Slide 1: Rackspace Technology Investor Presentation
Rackspace Technology Investor Presentation November 16, 2020 TM
Slide 2: Agenda
Agenda Company Overview Kevin Jones Financial Update Dustin Semach
Slide 3: Kevin Jones, CEO and Dustin Semach, CFO
Kevin Jones Chief Executive Officer Dustin Semach Chief Financial Officer 3
Slide 4: Rackspace Technology transformed
Rackspace Technology transformed At LBO Today Competitor Partner Market positioning to public cloud to cloud ecosystem Managed hosting, A leader in end-to-end Core offerings and services expertise OpenStack public cloud multicloud solutions Revenue from segments with <10% ~92% attractive growth dyna
Slide 5: We are mission control for multicloud
We are mission control for multicloud Advise Design Multicloud Applications Security Data Optimize Build Manage 5
Slide 6: The multicloud ecosystem is a large and growing market
The multicloud ecosystem is a large and growing market Businesses recognize the Leading to complexity and driving Creating a large benefits of multicloud strategies demand for multicloud services market opportunity % of cloud users working with % of enterprise customers consuming Estimated total add
Slide 7: Our multicloud delivers flexibility in technology stack and deployment model
Our multicloud delivers flexibility in technology stack and deployment model AP P L I C AT I O N S D ATA SECURITY Deployed across Rackspace Technology datacenters, hyperscalers and on-premises Fanatical ExperienceTM At-scale capabilities across all major clouds and everywhere in between 7
Slide 8: Our proprietary technology is at the center of our multicloud capabilities
Our proprietary technology is at the center of our multicloud capabilities Rackspace Fabric™ Automation Solution automation 8 years of development Reduced manual onboarding, provisioning, and admin tasks $1B+ Intelligent automation 62% of workloads automated invested in Rackspace Technology IP 12M+
Slide 9: Driving a highly efficient business with software-like economics
Driving a highly efficient business with software-like economics 2019 revenue per employee, $k per employee $375 $340 $334 Rackspace Technology Software IT services $325 $308 $307 $292 $291 $270 95%+ $209 $201 of 2019 $167 revenues $118 IT services median: $80k are recurring $87 $72 $57 $52 $49 $46
Slide 10: Competitive environment
Competitive environment IT systems Cloud SPs and Regional Hybrid colocation In-house IT integrators digital SIs MSPs providers CORE Consulting Cloud services Company’s internal Primarily “build” and Hardware and network and outsourcing within a single OFFERING IT department “manage” services connect
Slide 11: Our competitive advantage positions us to win
Our competitive advantage positions us to win Automation Standardization Rackspace FabricTM Automation-driven efficiency and scalability Efficiency for customers Investment in technology innovation Fanatical ExperienceTM End-to-end multicloud Best-in-class customer experience Across entire customer
Slide 12: Successful execution has accelerated growth
Successful execution has accelerated growth Total Bookings Growth Core Segment Revenue Growth NEW NEW MANAGEMENT MANAGEMENT 18% TEAM TEAM $315 $288 13% 11% $231 $231 10% 7% $192 7% 6% 6% 2% 2% $139 $139 0% Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 YoY Core S
Slide 13: Well positioned in a $400 billion market
Well Value proposition for Rackspace Technology positioned services has accelerated in a $400 billion market. Diverse customer base with low concentration Remote, software-enabled delivery model Supporting mission critical IT systems and applications Strong EBITDA margin profile with ample liquidity
Slide 14: Agenda
Agenda Company Overview Kevin Jones Financial Update Dustin Semach
Slide 15: Agenda
Agenda Summary results and takeaways Kevin Jones Financial results Dustin Semach 15
Slide 16: Financial model highlights
Scale Revenue visibility Growth in Core segments $2.6B 95%+ 10% Revenue Recurring revenues YoY PF Core (LTM Q3’20) (2019) revenue growth (Q3’20) Financial model highlights Low capital intensity Strong Adj. PF EBITDA Margin profile 7% $752M 29% Capital intensity Pro Forma Adj. EBITDA Adj. EBITDA marg
Slide 17: Accelerating revenue growth and operating leverage
Accelerating revenue growth and operating leverage Core OpenStack Bookings ($M) Revenue ($M) – yoy growth in constant currency 13% total 64% $315 17% Core $682 $602 $56 $192 $70 $531 $626 Q3 2019 Q3 2020 Q3 2019 Q3 2020 Adj. EBITDA ($M) Capital Intensity (CapEx as % of revenue) 2% (220) BPS $187 $19
Slide 18: Components of our revenue
Components of our revenue Multicloud Services Apps and Cross Platform OpenStack Public Cloud 8% Integrated suite of managed Applications Open-source cloud platform cloud services across public and private Security Declining % of revenue Data “Core” segments – single integrated portfolio 18
Slide 19: Components of our revenue – Multicloud Services
Components of our revenue – Multicloud Services Multicloud Services Revenue ($M) – yoy growth in constant currency $1,569 16% $1,353 $542 20% $450 Integrated suite of managed cloud services across Q3 2019 Q3 2020 YTD 2019 YTD 2020 public and private Q3 2019 Q3 2020 YTD 2019 YTD 2020 Revenue ($M) $ 4
Slide 20: Components of our revenue – Apps and Cross Platform
Components of our revenue – Apps and Cross Platform Apps and Cross Platform Revenue ($M) – yoy growth in constant currency 3% $245 $238 $81 3% $84 Applications Q3 2019 Q3 2020 YTD 2019 YTD 2020 Security Q3 2019 Q3 2020 YTD 2019 YTD 2020 Data Revenue ($M) $ 81.1 $ 83.9 $ 238.2 $ 245.3 YoY Growth – GA
Slide 21: Components of our revenue – OpenStack Public Cloud
Components of our revenue – OpenStack Public Cloud OpenStack Public Cloud Revenue ($M) – yoy growth in constant currency $220 (20%) $177 8% $70 (21%) $56 Open-source cloud platform Q3 2019 Q3 2020 YTD 2019 YTD 2020 Declining % of revenue Q3 2019 Q3 2020 YTD 2019 YTD 2020 Revenue ($M) $ 70.4 $ 55.7 $
Slide 22: Sources and Uses / Pro Forma Capitalization
Sources and Uses / Pro Forma Capitalization 9/30/2020 Pro Forma Sources Amount % of Total ($ in millions) Amount Adj. Amount (4) New Senior Notes $550 99% Cash $253 ($95) $158 Cash from Balance Sheet(1) 5 1 Revolver ($375mm) -- -- -- Term Loan Facility $2,803 -- $2,803 Total Sources $555 100% Receiv
Slide 23: Rackspace Technology FY 2020 outlook
Rackspace Technology FY 2020 outlook Original Guidance Updated Guidance Full year 2 0 2 0 Full year 2 0 2 0 REVENUE GROWTH 9% — 10% 10% — 11% CORE REVENUE GROWTH 12.5% — 13.5% 14% — 15% ADJUSTED $756 — $760 $758 — $762 EBITDA million million ADJUSTED $0.75 — $0.81 $0.79 — $0.81 EPS per share per sha
Slide 24: Appendix
Appendix rackspace technology.
Slide 25: Additional Q4 2020 outlook items
Additional Q4 2020 outlook items Q4 2 0 2 0 NON-GAAP OTHER INCOME AND EXPENSE Approximately $61 million N O N - G A A P TA X R AT E Approximately 26% N O N - G A A P W E I G H T E D AV E R A G E NUMBER OF SHARES Approximately 208 million Note: Refer to Appendix for more information on how we define
Slide 26: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation (In millions) Q3 2019 Q3 2020 YTD Q3 2020 (LTM) Net loss $(60.5) $(101.2) $(182.0) $(228.8) Interest expense 80.9 68.3 209.2 268.4 Benefit for income taxes (9.2) (18.1) (33.4) (46.9) Depreciation and amortization 114.4 117.5 355.1 478.8 Share-based compensation expense
Slide 27: Constant currency revenue reconciliation
Constant currency revenue reconciliation Three Months Ended Three Months Ended September 30, 2020 September 30, 2019 Foreign Currency Revenue in (In millions) Revenue Revenue Translation Constant Currency Multicloud Services $450.2 $542.1 $(3.6) $538.5 Apps & Cross Platform 81.1 83.9 (0.2) 83.7 Core
Slide 28: Adjusted Earnings Per Share
Adjusted Earnings Per Share Three Months Ended Nine Months Ended (In millions, except per share amounts) September 30, 2019 September 30, 2020 September 30, 2019 September 30, 2020 Net loss attributable to common stockholders $(60.5) $(101.2) $(55.5) $(182.0) Adjusted Net Income 23.8 36.4 27.1 97.7
Slide 29: Definitions
Definitions We calculate Bookings for a given period as the annualized monthly value of our recurring customer contracts entered into during the period from (i) new customers and (ii) net upgrades by existing customers within the same workload, plus the actual (not annualized) estimated value of pro
Slide 30: Definitions
Definitions Structural Non- We utilize an estimated structural long-term non-GAAP tax rate in order to provide consistency across reporting periods, removing the effect of non-recurring tax adjustments, which include but are not limited to tax rate changes, U.S. tax reform, share-based compensation,