Slide 1: Rackspace Technology Q3 2023 Earnings Presentation
Rackspace Technology Q3 2023 Earnings Presentation November 7, 2023
Slide 2: Disclaimer
Disclaimer Forward-Looking Statements Rackspace Technology has made statements in this presentation 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 histor
Slide 3: Q3 2023 financial results
Q3 2023 financial results #039;s in millions Q3 2023 Q/Q Y/Y Total Revenue $732 (2%) (7%) Non-GAAP Net Revenue $430 (4%) (12%) • Non-GAAP Net Revenue is a metric that applies Non-GAAP Gross Profit $162 (1%) (23%) net-accounting to public cloud infrastructure Non-GAAP Gross Margin 22.1% 0 pts (5 pts) re
Slide 4: Q3 2023 segment financials
Q3 2023 segment financials #039;s in millions Q/Q % Y/Y % Total Private Public Total Private Public Total Private Public Rackspace Cloud Cloud Rackspace Cloud Cloud Rackspace Cloud Cloud Total Revenue $732 $300 $433 (2%) (4%) (0%) (7%) (13%) (3%) Non-GAAP Net Revenue $430 $300 $130 (4%) -- (4%) (12%) -
Slide 5: Cash flow & capital expenditures
Cash flow & capital expenditures #039;s in millions Reported Normalized As of September 30, 2023 Q3'23 LTM Q3'23 LTM Cash Provided by Operating Activities $267 $330 $61 $125 Free Cash Flow $239 $252 $34 $47 LTM Free Cash Flow Yield 48% 8% Total Capital Expenditures $28 $187 $28 $187 Total CAPEX Intensi
Slide 6: Debt structure overview
Debt structure overview #039;s in millions As of September 30, 2023 Debt Highlights $3.1B • Total debt $3.1B, Net Debt $2.8B • Primarily (~70%) fixed or hedged debt Term Loan B $2,243 structure • No funded corporate maturities until 2028 Senior Secured Notes $550 Senior Notes • No maintenance covenants
Slide 7: Debt repurchases
Debt repurchases Throughout the first 10 months of 2023, Rackspace successfully retired $274 million of its outstanding 5.375% unsecured notes due 2028 via open market repurchases Strategic rationale Key stats Amount Retired Amount Spent1 Capture attractive discount, with $274M in notes repurchased
Slide 8: Outlook
Outlook Q4 2023 Guidance Total Revenue $710 - $720 million Private Cloud Revenue $284 - $289 million Public Cloud Revenue $426 - $431 million Non-GAAP Operating Profit $46 - $48 million Non-GAAP Loss Per Share ($0.05) - ($0.03) Non-GAAP Other Income (Expense) ($59) - ($57) million Non-GAAP Tax Expen
Slide 9: Appendix
Appendix
Slide 10: Non-GAAP Net Revenue Reconciliation
Non-GAAP Net Revenue Reconciliation (In millions) Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Total Revenue $787.6 $787.0 $758.7 $746.3 $732.4 Pass-through infrastructure resale costs (298.0) (306.3) (298.9) (299.7) (302.5) Non-GAAP Net Revenue $489.6 $480.7 $459.8 $446.6 $429.9 10
Slide 11: Non-GAAP Gross Profit Reconciliation
Non-GAAP Gross Profit Reconciliation (In millions) Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 GAAP Gross Profit $207.1 $199.8 $169.6 $153.1 $152.0 Share-based compensation expense 2.8 2.6 2.8 2.6 2.0 Other compensation expense 0.4 0.3 0.7 1.4 1.2 Purchase accounting impact on expense 0.6 0.6 0.6 0.7 0.
Slide 12: Non-GAAP Net Income (Loss) Reconciliation
Non-GAAP Net Income (Loss) Reconciliation (In millions) Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Net loss $(511.7) $(214.0) $(612.0) $(27.2) $(226.6) Share-based compensation expense 19.4 10.0 15.2 19.5 17.2 Special bonuses and other compensation expense 2.4 1.8 2.2 4.2 3.3 Transaction-related adjust
Slide 13: Non-GAAP Operating Profit Reconciliation
Non-GAAP Operating Profit Reconciliation (In millions) Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Loss from operations $(476.7) $(227.2) $(581.0) $(63.8) $(239.4) Share-based compensation expense 19.4 10.0 15.2 19.5 17.2 Special bonuses and other compensation expense 2.4 1.8 2.2 4.2 3.3 Transaction-rel
Slide 14: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation (In millions) Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Net loss $(511.7) $(214.0) $(612.0) $(27.2) $(226.6) Share-based compensation expense 19.4 10.0 15.2 19.5 17.2 Special bonuses and other compensation expense 2.4 1.8 2.2 4.2 3.3 Transaction-related adjustments, net
Slide 15: Non-GAAP Earnings (Loss) Per Share Reconciliation
Non-GAAP Earnings (Loss) Per Share Reconciliation (In millions) Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Net loss attributable to common stockholders $(511.7) $(214.0) $(612.0) $(27.2) $(226.6) Non-GAAP Net Income (Loss) $20.0 $13.5 $(4.7) $(13.5) $(8.1) Weighted average number of shares – Diluted 21
Slide 16: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation (In millions) Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Net cash provided by (used in) operating activities $70.7 $27.5 $(1.9) $37.8 $266.8 Cash purchases of property, equipment and software (19.0) (15.0) (12.1) (23.4) (27.5) Free Cash Flow $51.7 $12.5 $(14.0) $14.4 $239.
Slide 17: Normalized Cash Flow Reconciliations
Normalized Cash Flow Reconciliations (In millions) Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Net cash provided by (used in) operating activities $70.7 $27.5 $(1.9) $37.8 $266.8 Accounts receivable securitization and associated fees - - - - (205.7) Normalized Cash Provided by Operating Activities $70.7
Slide 18: Definitions
Definitions Non-GAAP Net Non-GAAP Net Revenue applies net-accounting to public cloud infrastructure resale revenue. This means only the profit element of infrastructure resale is included in Non-GAAP Net Revenue in Revenue addition to public cloud services and private cloud revenues. Segment Segment
Slide 19: Rackspace Technology
rackspace technology-