Rackspace Technology Inc (RXT) Reports Decline in Q3 Revenue and Earnings Amid Market Challenges
Q3 2023 revenue decreased by 7% year-over-year to $732 million.
Net loss improved to $(227) million from $(512) million in Q3 2022.
Non-GAAP Operating Profit fell 43% to $46 million compared to the same quarter last year.
Guidance for Q4 2023 includes total revenue of $710 - $720 million and Non-GAAP Operating Profit of $46 - $48 million.
Rackspace Technology Inc (NASDAQ:RXT), a leading provider of hybrid multicloud technology solutions, released its third-quarter earnings report for 2023 on November 7, 2023. The company reported a 7% year-over-year decline in revenue to $732 million, with both Private Cloud and Public Cloud revenues experiencing downturns of 13% and 3% respectively. Despite the revenue decline, the net loss for the quarter improved to $(227) million from $(512) million in the third quarter of the previous year.
Financial Performance Overview
Rackspace Technology Inc (NASDAQ:RXT) faced a challenging quarter with a reported net loss per diluted share of $(1.05), compared to $(2.43) in Q3 2022. The company's Non-GAAP Operating Profit also decreased by 43% to $46 million, while Non-GAAP Loss Per Share worsened by 140% to $(0.04). Capital expenditures were slightly reduced to $28 million from $31 million year-over-year.
Balance Sheet and Cash Flow
As of September 30, 2023, Rackspace Technology Inc (NASDAQ:RXT) had cash and cash equivalents of $278 million. The company reported a robust cash flow from operating activities at $267 million for the quarter and $330 million on a trailing-twelve-month basis. There was no balance outstanding on the company's Revolving Credit Facility, with $375 million of undrawn commitments available.
Management Commentary
CEO Amar Maletira commented on the results, stating,
Fiscal third quarter 2023 results exceeded the midpoint of our revenue, operating profit, and EPS guidance. Our two-business unit operating model is now fully implemented, and our leadership teams are executing to their plans."
He also noted the introduction of new offerings and traction in the industry vertical strategy within the Private Cloud segment.
Looking Ahead
For the fourth quarter of 2023, Rackspace Technology Inc (NASDAQ:RXT) is providing guidance for total revenue between $710 and $720 million, with Private Cloud and Public Cloud revenues expected to be in the ranges of $284 - $289 million and $426 - $431 million, respectively. The company anticipates a Non-GAAP Operating Profit of $46 - $48 million and a Non-GAAP Loss Per Share of $(0.05) - $(0.03).
The company's earnings report reflects the ongoing challenges in the cloud technology sector, with Rackspace Technology Inc (NASDAQ:RXT) navigating through a period of decreased revenue and profitability. However, the improved net loss figure and the strong cash flow from operations indicate areas of resilience. Investors will be watching closely to see if the company's strategic initiatives and new offerings can reverse the downward trend in revenue and return the company to growth.
For detailed financial tables and further information, please refer to the full earnings report on the Rackspace Technology Inc (NASDAQ:RXT) website.
Explore the complete 8-K earnings release (here) from Rackspace Technology Inc for further details.
This article first appeared on GuruFocus.
