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, 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!
Mon, Feb. 16, 5:35 PM
Thu, Jan. 15, 6:04 PM
Nov. 11, 2014, 4:43 PM
- Rackspace's (NYSE:RAX) Q3 numbers show the company "can carve out a niche" in a very competitive cloud infrastructure market by focusing on service quality, thinks Credit Suisse, hiking its target to $45. The firm also argues the re-acceleration seen in Rackspace's revenue growth points to improved execution.
- Likewise, Oppenheimer asserts Rackspace appears to be achieving "a customer care niche in hybrid cloud that is defensible." It recommends buying if shares fall again in response to Amazon price cuts; with Google having just slashed prices, Amazon might respond at this week's AWS re:Invent conference.
- Canaccord, however, is still cautious. "Although the management transition has been executed better than we had expected with respect to the Q3/14 results, we are not convinced we are on a complete road to recovery and that the countervailing trends of intense competitive pressures, contrasted with the strong secular demand, warrant a HOLD rating."
- Shares made new 2014 highs today. They're still well below an early-2013 high of $81.36.
- Prior Rackspace coverage
Nov. 10, 2014, 4:28 PM
- Rackspace (NYSE:RAX) expects Q4 revenue of $469M-$476M, below a $476.5M consensus. Forex is expected to have a $5M revenue impact.
- Q3 adjusted EBITDA margin was 34.5%, +240 bps Q/Q and +220 bps Y/Y, above guidance of 31%-33%, and well-received in light of the cloud infrastructure (IaaS) price pressure Rackspace has seen. Q4 guidance is at 33%-35%. A recent pricing overhaul is likely helping.
- Adjusted free cash flow was $41.5M, above net income of $25.7M. Capex still amounted to $117M (a steep 25% of revenue).
- Gross margin rose 180 bps Q/Q and 170 bps Y/Y to 68.9%. As a result, GAAP costs/expenses were 91.2% of revenue, down from 92.3% in Q2 and 92.9% a year ago.
- Dedicated cloud (Web hosting) revenue +14% Y/Y to $319.6M. Public cloud (IaaS) revenue +29% to $140.2M.
- Servers deployed rose 3% Q/Q to 110.4K, and average revenue/server rose by $30 to $1,405. Churn rose slightly to -0.6%, and net upgrade rate fell slightly to 1.4%.
- Q3 results, PR
Nov. 10, 2014, 4:11 PM
Nov. 9, 2014, 5:35 PM
Oct. 30, 2014, 11:17 AM
- In addition to posting mixed Q3 results, Equinix (NASDAQ:EQIX) is guiding for Q4 revenue of $627M-$631M, below a $642M consensus.
- However, the data center owner reported a 3.4K Q/Q increase in net billable cabinets for Q3, a record figure and (as noted on the CC) 70% above Equinix's 4-quarter average. Total billable cabinets stand at 96.1K - 44.9K in North America, 32.2K in Europe, 19K in Asia-Pac.
- Likewise, cross-connects rose by 5.7K to 141.2K, and exchange ports by 143 to 2,557. Total customers rose by 60 to 4,700, with the termination rate falling to 1.9% from 2.7% in Q2 and 2.5% a year ago.
- Gross margin was 68%, flat Q/Q and Y/Y. Adjusted EBITDA margin was 46% vs. 45% in Q2 and 46% a year ago. $43M was spent on buybacks. Equinix ended Q3 with $501M in cash, and $4B in debt.
- Equinix is guiding for full-year adjusted discretionary free cash flow of $590M-$620M, and adjusted funds from operations (AFFO) of greater than $745M. REIT approval is still expected by year's end.
- Several data center colocation, Web hosting, and interconnection services firms are also higher on a day the Nasdaq is down 0.5%. RAX +1.5%. INAP +3.5%. DLR +1.3%. CONE +1.4%.
- Q3 results, PR, slides (.pdf), datasheet (.pdf)
Aug. 12, 2014, 12:10 PM
- "Management provided no color with regard to the strategic alternatives the board is evaluating and did not provide a timeline for a decision," observes Piper's Andrew Nowinski, discussing Rackspace's (RAX -7.2%) cautious CC remarks (transcript) about its strategic review.
- Nonetheless, Nowinski declares Rackspace's business to be "in good shape," as proven by "accelerating growth in the dedicated segment and better-than-expected revenue guidance."
- Pac Crest's Michael Bowen isn't pleased management stated it's thinking of no longer providing guidance and/or breaking out Web hosting and public cloud revenue. "We believe now is not a good time to become less transparent due to uncertainties around an M&A deal and changes in the marketplace."
- Multiple analysts have taken note of Rackspace's EBITDA margin decline. CFO Karl Picher suggested Rackspace's revamped pricing will eventually boost margins. "We expect that we will have fewer low-paying customers than we currently have ... we are aiming for the high ARPU, high workloads, growing customer set that we serve exceptionally well."
- Prior Rackspace earnings coverage
Aug. 11, 2014, 4:51 PM
- Rackspace (NYSE:RAX) expects Q3 revenue of $454M-$461M, largely above a $454.2M consensus.
- Amid intense cloud infrastructure (IaaS) price competition, adjusted EBITDA margin fell to 32.1% in Q2 from 33.2% and 32.8% a year ago, pressuring EPS. Rackspace expects a margin of 31%-33% in Q3; it recently overhauled its IaaS pricing in an attempt to stand out from rivals.
- Dedicated cloud (Web hosting) revenue +12% Y/Y to $310.6M. Public cloud (OpenStack) revenue +32% to $130.5M.
- Adjusted free cash flow was $26.3M, down from $39.9M in Q1 and up from $11.5M a year ago. Capex rose 11% Q/Q to $112.4M (25% of revenue).
- Net upgrade rate rose to 1.5% from a depressed 0.9% in Q1, while churn improved to -0.7% from -0.6%. Average revenue/server grew 2.9% Q/Q to $1,375, and servers deployed 1.4% to 107.7K.
- Following a slew of M&A rumors, Rackspace says it's still exploring its options.
- RAX -1.1% AH. Q2 results, PR.
Aug. 11, 2014, 4:08 PM
Aug. 10, 2014, 5:35 PM
May. 12, 2014, 4:17 PM
- Rackspace (RAX) expects Q2 revenue of $434M-$440M, favorable at the midpoint to a $435.5M consensus.
- In spite of intense cloud infrastructure price pressure, adjusted EBITDA margin rose 80 bps Q/Q in Q1 to 33.2% (it was down 130 bps Y/Y), and contributing to its EPS beat. Rackspace expects a Q2 adjusted EBITDA margin of 32%-34%.
- Adjusted free cash flow was $39.9M, up from $15.3M in Q4 and -$1.2M a year ago, and also topping net income of $25M. Capex totaled $101M (24% of revenue).
- Dedicated cloud (Web hosting) revenue +3% Q/Q and +10% Y/Y to $299.7M. Public cloud revenue (inc. OpenStack) +4% Q/Q and +34% Y/Y to $121.4M.
- Net upgrade rate fell to 0.9% from 1.1% in Q4. Churn was -0.6% vs. -0.7%. Servers deployed rose 2% Q/Q to 106.2K, and average revenue/server rose $14 to $1,336.
- Q1 results, PR
May. 12, 2014, 4:01 PM| Comment!
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