Ivanti, a cybersecurity company owned by private equity firm Clearlake Capital, is finding out that change can be expensive. The firm's revenue and profit both took a hit in the second quarter as it moves customers to subscription plans, a shift that often delays revenue for software makers.
Revenue dropped 11% from a year earlier to $189 million. A key profit measure, adjusted EBITDA, sank 21% to $72 million. The company's annual recurring revenue, or ARR, which tracks predictable income from subscriptions, ticked down 1% to $778 million.
The good news is that the subscription business itself is growing. Subscription and software-as-a-service offerings now make up 83% of ARR, and that slice is expanding at a 10% clip. The bad news is that the transition is squeezing the bottom line, and about 5% of ARR comes from products Ivanti is phasing out.
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The pain is not new. In the first quarter, revenue fell 4% to $204 million, while adjusted EBITDA dropped 13% to $87 million. ARR was flat at $785 million. So the second quarter did not just look bad in isolation; it showed the slide is speeding up.
That fear is not baseless. Ivanti pays about $280 million a year in interest alone. In June, S&P Global Ratings cut Ivanti's credit rating one notch to CCC, a level that suggests borrowing costs are about to climb if they can borrow at all. S&P cited an "increased likelihood of default" in its decision.
This is not the first time Ivanti has had to scramble. Last year, the company restructured its maturities and raised $350 million in fresh capital to stay afloat. The move bought time, but it also added to the pile of debt that is now weighing on the stock. The pressure has also forced some tough calls, including a Bloomberg report from February that the company cut engineers vital to its Connect Secure VPN product, even as cyber threats were rising.
For regular investors, Ivanti is a reminder that a great product does not always equal a great business. The company's new AI-focused tool, Autonomous Endpoint Management, launched in the second quarter with a pipeline of about $71 million. That is real money, but it is small next to a debt load that is costing more to service.
The company's own spokesperson acknowledged the struggle, saying "while the near-term environment is presenting headwinds to virtually all in the software industry," it is not alone. But other software firms are not carrying the same debt burden.
For those watching from the outside, the key number to track is not the stock price. It is whether Ivanti can grow its subscription revenue fast enough to cover its interest payments. Until then, the risk stays high, and the reward for taking that risk is a bet on a turnaround that is far from guaranteed.
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