Rackspace ($RAX) reports Q1 2012 financial results on Monday, May 7, after market close.
Rackspace reports this Q1 2012 after a record-breaking Q4 2011. Both total assets and annual revenues reached $1 billion in the previous report. Analysts are estimating a flat earnings per share QoQ, which would match the prior quarter all-time high. This would still be a whopping +80% YoY increase.
CEO Lanham Napier could provide a small upside surprise, but Q1 has been flat QoQ the past 2 years. The estimated increase in Q1 total revenues is +6% QoQ and +31% YoY. Revenues and earnings per share growth is projected to accelerate in later quarters. The prior quarterly review is below.
Estimated Q1 2012 Earnings per Share (GAAP)
Yahoo Finance Estimates: $0.18 avg, $0.15 low, $0.22 high, 18 analysts
Prior Quarter: $0.18
Prior Year: $0.10
Rackspace Outlook: None provided
Estimated Q1 2012 Revenues (GAAP)
Yahoo Finance Estimates: $300.53M avg, $297.00M low, $303.77M high, 17 analysts
Prior Quarter: $283.26M
Prior Year: $230.00M
Rackspace Outlook: None provided
Rackspace Reports Record Quarter: Revenues, Income, EPS Growth Accelerate
Rackspace Summary Q4 2011 Total revenues, operating income, net income, earnings per share, and cash flow per share all reached a record high. Growth has accelerated. Financial performance continues outstanding. Overall financial position is good and total assets reached $1 billion. Working capital is positive, after being an issue earlier in 2011, mostly due to leasing of data centers and servers. This has been a liquidity issue not a profitability issue. “During the year we accelerated our revenue growth rate for the second year in a row and crossed one billion dollars in annual revenue, while simultaneously improving margins and returns. In short, we made tremendous progress towards our long-term goal of becoming the service leader in Cloud computing,” said Lanham Napier, CEO.
Rackspace Income Statement Q4 2011 Rackspace reported record total revenues of $283.26M, record net income of $25.05M, and record earnings per share of $0.18. From the prior quarter Q3 2011, total revenues were +7.06%, net income +25.35%, and earnings per share +28.57%. From the prior year quarter Q4 2011, these were +31.92%, +85.00%, and +80.00%, respectively. Gross margin increased QoQ and YoY to 70.75%, a multi-year high. Operating margin was a multi-year high of 14.04% and net margin was a multi-year high of 8.84%. Cash flow from operations was a record $0.76. The operating expense ratio of 56.71% is a multi-year low, reflecting an increase in revenues and cost containment.
Rackspace Balance Sheet Q4 2011 Rackspace’s total assets increased +5.75% QoQ and +34.78% YoY to reach a record $1.03 billion. The capital to assets ratio is a respectable 58.40%, which is a multi-year high. The current ratio is a low 25.66% as working capital has been an issue in the past year. Current working capital rebounded to a positive +$25.62 million, after being negative 3 of the prior 4 quarters. The return on assets is low for a technology company, but has consistently grown to the current peak of +8.53%.
Rackspace Outlook 2012 None provided, may be provided in annual letter to stockholders this spring.
Rackspace Financial Performance by the Quarters
Rackspace Earnings Per Share Current Earnings per Share of $0.18 is a record, +29% QoQ, and +80% YoY. EPS has been flat twice, but never decreased, since Q3 2009 on the chart below.
Rackspace Total Revenues, Operating Income, and Net Income Current Total Revenues of $283.26M are a new all-time high, +7% QoQ, +32% YoY, and have consistently grown. Current Operating Income of $39.66M is a new all-time high and +28% QoQ. Current Net Income of $25.05M is also an all-time high, +25% QoQ, and +85% YoY.
Rackspace Gross Margin, Operating Margin, and Net Margin Current Gross Margin of 70.75% is a multi-year, if not all-time, high. Current Operating Margin of 14.04% is a multi-year, if not all-time, high. This is the 6th consecutive quarter above 10%. Current Net Margin of 8.84% is a multi-year, if not all-time, high.
Rackspace Growth Rates YoY Total Revenues Growth YoY of +31.92% continues the high rate of increase. Current Earnings per Share Growth YoY of +80.00% also continues an exceptionally strong growth rate. The TRG and EPSG chart averages are a very strong +29.11% and incredible +55.63%, respectively.
Rackspace Working Capital Current Positive Working Capital of +$25.62 million is a reversal of negative working capital reported the prior 2 quarters and 3 of the prior 4 quarters. This appeared to be mostly the result of 1) an increase in accounts payable and other accrued expenses and 2) the ongoing leasing of data centers and servers (see next chart below). The leasing of data centers and servers, that is the current portion (due within 1 year) of obligations under capital leases, had created a large, ongoing current liability (now $66.03M). This has been a liquidity issue not a profitability issue.