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Presidio Acquires Red Sky Solutions for 6.8X EBITDA Valuation

Presidio CFO Neil Johnston
Presidio CFO Neil Johnston
Presidio CEO Bob Cagnazzi

Midmarket IT solutions provider Presidio has acquired Red Sky Solutions for a purchase price valuation of 6.8 times annual EBITDA, ChannelE2E has calculated.

Presidio paid $36.6 million in cash and approximately $4.2 million in Presidio common stock -- for a total price of $40.8 million, according to MSSP Alert reporting. Red Sky's annual revenue run rate is $70 million and EBITDA is about $6 million, according to Presidio CFO Neil Johnston, who shared the figures during the company's earnings call on Thursday.

Take the $40.8 million purchase, divide it by $6 million annual EBITDA, and the result is a 6.8 times EBITDA valuation -- which is in line with many of the deals that ChannelE2E has covered over the past year. Still, we don't know what percentage of Red Sky revenue is recurring, a variable that can greatly influence valuation.

Presidio Evolution

The deal is especially timely for both companies. Presidio is striving to push aggressively beyond tradition on-premises IT solutions. Through organic R&D and acquisitions, the company now offers a range of hybrid cloud and managed IT services.

"At the start of the fourth quarter, we completed the acquisition of Red Sky Solutions, a fast-growing solutions-driven company with a strong platform of engineers in consulting, and a customer base that matches well with our strategic direction," Presidio CEO Bob Cagnazzi said during the earnings call. "Red Sky gives us strong presence in the mountain states, where we had historically been under-penetrated. In addition, Red Sky is heavily focused on security and is highly OEM-diverse, which helps balance our portfolio. I'm very pleased to welcome the Red Sky team to Presidio."

Red Sky Solutions, meanwhile, is set to host a major cybersecurity conference next week.

Presidio Financial Performance

For its fiscal Q3 ended March 31, Presidio says total revenue increased $36.3 million, or 5.8%, to $665.1 million, compared to $628.8 million in the prior year period.

On the upside, 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," the company said.

However, revenue growth was "negatively impacted by continued weakness in sales to the federal government as compared to the prior year period," the company said.

Still, the company is seeing backlog growth amid increasing demand for public cloud solutions, managed services offerings and other recurring revenue projects, Presidio indicated.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.