Rackspace Technology (RXT) 22 Feb 232022 Q4 Earnings call transcript

Good afternoon and thank you for standing by. Welcome to Rackspace Technology's Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s call is being recorded.

to of call Corporate like Watson, to now President Vice Finance. would hand over the Robert I Please go ahead.

and Chief Thank be call you in as Maletira, Relations Officer well Amar Investor joined January. found today Molu, and good today's replay website. afternoon. on our I Supplemental materials as Chief our earnings recently a Officer, can who Financial am to by Bobby joined our announcement Executive today's of

forward-looking. on a to involve to The filings. call, certain obligation these update no be as we is call As SEC by could differ. results in Technology uncertainties included the of statements except required make and actual this the which reminder, discussion uncertainties risks information risks and assumes on law. Rackspace our will comments cause A presented

non-GAAP measures their certain are our information useful measures release we have available reconciliation financial believe the of and to IR provided with rules, on and and comparable to we which earnings presentation, those website. which SEC to includes both a presentation most these Our directly measures, GAAP provide measures investors. our accordance In adjustments of

will for an business. to now over Amar turn the on I update the call

Robert. you, Thank

other assist to threat. to completed quickly cybersecurity We and days. to roughly we On was immediately CrowdStrike engaged activity like you I'd our Ransomware response exchange triggered investigation, XX in incident Rackspace the in act contain leading to December email detected with update experts hosted in incident First, the our experienced the on X, which team firm us quickly QX. late forensic suspicious industry environment, which

were impact or which was result our not Rackspace revenue. the vector swift attack. the to a previously impacted to a platforms, threat, this to exploit, incident. solutions no email than of result known, determined enterprise other investigation of and exchange as less attack a products, the it total a the was customers was affected contain No zero solely this X% action Due was team's sophisticated and up businesses which the hosted environment, The makes of were means limited day

a email extremely We provided our the transmission. with we environment. and email hosted migrate and Security both their provide assisted customers focus to for to XXX customers have data customers many exchange our with secure our business and is services to Microsoft right critical path the investments a and continue to with

in first the In With adding me that, what we Technology implementing significant September. our been let leadership, trajectory since last the products changing else months, focused and unit performance. just transforming been few have new operating business into include two and board model, introducing laser company helm and taking new a of I've many cloud first share milestones, customer services. strengthening achieved doing on Rackspace the I've a a which

poised to throughout are and life. changes to We drive these the now company strategy bring our

We fixing this the very disruption. on term even focused if long it are near term, requires business for

on the next sustainable our for may quarters into positioning growth XXXX. is the be focus While few choppy, heading company

earnings call. last I'm pleased our the progress of to some since share

our or meeting is fourth profitability exceeding and This step track we of build a delivered First, the record our quarter continue high-end we revenue commitments. above of as positive a to guidance.

operational new Second, his during CFO, has in background running experience. I'm welcome Molu, services Bobby to our finance hit and ground excited broad the who January joined and

Business, the announced Private Cloud of Third, President of have President Lillie the Cloud Sinha unit. and DK a the business as Brian we have hired Public previously as

instrumental private each two strong leadership have strategy cloud in our execution now deep and core segments. on for we business. this, of experience and Given be technology Brian's these focus will transforming

to the extensive leading multi-cloud of lead recent board director that will Executive be Shashank help Technology asset of our joined experience has Roberts as with a and industry's Samant solutions. the fortify tremendous Senior our as Anthony position finally, will directors. together provider And Anthony's elevation define a of

months a into operating only progress. couple I model, are of we a While the am new of early encouraged signs by

reflect strongly the time right our Although believe progress financial to headed it results, in I are this fully we direction. in will take

environment, As experiencing others same we navigate some our the by challenging we the in highlighted macro trends are of industry.

the has product efficiency. Growth of showing slowed cloud as focus are customers heightened on market a

in The experiencing We private to for a cloud to are whether has deliberate also should approach public more companies cycles. led also slowdown and to optimize workloads performance longer sales recent costs. take economic operate evaluating many or

and our the shifting complete new taking to demand improve offerings. macro execution, launch to conditions transformation, The right, we're current advantage of

our In a we services-led customer infrastructure motion engagement. deeper with to from retail an pivot accelerated continue cloud, public led motion

As we term disruptions. business, some we the change near the are experiencing mix of

are margin suite of committed services several backlog already to long-term improved services will growth We sustained offerings. existing building higher shift that yield margins. steps a We a and to expand to accelerate taken a our and

expanded Let We long-term Google partnership examples. me Cloud. strategic highlight with an a recently announced few

development will as build a Cloud Rackspace of modernization, data migration, application services Excellence Together as partnership, GCP areas Cloud XXX will we such this Rackspace joint on of out Google drive part As business around with GCP, Google resources. certified Center and with AI. focused

that services. model is We AWS, of Azure a XX/X broad good new on a is for public example Operations expanding. GCP, focused of Modern we are sticky launched Modern support a will unified range which also managed provide customers annuity service services, recently offerings and the Operations a cloud for across

organizations emerge XXXX, high cloud opportunities market the Our that open new ensure public will model from the in this wide we with value focused on operating space.

a players that mission want cloud. to in operate in data All to Public private for safe, skilled new are largest now spurred longer workloads. workloads. place no also workloads significant Companies emerging also need public operated and To Rackspace many Many realizing, companies many new grow up reliable that to for however, the most are great efficiently for or one partner the solutions. cloud, a as of private demand native in-house the run opportunity centers, critical environment. cloud is cloud existing sums and has a build

enhanced business, To of address as options. unmet cloud broad and flex to we across cloud. demand enterprise, in customers, offerings, position software-defined a private These higher well data launched value meet demand recently offerings including range private center

forward, our As which should Rackspace and private and expect cloud, new operating on strategy underpin public value continued a in higher focus you innovations moves model.

In are cloud. both parallel, we progressing offerings industry-specific public private and in on

We are leverage complex customers. address healthcare, facing building as in and focus teams verticals better challenges sector strengths to gaming such and core the our tech and public multi-cloud solutions and of telecom,

value an a digital enable and MoU national support This Data blueprint Rackspace's Arabia's Vision agency strategic unlock of on government will XXXX example, signed to SDAIA Rackspace market. data collaborate technology asset. an an Saudi ambitious the important in kingdom's As and memorandum for example of relevance is Air we with partnership of an Authority, as understanding This and future. in a exciting mission initiatives SDAIA, to the Saudi multi-cloud the recently with of a

one I and talented around I'd [ph] to Before partners extend the my customers and world. conclude, of like each our heartfelt to Racker's every gratitude

Over we the and months, accomplished the initiated five within past have critical company. a deal changes great

transformational is sustained the team a and two XXXX we not be strategy as in year long-term lay operational, a for execute foundation leadership to to unit and fully continue Our plan. us we our for have performance strong will assembled the business structure future.

over now an Bobby overview for financials. to our I QX will call of the turn

Amar. you, Thank

forward and like excited would Rackspace meeting join in turnaround am I and a to begin, I I strongly Rackspace the part to looking and forward say team. the to weeks. that I'm chapter to also days extremely investors of the in story. the coming I with look our next believe being the talking Before of

Now, Revenue a on In was that November. growth to on year-over-year fourth $XXX constant X% the the high-end core quarter, QX provided call the and the basis. the million, guidance which Total reported in growth currency revenue both revenue X% results. and on exceeded in of represents was

currency year-over-year $XXX We revenue constant continue basis. business. X% currency, which on our X% Europe Core million, a to was headwinds reported in from experience year-over-year grew and material

by currency grew grew X% reported EMEA but APJ with of X% in on continued declined constant the minimal X% BT Americas ramp driven basis. reported grew XX% basis as impact. in a and part FX the in an on Revenue contract,

of to guidance. profit and legacy ongoing OpenStack gross margin was reduce quarter was due and Non-GAAP exceeded per our in $XX Non-GAAP high-end cloud private X% decline fourth non-GAAP primarily down the revenue was our share also operating of This million from operating profit year-over-year XX% earnings the businesses. $X.XX.

we be In of a full with free operations cash to ended the flow. of cash expect fourth and from from of We million negative and cash of year On by over flow XXX revolver cash driven of in in anticipate million a cash QX, total flow remaining cash generated our the $XX quarter $XXX million $XXX generated resulting outflows, remained from $XXX liquidity. operations quarters. from the year flow cash million undrawn, $XXX operations operations in free we basis, but $XX and We million positive seasonal million. flow cash flow available million

fourth was intensity respectively. $XX and of and million. in CapEx X% total CapEx CapEx cash quarter of $XX with expectations in=line the with capex X% million was

year, guided by quarter, impairment impairment. total CapEx the and a ended low we million which full primarily goodwill, range. intensity, million end the For at In non-cash to was $XX X% charges, we X% of $XXX fourth million X% recorded our of of $XXX at the driven asset

capitalization was following smaller our driven to San in platform primarily Antonio in ransomware a the office attack asset was hosted for impairment email on prepare our we North cross market San headquarters later by for goodwill the exchange The our Antonio in business. and in was impairment apps The XXXX. footprint as our decline relocation and segment

expenses release found our filings. Additional and details in non-cash of SEC these can press be

on to guidance. Now moving QX the

and XXXX the uncertain the includes from for first of macroeconomic guidance environment, related quarter attack. to caution continued an impacts reflects Ransomware December Our

quarter, $XX of expect to per of non-GAAP revenue to core range and revenue in profit $XX million, to the to of the $X.XX. expense other $XXX million million $XX $X.XX and we $XXX $XXX operating non-GAAP $XXX $XX million share loss first in million, million total the income of million of range million, For to

would new revenue QX, that operating segments, conclude, start public I for Before beginning I will reporting private profitability remind like cloud. our and cloud in everyone to and we

report also May. as new continue separately to segmentation to our historical QX anticipate financials released earnings will doing. in the providing We in We OpenStack business have we legacy our prior been

your And take questions. with we that, will

conduct question McVeigh we'll first time, Kevin At Suisse. session. from [Operator Our this Instructions] of comes of Credit question-and-answer the the you. line Thank

line open. is ahead. Your Go

the for give congratulations so be going Thanks Great. through restructuring. QX sense, as And know we're the if this don't you results. on will Amar, can a but I much. us

shepherd of thinking cash all But for holistically you've any of on this over sounds like of how Just we're like shape thoughts about free through in of Because about XXXX? overall flow? how XXXX? up got a to use sense QX, free seems cash that think but we the capital how any cash kind restructuring. just It should flow should it

question. Thanks Yeah. Thanks, Kevin. the for

prepared will bonus payment well as cash have to a a Bobby operations remarks, from company for we vendors. because bonus negative So is we be of impact flow in one One in payment, that QX a his reasons. have of seasonal payment there's two as as mentioned the

So this us flow low for QX. a quarter cash typically in is

as For roll our flow year, full as should And to cash operations the full from cash we positive. positive. for be through year, as the operations flow to expect we cash year from do flow free be expect the you well

me. just flow for a be major to major generation for us, a would focus I look, add, is cash focus going And

drive on these working to a initiatives are number We improvements. of

let me bit Kevin. a color So of this, you on give little

of cycle, that. and very payables. we're efficiency in We're receivables on focused on Just and that, our on CapEx our conversion improving cash terms focused

look for the optimization opportunities. to cost continue We

company, the making my focus look, sole this be expenses we're around and investments and And to our to that long-term managing going CFO making as drive is cash a of growth. sure

so much. Thanks Great.

the of for line which Barclays. Shirvaikar moment our next One from comes Ashwin question, of

line is Ashwin. open, Your

is the granularity slowdown regards great. December, It's up Citi. question started similar February, provide that picking Shirvaikar regards speak in provide with a a What have my how with be is seeing? you. obviously, Amar, or Yeah, different maybe that, bit. good color just to have in what from Any you're forward-look that pretty Ashwin is we've you environment heard demand you to would to companies than but Yeah. visibility with to strong Bobby, other things first more the meet. from by evolving. Is can if good to can you

voice. Thank Ashwin. you for question, your the hear to Good

know, you and in cloud as So have the you the rightly all companies outlook. macro demand Ashwin, been rightfully as given said, cautious the about so, tough environment ecosystem,

that course, growth you cautioned the maintain growth. believe IT reporting growth. know, too. double-digit that very closely customers are rates but critical faster as projects customer as slow of will spend, focused And the the hyperscalers be are by double-digit We work it's projects will broadly, We workloads optimization payback. have vertical. mission-critical spending a with slowing, And also lower cost on more less still, priority, the of hyperscalers, on They projects. as varies still but this, customers Ashwin, existing usage that on But well have a high on

work the seeing on projects year. as also we their of can with realize transformation they they want customers, Ashwin, those projects them We're that to the so transformation within projects accelerate really returns

also slowdown So changes we we expect in scope deals a We're size it's seeing the not Ashwin, decision-making. and are very that pursue. environment, in to sales some kind this the seeing in of also also cycle and longer of unusual

sure forward, across you've demand there, definitely Ashwin. the this and think will So heard And this I'm I ecosystem. -- looking the be is

after going of What talking of is customers, is on a mean spending to there. lot been partners. around, road I to the I've I'm time still talking The a I've demand been to our customers, seeing lot our

I of slowdown because right the the demand to just decision-making. the think shifting is in

is seeing budgets We are also getting the as first quarter. released, this are that

show So up. the it time least budgets takes for at to

So people are a bit cautious.

Now prepared. backdrop, Rackspace given this is

control what manage can we and We will cannot. what we

on a programs. Bobby expenses, our tight will control execute continue ongoing We on cost mentioned. very our We'll have to efficiency as

projects help can we -- payback. We and those to with go and also services provide the offerings investments make Whereas deliver these those programs. customers. that their and customers faster the we to our offerings solutions right, are the to optimize I costs to shifting have to the lined We'll also projects mentioned, right up to targeted moving capture expand want with

So complete can we in current improve so be into macro continue and conditions remain multi-cloud for here we to customer we the execution our go believe taking the demand. future. meet company, through look transformation as also offerings transformation, And Ashwin, that I to advantage as we to the will a new are the these honest, launch of demand that our

few what that's perspective, demand going a in what I'm the So seeing forward. I and expect seen months what I've from last

the follow perspective what out of now. to good up hold the last lot that bit key a initiatives kind Amar. you what or investors the over yourself? management a you That's standpoint, if of seems looking management you. complete comment Thank But have Obviously, deliverables can on team from your set organization said. are, goals part that year, accountable detail, from If you could more for for we of I the of course for and personnel should a of on those. What figure the

Yeah.

months. job a the Ashwin. So great I and think -- let for question, been last the that's me on half, five I've four

Ashwin, heavy units. the our We in I the lot have did first As strategy. the in we business prepared formalized sure mentioned remarks, was three to lifting, reorganize a two operating months my across of We four quarter model. -- created making we that the the December

the started two X. operating business units starting as We Jan have

have seen, Rackspace. changes. the that leadership I'm have pleased you with have leaders we we -- the right As very joined that made

going And will so our execution. -- our all going be focus execution about forward

expecting or Now some you positioning company we happens this and disruption, And units. reorganize it's do go beyond. company long-term that, where as two of and take as we we when business the can X,XXX across that in kind almost a heavy people and imagine growth, we reorganize XXXX do are for we are and lifting, we way it -- the the

very to we Sinha, clarity the drive we what to and go and we'll DK productivity on Lillie on execute field a public are cloud as go-to-market will continue company, Brian with we how sure organization to solutions engaged multi-cloud much So make private our the myself, is will expect we our customers. carry improve. although cloud

lot a things So of on. going

business of units. think we the granularity indicator, provide the and financials two visibility is you key I Ashwin, the will into more also

remarks, three to We'll right? continue private will we essentially public will So as segments. And and we Bobby how internally, by his report we be manage cloud, by cloud be is we infrastructure stay net you mentioned tuned, externally we OpenStack. So report and we in can prepared is will reporting pivot and motion. real a you will on give making -- Because see, at color retail also motion revenue as looking from how what come versus gross see more hard are revenue. to services-led a how you

the because that dollar And the of $X we infrastructure. in believe of looking $X to doing over go and thoughtful are the kind so, decision an tough, every we I anywhere services of top on of between making at. infrastructure we some of on side, hyperscale That's infrastructure opportunity life we have $X or are sell really that to for opportunity think the

So providing. be there we will lot that indicators of will be a

you first is will And and and think one, segments, come cloud the will tuned on and both think that be I see that, talk these visibility Ashwin, giving stay -- us public it. you for about private I cloud.

indicators plan. of up inside we financial have company, the terms in our Now set

We have years. on working next an we investment three are for thesis the that

We that operating has plan single and are KPIs unit lining that so manage plans. very Every we defined execute those tightly. business our can up getting operating go are OKRs and their against

our operating can we we go on rhythm so are into getting execute strategy. So that an

is a is on services you more All would right. major services. And cycle. we're add to look, just And longer know, Ashwin, as I And pivot, that, a this trying focus sales right?

engine be his as bit next it's the get take a few that to to remarks, in And Amar little quarters. going going longer for to it's sales choppy prepared going. So for mentioned

we've that to understand this got pivot. make So we as

lot you that. has business a Infrastructure right? Bobby Service Let's say, private ignored, So to a it up, add just about right? business demand great space, that we It's That business sort that business. was private sort cloud great think that have would brought to the been in coming that And up, reason right? businesses, not as largely So of make Yeah. Brian cloud. of, experience stops I who an I but the Lillie, not sure and the It's if the are bring we two can deemphasized, point, declining, are that's business we although a business. in stabilize has that because seeing of a going transform that's we

the Sinha, services cloud -- in to of the business. On we cloud reason -- lot scaling lot we a has services who are side, DK the Ashwin, experience of in is experience have public it And sell top on that's going of a infrastructure. scaling cloud digital

So stay tuned.

will last We example, -- time, deal in of takes pivot have but -- this to initial private quarter, one history are of we we see company. we sold starting the largest for the the -- cloud some

So see to we're traction some starting there.

we signed deal and a cloud strategic with Google that deal quarter, GCP also impacts a And with public signed This expanded business. very MoU we SDAIA. the on

you for Thank the all detail

Thank you.

Our Ramsey next the Barclays. of El-Assal comes line from question of

Your is line open.

for I book additional and the Hi, hoping for Thank the was this question order is Ryan some quarter on color the for backlog. today. taking Ramsey. you my in on

shift accelerate these order the percentage what take of higher-value strategy to the and And make with the book services the coming to you services? As from more you on? solutions, have you you are higher-value workloads do selective being

Yes.

so me we what we color give on pivot. this some first color doing give you make and additional you on will that bookings the itself for are So QX, I let

that's great So question. a

the slowdown bit macro in that expected, the in bookings seeing our and this of market. trend and a volume, reorganization driven of we we're by QX, the seeing was a Now also in were impact as we

focus seeing spend, are I IT are projects done. extended. critical a shift to more we cycles cost a earlier, and are As and Companies optimization, there's more are of the sales getting reevaluating getting mentioned of Ryan,

with perspective, to although data very quarter, high performance, professional to it with exceptionally So mix spear in traction business. regional cost we double-digit the critical From driven projects base us, business in in performance services on well the terms specific to of and for continue services very We'll a a was tip did for our shift cloud it saw Asia-Pacific good to relates the fourth optimization. our small drive the cloud. of Japan, our public growth cloud by it's I pleased but as

public clouds. deals had also couple of large we private And both across and a

renewed modernization example, example. For good-sized a contract cloud, with and data with company we a private in the for fairly in cloud, mobile to expanded an major services deal support application platform cloud professional environment. a In public as airline, SaaS signed their private we a

It does you starting And backlog. to mentioned, are bring this Bobby to when us, -- most that as important make take that is we Ryan. build to So for see pivot. the that time thing, services pivot,

resale And of it which -- infrastructure so cases, the if expand. from commercial side, is walk some in to specifically, and in speak, no the the in some the where the deals, land to so we away will there's opportunity in S SMB, of is small

away So expand from we'll those deals services. cannot with low-margin walk we where

So might the the of our But impact sales high-margin, want and impact shift short can more term. high-value that the are revenue of the bookings, might make motion. those in and so services-led a to we our that also company to DN decisions it overall we

you. Thank

Our from the of of Raymond next James. question Frank Louthan line comes

Your line is open.

Is What the forward as level and then a of be? of you. kind sort think going and behind Thanks. made management that of of -- And team also to questions. Thank Two you? Or more then where Great. lot EBITDA where that team. the you need on changes in capital the far it you as needs you can largely are there QX we quick hires secondly, in make expect intensity? margin to

Yeah.

start definitely I and then in jump Bobby So question, the with and will here. will guidance --

that. give I'll Because guidance the give it. start that on enough me EBITDA provided let model first. I you EBIT the with the will can QX, we margins, -- And so So already color you revenue not but you you

be a revenue approach We took our our Frank, here environment. guidance. bit a to with We continue to cautious, given the conservative macro uncertain

operational the in cost. in effort public companies on cloud optimizing usage reduce also the overall lower We to workloads as expected focus

to exchange some due Ransomware We attack. hosted also had impact revenue

from my are remarks, disruption operating now. prepared as a believe right realignment that mentioned we there's in model potential also And our undertaking that we we

So through our to profit. flow these also impacts

we So our the that essentially, XXXX. would we CapEx to so expect we be X% to X% roughly EBIT QX to where provided, be guidance margin the expect speak. -- in And we the of landed based in on range,

EBITDA is can going on you that. margin based to the be what calculate So

Yeah. The CapEx, private thing is, on only CapEx particularly very the I'd see there if business, as add look, on we're we will cloud focusing we're successful. increase,

a would And that to CapEx mentioned associated the large of Amar problem with history have. that our So deal be large the good we is had a in signed there that. company,

see a QX. you our So in in will CapEx spike

to on Yeah. --- that? have I And follow-up the Or -- think -- any question go second yes, Frank, should you I on the the

Yeah.

So booked? on think any deal, And will intensity about CapEx, business? how of then a should with we capital And that for what's that sort are that? of the paying How run of upfront? get rate that they the for long-term

a the long-term Frank. So I well, is contract contract, -- think

in a of initial contract CapEx the CapEx do order so the we in what we if firm a as we any where Success-based different It's make and private call means investment. CapEx cloud no we success-based have a from CapEx CapEx, right? a customer. this And our And than we only put deals.

a -- speak. CapEx, good So it is has to so

we Then CapEx. have maintenance

we see CapEx, should that CapEx, tightly over in success-based efficiency we the we in and CapEx success-based drive the to going innovation, too. we're maintenance Bobby on it. continue make all Even the So manage CapEx, to is -- sure as

changes No, on you that's where great. Or And yeah. any And to any have team? be need any do then the -- now? management think you for you things changes in Great. Okay. more --

I that's Listen, a point. good think Yeah.

team we in have ago. strongly Frank, drive we remarks, feel had We a months in now DK forward place, noted prepared -- right us leadership I As transformation. to that my the few our hired in

Brian Lillie private managing have cloud. We

us Bobby CFO. joined as Molu have We who

now across So all functions. the leaders we seasoned have

necessary. changes also we some made So other where leadership

feel And heavy so lot behind that confident of is I us. the lifting a

you Okay, much. grat. Thank very

you. Thank

of of JPMorgan. Huang next from Our line the Tien-Tsin comes question

Your line is open.

Tien-Tsin. on Biles for Brendan welcome, so is your This much Bobby. for guys. Thanks And Hey, time.

So congrats changes. first details the Thanks the for off, the Nicely all quarter. on done. on

for subject cloud any like in the areas, competing competitive much. you private on personnel business, these and incremental dynamics new services macro. from winning new from matter Just could new in Thanks talent, the adds areas of competitive like and then cultural challenging like business experts incremental in a in and also perspective, opine the guys from incremental both so for especially these sort environment

Yeah, sure.

got -- I that I also the right. competitive your If you right, in question got talent, it offering service it's for if thank So competition much but I if and very new for got a question. your environment

much. think Listen -- all of -- Listen, a the there. definitely time. yeah, thank the you up lot I very market we the and see in There's this demand market

and that have then the demand have execute We go to to we capture against demand.

are to enough So everyone to for market when so positioned, you speak. play. of there's talk we uniquely but And about very the opportunities, there, there's competition market definitely

we That We a private cloud. public are company. that's as do as a very pure-play, multi-cloud unique well means for position both us. And

where our are to go customers, we very, we talk on as and reside. the to So workload neutral needs very

So can hosted. where all workloads and about the be workloads it's

address against competition, the of we the segments of enterprise segment, all We segments. terms commercial address mid-market market, these market. in well in different segment each we and of the competitors as of So types three face as of off

is cloud is us cloud the out private believe player it we will A a of huge -- in stay private In opportunity workloads the cloud, regulated are cloud market we data for very cloud means in lot surge in given that that a market, the move public go demand one there private We'll in the industries, of redefine environment. we seeing as itself scaled largest that cloud an side. side, the of fragmented the private to on private are the centers. the cloud side. hosted example, which In a was and on private

for to be cloud sort a cloud. want kind those on-ramp go seeing need a refactored, of running a solution in be data very an a of don't also to customers center. becomes but the Our good business workloads. cannot public that Private of We're workloads

So believe well as competitive think here, very, placed see are can you very perspective. we from a we that I

a to offerings be to need the get we Now done. There's in. work right lot of

me get don't So wrong.

on to side a have the side, lot offering as do solution on We the side. on of work the as operations well

In and automation-driven a an are we terms of talent, company. technology

integrators, do large system staff business. large unlike augmentation we a not have So

don't having customers. go minus offering, attrition labor us for an want believe labor we numbers hiring instead we think with you which So and see our numbers because to just compelling is automation model, we or of very IP-led a which plus reporting is a model,

will have go talent. to wrong. So get the compete me Don't we for

We our base really and a are area that's have strong that solutions as of concerned as attracting talent not And that that because an about. we well brand offer. are the we we customer

much. you Thank very

you. Thank

Our the Breen line from James next of question William Blair. of comes

Thanks. the margins a taking Thanks about bit little the little -- on Can you you touched talk question. for a bit.

Obviously, was year? to a margin you the question. for down sequentially And there in bottom how of Is it that? sort think the Frank's as first coming seasonality quarter. operating I about do that feel

step-down, given the be giving Thanks. decline? losses you quarter, quicker are then this -- again third trying margins businesses continue that just and your at but happening up looking giving change, gross all or just across as obviously, that thoughts is to now, to basically attrition margin how you gross are the that the this have a around any pretty revenue, to quarter. And segment and up understand I had in three the the good then them in but And report going

Let me start.

sequential you the see to talk decline me there. that Let

that sequential in So there are causing decline several QX. factors

now in There's from attack December So QX you normally ransomware impact, the impact the do standpoint, of a like revenue we private seasonality cloud mentioned, right? be QX, that. there into as you there as forecast fully is in to So legacy continues that's well see QX. also a for then to our a you've baked And the decline seen, OpenStack as as mentioned. business,

that's the something the a that, the to fact, declining, focus cloud. look, with no And mentioned arrest that's of decline early There's private the Amar deemphasis reality and on been BU is on we're that new that there's new to on, structure. surprise like trying and

got opportunities benefits. and and impacts. remain still in then impacts and seasonality some we're down also we've to growth. offset looking addition, reduce revenue seasonal profit on QX of the costs taxes these revenue flowed But of lot is payroll from focused for look, And a QX side, But profit. So there impacts also on profit to impact to for to a these

Amar, you want to anything? add do

No, you I covered it well. think

OpenStack piece, is declining. On business you the had, let another I question jump. me think that that's just Well, James,

I rate lowered cloud is which the business, public business. think OpenStack that an OpenStack has decline in of actually

think the of we financial to decline think used be model factored had And our I and financial in plan that plus. rate I So already XX% to continues happen. that

it's the XX% XX%, Now in range.

to continue And do expect that? you

why Yeah, seeing think I that call that because we a kind move to customers as as we that few for in are expect decline it continue last a natural that's to platform. fact. of trajectory we And years, from away continue that's the legacy

profit. the we on impact And that to what out this cost take as we minimize happens, and optimize costs we the is, do basically our so continue

plan. the of part a all that's So

Thank you.

Clark Our next of from question of the Bradley comes BMO. line

Your line open. is

taking I any difference you types in most provide my are trends? more granularity of just thanks focus specifically, on little on on can you environment or terms deals? And the want Hi, certain bit Any seeing behaviors demand of geographical across demand to a in geographies more. touch for question. demand

Yeah.

earlier I I listen, think remarks -- on think earlier mention response. -- so did I my

still especially the of are cloud, again, across as public side Our the infrastructure it, But demand but in printing are environment slowed I reporting they said, double-digit down. hyperscalers growth. on has most the regions, all

a remains lot of there. still there So demand

especially I well financial as a verticals, services, as give bit retail, little color By technology vertical et cetera. verticals, in in on more can of

financial healthcare. We are again, by for started like verticals, slowdown. we other don't have there but some seeing -- services, demand But vertical example, in we have go

We are side, and a demand accelerate seeing is digital their to slow help help down, providers there healthcare but opportunity transformation. to the provider especially on transform, huge

seeing are And bit a that so we on little demand -- of some we are seeing side.

telco are we We are good also -- also, seeing demand. in

the slowed generally, In down the all well. But a it's geographies. across demand mixed across bag. we board APJ, very did has So and

have a we APJ continues across remain but As area AI which is double-digit is Data also small to for by is I modernization us. mentioned migration, focus data posted a the driven a and area. mainly growth, board. focus services, earlier, It base

Have any questions? other

That's all questions. our

it closing to to for like So back would turn Watson now I Robert remarks.

think I to joining reach your questions. any question just got And please to thank you the everyone, didn't if follow-ups, us. want we have for all to I get But you, we say or out.

You can contact e-mail directly. us ir@rackspace.com me or at

So thanks, everyone. And have a great evening.

Thank And does today's may you the This conference. program. you for your now in participation conclude disconnect.