Presidio, Inc. :PSDO-US: Earnings Analysis: 2017 By the Numbers : September 25, 2017

Presidio, Inc. reports financial results for the year ended June 30, 2017.

We analyze the earnings along side the following peers of Presidio, Inc. – Memex Inc. and NETGEAR, Inc. (OEE-CA and NTGR-US) that have also reported for this period.

Highlights

  • Gross margins widened from 17.11% to 17.89% compared to the same period last year, operating (EBITDA) margins now 7.46% from 7.41%.
  • Year-on-year change in operating cash flow of -40.42% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth due to contribution of one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017 2016 2015 2014 N/A
Relevant Numbers (Annual)
Revenues 2817.6 2714.9 2378.3 2266 N/A
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 4.4 -3.4 -29.4 32.5 N/A
Earnings Growth (YOY) 229.41 88.44 -190.46 N/A N/A
Net Margin 0.16 -0.13 -1.24 1.43 N/A
EPS 0.05 -0.04 -0.32 0.06 N/A
Return on Equity 0.93 -1 -8.76 N/A N/A
Return on Assets 0.17 -0.13 -1.2 N/A N/A

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Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 17.11% to 17.89% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 7.41% to 7.46% compared to the same period last year. For comparison, gross margins were 17.11% and EBITDA margins were 7.41% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

PSDO-US’s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days are now 2.45 days compared to 5.26 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

PSDO-US’s change in operating cash flow of -40.42% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s operating (EBIT) margins contracted from 4.40% to 4.36%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from 0.01% to 0.25%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for Presidio, Inc.

Company Profile

Presidio, Inc. provides information technology solutions. It enables business transformation through their expertise in information technology solutions, with a specific focus on Digital Infrastructure, Cloud, and Security solutions. Its solutions include advanced networking, IoT, data analytics, data center modernization, hybrid and multi-cloud, cyber risk management, and enterprise mobility. The company was founded in 2004 and is headquartered in New York. NY.

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