Rackspace Technology (RXT) 9 May 232023 Q1 Earnings call transcript

Good afternoon and thank you for standing by. Welcome to Rackspace Technology’s First Quarter 2023 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 turn over the Robert I Please go ahead, sir.

our Officer; Thank you, Amar Bobby Executive by joined am Officer. Molu, and and good Maletira, afternoon. our I Chief Financial today Chief

in This new Public operating Cloud. our quarter Private begin and segments, will we reporting Cloud

Cloud Platform Multicloud Public previously Cloud prior our components, prior been on segment been into into segment based Cross merged has we Private nature As products our its underlying separated and and offerings. Apps has and communicated, of Public Private the & and the

into Our Cloud. prior OpenStack segment has been collapsed Private

However, materials we website Please for provide today’s to metrics segments, into Relations refer in financials OpenStack financial the new earnings announcement. will revenue. continue to historical definitions Investor supplemental to other our of visibility and

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

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

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

Robert. you, Thank

start quarter some Let achievements. by our first sharing me of

first quarter. of midpoint above a the revenue Meeting priority. for delivered remains we First, profit guidance the and our commitments our

industry achieve were able these macroeconomic a while So, challenging results I’m pleased environment. navigating to we and

quarter now have first Second, business two we our unit operating model. in our full new completed

focus progress increased verticalization. and generation targeted new seeing already are We demand offerings, in with

opportunities efficiencies. for also We cost new have identified

segmentation. years our quarterly with Third, we financials have these two today, new new to This another provide my one creation units, of also transparency. published of commitments of the fulfills in business greater

skills resources required Human of strategy talented and Chief has leadership Resources a take with Chief role to Kellie Officer, Chief and has has clearly demonstrated buildout Fourth, experience this over of and XX two Legal I’ve where team serving Michael an appointment with time. management, been Bross the been brings of veteran Interim recently as design of Michael background strong XX the Legal completed years. leadership Rackspace Kellie my And most a management. been in he organizational named Officer, our global has our execution, on change human years Officer. in Teal-Guess named full talent executives,

Directors. the added Roberts, beginning Anthony the to chosen very of they three to Betsy closely. year, have accomplished the technology I’m Scott Rackspace finally, of And working Board Atkins Board that with highly pleased executives: join to we forward our Tony look and since have and them

to better we So, on CEO, drive make markets build we our team seasoned a the becoming upon I Board. established the Company’s objectives forward, continue attractive our in, the to operating model operate to strengthening executive strategy and progress sell realigning

in still We take these be our financial in to changes, the are early for results. time it so progress of will reflected days

reporting we me improvement the resulting remain to Before new little give trends. on Customers macro you. cautious, industry spoke we are segments, the sales been the lengthening deferred and Other cycles companies has the operating last in market. provide an same let in since perspective update There our with my decisions. on environment

business transformation expect However, enabler outcomes. we strong enjoy our key to still is digital and growth over the long-term market a multicloud as improving of

the of capitalize position company growth rebounds. ones using this to our are better flattening we So, market to

help, they need know migrating and leveraging customers multicloud. our Our

wherever they their them building on is digital to journey. transformation the and are So focus in our tools meet services

let Now, our turn to segments. new me

the With unique each to the advantages leadership, new better structure business. are of prepared of unit and leverage hiring competitive we the two business

We the specific are needs. more now and market developing solutions to engaging align closely customers products that and with our

delivery advantages global depth of to and provide our achieve capabilities, of flexible an unbiased customers. and customers have Cloud, us our can We the both outcome. we for all deliver view enable address strong that optimal model, And and ensure value since breadth public a we footprint, an differentiated to Private point competitive

customers. engage Public Cloud customer data centric first capital approach in value shifting and Cloud last K resale the been and deliver Public driving an value with year mid emphasis Business complexity customer and instrumental are partnership. as services unit, The added infrastructure of Elastic leader in from manage services and infrastructure, services, unit his cloud strong DK our managed current Engineering through operates prospective We and application, professional has security, deeply to on with the organization and Rackspace customers with light team business both, joined relationships service D and Sinha, added to a model. us cloud solutions developing engagements.

stakeholders. university large customer PeopleSoft an seven disparate enabling unify platform, helped large onto North example, to business recently we environment, to with and the Asian the As Azure a we containerize insights for American a also data partnered their systems

continue strategy our We to services to growth. and have oriented deliver a built industry flawlessly leading focus is to our leadership execute team,

is business this capital Cloud, a forwarded Private model. intensive technology the to Turning

have largest segments broad the of one a diverse address scale offerings players of are and in set of to hosted Private We a set industries. customer Cloud and

Rackspace’s the customers help can efficiently move in-house efficiently Public strategy not these is data from Cloud. help to centers workloads address challenges. workloads solutions as customers and as Cloud well operate Our may Private effectively in that

granted to recently Cloud and for taken is Product to management far and we accountability. management Revenue the for our in us I’m has long. also Private and changes last delighted innovating Brian improving too again quarter see business execution, Officer focus made business lead hired Lillie Chief unit new joined already a He Officer. us Chief had a and

suite has next generation a modern This that to launch Containers. Brian, Srini offering plans span computing. machines Private like our example, later offer to serverless of As Cloud of take technologies native will This the virtual metal an full year. in offerings to collaboration a will customers and CTO, to in bare from containers open Cloud Koushik, cloud with advantage Kubernetes Private source and

is strategy customers a the of set is supports to of one secular Hence, trend Our of out this migrating of to solutions moving capital-light options a customers model, to more environment. initiatives broader just data our provide with workloads centers It’ll a the managed ahead with for are the execution. growing an market focused they opportunity. bright Private capabilities. in his areas team take Brian business where a immense and future time Cloud show on improving lack our There but multicloud results, to and

benefits. new just summary, into In months this of the four we seeing some already are model,

more First, market. each that they competitive identifying focused can on their segment opportunities unique leverage advantages to is on attractive growth their capitalize

corporate uncovered operating we the unit the both, And and levels. potential new increased Second, at have accountability across business efficiencies have we third, Company.

As we XXXX exit XXXX. to cost have strong pipeline drive a goal stated a profitable and to with backlog our is structure growth previously, competitive heading into

to wrapping some will the I Bobby turn over thoughts. now financials the before for an closing up with on update call

you. to over Bobby,

you, Amar. Thank

our for I details then first segment guidance. the some quarter, our will company QX the cover performance, on results followed by total share

accounting midpoint metric we and applies X% was to million is guidance. $XXX introducing down revenue. the of revenue are that infrastructure company above slightly Public net a resale year-over-year, our of Non-GAAP Total Cloud revenue net

visibility to includes the component net provides non-GAAP Cloud all revenue clarity, and Public only resale. Private to net the true profile from website our business services For our Please non-GAAP profit Public refer with Cloud investors revenue details margin for unit, our of Relations and believe infrastructure revenue business. definitions. revenues, more Cloud of Investor We the

due our of to operating revenue, unit. $X.XX. For non-GAAP total loss revenue. revenue which the declines of XX% includes by as the year-over-year, per of midpoint was revenue XX% legacy Cloud ahead share share a declines $X.XX operating reminder loss non-GAAP profit non-GAAP Non-GAAP XX% our $XXX revenue down net guided $XX net X% total primarily Private guidance. range continued million revenue X% Cloud, and first down in of within non-GAAP net million, profit Private total This $XXX and OpenStack. of to was of quarter, our in Non-GAAP XX% business and gross slightly driven was $X.XX, of million, was now year-over-year, was margin Non-GAAP of per was

million We of flow $XX first from in largely on line payout offset ended the was our and Cash large was strong These operations which were Company and generation. results $XXX balance a flow laser focused prepayment. in million negative vendor $X negative with the and working management, free of million quarter cash cash due expectations cash impacts to the capital flow remained quarter. with a the bonus

QX intensity With the redeployed a CapEx to the customer signed as materialize higher and will regards QX, quarters, The to part was the arrangement purchase concerned we to of this $XX customer, million, driven other business for is fungible while began about respectively. execute did $XX CapEx viability not as became ultimately in was and recent and first new CapEx Total anticipated. quarter we CapEx it million. cash capital was in XXXX. the by X%, requirements. quarter was capital requirements be for than in we for X%

for expect should quarters typical next the X% total to our the remain for be you X% to such, year. CapEx range As intensity and in lower few CapEx full

result of $XXX recorded first decrease the million to our Xst goodwill relocation of capitalization. the market as non-cash due goodwill in in January realignment Additionally, business charges we the impairment quarter, and the unit of

results. segment our Onto

new will for for XXXX Platform Private Cross Now refer report in the that we financial are segments. operating website Investor in QX segments prior the longer and OpenStack segments no our quarter. Public Cloud, to Apps and our Cloud after earnings information new in segments, the estimate Multicloud, & our an Relations revenue and presentation this we of historical Please our

and driven year-over-year. For includes was Cloud net infrastructure X% business. Public Cloud revenue $XXX revenue our Public revenue, was this profit, primarily again, Public million $XXX non-GAAP million, X% by year-over-year, infrastructure Cloud, our resale up services up resale of

services sustained QX, business market pivot to was as services-led time for take the While the we growth, line in motion. reach it in will X% a with some revenue growth in to

offerings margin of million, Cloud, revenue. total was Hosted segment Cloud Public million for revenue in Cloud X% and XX% of as which QX which our December Private decrease Cloud Exchange XX% total $XXX declines revenue was Gross impact total million, Private of operating $XX The the net year-over-year. incident. for was profit In our from well $XX Public includes from and and XX% ransomware in segment non-GAAP net OpenStack OpenStack non-GAAP revenue resulted revenue revenues the Cloud XX% legacy revenue. Segment of was was down legacy Private as and segment of

revenue. Exchange Hosted business Cloud the company revenue represented roughly than total less reminder, the of a X% of As email X% and Private

and million XX% was margin segment operating gross $XX Cloud operating margin profit an of Private XX%. was at

continued and our financial Given structure. environment reiterate to widespread points some would balance like macro I attention capital in sheet the the and sector regarding disruption, important

with First, a terms, our or we rate is X.X% was and hedged solid recent by either structure total rates. the first have average interest debt the favorable for of less Over the fixed XX% debt in quarter. was run-up debt which on the impacted interest

which until funded have flexibility maturities and have covenants, transformation as significant gives a runway debt and We we XXXX execute our plan. no no we maintenance

exposure worth challenges. a the Second, we banks some our $XXX million It are financial Rackspace sheet commitments by revolver the faced of on recently no nearly is revolver. and and that of million largest liquidity have institutions, million the undrawn that have global $XXX $XXX U.S. of comprised regional of has provided to balance cash noting

These in the finally, in million in notes we of dollar $XX at opportunistically of of marketplace at $X.XX $XX were to and spent an result the will on senior discount. $X.X average savings. cash interest expense transactions our quarter, a And price million approximately of million annual deep unsecured first repurchase the

deploy and shareholder monitor We to and drive to will value. opportunities capital continue assess further

in we As Amar be will his year, reflect performance remarks, will noted believe a that. and our prepared XXXX transformational

seeing XXXX. will the financial for we We And sustained know here’s drive transformation begin progress cash expect backdrop, preserving that for will improved guidance continue to it the take to We but in time optimizing our expenses. performance, focus QX. on with to

cash cash $XX XXX XX%; of additionally, $X.XX Cloud of total $XXX of million we to to revenue other million $XX non-GAAP to expect loss non-GAAP non-GAAP tax in $X.XX; share million; flow Cloud as count non-GAAP million; noted million; of $XX From $XXX of to free $XXX revenue We non operating expense $XXX QX a and flow the segment million GAAP positive. Private million. of revenue and per to million $XX operation million. XXX quarter, profit perspective, $XXX of expect expect And from share to last Public million range million of million; $XXX rate we we to to be

be anticipated by QX operating and XXXX, Lastly, improvement of driven we the expect the profit primarily mix. improvement sequential profit remainder trough for to in reduction with some cost

will call the Amar I turn closing to some back comments. for now over

Thanks, Bobby.

As and is noted, being This in choppy. year, a but we operating expect to as an low I anticipate XXXX our profit from be point transformation QX mentioned we do last quarter, is Bobby guidance, perspective. performance reflected the

in We are fortunate working our hard improve growing to execution and across operate markets board. to the are

We turn around on to company’s are performance. focused four priorities financial our

lastly, Public sustained our OpenStack; market; drives excluding a free third, and build Cloud offerings, above the efficient second growth or services at decline grow profit in cash in structure; flow. Cloud business First, and cost highly stem, Private

lot hard have we but work ahead. progress, making are a We of

solid a strong plan, a good strategy, have We and team. a

done. So, we’ll get I’m this with questions. take we’ll your that, And confident

Thank line from of James. from Raymond question Louthan you. Frank [Operator Instructions] the comes Your first

give Great. Platform Could Cloud? the Thank color you in the what’s Private and are Apps little us that just and Public you. on in I & OpenStack Cross more a Cloud? how and then think Cloud. how Private about can that and for other exit relative businesses should And Private sort quickly look profitability of opportunities the those you there, we for assume

Frank, the thanks question. Yes. for

and in both, your Public around Private segment Private what’s the or So, question is Cloud Cloud?

of kind think how up divided and about profitability? difference -- from the them in what we Well, should you just

Yes, absolutely.

infrastructure and with includes Private is included and we segment private Brian Lillie. So, the managed which also both, managed OpenStack, by Cloud Frank, shares Cloud cloud, the Private also have includes hosting, which

that Some in put cloud also Platform to of Cross segment. Apps included pertains the is Private Cloud & private the

segment the data services a Public application, Public the includes in we That both managed segment Cloud engineering resale and versa. and do infrastructure, So, elastic for Private that Cloud and infrastructure services addresses hyperscalers market private vice services. cloud all the has across and services, for Cloud. security, three professional

segments. two are those So,

segment Public a look have Cloud, we Public perspective, the margins, margins provided -- you at financials. Cloud profitability to from and Now when the gross gross in you

net prepared around it’s as XX%, net defined close gross so So, is gross using Cloud net revenue. was Overall, -- a on operating Bobby percentage a on of was about the what on revenue in And gross XX% at a margins profit basis, a basis to is net his Public remarks. which gross basis margins about in XX%.

that really that infrastructure margins gross margins, provided can which as resale gross gross understand of the we metric the you why infrastructure reason after so margins the the excluding underlying basically of Now, very dilutes to margins, business you low. you know, for impact the the is resale gross

Cloud about QX On the we the margins gross side, in is that XX%. Private posted

business going our we in a the have you how as here, can to manage financials given of This now. So, see transparency we are lot internally. is

So externally Public we is managing report Cloud. Private this have two to leaders going And we to and Street. are the how

profitability. in Right. on trough QX That’s the great. just follow-up And the

sequentially, this improve you the from else gives What can be is from that you us? going give and the to it’s cost to said we’re forward moving going you confidence mostly there? What trough So, cutting.

Yes. Frank. Hey

point. we’ve the guidance QX look, So, here of provided being terms in low

We’re cost pretty about in we’ve underway significant some confident play. actions because got that and

down we’ve As we for we’ve segmented on and take which kind seen talked out, half some of of kind these be stall. we’re doubled business into used, on about the macroeconomic we’ve to to uncovered second the the significant cost executing we’ve opportunities of that, environment as that kind

a QX too, the in see should -- will QX going mix bit So, a of help that time, confident same little forward. that pretty improvement that improvement see we’re us. very will sequential At we confident and we

us confidence. gives what that’s So,

as build turnaround I of just may, for indicators two can I’m if right? two I the company. a think, -- other that, early if what us, on go, this the focused on as are the Frank, businesses successful we business entire three into And our measure is right? I business indicators a of question progress, segment So, of of units,

a a growth services to changing front and of Cloud, low is a Public on margin from keeping in high watch the I’m business in close business. mix services margin First, how the

Now, fiscal fiscal as initiated. low takes I services know, what nine since you growth already to and services months, expect growth year with to be ‘XX for a XXXX. backlog process six around acceleration very a typically that’s building we in

first the that’s So indicator.

Private in I’m that second in on Cloud, The very making focused sure revenue impact we decline excluding the the arrest OpenStack. of

and do performance have in takes to Cloud, backlog, the while actively and reducing So better place we And implement expect the time churn. bookings I both XXXX. initiatives to sales grow starting the you as know, the Private it solution, in long given cycle in also

to little every to we roughly the in Frank, and here, color the additional improvement point profit just fixed due the high incremental of bit about Private revenue positive And percentage $X to million of you $X give in leverage business. a Cloud cost adds million growth operating have

Bobby I efficiencies. focused we And the making final drive much metric, are go on is that sure both cost very and

the be uncovered As and as additional business on These Bobby are that the you can two a operating preservation. flow into on will focused split and business we things keeping also on. close we tab cash we side, drive cash go generation and I flow that know, efficiencies unit, have

question on Kevin McVeigh Suisse. from of the comes Credit line Our next

macro any so through assuming environment, with mean, Thanks work associated what the like additional comfortable current think type way and are way type what you much you with for to the Great. should what be -- your of disclosures. cash And of transition? you outlook EBITDA appreciate and I free XXXX this as macro pretty the environment are Amar that? Bobby, about Hey or flow

earnings expect the in cash flow, flow cash EBITDA flow to free flow February, cash our be we be did in like we From an but we from operations for And full slightly call free remaining expect QX perspective? for positive quarters. QX negative, the back margin do we do to positive look, cash Kevin, So anticipate year. in said

So, EBIT -- on and in I to improve. so then QX think perspective, sequentially there from we expect the Kevin, this trough EBITDA quarter

full don’t for one the the time, are an want and EBITDA you EBITDA driving. -- the Now, also environment given to like give transformation we at provide macro a quarter revenue given would we year to outlook forecast the that both uncertain I and forecast.

infrastructure of some need we of change the to to So, more Kevin, to go room mix here the compared services business, resale.

So, there parts here. are lot of a moving

at we expect So But And you flow had cash positive. a mentioned, given free guide be in in one-time as QX. we landed one in will good the Bobby we QX that time. all we quarter cash expenses to marginally place a

macro is just then, look, point get year tough. then it assumption the a Kevin, as better doesn’t our guidance, QX get on free And -- doesn’t -- macro right it’s into the tough perspective, So either. right? flow macro market to And That’s flow guidance. cash our our from well there any these that going now, and a and of kind assumption sorry, full cash remains

looked more acquire expect million. that? $XX then you that of notes Should it just we And some opportunity any course about around the thoughts Great. senior like year of the took to over the or

business, priority. that our pivot we $XX so mean, of priority trading to Yes. talked million we is it, profitable you That’s Look, $XX it million high the will comes our Kevin. debt, consider about. investing can the so that. forward. see growth And is When but Look, repurchasing at we we did our going do at bonds unsecured that to I debt purchase discounts,

capital so. priority remains in changed our Our investing the priorities business, allocation top and haven’t

environment given want that, ongoing Kevin, about be uncertain we add well just also transformation. And said, if can I given Bobby, to and also prudent the the our macro to liquidity, maintaining very

things. all organically balance to, will that, mentioned, also sufficient opportunistic if we have but the you being and Bobby those as the making transformation given we macro maintain sure So Investing liquidity, outlook.

Thank you.

with line next from question. Barclays. from of Please go The the El-Assel question comes Ramsey your ahead

from a then, has the Campbell for taking in Ryan my new from Ramsey. on are the value hoping questions today. seeing [ph] versus color services? dynamics little accelerate for to to bookings perspective, Hi. pipeline. Thanks you clients provide a on you current your could This I is higher sales changed And What logos? approach order additional was shift

Yes. I’ll take both.

changing macro higher and this of bookings little opportunity the give then, and you about a take services. then talk organization do just will here drive some environment within mix to and to on bit what me that go-to-market color margin I Let the is

cloud macro in similar So well broader dynamics when our about compete Cloud take quarter, said and ecosystem Public We who as to the companies many what the as -- to cautious you we see impact demand. Cloud we last seeing with different they’re that business. outlook Private remain in the the

to spend our focused under in Cloud, also Public when Cloud, customers, and of their customers moving is Private are operating workloads move want their centers. our Public talk we CapEx They in heavy looking in efficiently customers most the their at looking Cloud. reduce to they’re data are cloud example, optimizing of investments. not For spend, out on to all And scrutiny, whereas are discretionary that

mentioned, Bobby for a the as again, preparing navigate So, slowdown rebound. prepared while are to we

So, to continue our expenses. manage we’ll

We demand our trying be public to so of and and returns to I’d offerings customer’s complete market. across begin Private the at are the and our to above to the we we’ll macro execution, advantage prepared solutions spending transformation improve also conditions And in to grow current our expanding take services as Cloud. capture and are summary, say, normal both

So, -- execute. our strategy that’s that’s to want the how and we here

a a bookings macroenvironment slowdown expect a as by Now, reorganization. impact of bit of did coming bookings, driven both to we as volume, the in well

I in sales see reevaluate to remarks, mentioned mentioned their to as we focus I optimization, longer companies as earlier. as cycles my cost Now, spending, shift continue prepared

quarter, our to number, specific bookings not start a although do So, give first geographies. bookings slow to in off terms were all specific we of performance across

need our I’m start our glad bookings market. perspective, to the above services typical a we drive And go to still shift at we mix from within but showed Cloud business. sure that sequential or continue we the to bookings growing landed However, as where mixed we quarter. make improvement progressed, services Public in quarter our

be work some there’s So, there. to done

We saw funnel our Private in certain Cloud. in verticals

which it right. encouraging continues in improve, is Specifically very healthcare, to

to Now, from how shift services with market a used infrastructure resale an in right? we go today, So, sales perspective attached. we to there’s have definitely a motion

led that. to infrastructure We forcing an it are not services a We as with are motion wherever can, flipping attached we resale right?

also whether We go level data having or services. right or the of application discussion, with officers it’s data guys the are talk business and CDOs chief with we our services, for modernization for the

a is we this had the in last than what different of couple So, motion years.

the We are and also approach. focusing enterprise are services, Public on enterprise accounts spot principal are biggest accounts account Cloud as mid-market, size well we the -- selectively XX, client penetrate XX is large using a as that us on a can accounts mid-market. so for is we we different model, to on Enterprise those mid-market where focusing for the I for believe expand is opportunity we are whereas in sweet the a which using

sales and line, we have do service have by we model some a have a regional model, we specialists. So,

customer we So, go whatever the believe is That’s how can the keeping to and transforming business. we drive importantly, the more are customer. affinity discussion more have center -- this that market way But we are the do to of customer. with we we more really we at and win the a

Any hear other us? question? John? Can you

question. move on the It would who next Let’s was mute? to appear

question next from the from [ph] Our Khan Evercore. Abdullah line comes

margins gross like speaking and higher I Hi versus they’re about to XX%, XX% mentioned you in Daryanani. Amit number I revenue. as noticed And Cloud in for quarter. everyone. And based Public the in at net QX specifically marginally on that’s ask that ‘XX, of Abdullah wanted about

that forward. grow going to ask the stabilize So and or drove beat what I how just can wanted to decline or expect we

you’re hope doing I think well. I Yes. Thanks, Abdullah. right. Listen, you’re absolutely

net were a margins was XX% last XX% basis, on year. and it gross Our roughly

are driving go is and our key, to macro under environment, And resources. what the is in we here that what is are is pivot utilization as services services One margin Now, slowdown this services happening two seeing demand gross right? of because are business, things, in our seeing of a compression. we also, we

partly this starting mentioned programs we this Bobby second to are motion services will of to as as our running align cost well about quarter Now, making resources well be -- efficiency run our go the that utilization go services-led in in there be in we as half, our that structure the as OpEx that we sure improve right our marketplace. have as will

efficiencies business. billable things of would we’ve one something is we’re the that address second as seeing the slowdown segmented Amar And resource to this and that we’re uncovered cost of I as that add, just we’ve the our are as of going -- we definitely is that’s the said, resources, in at part actions. half looking our billable part

Let me just reporting this give because you an the are we time is first information. additional color, segment this

the us, ‘XX to start pivoting as For to a services. higher we fiscal consider year business margin

segment reporting. previous previous segment reporting So, there this years a are a on between lot of things -- there and are lot of going dynamics or

us how to go are and this is manage. we from now it starts For going

XX% typically in. should a believe at operating gross services between at take that that’s you companies, the look Cloud -- do I that the Abdullah, operate look be Public when take companies or range to a we And margins. services XX%

actually positive a but in on services, impact we growth more the as higher we’ll be driving but more from the have of drive range, go business, are we end importantly higher growth. So, margin will the also our

margins a margins net so services sort Public that Cloud it’s XX% gross basis, -- our business low for for of to are we environment, on a right the services. competitive mid believe So, gross

helpful me just And with a you. say above really Cloud guys if to giving at a or want number? When really follow-up one That’s market, range grow be then you But, quickly. you. really guys or helpful. would you Okay. additional the comfortable Public that possible. Thank Thank are you

again. that What’s Say the last

the that we growth or Public market for Range for Cloud? -- number

Yes.

listen, double digit. sustainable business think there Cloud this So, what right? for lot Cloud I are macro environment -- That’s believe predict rate again, for of double out long-term targeting, single low to right hard are current that the what is long-term the we there. market services should growth now the Public is what -- be digits, We a the rate for believe rate a in But So, growth we high services. data that’s growth to this low Public digit is.

Our line Jain comes the of from Please next question. question go Puneet Instructions] your from [Operator ahead JP with Morgan.

Hey. How question. my Public Public on the large up question wanted taking to on just within Thanks Cloud. for is Cloud? reselling business I follow prior

-- Well, thanks listen, for I I think And your hear voice. of the couple think, good to , a question. Puneet

an to in competitive the that, resale compared are to will the that we Puneet, and our can said based reasons, on able you have information further unable overall. various Having we reasons not we So, visibility the given I trade be -- on to infrastructure big extrapolate revenue. for is how think information net for disclose information disclose

but already that’s for going So, reasons. is competitive I’m not disclose number that to Okay? what there,

fair. year? how That’s of can year, second this from point backlog. this fair. how talk the bookings bookings like you half maybe you on visibility at have visibility are And the That’s half Like, or like, the the how’s and have you also if on -- second much trending

limited. Puneet, I be So, the is you, with think honest to visibility

they also our think macro be focused to remains environment customers that the optimize I sure very on and drive And their also spend. are making volatile.

cost on are projects our of optimization. most So,

Having honest you, the to And continuously quarter. said be every limited internal is so, with is I terms visibility environment. demand sequentially our booking of in the think that, to drive goal

in, model sequentially. our the that And that couple for through roll As -- bookings as we quarters we it have this we a to new year, organization takes sales our hoping we of into start about improve are settle should created.

in put know Now, But because to going I the environment executing side. a want plan place, well on don’t where and of is the go-to-market into to the be. we we get rhythm I going have think demand conservative

confidence performance during have profit That’s just would say I the that QX. in rest lot operating why the a we more year. improvement QX that are in we and sequential we the about see of confident will saying

of like the couple to thing. and and saying And for point, would are same there a this been -- we quarters have repeat to Puneet, Yes. add to I the

that’s negative, flow fully have that to right? We we away invested discipline want loaded services doesn’t the for outlook So, a it us we for that resale a make to the this on that outlook uncertain business. say, I little reason in right be basis will second makes capital is to return the from building predicting walking transformation, so the are cash the half. I going which can business start start continue infrastructure And or a backlog the sure be what that on macro

Got it. Thank you.

final line with Clark of Brad of of comes the the Montreal. Our your Please ahead question Bank from go question. day from

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further Mr. no like remarks. to turn have any questions at for We call concluding would to Robert time. back now I the Watson this

joining Yes. Thank for us. everybody, you,

If much. we speak Thanks. all soon. you please Thanks And at out will ir@rackspace.com. you up reach with so questions, any us have to follow

concludes conference you. This call. Thank today’s

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