Rackspace Technology, Inc. (Nasdaq: RXT), a leading end-to-end
multicloud technology solutions company, today announced results
for its second quarter ended June 30, 2022.
Kevin Jones, chief executive officer, stated, “The second
quarter financial results demonstrated solid growth and
profitability for our business, as well as robust cash flow. We
continue to benefit from secular tailwinds in the cloud market,
which show no signs of abating.”
Mr. Jones added, “Last quarter we previewed changes we are
executing in our business, including aligning and repositioning the
company to better capitalize on the immense market opportunity we
see today. As we’ve met with customers, partners, and other
stakeholders to preview these changes we have received very
positive feedback. We are nearing the point where we can provide
additional details on our go-forward game plan, including any
additional decisions regarding the structure of the company, later
this fall.”
Second Quarter 2022 Results
Revenue was $772 million in the second quarter of 2022, an
increase of 4% as compared to revenue of $744 million in the second
quarter of 2021. Revenue for the second quarter of 2022 was
positively impacted by new customer acquisitions and growing
customer spend in our Multicloud Services and Apps & Cross
Platform segments. On a constant currency basis, revenue increased
5% in the second quarter of 2022 as compared to the second quarter
of 2021.
Revenue from our Core Segments (“Core Revenue”), comprised of
Multicloud Services and Apps & Cross Platform, increased 5% on
an actual basis and 7% on a constant currency basis, in the second
quarter of 2022 as compared to the second quarter of 2021.
Income from operations was $4 million in the second quarter of
2022, compared to income from operations of $3 million in the
second quarter of 2021.
Net loss was $(41) million in the second quarter of 2022,
compared to net loss of $(37) million in the second quarter of
2021.
Net loss per diluted share was $(0.19) in the second quarter of
2022, compared to net loss per diluted share of $(0.18) in the
second quarter of 2021.
Non-GAAP Operating Profit was $99 million in the second quarter
of 2022, a decrease of 18% compared to $119 million in the second
quarter of 2021.
Non-GAAP Earnings Per Share was $0.17 in the second quarter of
2022, a decrease of 29% as compared to Non-GAAP Earnings Per Share
of $0.24 in the second quarter of 2021.
Capital expenditures were $37 million in the second quarter of
2022, compared to $82 million in the second quarter of 2021.
As of June 30, 2022, we had cash and cash equivalents of
$261 million with no balance outstanding on our Revolving Credit
Facility.
Financial Outlook
Rackspace Technology is providing guidance as follows:
|
Q3 2022 Guidance |
Revenue |
$769 - $779 million |
Core Revenue |
$733 - $741 million |
Non-GAAP Operating Profit |
$73 - $77 million |
Non-GAAP Earnings Per Share |
$0.08 - $0.10 |
Non-GAAP Other Income
(Expense)1 |
($49) – ($51) million |
Non-GAAP Tax Expense Rate |
26 % |
Non-GAAP Weighted Average Shares |
210 – 212 million |
1 Non-GAAP Other Income (Expense) is only expected to include
interest expense.
Definitions of non-GAAP financial measures and the
reconciliations to the most directly comparable measures in
accordance with generally accepted accounting principles in the
United States (“GAAP”) are provided in subsequent sections of this
press release narrative and supplemental schedules. Rackspace
Technology has not reconciled Non-GAAP Operating Profit, Non-GAAP
Earnings Per Share, Non-GAAP Other Income (Expense) or Non-GAAP Tax
Expense Rate guidance to the most directly comparable GAAP measure
because it does not provide guidance on GAAP net income (loss) or
the reconciling items between these Non-GAAP measures and GAAP net
income (loss) as a result of the uncertainty regarding, and the
potential variability of, certain of these items, such as
share-based compensation expense. Accordingly, a reconciliation of
the non-GAAP financial measure guidance to the corresponding GAAP
measure is not available without unreasonable effort. With respect
to Non-GAAP Operating Profit, Non-GAAP Earnings Per Share, Non-GAAP
Other Income (Expense) and Non-GAAP Tax Expense Rate guidance,
adjustments in future periods are generally expected to be similar
to the kinds of charges and costs excluded from these Non-GAAP
measures in prior periods, but the impact of such adjustments could
be significant.
Conference Call and Webcast
Rackspace Technology will hold a conference call today, August
9, 2022, at 4:00pm CT / 5:00pm ET to discuss its second quarter
2022 results. Interested parties may access the conference call as
follows:
Via Zoom:
https://rackspace.zoom.us/j/95750453932?pwd=Q21HWis1T1k5UEQvemI2NlFEREp5UT09 Password:
112067
Via telephone (listen only mode):
+1 408 638 0968 (US Toll)+1 646 558 8656 (US Toll)+1 647 374
4685 (Canada)+44 (0) 20 3695 0088 (United Kingdom Toll)Webinar ID:
957 5045 3932
Additional International numbers are also available:
https://rackspace.zoom.us/u/adk8d0mzAo
A live webcast of the call and audio replay will also be
available on Rackspace Technology’s website at
ir.rackspace.com.
About Rackspace Technology
Rackspace Technology is a leading end-to-end multicloud
technology services company. We design, build and operate our
customers’ cloud environments across all major technology
platforms, irrespective of technology stack or deployment model. We
partner with our customers at every stage of their cloud journey,
enabling them to modernize applications, build new products and
adopt innovative technologies.
Forward-looking Statements
Rackspace Technology has made statements in this press release
and other reports, filings, and other public written and verbal
announcements that are forward-looking and therefore subject to
risks and uncertainties. All statements, other than statements of
historical fact, included in this document are, or could be,
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 and are made in reliance
on the safe harbor protections provided thereunder. These
forward-looking statements relate to anticipated financial
performance, management’s plans and objectives for future
operations, business prospects, outcome of regulatory proceedings,
market conditions, our ability to successfully respond to the
challenges posed by the COVID-19 pandemic, and other matters. Any
forward-looking statement made in this presentation speaks only as
of the date on which it is made. We undertake no obligation to
publicly update or revise any forward-looking statement, whether as
a result of new information, future developments or otherwise.
Forward-looking statements can be identified by various words such
as “expects,” “intends,” “will,” “anticipates,” “believes,”
“confident,” “continue,” “propose,” “seeks,” “could,” “may,”
“should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,”
“targets,” “planned,” “projects,” and similar expressions. These
forward-looking statements are based on management’s current
beliefs and assumptions and on information currently available to
management. Rackspace Technology cautions that these statements are
subject to risks and uncertainties, many of which are outside of
our control, and could cause future events or results to be
materially different from those stated or implied in this document,
including among others, risk factors that are described in
Rackspace Technology, Inc.’s Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and other
filings with the Securities and Exchange Commission, including the
sections entitled “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”
contained therein.
Non-GAAP Financial Measures
This press release includes several non-GAAP financial measures
such as constant currency revenue, Non-GAAP Gross Profit, Non-GAAP
Net Income (Loss), Non-GAAP Operating Profit, Adjusted EBITDA and
Non-GAAP Earnings Per Share (“EPS”). These non-GAAP financial
measures exclude the impact of certain costs, losses and gains that
are required to be included in our profit and loss measures under
GAAP. Although we believe these measures are useful to investors
and analysts for the same reasons they are useful to management, as
described in the accompanying pages, these measures are not a
substitute for, or superior to, GAAP financial measures or
disclosures. Other companies may calculate similarly-titled
non-GAAP measures differently, limiting their usefulness as
comparative measures. We have reconciled each of these non-GAAP
measures to the applicable most comparable GAAP measure in the
accompanying pages.
IR ContactRobert WatsonRackspace Technology
Investor Relationsir@rackspace.com
PR ContactNatalie SilvaRackspace Technology
Corporate Communicationspublicrelations@rackspace.com
|
RACKSPACE TECHNOLOGY, INC.CONSOLIDATED
RESULTS OF OPERATIONS(Unaudited) |
|
|
Three Months Ended June 30, |
|
Year-Over-YearComparison |
|
|
2021 |
|
|
|
2022 |
|
|
(In millions, except % and per
share data) |
Amount |
|
% Revenue |
|
Amount |
|
% Revenue |
|
Amount |
|
% Change |
Revenue |
$ |
743.8 |
|
|
100.0 |
% |
|
$ |
772.2 |
|
|
100.0 |
% |
|
$ |
28.4 |
|
|
3.8 |
% |
Cost of revenue |
|
(508.3 |
) |
|
(68.3 |
)% |
|
|
(548.2 |
) |
|
(71.0 |
)% |
|
|
(39.9 |
) |
|
7.8 |
% |
Gross profit |
|
235.5 |
|
|
31.7 |
% |
|
|
224.0 |
|
|
29.0 |
% |
|
|
(11.5 |
) |
|
(4.9 |
)% |
Selling,
general and administrative expenses |
|
(232.6 |
) |
|
(31.3 |
)% |
|
|
(220.0 |
) |
|
(28.5 |
)% |
|
|
12.6 |
|
|
(5.4 |
)% |
Income from operations |
|
2.9 |
|
|
0.4 |
% |
|
|
4.0 |
|
|
0.5 |
% |
|
|
1.1 |
|
|
37.9 |
% |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(50.5 |
) |
|
(6.8 |
)% |
|
|
(50.5 |
) |
|
(6.5 |
)% |
|
|
— |
|
|
— |
% |
Gain (loss) on investments, net |
|
0.1 |
|
|
0.0 |
% |
|
|
(0.2 |
) |
|
(0.0 |
)% |
|
|
(0.3 |
) |
|
NM |
|
Debt modification and extinguishment costs |
|
(0.5 |
) |
|
(0.1 |
)% |
|
|
— |
|
|
— |
% |
|
|
0.5 |
|
|
(100.0 |
)% |
Other income (expense), net |
|
0.6 |
|
|
0.1 |
% |
|
|
(5.9 |
) |
|
(0.8 |
)% |
|
|
(6.5 |
) |
|
NM |
|
Total other income (expense) |
|
(50.3 |
) |
|
(6.8 |
)% |
|
|
(56.6 |
) |
|
(7.3 |
)% |
|
|
(6.3 |
) |
|
12.5 |
% |
Loss before income taxes |
|
(47.4 |
) |
|
(6.4 |
)% |
|
|
(52.6 |
) |
|
(6.8 |
)% |
|
|
(5.2 |
) |
|
11.0 |
% |
Benefit for income taxes |
|
10.8 |
|
|
1.5 |
% |
|
|
12.0 |
|
|
1.6 |
% |
|
|
1.2 |
|
|
11.1 |
% |
Net loss |
$ |
(36.6 |
) |
|
(4.9 |
)% |
|
$ |
(40.6 |
) |
|
(5.2 |
)% |
|
$ |
(4.0 |
) |
|
10.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.18 |
) |
|
|
|
|
$ |
(0.19 |
) |
|
|
|
|
|
|
|
|
Weighted average number of
shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
207.9 |
|
|
|
|
|
|
209.5 |
|
|
|
|
|
|
|
|
|
NM = not meaningful. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RACKSPACE TECHNOLOGY, INC.CONSOLIDATED
RESULTS OF OPERATIONS(Unaudited) |
|
|
Six Months Ended June 30, |
|
Year-Over-YearComparison |
|
|
2021 |
|
|
|
2022 |
|
|
(In millions, except % and per
share data) |
Amount |
|
% Revenue |
|
Amount |
|
% Revenue |
|
Amount |
|
% Change |
Revenue |
$ |
1,469.7 |
|
|
100.0 |
% |
|
$ |
1,547.7 |
|
|
100.0 |
% |
|
$ |
78.0 |
|
|
5.3 |
% |
Cost of revenue |
|
(998.9 |
) |
|
(68.0 |
)% |
|
|
(1,097.7 |
) |
|
(70.9 |
)% |
|
|
(98.8 |
) |
|
9.9 |
% |
Gross profit |
|
470.8 |
|
|
32.0 |
% |
|
|
450.0 |
|
|
29.1 |
% |
|
|
(20.8 |
) |
|
(4.4 |
)% |
Selling, general and
administrative expenses |
|
(463.6 |
) |
|
(31.5 |
)% |
|
|
(425.1 |
) |
|
(27.5 |
)% |
|
|
38.5 |
|
|
(8.3 |
)% |
Gain on sale of land |
|
19.9 |
|
|
1.4 |
% |
|
|
— |
|
|
— |
% |
|
|
(19.9 |
) |
|
(100.0 |
)% |
Income from operations |
|
27.1 |
|
|
1.8 |
% |
|
|
24.9 |
|
|
1.6 |
% |
|
|
(2.2 |
) |
|
(8.1 |
)% |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(103.1 |
) |
|
(7.0 |
)% |
|
|
(100.6 |
) |
|
(6.5 |
)% |
|
|
2.5 |
|
|
(2.4 |
)% |
Loss on investments, net |
|
(3.6 |
) |
|
(0.2 |
)% |
|
|
(0.3 |
) |
|
(0.0 |
)% |
|
|
3.3 |
|
|
(91.7 |
)% |
Debt modification and extinguishment costs |
|
(37.5 |
) |
|
(2.5 |
)% |
|
|
— |
|
|
— |
% |
|
|
37.5 |
|
|
(100.0 |
)% |
Other expense, net |
|
(1.2 |
) |
|
(0.1 |
)% |
|
|
(9.5 |
) |
|
(0.6 |
)% |
|
|
(8.3 |
) |
|
NM |
|
Total other income (expense) |
|
(145.4 |
) |
|
(9.9 |
)% |
|
|
(110.4 |
) |
|
(7.1 |
)% |
|
|
35.0 |
|
|
(24.1 |
)% |
Loss before income taxes |
|
(118.3 |
) |
|
(8.0 |
)% |
|
|
(85.5 |
) |
|
(5.5 |
)% |
|
|
32.8 |
|
|
(27.7 |
)% |
Benefit for income taxes |
|
17.7 |
|
|
1.2 |
% |
|
|
6.4 |
|
|
0.4 |
% |
|
|
(11.3 |
) |
|
(63.8 |
)% |
Net loss |
$ |
(100.6 |
) |
|
(6.8 |
)% |
|
$ |
(79.1 |
) |
|
(5.1 |
)% |
|
$ |
21.5 |
|
|
(21.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.49 |
) |
|
|
|
|
$ |
(0.38 |
) |
|
|
|
|
|
|
|
|
Weighted average number of
shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
206.2 |
|
|
|
|
|
|
210.5 |
|
|
|
|
|
|
|
|
|
NM = not meaningful. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RACKSPACE TECHNOLOGY, INC.CONSOLIDATED BALANCE
SHEETS(Unaudited) |
|
(In millions, except per share
data) |
|
December 31,2021 |
|
June 30,2022 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
272.8 |
|
|
$ |
261.3 |
Accounts receivable, net of allowance for credit losses and accrued
customer credits of $18.4 and $18.8, respectively |
|
|
554.3 |
|
|
|
583.9 |
Prepaid expenses |
|
|
110.0 |
|
|
|
87.1 |
Other current assets |
|
|
52.4 |
|
|
|
81.9 |
Total current assets |
|
|
989.5 |
|
|
|
1,014.2 |
|
|
|
|
|
Property, equipment and software, net |
|
|
826.7 |
|
|
|
759.4 |
Goodwill, net |
|
|
2,706.8 |
|
|
|
2,693.5 |
Intangible assets, net |
|
|
1,466.5 |
|
|
|
1,379.0 |
Operating right-of-use assets |
|
|
161.8 |
|
|
|
140.9 |
Other non-current assets |
|
|
177.4 |
|
|
|
221.2 |
Total assets |
|
$ |
6,328.7 |
|
|
$ |
6,208.2 |
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
369.5 |
|
|
$ |
388.0 |
Accrued compensation and benefits |
|
|
104.5 |
|
|
|
87.4 |
Deferred revenue |
|
|
98.6 |
|
|
|
106.0 |
Debt |
|
|
23.0 |
|
|
|
23.0 |
Accrued interest |
|
|
27.6 |
|
|
|
27.4 |
Operating lease liabilities |
|
|
60.4 |
|
|
|
55.5 |
Finance lease liabilities |
|
|
64.6 |
|
|
|
64.6 |
Financing obligations |
|
|
48.0 |
|
|
|
37.8 |
Other current liabilities |
|
|
41.2 |
|
|
|
33.1 |
Total current liabilities |
|
|
837.4 |
|
|
|
822.8 |
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
Debt |
|
|
3,310.9 |
|
|
|
3,303.1 |
Operating lease liabilities |
|
|
114.8 |
|
|
|
94.8 |
Finance lease liabilities |
|
|
345.1 |
|
|
|
314.1 |
Financing obligations |
|
|
62.9 |
|
|
|
53.1 |
Deferred income taxes |
|
|
205.8 |
|
|
|
204.6 |
Other non-current liabilities |
|
|
124.4 |
|
|
|
117.3 |
Total liabilities |
|
|
5,001.3 |
|
|
|
4,909.8 |
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
Preferred stock, $0.01 par value per share: 5.0 shares authorized;
no shares issued or outstanding |
|
|
— |
|
|
|
— |
Common stock, $0.01 par value per share: 1,495.0 shares authorized;
211.2 and 213.5 shares issued; 211.2 and 210.4 shares
outstanding, respectively |
|
|
2.1 |
|
|
|
2.1 |
Additional paid-in capital |
|
|
2,500.0 |
|
|
|
2,542.9 |
Accumulated other comprehensive income |
|
|
6.9 |
|
|
|
45.1 |
Accumulated deficit |
|
|
(1,181.6 |
) |
|
|
(1,260.7) |
Treasury stock, at cost; zero and 3.1 shares held,
respectively |
|
|
— |
|
|
|
(31.0) |
Total stockholders' equity |
|
|
1,327.4 |
|
|
|
1,298.4 |
Total liabilities and stockholders' equity |
|
$ |
6,328.7 |
|
|
$ |
6,208.2 |
RACKSPACE TECHNOLOGY, INC.CONSOLIDATED STATEMENTS
OF CASH FLOWS(Unaudited) |
|
|
Six Months Ended June 30, |
(In millions) |
|
2021 |
|
|
|
2022 |
|
Cash Flows From
Operating Activities |
|
|
|
Net loss |
$ |
(100.6 |
) |
|
$ |
(79.1 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
|
216.3 |
|
|
|
199.8 |
|
Amortization of operating right-of-use assets |
|
36.0 |
|
|
|
28.6 |
|
Deferred income taxes |
|
(23.1 |
) |
|
|
(20.0 |
) |
Share-based compensation expense |
|
37.6 |
|
|
|
40.1 |
|
Gain on sale of land |
|
(19.9 |
) |
|
|
— |
|
Debt modification and extinguishment costs |
|
37.5 |
|
|
|
— |
|
Unrealized loss on derivative contracts |
|
10.8 |
|
|
|
9.2 |
|
Loss on investments, net |
|
3.6 |
|
|
|
0.3 |
|
Provision for bad debts and accrued customer credits |
|
(8.0 |
) |
|
|
3.5 |
|
Amortization of debt issuance costs and debt discount |
|
4.8 |
|
|
|
4.0 |
|
Other operating activities |
|
(0.6 |
) |
|
|
(0.5 |
) |
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
|
(8.9 |
) |
|
|
(34.3 |
) |
Prepaid expenses and other current assets |
|
11.5 |
|
|
|
12.5 |
|
Accounts payable, accrued expenses, and other current
liabilities |
|
19.1 |
|
|
|
1.3 |
|
Deferred revenue |
|
16.5 |
|
|
|
3.6 |
|
Operating lease liabilities |
|
(31.9 |
) |
|
|
(32.1 |
) |
Other non-current assets and liabilities |
|
8.2 |
|
|
|
11.6 |
|
Net cash provided by operating activities |
|
208.9 |
|
|
|
148.5 |
|
Cash Flows From
Investing Activities |
|
|
|
Purchases of property, equipment and software |
|
(66.0 |
) |
|
|
(46.4 |
) |
Acquisitions, net of cash acquired |
|
— |
|
|
|
(7.7 |
) |
Proceeds from sale of land |
|
31.3 |
|
|
|
— |
|
Other investing activities |
|
3.0 |
|
|
|
3.5 |
|
Net cash used in investing activities |
|
(31.7 |
) |
|
|
(50.6 |
) |
Cash Flows From
Financing Activities |
|
|
|
Proceeds from employee stock plans |
|
43.9 |
|
|
|
2.7 |
|
Shares of common stock repurchased |
|
— |
|
|
|
(31.0 |
) |
Proceeds from borrowings under long-term debt arrangements |
|
2,838.5 |
|
|
|
— |
|
Payments on long-term debt |
|
(2,866.4 |
) |
|
|
(11.5 |
) |
Payments for debt issuance costs |
|
(34.5 |
) |
|
|
— |
|
Payments on financing component of interest rate swap |
|
(4.3 |
) |
|
|
(8.5 |
) |
Principal payments of finance lease liabilities |
|
(21.4 |
) |
|
|
(32.3 |
) |
Principal payments of financing obligations |
|
(22.6 |
) |
|
|
(22.9 |
) |
Other financing activities |
|
— |
|
|
|
(0.9 |
) |
Net cash used in financing activities |
|
(66.8 |
) |
|
|
(104.4 |
) |
Effect of exchange rate changes on cash, cash
equivalents, and restricted cash |
|
(0.4 |
) |
|
|
(5.1 |
) |
Increase (decrease) in cash, cash equivalents,
and restricted cash |
|
110.0 |
|
|
|
(11.6 |
) |
Cash, cash equivalents, and restricted cash at
beginning of period |
|
108.1 |
|
|
|
275.4 |
|
Cash, cash equivalents, and restricted cash at
end of period |
$ |
218.1 |
|
|
$ |
263.8 |
|
Supplemental Cash Flow
Information |
|
|
|
Cash payments for interest, net of amount capitalized |
$ |
90.6 |
|
|
$ |
84.6 |
Cash payments for income taxes, net of refunds |
$ |
6.5 |
|
|
$ |
9.9 |
|
|
|
|
Non-cash Investing and
Financing Activities |
|
|
|
Acquisition of property, equipment and software by finance
leases |
$ |
38.4 |
|
|
$ |
9.3 |
Acquisition of property, equipment and software by financing
obligations |
|
40.1 |
|
|
|
7.1 |
Increase (decrease) in property, equipment and software accrued in
liabilities |
|
(3.7 |
) |
|
|
5.3 |
Non-cash purchases of property, equipment and software |
$ |
74.8 |
|
|
$ |
21.7 |
|
|
|
|
Other non-cash investing and financing activities |
$ |
0.3 |
|
|
$ |
— |
|
|
|
|
|
|
|
REVENUE BY SEGMENT |
|
|
|
Three Months Ended June 30, |
|
% Change |
(In millions, except %) |
|
|
2021 |
|
|
2022 |
|
Actual |
|
ConstantCurrency(1) |
Multicloud Services |
|
$ |
605.1 |
|
$ |
633.3 |
|
4.7 |
% |
|
6.2 |
% |
Apps & Cross Platform |
|
|
92.7 |
|
|
100.1 |
|
8.0 |
% |
|
8.8 |
% |
Core Revenue |
|
|
697.8 |
|
|
733.4 |
|
5.1 |
% |
|
6.5 |
% |
OpenStack Public Cloud |
|
|
46.0 |
|
|
38.8 |
|
(15.9 |
)% |
|
(14.3 |
)% |
Total |
|
$ |
743.8 |
|
$ |
772.2 |
|
3.8 |
% |
|
5.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Refer to
"Non-GAAP Financial Measures" in this section for further
explanation and reconciliation. |
|
|
Six Months Ended June 30, |
|
% Change |
(In millions, except %) |
|
|
2021 |
|
|
2022 |
|
Actual |
|
ConstantCurrency(1) |
Multicloud Services |
|
$ |
1,184.7 |
|
$ |
1,273.4 |
|
7.5 |
% |
|
8.5 |
% |
Apps & Cross Platform |
|
|
190.0 |
|
|
194.9 |
|
2.6 |
% |
|
3.1 |
% |
Core Revenue |
|
|
1,374.7 |
|
|
1,468.3 |
|
6.8 |
% |
|
7.8 |
% |
OpenStack Public Cloud |
|
|
95.0 |
|
|
79.4 |
|
(16.5 |
)% |
|
(15.5 |
)% |
Total |
|
$ |
1,469.7 |
|
$ |
1,547.7 |
|
5.3 |
% |
|
6.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Refer to "Non-GAAP Financial Measures" in this
section for further explanation and reconciliation. |
GROSS PROFIT BY SEGMENT |
|
|
Three Months Ended June 30, |
|
Year-Over-YearComparison |
(In millions, except %) |
|
2021 |
|
|
|
2022 |
|
|
Segment gross
profit: |
Amount |
|
% ofSegmentRevenue |
|
Amount |
|
% ofSegmentRevenue |
|
Amount |
|
% Change |
Multicloud Services |
$ |
202.0 |
|
33.4 |
% |
|
$ |
183.3 |
|
28.9 |
% |
|
$ |
(18.7 |
) |
|
(9.3 |
)% |
Apps & Cross Platform |
|
32.0 |
|
34.5 |
% |
|
|
35.5 |
|
35.5 |
% |
|
|
3.5 |
|
|
10.9 |
% |
OpenStack Public Cloud |
|
16.1 |
|
35.0 |
% |
|
|
12.9 |
|
33.2 |
% |
|
|
(3.2 |
) |
|
(19.9 |
)% |
Non-GAAP Gross Profit (1) |
$ |
250.1 |
|
|
|
$ |
231.7 |
|
|
|
$ |
(18.4 |
) |
|
(7.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Refer to "Non-GAAP Financial Measures" in this
section for further explanation and reconciliation. |
|
Six Months Ended June 30, |
|
Year-Over-Year Comparison |
(In millions, except %) |
|
2021 |
|
|
|
2022 |
|
|
Segment gross
profit: |
Amount |
|
% ofSegmentRevenue |
|
Amount |
|
% ofSegmentRevenue |
|
Amount |
|
% Change |
Multicloud Services |
$ |
398.4 |
|
33.6 |
% |
|
$ |
371.5 |
|
29.2 |
% |
|
$ |
(26.9 |
) |
|
(6.8 |
)% |
Apps & Cross Platform |
|
66.9 |
|
35.2 |
% |
|
|
70.0 |
|
35.9 |
% |
|
|
3.1 |
|
|
4.6 |
% |
OpenStack Public Cloud |
|
34.7 |
|
36.5 |
% |
|
|
25.8 |
|
32.5 |
% |
|
|
(8.9 |
) |
|
(25.6 |
)% |
Non-GAAP Gross Profit(1) |
$ |
500.0 |
|
|
|
$ |
467.3 |
|
|
|
$ |
(32.7 |
) |
|
(6.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Refer to "Non-GAAP Financial Measures" in this
section for further explanation and reconciliation. |
|
NON-GAAP FINANCIAL MEASURES
Constant Currency Revenue
We use constant currency revenue as an additional metric for
understanding and assessing our growth excluding the effect of
foreign currency rate fluctuations on our international business
operations. Constant currency information compares results between
periods as if exchange rates had remained constant period over
period and is calculated by translating the non-U.S. dollar income
statement balances for the most current period to U.S. dollars
using the average exchange rate from the comparative period rather
than the actual exchange rates in effect during the respective
period. We also believe this is an important metric to help
investors evaluate our performance in comparison to prior
periods.
|
|
Three MonthsEnded June 30,2021 |
|
Three Months Ended June 30, 2022 |
|
% Change |
(In millions, except %) |
|
Revenue |
|
Revenue |
|
ForeignCurrencyTranslation(a) |
|
Revenue inConstantCurrency |
|
Actual |
|
ConstantCurrency |
Multicloud Services |
|
$ |
605.1 |
|
$ |
633.3 |
|
$ |
9.1 |
|
$ |
642.4 |
|
4.7 |
% |
|
6.2 |
% |
Apps & Cross Platform |
|
|
92.7 |
|
|
100.1 |
|
|
0.8 |
|
|
100.9 |
|
8.0 |
% |
|
8.8 |
% |
OpenStack Public Cloud |
|
|
46.0 |
|
|
38.8 |
|
|
0.7 |
|
|
39.5 |
|
(15.9 |
)% |
|
(14.3 |
)% |
Total |
|
$ |
743.8 |
|
$ |
772.2 |
|
$ |
10.6 |
|
$ |
782.8 |
|
3.8 |
% |
|
5.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The effect of foreign currency is calculated by
translating current period results using the average exchange rate
from the prior comparative period. |
|
|
Six MonthsEnded June 30,2021 |
|
Six Months Ended June 30, 2022 |
|
% Change |
(In millions, except %) |
|
Revenue |
|
Revenue |
|
ForeignCurrencyTranslation(a) |
|
Revenue inConstantCurrency |
|
Actual |
|
ConstantCurrency |
Multicloud Services |
|
$ |
1,184.7 |
|
$ |
1,273.4 |
|
$ |
12.1 |
|
$ |
1,285.5 |
|
7.5 |
% |
|
8.5 |
% |
Apps & Cross Platform |
|
|
190.0 |
|
|
194.9 |
|
|
1.0 |
|
|
195.9 |
|
2.6 |
% |
|
3.1 |
% |
OpenStack Public Cloud |
|
|
95.0 |
|
|
79.4 |
|
|
0.9 |
|
|
80.3 |
|
(16.5 |
)% |
|
(15.5 |
)% |
Total |
|
$ |
1,469.7 |
|
$ |
1,547.7 |
|
$ |
14.0 |
|
$ |
1,561.7 |
|
5.3 |
% |
|
6.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The effect of foreign currency is calculated by
translating current period results using the average exchange rate
from the prior comparative period. |
|
Non-GAAP Gross Profit
We present Non-GAAP Gross Profit, which represents the total of
our individual segment gross profit measures, because we believe
the measure is useful in analyzing trends in our underlying,
recurring gross margins. We define Non-GAAP Gross Profit as our
consolidated gross profit, adjusted to exclude the impact of
share-based compensation expense and other non-recurring or unusual
compensation items, purchase accounting-related effects, and
certain business transformation-related costs.
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(In millions) |
|
2021 |
|
2022 |
|
2021 |
|
2022 |
Total consolidated gross profit |
|
$ |
235.5 |
|
$ |
224.0 |
|
$ |
470.8 |
|
$ |
450.0 |
Share-based compensation
expense |
|
|
4.3 |
|
|
3.4 |
|
|
9.2 |
|
|
6.2 |
Other compensation
expense(1) |
|
|
0.4 |
|
|
0.4 |
|
|
1.7 |
|
|
1.2 |
Purchase accounting impact on
expense(2) |
|
|
1.2 |
|
|
0.8 |
|
|
2.4 |
|
|
1.5 |
Restructuring and
transformation expenses(3) |
|
|
8.7 |
|
|
3.1 |
|
|
15.9 |
|
|
8.4 |
Non-GAAP Gross Profit |
|
$ |
250.1 |
|
$ |
231.7 |
|
$ |
500.0 |
|
$ |
467.3 |
(1 |
) |
Adjustments for retention bonuses, mainly in connection with
restructuring and transformation projects, and the related payroll
tax, and payroll taxes associated with the exercise of stock
options and vesting of restricted stock. |
(2 |
) |
Adjustment for the impact of purchase accounting from the November
2016 merger on expenses. |
(3 |
) |
Adjustment for the impact of business transformation and
optimization activities, as well as associated severance, facility
closure costs and lease termination expenses. This amount also
includes certain costs associated with the July 2021 Restructuring
Plan which are not accounted for as exit and disposal costs under
ASC 420, including one-time offshore build out costs. |
Non-GAAP Net Income (Loss), Non-GAAP Operating Profit
and Adjusted EBITDA
We present Non-GAAP Net Income (Loss), Non-GAAP Operating Profit
and Adjusted EBITDA because they are a basis upon which management
assesses our performance and we believe they are useful to
evaluating our financial performance. We believe that excluding
items from net income that may not be indicative of, or are
unrelated to, our core operating results, and that may vary in
frequency or magnitude, enhances the comparability of our results
and provides a better baseline for analyzing trends in our
business.
We define Non-GAAP Net Income (Loss) as net income (loss)
adjusted to exclude the impact of non-cash charges for share-based
compensation, special bonuses and other compensation expense,
transaction-related costs and adjustments, restructuring and
transformation charges, the amortization of acquired intangible
assets and certain other non-operating, non-recurring or non-core
gains and losses, as well as the tax effects of these non-GAAP
adjustments.
We define Non-GAAP Operating Profit as income (loss) from
operations adjusted to exclude the impact of non-cash charges for
share-based compensation, special bonuses and other compensation
expense, transaction-related costs and adjustments, restructuring
and transformation charges, the amortization of acquired intangible
assets and certain other non-operating, non-recurring or non-core
gains and losses.
We define Adjusted EBITDA as net income (loss) adjusted to
exclude the impact of non-cash charges for share-based
compensation, special bonuses and other compensation expense,
transaction-related costs and adjustments, restructuring and
transformation charges, certain other non-operating, non-recurring
or non-core gains and losses, interest expense, income taxes, and
depreciation and amortization.
Non-GAAP Operating Profit and Adjusted EBITDA are management’s
principal metrics for measuring our underlying financial
performance. Non-GAAP Operating Profit and Adjusted EBITDA, along
with other quantitative and qualitative information, are also the
principal financial measures used by management and our board of
directors in determining performance-based compensation for our
management and key employees.
These non-GAAP measures are not intended to imply that we would
have generated higher income or avoided net losses if the November
2016 merger and the subsequent transactions and initiatives had not
occurred. In the future we may incur expenses or charges such as
those added back to calculate Non-GAAP Net Income (Loss), Non-GAAP
Operating Profit or Adjusted EBITDA. Our presentation of Non-GAAP
Net Income (Loss), Non-GAAP Operating Profit and Adjusted EBITDA
should not be construed as an inference that our future results
will be unaffected by these items. Other companies, including our
peer companies, may calculate similarly-titled measures in a
different manner from us, and therefore, our non-GAAP measures may
not be comparable to similarly-titled measures of other companies.
Investors are cautioned against using these measures to the
exclusion of our results in accordance with GAAP.
Net loss reconciliation to Non-GAAP Net
Income
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(In millions) |
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
Net loss |
$ |
(36.6 |
) |
|
$ |
(40.6 |
) |
|
$ |
(100.6 |
) |
|
$ |
(79.1 |
) |
Share-based compensation
expense |
|
20.4 |
|
|
|
23.1 |
|
|
|
37.6 |
|
|
|
40.1 |
|
Special bonuses and other
compensation expense(a) |
|
3.0 |
|
|
|
2.4 |
|
|
|
7.0 |
|
|
|
5.8 |
|
Transaction-related
adjustments, net(b) |
|
6.9 |
|
|
|
1.9 |
|
|
|
15.3 |
|
|
|
7.2 |
|
Restructuring and
transformation expenses(c) |
|
39.1 |
|
|
|
24.9 |
|
|
|
77.7 |
|
|
|
48.2 |
|
Gain on sale of land |
|
— |
|
|
|
— |
|
|
|
(19.9 |
) |
|
|
— |
|
Net (gain) loss on divestiture
and investments(d) |
|
(0.1 |
) |
|
|
0.2 |
|
|
|
3.6 |
|
|
|
0.3 |
|
Debt modification and
extinguishment costs(e) |
|
0.5 |
|
|
|
— |
|
|
|
37.5 |
|
|
|
— |
|
Other (income) expense,
net(f) |
|
(0.6 |
) |
|
|
5.9 |
|
|
|
1.2 |
|
|
|
9.5 |
|
Amortization of intangible
assets(g) |
|
47.1 |
|
|
|
42.2 |
|
|
|
93.5 |
|
|
|
84.4 |
|
Tax effect of non-GAAP
adjustments(h) |
|
(28.8 |
) |
|
|
(24.5 |
) |
|
|
(52.9 |
) |
|
|
(35.0 |
) |
Non-GAAP Net Income |
$ |
50.9 |
|
|
$ |
35.5 |
|
|
$ |
100.0 |
|
|
$ |
81.4 |
|
Income from operations reconciliation to Non-GAAP
Operating Profit
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(In millions) |
2021 |
|
2022 |
|
|
2021 |
|
|
2022 |
Income from operations |
$ |
2.9 |
|
$ |
4.0 |
|
$ |
27.1 |
|
|
$ |
24.9 |
Share-based compensation
expense |
|
20.4 |
|
|
23.1 |
|
|
37.6 |
|
|
|
40.1 |
Special bonuses and other
compensation expense(a) |
|
3.0 |
|
|
2.4 |
|
|
7.0 |
|
|
|
5.8 |
Transaction-related
adjustments, net(b) |
|
6.9 |
|
|
1.9 |
|
|
15.3 |
|
|
|
7.2 |
Restructuring and
transformation expenses(c) |
|
39.1 |
|
|
24.9 |
|
|
77.7 |
|
|
|
48.2 |
Gain on sale of land |
|
— |
|
|
— |
|
|
(19.9 |
) |
|
|
— |
Amortization of intangible
assets(g) |
|
47.1 |
|
|
42.2 |
|
|
93.5 |
|
|
|
84.4 |
Non-GAAP Operating Profit |
$ |
119.4 |
|
$ |
98.5 |
|
$ |
238.3 |
|
|
$ |
210.6 |
Net loss reconciliation to Adjusted EBITDA
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(In millions) |
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
Net loss |
$ |
(36.6 |
) |
|
$ |
(40.6 |
) |
|
$ |
(100.6 |
) |
|
$ |
(79.1 |
) |
Share-based compensation
expense |
|
20.4 |
|
|
|
23.1 |
|
|
|
37.6 |
|
|
|
40.1 |
|
Special bonuses and other
compensation expense(a) |
|
3.0 |
|
|
|
2.4 |
|
|
|
7.0 |
|
|
|
5.8 |
|
Transaction-related
adjustments, net(b) |
|
6.9 |
|
|
|
1.9 |
|
|
|
15.3 |
|
|
|
7.2 |
|
Restructuring and
transformation expenses(c) |
|
39.1 |
|
|
|
24.9 |
|
|
|
77.7 |
|
|
|
48.2 |
|
Gain on sale of land |
|
— |
|
|
|
— |
|
|
|
(19.9 |
) |
|
|
— |
|
Net (gain) loss on divestiture
and investments(d) |
|
(0.1 |
) |
|
|
0.2 |
|
|
|
3.6 |
|
|
|
0.3 |
|
Debt modification and
extinguishment costs(e) |
|
0.5 |
|
|
|
— |
|
|
|
37.5 |
|
|
|
— |
|
Other (income) expense,
net(f) |
|
(0.6 |
) |
|
|
5.9 |
|
|
|
1.2 |
|
|
|
9.5 |
|
Interest expense |
|
50.5 |
|
|
|
50.5 |
|
|
|
103.1 |
|
|
|
100.6 |
|
Benefit for income taxes |
|
(10.8 |
) |
|
|
(12.0 |
) |
|
|
(17.7 |
) |
|
|
(6.4 |
) |
Depreciation and
amortization(i) |
|
107.0 |
|
|
|
98.1 |
|
|
|
214.7 |
|
|
|
199.5 |
|
Adjusted EBITDA |
$ |
179.3 |
|
|
$ |
154.4 |
|
|
$ |
359.5 |
|
|
$ |
325.7 |
|
(a) |
Includes expense related to retention bonuses, mainly relating to
restructuring and integration projects, and the related payroll
tax, senior executive signing bonuses and relocation costs, and
payroll taxes associated with the exercise of stock options and
vesting of restricted stock. |
(b) |
Includes
legal, professional, accounting and other advisory fees related to
acquisitions, certain one-time costs related to being a first year
public company, integration costs of acquired businesses, purchase
accounting adjustments (including deferred revenue fair value
discount), payroll costs for employees that dedicate significant
time to supporting these projects and exploratory acquisition and
divestiture costs and expenses related to financing
activities. |
(c) |
Includes
consulting and advisory fees related to business transformation and
optimization activities, payroll costs for employees that dedicate
significant time to these projects, as well as associated
severance, facility closure costs, and lease termination expenses.
This amount also includes employee related costs and other costs
related to the July 2021 Restructuring Plan of $6.4 million for the
three and six months ended June 30, 2021, which are accounted for
as exit and disposal costs under ASC 420. In addition, it includes
certain costs associated with the July 2021 Restructuring Plan
which are not accounted for as exit and disposal costs under ASC
420, including one-time offshore build out costs. |
(d) |
Includes
gains and losses on investment and from dispositions. |
(e) |
Includes
expenses related the February 2021 Refinancing Transaction and
termination of the Receivables Financing Facility. |
(f) |
Primarily consists of foreign currency gains and losses. |
(g) |
All of
our intangible assets are attributable to acquisitions, including
the November 2016 merger. |
(h) |
We
utilize an estimated structural long-term non-GAAP tax rate in
order to provide consistency across reporting periods, removing the
effect of non-recurring tax adjustments, which include but are not
limited to tax rate changes, U.S. tax reform, share-based
compensation, audit conclusions and changes to valuation
allowances. When computing this long-term rate for the 2021 and
2022 interim periods, we based it on an average of the 2020 and
estimated 2021 tax rates and 2021 and estimated 2022 tax rates,
respectively, recomputed to remove the tax effect of non-GAAP
pre-tax adjustments and non-recurring tax adjustments, resulting in
a structural non-GAAP tax rate of 26% for all periods. The non-GAAP
tax rate could be subject to change for a variety of reasons,
including the rapidly evolving global tax environment, significant
changes in our geographic earnings mix including due to acquisition
activity, or other changes to our strategy or business operations.
We will re-evaluate our long-term non-GAAP tax rate as appropriate.
We believe that making these adjustments facilitates a better
evaluation of our current operating performance and comparisons to
prior periods. |
(i) |
Excludes
accelerated depreciation expense related to facility closures. |
Non-GAAP Earnings Per Share (EPS)
We define Non-GAAP EPS as Non-GAAP Net Income divided by our
GAAP weighted average number of shares outstanding for the period
on a diluted basis and further adjusted for the weighted average
number of shares associated with securities which are anti-dilutive
to GAAP earnings per share but dilutive to Non-GAAP EPS. Management
uses Non-GAAP EPS to evaluate the performance of our business on a
comparable basis from period to period, including by adjusting for
the impact of the issuance of shares that would be dilutive to
Non-GAAP EPS.
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(In millions, except per share amounts) |
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
Net loss attributable to
common stockholders |
$ |
(36.6 |
) |
|
$ |
(40.6 |
) |
|
$ |
(100.6 |
) |
|
$ |
(79.1 |
) |
Non-GAAP Net Income |
$ |
50.9 |
|
|
$ |
35.5 |
|
|
$ |
100.0 |
|
|
$ |
81.4 |
|
|
|
|
|
|
|
|
|
Weighted average number of
shares - Diluted |
|
207.9 |
|
|
|
209.5 |
|
|
|
206.2 |
|
|
|
210.5 |
|
Effect of dilutive
securities(a) |
|
5.4 |
|
|
|
0.4 |
|
|
|
6.0 |
|
|
|
0.7 |
|
Non-GAAP weighted average number of shares - Diluted |
|
213.3 |
|
|
|
209.9 |
|
|
|
212.2 |
|
|
|
211.2 |
|
|
|
|
|
|
|
|
|
Net loss per share -
Diluted |
$ |
(0.18 |
) |
|
$ |
(0.19 |
) |
|
$ |
(0.49 |
) |
|
$ |
(0.38 |
) |
Per share impacts of
adjustments to net loss(b) |
|
0.42 |
|
|
|
0.36 |
|
|
|
0.97 |
|
|
|
0.76 |
|
Per share impacts of shares
dilutive after adjustments to net loss(a) |
|
(0.00 |
) |
|
|
0.00 |
|
|
|
(0.01 |
) |
|
|
0.01 |
|
Non-GAAP EPS |
$ |
0.24 |
|
|
$ |
0.17 |
|
|
$ |
0.47 |
|
|
$ |
0.39 |
|
(a) |
Reflects impact of awards that would have been anti-dilutive to net
loss per share, and therefore not included in the calculation, but
would be dilutive to Non-GAAP EPS and are therefore included in the
share count for purposes of this non-GAAP measure. Potential common
share equivalents consist of shares issuable upon the exercise of
stock options, vesting of restricted stock units (including
performance-based restricted stock units) or purchases under the
Employee Stock Purchase Plan (the "ESPP"), as well as contingent
shares associated with our acquisition of Datapipe Parent, Inc.
Certain of our potential common share equivalents are contingent on
Apollo achieving pre-established performance targets based on a
multiple of their invested capital ("MOIC"), which are included in
the denominator for the entire period if such shares would be
issuable as of the end of the reporting period assuming the end of
the reporting period was the end of the contingency period. |
(b) |
Reflects the aggregate
adjustments made to reconcile Non-GAAP Net Income to our net loss,
as noted in the above table, divided by the GAAP diluted number of
shares outstanding for the relevant period. |
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