Rackspace Technology, Inc 8-K/A, filed Feb 19, 2021

Rackspace Technology, Inc. (RXT)

8-K/A 2021-02-19 For: 2021-02-18

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Added on April 07, 2026

About this 8-K/A

Rackspace Technology, Inc filed this 8-K/A on February 19, 2021, reporting on events of February 18, 2021.

Items reported

Item 2.02: Financial results
Item 7.01: Regulation FD disclosure
Item 9.01: Financial statements and exhibits

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Delaware	001-39420	81-3369925
(State of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1 Fanatical Place
City of Windcrest
San Antonio, Texas		78218
(Address of principal executive offices)		(Zip Code)


	FY 2021 Guidance	2020 Actual	Implied 2021 Growth at Midpoint
Revenue	$2.9-$3.1 billion	$2.7 billion	11	%
Core Revenue	$2.7-$2.9 billion	$2.5 billion	13	%
Non-GAAP Operating Profit	$500-$530 million	$473 million	9	%
Non-GAAP Earnings Per Share	$0.95-$1.05	$0.83	20	%


Non-GAAP Other Income (Expense)1	($226)-($233) million
Non-GAAP Tax Expense Rate	26	%
Non-GAAP Weighted Average Shares	210-214 million


	Three Months Ended December 31,								Year-Over-Year Comparison
	2019				2020
(In millions, except % and per share data)	Amount		% Revenue		Amount		% Revenue		Amount		% Change
Revenue	$	627.1	100.0	%	$	716.2	100.0	%	$	89.1	14.2	%
Cost of revenue	(372.7)		(59.4)	%	(468.8)		(65.5)	%	(96.1)		25.8	%
Gross profit	254.4		40.6	%	247.4		34.5	%	(7.0)		(2.8)	%
Selling, general and administrative expenses	(231.8)		(37.0)	%	(252.2)		(35.2)	%	(20.4)		8.8	%



Income (loss) from operations	22.6		3.6	%	(4.8)		(0.7)	%	(27.4)		NM
Other income (expense):
Interest expense	(59.2)		(9.4)	%	(59.2)		(8.3)	%	—		—	%
Loss on investments, net	(21.9)		(3.5)	%	(0.2)		(0.0)	%	21.7		(99.1)	%
Gain (loss) on extinguishment of debt	0.3		0.0	%	(34.5)		(4.8)	%	(34.8)		NM
Other income (expense), net	(2.1)		(0.3)	%	2.1		0.3	%	4.2		NM
Total other income (expense)	(82.9)		(13.2)	%	(91.8)		(12.8)	%	(8.9)		10.7	%
Loss before income taxes	(60.3)		(9.6)	%	(96.6)		(13.5)	%	(36.3)		60.2	%
Benefit for income taxes	13.5		2.2	%	32.8		4.6	%	19.3		143.0	%
Net loss	$	(46.8)	(7.5)	%	$	(63.8)	(8.9)	%	$	(17.0)	36.3	%

Net loss per share:
Basic and diluted	$	(0.28)			$	(0.32)

Weighted average number of shares outstanding:
Basic and diluted	165.3				200.7


	Year Ended December 31,								Year-Over-Year Comparison
	2019				2020
(In millions, except % and per share data)	Amount		% Revenue		Amount		% Revenue		Amount		% Change
Revenue	$	2,438.1	100.0	%	$	2,707.1	100.0	%	$	269.0	11.0	%
Cost of revenue	(1,426.9)		(58.5)	%	(1,722.7)		(63.6)	%	(295.8)		20.7	%
Gross profit	1,011.2		41.5	%	984.4		36.4	%	(26.8)		(2.7)	%
Selling, general and administrative expenses	(911.7)		(37.4)	%	(959.7)		(35.4)	%	(48.0)		5.3	%

Gain on sale	2.1		0.1	%	—		—	%	(2.1)		(100.0)	%

Income from operations	101.6		4.2	%	24.7		0.9	%	(76.9)		(75.7)	%
Other income (expense):
Interest expense	(329.9)		(13.5)	%	(268.4)		(9.9)	%	61.5		(18.6)	%
Gain on investments, net	99.5		4.1	%	0.7		0.0	%	(98.8)		(99.3)	%
Gain (loss) on extinguishment of debt	9.8		0.4	%	(71.5)		(2.6)	%	(81.3)		NM
Other income (expense), net	(3.3)		(0.1)	%	2.5		0.1	%	5.8		NM
Total other income (expense)	(223.9)		(9.2)	%	(336.7)		(12.4)	%	(112.8)		50.4	%
Loss before income taxes	(122.3)		(5.0)	%	(312.0)		(11.5)	%	(189.7)		155.1	%
Benefit for income taxes	20.0		0.8	%	66.2		2.4	%	46.2		NM
Net loss	$	(102.3)	(4.2)	%	$	(245.8)	(9.1)	%	$	(143.5)	140.3	%

Net loss per share:
Basic and diluted	$	(0.62)			$	(1.37)

Weighted average number of shares outstanding:
Basic and diluted	165.3				179.6


(In millions, except per share data)	December 31, 2019		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	83.8	$	104.7
Accounts receivable, net of allowance for doubtful accounts and accrued customer credits of $17.0 and $28.3, respectively	350.3		483.0
Prepaid expenses	76.2		123.8
Other current assets	33.4		47.0
Total current assets	543.7		758.5

Property, equipment and software, net	727.8		884.6
Goodwill, net	2,745.8		2,761.1
Intangible assets, net	1,817.4		1,646.3
Operating right-of-use assets	308.3		171.1
Other non-current assets	129.4		156.2
Total assets	$	6,272.4	$	6,377.8

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	260.4	$	285.4
Accrued compensation and benefits	128.5		110.6
Deferred revenue	66.6		76.7
Debt	29.0		43.4
Accrued interest	36.0		26.5
Operating lease liabilities	58.3		62.2
Financing obligations	42.9		48.8
Other current liabilities	50.2		88.6
Total current liabilities	671.9		742.2

Non-current liabilities:
Debt	3,844.3		3,319.3
Operating lease liabilities	256.5		118.2
Finance lease liabilities	88.4		358.1
Financing obligations	86.4		74.1
Deferred income taxes	326.9		236.7
Other non-current liabilities	99.2		145.5
Total liabilities	5,373.6		4,994.1

Commitments and Contingencies

Stockholders' equity:
Preferred stock, $0.01 par value per share: 5.0 shares authorized; no shares issued or outstanding	—		—
Common stock, $0.01 par value per share: 1,495.0 shares authorized; 165.4 and 201.8 shares issued and outstanding, respectively	1.6		2.0
Additional paid-in capital	1,602.7		2,363.6
Accumulated other comprehensive income (loss)	12.0		(18.6)
Accumulated deficit	(717.5)		(963.3)
Total stockholders' equity	898.8		1,383.7
Total liabilities and stockholders' equity	$	6,272.4	$	6,377.8


	Year Ended December 31,
(In millions)	2019		2020
Cash Flows From Operating Activities
Net loss	$	(102.3)	$	(245.8)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	496.0		466.2
Amortization of operating right-of-use assets	70.5		70.7
Deferred income taxes	(40.7)		(73.6)
Share-based compensation expense	30.2		74.5

Gain on sale	(2.1)		—
(Gain) loss on extinguishment of debt	(9.8)		71.5
Unrealized (gain) loss on derivative contracts	54.0		(2.3)
Gain on investments, net	(99.5)		(0.7)
Provision for bad debts and accrued customer credits	17.8		24.7
Amortization of debt issuance costs and debt discount	18.3		18.0
Other operating activities	(0.4)		(1.4)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	(42.2)		(156.0)
Prepaid expenses and other current assets	(10.2)		(58.0)
Accounts payable, accrued expenses, and other current liabilities	(32.7)		(7.4)
Deferred revenue	11.6		9.9
Operating lease liabilities	(78.1)		(58.0)
Other non-current assets and liabilities	12.5		(15.6)
Net cash provided by operating activities	292.9		116.7
Cash Flows From Investing Activities
Purchases of property, equipment and software	(198.0)		(116.5)
Acquisitions, net of cash acquired	(316.1)		(9.5)
Proceeds from sales	16.8		—
Proceeds from sales of investments	109.5		0.9
Other investing activities	1.3		(3.3)
Net cash used in investing activities	(386.5)		(128.4)
Cash Flows From Financing Activities
Proceeds from issuance of common stock, net	—		657.8
Proceeds from employee stock plans	—		31.1
Shares of common stock withheld for employee taxes	(1.1)		(2.1)
Repurchase of common stock	(2.2)		—
Cash settlement of share-based awards	(1.5)		—
Proceeds from borrowings under long-term debt arrangements	225.0		860.0
Payments on long-term debt	(320.0)		(1,450.6)
Payments for debt issuance costs	—		(8.8)
Principal payments of finance lease liabilities	(19.9)		(24.0)
Proceeds from financing obligations	62.6		20.9
Principal payments of financing obligations	(22.1)		(54.4)
Net cash provided by (used in) financing activities	(79.2)		29.9
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	1.7		2.8
Increase (decrease) in cash, cash equivalents, and restricted cash	(171.1)		21.0
Cash, cash equivalents, and restricted cash at beginning of period	258.2		87.1
Cash, cash equivalents, and restricted cash at end of period	$	87.1	$	108.1


Supplemental Cash Flow Information
Cash payments for interest, net of amount capitalized	$	265.3	$	262.8
Cash payments for income taxes, net of refunds	$	7.2	$	15.6

Non-cash Investing and Financing Activities
Acquisition of property and equipment by finance leases	$	12.6	$	93.7
Acquisition of property, equipment and software by financing obligations	3.1		27.8
Decrease in property, equipment and software accrued in liabilities	(4.0)		(13.4)
Non-cash purchases of property, equipment and software	$	11.7	$	108.1

Non-cash increase in buildings within property, equipment and software, net due to lease modification	$	—	$	220.3
Debt issuance costs included in accrued liabilities	$	—	$	0.6
Other non-cash investing and financing activities	$	1.2	$	2.3


	Three Months Ended December 31,				% Change
(In millions, except %)	2019		2020		Actual		Constant Currency (1)
Multicloud Services	$	480.0	$	572.5	19.3	%	18.6	%
Apps & Cross Platform	81.0		91.3		12.6	%	12.3	%
Core Revenue	561.0		663.8		18.3	%	17.7	%
OpenStack Public Cloud	66.1		52.4		(20.7)	%	(21.1)	%
Total	$	627.1	$	716.2	14.2	%	13.6	%


(1)			Refer to "Non-GAAP Financial Measures" in this section for further explanation.
(2)			Adjustments for retention bonuses, mainly in connection with restructuring and transformation projects, and the related payroll tax.
(3)			Adjustment for the impact of purchase accounting from the November 2016 merger on expenses.
(4)			Adjustment for the impact of business transformation and optimization activities, as well as associated severance, facility closure costs and lease termination expenses.


	Three Months Ended December 31, 2019		Three Months Ended December 31, 2020						% Change
(In millions, except %)	Revenue		Revenue		Foreign Currency Translation (a)		Revenue in Constant Currency		Actual		Constant Currency
Multicloud Services	$	480.0	$	572.5	$	(3.1)	$	569.4	19.3	%	18.6	%
Apps & Cross Platform	81.0		91.3		(0.2)		91.1		12.6	%	12.3	%
OpenStack Public Cloud	66.1		52.4		(0.4)		52.0		(20.7)	%	(21.1)	%
Total	$	627.1	$	716.2	$	(3.7)	$	712.5	14.2	%	13.6	%


	Year Ended December 31, 2019		Year Ended December 31, 2020						% Change
(In millions, except %)	Revenue		Revenue		Foreign Currency Translation (a)		Revenue in Constant Currency		Actual		Constant Currency
Multicloud Services	$	1,832.6	$	2,141.5	$	(1.8)	$	2,139.7	16.9	%	16.7	%
Apps & Cross Platform	319.2		336.6		(0.1)		336.5		5.4	%	5.4	%
OpenStack Public Cloud	286.3		229.0		(0.2)		228.8		(20.0)	%	(20.1)	%
Total	$	2,438.1	$	2,707.1	$	(2.1)	$	2,705.0	11.0	%	10.9	%


(a)			Includes expense related to the cash settlement of unvested equity awards that were outstanding at the consummation of the November 2016 merger (amounting to $3 million for the year ended December 31, 2019 and zero for all other periods presented), retention bonuses, mainly relating to restructuring and integration projects, and, beginning in 2019, senior executive signing bonuses and relocation costs. The three months and year ended December 31, 2020 also includes $13 million for one-time cash bonuses related to successful completion of the IPO.
(b)			Includes legal, professional, accounting and other advisory fees related to the acquisition of Onica in the fourth quarter of 2019 and the IPO in the third quarter of 2020, integration costs of acquired businesses, 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 gains and losses on investment and from dispositions, including our investment in CrowdStrike realized in 2019.

(f)			Includes gains and losses on our repurchases of 8.625% Senior Notes.
(g)			Reflects mainly changes in the fair value of foreign currency derivatives.
(h)			All of our intangible assets are attributable to acquisitions, including the November 2016 merger.
(i)			We utilize an estimated structural long-term non-GAAP tax rate in order to provide consistency across reporting periods, removing the effect of non-recurring tax adjustments, which include but are not limited to tax rate changes, U.S. tax reform, share-based compensation, audit conclusions and changes to valuation allowances. For 2019 and 2020, we used a structural non-GAAP tax rate of 26%, which reflects the removal of the tax effect of non-GAAP pre-tax adjustments and non-recurring tax adjustments on a year-over-year basis. The non-GAAP tax rate could be subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in our geographic earnings mix including due to acquisition activity, or other changes to our strategy or business operations. We will re-evaluate our long-term non-GAAP tax rate as appropriate. We believe that making these adjustments facilitates a better evaluation of our current operating performance and comparisons to prior periods.


	Three Months Ended December 31,				Year Ended December 31,
(In millions, except per share amounts)	2019		2020		2019		2020
Net loss attributable to common stockholders	$	(46.8)	$	(63.8)	$	(102.3)	$	(245.8)
Non-GAAP Net Income	$	35.3	$	53.6	$	62.4	$	151.3

Weighted average number of shares - Diluted	165.3		200.7		165.3		179.6
Effect of dilutive securities (a)	0.2		6.2		0.6		3.7
Non-GAAP weighted average number of shares - Diluted	165.5		206.9		165.9		183.3

Net loss per share - Diluted	$	(0.28)	$	(0.32)	$	(0.62)	$	(1.37)
Per share impacts of adjustments to net loss (b)	0.50		0.59		1.00		2.21
Per share impacts of shares dilutive after adjustments to net loss (a)	(0.01)		(0.01)		(0.00)		(0.01)
Non-GAAP EPS	$	0.21	$	0.26	$	0.38	$	0.83


(a)			Reflects impact of awards that would have been anti-dilutive to Net loss per share, and therefore not included in the calculation, but would be dilutive to Non-GAAP EPS and are therefore included in the share count for purposes of this non-GAAP measure. Potential common share equivalents consist of shares issuable upon the exercise of stock options, vesting of restricted stock or purchase under the Employee Stock Purchase Plan (the “ESPP”), as well as contingent shares associated with our acquisition of Datapipe Parent, Inc. Certain of our potential common share equivalents are contingent on Apollo achieving pre-established performance targets based on a multiple of their invested capital ("MOIC"), which are included in the denominator for the entire period if such shares would be issuable as of the end of the reporting period assuming the end of the reporting period was the end of the contingency period.
(b)			Reflects the aggregate adjustments made to reconcile Non-GAAP Net Income to our net loss, as noted in the above table, divided by the GAAP diluted number of shares outstanding for the relevant period.