Rackspace (RXT) came out with a quarterly loss of $0.04 per share versus the Zacks Consensus Estimate of a loss of $0.08. This compares to loss of $0.04 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 50%. A quarter ago, it was expected that this company would post a loss of $0.11 per share when it actually produced a loss of $0.08, delivering a surprise of 27.27%.Over the last four quarters, the company has surpassed consensu ...

Financial Data and Key Metrics - Total company GAAP revenue for Q3 2024 was $676 million, within the guided range, driven by strength in public cloud [35] - Non-GAAP gross profit margin was 21.2% of GAAP revenue, up 90 basis points sequentially [35] - Non-GAAP operating profit was $34 million, exceeding the high end of guidance, with a non-GAAP operating margin of 5.1% of GAAP revenue, up 180 basis points sequentially [35] - Non-GAAP loss per share was $0.04, better than the guided range of $0.06 to $0.08 loss per share [35] - Cash flow from operations was $52 million, and free cash flow was $27 million in Q3 2024 [36] - The company closed the quarter with $157 million in cash and $532 million of total liquidity, including $375 million of undrawn commitments [36] Business Line Performance Private Cloud - Private Cloud GAAP revenue was $258 million, within the guided range, but down 1% sequentially due to customers rolling off older generation private cloud offerings [37] - Non-GAAP gross margin for private cloud was 38.6%, up 120 basis points sequentially, driven by cost efficiencies [38] - Non-GAAP segment operating margin was 28.9%, up 210 basis points sequentially, due to gross margin expansion and better cost management [38] - Bookings saw a slight sequential decline in Q3, but the pipeline increased by 41% year-over-year, with expectations of strong sequential bookings growth in Q4 [11] - Healthcare Private Cloud revenue is projected to grow nearly 30% year-over-year in fiscal 2024, driven by differentiated offerings like Epic Hosting [12] - Sovereign vertical revenue is expected to grow over 50% in 2024 compared to 2023 [16] Public Cloud - Public Cloud GAAP revenue was $418 million, down 2% sequentially but above the guidance midpoint, driven by services [21] - Public Cloud achieved record bookings in Q3, with high double-digit growth sequentially and year-over-year [22] - Non-GAAP gross margin for public cloud was 10.4%, up 50 basis points sequentially, driven by improved resale margins [40] - Non-GAAP segment operating margin was 3.9%, up 110 basis points sequentially, due to improved gross margins and operational efficiency [40] - The company launched four new solutions and enhanced four others in Q3, including Amazon Q Incubate, an AI-powered assistant [27] AI - The company is making progress in AI with nearly 50 customers and over 250 opportunities at various stages of implementation [32] - In public cloud, the company joined AWS' Generative AI Partner Innovation Alliance to help customers build and deploy generative AI solutions [32] - In private cloud, a proof of concept is underway with a large international company to run inferencing workloads on private AI infrastructure [33] - The company launched on-demand GPU as a Service on its spot platform, powered by NVIDIA's H100 Tensor Core GPUs [33] Market Performance - The Americas region showed robust sales performance in Q3, marking the third consecutive quarter of exceeding internal bookings targets [23] - Platform and data services bookings grew double digits sequentially and year-over-year, driven by strong demand in AI-related data modernization [24] - The company signed a multiyear strategic collaboration agreement with AWS to accelerate digital transformation for customers [25] Strategic Direction and Industry Competition - The company is focused on three strategic priorities: operational turnaround, positioning as a hybrid cloud and AI solutions company, and improving capital structure [6] - The company is launching new products and solutions targeting hybrid cloud and AI growth, with a focus on long-term profitable growth [6] - The company is expanding its offerings in regulated industries, such as healthcare and sovereign markets, with significant wins in both verticals [12][16] - The company is strengthening partnerships with hyperscalers and focusing on a services-led strategy to drive higher consumption of cloud infrastructure [25][30] Management Commentary on Operating Environment and Future Outlook - The company expects Q4 2024 GAAP revenue to be $668 million to $680 million, slightly down sequentially at the midpoint [41] - Non-GAAP operating profit is expected to be $34 million to $36 million, with a non-GAAP loss of $0.03 to $0.05 per share [41] - Private Cloud revenue is expected to be $258 million to $264 million, up 1% sequentially at the midpoint, while Public Cloud revenue is expected to be $410 million to $416 million, down 1% sequentially at the midpoint [42] - The company is optimistic about the growth potential in AI and hybrid cloud markets, with a balanced approach to helping customers leverage AI for impactful and sustainable solutions [34] Other Important Information - The company successfully migrated one of the nation's largest healthcare providers to its healthcare cloud, involving 38,000 concurrent users across 54 hospitals in nine states [13] - The company joined the Board of the OpenInfra Foundation to influence the strategic direction of open-source innovation [19] - The company is seeing renewed customer interest in its OpenStack offerings, with approximately 300,000 Bcf cores managed [18] Q&A Session Question 1: Size of the healthcare win - The healthcare win in Q4 2023 was in the hundreds of millions of dollars in TCV, with a successful onboarding and transition to Rackspace Healthcare Cloud [45] - The deal involved 38,000 concurrent users and was one of the largest Epic system installations globally [46] Question 2: Vertical breakdown of private cloud revenue - Healthcare and sovereign verticals are expected to grow from 5%-10% of total revenue in fiscal 2023 to nearly 15% by the end of fiscal 2024, with further growth expected in fiscal 2025 [48] - Healthcare revenue is projected to grow by nearly 30% year-over-year in fiscal 2024, with high double-digit growth expected in fiscal 2025 [49] Question 3: Services attach rate on infrastructure deals - The company has shifted to a services-led go-to-market strategy, resulting in a 22 out of 28 attach rate for services on top deals in Q3 [52] - This strategy has transformed discussions with customers, focusing on C-level engagement and delivering holistic value, which has improved margins and customer profitability [54]

Financial Performance - Revenue for the three months ended September 30, 2024, was $675.8 million, a decrease of 7.7% compared to $732.4 million for the same period in 2023[9]. - Gross profit for the third quarter of 2024 was $137.5 million, down from $152.0 million in the same quarter of 2023, reflecting a gross margin decline[9]. - Net loss for the three months ended September 30, 2024, was $186.6 million, compared to a net loss of $226.6 million for the same period in 2023, indicating a reduction in losses[9]. - Total consolidated revenue for the three months ended September 30, 2023, was $732.4 million, an increase from $675.8 million in the same period of 2024, representing a growth of 8.9%[183]. - Public Cloud revenue for the nine months ended September 30, 2023, reached $1,308.7 million, compared to $1,265.6 million in 2024, indicating a growth of 3.4%[183]. - Private Cloud segment operating profit for the three months ended September 30, 2023, was $86.2 million, up from $74.5 million in 2024, reflecting a growth of 15.5%[183]. - Total consolidated segment operating profit for the three months ended September 30, 2023, was $106.5 million, compared to $90.9 million in 2024, marking an increase of 17.5%[183]. - The company reported a total consolidated loss before income taxes of $(243.1) million for the three months ended September 30, 2023, compared to $(174.6) million in 2024, indicating a deterioration of 39.3%[183]. Assets and Liabilities - Total assets decreased from $4,096.2 million as of December 31, 2023, to $3,145.8 million as of September 30, 2024[8]. - Total liabilities decreased from $4,250.7 million at the end of 2023 to $4,095.5 million at the end of the third quarter of 2024[8]. - Cash and cash equivalents decreased from $196.8 million as of December 31, 2023, to $157.1 million as of September 30, 2024[8]. - As of September 30, 2024, total debt was $2,809.5 million, with a current portion of $27.1 million[78]. Impairment and Goodwill - The company reported an impairment of goodwill of $141.7 million for the third quarter of 2024, compared to $165.7 million in the same quarter of 2023[9]. - Goodwill impairment charges recorded in the first quarter of 2023 amounted to $270.8 million due to a decline in market capitalization[43]. - For the third quarter of 2024, goodwill impairment charges were $69.2 million for the Public Cloud and $72.5 million for the Private Cloud[42]. - The company completed a quantitative goodwill impairment analysis as of September 30, 2023, resulting in a non-cash impairment charge of $165.7 million for the Private Cloud[44]. - As of September 30, 2024, accumulated impairment charges on a consolidated basis were $2,305.6 million[72]. Cash Flow and Financing - Cash flows from operating activities provided $302.7 million in 2023, while there was a cash outflow of $14.4 million in 2024[11]. - The company primarily finances operations through internally-generated cash and has a New Revolving Credit Facility of up to $375.0 million, which was undrawn as of September 30, 2024[29]. - Proceeds from borrowings under long-term debt arrangements were $50.0 million in 2023, compared to $275.0 million in 2024[11]. - The company recorded cash payments for interest, net of amount capitalized, of $166.2 million in 2023, compared to $83.9 million in 2024[12]. Share-Based Compensation - Share-based compensation expense increased to $51.9 million in 2023 from $47.8 million in 2024[11]. - Total share-based compensation expense for the three months ended September 30, 2023, was $17.2 million, compared to $15.5 million for the same period in 2024, reflecting a 10.9% increase[147]. - For the nine months ended September 30, 2023, total share-based compensation expense was $51.9 million, while for 2024 it was $47.8 million, indicating a decrease of 7.9%[147]. - As of September 30, 2024, the company had $47.2 million of total unrecognized compensation cost related to stock options, RSUs, PSUs, and the ESPP[148]. Tax and Accounting - The effective tax rate for the three months ended September 30, 2024, was lower than the U.S. federal statutory rate of 21% due to various tax impacts, including goodwill impairment and changes in valuation allowance[149]. - The company recorded an income tax benefit of $79.5 million related to the effects of the March 2024 Refinancing Transactions, including excluded cancellation of indebtedness income (CODI)[152]. - The total CODI realized for U.S. tax purposes from the March 2024 Refinancing Transactions was $625.0 million for the nine months ended September 30, 2024[150]. Market Conditions and Future Outlook - The company anticipates continued challenges in market conditions, which may impact future performance[6]. - The company emphasizes the importance of customer retention and the development of new opportunities to sustain revenue growth in a competitive market[195]. - Rackspace Technology continues to focus on differentiating its service offerings to meet evolving customer needs and deepen relationships with major cloud service providers[194]. Segment Performance - The company operates in two segments: Public Cloud and Private Cloud, focusing on managed services and capital-intensive models respectively[178]. - The shift in revenue mix from Private Cloud to Public Cloud has been noted, with Public Cloud requiring significantly less capital expenditures[196]. - The company aims to expand its Public Cloud segment operating margins by driving cost efficiencies and growing higher-margin services revenue[196].

Revenue Performance - Revenue for Q3 2024 was $676 million, down 8% year-over-year from $732 million in Q3 2023[2] - Total consolidated revenue for the three months ended September 30, 2024, was $675.8 million, a decrease of 7.7% compared to $732.4 million in the same period of 2023[26] - Total consolidated revenue for the nine months ended September 30, 2024, was $2,051.5 million, reflecting an 8.3% decrease from $2,237.4 million in 2023[26] Cloud Revenue - Private Cloud revenue decreased by 14% year-over-year to $258 million, while Public Cloud revenue decreased by 3% to $418 million[3] - Public Cloud revenue for the nine months ended September 30, 2024, was $1,265.6 million, down 3.3% from $1,308.7 million in 2023[26] - Private Cloud revenue for the three months ended September 30, 2024, decreased by 14.4% to $257.5 million from $300.9 million in the same period of 2023[26] Profitability Metrics - Loss from operations improved to $(174) million in Q3 2024, compared to $(239) million in Q3 2023[4] - Net loss for Q3 2024 was $(187) million, an improvement from $(227) million in Q3 2023, with net loss per diluted share at $(0.82) compared to $(1.05) in the prior year[4] - Non-GAAP Operating Profit was $34 million, down 25% from $46 million in Q3 2023[5] - Non-GAAP Operating Profit for the three months ended September 30, 2024, was $34.3 million, down 24.6% from $45.5 million in 2023[28] Cash Flow and Liquidity - Cash flow from operating activities for Q3 2024 was $52 million[1] - Cash flows from operating activities provided $302.7 million in 2023, contrasting with a cash outflow of $14.4 million in 2024[24] - As of September 30, 2024, cash and cash equivalents stood at $157 million, with no outstanding balance on the New Revolving Credit Facility[6] - Cash and cash equivalents at the end of the period were $280.7 million, up from $160.1 million[24] Guidance and Projections - Guidance for Q4 2024 projects total revenue between $668 million and $680 million, with Private Cloud revenue expected between $258 million and $264 million[7] - Public Cloud revenue guidance for Q4 2024 is set between $410 million and $416 million[7] - Non-GAAP Loss Per Share is projected to be between $(0.03) and $(0.05) for Q4 2024[7] Asset and Liability Overview - Total assets increased to $4,096.2 million in December 2023 from $3,145.8 million in September 2024[23] - Total liabilities rose to $4,250.7 million in December 2023, compared to $4,095.5 million in September 2024[23] - Debt stood at $2,839.6 million in December 2023, an increase from $2,782.4 million in September 2024[23] Impairment and Expenses - The company reported impairment of goodwill at $708.8 million for 2023, slightly down from $714.9 million in 2024[24] - Impairment of goodwill amounted to $165.7 million for the three months ended September 30, 2023, and $141.7 million for 2024[47] - Restructuring and transformation expenses were $14.3 million for the three months ended September 30, 2023, compared to $8.8 million for 2024[45] Shareholder Metrics - Weighted average number of shares - Diluted for the three months ended September 30, 2023, was 216.0 million, while for 2024 it was 226.4 million[50] - Net loss per share - Diluted for the three months ended September 30, 2023, was $(1.05), compared to $(0.82) for 2024[50]

SAN ANTONIO, Nov. 05, 2024 (GLOBE NEWSWIRE) -- Rackspace Technology® (NASDAQ: RXT), a leading hybrid, multicloud, and AI technology services company, announced today that it will work with Amazon Web Services (AWS), an Amazon.com, Inc. company, as part of the company’s new Generative AI Partner Innovation Alliance. The Generative AI Partner Innovation Alliance will help scale and expand the reach of the AWS Generative AI Innovation Center (GenAIIC) - a program that helps AWS customers successfully build and ...

SAN ANTONIO, Oct. 23, 2024 (GLOBE NEWSWIRE) -- Rackspace Technology® (NASDAQ: RXT)— a leading hybrid, multicloud, and AI solutions company, today announced that it will release its third quarter 2024 financial results after the market closes on Tuesday, November 12, 2024. Amar Maletira, Chief Executive Officer, and Mark Marino, Chief Financial Officer, will host a conference call on the day of the release (November 12, 2024) at 5:00 PM ET to discuss the Company’s financial results. Interested parties may ac ...

SAN ANTONIO, Texas, Sept. 17, 2024 (GLOBE NEWSWIRE) -- Rackspace Technology® (NASDAQ: RXT), a leading hybrid, multicloud, and AI technology services company, today announced the launch of Rackspace Rapid Migration Offer (RRMO) designed to expedite data center migrations to Amazon Web Services (AWS). The Rackspace Rapid Migration Offer (RRMO) provides everything an organization needs to accelerate its move to the cloud. RRMO provides a comprehensive suite of services encompassing migration planning, landing ...

SAN ANTONIO, Aug. 14, 2024 (GLOBE NEWSWIRE) -- Rackspace Technology® (NASDAQ: RXT), a leading end-to-end, hybrid, multicloud, and AI solutions company, today announced it is working with TrueData, the leader in providing first-party data for advertisers, publishers, and AdTech firms, to achieve cloud and data storage cost savings that can be invested in innovative new services for its clients. Founded in 2013, TrueData is a leader in independent omnichannel identity resolution. The company connects individu ...

Rackspace (RXT) came out with a quarterly loss of $0.08 per share versus the Zacks Consensus Estimate of a loss of $0.11. This compares to loss of $0.06 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 27.27%. A quarter ago, it was expected that this company would post a loss of $0.13 per share when it actually produced a loss of $0.11, delivering a surprise of 15.38%. Over the last four quarters, the company has surpassed con ...

Revenue of $685 million in the Second Quarter, down 8% Year-over-Year Private Cloud Revenue was $260 million, down 17% Year-over-Year Public Cloud Revenue was $425 million, down 2% Year-over-Year Second Quarter 2024 Cash Flow From Operating Activities was $24 million; Cash Flow From Operating Activities was $273 million on a Trailing-Twelve-Month Basis Q3 2024 Guidance Total Revenue $668 - $680 million Private Cloud Revenue $255 - $262 million Public Cloud Revenue $414 - $419 million Non-GAAP Operating Prof ...