Presidio CEO: Expect More Channel Acquisitions Ahead

Reporting its quarterly earnings for the first time as a public company, Presidio CEO Bob Cagnazzi said the solution provider expects to make more channel acquisitions.

"We've been very good at acquisitions -- those tuck-in acquisitions that add value really right out of the gate," said Cagnazzi, during the company's third fiscal quarter earnings call on Thursday.

"We'll continue to look for geographic expansion in the white space areas in the Mountain area, some areas of the Midwest, and certainly on the West Coast, and we'll continue to look for differentiated solutions or services value via acquisitions around cloud, security, Internet of Things and managed services," Cagnazzi said.

New York-based Presidio, ranked No. 22 on CRN's 2016 Solution Provider 500 list, has been acquiring smaller solution providers, including Cisco networking specialist Netech and cloud consulting, engineering and integration firm Sequoia Worldwide.

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"We'll continue to pursue strategic acquisitions to increase our geographical scale in underserved markets," said Cagnazzi. Presidio reported it generated $96 million of net cash during its third quarter, which ended March 31.

The solution provider began trading as a public company on March 10 at $13.50 per share after its IPO raising $233 million from investors.

For its third quarter, Presidio generated $629 million in revenue, up 7 percent year-over-year. The solution provider's total gross margin jumped 15 percent to $142 million compared to the same quarter one year ago.

However, the company reported a net loss of $15 million, or $0.20 per diluted share, compared to a loss of $6.4 million last year.

"The net loss in the current year was largely due to non-recurring expenses associated with our IPO," said Presidio CFO Paul Fletcher.

Presidio also attributed the net loss due to paying off debt, which dropped from $1.07 billion on June 30, to $777 million as of March 31.

The solution provider broke down revenues in three market segments: cloud, security and digital infrastructure.

Cloud revenues grew 52 percent to $119 million, while security jumped 85 percent to $89 million. Digital infrastructure – the company's largest segment – declined by $40 million during the quarter to $420 million, representing an 8.6 percent drop compared to a year ago.

Cagnazzi said the decrease in digital infrastructure was due to lower sales from government customers, particularly the federal government, and the shift towards software subscriptions. However, the CEO expects the segment to bounce back in the next quarter.

"[Digital infrastructure] is going to be a low single-digit growth area for us over time," he said. "You'll see over time the continuing trend toward greater cloud and greater security business in our solution set, so that's going to change the mix over time as well."

Presidio stock slightly dropped in after-hours trading from $15.96 per share at the market close, to $15.65 as of 6 p.m.

"We're excited about the results," said Cagnazzi. "We'll continue to grow and scale in all the right areas. We're expecting to see growth in the business and continue to position the company for long-term growth around security, around cloud, around managed services, and around increasing services overall."

Presidio this week received the 2017 Dell EMC Services Delivery Partner of the year award, as well as the 2017 Partner Services Quality Award for "achieving extraordinary results and commitment" to Dell EMC, according to a release.