Rackspace (RXT) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was $676 million, down 8% year-over-year, but exceeded the midpoint of guidance for revenue, operating profit, and EPS.

• Net loss improved to $186.6 million from $226.6 million in Q3 2023, driven by lower impairment and interest expenses.

• Non-GAAP operating profit reached $34 million, up 50% sequentially but down 25% year-over-year.

• Public Cloud bookings grew double digits, with a record quarter since the formation of the two business units.

• Strategic focus on operational turnaround, innovation in hybrid cloud and AI, and capital structure improvement.

Financial highlights

• Q3 2024 revenue: $676 million, down 8% year-over-year; Private Cloud revenue fell 14%, Public Cloud revenue fell 3%.

• Non-GAAP gross profit was $143 million, non-GAAP gross margin 21.2%, up 1 point sequentially, down 1 point year-over-year.

• Adjusted EBITDA for Q3 2024 was $67.9 million, down from $95.9 million in Q3 2023.

• Cash flow from operations was $52 million; free cash flow was $27 million; liquidity at $532 million.

• Cash and cash equivalents at quarter end were $157 million, with $375 million undrawn on the credit facility.

Outlook and guidance

• Q4 2024 revenue guidance: $668–$680 million; Private Cloud $258–$264 million; Public Cloud $410–$416 million.

• Q4 non-GAAP operating profit expected at $34–$36 million; non-GAAP loss per share $(0.03)–$(0.05).

• Private cloud revenue expected to rise 1% sequentially; public cloud revenue to decline 1% sequentially.

• Management expects continued revenue pressure from cyclical IT services headwinds and legacy product roll-offs.

• Liquidity is expected to be sufficient for at least the next twelve months, but future cash flows and borrowing capacity remain subject to market and operational risks.