Rackspace Technology (Nasdaq: RXT) announces today the appointment
of services industry veteran Amar Maletira as President and Chief
Financial Officer, effective November 23, 2020. Current CFO Dustin
Semach has resigned to take a new career opportunity. Semach will
stay through the company’s third quarter earnings report and
transition to Maletira thereafter.
Maletira joins Rackspace Technology from VIAVI
Solutions, Inc. where he was Executive Vice President and CFO.
Maletira brings an extensive background in corporate finance,
strategic planning, M&A and risk management. During Maletira’s
tenure at VIAVI, the company’s market capitalization more than
doubled, surpassing S&P 500 growth over the same period. In
2019, Maletira was ranked the #1 CFO in TMT Mid-Cap by analysts and
investors surveyed by Institutional Investor Magazine.
“I am thrilled to welcome Amar to Rackspace
Technology and be back together with him to build upon our proven
winning partnership,” said Kevin Jones, CEO, Rackspace Technology.
“Amar’s incredible 5-year track record as public company CFO
coupled with his services experience and strategic thinking are
winning elements to our growth agenda and value creation for our
shareholders and customers.”
Jones adds, “I want to take this opportunity to
thank my partner Dustin for his key role in helping pivot the
company and his leadership through our IPO. I wish him all the
best.”
“I can’t imagine a more exciting time to join
Rackspace Technology,” said Amar Maletira, president and CFO of
Rackspace Technology. “The company is uniquely poised to accelerate
as the leading pure play multicloud solutions provider. I am
looking forward to working again with Kevin and his executive team
to lead the company’s financial direction as we execute our growth
strategy.”
Maletira has more than 27 years of experience in
the technology industry. Prior to serving as EVP and CFO of VIAVI,
Maletira held a series of senior executive positions at Hewlett
Packard Co. including CFO for Americas Enterprise Services, CFO for
Application services, and Director of Investor Relations. Prior to
HP, he led sales teams at Siemens and HCL in India. He received his
undergraduate degree in Engineering from Karnataka University in
India, and an MBA from the Ross School of Business at the
University of Michigan.
Third
Quarter
Financial
Update
Jones added, “The preliminary third quarter
estimates provided today demonstrate that Rackspace Technology
continues to execute well and capitalize on the tectonic shift to
the cloud that is occurring around the world. We expect
double-digit year-over-year revenue growth, and in particular,
double digit year-over-year Pro-Forma Core Revenue growth, which we
achieved well ahead of schedule. In addition, Adjusted Earnings Per
Share and Adjusted EBITDA are also expected to be up compared to
last year’s third quarter. We believe we are ahead of schedule with
key financial metrics and milestones that we have provided
investors, and we will address the impact on 2020 guidance when we
announce third quarter earnings in mid- November.”
The company is reaffirming its financial guidance
for the full year 2020 and based on preliminary financial data is
providing preliminary estimates of selected financial metrics for
the third quarter:
|
Three Months EndedSeptember 30, 2020 |
|
|
|
Low(Estimated) |
|
|
|
High(Estimated) |
|
Unaudited, in millions, except per share data and
percentages |
|
|
|
|
|
|
|
Consolidated Statement of Operations
data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
681 |
|
|
$ |
683 |
|
Net loss |
$ |
(108 |
) |
|
$ |
(88 |
) |
Other Financial and Operating Data: |
|
|
|
|
|
|
|
Year over year revenue growth |
|
13 |
% |
|
|
14 |
% |
Year over year revenue growth on constant currency basis
assuming acquisition of Onica as of January 1,
2019 |
|
6 |
% |
|
|
7 |
% |
Core Revenue (a) |
$ |
625 |
|
|
$ |
627 |
|
Year over year Core Revenue growth |
|
17 |
% |
|
|
18 |
% |
Year over year Core Revenue growth on constant currency basis
assuming acquisition of Onica as of January 1,
2019 |
|
9 |
% |
|
|
11 |
% |
GAAP net loss per share diluted |
$ |
(0.58 |
) |
|
$ |
(0.47 |
) |
Adjusted Earnings per Share (b) |
$ |
0.17 |
|
|
$ |
0.19 |
|
Adjusted EBITDA(b) |
$ |
189 |
|
|
$ |
191 |
|
(a) |
Revenue from our Core Segments (“Core Revenue”), comprised of
Multicloud Services and Apps & Cross Platform. |
(b) |
Adjusted Earnings Per Share and
Adjusted EBITDA are non-GAAP financial measures. For important
information regarding our presentation of Adjusted Earnings Per
Share and Adjusted EBITDA see the Non-GAAP Financial Measures
section. |
The Company has provided ranges, rather than specific amounts,
for the preliminary results described above primarily because it is
still in the process of finalizing its financial results for the
three months ended September 30, 2020, and as a result, the
information above may vary materially from the preliminary
estimates. Definitions of non-GAAP financial measures and the
reconciliations to the most directly comparable measures in
accordancewith generally accepted accounting principles in the
United States (“GAAP”) are provided in the Non-GAAP Financial
Measures section below.
Full-year
2020
Financial Outlook
|
Low
(Estimated) |
High
(Estimated) |
Consolidated revenue growth, Year-over-Year in constant
currency |
|
9.0 |
% |
|
10 |
% |
Core Revenue growth,
Year-over-Year in constant currency |
|
12.5 |
% |
|
13.5 |
% |
Adjusted EBITDA |
$ |
756 million |
|
$ |
760 million |
|
Adjusted Earnings Per Share |
$ |
0.75 |
|
$ |
0.81 |
|
Definitions of non-GAAP financial measures and the
reconciliations to the most directly comparable measures in
accordance with GAAP are provided in the Non-GAAP Financial
Measures section below. Rackspace Technology has not reconciled
Consolidated revenue growth, Year-over-Year in constant currency or
Core Revenue growth, Year-over-Year in constant currency guidance
to the most directly comparable GAAP measures because it does not
provide guidance on forward-looking foreign exchange rates given
their potential variability, which could be significant. Further,
Rackspace Technology has not reconciled Adjusted EBITDA or Adjusted
Earnings Per Share guidance to the most directly comparable GAAP
measure because it does not provide guidance on GAAP net income
(loss) or the reconciling items between Adjusted EBITDA and GAAP
net income (loss) as a result of the uncertainty regarding, and the
potential variability of, certain of these items, such as
share-based compensation expense. Accordingly, a reconciliation of
the non-GAAP financial measure guidance to the corresponding GAAP
measure is not available without unreasonable effort. With respect
to Adjusted EBITDA and Adjusted Earnings Per Share guidance,
adjustments in future periods are generally expected to be similar
to the kinds of charges and costs excluded from Adjusted EBITDA in
prior periods, but the impact of such adjustments could be
significant.
Conference
Call
Details:
Rackspace Technology will host a conference call with investors
at 4:30 pm eastern time on October 21, 2020 to discuss today’s
announcement. To join please visit:
https://rackspace.zoom.us/j/96559590462?pwd=N2RKK3dLYTRXVUZjK3lucC9KUnN0UT09
Password: 661430
Or iPhone one-tap (US Toll): +13462487799,96559590462# or
+12532158782,96559590462#
Or via telephone:
+1 408 638 0968 (US Toll)+1 646 558 8656 (US Toll)+61 (0) 2 8015
2088 (Australia Toll)+49 (0) 30 3080 6188 (Germany Toll)+852 5808
6088 (Hong Kong Toll)+52 554 161 4288 (Mexico Toll)+31 (0) 20 241
0288 (Netherlands Toll)+41 (0) 31 528 0988 (Switzerland Toll)+44
(0) 20 3695 0088 (United Kingdom Toll)+1 647 374 4685 (Canada)
Webinar ID: 965 5959 0462
Additional international numbers are also available at:
https://rackspace.zoom.us/u/asIUoAgpF
If you have issues or questions about Zoom during the meeting,
please email zoom@rackspace.com.
Rackspace Technology is a member of NASDAQ trading under the
symbol of RXT. An industry multicloud leader, the company operates
in 120 countries around the world, spanning three regions, Asia
Pacific & Japan, Europe, Middle East & Africa, and the
Americas covering Latin America, US and Canada.
Investor
Contact
Joe CrivelliRackspace Technology Investor
RelationsIR@rackspace.com
PR
Contact
Michelle DossRackspace Technology Corporate Communications
publicrelations@rackspace.com
Forward-looking Statements
Rackspace Technology has made statements in this press release
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
historical fact, included in this document are, or could be,
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 and are made in reliance
on the safe harbor protections provided thereunder. These
forward-looking statements relate to anticipated financial
performance, management’s plans and objectives for future
operations, business prospects, outcome of regulatory proceedings,
market conditions, our ability to successfully respond to the
challenges posed by the COVID-19 pandemic, and other matters. Any
forward-looking statement made in this press release speaks only as
of the date on which it is made. We undertake no obligation to
publicly update or revise any forward- looking statement, whether
as a result of new information, future developments or otherwise.
Forward-looking statements can be identified by various words such
as “expects,” “intends,” “will,” “anticipates,” “believes,”
“confident,” “continue,” “propose,” “seeks,” “could,” “may,”
“should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,”
“targets,” “planned,” “projects,” and similar expressions. These
forward-looking statements are based on management’s current
beliefs and assumptions and on information currently available to
management. Rackspace Technology cautions that these statements are
subject to risks and uncertainties, many of which are outside of
our control, and could cause future events or results to be
materially different from those stated or implied in this document,
including among others, risk factors that are described in
Rackspace Technology, Inc.’s Registration Statement on Form S-1
(File No. 333-239794), Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and other filings with the Securities and
Exchange Commission, including the sections entitled “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” contained therein.
Non-GAAP
Financial
Measures
This press release includes several non-GAAP financial measures
such as constant currency revenue, Adjusted Net Income (Loss),
Adjusted EBIT, Adjusted EBITDA and Adjusted Earnings Per Share
(“EPS”). These non-GAAP financial measures exclude the impact of
certain costs, losses and gains that are required to be included in
our profit and loss measures under GAAP. Although we believe these
measures are useful to investors and analystsfor the same reasons
they are useful to management, as described in the accompanying
pages, these measures are not a substitute for, or superior to,
GAAP financial measures or disclosures. Other companies may
calculate similarly-titled non-GAAP measures differently, limiting
their usefulness as comparative measures. We have reconciled each
of these non-GAAP measures to the applicable most comparable GAAP
measure in the accompanying pages.
Constant Currency Revenue
We use constant currency revenue as an additional metric for
understanding and assessing our growth excluding the effect of
foreign currency rate fluctuations on our international business
operations. Constant currency information compares results between
periods as if exchange rates had remained constant period over
period and is calculated by translating the non-U.S. dollar income
statement balances for the most current period to U.S. dollars
using the average exchange rate from the comparative period rather
than the actual exchange rates in effect during the respective
period. We also believe this is an important metric to help
investors evaluate our performance in comparison to prior
periods.
Adjusted Net Income (Loss), Adjusted EBIT and Adjusted
EBITDA
We present Adjusted Net Income (Loss), Adjusted EBIT and
Adjusted EBITDA because they are a basis upon which management
assesses our performance and we believe they are useful to
evaluating our financial performance. We believe that excluding
items from net income that may not be indicative of, or are
unrelated to, our core operating results, and that may vary in
frequency or magnitude, enhances the comparability of our results
and provides a better baseline for analyzing trends in our
business.
We define Adjusted Net Income (Loss) as net income (loss)
adjusted to exclude the impact of non-cash charges for share-based
compensation and cash charges related to the settlement of share-
based awards in connection with the November 2016 merger,
transaction-related costs and adjustments, restructuring and
transformation charges, management fees, the amortization of
acquired intangible assets and certain other non-operating,
non-recurring or non-core gains and losses, as well as the tax
effects of these non-GAAP adjustments.
We define Adjusted EBIT as net income (loss), plus interest
expense and income taxes, further adjusted to exclude the impact of
non-cash charges for share-based compensation and cash charges
related to the settlement of share-based awards in connection with
the November 2016 merger, transaction- related costs and
adjustments, restructuring and transformation charges, management
fees, the amortization of acquired intangible assets and certain
other non-operating, non-recurring or non-core gains and
losses.
We define Adjusted EBITDA as Adjusted EBIT plus depreciation and
amortization.
Adjusted EBIT and Adjusted EBITDA are management’s principal
metrics for measuring our underlying financial performance.
Adjusted EBITDA, along with other quantitative and qualitative
information, is also the principal financial measure used by
management and our board of directors in determining
performance-based compensation for our management and key
employees.
These non-GAAP measures are not intended to imply that we would
have generated higher income or avoided net losses if the November
2016 merger and the subsequent transactions and initiatives had not
occurred. In the future we may incur expenses or charges such as
those added back to calculate Adjusted Net Income (Loss), Adjusted
EBIT or Adjusted EBITDA. Our presentation of Adjusted Net Income
(Loss), Adjusted EBIT and Adjusted EBITDA should not be construed
as an inference that our future results will be unaffected by these
items. Other companies, including our peer companies, may calculate
similarly-titled measures in a different manner from us, and
therefore, our non-GAAP measures may not be comparable to
similarly-tiled measures of other companies. Investors are
cautioned against using these measures to the exclusion of our
results in accordance with GAAP.
|
Three
MonthsEnded
September
30, 2020 |
|
|
Low(Estimated) |
|
High(Estimated) |
|
|
|
|
|
|
|
|
Unaudited, in millions |
|
Net
income (loss) |
$ |
(108 |
) |
$ |
(88 |
) |
Share-based compensation
expense |
|
41 |
|
|
40 |
|
Cash settled equity and special
bonuses (a) |
|
6 |
|
|
4 |
|
Transaction-related adjustments,
net (b) |
|
14 |
|
|
13 |
|
Restructuring and transformation
expenses (c) |
|
24 |
|
|
22 |
|
Management fees (d) |
|
1 |
|
|
1 |
|
Net (gain) loss on divestiture
and investments |
|
(1 |
) |
|
— |
|
Net loss on extinguishment of
debt (e) |
|
38 |
|
|
36 |
|
Other (income) expense (f) |
|
(2 |
) |
|
(1 |
) |
Amortization of intangible
assets |
|
45 |
|
|
44 |
|
Tax effect of non-GAAP
adjustments |
|
(26 |
) |
|
(34 |
) |
Adjusted Net
Income
(Loss) |
|
32 |
|
|
37 |
|
Interest expense |
|
69 |
|
|
68 |
|
Benefit for income taxes |
|
(12 |
) |
|
(21 |
) |
|
|
|
|
|
|
|
Tax effect of non-GAAP
adjustments |
|
26 |
|
|
34 |
|
Adjusted EBIT |
|
115 |
|
|
118 |
|
Depreciation and
amortization |
|
119 |
|
|
117 |
|
Amortization of intangible
assets |
|
(45 |
) |
|
(44 |
) |
Adjusted EBITDA |
$ |
189 |
|
$ |
191 |
|
|
|
|
|
|
|
|
|
|
(a) |
Includes retention
bonuses, mainly relating to restructuring and integration projects,
and senior executive signing bonuses and relocation costs. |
(b) |
Includes legal,
professional, accounting and other advisory fees related to
completed acquisitions (mostly Onica, consummated in the fourth
quarter of 2019), and integration costs of acquired businesses
(mainly Datapipe and Onica), purchase accounting adjustments
(including deferred revenue fair value discount), payroll costs for
employees that dedicate significant time to supporting these
projects and exploratory acquisition and divestiture costs and
expenses related to financing activities. |
(c) |
Includes consulting
and advisory fees related to business transformation and
optimization activities, payroll costs for employees that dedicate
significant time to these projects, as well as associated
severance, facility closure costs and lease termination expenses.
We assessed these activities and determined that they did not
qualify under the scope of ASC 420 (Exit or Disposal costs). |
(d) |
Represents historical
management fees pursuant to management consulting agreements. The
management consulting agreements were terminated effective August
4, 2020, and therefore no management fees have accrued or will be
payable for periods after August 4, 2020. |
(e) |
Includes losses on
our repurchases of 8.625% Senior Notes. |
(f) |
Reflects mainly
changes in the fair value of foreign currency derivatives. |
Adjusted Earnings Per Share (EPS)
We define Adjusted EPS as Adjusted Net Income (Loss) divided by
our GAAP average number of shares outstanding for the period on a
diluted basis and further adjusted for the average number of shares
associated with securities which are anti-dilutive to GAAP earnings
per share but dilutive to Adjusted EPS. Management uses Adjusted
EPS to evaluate the performance of our business on a comparable
basis from period to period, including by adjusting for the impact
of the issuance of shares that would be dilutive to Adjusted
EPS.
|
Three Months
EndedSeptember
30, 2020 |
|
|
Low(Estimated) |
|
|
High(Estimated) |
|
(In whole dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net loss per share
diluted |
$ |
(0.58 |
) |
|
$ |
(0.47 |
) |
Per share impacts of adjustments
to net loss(a) |
|
0.74 |
|
|
|
0.65 |
|
Impact of shares dilutive after
adjustments to net loss (b) |
|
0.01 |
|
|
|
0.01 |
|
Adjusted EPS |
$ |
0.17 |
|
|
$ |
0.19 |
|
(a) |
Reflects the aggregate adjustments made to reconcile Adjusted Net
Income (Loss) to our net loss, as noted in the above table, divided
by the GAAP diluted number of shares outstanding for the relevant
period, as adjusted for the company’s twelve-for-one stock split
effected on July 20, 2020. |
(b) |
Reflects the impact of
approximately 6 million shares of common stock relating to equity
awards for the three months ended September 30, 2020. These awards
would have been anti-dilutive to GAAP net loss per share, and are
therefore not included in the calculation of GAAP EPS, but would be
dilutive to Adjusted EPS and are therefore included in the share
count for purposes of presenting this non-GAAP measure. |
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