Moody’s downgrades Stepstone to B2 amid recruitment market weakness

Investing.com -- Moody’s Ratings has downgraded The Stepstone Group Midco 1 GmbH’s long-term Corporate Family Rating to B2 from B1, citing significant revenue and EBITDA underperformance in 2025.

The rating agency also downgraded Stepstone’s Probability of Default Rating to B2-PD from B1-PD. The outlook remains stable.

The downgrade affects the €1,350 million backed senior secured term loan B, the $600 million backed senior secured TLB, and the €300 million backed senior secured revolving credit facility, all due in 2031 and borrowed by The Stepstone Group Midco 2 GmbH.

"The downgrade reflects the significant revenue and EBITDA underperformance in 2025 amid a weaker than anticipated demand for recruitment services owing to a more challenging macroeconomic environment in Germany, its core market," said Agustin Alberti, a Moody’s Ratings Vice President-Senior Analyst.

Stepstone, a digital recruiting platform with operations in Germany and other EMEA countries, has experienced an estimated 14% decline in revenues for 2025. This decrease was driven by substantially lower demand for recruitment services, particularly in Germany, though partially offset by solid organic growth in its US division.

Despite maintaining EBITDA margins around 36%, Moody’s now expects Stepstone to report adjusted EBITDA of €285 million for 2025, down from the €340 million projected in November 2024.

As a result, the company’s Moody’s-adjusted gross debt to EBITDA ratio will rise to 7.0x in 2025, up from 6.5x in 2024. Free cash flow is expected to be positive at approximately €35 million in 2025.

Moody’s projects a 10% revenue increase for Stepstone in 2026, driven by improving macroeconomic trends in Germany following the implementation of the fiscal package approved in March 2025. The rating agency expects German GDP growth to accelerate to 1.4% in 2026 from 0.3% in 2025.

The B2 rating is supported by Stepstone’s strong market position, good brand awareness, secular industry growth, flexible cost structure, and high EBITDA margins. However, it is constrained by the company’s moderate scale compared to global players like LinkedIn and Indeed, the competitive environment, exposure to cyclical employment markets, and high leverage.

Stepstone’s liquidity is considered good, supported by a cash balance of €98 million as of June 2025, access to a €300 million undrawn revolving credit facility, and long-dated maturities.

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