Rackspace Technology(RXT) - 2025 Q2 - Quarterly Results

Executive Summary Rackspace Technology's Q2 2025 results exceeded guidance, with 16% bookings growth and 34% Non-GAAP Operating Profit increase Q2 2025 Performance Highlights Rackspace Technology reported Q2 2025 results with revenue and operating profit exceeding guidance midpoints. Bookings grew 16% year-over-year, and Non-GAAP Operating Profit increased 34%. The company also delivered positive operating cash flow - Revenue and operating profit exceeded the midpoint of guidance, and EPS was within the guided range[1] - Bookings grew 16% year-over-year[1] - Operating profit increased 34% year-over-year[1] - Delivered positive operating cash flow[1] Second Quarter 2025 Financial Results Rackspace Technology's Q2 2025 financial results show revenue declines and a net loss, offset by improved non-GAAP operating profit Consolidated Financial Performance Rackspace Technology's Q2 2025 revenue decreased by 3% year-over-year to $666 million. The company reported a net loss of $(55) million, a significant decline from a net income of $25 million in Q2 2024, resulting in a diluted net loss per share of $(0.23) Q2 2025 Consolidated Financial Highlights | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | YoY Change (%) | | :----------------------- | :------------------ | :------------------ | :------------- | | Revenue | $666 | $685 | (3)% | | Loss from operations | $(25) | $(54) | 53.7% (Improvement) | | Net loss (income) | $(55) | $25 | NM (Significant decline) | | Net loss per diluted share | $(0.23) | $0.11 | NM (Significant decline) | Segment Performance Both Public Cloud and Private Cloud segments experienced revenue declines in Q2 2025. Public Cloud revenue decreased by 2% to $417 million, while Private Cloud revenue saw a 4% decrease to $250 million Q2 2025 Segment Revenue | Segment | Q2 2025 (Millions) | Q2 2024 (Millions) | YoY Change (%) | | :------------ | :------------------ | :------------------ | :------------- | | Private Cloud | $250 | $260 | (4)% | | Public Cloud | $417 | $425 | (2)% | Non-GAAP Financial Performance Non-GAAP Operating Profit significantly increased by 34% year-over-year to $27 million in Q2 2025, indicating improved operational efficiency. Non-GAAP Loss Per Share also improved by 33% to $(0.06) Q2 2025 Non-GAAP Financial Highlights | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | YoY Change (%) | | :---------------------- | :------------------ | :------------------ | :------------- | | Non-GAAP Operating Profit | $27 | $20 | 34% | | Non-GAAP Loss Per Share | $(0.06) | $(0.09) | 33% (Improvement) | Liquidity and Capital Expenditures As of June 30, 2025, Rackspace Technology maintained $104 million in cash and cash equivalents and $414 million in total liquidity. Capital expenditures for Q2 2025 were $31 million, a slight decrease from the prior year Q2 2025 Liquidity and Capital Expenditures | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | | :-------------------------- | :------------------ | :------------------ | | Capital expenditures | $31 | $33 | | Cash and cash equivalents (as of June 30, 2025) | $104 | N/A | | Total liquidity (as of June 30, 2025) | $414 | N/A | - Cash Flow From Operating Activities was $8 million in Q2 2025, and $127 million on a Trailing-Twelve-Month Basis[6] Financial Outlook Rackspace Technology provides Q3 2025 guidance, projecting total revenue between $660 million and $674 million, and non-GAAP profit ranges Q3 2025 Guidance Rackspace Technology provided guidance for Q3 2025, projecting total revenue between $660 million and $674 million. Non-GAAP Operating Profit is expected to be in the range of $30 million to $32 million, with Non-GAAP Loss Per Share between $(0.04) and $(0.06) Q3 2025 Financial Guidance | Metric | Q3 2025 Guidance (Millions) | | :-------------------------- | :-------------------------- | | Total Revenue | $660 - $674 | | Private Cloud Revenue | $246 - $254 | | Public Cloud Revenue | $414 - $420 | | Non-GAAP Operating Profit | $30 - $32 | | Non-GAAP Loss Per Share | $(0.04) - $(0.06) | | Non-GAAP Other Income (Expense) | $(47) – $(51) | | Non-GAAP Tax Expense Rate | 26% | | Non-GAAP Weighted Average Shares | 239 - 241 | Non-GAAP Guidance Disclaimer The company does not provide GAAP net income (loss) guidance or a reconciliation for its Non-GAAP guidance due to the inherent uncertainty and potential variability of certain reconciling items, such as share-based compensation expense, which would require unreasonable effort to forecast - Rackspace Technology does not reconcile Non-GAAP Operating Profit, Non-GAAP Loss Per Share, Non-GAAP Other Income (Expense), or Non-GAAP Tax Expense Rate guidance to the most directly comparable GAAP measure due to the uncertainty and potential variability of certain items like share-based compensation expense[9] Company Information This section provides company details, including conference call, business overview, forward-looking statements, non-GAAP explanations, and contacts Conference Call and Webcast Rackspace Technology hosted a conference call on August 7, 2025, to discuss its second quarter 2025 results, with webcast and dial-in options available for interested parties - A conference call was held on August 7, 2025, at 4:00pm CT / 5:00pm ET to discuss Q2 2025 results[10] - Webcast replay and dial-in information were provided via the company's IR website and a pre-registration link[10][11] About Rackspace Technology Rackspace Technology is a leading provider of end-to-end, hybrid cloud and AI solutions, specializing in designing, building, and operating cloud environments across various technology platforms and deployment models for its customers - Rackspace Technology is a leading end-to-end, hybrid cloud and AI solutions company[12] - The company designs, builds, and operates customers' cloud environments across all major technology platforms, irrespective of technology stack or deployment model[12] Forward-looking Statements The press release contains forward-looking statements subject to risks and uncertainties, as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on management's current beliefs and are not guarantees of future performance, with actual results potentially differing materially due to various risk factors - All statements, other than statements of historical fact, are 'forward-looking statements' subject to risks and uncertainties[13] - These statements relate to anticipated financial performance, management's plans, business prospects, and market conditions[13] - The company undertakes no obligation to publicly update or revise any forward-looking statement[13] Non-GAAP Financial Measures Explanation Rackspace Technology utilizes 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 (Loss) Per Share, to provide investors and analysts with a clearer view of underlying business trends by excluding certain non-recurring or non-cash items. The presentation of these measures was updated in Q4 2024 to no longer exclude certain cash compensation - The press release includes non-GAAP financial measures like constant currency revenue, Non-GAAP Gross Profit, Non-GAAP Net Income (Loss), Non-GAAP Operating Profit, Adjusted EBITDA, and Non-GAAP Earnings (Loss) Per Share[14] - These non-GAAP measures exclude certain costs, losses, and gains to provide a better understanding of underlying, recurring performance[14] - Beginning in Q4 2024, the presentation of non-GAAP financial measures was updated to no longer exclude certain cash compensation previously included in 'special bonuses and other compensation expenses' and 'restructuring and transformation expenses'[15] Investor Relations & Media Contacts Contact information for Rackspace Technology's Investor Relations and Media Relations departments is provided for inquiries - Investor Relations contact: Sagar Hebbar at ir@rackspace.com[16] - Media Relations contact: Cheryl Amerine at publicrelations@rackspace.com[16] Consolidated Financial Statements (Unaudited) This section presents Rackspace Technology's unaudited consolidated financial statements, including results of operations, balance sheets, and cash flows Consolidated Results of Operations (Three Months) For the three months ended June 30, 2025, Rackspace Technology reported a revenue of $666.3 million, a 2.7% decrease year-over-year. The company's net income shifted from a $25.0 million profit in Q2 2024 to a $(54.5) million loss in Q2 2025, primarily due to the absence of a significant gain on debt extinguishment recorded in the prior year Consolidated Results of Operations (Three Months Ended June 30) | Metric (in millions) | 2024 Amount | 2024 % Revenue | 2025 Amount | 2025 % Revenue | YoY Change Amount | YoY % Change | | :---------------------------------- | :---------- | :------------- | :---------- | :------------- | :---------------- | :----------- | | Revenue | $684.9 | 100.0% | $666.3 | 100.0% | $(18.6) | (2.7)% | | Gross profit | $131.4 | 19.2% | $129.2 | 19.4% | $(2.2) | (1.7)% | | Loss from operations | $(53.8) | (7.9)% | $(25.1) | (3.8)% | $28.7 | (53.3)% | | Total other income (expense) | $48.9 | 7.2% | $(24.8) | (3.7)% | $(73.7) | NM | | Net income (loss) | $25.0 | 3.7% | $(54.5) | (8.2)% | $(79.5) | NM | | Net earnings (loss) per share: Diluted | $0.11 | | $(0.23) | | | | Consolidated Results of Operations (Six Months) For the six months ended June 30, 2025, total revenue was $1,331.7 million, a 3.2% decrease from the prior year. The net loss significantly improved by 79.5% to $(126.0) million, primarily due to the absence of goodwill and asset impairment charges that impacted the prior year, despite a decrease in gain on debt extinguishment Consolidated Results of Operations (Six Months Ended June 30) | Metric (in millions) | 2024 Amount | 2024 % Revenue | 2025 Amount | 2025 % Revenue | YoY Change Amount | YoY % Change | | :---------------------------------- | :---------- | :------------- | :---------- | :------------- | :---------------- | :----------- | | Revenue | $1,375.7 | 100.0% | $1,331.7 | 100.0% | $(44.0) | (3.2)% | | Gross profit | $264.2 | 19.2% | $256.1 | 19.2% | $(8.1) | (3.1)% | | Impairment of goodwill | $(573.2) | (41.7)% | — | —% | $573.2 | (100.0)% | | Loss from operations | $(706.6) | (51.4)% | $(63.5) | (4.8)% | $643.1 | (91.0)% | | Total other income (expense) | $56.4 | 4.1% | $(49.7) | (3.7)% | $(106.1) | NM | | Net loss | $(615.6) | (44.7)% | $(126.0) | (9.5)% | $489.6 | (79.5)% | | Net loss per share: Basic and diluted | $(2.77) | | $(0.54) | | | | Consolidated Balance Sheets As of June 30, 2025, total assets decreased to $2,894.9 million from $3,054.1 million at December 31, 2024, primarily driven by a reduction in cash and accounts receivable. Total liabilities also decreased slightly to $4,013.9 million, while stockholders' deficit widened to $(1,119.0) million Consolidated Balance Sheet Highlights (in millions) | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------- | :------------------ | :------------ | | Cash and cash equivalents | $144.0 | $103.9 | | Total current assets | $618.8 | $548.4 | | Total assets | $3,054.1 | $2,894.9 | | Total current liabilities | $766.6 | $715.4 | | Total liabilities | $4,058.3 | $4,013.9 | | Total stockholders' deficit | $(1,004.2) | $(1,119.0) | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities was $21.0 million, a significant improvement from a net cash outflow of $(66.2) million in the prior year. Net cash used in investing activities decreased to $(29.9) million, while financing activities resulted in a net cash outflow of $(35.7) million, compared to an inflow in the prior year Consolidated Statements of Cash Flows (Six Months Ended June 30, in millions) | Metric | 2024 | 2025 | | :------------------------------------------ | :----- | :----- | | Net cash provided by (used in) operating activities | $(66.2) | $21.0 | | Net cash used in investing activities | $(49.5) | $(29.9) | | Net cash provided by (used in) financing activities | $110.4 | $(35.7) | | Decrease in cash, cash equivalents, and restricted cash | $(6.6) | $(41.3) | | Cash, cash equivalents, and restricted cash at end of period | $193.1 | $105.7 | Supplemental Cash Flow Information (Six Months Ended June 30, in millions) | Metric | 2024 | 2025 | | :------------------------------------------------ | :----- | :----- | | Cash payments for interest, net of amount capitalized | $70.1 | $41.0 | | Cash payments for income taxes, net of refunds | $6.8 | $1.3 | | Non-cash purchases of property, equipment and software | $11.9 | $28.5 | Segment Data This section details Rackspace Technology's revenue and operating profit performance by segment, including Public Cloud and Private Cloud Revenue by Segment Both Public Cloud and Private Cloud segments experienced revenue declines for both the three and six months ended June 30, 2025. Public Cloud revenue decreased by 2.0% (actual) and 2.2% (constant currency) for the quarter, while Private Cloud revenue decreased by 4.0% (actual) and 4.8% (constant currency) Revenue by Segment (Three Months Ended June 30, in millions) | Segment | 2024 | 2025 | Actual % Change | Constant Currency % Change | | :------------ | :----- | :----- | :-------------- | :------------------------- | | Public Cloud | $424.9 | $416.6 | (2.0)% | (2.2)% | | Private Cloud | $260.0 | $249.7 | (4.0)% | (4.8)% | | Total | $684.9 | $666.3 | (2.7)% | (3.2)% | Revenue by Segment (Six Months Ended June 30, in millions) | Segment | 2024 | 2025 | Actual % Change | Constant Currency % Change | | :------------ | :------- | :------- | :-------------- | :------------------------- | | Public Cloud | $847.3 | $832.2 | (1.8)% | (1.7)% | | Private Cloud | $528.4 | $499.5 | (5.5)% | (5.7)% | | Total | $1,375.7 | $1,331.7 | (3.2)% | (3.3)% | Segment Operating Profit For Q2 2025, Public Cloud segment operating profit increased significantly by 51.4% to $16.2 million, while Private Cloud operating profit decreased by 10.6% to $61.5 million. Non-GAAP Operating Profit for the consolidated entity grew by 34.5% for the quarter and 54.2% for the six-month period, driven by improved performance in Public Cloud and reduced corporate function costs Segment Operating Profit (Three Months Ended June 30, in millions) | Segment | 2024 Amount | 2024 % of Segment Revenue | 2025 Amount | 2025 % of Segment Revenue | YoY Change Amount | YoY % Change | | :-------------------- | :---------- | :------------------------ | :---------- | :------------------------ | :---------------- | :----------- | | Public Cloud | $10.7 | 2.5% | $16.2 | 3.9% | $5.5 | 51.4% | | Private Cloud | $68.8 | 26.5% | $61.5 | 24.6% | $(7.3) | (10.6)% | | Corporate functions | $(59.2) | | $(50.4) | | $8.8 | (14.9)% | | Non-GAAP Operating Profit | $20.3 | | $27.3 | | $7.0 | 34.5% | Segment Operating Profit (Six Months Ended June 30, in millions) | Segment | 2024 Amount | 2024 % of Segment Revenue | 2025 Amount | 2025 % of Segment Revenue | YoY Change Amount | YoY % Change | | :-------------------- | :---------- | :------------------------ | :---------- | :------------------------ | :---------------- | :----------- | | Public Cloud | $18.9 | 2.2% | $33.5 | 4.0% | $14.6 | 77.2% | | Private Cloud | $139.9 | 26.5% | $122.5 | 24.5% | $(17.4) | (12.4)% | | Corporate functions | $(124.5) | | $(103.1) | | $21.4 | (17.2)% | | Non-GAAP Operating Profit | $34.3 | | $52.9 | | $18.6 | 54.2% | Non-GAAP Financial Measures This section provides detailed reconciliations and explanations for Rackspace Technology's key non-GAAP financial measures Constant Currency Revenue Constant currency revenue is used to assess growth by excluding foreign currency fluctuations. For Q2 2025, total revenue decreased by 3.2% on a constant currency basis, slightly more than the actual 2.7% decrease, indicating a minor positive foreign currency translation impact - Constant currency revenue is a non-GAAP metric used to understand growth by excluding foreign currency rate fluctuations[32] Constant Currency Revenue (Three Months Ended June 30, in millions) | Segment | 2024 Revenue | 2025 Revenue | Foreign Currency Translation | Revenue in Constant Currency | Actual % Change | Constant Currency % Change | | :------------ | :----------- | :----------- | :--------------------------- | :--------------------------- | :-------------- | :------------------------- | | Public Cloud | $424.9 | $416.6 | $(0.8) | $415.8 | (2.0)% | (2.2)% | | Private Cloud | $260.0 | $249.7 | $(2.2) | $247.5 | (4.0)% | (4.8)% | | Total | $684.9 | $666.3 | $(3.0) | $663.3 | (2.7)% | (3.2)% | Constant Currency Revenue (Six Months Ended June 30, in millions) | Segment | 2024 Revenue | 2025 Revenue | Foreign Currency Translation | Revenue in Constant Currency | Actual % Change | Constant Currency % Change | | :------------ | :----------- | :----------- | :--------------------------- | :--------------------------- | :-------------- | :------------------------- | | Public Cloud | $847.3 | $832.2 | $0.3 | $832.5 | (1.8)% | (1.7)% | | Private Cloud | $528.4 | $499.5 | $(1.4) | $498.1 | (5.5)% | (5.7)% | | Total | $1,375.7 | $1,331.7 | $(1.1) | $1,330.6 | (3.2)% | (3.3)% | Non-GAAP Gross Profit Non-GAAP Gross Profit for Q2 2025 was $131.9 million, a 4.8% decrease from $138.6 million in Q2 2024. This measure excludes share-based compensation, purchase accounting impacts, and restructuring/transformation expenses to provide a clearer view of recurring gross margins - Non-GAAP Gross Profit excludes share-based compensation expense, purchase accounting-related effects, and certain business transformation-related costs[34] Non-GAAP Gross Profit Reconciliation (in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross profit | $131.4 | $129.2 | $264.2 | $256.1 | | Share-based compensation expense | $2.0 | $1.3 | $3.9 | $3.1 | | Purchase accounting impact on expense | $0.6 | $0.2 | $1.2 | $0.4 | | Restructuring and transformation expenses | $4.6 | $1.2 | $9.6 | $4.4 | | Non-GAAP Gross Profit | $138.6 | $131.9 | $278.9 | $264.0 | Non-GAAP Net Income (Loss), Operating Profit and Adjusted EBITDA These non-GAAP measures are key management metrics for assessing performance by excluding non-cash, non-recurring, or non-core items. Non-GAAP Operating Profit for Q2 2025 was $27.3 million, a 34.5% increase year-over-year, while Adjusted EBITDA increased by 16.9% to $64.4 million. Non-GAAP Net Loss improved to $(15.0) million from $(21.3) million in Q2 2024 - Non-GAAP Net Income (Loss), Non-GAAP Operating Profit, and Adjusted EBITDA are management's principal metrics for measuring underlying financial performance[37][41] - These measures exclude non-cash charges (share-based compensation, amortization of acquired intangibles), transaction-related costs, restructuring charges, impairment charges, and certain other non-operating gains/losses[38][39][40] - The non-GAAP tax rate is an estimated structural long-term rate of 26% for all periods, adjusted to remove non-recurring tax adjustments[48] Net Income (Loss) Reconciliation to Non-GAAP Net Loss For Q2 2025, the GAAP net loss of $(54.5) million was adjusted to a Non-GAAP Net Loss of $(15.0) million, reflecting exclusions such as share-based compensation, amortization of intangible assets, and the interest expense impact from the March 2024 Refinancing Transactions Net Income (Loss) Reconciliation to Non-GAAP Net Loss (in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $25.0 | $(54.5) | $(615.6) | $(126.0) | | Share-based compensation expense | $19.5 | $10.0 | $32.3 | $22.0 | | Amortization of intangible assets | $38.6 | $37.6 | $77.3 | $75.0 | | Interest expense impact from March 2024 Refinancing | $(25.6) | $(21.1) | $(25.6) | $(42.1) | | Tax effect of non-GAAP adjustments | $(22.4) | $10.0 | $(18.0) | $23.3 | | Non-GAAP Net Loss | $(21.3) | $(15.0) | $(47.1) | $(29.7) | Loss from Operations Reconciliation to Non-GAAP Operating Profit The GAAP loss from operations of $(25.1) million in Q2 2025 was reconciled to a Non-GAAP Operating Profit of $27.3 million, primarily by adding back share-based compensation, restructuring expenses, and amortization of intangible assets Loss from Operations Reconciliation to Non-GAAP Operating Profit (in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Loss from operations | $(53.8) | $(25.1) | $(706.6) | $(63.5) | | Share-based compensation expense | $19.5 | $10.0 | $32.3 | $22.0 | | Restructuring and transformation expenses | $14.5 | $4.4 | $35.4 | $17.5 | | Amortization of intangible assets | $38.6 | $37.6 | $77.3 | $75.0 | | Non-GAAP Operating Profit | $20.3 | $27.3 | $34.3 | $52.9 | Net Income (Loss) Reconciliation to Adjusted EBITDA Adjusted EBITDA for Q2 2025 was $64.4 million, an increase from $55.1 million in Q2 2024. This reconciliation adds back interest expense, income taxes, depreciation and amortization, and other non-GAAP adjustments to net income (loss) Net Income (Loss) Reconciliation to Adjusted EBITDA (in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $25.0 | $(54.5) | $(615.6) | $(126.0) | | Share-based compensation expense | $19.5 | $10.0 | $32.3 | $22.0 | | Interest expense | $18.4 | $21.3 | $62.1 | $40.7 | | Provision (benefit) for income taxes | $(29.9) | $4.6 | $(34.6) | $12.8 | | Depreciation and amortization | $73.4 | $74.7 | $148.3 | $147.8 | | Adjusted EBITDA | $55.1 | $64.4 | $105.3 | $125.7 | Non-GAAP Earnings (Loss) Per Share Non-GAAP Loss Per Share improved to $(0.06) in Q2 2025 from $(0.09) in Q2 2024. This metric adjusts GAAP diluted shares outstanding for anti-dilutive securities and uses Non-GAAP Net Loss to provide a comparable performance measure - Non-GAAP Earnings (Loss) Per Share is defined as Non-GAAP Net Income (Loss) divided by GAAP weighted average diluted shares, adjusted for anti-dilutive securities[50] Non-GAAP Earnings (Loss) Per Share Reconciliation (in millions, except per share amounts) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to common stockholders | $25.0 | $(54.5) | $(615.6) | $(126.0) | | Non-GAAP Net Loss | $(21.3) | $(15.0) | $(47.1) | $(29.7) | | Weighted average number of shares - Diluted | 229.6 | 238.0 | 222.2 | 235.0 | | Non-GAAP weighted average number of shares - Diluted | 229.6 | 239.3 | 229.5 | 242.1 | | Net earnings (loss) per share - Diluted | $0.11 | $(0.23) | $(2.77) | $(0.54) | | Non-GAAP Loss Per Share | $(0.09) | $(0.06) | $(0.21) | $(0.12) |