Magenta Buyer, a collection of cybersecurity businesses including what was previously known as McAfee Enterprise, recently posted third quarter results revealing revenue declined year-over-year, while cash flow continued to diminish sequentially, according to two sources familiar with the matter.

The Symphony Technology Group (STG)-backed company, which operates under the Trellix and Skyhigh Security brands, reported third quarter total revenue fell 11% YoY to USD 407m compared to USD 457m reported in the prior year period, the sources said.

Recurring sales, which make up the lion’s share of the company’s total revenue continued to show weakness, declining 6% YoY to USD 327m, though improving a smidge on a sequential basis, the sources said. This segment consists of subscription sales and support revenues for customers with perpetual software licenses. Meanwhile non-recurring revenue continued to be a headwind, declining 27% YoY to USD 81m, the sources added.

However, EBITDA showed improvement, increasing 8.4% YoY to USD 168m, compared to USD 155m reported in the prior year period driven in part by cost reductions, the sources continued. For the nine months ended 30 September, the company booked USD 408m of EBITDA versus USD 513m generated over the same period a year ago, the sources noted.

Liquidity at quarter-end totaled USD 198m, split between USD 77m of cash and USD 121m revolver availability. For reference, the company has USD 141m of cash as of 30 June and had started the year with USD 304m in cash, the sources noted.

Net leverage as of 30 September stood at 4.7x through the first lien and 5.7x total based on USD 3.531bn total first lien debt, USD 4.281bn total debt and LTM pro forma adjusted EBITDA of USD 742m, the sources said.

Fitch Ratings in June downgraded the issuer a notch to B-, citing the company’s declining performance and competitive position. The ratings agency also highlighted the fragmented state of the cybersecurity market with several competing brands and products.

A consortium led by STG acquired McAfee Enterprise from McAfee Corp for USD 4bn in July 2021 and subsequently merged the company with another cybersecurity firm acquired by STG, FireEye, to form Trellix.

In January 2022, the sponsors reorganized and rebranded the company. The XDR segment was branded Trellix and the Data-Aware Cloud Security segment was branded Skyhigh Security. The businesses are now two sister companies, each with its own top management, according to the Fitch note.

The borrower’s debt has been trading further into distressed territory on the back of continued earnings weakness over recent quarters.

Magenta’s USD 3.1bn first lien TLB due 2028 is quoted at 63.06/64.69 today compared to 69.58/71.36 on 13 November. Its USD 413m first lien TL due 2028 last quoted at 69.5/73.83 today compared to 75.83/78.17 on 13 November prior to the earnings release, according to Markit. Meanwhile, its USD 750m second lien TL due 2029 is quoted at 34.63/37.94 today compared to quotes at 39/42.67 on 13 November.

Calls to Trellix and STG were not returned.