Delivers Solid Total Revenue and Earnings
GrowthEnhanced Financial Flexibility Through Continued
DeleveragingProvides Update to Fiscal Year 2018 Guidance
Presidio, Inc. (NASDAQ:PSDO) (“Presidio” or the “Company”), a
leading North American IT solutions provider delivering Cloud,
Security and Digital Infrastructure solutions to middle-market
customers, today announced its financial results for its fiscal
third quarter ended March 31, 2018.
| |
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
|
Nine months ended |
|
|
| (in $
millions, except per share data) |
|
March 31,2017 |
|
March 31,2018 |
|
% Chg |
|
March 31,2017 |
|
March 31,2018 |
|
% Chg |
| Total Revenue |
|
$ |
628.8 |
|
|
$ |
665.1 |
|
|
5.8 |
% |
|
$ |
2,088.3 |
|
|
$ |
2,091.7 |
|
|
0.2 |
% |
| Total Gross Margin |
|
$ |
142.1 |
|
|
$ |
139.4 |
|
|
(1.9 |
)% |
|
$ |
433.6 |
|
|
$ |
433.2 |
|
|
(0.1 |
)% |
| Gross
Margin % |
|
22.6 |
% |
|
21.0 |
% |
|
|
|
20.8 |
% |
|
20.7 |
% |
|
|
| Net Income (loss) |
|
$ |
(15.0 |
) |
|
$ |
0.6 |
|
|
n.m. |
|
$ |
(6.0 |
) |
|
$ |
119.5 |
|
|
n.m. |
| Diluted EPS |
|
$ |
(0.20 |
) |
|
$ |
0.01 |
|
|
n.m. |
|
$ |
(0.08 |
) |
|
$ |
1.24 |
|
|
n.m. |
| Adjusted EBITDA1 |
|
$ |
52.7 |
|
|
$ |
49.0 |
|
|
(7.0 |
)% |
|
$ |
165.7 |
|
|
$ |
165.8 |
|
|
0.1 |
% |
| Adj.
EBITDA margin %1 |
|
8.4 |
% |
|
7.4 |
% |
|
|
|
7.9 |
% |
|
7.9 |
% |
|
|
| Adjusted Net
Income1 |
|
$ |
22.8 |
|
|
$ |
26.8 |
|
|
17.5 |
% |
|
$ |
69.8 |
|
|
$ |
89.9 |
|
|
28.8 |
% |
| Pro Forma Adjusted Net
Income2 |
|
$ |
26.8 |
|
|
$ |
26.9 |
|
|
0.4 |
% |
|
$ |
84.4 |
|
|
$ |
93.2 |
|
|
10.4 |
% |
| Pro Forma Diluted
EPS2 |
|
$ |
0.28 |
|
|
$ |
0.28 |
|
|
— |
% |
|
$ |
0.89 |
|
|
$ |
0.97 |
|
|
9.0 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
“During the third quarter, we delivered solid
revenue growth of 5.8%, driven by Digital Infrastructure solutions
growth of 13.9% and services revenue growth of 9.3%. Security
solutions decreased 5.9% during the third quarter, reflecting that
a number of very large orders in the third quarter of fiscal
year 2017 did not reoccur. However, Security solutions have
increased 23.3% year-to-date, and we continue to see robust demand
in this solution area. Cloud revenues declined during the third
quarter, driven by the overall market softness experienced by our
primary OEM in the space. We have seen double and triple digit
growth in many of our other Cloud partners in both the private and
public cloud space and remain bullish on this solutions area,” said
Bob Cagnazzi, Chief Executive Officer of Presidio.
Cagnazzi continued, “Our third quarter results
reflect a strong recovery from last quarter’s weakness in revenue,
however, based on our performance year-to-date, we have revised our
revenue guidance for the full year to low single digit growth. Our
backlog continues to grow, increasing 19% year-over-year at the end
of the third quarter from an increase of 13% at the end of the
second quarter. This positive momentum has been driven by the
highly beneficial long term trends of continued growth in
multi-year contracted recurring revenue, which has increased 17%
year-over-year, and larger, more complex projects which have
elongated project delivery cycles. We remain optimistic about the
fundamentals of our business and our ability to deliver mid-single
digit growth over the medium term. In addition, the business
continues to deliver consistent and strong free cash flow, which
allows us to enhance our financial flexibility by improving our
balance sheet to drive profitability.”
“In early April, we acquired Red Sky Solutions,
LLC, a fast growing solutions-driven company with a strong team
that gives us an enhanced presence in the mountain states. This is
consistent with our stated growth strategy of pursing complementary
acquisitions. We are very excited to welcome the Red Sky team to
Presidio,” Cagnazzi concluded.
1 This financial measure is not based on U.S.
GAAP. Please refer to the section of this press release entitled
"About Non-GAAP and Pro Forma Financial Measures" for additional
information and to the attached reconciliation to the most directly
comparable U.S. GAAP measure.
2 This non-GAAP financial measure adjusts
certain historical data on a pro forma basis following certain
transactions. Please refer to the section of this press
release entitled "About Non-GAAP and Pro Forma Financial Measures"
for additional information and to the section entitled "Non-GAAP
Reconciliations" for reconciliation to the most directly comparable
U.S. GAAP measure.
Financial Highlights for the Fiscal Third
Quarter Ended March 31, 2018
- Total Revenue increased $36.3 million, or 5.8%, to $665.1
million, compared to $628.8 million in the prior year period.
Revenue growth in the quarter was driven by delivery of orders that
were in backlog at the end of the second quarter of 2018 into
revenue, strong growth in Digital Infrastructure solutions, and a
higher proportion of services as part of our solutions. Revenue
growth was negatively impacted by continued weakness in sales to
the federal government as compared to the prior year period, and
the accelerating growth in our backlog orders believed to be firm
which was 19% higher as of March 31, 2018, compared to the prior
year period. The backlog growth included increasing demand for our
public cloud solutions, managed services offerings and other
recurring revenue projects, which highlights the transition of a
growing component of our revenue that will be recognized over time.
- Digital Infrastructure revenue increased 13.9% to $479.0
million, compared to $420.6 million in the prior year period. The
increase was led by substantial investments by our mid-market and
government clients to support their multi-cloud projects.
- Cloud revenue decreased 14.1% to $102.2 million, compared to
$119.0 million in the prior year period, driven by the overall
market softness experienced by our primary OEM in the
space. In addition, we lapped a very strong third quarter
fiscal 2017 where we achieved 52% growth driven by a number of
large data center modernization projects that did not reoccur.
- Security revenue decreased 5.9% to $83.9 million, compared to
$89.2 million in the prior year period. During the third quarter,
we experienced strong demand for Security solutions in the form of
client orders, but delays in delivering these solutions resulted in
lower revenue recognition which drove the decline in Security
revenue as compared to the prior year period.
- Total Gross Margin decreased $2.7 million, or 1.9%, to $139.4
million, compared to $142.1 million in the prior year period,
driven by the contraction of Total Gross Margin as a percent of
Total Revenue to 21.0% in the third quarter from 22.6% in the prior
year period, partially offset by Total Revenue growth of 5.8%.
Margin contraction was driven by the combination of lower margins
on the delivery of product as part of our solutions, a decline in
vendor incentive rebates, higher incentive compensation for our
engineering resources, and continued investments to enhance the
capabilities of our managed services offerings and cloud-related
service offerings.
- On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Reform”)
was passed, resulting in a significant impact to the Company’s
provision for income taxes in the period. As we have a fiscal year
ending on June 30, the impact will be realized over the next two
fiscal years. The most significant changes to the Company’s
accounting for income tax associated with Tax Reform included:
- the reduction of our statutory federal tax rate for the year
ending June 30, 2018 from 35.0% to 28.1%
- the reduction of our statutory federal tax rate for the year
ending June 30, 2019 to 21.0%; and
- the revaluation of our deferred income tax liabilities as of
December 22, 2017 based on the aforementioned tax rates.
- Net Income was $0.6 million, or $0.01 per diluted share,
compared to a net loss of $15.0 million, or $(0.20) per diluted
share, in the prior year period. The increase was comprised of the
following:
- the favorable impact of lower interest expense in the third
quarter, attributable to (1) the redemption and retirement of
senior and subordinated notes in connection with our March 2017
initial public offering, (2) the impact of the 2018 Refinancing
(described below), and (3) the impact of voluntary prepayments of
our term loan facility,
- lower transaction costs as compared to the prior year period,
and the favorable impact of Tax Reform as described above.
- Adjusted EBITDA decreased $3.7 million, or 7.0%, to $49.0
million compared to $52.7 million for the prior year period, driven
by gross margin percent contraction and an increase in selling,
general and administrative expenses excluding share-based
compensation expense. Adjusted EBITDA in the prior year period
benefited from lower incentive compensation to employees that did
not reoccur in the current year period. Adjusted EBITDA margin was
7.4% as compared to 8.4% in the prior year period.
- Pro Forma Adjusted Net Income increased $0.1 million, or 0.4%,
to $26.9 million, or $0.28 per diluted share, compared to $26.8
million, or $0.28 per diluted share, in the prior year period,
driven by the favorable impact of Tax Reform and lower pro-forma
interest expense.
Financial Highlights for the Nine Months Ended
March 31, 2018
- Total Revenue increased $3.4 million, or 0.2%, to $2,091.7
million, compared to $2,088.3 million in the prior year period.
Total Revenue growth was negatively impacted by a decline in sales
to the federal government, the impact of a higher proportion of our
revenue being recognized over time, a 19% increase in backlog
orders believed to be firm as of March 31, 2018 compared to the
prior year period, partially offset by the 23.3% growth of Security
solutions and a higher proportion of services as part of our
solutions. Our growth in backlog includes increasing demand for
recurring revenue solutions such as public cloud and managed
services offerings.
- Digital Infrastructure revenue decreased 1.9% to $1,466.9
million, compared to $1,495.5 million in the prior year period.
Government clients, including federal as well as state and local
governments, experienced the most pronounced decline in core
infrastructure solutions.
- Cloud revenue decreased 5.6% to $346.6 million, compared to
$367.1 million in the prior year period, driven by a combination of
overall market softness experienced by our primary OEM in the
space, a very strong third quarter fiscal 2017 where we achieved
52% growth driven by a number of large data center modernization
projects that did not reoccur, and the migration of clients to
public cloud instances as part of a multi-cloud solution,
where revenue is recognized over time.
- Security revenue increased 23.3% to $278.2 million, compared to
$225.7 million in the prior year period as the continued disclosure
of high-profile data security breaches by companies without
sufficient security protection have driven strong demand for our
security solutions. We have experienced broad-based growth
across our portfolio of security services and technology partners
driven by higher demand across all of our market segments
particularly in the mid-market and large sector.
- Total Gross Margin decreased $0.4 million, or 0.1%, to $433.2
million, compared to $433.6 million in the prior year period. Total
Gross Margin as a percent of Total Revenue contracted to 20.7% from
20.8% in the prior year period. The decline in total margins was
driven by lower services margins as a percent of service revenue,
mostly offset by higher product margins.
- Income tax benefit was $83.5 million, compared to an income tax
benefit of $9.6 million in the prior year period. The increase was
driven by the $92.4 million tax benefit associated with the
revaluation of our net deferred income tax liabilities using our
new federal tax rate of 28.1% for the year ending June 30, 2018 as
a result of Tax Reform.
- Net Income was $119.5 million, or $1.24 per diluted share,
compared to a net loss of $6.0 million, or $(0.08) per diluted
share, in the prior year period. We benefited from the following:
- the impact of Tax Reform as described above,
- a decline in transaction costs, as compared to the prior year,
and
- lower interest expense, attributable to (1) the redemption and
retirement of senior and subordinated notes in connection with our
March 2017 initial public offering, (2) the impact of the 2018
Refinancing, and (3) the impact of voluntary prepayments of our
term loan facility.
- Adjusted EBITDA increased $0.1 million, or 0.1%, to $165.8
million, from $165.7 million in the prior year period. Adjusted
EBITDA margin was 7.9%, or flat as compared to the prior year
period.
- Pro Forma Adjusted Net Income increased $8.8 million, or 10.4%,
to $93.2 million, or $0.97 per diluted share, compared to $84.4
million, or $0.89 per diluted share, in the prior year period. The
increase was attributable to the positive impact of Tax Reform and
lower interest expense in the nine months ended March 31,
2018.
Capital Resources and Free Cash Flow
- On January 5, 2018, the Company completed certain refinancing
transactions (the “2018 Refinancing”) consisting of:
- refinancing all $576.6 million in aggregate principal amount of
term loans outstanding under our existing credit agreement (the
“Existing Term Loans”) and borrowing $140.0 million in aggregate
principal amount of incremental term loans, in each case with new
term loans (the “New Term Loans”) under our existing credit
agreement, which New Term Loans have an interest rate margin that
is 0.50% lower than the interest margin applicable to the Existing
Term Loans and a maturity date in 2024 (two years later than the
maturity date of the Existing Term Loans); and
- applying the proceeds from the New Term Loans to (i) refinance
all of the Existing Term Loans, (ii) redeem all of the $125.0
million outstanding aggregate principal amount of Presidio
Holdings, Inc.'s 10.25% senior notes due 2023 (the “senior notes”),
and (iii) pay the redemption premium on the senior notes, accrued
and unpaid interest, and other fees and expenses payable in
connection with the foregoing.
- Subsequent to the 2018 Refinancing, the Company voluntarily
prepaid $25.0 million in aggregate principal amount of the New Term
Loans. This is consistent with our plan to reduce debt to target
levels. As we approach our target debt levels we will look at all
available options to efficiently deploy our cash, including further
debt pay downs, additional tuck-in acquisitions, and other capital
allocation priorities such as share repurchases or dividends.
- As of March 31, 2018, the Company had cash and cash equivalents
of $24.9 million, total long-term debt of $691.6 million comprised
entirely of our term loan facility, and total net debt (defined as
the total principal of debt outstanding, excluding discounts and
issuance costs less cash and cash equivalents) of $666.7 million,
representing 2.9x net total leverage (defined as total net debt
divided by trailing twelve month Adjusted EBITDA).
- For the three months ended March 31, 2018, the Company
generated Free Cash Flow of $25.9 million, an increase of 47.2% or
$8.3 million, compared to $17.6 million in the prior year period.
The increase in Free Cash Flow was driven primarily by lower cash
interest expense, partly offset by an increase in working capital
primarily related to higher prepaid expenses, which includes higher
prepaid income taxes and higher deferred product costs related to
recurring revenue projects.
- For the nine months ended March 31, 2018, the Company generated
Free Cash Flow of $74.5 million, an increase of 18.1% or $11.4
million, compared to $63.1 million in the prior year period. The
increase in Free Cash Flow was driven by higher operating cash flow
and higher Net Income in the period, mostly offset by the
unfavorable impact of the timing of cash flows associated with the
leasing business and higher prepaid income taxes in the current
period as compared to the prior year period.
Business Outlook
We have revised our outlook for the fiscal year ending June 30,
2018 as follows:
- Total Revenue growth is expected to be in the low single-digit
range;
- Adjusted EBITDA margin is expected to be in the high 7%
range;
- Pro Forma Diluted EPS is expected to grow in the mid to high
single-digit range;
- Net total leverage is expected to be 3.0x at the end of our
fiscal year 2018, including the impact of the Red Sky
acquisition.
About Non-GAAP and Pro Forma Financial
Measures
Our management regularly monitors certain
financial measures to track the progress of our business against
internal goals and targets. In addition to financial information
presented in accordance with GAAP, management uses Adjusted EBITDA,
Adjusted Net Income, Pro Forma Adjusted Net Income, Pro Forma
Diluted EPS and Free Cash Flow (collectively, “non-GAAP measures,”
as further described below) in its evaluation of past performance
and prospects for the future. These non-GAAP measures should be
considered in addition to, not as a substitute for, or superior to,
financial measures calculated in accordance with GAAP. They are not
measurements of our financial performance under GAAP and should not
be considered as alternatives to net income or revenue, as
applicable, or any other performance measures derived in accordance
with GAAP and may not be comparable to other similarly titled
measures of other businesses. These non-GAAP measures have
limitations as analytical tools and you should not consider them in
isolation or as a substitute for analysis of our operating results
as reported under GAAP and they include adjustments for items that
may occur in future periods. However, we believe these adjustments
are appropriate because the amounts recognized can vary
significantly from period to period, do not directly relate to the
ongoing operations of our business and complicate comparisons of
our internal operating results and operating results of other peer
companies over time.
We also adjust certain historical data on a pro
forma basis following certain significant transactions.
Specifically, we have provided a calculation of Pro Forma Adjusted
Net Income to adjust our reported results for the three and nine
months ended March 31, 2017 for:
- lower after-tax interest expense associated with the redemption
and repurchase of notes as part of our IPO as if the IPO occurred
on July 1, 2016;
- lower after-tax interest expense associated with the term loan
repricing that occurred in January 2017 as if the repricing
occurred on July 1, 2016; and
- lower after-tax interest expense associated with the redemption
of the senior notes in connection with the 2018 Refinancing as if
the redemption occurred on July 1, 2016.
The calculation of Pro Forma Adjusted Net Income for the three
and nine months ended March 31, 2018 includes adjustments for:
- lower after-tax interest expense associated with the redemption
of the senior notes in connection with the 2018 Refinancing as if
the redemption occurred on July 1, 2016; and
- lower after-tax interest expense associated with the term loan
repricing as part of the 2018 Refinancing as if it occurred on July
1, 2017.
Pro Forma Adjusted Net Income is for
illustrative and informational purposes and is not intended to
represent or be indicative of what our financial condition or
results of operations would have been had the transactions occurred
on the dates indicated. Pro Forma Adjusted Net Income should not be
considered representative of our future financial condition or
results of operations.
Conference Call Information
We have scheduled a conference call
for Thursday, May 10, 2018, at 5:00 p.m. Eastern Time to
discuss our financial results for the fiscal third quarter ended
March 31, 2018. Financial results will be released after the
close of the U.S. financial markets on May 10, 2018.
Those wishing to participate via webcast should access the call
through Presidio's Investor Relations website at
http://investors.presidio.com. Those wishing to participate via
telephone may dial in at 1-877-407-4018 (USA) or 1-201-689-8471
(International). The conference call replay will be available via
webcast through Presidio's Investor Relations website. The
telephone replay will be available from 8:00 p.m. Eastern Time on
May 10, 2018, through May 17, 2018, by dialing 1-844-512-2921 (USA)
or 1-412-317-6671 (International). The replay passcode will be
13679142.
About Presidio
Presidio is a leading North American IT solutions provider
focused on Digital Infrastructure, Cloud and Security solutions. We
deliver this technology expertise through a full life cycle model
of professional, managed, and support services including strategy,
consulting, implementation and design. By taking the time to deeply
understand how our clients define success, we help them harness
technology advances, simplify IT complexity and optimize their
environments today while enabling future applications, user
experiences, and revenue models. As of June 30, 2017, we serve
approximately 7,500 middle-market, large, and government
organizations across a diverse range of industries. More than 2,700
Presidio professionals, including more than 1,500 technical
engineers, are based in 60+ offices across the United States in a
unique, local delivery model combined with the national scale of a
$2.8 billion dollar industry leader. We are passionate about
driving results for our clients and delivering the highest quality
of service in the industry. Presidio is controlled by funds
affiliated with Apollo Global Management, LLC (NYSE:APO). For more
information visit: www.presidio.com.
Source: Presidio, Inc.
Contact Information
Investor Relations Contact:Ed
Yuen866-232-3762investors@presidio.com
Media Contact:Dori WhiteVice President of Corporate
Marketing212-324-4301doriwhite@presidio.com
Safe Harbor Statement Under the Private
Securities Litigation Reform Act of 1995
This press release contains “forward looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. The use of words such as “anticipates,”
“expects,” “intends,” “plans” and “believes,” among others,
generally identify forward-looking statements. These
forward-looking statements include statements relating to: future
financial performance, business prospects and strategy, anticipated
trends, prospects in the industries in which our businesses operate
and other similar matters. These forward looking statements are
based on management’s current expectations and assumptions about
future events, which are inherently subject to uncertainties, risks
and changes in circumstances that are difficult to predict. Actual
results could differ materially from those contained in these
forward looking statements for a variety of reasons, including,
among others: risks and uncertainties related to the capital
markets, changes in senior management at Presidio, changes in our
relationship with our vendor partners, adverse changes in economic
conditions, risks resulting from a decreased demand for Presidio’s
information technology solutions, risks relating to rapid
technological change in Presidio’s industry, risks relating to the
inability to realize the full amount of our backlog and risks
relating to acquisitions or regulatory changes. Certain of these
and other risks and uncertainties are discussed in Presidio’s
filings with the Securities and Exchange Commission. Other unknown
or unpredictable factors that could also adversely affect our
business, financial condition and results of operations may arise
from time to time. In light of these risks and uncertainties, these
forward looking statements may not prove to be accurate.
Accordingly, you should not place undue reliance on these forward
looking statements, which only reflect the views of our management
as of the date of this press release. We do not undertake to update
these forward-looking statements.
Non-GAAP Reconciliations
The reconciliation of Adjusted EBITDA from Net
Income (Loss) for each of the periods presented is as follows:
| |
|
|
|
|
| |
|
Three months ended March 31, |
|
Nine months ended March 31, |
| (in
millions) |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
| Adjusted EBITDA
reconciliation: |
|
|
|
|
|
|
|
|
| Net Income (loss) |
|
$ |
(15.0 |
) |
|
$ |
0.6 |
|
|
$ |
(6.0 |
) |
|
$ |
119.5 |
|
| Total
depreciation and amortization (1) |
|
21.7 |
|
|
22.1 |
|
|
65.3 |
|
|
66.6 |
|
| Interest
and other (income) expense |
|
45.3 |
|
|
23.3 |
|
|
87.8 |
|
|
49.8 |
|
| Income
tax benefit |
|
(15.9 |
) |
|
(5.6 |
) |
|
(9.6 |
) |
|
(83.5 |
) |
| EBITDA |
|
36.1 |
|
|
40.4 |
|
|
137.5 |
|
|
152.4 |
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
Share-based compensation expense |
|
7.9 |
|
|
3.1 |
|
|
8.9 |
|
|
5.6 |
|
| Purchase
accounting adjustments (2) |
|
0.2 |
|
|
0.1 |
|
|
0.9 |
|
|
0.3 |
|
|
Transaction costs (3) |
|
8.5 |
|
|
4.2 |
|
|
14.5 |
|
|
6.3 |
|
| Other
costs (4) |
|
— |
|
|
1.2 |
|
|
3.9 |
|
|
1.2 |
|
| Total adjustments |
|
16.6 |
|
|
8.6 |
|
|
28.2 |
|
|
13.4 |
|
| Adjusted EBITDA |
|
$ |
52.7 |
|
|
$ |
49.0 |
|
|
$ |
165.7 |
|
|
$ |
165.8 |
|
| Adjusted EBITDA %
(5) |
|
8.4 |
% |
|
7.4 |
% |
|
7.9 |
% |
|
7.9 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes depreciation and amortization included within total
operating expenses and cost of
revenue. (2)
Includes noncash adjustments associated with purchase accounting
(including inventory step up, deferred revenue step down and
revaluation of deferred rent).
(3) Includes transaction-related expenses such as: stay and
retention bonuses, transaction-related advisory and diligence fees,
transaction-related legal, accounting and tax fees and other
transaction-related items.
(4) Includes certain non-recurring costs incurred in the
development of our new cloud service offerings and severance
charges associated with the retirement of our former Chief
Financial Officer.
(5) Adjusted EBITDA % represents the ratio of Adjusted EBITDA to
Total Revenue.
The reconciliation of Adjusted Net Income and
Pro Forma Adjusted Net Income from Net Income (Loss) for each of
the periods presented is as follows:
| |
|
|
|
|
| |
|
Three months ended March 31, |
|
Nine months ended March 31, |
| (in
millions) |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
| Adjusted Net Income
reconciliation: |
|
|
|
|
|
|
|
|
| Net Income (loss) |
|
$ |
(15.0 |
) |
|
$ |
0.6 |
|
|
$ |
(6.0 |
) |
|
$ |
119.5 |
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
18.4 |
|
|
18.3 |
|
|
55.2 |
|
|
55.5 |
|
|
Amortization of debt issuance costs |
|
1.7 |
|
|
1.0 |
|
|
5.1 |
|
|
3.6 |
|
| Loss on
extinguishment of debt |
|
26.9 |
|
|
13.3 |
|
|
27.7 |
|
|
14.8 |
|
|
Share-based compensation expense |
|
7.9 |
|
|
3.1 |
|
|
8.9 |
|
|
5.6 |
|
| Purchase
accounting adjustments |
|
0.2 |
|
|
0.1 |
|
|
0.9 |
|
|
0.3 |
|
|
Transaction costs |
|
8.5 |
|
|
4.2 |
|
|
14.5 |
|
|
6.3 |
|
| Other
costs |
|
— |
|
|
1.2 |
|
|
3.9 |
|
|
1.2 |
|
|
Revaluation of federal deferred taxes |
|
— |
|
|
(3.2 |
) |
|
— |
|
|
(92.4 |
) |
| Income
tax impact of adjustments (1) |
|
(25.8 |
) |
|
(11.8 |
) |
|
(40.4 |
) |
|
(24.5 |
) |
| Total adjustments |
|
37.8 |
|
|
26.2 |
|
|
75.8 |
|
|
(29.6 |
) |
| Adjusted
Net Income |
|
22.8 |
|
|
26.8 |
|
|
69.8 |
|
|
89.9 |
|
| Pro Forma
Adjustments: |
|
|
|
|
|
|
|
|
| Interest
on notes repaid in IPO |
|
3.7 |
|
|
— |
|
|
14.4 |
|
|
— |
|
| Interest
on 2017 term loan repricing |
|
1.2 |
|
|
— |
|
|
4.7 |
|
|
— |
|
| Interest
on notes redeemed, net savings |
|
1.6 |
|
|
0.1 |
|
|
4.9 |
|
|
3.3 |
|
| Interest
on 2018 term loan repricing |
|
— |
|
|
0.1 |
|
|
— |
|
|
1.7 |
|
| Income
tax impact of adjustments |
|
(2.5 |
) |
|
(0.1 |
) |
|
(9.4 |
) |
|
(1.7 |
) |
| Total Pro Forma
adjustments |
|
4.0 |
|
|
0.1 |
|
|
14.6 |
|
|
3.3 |
|
| Pro Forma
Adjusted Net Income |
|
$ |
26.8 |
|
|
$ |
26.9 |
|
|
$ |
84.4 |
|
|
$ |
93.2 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes an estimated tax impact of the adjustments to Net
Income at our average statutory rate to arrive at an appropriate
effective tax rate on Adjusted Net Income, except for (i) the
adjustment of certain transaction costs that are permanently
nondeductible for tax purposes and (ii) the impact of
tax-deductible goodwill and intangible assets resulting from
certain historical acquisitions and further adjusted for discrete
tax items such as: the tax benefit associated with excess stock
compensation deductions, the remeasurement of deferred tax
liabilities due to state rate changes or the excess tax benefit
related to shared-based compensation activity.
The reconciliation of Pro Forma weighted-average
shares - diluted and Pro Forma Diluted EPS from GAAP
weighted-average shares for each of the periods presented is as
follows:
| |
|
|
|
|
| |
|
Three months ended March 31, |
|
Nine months ended March 31, |
| |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
| Share count: |
|
|
|
|
|
|
|
|
| Weighted-average shares
– basic |
|
75,374,606 |
|
|
92,015,710 |
|
|
73,064,789 |
|
|
91,629,703 |
|
| Dilutive
effect of stock options |
|
— |
|
|
4,901,072 |
|
|
— |
|
|
4,938,180 |
|
| Weighted-average shares
– diluted |
|
75,374,606 |
|
|
96,916,782 |
|
|
73,064,789 |
|
|
96,567,883 |
|
| Pro Forma
shares issued at IPO (1) |
|
15,361,675 |
|
|
— |
|
|
17,648,103 |
|
|
— |
|
| Dilutive
impact of stock options (2) |
|
4,602,512 |
|
|
— |
|
|
3,981,394 |
|
|
— |
|
| Pro Forma
weighted-average shares – diluted |
|
95,338,793 |
|
|
96,916,782 |
|
|
94,694,286 |
|
|
96,567,883 |
|
| |
|
|
|
|
|
|
|
|
| Diluted
EPS |
|
$ |
(0.20 |
) |
|
$ |
0.01 |
|
|
$ |
(0.08 |
) |
|
$ |
1.24 |
|
| Pro Forma
Diluted EPS |
|
$ |
0.28 |
|
|
$ |
0.28 |
|
|
$ |
0.89 |
|
|
$ |
0.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes an adjustment to reflect the shares issued in the
March 2017 IPO as if the IPO occurred at the beginning of the
period that are not already reflected in the basic weighted-average
shares presented.(2) Includes an adjustment to reflect the dilutive
impact of outstanding stock options on Pro Forma Adjusted Net
Income that were excluded from the calculation for GAAP purposes as
anti-dilutive due to the GAAP net loss in the period.
We define free cash flow as our net cash
provided by operating activities adjusted to include: (i) the
impact of net borrowings (repayments) on the floor plan facility,
(ii) the aggregate net cash impact of our leasing business and
(iii) the purchases of property and equipment.
The following table presents the aggregate net
cash impact of our leasing business for the three and nine months
ended March 31, 2017 and 2018 (in millions):
| |
|
|
|
|
| |
|
Three months ended March 31, |
|
Nine months ended March 31, |
| (in
millions) |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
| Additions of equipment
under sales-type and direct financing leases |
|
$ |
(12.4 |
) |
|
$ |
(30.9 |
) |
|
$ |
(76.3 |
) |
|
$ |
(80.6 |
) |
| Proceeds from
collection of financing receivables |
|
1.1 |
|
|
0.8 |
|
|
8.8 |
|
|
3.0 |
|
| Additions to equipment
under operating leases |
|
(0.8 |
) |
|
(0.3 |
) |
|
(1.6 |
) |
|
(1.5 |
) |
| Proceeds from
disposition of equipment under operating leases |
|
0.9 |
|
|
— |
|
|
1.4 |
|
|
0.7 |
|
| Proceeds from the
discounting of financing receivables |
|
20.4 |
|
|
34.5 |
|
|
86.5 |
|
|
81.5 |
|
| Retirements of
discounted financing receivables |
|
(0.1 |
) |
|
(3.2 |
) |
|
(4.4 |
) |
|
(5.7 |
) |
| Aggregate
net cash impact of leasing business |
|
$ |
9.1 |
|
|
$ |
0.9 |
|
|
$ |
14.4 |
|
|
$ |
(2.6 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents reconciliation of
Free Cash Flow from net cash provided by operating activities for
the three and nine months ended March 31, 2017 and 2018 (in
millions):
| |
|
|
|
|
| |
|
Three months ended March 31, |
|
Nine months ended March 31, |
| (in
millions) |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
| Net cash provided by
operating activities |
|
$ |
13.0 |
|
|
$ |
18.1 |
|
|
$ |
96.3 |
|
|
$ |
142.7 |
|
| Adjustments to
reconcile to Free Cash Flow: |
|
|
|
|
|
|
|
|
| Net
change in accounts payable - floor plan |
|
(2.3 |
) |
|
10.2 |
|
|
(38.7 |
) |
|
(55.1 |
) |
| Aggregate
net cash impact of leasing business |
|
9.1 |
|
|
0.9 |
|
|
14.4 |
|
|
(2.6 |
) |
| Purchases
of property and equipment |
|
(2.2 |
) |
|
(3.3 |
) |
|
(8.9 |
) |
|
(10.5 |
) |
| Total adjustments |
|
4.6 |
|
|
7.8 |
|
|
(33.2 |
) |
|
(68.2 |
) |
| Free Cash Flow |
|
$ |
17.6 |
|
|
$ |
25.9 |
|
|
$ |
63.1 |
|
|
$ |
74.5 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| PRESIDIO, INC.Consolidated
Balance Sheets(in millions, except share
data) |
| |
| |
|
As of June 30, 2017 |
|
As of March 31, 2018 |
|
Assets |
|
|
|
|
| Current Assets |
|
|
|
|
| Cash and
cash equivalents |
|
$ |
27.5 |
|
|
$ |
24.9 |
|
| Accounts
receivable, net |
|
576.3 |
|
|
574.5 |
|
| Unbilled
accounts receivable, net |
|
159.8 |
|
|
152.0 |
|
| Financing
receivables, current portion |
|
84.2 |
|
|
85.4 |
|
|
Inventory |
|
27.7 |
|
|
26.8 |
|
| Prepaid
expenses and other current assets |
|
63.4 |
|
|
89.0 |
|
| Total
current assets |
|
938.9 |
|
|
952.6 |
|
| Property and equipment,
net |
|
32.1 |
|
|
33.9 |
|
| Financing receivables,
less current portion |
|
113.6 |
|
|
116.7 |
|
| Goodwill |
|
781.5 |
|
|
784.1 |
|
| Identifiable intangible
assets, net |
|
751.9 |
|
|
700.7 |
|
| Other assets |
|
32.7 |
|
|
31.4 |
|
| Total
assets |
|
$ |
2,650.7 |
|
|
$ |
2,619.4 |
|
| Liabilities and
Stockholders’ Equity |
|
|
|
|
| Current
Liabilities |
|
|
|
|
| Current
maturities of long-term debt |
|
$ |
— |
|
|
$ |
— |
|
| Accounts
payable – trade |
|
350.5 |
|
|
427.1 |
|
| Accounts
payable – floor plan |
|
264.9 |
|
|
209.8 |
|
| Accrued
expenses and other current liabilities |
|
216.3 |
|
|
174.1 |
|
|
Discounted financing receivables, current portion |
|
79.9 |
|
|
81.5 |
|
| Total
current liabilities |
|
911.6 |
|
|
892.5 |
|
| Long-term debt, net of
debt issuance costs and current maturities |
|
730.7 |
|
|
675.4 |
|
| Discounted financing
receivables, less current portion |
|
104.7 |
|
|
105.7 |
|
| Deferred income tax
liabilities |
|
270.4 |
|
|
182.4 |
|
| Other liabilities |
|
30.4 |
|
|
29.5 |
|
| Total
liabilities |
|
2,047.8 |
|
|
1,885.5 |
|
| Commitments and
contingencies |
|
|
|
|
| Stockholders’
Equity |
|
|
|
|
| Preferred stock: |
|
|
|
|
| $0.01 par
value; 100 shares authorized and zero shares issued and outstanding
at March 31,2018 and June 30, 2017 |
|
— |
|
|
— |
|
| Common stock: |
|
|
|
|
| $0.01 par
value; 250,000,000 shares authorized, 92,238,809 shares issued and
outstanding atMarch 31, 2018 and 90,969,919 shares issued and
outstanding at June 30, 2017 |
|
0.9 |
|
|
0.9 |
|
|
Additional paid-in capital |
|
625.3 |
|
|
636.8 |
|
| Retained
earnings (accumulated deficit) |
|
(23.3 |
) |
|
96.2 |
|
| Total
stockholders’ equity |
|
602.9 |
|
|
733.9 |
|
| Total
liabilities and stockholders’ equity |
|
$ |
2,650.7 |
|
|
$ |
2,619.4 |
|
| |
|
|
|
|
|
|
|
|
| PRESIDIO, INC.Consolidated
Statements of Operations(in millions, except share
and per-share data) |
|
|
| |
|
Three months ended March 31, |
|
Nine months ended March 31, |
| |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
| Revenue |
|
|
|
|
|
|
|
|
|
Product |
|
$ |
519.1 |
|
|
$ |
545.2 |
|
|
$ |
1,757.8 |
|
|
$ |
1,714.1 |
|
|
Service |
|
109.7 |
|
|
119.9 |
|
|
330.5 |
|
|
377.6 |
|
| Total
Revenue |
|
628.8 |
|
|
665.1 |
|
|
2,088.3 |
|
|
2,091.7 |
|
| Cost of revenue |
|
|
|
|
|
|
|
|
|
Product |
|
403.8 |
|
|
429.7 |
|
|
1,394.9 |
|
|
1,359.3 |
|
|
Service |
|
82.9 |
|
|
96.0 |
|
|
259.8 |
|
|
299.2 |
|
| Total
cost of revenue |
|
486.7 |
|
|
525.7 |
|
|
1,654.7 |
|
|
1,658.5 |
|
|
Gross margin |
|
142.1 |
|
|
139.4 |
|
|
433.6 |
|
|
433.2 |
|
| Operating expenses |
|
|
|
|
|
|
|
|
| Selling
expenses |
|
70.8 |
|
|
70.2 |
|
|
204.9 |
|
|
201.0 |
|
| General
and administrative expenses |
|
27.9 |
|
|
26.1 |
|
|
80.7 |
|
|
77.8 |
|
|
Transaction costs |
|
8.5 |
|
|
4.2 |
|
|
14.5 |
|
|
6.3 |
|
|
Depreciation and amortization |
|
20.5 |
|
|
20.6 |
|
|
61.3 |
|
|
62.3 |
|
| Total
operating expenses |
|
127.7 |
|
|
121.1 |
|
|
361.4 |
|
|
347.4 |
|
|
Operating income |
|
14.4 |
|
|
18.3 |
|
|
72.2 |
|
|
85.8 |
|
| Interest and other
(income) expense |
|
|
|
|
|
|
|
|
| Interest
expense |
|
18.3 |
|
|
10.1 |
|
|
59.9 |
|
|
35.3 |
|
| Loss on
extinguishment of debt |
|
26.9 |
|
|
13.3 |
|
|
27.7 |
|
|
14.8 |
|
| Other
(income) expense, net |
|
0.1 |
|
|
(0.1 |
) |
|
0.2 |
|
|
(0.3 |
) |
| Total
interest and other (income) expense |
|
45.3 |
|
|
23.3 |
|
|
87.8 |
|
|
49.8 |
|
|
Income (loss) before income taxes |
|
(30.9 |
) |
|
(5.0 |
) |
|
(15.6 |
) |
|
36.0 |
|
| Income tax benefit |
|
(15.9 |
) |
|
(5.6 |
) |
|
(9.6 |
) |
|
(83.5 |
) |
|
Net Income (loss) |
|
$ |
(15.0 |
) |
|
$ |
0.6 |
|
|
$ |
(6.0 |
) |
|
$ |
119.5 |
|
| Earnings (loss) per
share: |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.20 |
) |
|
$ |
0.01 |
|
|
$ |
(0.08 |
) |
|
$ |
1.30 |
|
|
Diluted |
|
$ |
(0.20 |
) |
|
$ |
0.01 |
|
|
$ |
(0.08 |
) |
|
$ |
1.24 |
|
| Weighted-average common
shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
75,374,606 |
|
|
92,015,710 |
|
|
73,064,789 |
|
|
91,629,703 |
|
|
Diluted |
|
75,374,606 |
|
|
96,916,782 |
|
|
73,064,789 |
|
|
96,567,883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| PRESIDIO, INC.Consolidated
Statements of Cash Flows(in
millions) |
|
|
| |
|
Three months ended March 31, |
|
Nine months ended March 31, |
| |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
|
Net cash provided by operating
activities |
|
$ |
13.0 |
|
|
$ |
18.1 |
|
|
$ |
96.3 |
|
|
$ |
142.7 |
|
| Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
|
Acquisition of businesses, net of cash and cash equivalents
acquired |
|
— |
|
|
— |
|
|
— |
|
|
(9.5 |
) |
| Proceeds
from collection of escrow related to acquisition of
business |
|
— |
|
|
— |
|
|
0.6 |
|
|
0.2 |
|
| Additions
of equipment under sales-type and direct financing
leases |
|
(12.4 |
) |
|
(30.9 |
) |
|
(76.3 |
) |
|
(80.6 |
) |
| Proceeds
from collection of financing receivables |
|
1.1 |
|
|
0.8 |
|
|
8.8 |
|
|
3.0 |
|
| Additions
to equipment under operating leases |
|
(0.8 |
) |
|
(0.3 |
) |
|
(1.6 |
) |
|
(1.5 |
) |
| Proceeds
from disposition of equipment under operating leases |
|
0.9 |
|
|
— |
|
|
1.4 |
|
|
0.7 |
|
| Purchases
of property and equipment |
|
(2.2 |
) |
|
(3.3 |
) |
|
(8.9 |
) |
|
(10.5 |
) |
|
Net cash used in investing
activities |
|
(13.4 |
) |
|
(33.7 |
) |
|
(76.0 |
) |
|
(98.2 |
) |
| Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
| Proceeds
from initial public offering, net of underwriterdiscounts and
commissions |
|
247.5 |
|
|
— |
|
|
247.5 |
|
|
— |
|
| Payment
of initial public offering costs |
|
(0.7 |
) |
|
— |
|
|
(0.7 |
) |
|
— |
|
| Proceeds
from issuance of common stock under share-based compensation
plans |
|
0.5 |
|
|
1.4 |
|
|
0.6 |
|
|
5.9 |
|
| Proceeds
from the discounting of financing receivables |
|
20.4 |
|
|
34.5 |
|
|
86.5 |
|
|
81.5 |
|
|
Retirements of discounted financing receivables |
|
(0.1 |
) |
|
(3.2 |
) |
|
(4.4 |
) |
|
(5.7 |
) |
| Net
repayments on the receivables securitization facility |
|
— |
|
|
— |
|
|
(5.0 |
) |
|
— |
|
| Deferred
financing costs |
|
— |
|
|
(0.6 |
) |
|
— |
|
|
(1.2 |
) |
|
Redemptions and repurchases of senior and subordinated
notes |
|
(230.8 |
) |
|
(135.7 |
) |
|
(230.8 |
) |
|
(135.7 |
) |
|
Borrowings on term loans, net of original issue discount |
|
— |
|
|
138.2 |
|
|
— |
|
|
138.2 |
|
|
Repayments of term loans |
|
(51.8 |
) |
|
(25.0 |
) |
|
(80.5 |
) |
|
(75.0 |
) |
| Net
change in accounts payable — floor plan |
|
(2.3 |
) |
|
10.2 |
|
|
(38.7 |
) |
|
(55.1 |
) |
|
Net cash provided by (used in)
financing activities |
|
(17.3 |
) |
|
19.8 |
|
|
(25.5 |
) |
|
(47.1 |
) |
|
Net increase (decrease) in cash and
cash equivalents |
|
(17.7 |
) |
|
4.2 |
|
|
(5.2 |
) |
|
(2.6 |
) |
| Cash and cash
equivalents: |
|
|
|
|
|
|
|
|
| Beginning
of the period |
|
45.5 |
|
|
20.7 |
|
|
33.0 |
|
|
27.5 |
|
| End of
the period |
|
$ |
27.8 |
|
|
$ |
24.9 |
|
|
$ |
27.8 |
|
|
$ |
24.9 |
|
| Supplemental
disclosures of cash flow information |
|
|
|
|
|
|
|
|
| Cash paid during the
period for: |
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
31.3 |
|
|
$ |
13.4 |
|
|
$ |
68.7 |
|
|
$ |
36.0 |
|
| Income
taxes, net of refunds |
|
$ |
0.9 |
|
|
$ |
7.0 |
|
|
$ |
2.6 |
|
|
$ |
29.9 |
|
| Reduction of discounted
lease assets and liabilities |
|
$ |
21.7 |
|
|
$ |
26.6 |
|
|
$ |
65.3 |
|
|
$ |
80.2 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Presidio (NASDAQ:PSDO)
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From Mar 2024 to Apr 2024
Presidio (NASDAQ:PSDO)
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From Apr 2023 to Apr 2024
