Yahoo Finance Rackspace Technology Inc. Reports First Quarter 2024 Earnings: A Detailed Analysis
Revenue: Reported at $691 million, down 9% year-over-year, exceeding estimates of $684.25 million.
Private Cloud Revenue: Totaled $268 million, marking a 15% decrease year-over-year.
Public Cloud Revenue: Reached $422 million, a 5% decrease from the previous year.
Net Loss per Share: Expected to range between $(2.48) and $(2.94), compared to $(2.87) in the prior year.
Non-GAAP Operating Profit: Stood at $16 million, a significant drop of 68% year-over-year.
Non-GAAP Loss Per Share: Recorded at $(0.11), a substantial increase from $(0.02) in the previous year.
Cash Flow: Operating activities used $(90) million in cash, including one-time fees related to debt refinancing.
On May 9, 2024, Rackspace Technology Inc (NASDAQ:RXT) released its 8-K filing, detailing the financial outcomes for the first quarter of 2024. The company, a leader in end-to-end, hybrid, multicloud, and AI solutions, reported a revenue of $691 million for the quarter, marking a 9% decrease year-over-year, and falling short of analyst expectations of $684.25 million.
Company Overview
Rackspace Technology Inc is renowned for its comprehensive range of services including Application Services, Data, Colocation, Cloud, Managed Hosting, Professional Services, and Security & Compliance. The company operates primarily through two segments: Private Cloud and Public Cloud, generating revenue through consumption-based contracts and professional services.
Financial Performance and Challenges
The first quarter saw a significant decline in both Private and Public Cloud revenues, with Private Cloud revenue dropping by 15% to $268 million and Public Cloud by 5% to $422 million. This decline is attributed to the ongoing strategic adjustments and market challenges impacting the sector. Additionally, the company faced a substantial loss from operations amounting to $(653) million, exacerbated by $593 million in non-cash impairment charges.
The net loss per diluted share for Q1 2024 is projected between $(2.48) and $(2.94), a slight improvement from the $(2.87) reported in the same period last year. Despite these challenges, the Non-GAAP Operating Profit stood at $16 million, although this represents a 68% decrease from the previous year's $51 million.
Key Financial Metrics
Capital expenditures were reduced to $46 million from $72 million in Q1 2023, reflecting the company's cautious approach to spending amidst its financial restructuring. As of March 31, 2024, Rackspace reported $283 million in cash and cash equivalents, with a significant reduction in the principal balance of debt from $2,892.5 million to $2,598.2 million, indicating effective debt management strategies.
The company's cash flow from operating activities presented a complex picture. While the trailing twelve-month basis showed a positive cash flow of $287 million, the first quarter alone saw a cash use of $(90) million, including one-time fees related to debt refinancing. This highlights the ongoing financial restructuring efforts aimed at stabilizing the company's operations.
Looking Ahead
For the second quarter of 2024, Rackspace Technology anticipates revenues between $668 million and $678 million, with a Non-GAAP Operating Profit expected to range from $20 million to $22 million. The forecasted Non-GAAP Loss Per Share is between $(0.09) and $(0.11).
The company's focus remains on navigating the current challenges while aiming for a turnaround with consistent revenue and profit growth, as emphasized by CEO Amar Maletira. The strategic focus on the healthcare vertical in the Private Cloud and enhanced go-to-market execution in the Public Cloud are pivotal to Rackspace's recovery and future growth strategies.
As Rackspace Technology continues to adapt to the dynamic market conditions, investors and stakeholders are closely monitoring its ability to achieve sustainable profitability and growth in the evolving cloud services landscape.
Explore the complete 8-K earnings release (here) from Rackspace Technology Inc for further details.
This article first appeared on GuruFocus.
