Rackspace [RAX] Beats Estimates; Does Not Comment on Takeover Interest
Shares of Rackspace (RAX 28.50, -0.11) are on track to open lower by 0.4% even though the company beat earnings estimates and issued upbeat guidance. The earnings release did not include commentary about takeover interest, which has been reported earlier this month.
The provider of cloud computing services reported above-consensus earnings of $0.28 per share on a 7.0% increase in revenue to $523.60 million, which was also ahead of estimates. Currency exchange rates and the sale of the company's Jungle Disk business impacted the revenue growth rate by 190 basis points.
Net income ($35.80 million) accounted for 5.8% of net revenue after making up 7.0% of revenue in the same quarter a year ago ($28.30 million). Net income margin improved to 6.8% from 5.8%. Income from operations represented 12.3% of net revenue, up from last year's 8.6%.
Capital expenditures totaled $82.10 million, which was up sequentially, but down more than 45.0% year-over-year.
Free cash flow totaled $98.40 million, which was up from $36.80 million in the same quarter last year.
In addition to reporting earnings, Rackspace announced the sale of its Cloud Sites business unit to Liquid Web, but terms of the transaction were not disclosed.
Going forward, Rackspace expects to generate third-quarter revenue between $534 and $539 million, which is ahead of market expectations. Full-year revenue is expected between $2.13 and $2.15 billion, which is also ahead of estimates.