Rackspace (RXT) Q1 2025 Earnings Call May 08, 2025 05:00 PM ET Speaker0 Good day, and welcome to the Rackspace First Quarter twenty twenty five Earnings Webcast. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would now like to turn the call over to Sagar Habar, Head of Investor Relations. Please go ahead. Speaker1 Thank you, and welcom ...

Financial Performance - Total revenue for Q1 2025 was $665 million, a decrease of 3% quarter-over-quarter and 4% year-over-year[7] - Non-GAAP gross profit was $132 million, down 6% both quarter-over-quarter and year-over-year[7] - Non-GAAP operating profit was $26 million, a decrease of 35% quarter-over-quarter but an increase of 83% year-over-year[7] - Non-GAAP loss per share was $(006), compared to $(002) in Q4 2024 and $005 in Q1 2024[7, 25] - Cash provided by operating activities was $13 million in Q1 2025[9] - Free cash flow was $4 million in Q1 2025[9] Segment Performance - Total Rackspace revenue was $665 million, with Private Cloud contributing $250 million and Public Cloud $416 million[8] - Private Cloud revenue decreased by 7% year-over-year, while Public Cloud revenue decreased by 2% year-over-year[8] - Private Cloud Non-GAAP gross margin was 371%, while Public Cloud Non-GAAP gross margin was 95%[8] Debt and Liquidity - Total principal balance of debt as of March 31, 2025, was $2474 billion[10] - Total debt, including unamortized debt issuance costs, debt premium, and debt discount, was $2787 billion[10] - Total liquidity, including cash and cash equivalents and the revolving credit facility, was $473 million[9] Outlook - Q2 2025 revenue is expected to be between $653 million and $665 million[16] - Q2 2025 Non-GAAP operating profit is expected to be between $25 million and $27 million[16] - Q2 2025 Non-GAAP loss per share is expected to be between $(004) and $(006)[16]

Exhibit 99.1 Rackspace Technology Reports First Quarter 2025 Results SAN ANTONIO, May 8, 2025 – Rackspace Technology, Inc. (Nasdaq: RXT), a leading end-to-end, hybrid cloud and AI solutions company, today announced results for its first quarter ended March 31, 2025. Amar Maletira, Chief Executive Officer, stated, "Results in the first quarter of 2025 exceeded our expectations across all key metrics. Revenue was at the high end of our guidance while profit and EPS exceeded our guidance range. This marks the ...

Core Insights - Rackspace Technology, Inc. reported first quarter 2025 results that exceeded expectations across key metrics, with revenue at the high end of guidance and profit and EPS surpassing guidance ranges [2][3][5] Financial Performance - Total revenue for Q1 2025 was $665 million, a decrease of 4% year-over-year from $691 million in Q1 2024 [3][7] - Private Cloud revenue was $250 million, down 7% year-over-year from $268 million in Q1 2024 [3][4] - Public Cloud revenue was $416 million, a decrease of 2% year-over-year from $422 million in Q1 2024 [4][28] - Non-GAAP operating profit increased by 83% year-over-year to $26 million from $14 million in Q1 2024 [5][46] - Net loss for Q1 2025 was $(72) million, significantly improved from a net loss of $(641) million in Q1 2024 [5][50] Operational Metrics - Sales bookings grew by 9% in Q1 2025, indicating a strengthening sales pipeline across business units [2] - Cash flow from operating activities was $13 million for Q1 2025, compared to $143 million on a trailing twelve-month basis [7] Guidance - For Q2 2025, the company provided revenue guidance of $653 - $665 million, with Private Cloud revenue expected between $247 - $253 million and Public Cloud revenue between $406 - $412 million [8]

Rackspace Cyber Recovery Cloud powered by Rubrik Enables Organizations to Restore Critical Operations Faster and More Securely than Traditional Offerings in the Event of a Cyber AttackSAN FRANCISCO, April 30, 2025 (GLOBE NEWSWIRE) -- LIVE! from RSAC, Rubrik (NYSE: RBRK), a leading cybersecurity company, and Rackspace Technology® (NASDAQ: RXT), a leading end-to-end hybrid cloud and AI solutions company, today announced a strategic partnership. The two companies will collaborate to deliver a fully managed iso ...

SAN ANTONIO, April 15, 2025 (GLOBE NEWSWIRE) -- Rackspace Technology® (NASDAQ: RXT), a leading end-to-end hybrid cloud and AI solutions company, today announced that it will release its first quarter 2025 financial results after the market closes on Thursday, May 8, 2025. Amar Maletira, Chief Executive Officer, and Mark Marino, Chief Financial Officer, will host a conference call on the day of the release (May 8, 2025) at 5:00 PM ET to discuss the Company’s financial results. Interested parties may access t ...

New multi-tenant infrastructure-as-a-service empowers organizations to modernize with high-performance, license-free cloud service that alleviates vendor lock-in concernsSAN ANTONIO, April 10, 2025 (GLOBE NEWSWIRE) -- Rackspace Technology® (NASDAQ: RXT), a leading end-to-end hybrid and AI solutions company, today announced the launch of Rackspace OpenStack Flex, an Enterprise-ready, on-demand, shared cloud service providing secure and open Infrastructure-as-a-Service (IaaS). Rackspace OpenStack Flex service ...

Fully managed private AI solution combines cutting-edge AI capabilities with enterprise-grade security and privacy protectionsSAN ANTONIO, March 25, 2025 (GLOBE NEWSWIRE) -- Rackspace Technology® (NASDAQ: RXT), a leading end-to-end hybrid cloud and AI solutions company, today announced Rackspace AI Business, a versatile, secure and high-performance AI-optimized hybrid cloud platform that targets customers with AI training and inferencing requirements to unlock the full potential of AI. In today's rapidly e ...

Customer Base and Market Presence - Rackspace Technology served over 81,000 customers across 120 countries as of December 31, 2024[41]. - The company operates in more than 60 cities globally, enhancing its ability to serve multinational clients[40]. - As of December 31, 2024, Rackspace Technology served over 81,000 customers across more than 120 countries, with no single customer representing 5% or more of total revenue[62][63]. - The company has a global direct sales team of over 170 representatives and over 570 service delivery managers as of December 31, 2024[66]. Financial Performance and Efficiency - Revenue per employee for the years ended December 31, 2023 and 2024 exceeded $500,000, indicating a strong operational efficiency[38]. - The company incurred net losses of $804.8 million, $837.8 million, and $858.2 million for the fiscal years ended December 31, 2022, 2023, and 2024, respectively[98]. - The company has $375.0 million available for additional borrowing under the New Revolving Credit Facility, with $23.5 million of letters of credit issued[184]. - The company’s substantial indebtedness could limit its ability to borrow for working capital, capital expenditures, and strategic initiatives, potentially resulting in an event of default under its debt agreements[180]. Product and Service Offerings - The company has invested over $1 billion and 12 million hours in developing Rackspace Fabric, its proprietary cloud software[35]. - Rackspace Technology differentiates itself by focusing solely on hybrid cloud solutions, unlike many competitors who charge based on labor costs[31]. - Rackspace Technology launched Foundry for Artificial Intelligence (FAIR) in June 2023, offering services to accelerate AI adoption across industries[52]. - The company focuses on expanding its private cloud business with new solutions, including Rackspace Software Defined Datacenter and Private AI Cloud[56]. Partnerships and Collaborations - The company partners with major cloud providers, including AWS, Google Cloud, and Microsoft Azure, to deliver a full suite of cloud services[38]. - The company has established partnerships with major cloud vendors like AWS, Microsoft Azure, and Google Cloud, enhancing its competitive advantage[65]. - The company has established non-exclusive managed service provider relationships with major cloud providers such as AWS, Microsoft, and Google, which are crucial for maintaining customer relationships and driving revenue[108]. Operational Challenges and Risks - The company faces risks related to customer retention and acquisition, which could adversely affect revenue and results of operations[87]. - The company operates in a highly competitive market with significant challenges from existing and new competitors[102]. - Cybersecurity threats are a significant concern, with past incidents causing service disruptions, which could harm the company's reputation and financial condition[115]. - The company faces significant risks related to service interruptions, which could lead to substantial customer dissatisfaction and loss of revenue[123]. Compliance and Regulatory Issues - Compliance with various data privacy laws, including the E.U. GDPR and U.K. GDPR, could result in fines up to €20 million or £17 million, and 4% of total annual revenue for non-compliance[143]. - The regulatory framework for privacy and security is complex and evolving, leading to potential increased costs and liability for the company[144]. - The company must maintain FISMA and FedRAMP certifications to meet federal government security compliance requirements, with failure potentially breaching contracts[152]. Corporate Governance and Ownership - Apollo beneficially owned approximately 57% of the voting power of the company's outstanding common stock as of December 31, 2024, allowing it to control significant corporate decisions[206]. - The company is classified as a "controlled company" under Nasdaq rules, allowing it to rely on exemptions from certain corporate governance requirements[207]. Environmental and Social Responsibility - The company logged over 22,000 volunteer hours for community service in the year ended December 31, 2024[74]. - Concerns about greenhouse gas emissions may lead to increased electricity prices, impacting the company's operational costs[164]. Debt and Financial Obligations - The company had $2,449.4 million in outstanding indebtedness, with total debt service payments of approximately $200.7 million and $162.1 million for the years ended December 31, 2023 and 2024, representing 53.5% and 406.2% of cash flow from operations respectively[179]. - The company’s ability to generate sufficient cash flow to service its indebtedness is uncertain, and failure to do so could lead to substantial liquidity problems[187]. - The company’s debt agreements contain restrictive covenants that limit its operational flexibility and ability to engage in favorable business activities[189].

Core Insights - Rackspace Technology partners with Domino's Pizza UK & Ireland to enhance digital capabilities through a robust hybrid cloud environment [1][5] - Domino's has transformed into a technology-driven enterprise, with significant sales through digital channels and nearly six million active mobile app users [2][4] Company Overview - Domino's Pizza UK & Ireland is the leading pizza delivery company in the region, operating a network of franchisee-owned stores supported by centralized corporate operations [2][3] - The company is expanding its store network from approximately 1,400 to over 1,600 locations, necessitating a scalable infrastructure to meet increasing demands [4] Technology Transformation - The partnership with Rackspace aims to create a flexible and scalable technology platform, leveraging Microsoft Azure for a hybrid environment that combines private cloud stability with scalability [5][8] - Domino's modernized its e-commerce platform by transitioning to a microservices architecture on Azure Kubernetes Service, enabling efficient scaling and faster feature deployment [7][8] Operational Enhancements - The implementation of Infrastructure-as-Code (IaC) practices ensures consistent and reliable deployments across environments, facilitating rapid environment rebuilding [6][7] - Domino's is also modernizing its supply chain and finance operations through Microsoft Dynamics 365, enhancing digital operations and transitioning most orders to digital channels [8] Partnership Dynamics - Rackspace Technology has been a trusted partner for Domino's since 2011, providing essential technical expertise and support for innovation while maintaining operational stability [10][11] - The collaboration has been particularly beneficial during high-demand events, such as the 2022 FIFA World Cup, showcasing the effectiveness of the partnership [11][12]