Rackspace (RAX) posted their Q2 2016 earnings report after the closing bell on Monday. The company’s year-over-year growth is a positive sign for investors as the company continues in its product transition that has been slower than expected.
1. Revenue Growth of 7.1%
The company posted revenues of $524 million, up 7.1%, during the same period last year. Net income rose 27% compared to the same period last year to $35.8 million. Diluted EPS rose 40%, up to $0.28 on the quarter.
The company also announced that they’ve sold their Cloud Sites business to Liquid Web on Monday.
2. Sales Increased 8.2% Year Over Year
Rackspace’s sales are up 8.2% year over year. The figure is even more impressive when you remove the effects of spin-offs and currency-adjustments, which put the sales increase up to 8.9% year over year.
3. Average Revenue per Managed Server Rose 7%
The company’s average revenue per managed server has risen by 7%, up to $1,513 per month. During the same period a month ago, revenue per server was just $1,416 per month.
4. Free Cash Flow Rose to $161.5 Million
The company added $18.2 million to their free cash flow to boost free cash flow to $161.5 million. The additional cash is a direct result of the company’s transition to a support service for other cloud hosting companies.
The transition has allowed the company to reduce capital expenditures by 46% year over year.
Rackspace has transitioned away from offering hosted services and has switched their focus to high-quality support services, which has proven to be a difficult transition for the company. The transition is finally bearing fruit, with the company spending 60% less on customer gear and lowering capital expenditures along the way.
The company expected revenue to reach just $513 million in the third quarter of the year, which is just a 1% increase from a year prior.
