12 Things To Know About Presidio's IPO Filing

Presidio Becoming Public

Solution provider powerhouse Presidio took center stage in the channel world Tuesday by filing an initial public offering with the U.S. Securities and Exchange Commission. Within the S-1 Form filed with the SEC was a slew of previously guarded information from the privately held New York-based $2.7 billion company, ranked No. 22 on CRN's 2016 Solution Provider 500 list.

Presidio's IPO is expected to take place next year and be valued as much as $3 billion, with Renaissance Capital -- an IPO research and investment management company -- estimating that the IPO could raise $400 million.

Here are 12 key things to know about Presidio's IPO filing.

Competitors Include Accenture, CDW, Dimension Data

One risk factor Presidio said in the filing is that "substantial competition" could reduce its market share and "significantly harm" financials. Presidio lists competitors including large systems integrators and resellers such as Accenture, Dimension Data and Computer Sciences Corp., as well as VARs such as CDW and ePlus.

In addition, Presidio expressed concerns that "some of our hardware and software vendor partners sell and could intensify their efforts to sell their products directly to our clients."

Expect More Acquisitions

Since 2004, Presidio has acquired and integrated 10 companies, including Cisco networking specialist Netech and cloud consulting, engineering and integration firm Sequoia Worldwide.

"We expect to continue to selectively pursue acquisition opportunities within the highly fragmented IT solutions market," according to the filing. "We believe that our M&A strategy enhances and augments all of our growth avenues, including gaining capabilities, cross-selling to our existing clients and entering new markets and verticals."

7,000 Customers; 95 Percent Retention

Presidio reported having 7,000 midmarket, enterprise and government clients. The company generated approximately 70 percent of its fiscal year 2016 revenue from the midmarket, 17 percent from government agencies and 13 percent from enterprises.

In addition, Presidio said it has a 95 percent retention rate for repeating revenue clients over the past three years.

The company has more than 2,800 employees including 1,600 engineers and more than 500 sales professionals.

'Heavily Concentrated' On Cisco

For fiscal year 2016, Cisco provided products that made up 67 percent of Presidio's purchases from all manufacturers, while EMC provided products that constituted 10 percent, according to the SEC filing. The company's other significant vendor partners are VMware and VCE, which provided hardware products that generated 2 percent and 1 percent, respectively, of their purchases in fiscal year 2016.

Presidio's portfolio "has been heavily concentrated in Cisco products," according to the filing.

Health Care, Financial Services Top Verticals

Looking at fiscal year 2016 revenue, Presidio's top revenue-driving vertical was health care, representing 20 percent of sales for the fiscal year. The second top vertical was financial services at 14 percent, followed by education and local government, each at 11 percent. Professional services accounted for 9 percent of revenue for fiscal year 2016, followed by manufacturing at 8 percent and media at 6 percent.

Product King Over (Rising) Services

Presidio's annual product revenue for fiscal year 2016 was $2.32 billion, up 13 percent compared with fiscal year 2015. Annual services sales increased 20 percent to $395 million year over year.

Infrastructure Leading The Way, Cloud 15 Percent Of Business

Digital infrastructure has been the primary revenue driver for the New York-based solution provider, which generated $2.07 billion in sales for fiscal year 2016.

The company's annual cloud sales, which were up 34 percent to $391 million in fiscal year 2016, made up 14 percent of annual sales. Security revenue, which was up 60 percent to $250 million for the fiscal year, represented 9 percent of Presidio's annual sales.

Cloud Concern

One of the risk factors noted in the SEC filing is the potential loss of product revenue as cloud services becoming a bigger factor in the IT market.

"Cloud offerings may influence our customers to move workloads to cloud providers, which may reduce the procurement of products and solutions from us," according to the filing.

Midmarket Is Primary Focus

The company said its primary sales focus is "on the attractive middle market."

"The middle market is one of the fastest-growing segments of the overall North American IT market in part because its companies often employ smaller internal IT teams that do not have the broad expertise required to keep pace with increasingly complex IT environments and constant technology changes," according to the filing.

Presidio said industry dynamics continue to favor services-led solution providers, as businesses "increasingly rely on us to advise them on complex IT projects, enabling them to better focus on their core capabilities and enhance productivity."

11 Percent CAGR

The company reported having an average revenue compound annual growth rate of 11 percent.

For fiscal year 2016, which ended June 30, Presidio reported annual sales growth of 14 percent to $2.71 billion. Presidio generated revenue of $2.38 billion in fiscal year 2015, $2.27 billion in fiscal year 2014, $2.12 billion in fiscal year 2013 and $1.76 billion in fiscal year 2012.

J.P. Morgan & Citigroup Leading IPO Charge, Not Barclays & Credit Suisse Group AG

This week was not the first time Presidio has explored the option of going public. In 2014, just a few months before being acquired by Apollo, Presidio reportedly hired Barclays and Credit Suisse Group AG to explore the company’s sale or IPO options.

J.P. Morgan and Citigroup are the lead underwriters of the new IPO offering filed on Nov. 22.

No Price Range Yet

The number of shares and the price range for the IPO have not yet been determined.

Presidio's IPO is expected to take place next year and be valued as much as $3 billion, according to The Wall Street Journal. Renaissance Capital, an IPO research and investment management company, estimates that Presidio's IPO could raise $400 million.