- Fourth Quarter Revenue of
$716 million , up 14% Year-over-Year; 2020 Revenue of$2,707 million , up 11% Year-over-Year - Fourth Quarter Bookings of
$293 million , an increase of 27% Year-over-Year; 2020 Bookings of$1,126 million , an increase of 61% Year-over-Year - Fourth Quarter Net loss of
$(64) million , or$(0.32) per diluted share; 2020 Net loss of$(246) million , or$(1.37) per diluted share - Fourth Quarter Adjusted EBITDA was $199 million and 2020 Adjusted EBITDA was
$763 million ; Adjusted EBITDA margin was 28% for both Fourth Quarter and Full Year 2020 - Fourth Quarter Non-GAAP Earnings Per Share of
$0.26 , up 24% Year-over-Year; 2020 Non-GAAP Earnings Per Share of$0.83 , up 118%
Fourth Quarter 2020 Results
Revenue was
Revenue from our Core Segments (“Core Revenue”), comprised of Multicloud Services and Apps & Cross Platform, increased 18% in the fourth quarter of 2020 as compared to the fourth quarter of 2019. On a constant currency basis, after giving effect to the acquisition of
Bookings were
Net loss was
Adjusted EBITDA was $199 million in the fourth quarter of 2020, an increase of 6% as compared to Adjusted EBITDA of
Net loss per diluted share was
Non-GAAP Earnings Per Share was
Capital expenditures were
Full Year 2020 Results
Revenue was
Core Revenue increased 15% in 2020 as compared to 2019. On a constant currency basis, after giving effect to the acquisition of
Bookings were
Net loss was
Adjusted EBITDA was
Net loss per diluted share was
Non-GAAP Earnings Per Share was
Capital expenditures were
As of
2021 Financial Outlook
FY 2021 Guidance | 2020 Actual | Implied 2021 Growth at Midpoint | |||
Revenue | 11 | % | |||
Core Revenue | 13 | % | |||
Non-GAAP Operating Profit | 9 | % | |||
Non-GAAP Earnings Per Share | 20 | % |
Non-GAAP Other Income (Expense)1 | ( | |
Non-GAAP Tax Expense Rate | 26% | |
Non-GAAP Weighted Average Shares | 210-214 million |
1 Non-GAAP Other Income (Expense) is only expected to include interest expense.
Definitions of non-GAAP financial measures and the reconciliations to the most directly comparable measures in accordance with generally accepted accounting principles in
Conference Call and Webcast
About
Forward-looking Statements
Non-GAAP Financial Measures
This press release includes several non-GAAP financial measures such as constant currency revenue, Non-GAAP Gross Profit, Non-GAAP Net Income (Loss), Non-GAAP Operating Profit, Adjusted EBITDA and Non-GAAP Earnings Per Share (“EPS”). These non-GAAP financial measures exclude the impact of certain costs, losses and gains that are required to be included in our profit and loss measures under GAAP. Although we believe these measures are useful to investors and analysts for the same reasons they are useful to management, as described in the accompanying pages, these measures are not a substitute for, or superior to, GAAP financial measures or disclosures. Other companies may calculate similarly-titled non-GAAP measures differently, limiting their usefulness as comparative measures. We have reconciled each of these non-GAAP measures to the applicable most comparable GAAP measure in the accompanying pages.
IR Contact
Rackspace Technology Investor Relations
ir@rackspace.com
PR Contact
publicrelations@rackspace.com
CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)
Three Months Ended | 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 |
NM = not meaningful.
CONSOLIDATED RESULTS OF OPERATIONS
Year Ended | 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 |
NM = not meaningful.
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data) | 2019 | 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 | 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 | ||||||
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, | — | — | ||||||
Common stock, | 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 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended | |||||||
(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 |
REVENUE BY SEGMENT
Three Months Ended | % 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 and reconciliation.
Year Ended | % Change | |||||||||||||
(In millions, except %) | 2019 | 2020 | Actual | Constant Currency (1) | ||||||||||
Multicloud Services | $ | 1,832.6 | $ | 2,141.5 | 16.9 | % | 16.7 | % | ||||||
Apps & Cross Platform | 319.2 | 336.6 | 5.4 | % | 5.4 | % | ||||||||
Core Revenue | 2,151.8 | 2,478.1 | 15.2 | % | 15.1 | % | ||||||||
OpenStack Public Cloud | 286.3 | 229.0 | (20.0 | )% | (20.1 | )% | ||||||||
Total | $ | 2,438.1 | $ | 2,707.1 | 11.0 | % | 10.9 | % |
(1) Refer to "Non-GAAP Financial Measures" in this section for further explanation and reconciliation.
NON-GAAP GROSS PROFIT BY SEGMENT
Three Months Ended | Year-Over-Year Comparison | |||||||||||||||||||
(In millions, except %) | 2019 | 2020 | ||||||||||||||||||
Non-GAAP gross profit by segment: | Amount | % of Segment Revenue | Amount | % of Segment Revenue | Amount | % Change | ||||||||||||||
Multicloud Services | $ | 201.8 | 42.0 | % | $ | 210.2 | 36.7 | % | $ | 8.4 | 4.2 | % | ||||||||
Apps & Cross Platform | 30.5 | 37.7 | % | 30.7 | 33.6 | % | 0.2 | 0.7 | % | |||||||||||
OpenStack Public Cloud | 31.8 | 48.1 | % | 22.0 | 42.0 | % | (9.8 | ) | (30.8 | )% | ||||||||||
Non-GAAP Gross Profit (1) | 264.1 | 262.9 | (1.2 | ) | (0.5 | )% | ||||||||||||||
Less: | ||||||||||||||||||||
Share-based compensation expense | (1.6 | ) | (5.9 | ) | ||||||||||||||||
Other compensation expense (2) | (1.3 | ) | (1.0 | ) | ||||||||||||||||
Purchase accounting impact on expense (3) | (2.3 | ) | (1.2 | ) | ||||||||||||||||
Restructuring and transformation expenses (4) | (4.5 | ) | (7.4 | ) | ||||||||||||||||
Total consolidated gross profit | $ | 254.4 | $ | 247.4 |
(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 |
(4 | ) | Adjustment for the impact of business transformation and optimization activities, as well as associated severance, facility closure costs and lease termination expenses. |
Year Ended | Year-Over-Year Comparison | |||||||||||||||||||
(In millions, except %) | 2019 | 2020 | ||||||||||||||||||
Non-GAAP gross profit by segment: | Amount | % of Segment Revenue | Amount | % of Segment Revenue | Amount | % Change | ||||||||||||||
Multicloud Services | $ | 774.7 | 42.3 | % | $ | 810.2 | 37.8 | % | $ | 35.5 | 4.6 | % | ||||||||
Apps & Cross Platform | 118.7 | 37.2 | % | 115.5 | 34.3 | % | (3.2 | ) | (2.7 | )% | ||||||||||
OpenStack Public Cloud | 146.0 | 51.0 | % | 100.3 | 43.8 | % | (45.7 | ) | (31.3 | )% | ||||||||||
Non-GAAP Gross Profit (1) | 1,039.4 | 1,026.0 | (13.4 | ) | (1.3 | )% | ||||||||||||||
Less: | ||||||||||||||||||||
Share-based compensation expense | (5.7 | ) | (14.5 | ) | ||||||||||||||||
Other compensation expense (2) | (2.8 | ) | (5.9 | ) | ||||||||||||||||
Purchase accounting impact on revenue (3) | 0.2 | — | ||||||||||||||||||
Purchase accounting impact on expense (3) | (9.6 | ) | (5.9 | ) | ||||||||||||||||
Restructuring and transformation expenses (4) | (10.3 | ) | (15.3 | ) | ||||||||||||||||
Total consolidated gross profit | $ | 1,011.2 | $ | 984.4 |
(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 |
(4 | ) | Adjustment for the impact of business transformation and optimization activities, as well as associated severance, facility closure costs and lease termination expenses. |
KEY OPERATING METRICS
Three Months Ended | |||||||
(In millions, except %) | 2019 | 2020 | |||||
Bookings | $ | 230.8 | $ | 292.5 | |||
Core Quarterly Net Revenue Retention Rate | 98 | % | 101 | % | |||
Quarterly Net Revenue Retention Rate | 98 | % | 100 | % | |||
Annualized Recurring Revenue (ARR) | $ | 2,411.6 | $ | 2,711.1 |
Year Ended | |||||||
(In millions) | 2019 | 2020 | |||||
Bookings | $ | 700.7 | $ | 1,126.1 | |||
Annualized Recurring Revenue (ARR) | $ | 2,411.6 | $ | 2,711.1 |
NON-GAAP FINANCIAL MEASURES
Constant Currency Revenue
We use constant currency revenue as an additional metric for understanding and assessing our growth excluding the effect of foreign currency rate fluctuations on our international business operations. Constant currency information compares results between periods as if exchange rates had remained constant period over period and is calculated by translating the non-
Three Months Ended | Three Months Ended | % 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 | % |
(a) | The effect of foreign currency is calculated by translating current period results using the average exchange rate from the prior comparative period. |
Year Ended | Year Ended | % 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) | The effect of foreign currency is calculated by translating current period results using the average exchange rate from the prior comparative period. |
Non-GAAP Gross Profit
Our principal measure of segment profitability is segment non-GAAP gross profit. We also present Non-GAAP Gross Profit, which is the aggregate of segment non-GAAP gross profit, because we believe the measure is useful in analyzing trends in our underlying, recurring gross margins. We define Non-GAAP Gross Profit as our consolidated gross profit, adjusted to exclude the impact of share-based compensation expense and other non-recurring or unusual compensation items, purchase accounting-related effects, and certain business transformation-related costs. For a reconciliation of our Non-GAAP Gross Profit to our total consolidated gross profit, see “Non-GAAP Gross Profit by Segment” above.
Non-GAAP Net Income (Loss), Non-GAAP Operating Profit and Adjusted EBITDA
We present Non-GAAP Net Income (Loss), Non-GAAP Operating Profit and Adjusted EBITDA because they are a basis upon which management assesses our performance and we believe they are useful to evaluating our financial performance. We believe that excluding items from net income that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude, enhances the comparability of our results and provides a better baseline for analyzing trends in our business.
We define Non-GAAP Net Income (Loss) as net income (loss) adjusted to exclude the impact of non-cash charges for share-based compensation and cash charges related to the settlement of share-based awards in connection with the
We define Non-GAAP Operating Profit as net income (loss), plus interest expense and income taxes, further adjusted to exclude the impact of non-cash charges for share-based compensation and cash charges related to the settlement of share-based awards in connection with the
We define Adjusted EBITDA as Non-GAAP Operating Profit plus depreciation and amortization.
Non-GAAP Operating Profit and Adjusted EBITDA are management’s principal metrics for measuring our underlying financial performance. Adjusted EBITDA, along with other quantitative and qualitative information, is also the principal financial measure used by management and our board of directors in determining performance-based compensation for our management and key employees.
These non-GAAP measures are not intended to imply that we would have generated higher income or avoided net losses if the
Three Months Ended | Year Ended | |||||||||||||||
(In millions) | 2019 | 2020 | 2019 | 2020 | ||||||||||||
Net loss | $ | (46.8 | ) | $ | (63.8 | ) | $ | (102.3 | ) | $ | (245.8 | ) | ||||
Share-based compensation expense | 7.4 | 17.7 | 30.2 | 74.5 | ||||||||||||
Cash settled equity and special bonuses (a) | 6.5 | 18.4 | 24.1 | 37.5 | ||||||||||||
Transaction-related adjustments, net (b) | 8.8 | 11.3 | 22.5 | 46.7 | ||||||||||||
Restructuring and transformation expenses (c) | 11.9 | 45.1 | 54.3 | 104.8 | ||||||||||||
Management fees (d) | 6.6 | — | 16.2 | 8.4 | ||||||||||||
Net (gain) loss on divestiture and investments (e) | 21.8 | 0.2 | (101.6 | ) | (0.7 | ) | ||||||||||
Net (gain) loss on extinguishment of debt (f) | (0.3 | ) | 34.5 | (9.8 | ) | 71.5 | ||||||||||
Other (income) expense, net (g) | 2.3 | (2.1 | ) | 3.3 | (2.5 | ) | ||||||||||
Amortization of intangible assets (h) | 43.0 | 44.0 | 167.5 | 176.3 | ||||||||||||
Tax effect of non-GAAP adjustments (i) | (25.9 | ) | (51.7 | ) | (42.0 | ) | (119.4 | ) | ||||||||
Non-GAAP Net Income | 35.3 | 53.6 | 62.4 | 151.3 | ||||||||||||
Interest expense | 59.2 | 59.2 | 329.9 | 268.4 | ||||||||||||
Benefit for income taxes | (13.5 | ) | (32.8 | ) | (20.0 | ) | (66.2 | ) | ||||||||
Tax effect of non-GAAP adjustments (i) | 25.9 | 51.7 | 42.0 | 119.4 | ||||||||||||
Non-GAAP Operating Profit | 106.9 | 131.7 | 414.3 | 472.9 | ||||||||||||
Depreciation and amortization | 123.7 | 111.1 | 496.0 | 466.2 | ||||||||||||
Amortization of intangible assets (h) | (43.0 | ) | (44.0 | ) | (167.5 | ) | (176.3 | ) | ||||||||
Adjusted EBITDA | $ | 187.6 | $ | 198.8 | $ | 742.8 | $ | 762.8 |
(a) | Includes expense related to the cash settlement of unvested equity awards that were outstanding at the consummation of the |
(b) | Includes legal, professional, accounting and other advisory fees related to the acquisition of |
(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 |
(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 |
(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, |
Non-GAAP Earnings Per Share (EPS)
We define Non-GAAP EPS as Non-GAAP Net Income divided by our GAAP average number of shares outstanding for the period on a diluted basis, after giving effect to the twelve-for-one stock split that was approved and effected on
Three Months Ended | Year Ended | ||||||||||||||
(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 |
(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. |
Source:
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