Tue, May 12, 9:16 AM
Mon, May 11, 5:03 PM
- With forex clearly a headwind (it had a 250 bps impact on Q1 revenue growth), Rackspace's (NYSE:RAX) guidance for Q2 revenue to be up 1.5%-2.5% Q/Q in constant currency implies Q2 sales will fall short of a consensus of $502.1M (+4.6% Q/Q in actual dollars).
- Financials: Revenue growth fell to 14.1% Y/Y in Q1 from Q4's 15.8% and Q3's 18.3%. Gross margin was 66.4%, -100 bps Q/Q and -30 bps Y/Y. R&D rose to 6.7% of revenue from 6% a year ago, and G&A to 18% from 16.9%. Sales/marketing fell to 12.3% from 13.6%. $90.2M was spent on capex, -10% Y/Y and equal to 19% of revenue.
- Business metrics: Average revenue/server was $1,412, flat Q/Q and up $76 Y/Y; it had been rising Q/Q in prior quarters. Servers deployed rose 1% Q/Q and 7% Y/Y to 114,105. Headcount rose by 28 Q/Q and 221 Y/Y to 5,964. Rackspace is no longer breaking out its dedicated cloud (Web hosting) and public cloud (IaaS) revenue.
- Also: 1) Adjusted EBITDA margin was 33.6% vs. 35% in Q4 and 33.2% a year ago (Q2 guidance is at 32%-34%). 2) Adjusted free cash flow was $67.4M, +69% Y/Y and above net income of $28.4M. 3) No buybacks took place; $200M was spent on them in Q4. Rackspace says it's seeing "a rising number of new, larger enterprise customers."
- Rackspace has fallen to $46.88 AH. Is competition taking a toll? Amazon's AWS revenue rose 49% Y/Y in Q1 to $1.57B, and Synergy Research thinks Microsoft, IBM, and Google saw even faster IaaS/PaaS cloud service growth (albeit off much smaller bases).
- Q1 results, PR
Mon, May 11, 4:09 PM| 3 Comments
Sun, May 10, 5:35 PM
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Fri, Apr. 24, 11:08 AM
- In its first quarter of breaking out Amazon Web Services' results on their own, Amazon reported the business had Q1 revenue of $1.57B (+49% Y/Y) and (notably) a $265M op. profit (+8%).
- Rival Rackspace (NYSE:RAX) is getting a lift from the numbers ahead of its May 11 Q1 report. For reference, Rackspace had Q4 public cloud segment revenue of $147.7M (+26% Y/Y, 31% of total revenue).
Mon, Apr. 20, 4:09 PM
- Equinix (EQIX +1.6%) should post revenue and EBITDA ahead of Street estimates amid "y/y growth in MRR ... and a secular shift to the cloud," according to Pacific Crest's Michael Bowen and Trevor Upton. It's one of five stocks that Pacific Crest mentioned buying into upcoming earnings in its Q1 Communications Services Preview.
- The stocks all get an Outperform rating from the analysts. Equinix received a $255 price target and the firm "would remind investors that our bull case on shares remains $280." Shares closed today at $239.80 and the firm reports April 29.
- Rackspace (RAX +0.9%) also benefits from shifting business, the firm says: "We believe we are in the early stages of a secular shift from on-premise data centers to hybrid clouds made up of private and public cloud platforms. We believe the company is executing more efficiently and improving its managed service value proposition." Their price target is $58; shares closed today at $52.53 and the company reports May 11.
- SBA Communications (SBAC +1.8%) got a price target of $138 on expectations of strong leasing activity and hearing about positive impact from the FCC's last spectrum auction; it closed today at $121.84 and reports on Friday.
- Cogent Communications (CCOI +1%) received a price target of $45 and closed today at $34.24; it reports May 7. GTT Communications (GTT +1.6%) got a $24 target and closed today at $18.31; it reports May 7 as well.
Wed, Apr. 15, 12:40 PM
- Scott Crenshaw, until now domain name/authentication service provider VeriSign's (VRSN +0.1%) SVP of products (responsible for developing new products/services), has been hired by Rackspace (RAX +0.1%) to be its SVP of strategy and product.
- In his new job, Crenshaw will oversee Rackspace's "corporate strategy, business development and product and engineering portfolio." He'll report to CEO Taylor Rhodes, who landed the top job only 7 months ago.
- VeriSign's Q1 report arrives on April 23. Rackspace hasn't set an earnings date yet.
Thu, Apr. 9, 10:56 AM
- BofA/Merrill has downgraded cloud HR/payroll software vendor Paylocity (PCTY -5.9%) and cloud fleet management software vendor Fleetmatics (FLTX -3.2%) to Underperform, and cloud contact center software vendor Five9 (FIVN -4.7%) to Neutral. Rackspace (NYSE:RAX) and Citrix (NASDAQ:CTXS) have also been downgraded (to Neutral and Underperform, respectively), but are posting sub-1% declines.
- Shares of all 3 companies rallied in February in response to Q4 beats (I, II, III)
Fri, Mar. 6, 7:22 PM
- During talks with Rackspace (NYSE:RAX) sales chief Todd Cione and other execs, JMP's Patrick Walravens was told business and demand signals remain good, particularly from larger organizations, and that the Web hosting/cloud infrastructure provider is beginning to reap the benefits of last year's big sales reorg.
- Also heard: Last year's favorable Gartner Magic Quadrant report (named Rackspace one of two leaders, along with Datapipe, in cloud-enabled managed hosting) has driven an increase in enterprise RFPs; Microsoft (though competing against Rackspace via Azure) remains Rackspace's largest hosting partner.
- In addition, Walravens reports VMware (NYSE:VMW) and Rackspace plan joint account planning and branding related to their recently-launched partnership - it involves a managed private cloud service based on VMware's comprehensive vCloud management platform.
- Following the deal, Rackspace offers managed private cloud services relying on VMware and Microsoft software at similar prices to its mainstay OpenStack offerings. "We are agnostic," says Rackspace exec Arrian Mehis. VMware, meanwhile, has been relying on service provider partnerships to extend vCloud's reach.
- Previously: Rackspace gains post-earnings as analysts react
- Previously: VMware forms public cloud service partnership with Google
Thu, Feb. 19, 2:58 PM
- Today's notable tech gainers include fiber equipment provider Zhone (ZHNE +10.6%), IP licensing firm VirnetX (VHC +7%), healthcare software provider Allscripts (MDRX +4.8%), app development software provider Pegasystems (PEGA +6%), software outsourcing firm EPAM (EPAM +5.6%), security software/service provider Imperva (IMPV +5.3%), and cloud HR software provider Paylocity (PCTY +4.5%).
- Notable decliners include Chinese search/app store/security app provider Qihoo (QIHU -5.2%), Web hosting/cloud infrastructure provider Rackspace (RAX -3.9%), LED equipment maker Veeco (VECO -4.9%), and analog/mixed-signal chipmaker MagnaChip (MX -5%). The Nasdaq is up 0.4%.
- VirnetX is adding to the Wednesday gains seen after Apple patent review petitions were denied, and Qihoo is adding to the losses seen following a Jefferies downgrade.
- Rackspace and Veeco are reversing the gains they saw yesterday after posting their Q4 reports (I, II), and then some. MagnaChip is now down 58% since posting its Q1-Q3 results a week ago.
- Previously covered: SolarCity, Facebook, Castlight, Applied Materials, DragonWave, Nimble Storage, AVG, Ascent Solar, Netlist
Wed, Feb. 18, 12:15 PM
- Down AH yesterday due to the light sales guidance provided with its mixed Q4 results, Rackspace (RAX +1.4%) is now back above $50. Helping its cause: Pac Crest has upgraded to Outperform, and at least four firms have hiked their targets.
- Pac Crest cites enterprise and OpenStack momentum as reasons for upgrading: "In the second half of 2014, Rackspace won more large enterprise contracts worth at least $100,000 per month than it had in the prior five quarters combined ... management indicated that OpenStack now makes up more than 50% of its public cloud revenue, which implies OpenStack revenue is at least 15.6% of its total revenue."
- Cowen (target hiked to $75) now considers it likely Rackspace "will announce support for a mega cloud provider in 1H15," thereby boosting its long-term addressable market and lowering future capex needs (in exchange for sharing revenue). It adds sales guidance was in-line after adjusting for forex, and that EBITDA margin guidance was better than expected.
- Meanwhile, new CEO Taylor Rhodes argues the cloud infrastructure (IaaS) market's price war is calming down. "Amazon Web Services (NASDAQ:AMZN) in November, for the first time, didn’t make a price cut move ... AWS is feeling like they are the reference brand leader, that they are strong versus Google (NASDAQ:GOOG), so they don’t need to do it as much. Microsoft (NASDAQ:MSFT) is cutting price, but who knows how much share they are actually taking."
- He also reiterates Rackspace's assertion that its OpenStack/hybrid cloud offerings are differentiated in the battle for enterprise accounts. "The mainstream market has two problems: They have legacy apps that won’t go [to multi-tenant public clouds] automatically ... the second problem they have is this skills set gap ... There is a need for software and tools development."
- Q4 results, guidance/details
Tue, Feb. 17, 5:37 PM
Tue, Feb. 17, 4:22 PM
- With forex providing a 1% headwind, Rackspace (NYSE:RAX) expects Q1 revenue of $477M-$488M, below a $490.5M consensus. Full-year revenue guidance is at $2B-$2.1B vs. a $2.08B consensus (2% forex headwind).
- Q4 adjusted EBITDA margin was 35%, +50 bps Q/Q and +260 bps Y/Y, and at the high end of a 33%-35% guidance range. However, Q1 guidance is at 32%-34% (cloud price pressure?), and full-year guidance at 33%-36% (still favorable to 2014's 33.7% at the midpoint).
- Dedicated cloud (Web hosting) revenue rose 8% Y/Y in Q4 to $324.7M, a slowdown from Q3's 14%. Public cloud revenue (inc. OpenStack) grew 26% to $147.7M after growing 29% in Q3. Servers deployed rose to 112.7K from 110.5K in Q3 and 103.9K a year ago, and average revenue/server grew to $1,412 from $1,405 and $1,322.
- Gross margin was 67.4%, up 20 bps Y/Y but down 150 bps Q/Q. Total costs/expenses rose 11% Y/Y to $422.4M (less than revenue growth of 15.8%).
- Free cash flow was $55M, above net income of $36.9M. $105M (22% of revenue) was spent on capex.
- Shares have fallen to $47.00 in AH trading. They went into earnings up more than $12 from where they traded prior to Rackspace's Q3 report.
- Q4 results, PR
Tue, Feb. 17, 4:03 PM| Comment!
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