Slide 1: Rackspace Technology 2nd Quarter 2020 Earnings Presentation
Rackspace Technology 2nd Quarter 2020 Earnings Presentation August 31, 2020 TM
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: Kevin Jones, CEO and Dustin Semach, CFO
Kevin Jones Chief Executive Officer Dustin Semach Chief Financial Officer
Slide 4: Agenda
Agenda Summary results and takeaways Kevin Jones Financial results Dustin Semach
Slide 5: Q2 2020 key messages
Q2 2020 key messages • 107% Bookings growth driven by our strategic transformation and secular Bookings multicloud adoption growth • 4th straight record sales quarter Revenue • 14% Core revenue growth on a constant currency basis (up 7% pro forma) growth • 10% consolidated revenue growth on a consta
Slide 6: 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% ~90% attractive growth dyna
Slide 7: Successful execution has accelerated growth
Successful execution has accelerated growth Total Bookings growth Core segment revenue growth YoY Bookings growth YoY Core segment growth YoY PF Core segment growth 107% 13% New New management management 11% team team 66% 7% 39% 7% 6% 6% 27% 2% 2% 0% (2%) 0% Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q
Slide 8: Drivers of Bookings growth
Drivers of Bookings growth Salesforce Land and Management Increased Focus on Strong productivity expand Tectonic system salesforce professional enterprise strategy shift to investment services focus multicloud 8
Slide 9: Our mission
Our mission Embrace Empower Deliver technology customers the future 9
Slide 10: Rackspace Technology is an investment in pure-play multicloud at scale
Rackspace Technology is an investment in pure-play multicloud at scale 10
Slide 11: Multicloud will power the future of technology innovation
Multicloud will power the future Multicloud of technology innovation Public Cloud & Mobile Complexity Internet PC Mainframe 1970’s - 1980’s 1990’s 2000’s 2010’s 2020’s 11
Slide 12: Cloud adoption has evolved into a modern, multicloud approach
Cloud adoption has evolved into a modern, multicloud approach 2013 2017 2020 Early Mainstream Modern Technology leaders Key Tech-forward companies Everyone Adopters Digital-native businesses Cloud-native adoption, Cloud-native, multicloud Adoption IT cost reduction, capturing benefits adoption, embr
Slide 13: 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 14: We help companies navigate the complex multicloud ecosystem
We help companies navigate the complex multicloud ecosystem Apps Data services Infrastructure software Public clouds Private clouds Hardware Datacenter Security 14
Slide 15: We are mission control for multicloud
We are mission control for Advise multicloud Design Multicloud Applications Security Data Optimize Build Manage 15
Slide 16: Rackspace Technology powers the future of innovation
Rackspace Technology powers the future of innovation Multicloud Applications Data Security Cloud strategy and Cloud-optimized COTS apps Data engineering and strategy Data governance and security transformation Cloud adoption and migration SaaS products Relational and next-gen DBs Security design and
Slide 17: 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 17
Slide 18: 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 19: 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 20: Well positioned in the COVID-19 era
Well Value proposition for Rackspace Technology positioned services has accelerated in the COVID-19 Diverse customer base with low concentration era Remote, software-enabled delivery model Supporting mission critical IT systems and applications Strong EBITDA margin profile with ample liquidity 20
Slide 21: Agenda
Agenda Summary results and takeaways Kevin Jones Financial results Dustin Semach
Slide 22: Financial model highlights
Scale Growth in Core segments Revenue visibility $2.5B 7% 95%+ Revenue YoY PF Core Recurring revenues (LTM Q2’20) (2019) revenue growth (Q2’20) Financial model highlights Low capital intensity Margin profile Strong Adj. EBITDA 9% 29% $748M Capital intensity Adj. EBITDA margin Adj. EBITDA (LTM Q2’20)
Slide 23: Accelerating revenue growth and operating leverage
Accelerating revenue growth and operating leverage Core OpenStack Bookings ($M) Revenue ($M) – yoy growth in constant currency 107% 10% total $288 14% Core $657 $602 $58 $139 $74 $529 $599 Q2 2019 Q2 2020 Q2 2019 Q2 2020 Adj. EBITDA ($M) Capital Intensity (CapEx as % of revenue) 3% (80) BPS $183 $18
Slide 24: Bookings momentum represents new business opportunities
Bookings momentum represents new business opportunities — Bookings growth (% YoY) Improving sales $288M productivity $231M $231M 107% Larger 66% deal sizes $192M $139M $139M 39% Investment 27% in salesforce Enterprise 0% (2%) penetration Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 24 Note: Refer
Slide 25: Components of our revenue
Components of our revenue Multicloud Services Apps and Cross Platform OpenStack Public Cloud 9% Integrated suite of managed Applications Open-source cloud platform cloud services across public and private Security Declining % of revenue Data “Core” segments – single integrated portfolio 25
Slide 26: Components of our revenue – Multicloud Services
Components of our revenue – Multicloud Services Multicloud Services Revenue ($M) – yoy growth in constant currency $1,027 14% $902 $519 16% $450 Integrated suite of managed cloud services across Q2 2019 Q2 2020 YTD 2019 YTD 2020 public and private Q2 2019 Q2 2020 YTD 2019 YTD 2020 Revenue ($M) $ 449
Slide 27: 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 $157 3% $161 $79 2% $80 Applications Q2 2019 Q2 2020 YTD 2019 YTD 2020 Security Q2 2019 Q2 2020 YTD 2019 YTD 2020 Data Revenue ($M) $ 79.0 $ 79.9 $ 157.1 $ 161.4 YoY Growth – GA
Slide 28: Components of our revenue – OpenStack Public Cloud
Components of our revenue – OpenStack Public Cloud OpenStack Public Cloud Revenue ($M) – yoy growth in constant currency $150 (19%) $121 9% $74 (21%) $58 Open-source cloud platform Q2 2019 Q2 2020 YTD 2019 YTD 2020 Declining % of revenue Q2 2019 Q2 2020 YTD 2019 YTD 2020 Revenue ($M) $ 73.8 $ 57.6 $
Slide 29: Attractive capital structure providing strategic flexibility
Attractive capital structure providing strategic flexibility Bond ($ in millions) Q2 2020 IPO Tender Pro Forma Term loan Cash and cash equivalents $ 161.4 $ 658.2 $ (549.2) $ 270.4 facility Debt: $2.8B Revolving credit facility — — L + 3.0% Term loan facility 2,810.1 2,810.1 8.625% senior notes 1,12
Slide 30: Rackspace Technology FY 2020 outlook
Rackspace 1st Half Actual 2nd Half Full year Technology 2020 2020 2020 FY 2020 Revenue outlook growth 9% 9% — 11% 9% — 10% Core revenue 13% 13% — 15% 12.5% — 13.5% growth Adjusted $373 $383 — $387 $756 — $760 EBITDA million million million Adjusted $0.37 $0.38 — $0.44 $0.75 — $0.81 EPS per share per
Slide 31: An investment in a leading pure play multicloud solutions company
An investment in a leading pure play multicloud solutions company End-to-end Accelerating multicloud leader Bookings growth Uniquely positioned in a Improving large and growing market profitability Relentless focus Rapid FCF per on execution share growth 31
Slide 32: Appendix
Appendix Solving rackspace Together technology.
Slide 33: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation (In millions) Q2 2019 Q2 2020 1st Half 2020 Q2 2020 (LTM) Net income (loss) $62.5 $(32.6) $(80.8) $(188.1) Interest expense 100.8 68.9 140.9 281.0 Provision (benefit) for income taxes 12.3 (12.3) (15.3) (38.0) Depreciation and amortization 124.3 116.3 237.6 475.7 Share
Slide 34: Constant currency revenue reconciliation
Constant currency revenue reconciliation Three Months Ended Three Months Ended June 30, 2020 June 30, 2019 Foreign Currency Revenue in (In millions) Revenue Revenue Translation Constant Currency Multicloud Services $449.6 $519.0 $3.4 $522.4 Apps & Cross Platform 79.0 79.9 0.2 80.1 Core Revenue 528.6
Slide 35: Adjusted Earnings Per Share
Adjusted Earnings Per Share (In whole dollars) Six Months Ended June 30, 2020 GAAP net loss per share diluted $(0.49) Per share impacts of adjustments to net loss 0.86 Impact of shares dilutive after adjustments to net loss (0.00) Adjusted EPS $0.37 35
Slide 36: 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 37: Rackspace Technology
rackspace technology.