Rackspace Technology(US:RXT)2024-11-12 22:03Financial 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].