Thursday, February 23, 2012

SalesForce.com (CRM) Reports 5th Consecutive Operating Loss: Loss per Share -$0.03

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SalesForce.com (CRM) Reports 5th Consecutive Operating Loss: Loss per Share -$0.03


SalesForce.com (CRM) Prelude QE January 2012 How do you describe this dog and pony show of questionable financial performance, hyped press releases, and "locker room talk" earnings calls? CEO Mark Benioff may be a cloud visionary and evangelist plus a consummate promoter, but translating this to financial performance and maximizing shareholder wealth has not been part of the vision recently. The gist of CEO Benioff's spiel is increasing revenues, beating Oracle, promoting his conferences, and a general onwards and upwards forevermore tone including ultimately $10B annual revenues! Benioff's enthusiasm is contagious, you cheer for him, and hope he can fulfill his vision but would rather invest your money long-term elsewhere. The 5 most recent quarters have been not only been unimpressive and each quarter increases investor concern and uncertainty. The past 5 quarters net total GAAP EPS has been -$0.01 on GAAP net losses of -$10.89 million. In addition, the GAAP operating losses have been -$35.48 million the past 5 quarters.

SalesForce.com (CRM) Summary QE January 2012 (GAAP) GAAP financial performance continues poor, even though rebounding QoQ. The outlook for the next quarter is a drop to record operating and net losses. Revenues continue increasing as return on assets continue decreasing to the current dismal, and negative, -0.63%. A 3rd  consecutive quarterly GAAP net loss and 5 consecutive quarterly GAAP operating losses have been reported. Cash flow per share is a positive for CRM, a multi-year, if not all-time, high of $1.76. Financial position overall remains adequate, but unless financial performance can be improved will deteriorate further. The stock is priced for a stellar future performance that does not appear to be on the horizon. Of even more concern is CEO Marc Benioff typically not commenting on poor financial performance but instead pumping the annual DreamForce meeting and wanting us all to be there. Further, there is The Mystery of the Unknown Customers Headcount. There were 104,000 customers in the QE July 2011 but this quarterly data has stopped being reported. Presumably this means the customer count decreased and was omitted. Accounts receivable and deferred revenue both increased $300M+ QoQ to all-time highs, which indicates more of a financing operation.

SalesForce.com (CRM) Income Statement QE January 2012 (GAAP) SalesForce.com (CRM) reported total revenues of $631.91M, a net loss of -$6.38M, and a loss per share of -$0.03. From the prior QE October 2011, these were +8.16%, +70.75%, and flat at 0.00%, respectively. From the prior year QE January 2011, these were +38.31%, -137.52%, and -137.50%, respectively. Gross margin, operating and net margin improved QoQ but deteriorated YoY to 78.42%, -1.01%, and -0.65%, respectively. Cash flow from operations was a multi-year, if not all-time, high of $1.76. The operating expense ratio of 79.43% continues extremely high. Subscriptions and Support were 94% of total revenues.

SalesForce.com (CRM) Balance Sheet QE January 2012 (GAAP) SalesForce.com's (CRM) total assets exploded +19% QoQ to a record $4.16B. As a result, the capital to assets ratio is a multi-year low 38%, exclusive of "temporary equity" of $79M. The current ratio is a more liquid 40% and does not include $669M in noncurrent marketable securities. SalesForce.com (CRM) is liquid with reasonable capital. The return on assets peaked in QE October 2009 at 5.13% and has declined for 9 consecutive quarters the current, dismal -0.63%. The $1.45B in cash, cash equivalents, and marketable securities (current and noncurrent), are 35% of total assets of $3.51B and pulling down the ROA as net losses continue.

SalesForce.com (CRM) Outlook QE April 2012 (GAAP) Revenue for the company's first fiscal quarter is projected to be in the range of $673 million to $678 million, an increase of 33% to 34%, year-over-year. GAAP net loss per share is expected to be in the range of ($0.19) to ($0.18), while diluted non-GAAP EPS is expected to be in the range of $0.33 to $0.34.


SalesForce.com (CRM) Financial Performance by the Quarters


SalesForce.com (CRM) GAAP Earnings (Loss) per Share Current Loss per Share of -$0.03 is the same QoQ, down -138% YoY, the 3rd consecutive quarterly loss per share, and continues the multi-year low. This is the 4th consecutive quarter EPS has been at or below $0.00. The EPS chart average is +$0.08.




SalesForce.com (CRM) GAAP Cash Flow per Share Current Cash Flow per Share of $1.76 is a multi-year, if not all-time, high. The CFS chart average is $0.72.




SalesForce.com (CRM) Total Revenues and Net Income Current Total Revenues of $631.91M are yet another record and have consistently grown. SalesForce.com guidance indicates even higher total revenues in the future. Current Net Loss of -$4.08M is a rebound from the prior quarter multi-year low of -$13.94M, the 3rd consecutive net loss, and a cumulative -$22.29M net losses in the past 3 quarters.



SalesForce.com (CRM) Gross Margin, Operating Margin, and Net Margin Current Gross Margin of 78.42% is higher QoQ, lower YoY, and below the chart average 79.72%. Current Operating Margin of -1.01% is higher QoQ, lower YoY, been negative for 5 consecutive quarters, is well below the chart average +3.99%, and is well below the peaks of 9%+ in 2009. Current Net Margin of -0.65% is higher QoQ, lower YoY, been negative 3 consecutive quarters, is well below the chart average +3.01%, and well below the peaks of 2009.



SalesForce.com (CRM) Return on Assets SalesForce.com has a historically low ROA for a technology company and doesn't have an effective deployment of assets. The ROA peaked in QE October 2009 at 5.13% and has declined each quarter since, for 9 consecutive quarters, to the current Return on Assets of a dismal, and negative, -0.63%. Besides the ongoing net losses, the $1.45B in cash, cash equivalents, and marketable securities, which are 35% of the total assets, are pulling down the ROA. The ROA chart average is 3.12%.




SalesForce.com (CRM) Growth Rates Total Revenues Growth YoY of +38.31% continues an extraordinary uptrend and is above the chart average +29.71%. Total revenues have increased every quarter on the chart, ranging from +19.55% to +43.40%. Earnings per Share Growth YoY of -137.50% YoY is the opposite story and has deteriorated into a significant downtrend decreasing for 8 consecutive quarters. The EPSG chart average is -7.20%.




SalesForce.com (CRM) Regional Revenues For the current quarter, Americas revenues were $436M and 69% of total revenues. Europe was $108M and 17%, while Asia Pacific was $87M and 14%. The overall trend had been higher growth Americas with slower growth in Europe and Asia Pacific.



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Rackspace Reports Record Quarter: Revenues, Income, EPS Growth Accelerate

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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 Cash Flow per Share Current Cash Flow per Share of $0.76 is a record, +49% QoQ, and +37% YoY.

 

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 Return on Assets Rackspace has a historically low ROA for a technology company, but the ROA is consistently increasing QoQ. Current Return on Assets of +8.53% continues the uptrend QoQ and is a multi-year, if not all-time high. This indicates assets are being more effectively deployed. The ROA chart average is 6.88%.

 

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 Revenue Sources The trend is a decrease in Dedicated Cloud (managed hosting, now 79.36%) offset by an increase in Private Cloud (now 20.64%). The Dedicated Cloud and Private Cloud chart averages are 85.60% and 14.40%, 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.

 

Rackspace Customers, Servers, Employees Current Customers of 172,510 have been steadily increasing and current Servers of 79,805 have also, but at a slower rate. Current Employees of 4,040 have increased at an even slower rate, which has consistently increased the Customers to Employees Ratio. This indicates increased efficiency.

 

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HP Earnings Rebound QoQ but Drop YoY, Reorganization of Reorganization Continues

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HP Earnings Rebound QoQ but Drop YoY, Reorganization of Reorganization Continues


HP Prelude QE January 2012 CEO Meg Whitman, former eBay CEO and California Governor candidate, has the task of redefining HP. This is after HP already attempted to redefine itself through former and fired CEO Léo Apotheker. CEO Apotheker and the Board of Directors announced last year a "historic company transition" including leaving the consumer PC market, leaving the webOS mobile device market, and entering enterprise cloud computing services. CEO Whitman then announced HP would keep the personal systems group and stay in the consumer PC market. HP continues in flux and the "new HP" remains to be seen. Therefore, financial performance is expected to continue historically weak as reorganization of the reorganization is implemented.


HP Summary QE January 2012 (GAAP) Financial performance rebounded QoQ but dropped YoY as expected. Total revenues decreased both QoQ and YoY, which is concerning. Earnings per share, cash flow per share, operating income, net income, gross margin, operating margin, and net margin were up QoQ but down YoY. Debt increased to a concerning $30.9B and 24% of total assets. The outlook for QE April is encouraging with a projected increase in earnings per share QoQ but still another decrease YoY. The bottom appears to be in for HP. HP has a large, embedded product financing operation which results in lower financial performance than other technology companies. Financial position continues as acceptable, with adequate capital, adequate liquidity, but higher debt.


HP Income Statement QE January 2012 (GAAP) HP reported total revenues of $30.04B, net income of $1.47B, and earnings per share of $0.73. From the prior quarter QE October 2011, these were QoQ -6.49%, +514.23%, and +508.33%, respectively. From the prior year QE January 2011, these were -7.02%, -43.65%, and -37.61%, respectively. Gross margin, operating margin, and net margin were up QoQ from the multi-year lows but down YoY at 22.38%, 6.80%, and 4.89%, respectively. Cash flow from operations of $0.60 was down QoQ and YoY. The operating expense ratio of 15.58% is about the historical average and indicates operating expenses are contained.


HP Balance Sheet QE January 2012 (GAAP) HP's total assets decreased -2.26% QoQ to $126.60 billion, just below the prior quarter record. The capital to assets ratio of 31.26% is adequate and above recent multi-year lows. The current ratio of 38.51% is another multi-year low. The return on assets of +4.74% is a multi-year low. Total debt of $30.90 billion is higher at 24.41% of total assets, a multi-year high, and beginning to be of concern.


HP Outlook (GAAP) QE April 2012 HP estimates non-GAAP diluted EPS to be in the range of $0.88 to $0.91 and GAAP diluted EPS to be in the range of $0.68 to $0.71. Second quarter fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.20 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.


HP Financial Performance by the Quarters


HP GAAP Earnings Per Share and Cash Flow per Share Current Earnings per Share of $0.73 is +508% QoQ, -38% YoY, the first increase in 4 quarters, and below the $0.83 chart average. Current Cash Flow per Share of $0.60 is a 12-quarter low and the 3rd consecutive quarterly decrease.




HP Total Revenues and Net Income Current Total Revenues of $30.04B are a multi-year low, -6% QoQ, -7% YoY, decreased 4 of the past 5 quarters, decreased 5 of the past 8 quarters, and below the chart average $31.41B. Current Net Income of $1.47B +514% QoQ, -44% YoY, and below the chart average $1.97B.




HP Gross Margin, Operating Margin, and Net Margin Current Gross Margin of 22.38% increased QoQ, decreased YoY, and is below the chart average 23.48%. Current Operating Margin of 6.80% increased QoQ, decreased YoY, and is below the chart average 8.38%. Current Net Margin of 4.89% also increased QoQ, decreased YoY, and is below the chart average of 6.27%.




HP Return on Assets Current Return on Assets of +4.74% is a multi-year low, is historically low for a technology company, and reflects the struggles of HP. ROA has historically been low because of an embedded financing operations. Return on Assets previously had been stable in the 7%+ range. The chart average ROA is 6.98%.




HP Growth Rates Current Total Revenues Growth YoY of -7.02% YoY is an 9-quarter low and below the chart average +2.92%. Current Earnings per Share Growth YoY of -37.61% YoY is the second lowest in several years and below the chart average +2.83%.




HP Segment Revenues The current quarter was a decrease in all major segments, with a notable drop in the segment leaders Personal Systems and Services.




HP Regional Revenues For the current quarter, Americas revenues were a much lower QoQ of $13.2B and 45% of total revenues. Europe, Middle East, Africa were flat QoQ at $11.7B and 36% and Asia Pacific was down QoQ at $5.2B and 19%. International sales, outside of U.S., were 66% of total revenues and included within the above totals. BRIC countries (Brazil, Russia, India, and China) were 13% of total revenues and included within the above totals.



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Tuesday, February 14, 2012

HP Earnings Preview: Rebound Projected but Continued Weak Performance

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HP (HPQ) Quarterly Earnings Announcement

HP will report QE January 2012 financial results on Wednesday, February 22, after market close. The conference call will be at 2:00 p.m. PT.


HP Future and Past Financial Performance
Estimated QE January 2012 Earnings per Share (Non-GAAP)
Yahoo Finance Analysts Estimates: $0.87 avg, $0.83 low, $1.01 high, 28 analysts
Prior Quarter: $1.17
Prior Year: $1.36
HP Outlook: $0.83 to $0.86


Prior QE October 2011 Financial Results (GAAP) When HP reports QE January 2012, the 3 months ended January, financial results on February 22, HP is expected to meet, beat, or miss various prior quarterly results. These prior quarterly financial results were:
Total Revenues $32.12B
Operating Income $795M
Net Income $239M
Earnings per Share $0.12
Cash Flow per Share $1.20
Gross Profit Margin 21.14%
Operating Income Margin 2.47%
Net Income Margin 0.74%


Summary (GAAP) Overall, the QE January 2012 is expected to be a rebound for Earnings per Share from the abysmal prior quarter, up QoQ but still significantly down YoY. HP continues in flux with a new CEO, Meg Whitman, and now staying in the consumer PC market. This was after announcing a "historic company transition" last summer, which included leaving the consumer PC market. Therefore, financial performance is expected to continue historically weak as reorganization of the reorganization is implemented. For the QE January 2012, HP is expected to miss QoQ and YoY on Total Revenues. HP is expected to beat QoQ and miss YoY on Operating Income, Net Income, Earnings per Share, and probably on Cash Flow per Share. HP should meet or just miss QoQ for Gross Margin, already at a multi-year low, and beat QoQ on Operating Margin and Net Margin. All 3 margins are expected to miss YoY. The prior quarterly review is below.


HP Reports Declining Financial Results, EPS $0.12


HP Prelude QE October 2011 New CEO Meg Whitman, former eBay CEO and California Governor candidate, has the task of redefining HP. This is after HP already attempted to redefine itself through fired CEO Léo Apotheker. CEO Apotheker and the Board of Directors announced in the prior quarter a "historic company transition" including leaving the consumer PC market, leaving the webOS mobile device market, and entering enterprise cloud computing services. CEO Whitman announced in late October HP is now keeping the personal systems group, staying in the consumer PC market. HP is in flux and the "new HP" remains to be seen. When a new CEO, in this case Whitman, says "We need to get back to the business fundamentals", this usually means disarray.


HP Summary QE October 2011 (GAAP) Financial performance dropped again in QE October 2011 from the prior quarter. Total revenues did increase QoQ, but were down YoY. Operating income, net income, earnings per share, cash flow per share, gross margin, operating margin, and net margin hit multi-year lows. Debt increased to a multi-year high of 23.65% of total assets. The QE October and QE January are the strongest quarters for HP, so these are very disappointing financial results. However, the bottom may be in for HP. HP is projecting QE January 2012 earnings per share to increase to $0.61 - $0.64. HP has a large, embedded product financing operation which results in lower financial performance than other technology companies. Financial position continues as acceptable, with adequate capital, moderate debt, and adequate liquidity.


HP Income Statement QE October 2011 (GAAP) HP reported total revenues of $32.12, net income of $795M, and earnings per share of $0.12. From the prior quarter QE July 2011, total revenues were up +2.99%, net income down -87.59%, and earnings per share down -87.10%. From the prior year QE October 2010, these were down -3.47%, down -90.58%, and down -89.098%, respectively. Gross margin, operating margin, and net margin were down QoQ and YoY to multi-year lows of 21.14%, 2.47%, and 0.74%, respectively. Cash flow from operations of $1.20 was down QoQ and YoY. The operating expense ratio (operating expenses divided by total revenues) of 18.66% is a multi-year high.


HP Balance Sheet QE October 2011 (GAAP) HP's total assets increased +3.68% QoQ to a record $129.52 billion. The capital to assets ratio (total stockholders' equity divided by total assets) of 30.11% is adequate, but another multi-year low. The current ratio (current assets divided by total assets) of 39.39% is a multi-year low. The return on assets of +5.67% is a multi-year low. Total debt is higher at 23.65% of total assets and a multi-year high.


HP Financial Performance by the Quarters


HP GAAP Earnings Per Share Current Earnings per Share of $0.12 is down -87.10% QoQ, down -89.09% YoY, and a multi-year low. The recent peak was prior QE January 2011 of $1.17. The lows have been $0.75 in QE July 2010 and $0.69 in QE July 2009. The chart average EPS is $0.84.

 


HP Cash Flow per Share Current Cash Flow per Share of $1.20 is below average and a 7-quarter low. The peak was $2.04 in QE April 2010. The lows have been QE January 2009 of $0.99 and QE January 2009 of $0.46. The chart average CFS is $1.37.

 


HP Total Revenues, Operating Income, and Net Income Current Total Revenues of $32.12B is a 3-quarter high, up +2.99% QoQ and down -3.47% YoY. Total Revenues have generally been stable for the past 9 quarters, ranging from a low of $30.73B in QE July 2010 to a high of $33.28B in QE October 2010. The TR chart average is $31.56B. Current Operating Income of $795M is a multi-year low and had ranged from a low of $2.32B in QE July 2010 and a high of $3.39B in QE January 2011 in the prior 8 quarters. The OI chart average is $2.70B. Current Net Income of $239M is also a multi-year low, down -87.59% QoQ and down -90.58% YoY. Net Income had ranged from a low of $1.78B in QE July 2010 to a high of $2.61B in QE January 2011 in the prior 8 quarters. The NI chart average is $2.03B.

 


HP Gross Margin, Operating Margin, and Net Margin Current Gross Margin of 21.14% is a multi-year low. The GM chart average is 23.60%. Current Operating Margin of 2.47% is a multi-year low and was pulled down by a decrease in gross profit, increase in S,G,&A expenses, and impairment of goodwill and purchased intangible assets. The OM chart average is 8.55%. Current Net Margin of 0.74% is a multi-year low. The OM chart average is 6.43%. The average income tax rate of 39.34% is a multi-year high.

 


HP Return on Assets The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. Current Return on Assets of +5.67% is a multi-year low. Return on Assets previously had been stable in the 7%+ range. The chart average ROA is 7.30%.

 


HP Growth Rates Below is a chart of the annual (YoY, Y/Y, annual change) growth rates for total revenues and earnings per share. Current Total Revenues Growth of -3.47% YoY is an 8-quarter low. The chart average TRG is +4.02%. Current Earnings per Share Growth of -89.09% YoY is a multi-year low. The chart average EPSG is +7.33%.

 


HP Revenue Sources The current quarter was an increase in all major segments, but still below the prior year QE October 2010 peak overall. Corporate Investments were a loss of -$94M.

 


HP Geographic Revenues For the current quarter, Americas revenues were $14.5B and 45% of total revenues. Europe, Middle East, Africa were $11.7B and 36% and Asia Pacific was $6.0B and 19%. International sales, outside of U.S., were 65% of total revenues and included within the above totals. BRIC countries (Brazil, Russia, India, and China) were 12% of total revenues and included within the above totals.




HP Operating Expense Ratio The current Operating Expense Ratio of 18.66% is a multi-year high. Slightly higher total revenues were offset by a decrease in gross profit, increase in S,G,&A expenses, impairment of goodwill and purchased intangible assets, a loss in corporate investments, and a higher income tax rate. This indicates a decreased efficiency and a lower proportion of revenues is reaching the bottom line, net income. The chart average OER is 15.12%.

 

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Tuesday, February 7, 2012

Rackspace Earnings Preview: Record Quarter Expected

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Update 1 on 2-5-12


Rackspace (RAX) Quarterly Earnings Announcement

Rackspace will report Q4 2011 financial results on Monday, February 13, after market close. The conference call will be at 1:30 p.m. PT.


Rackspace Future and Past Financial Performance
Estimated Q4 2011 Earnings per Share (GAAP) Yahoo Finance Analysts Estimates: $0.15 avg, $0.13 low, $0.17 high, 17 analysts
Prior Quarter: $0.14
Prior Year: $0.10
Rackspace Outlook: none


Prior Q3 2011 Financial Results (GAAP) When Rackspace reports Q4 2011, the 3 months ended December, financial results on February 13, Rackspace is expected to meet, beat, or miss various prior quarterly results. These prior quarterly GAAP financial results were:
Total Revenues $264.57M
Operating Income $31.07M
Net Income $19.98M
Earnings per Share $0.14
Rackspace Outlook: Total Revenues minimum $258.20M
Gross Margin 68.84%
Operating Margin 11.74%
Net Margin 7.55%


Summary (GAAP) Overall, Rackspace is expected to beat QoQ and YoY for Earnings per Share. Therefore, Rackspace is also expected to beat QoQ and YoY for Total Revenues, Operating Income, and Net Income. Cash Flow per share should increase QoQ but may decrease YoY. Rackspace should at least meet QoQ and beat YoY for gross, operating, and net margins. In short, this is expected to be a record quarter. The prior quarterly review is below.


Rackspace Reports Record Q3 Earnings!: Revenues, Net Income, EPS Up


Rackspace Summary Q3 2011 Total revenues, operating income, net income, and earnings per share all reached another record high. Financial performance continues outstanding. Cash flow per share from operations dropped, but is not an immediate concern. Overall financial position is good, but working capital is negative again, mostly due to leasing of data centers and servers. This is a liquidity issue not a profitability issue.


Rackspace Income Statement Q3 2011 Rackspace reported record total revenues of $264.57M, record net income of $19.98M, and record earnings per share of $0.14. From the prior quarter Q2 2011, total revenues were up +7.01%, net income up +13.79%, and earnings per share up +7.69%. From the prior year quarter Q3 2010, these were up +32.48%, up +69.21%, and up +55.56%, respectively. Gross margin dipped QoQ to 68.84%, operating margin was a multi-year high of 11.74%, and net margin was a multi-year high of 7.55%. Cash flow from operations dipped to $0.51 per share mostly due to a large increase in prepaid expenses and other current assets. The Operating Expense Ratio of 57.09% is a 4-quarter low.

Rackspace Balance Sheet Q3 2011 Rackspace's total assets increased +9.36% QoQ to a record $970.68M from the prior quarter of $887.58M. The capital to assets ratio is a respectable 56.77% and about the same for the past 3 quarters. The current ratio is an illiquid 23.41% and lack of working capital has been a problem for Rackspace 3 of the past 4 quarters. Current working capital (current assets less current liabilities) is a negative -$2.73 and was negative in the prior quarter Q2 2011 (-$3.53M). Rackspace continues with low working capital, due to ongoing leasing of data centers and servers plus an increase in prepaid expenses and other current assets. This is a liquidity issue, not a profitability issue. The return on assets is low for a technology company, but has consistently grown to the current peak of +7.71%.


Rackspace Outlook 2011 Total revenues $1 billion, maintain margin profile


Rackspace Financial Performance by the Quarters


Rackspace Earnings Per Share Current Earnings per Share of $0.14 is a very strong +7.69% QoQ and +55.56% YoY. EPS has been flat 2 times, but never decreased, since Q3 2009 on the chart below.

 


Rackspace Cash Flow per Share Current Cash Flow per Share of $0.51 is a 4-quarter low. CFS dropped -$0.09 and -15.25% QoQ, and was up +$0.01 YoY. The largest contributors to this drop were an increase in Prepaid Expenses and Other Current Assets plus Excess Tax Benefits from Share-Based Compensation Arrangements.

 

Rackspace Total Revenues, Operating Income, and Net Income Current Total Revenues of $264.57M are a new all-time high, up +7.01% QoQ and +32.48% YoY, and have consistently grown. This is the 4th consecutive quarter above $200M. Current Operating Income of $31.07M are a new all-time high, up +8.44% QoQ. Current Net Income of $19.98M is also an all-time high, up +13.79% QoQ and +69.21% YoY.

 

Rackspace Gross Margin, Operating Margin, and Net Margin Current Gross Margin of 68.84% is a 4-quarter low and just above the historical average. Current Operating Margin of 11.74% is historically very strong and is a multi-year, if not all-time, high. This is the 5th consecutive quarter above 10%. Current Net Margin of 7.55% is historically very strong and is a multi-year, if not all-time, high.

 

Rackspace Return on Assets Rackspace has a historically low ROA for a technology company, but the ROA is consistently increasing QoQ. Current Return on Assets of +7.71% continues the uptrend QoQ and is a multi-year, if not all-time high. This indicates assets are being more effectively deployed. The ROA chart average is 6.60%.

 

Rackspace Growth Rates YoY Total Revenues Growth YoY of +32.48% continues the high rate of increase. Current Earnings per Share Growth YoY of +55.56% also continues a strong growth rate. The TRG and EPSG chart averages are a very strong +28.55% and incredible +50.75%, respectively.

 

Rackspace Revenue Sources The trend is a decrease in Managed Hosting (now 80.85%) offset by an increase in Cloud (now 19.15%). The Managed Hosting and Cloud chart averages are 86.29% and 13.71%, respectively.

 

Rackspace Working Capital Current Negative Working Capital  of -$2.73 million is the 2nd consecutive quarter and the 3rd quarter in the past 4 quarters such a condition has existed. This appears 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, has created a large, ongoing current liability (now $65.78M). This is a liquidity issue not a profitability issue. The Current Assets, Current Liabilities, and Working Capital chart averages are $207.71M, $185.20M, and $22.51M, respectively.

 


Rackspace Customers, Servers, Employees Current Customers of 161,422 have been steadily increasing and current Servers of 78,717 have also, but at a slower rate. Current Employees of 3.799 have increased at an even slower rate, which has consistently increased the Customers to Employees Ratio. This indicates increased efficiency.

 

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Friday, February 3, 2012

Qualcomm Reports Record Earnings: Revenues, Income, EPS Upsurge

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Qualcomm Reports Record Earnings: Revenues, Income, EPS Upsurge


Qualcomm Summary Calendar Q4 2011 Qualcomm reported record financial results with all-time high total revenues, net income, and earning per share. The outlook for calendar Q1 2012 is for more record earnings. Financial position continues very liquid and strong. "I am pleased to report another record quarter with revenues, earnings and MSM shipments reaching all-time highs, driven by our industry-leading chipset portfolio and the continued strong demand for smartphones around the world," said CEO Dr. Paul E. Jacobs. "We are raising our revenue and earnings guidance as our broad licensing partnerships and extensive chipset roadmap, led by our integrated Snapdragon processors, position us well for strong growth in fiscal 2012."


Qualcomm Income Statement Calendar Q4 2011 Qualcomm reported record total revenues of $4.68 billion, record net income of $1.55 billion, and record earnings per share of $0.81. From the prior calendar quarter Q3 2011, total revenues were +14%, net income +33%, and earnings per share +31%. From the prior year calendar Q4 2011, total revenues were +40%, net income +20%, and earnings per share +14%. Gross margin increased slightly QoQ to 44.6%, operating margin was flat QoQ at 33.1%, and net margin increased significantly QoQ to 29.9%. The operating expense ratio decreased to a 4-quarter low of 66.9%. Equipment and services have increased to 67% of total revenues over licensing and royalty fees.


Qualcomm Balance Sheet Calendar Q4 2011 Qualcomm continues incredibly liquid and well capitalized. Total assets have reached an all-time high of $37.61 billion. Qualcomm has $11.5 billion in short-term cash, cash equivalents, and marketable securities. Add noncurrent marketable securities and total reserves are $22.0 billion. Capital to assets increased QoQ and YoY to a very strong 75.8%. Return on assets of 12.89% is a multi-year, if not all-time, high.


Qualcomm Calendar Q1 2012 Business Outlook
• GAAP & Non-GAAP Revenues: $4.6B - $5.0B
• GAAP EPS: $1.20 - $1.26
• Non-GAAP EPS: $0.91 - $0.97


Qualcomm Performance by the Quarters


Qualcomm Cash Flow per Share and Earnings Per Share Current Cash Flow per Share of $1.03 dipped slightly QoQ from the prior $1.06, which was an 11-quarter high. Current Earnings per Share of $0.81 is a an all-time high, a +31% increase QoQ, and a +14% YoY increase.




Qualcomm Total Revenues, Operating Income, and Net Income Current Total Revenues of $4.68 billion is a record high, a +14% increase QoQ, and a +40% increase YoY. Current Operating Income of $1.55 billion is a record high. Current Net Income of $1.40 billion is a record high, a +33% increase QoQ, and a +20% increase YoY.




Qualcomm Gross Margin, Operating Margin, and Net Margin Current Gross Margin (Equipment and Services) of 44.6% slightly increased QoQ, significantly decreased YoY, and is below the 47.3% historical average. Current Operating Margin of 33.1% increased QoQ, is flat YoY, and is above the 30.5% historical average. Current Net Margin of 29.9% significantly increased QoQ, decreased significantly YoY, and is just above the 29.3% historical average.



Qualcomm Return on Assets Current Return on Assets of 12.9% is a multi-year, if not all-time, high. The ROA chart average is 11.2%.



Qualcomm Growth Rates YoY Current Total Revenues Growth YoY of +40% is well above the historical average and the 6th consecutive quarter of growth. Current Earnings per Share Growth YoY of +14% is historically below average but the 7th consecutive quarter of growth.



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