service assessment, a very high liquidity assessment, and very high profitability coupled with medium estimates of business size and cash flow.

Positive Group is one of the leading Russian developers of cybersecurity solutions. The Company offers more than 20 products to ensure the security of IT infrastructure, industrial networks, development, container and cloud environments. Positive Group’s portfolio consisted of 4,000 clients as of the end of 2023.

KEY ASSESSMENT FACTORS

Strong operational risk profile. ACRA notes the Company’s strong market position and high business growth rates that are supported by favorable market conditions. The latter, in turn, is due to the departure of some foreign vendors from the Russian market, regulatory requirements for the transition to domestic software for critical information infrastructure facilities, an increase in the number of cyberattacks and, as a consequence, increasing demand for information security products. The Agency expects the Company’s revenue growth rate to decrease as market niches created by the departure of foreign suppliers are filled and demand caused by regulatory changes is met.

ACRA very highly assesses the geographic diversification of the Company’s business (one of the strategic areas of its development is international expansion), and also notes the high degree of uniqueness of key products and diversification of the product portfolio. In addition to selling flagship products that have earned the trust of the market, such as MaxPatrol SIEM (infrastructure security segment) and MaxPatrol VM (secure development), Positive Group develops metaproducts, the operation of which is based on the solutions of the Company’s ecosystem and is aimed at comprehensive and automated security. The Agency expects it will be possible to evaluate the first results of the sale of metaproducts based on the results for 2024 and 2025.

The level of corporate governance is assessed as high — the Company’s board of directors consists of nine members, three of whom are independent; the board of directors has established audit, personnel, and remuneration committees. The Company has built a well-formalized system of internal control and risk management, and the level of communication with the investment community is characterized by very high financial transparency.

Very high profitability and medium size of business. ACRA assesses the Company’s profitability as very high and expects the FFO margin before fixed payments and taxes to remain at 48–49% over the forecast horizon. The Agency notes the Company’s high growth rates and expects the weighted average value of FFO before fixed payments to be RUB 15 bln for the period from 2021 to 2026.

Very low leverage and very high level of fixed payment coverage. The Company’s loan portfolio consists of an issue of ruble bonds maturing in 2025 and bank financing.

ACRA expects the adjusted total debt to FFO before fixed payments to remain within 1.0x over the forecast period, which corresponds to the highest assessment as per the Agency’s methodology.

Very high liquidity assessment and medium cash flow assessment. Due to the Company’s long sales cycle, the budgeting process of certain clients, and the typically annual term of its licenses, the Company’s revenues are subject to seasonality with the majority recognized in the fourth quarter of the year, which impacts free cash flow (FCF) volatility. The Agency believes that the cash flow generated by the Company will be sufficient to cover mandatory payments and finance the capital investment program, but assumes that its volatility will create a need to attract short-term financing. Positive Group had a significant amount of undrawn bank financing limits as of the end of 2023.

The fairly high level of capital expenditures is due to the Company’s ongoing work on improving existing products and developing new products. According to ACRA estimates, the weighted average ratio of capital expenditures to revenues for the period from 2021 to 2026 will be 18.7%.

KEY ASSUMPTIONS

  • Maintaining high revenue growth rates;

  • Gross profit margin at 90–91% in 2023–2026;

  • Maintaining the current regulatory landscape for companies in the IT industry;

  • Payment of dividends as per the dividend policy.

POTENTIAL OUTLOOK OR RATING CHANGE FACTORS

The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.

A positive rating action may be prompted by:

  • Sustainable growth of FCF above 10% at the same time as maintaining capital expenditures at below 20% of revenues.

A negative rating action may be prompted by:

  • Growth of leverage and the ratio of adjusted total debt to FFO before fixed payments consistently above 1.0x;

  • FFO margin before fixed payments and taxes falling below 30%;

  • Ratio of FFO before fixed payments to fixed payments falling below 10x.

RATING COMPONENTS

Standalone creditworthiness assessment (SCA): aa.

Adjustments: none.

ISSUE RATINGS

No outstanding issues have been rated.

REGULATORY DISCLOSURE

The credit rating has been assigned to PJSC Positive Group under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.

A credit rating has been assigned to PJSC Positive Group for the first time. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.

The credit rating was assigned based on data provided by PJSC Positive Group, information from publicly available sources, and ACRA’s own databases. The credit rating is solicited and PJSC Positive Group participated in its assignment.

In assigning the credit rating, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.

ACRA provided no additional services to PJSC Positive Group. No conflicts of interest were discovered in the course of credit rating assignment.

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