RXT - Earnings call transcript Q4 2021 | Rackspace Technology, Inc.

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Joseph Crivelli

Good afternoon, and welcome to Rackspace Technology's Fourth Quarter 2021 Earnings Conference Call.

As a reminder, today's call is being recorded. Kevin Jones, our CEO; and Amar Maletira, our President and CFO, join us today. The slide deck we will reference during the call can be found on our IR website. On Slide 2, certain comments we make on this call will be forward-looking. to differ. uncertainties, subject actual could are to results statements risks which and cause These of risks discussion filings. A these our included SEC in and uncertainties is Technology information update except Rackspace required obligation the as on call the law. by no assumes presented to

earnings the our non-GAAP provide release reconciliation their presentation, most presentation believe rules, take certain directly over further which information in comparable we with on of SEC to to our have measures I'll After adjustments measures Our which to of website. your And available call financial and prepared and are a turn these Instructions]. GAAP both we'll these to the now measures certain measures, Kevin. accordance questions. provided includes useful our [Operator we investors. In remarks,

Kevin Jones

thanks results. I'll go Amar then highlights afternoon, discuss case some financial for will on Good us. the quarterly customer on joining touch and studies, into detail and

X. Turning to Slide

best-in-class positioned pure cloud a Rackspace market company, solutions booming. a is in As is well play technology that

cloud revenue XX% fourth by the Microsoft year-over-year in AWS, XX% quarter. Azure, grew Google Our to Cloud and partner,

annual XX% the at market that cloud in the User X% their re:Invent Adam present. Selipsky, addition, In stated December, AWS by only is in penetrated estimates, Conference at to CEO, AWS

our the In and and a partner growth their strong continued and And threefold for the to very are modernizing enterprise cloud. as with year, choosing early our business, million, cash just their results over flow the journey. the row. of solidify on flow financial and we help X large So this. operating market. are year. Rackspace quarter cloud. operating need We EPS and automating, in trajectory move fourth company, fourth $XXX for medium-sized for are Technology customers non-GAAP expectations their cloud wrestling of profit cloud the is the whether the Customers core delivered reflect to Every a the or cash year-over-year. they or choice The grew was revenue quarter, our in partners to position operating increase Revenue transition in the exceeded non-GAAP wherever full small

We service and unmet customers in their address and white from product help the introduce continue offerings most the investment to cloud get spaces cloud to new market. to

example, an of ERP or over applications have to sit companies the Oracle they centers, XX% customers' still and As data upgrade and SAP in years. their know move coming modernize, solutions in these

this quarter, we for opportunity. So Elastic introduced address to ERP fourth in the multibillion-dollar Engineering Rackspace

Google Partner earned highlights We also the Cloud Cloud which ERP to Advantage apps our in expertise Program, in SAP specialization migrating cloud. on Google the

we believe addition, the in in a the will enhance January in significantly announced In market, pursue growing moment. partnership we acquisition analytics aggressively we allow more January on data Just presence will Europe. us our BT to announced that in The Analytics

Turning to Slide X.

our integration, our partnership with market. the Technology new billion. we total continue in to was our BT aligns recent companies bookings year's business Eve was and was strong revenue growth. million, cloud virtue over jointly most the history up revenue we for BT profit XX% million the biggest EPS deliver as operating last were is X%, Christmas that X. On for Total bringing core that to saying benefited and on year deal on $XXX $X.XX. quarter quarter. just We Non-GAAP revenue The and their pursue win called world customers non-GAAP Slide fourth us the of Total earnings was largest cloud compared to and call, its $X out closed XXXX capability. automation Rackspace the AI by of $XXX it up in one the

Cloud. to cloud brings BT Rackspace we journey of migrated XXXX. Together infrastructure, hybrid This this customers enterprise Technology private modernize partnership for VMware the based on BT's it to new of Rackspace our with cloud will expedite will be their and that beginning deal, business will from with in BT, cloud. hundreds their be part offerings help services As including customers

will partner enterprise and, cloud pursue complex for deployments The forward, technology together, customers. BT's to private right BT validates additional premier in Going we be cloud jointly partnership Technology's we Rackspace cloud our business will cloud transformation the win, market.

some extended can area highly most significantly competitors. largest and imagine, a spend increase selection growing next that over rapidly that we for this a will with prevailed large is analytics process year, data cloud well the As market several years. sophisticated this in competitive and The expectations against with deal of and a and is you our for

So Slide X. on

headquarters provider We Analytics in has Vietnam grown XX also in from artificial leading of announced and XXXX, and region cloud-based in and the gold that Microsoft in a partner intelligence Analytics, employees acquired data Azure. and employees small for Just XXX with analytics we've services company a India. Singapore Just Founded to in start-up APJ January a

analytics public help acquisition a our Just Analytics Acquiring and Analytics create their assets, data information QX our capabilities geographic cloud-based data transform pipelines in presence. presence. the Skies Bright build of coupled intent unified our its XXXX in it market-leading a capabilities customers platform, and we data view X. data strengthens regional to similar way helps using stack. that with build our data proprietary On cloud move to services with company is completed and a the and Just That, that insights, This into is tuck-in scalable both and like Guzzle. successful business Slide acquisition design customers fast services innovate to and gives our aligned customers up

quarter, our ESG release to an report we continue profile first our of from addition the improve during to the ESG In standpoint. fourth

years deadline. CDP, This ahead X disclosures profile will as For Paris Disclosure continue our to the we towards of a to track the Carbon and allow of first monitor Accord our investors. our we time, made Project, or ESG to accessible goal march carbon-neutral investors environmental progress

will years the We matter next fourth survey. continue and millennials and in talent, Work of culture. one, governance deep of the this and Mexico help CEO a We by top Place believe technology He an to will digital in also transformation with our particular, services a Great we named were XXX in war were for and expertise to to named technology Mexico. Racker for global Next innovation the in has brings in company. standpoint, we Samant, passion and a truly of workplace talent independent to and experience win Place industry added industry recruiting quarter, cloud accolades From generation the IT perspective, experience. is over our Shashank, bring Shashank These we for In who for our Work director, Best Gen a Board. Gen Z-ers. the additional XX GlobalLogic, in #X the to differentiators current

VoltaGrid reduced microgrids database. learning, solution and initiatives. remote tracking, to the predicted. for AI, carbon also considered and had Internet those the Rackspace Board, that's real-time cloud in in in Slide Pipedrive customer-facing As needed Walter such December, the Technology's data. emissions minimize for IoT scale power The By a VoltaGrid to edge ecosystem deploying computing, Slide AI global I've Things offering private Rackspace tapped On portal. as in of to a to from clients This and Pipedrive customer that market. deployment the its Eastern IoT be able stringent won could Capital, centralized also security of a provide result, less European of that sustainability Plan in customers. customer including expertise be well year. its Company to platform building a value locations, a of with business cloud base, project, Technology capital along build launch raise global our creating Pilot while grow. service unicorn Rackspace past we that follow-on entire They data done expanding is AWS cloud public overall needs as EU. times Longbow Investment fits ESG which case CRM or on I'd footprint than demonstrating access risk On center the I'll addressing development, studies of needed native business application their but of Pipedrive's with and the of intensity SaaS our its additional provider like a we've entire initially incorporated to a marketing meet completed through quicker complete the application quarters, been provides addition especially portal users $XXX reporting And VoltaGrid delivers Furthermore, infrastructure into product to security, machine Pipedrive VoltaGrid's event and that customers' VoltaGrid mobile of to million a and operations and ESG unlikely to issues. its investors study the XX. have connectivity funded we'll outside share continue a to Ventures. Canada track environment Pension its the was in its remote requirements. the technology, EU's some cloud XX, than by response and and private was and sovereignty enhance as ESG environment sales live completed was solutions, cloud case software customer Pipedrive able requirements and emissions cloud data a compliance note

financials. will through Amar you take the Now Amar?

Amar Maletira

was our was for earnings for Slide operating was $X.XX, which and was end for profit financial joining all from Thank range non-GAAP the financial for $XXX Core the per recaps today. the was Slide our full fourth the Non-GAAP XX% profit thank XX% for billion, On Core X% for was operating was non-GAAP was XX% XXXX. grew million. to Revenue grew high Non-GAAP expectations the revenue everyone, fiscal $X of $XXX you, XX% year. margin $XXX Non-GAAP $XXX you Revenue compared million, you, to $X.XX, up earnings year-over-year a share Kevin, XX% XX, and on our year. quarter. up of increase. the year-over-year revenue were per million, non-GAAP year. margin operating million, call XX% quarter. results XXXX. share operating and a results see XX of

we XX, actions quarter. cash cash million. all XXXX and the $XX fourth to the year. cash took results was were fourth flow million, in Both last $XX was Slide these In free improve in flow the on quarter, metrics delivered of shown negative strong throughout year's flow As operating

flow essentially million cash was operating $XXX full Free in cash which year, flow, in X to XXXX. tripled. nearly XXXX, the accelerated For

point CapEx of were the we Total to intensity addition, reduce continue to to expenditures and make intensity a year this capital XXXX. XX% In down CapEx year, was compared to progress the total last down from X% business. X%

providing on been public of total of customers. wrap liquidity. with million cumulative managed and result On representing cash ended cash the our a continues of $XXX XX, follow-on data we success on up strong strategy. With the public our to have sales want $XXX million year growth, we flow, Slide customers, of to As these the cloud of validate balance sheet bookings I This data quarterly cloud the seen land-and-expand managed XXXX every we cohorts. cohort to consistent XXXX have the

gross sales sold customers. More cumulative expanding importantly, margins overall these with are these follow-on the

In previously reported. has fact, these for the from margin for basis XXX to XXX to points expansion the increased gross overall points XXX sold to XXX cohorts range basis

vast year Technology's progression first year. successfully to is grew XX% the XX% gross business have grew and now XX% shows continue negative higher-margin cross-sell at shift and XXXX. full revenues as the Platform Apps represented On diluted of driven only XX have XX%, over range year-over-year. includes our the it of managed multicloud years, margins earlier our majority data our to segment offerings services gross X% our the we total to our XX% business, Rackspace while past Growth segment this mix revenue been to The are So Slide XX% deemphasized the the at and & Cross in service of for the security businesses of which growth we corporate growth customers, year-over-year Multicloud the we the XXXX. mix of of over declined legacy in XX, guidance revenue upsell believe year-over-year. by represents XX% Slide revenue public of stabilize. XX% for growth will quarter. by margins that market our and X and application, cloud Multicloud this these impact businesses. in the the total growing XX% CRM are OpenStack, we to

for business million $XXX EPS the in of to $XXX non-GAAP $X.XX. revenue million revenue of total million $XXX to the non-GAAP to expect $XXX of Note core BT operating up of XXXX. We in to half $XXX the of of million, in we gearing million, the onboarding $X.XX range that the million $XXX range are and profit first

the be our XXXX, be do In year. customers the cloud To core fiscal we to prepare accelerate revenue quarter. investors will through begin the obviously ahead anticipate growth we we full going help However, to the there full revenue transformation and BT year. business, for in deal revenue The for expect we until double-digit taking and our growth Hence, the backdrop off. market point guidance as to Technology. on revenue path Rackspace quarterly of not of transition year BT expenses revenue will providing the business second and specific Technology. for growth trajectory cloud our a Rackspace solid ramping and is The forward, market expect to color model

accelerate. is last operational That where and seeing in working continue efficiencies and noted, at opportunities. cloud past drive Kevin X% to can but how solid strategic won land transformation at spent a cloud point a we for we markets market the through time actually mix accelerating of customers, the growth even and XX% particular, deal choices, the versus investments is the and activity cross S-curve capture recently we faster. or quickly the penetrated. mix for at the ramp chasm AWS even growth of As the sees and plan BT BT's working are demand We business. various is the Hence, of much stronger market growth of on long-term capabilities build accelerating to right We of growth, expand the number initiatives entering and of year priorities for to XXXX,

XXXX. operating we closing, our We have to this the along mid-teens ability and our process revenue double-digit We and plan in the solid evaluating multiple of strategy our of X-year pleased are later with growth margins in double-digit and paths forward decisions. plan on with investments, to important In X- and more strategic while significantly are growth, We business. accomplishments EPS several details provide cash-generating core year. delivered results the strong improving financial

to with More gross attach, importantly, our in the our our we within highest services change while improving from multicloud, driving reducing in X execute continuing our mature this sold did pivot global look years, margins level cost businesses serve significant growth to to higher-margin to a queue that, we'll questions. footprint and up for service XXXX investing and XXXX year go and new forward beyond. workforce offerings to please All in believe successful delivery. the and your was Joe, product told, and Q&A. audience With we we ahead take

Operator

[Operator Instructions].

you're comes question Shirvaikar, with And next. El-Assal Ramsey Our first from Barclays Capital. Ashwin up

Ramsey El-Assal

the That's on -- I thinking of wanted little your growth to of this slowed thoughts little it profile than we has guide the core a the normalized calculated down terms changed normalized guidance QX kind is it. a of business? anticipated. in of maybe revenue I'm where ask and just since we curious know of of X.X% business. slower us you at the profile core your Can growth updated full in IPO like about year I bit, point, a give the bit the we sort can't see terms looks the but growth

Amar Maletira

So thanks, Ramsey.

with start full give the just color on guidance, I me QX will year. some first also QX you guidance Let color the and give the on you and

year. full the as As accelerate I believe that go we remarks, to mentioned prepared my trajectory in the growth will we

from QX QX So result you seasonality, is when revenue down is to a look this Ramsey. of specifically, as going guidance, at our and typical sequentially QX,

in Like like in services, first, financial certain we calendar typically Multicloud and normalizes retail volumes gaming, this have business, QX. are QX in The our highest calendar verticals the in verticals. and

IT revenue makes mentioned And factors in and of budget enterprise probably flush this year. there's always X strongest I these last the year, some customers. typically our QX mid-market is, year-end even Second the quarter

we are strong a quarter. off to revenue So

that large from QX of enterprise was the XXXX. of In in fact, to ramping in QX deals half signed we And this XXXX. we saw of year, seasonal similar going masked seasonality the impact QX by second last XXXX however,

okay? deceleration talked square you just -- is guidance off me that, the you color revenue line on about with give to some So Now typical in QX. QX in let seasonality,

there There growing I are double here. of if One to against Cross we have tough out that are QX. point right? here, are playing very in compares Apps digits. things couple consistently business, Now & X look you things Platform is wanted So at a that been Ramsey, up it's our some

QX For remember, we example, of our starting our Texas in lapped DIR CRM deal, also XXXX. fiscal QX business fiscal XXXX. of And revenue deemphasized

those So are growth of year-on-year things Apps our & Cross X for a perspective business. headwind sort Platform a from

growing Multicloud around dynamics really this aspect but double our some segment, have is we The within mixed second it segment. This is of Ramsey. digits, do

If although mix we tougher feel the the to that solid is business when growth you the of it's compares. the segment. and digits, more market business it's it slide negatively business that I of at also at mature given you also momentum, Multicloud But declining, continue growing look that important some double overall within our than Multicloud note, that But against look within the business the But up Multicloud, now it's growth to rate has will is impacted growth XX% mix. revenue the grow. presented,

And an there. we are point sort so inflection nearing of

quarter seeing bookings it say, takes expect, And that the rapid bookings in that to November. end it. native strength do and also record as by why the as cloud more bookings you the some from four, BT saw give feel one supported the the that about talked in And into XX% with strong saw for X in December XXXX, to, Platform know into One deal core cloud a X the strong we the now So my Ramsey, time is and about growth year, deal, boasting growth for double-digit revenue a market. growth bookings takes you we Number anticipate our on you to Even continued the core did me in fiscal was of we growth. want to we realize prepared accelerate they're accelerate looking managed Apps we ahead October the about revenue momentum quarter I the color let will number through in year. cloud point do confident this excluding see to three, and QX months. towards all Number of of compared in perspective. public And about revenue. I ramping to the we our services print It data are by Cross out both in Like applications. hyperscalers. & in BT strong two, growth growth then remarks. And well XX% QX.

is business Analytics, through going high more it added, We been digits. then expand Our the also but globally. capability has data services in and today double small, we Just space growing are it to consistently

say, temporary. rates would down believe summary, slowing do in we although growth of perspective, our from I year. core sort the of And to in later improve expect So that we the the growth a half it's revenue, it's

Ramsey El-Assal

for other That's impair follow-up environment growth? intensification curious there. the pretty your I of core could seeing robust. accelerate like I'm you're ability very, of could factors that It impact demand environment out to kind or is of you or give if any any just competition just that view update wondering if me. on One was competitive helpful. very the your an us seems

Kevin Jones

Jones. I'll Hey, Yes. it's one. Yes, that take Kevin Ramsey,

from I'm perspective. market of this And I'll little and So our what tell what partners. bit our you about give from customers then I'll my I'll a you hearing impressions a do,

play is segments the the the tech. past as AWS S-curve at our market in the prepared about cloud perspective, from point absolutely XX% taking fastest-growing we're the And cloud and on chasm market remarks, pure off. market cloud, is or And really X% markets talked So of where sees accelerate. in to at one this penetrated. the we a a cross on

cloud side on and private multicloud we great see on potential the So side. public in both cloud the

we've they the migrated, thing about the other going is workloads The environment, significantly. up that demand are Ramsey, multicloud

in also because of have workloads data in apps, we're all additional areas areas migration the growth make work demand there. is additional we accelerating. And And So accelerating. see then we then to that our that we services, investments like some the native migrated XXXX seeing cloud over, we're emerging planning those

this terms very in really, I positioned fast-growing environment, continue of market. we're feel good cloud So think, to about and we demand it, well in

of traveled and to world, industry, I talking over thing XXXX hearing miles I'm have same from logged CEOs. XXXX lots when customers, I've all customers in to far. so Now talk of regardless the the Ramsey, in And

the customer people customers because need got a have manage to they CEOs to their They It's have technology of mandate They the the But it. say to have priorities. the to Board. do want do help one don't it the transform Our cloud. top it. our they these multicloud do to or They've processes from in-house. don't to

care, So seeing even we're across we services, our public sector, serve, strength Actually, need industries you health really help. automotive, financial the sophisticated all companies tech airlines, name it.

including One QX deals cloud AWS large in a platforms, of Azure. was to our customer major and multiple ISV help to migrate

with our growth even thousands XXXX. nearly teams, our top added some was our $XX them, to the there's as year. think go-to-market of base. They're that got U.S. That's sell of large a joint more the I we've evolve, meeting cloud to a with We're revenue with And right? in customers of new up with over off We up very $XX amazing just expected together. approach that revenue add they for continues and mean will focus at I over us. week sales go-to-market hyperscalers' the West on new we industries of billion growth, of partners. mind public the this partners, Coast of so accelerated you on on all-in the then last got if And So lined our hyperscalers, if right? really all minute, And top world. open look even just hyperscalers I we've it's teams the billion to

very remains strong. So demand environment

business tailwind our there VMware, We of the reinventing meeting right as others, Datadog, Snowflake we other CEOs cloud and are continue partners their enjoy we're in with the with alongside services. a technology, secular and of amazing them Cloudflare, such and to a future

of here, cloud, we're this and kind to is the there customers have strong, move a demand So wrap demand. to to environment to market mandate the up unprecedented service strong, is

Operator

Our on comes Amit you're deck. and Daryanani, Research next question with Citi from Shirvaikar Ashwin

Ashwin Shirvaikar

needed have in guys 'XX said previously you bookings rev you to $X to in organic achieve So billion in double-digit 'XX. growth core get

term So you in you the Or that growth those. if to 'XX, of you but to the on is beyond both the checked sort I it bag, on in there box is Could hit of a it sort clarify you in reliant for Also continue expectation is mentioned to of 'XX? use is performance? double-digit it, additional a hate 'XX bookings like quota done? double-digit bookings need 'XX

Amar Maletira

Okay. for comments. question, will in and Kevin I thanks Ashwin, with jump additional your and will start, here

should the I confident plus hitting 'XX, absolutely, double-digit fiscal beauty deliver think we billion recurring in this outset able business. positive of will $X this a the is very bookings, if be we through base the say revenue of minus, So that's you core growth did In year. growth have or revenue to at the of lot are of the And reason in 'XX accelerate that revenue as business, the the double-digit core get the to of we year growth. we

and confidence that good XX% deliver revenue with build, right? offsetting math, cetera, every need our sell, of really started core go gives between expect base if some with a bookings, year, for to which since fiscal 'XX. you of So recurring be hit that anywhere et to XX% the to can about the you churn you base, backlog, do we some we go XX% the double-digit says us revenue growth So revenue just that that

a question Now a the management as And is very important one. is we market opportunity. think, are I looking where your next this at team,

make. For go we we and to And pedal remain 'XX because the remain investments better fiscal market double-digit us, bookings, want that's we and in of us, can where And decisions deliver the growth core cloud-native 'XX? growth go is as exploring in that we backlog outdeliver so make and So some continue can to to than this a and Can that really we make continue a can deliberate bookings as that a good Do $X for down we sure applications? want is can that Ashwin. whole process. It's market, thoughtful and those beyond. services, do the choices of opportunity believe deliver continue create billion the certain to market are plus to rapidly dynamic very We fiscal growing. right? we an revenue strategic decision the example, decisions going if make that, data we and push we through we into go

Ashwin Shirvaikar

sort Got part you as of past. of on clients in mentioned of the large. But have Obviously, clients I mid-market, for the of you've a it. the which is it, pursue. the one strategic you look at And of type preference is are signed choice the Just Analytics client. BT, some you choices strategic do a large the also client base, indicated When

on And flow So front something the that particularly, impact this capital clarify have did could was turnaround cash well intensity? year, which the of push-pull? sort you it on can and the you

Amar Maletira

Yes.

I actually. start question I see It's I will if address can here So think a and the great question.

last I model capital-light our intensity has to right? to years. CapEx in Ashwin, prepared so So to between X% midpoint X a roughly So X% my will X%, remarks. the this We it as to been model, the intensity move you went CapEx CapEx believe always that in X% mentioned in to we in so. 'XX, significantly gone fiscal our And be X% or more has year, intensity, the of X% lot say, from X% our did So actually of things towards right? down look between, if at

First is we side the growth business from mature. pivoted to

business is mix XX% This less about. OpenStack legacy you within mix is now of is of This I'm of saw mix. than talking mature So XX%. segment. Multicloud the outside the total business less than The the is

we customers, one land, landed. and because thoughtful that So for We from because that expansion year. BT selectively that we very expect a very very so more we landed deal it, strategy. you we was can that landing we we've in growth our major but an us is was a And a it strict than this accounts the deals also And was also about of were forward on working expand it for that as been on pushed important side. the

VMware, this in what we to which So the of a into I time, a is on path, want you same including our the white offering, that after on. We investments should would multi-tenant to Freedom, environment. offerings have Rackspace by early again. At private Services cloud, to side. areas public which went We the is the expect continue those those growth customer the Data expand also offerings gives is like forward cloud the down for cloud same which think push in get new spaces making business, launched they continue flexibility

the should So cloud really to in as segment public us you play the side hard side. on expect both private Multicloud cloud well as the

Kevin Jones

Yes.

and Ashwin. add few that's I here, said, really points think I'll just well a

mid-market and is question think, enterprise, one. I a your good think I on

a lot of opportunity really the We spot good We sweet continue to mid-market. in see for a us. think that's

it on deal. we which having to We success we're years. the won last we'll the capabilities for will the is right? there, Texas earnings been deal on last a of then you pick be selective deal the further the in accelerate enterprise enterprise We call And market. brings the only We've was customers, want it as BT calling because interesting several But in noted, market BT BT's and State the deal. spots. enterprise. Now about with Porsche our our There talked enterprise

we've win advantages we've got, the think because we can I there. all that of proven, competitive

and mid-market, enterprise focus for is area of in us. a particularly Multicloud, So huge

Operator

Thanks, Ashwin.

you're Evercore from next Our question Daryanani with on Amit Huang, And Tien-Tsin ISI. comes deck.

Amit Daryanani

or want to well. a cost a I look maybe sequential BT anything the you drop to you're flat, as guess the EPS guess million the on guide I basis? it, it And you down that be I talk helpful about March down guide the go like from a is there, few in on perspective to a to bit. revenues just basis, Can would guiding as is but EPS driving quarter And teen is if percent, a out sequentially down. dollars, back $X.XX there I call would high on sequential what be at a deal

Amar Maletira

Sure. Thanks the for question.

decline a from So there revenue see is go that happening Amit, explained One costs to to so I also fringe from here, investments, up, Amit, And way that QX because the go-to-market, are in are market especially to earlier, QX. in in with that serves investments have year, mentioned we the calendar secondly, back had as sequential QX some go business, up, is that every U.S. we we cetera. our benefit drivers right? QX in X And large that of And in et happens this we in incremental continue we a way, last make what line will also, making headwind. footprint QX year

are are decline and those the So EPS. factors profit that operating in in X resulting also sequential a

Amit Daryanani

and cash free That's very maybe it. flow Got the discussion. go CapEx to back helpful. And to want just

cash free any 'XX? think 'XX calendar I calendar good markers and really about think cash flow a around about flow. metrics had How should You've free as or CapEx we

Amar Maletira

sure. Yes,

to free we We are the this across we flow X focused improved Amit, million cash company. working operations, good for capital in cash have QX is XX% flow from generating we are significantly very Now went that as quarters conversion mentioned impact operating and I've I XX% management cash operating typically before, operating our a in of go seasonal to proven year. the will $XXX flow up profit. flow. That's us. of cash as million. about lower know, should with, tracking mean be during there QX for that metric believe cash mind at of be I And $XXX profit you That maybe keep company. that cash from to right? very flow, the our So it, good we operating

in For that QX, there's we had payout. bonus big annual to in example, of some prepayments bonus big QX, vendors. payment, And some cash our

from stronger and perspective. QX are relatively flow QX So cash are a typically, QX QX lower, and

give some because asked Now let me me you this cash on you question. free color flow

to down. to intensity question continues in Ashwin, As my go I our mentioned response CapEx

let's of if CapEx you remain operations, profit X% CapEx you XX% these to If the X%, free CapEx from operating CapEx We be about we'll beginning fiscal between remaining fiscal revenue. take at cash lower the I to a a range. around intensity guided X.X% of say, within as landed XXXX, believe you to 'XX, our cash percentage I the recall, intensity, X% right? X% continue models, flow at turning to in into our healthy. of X% So see of end intensity in year that will so margin to X% flow will

guidance the have from just fiscal will lower it flow we the free healthy. a but cash in X% to went So here, in And than XXXX. still given will of sort be XXXX we it reference, be provided margins as X%, X%

Operator

JPMorgan, you're with you're on up. Keith Tien-Tsin Bachman, Huang And deck.

Puneet Jain

year-on-year sitting margins least are some revenue incremental in flat is gross on be on the And you a Puneet at margins What basis this that of are year? Tien-Tsin. generating? segment's high-growth the that Multicloud for This can

Amar Maletira

within So about about -- let talking the high-margin follow-on are we make about Or overall? talking sales, Multicloud, segment the you are sure talking me when Puneet? the are you

Puneet Jain

like you meant growth XX% Multicloud that like I high that giving there. business the are in growth,

Amar Maletira

Yes.

the know you growth think and our mix are this all we depends assuming point business, Puneet. infrastructure it that portfolio. what, between in remains services So internal At the mix that the within of plans, given listen, on of business same time, I

services. infrastructure So we that But and remain on expect of of the margins in sort depends again, gross mix the to, business, stable. particular it to

there's we So a on. more to that land after landing accounts going mix because grab can change go if decide of

decide if push might to change. and we So acquire that forward accounts, more mix

Operator

Louthan, deck. you're you BMO. on Bachman with comes Keith, All Frank question Keith are right. there? Next And from

back speaker, promote circle to Keith. Louthan Let's Can Frank we please? to

Frank Louthan

quantify can the cost terms the how where be for percentage deal I then That do that of great. Maybe this, sort be quarter? the much savings the was And completed? you to in of with And the will you think the labor of on the BT date? would in when total offshoring and shift but bookings missed are the we

Kevin Jones

Frank, it's Kevin here.

So I'll start with some color on the BT deal.

was the deal in parties dollar for hybrid that's will new It million both validate and and Services And several This validates introduced last new on presence opportunity disclosing large I'll market, largest offering our a this the the Rackspace number strategy, BT cloud detail XXX for but Services Rackspace be cloud Frank, significant in you us. It So give the private our about history. We're could here. in private bit value to company brings exact offerings deal VMware validates a things of not solution, mentioned deal amount, this over potential several looking enterprise It BT for offering, year. migrating at we're we're us of Technology. excited multiple dollars to worth years. be countries, BT's earlier. And enterprise our Cloud. our Multicloud cloud to hundred expand deal Cloud. customers we VMware I Rackspace a the namely based growth Rackspace as gives as

Our strategy. geographic expansion

I think this shows against our the some also of the in competitors competitive deal largest advantages industry.

and So excited BT. to about about want you we're with offshore? pleased do our talk relationship Amar,

Amar Maletira

sure. Yes,

of approval the one the of I last for think, Frank, mid when we tenets year, of program to key announced restructuring program change was footprint. the

we by look XXXX. fiscal XX So 'XX, than were right? about at mix less We more offshore/onshore that we offshore, improved take a exiting the points than at end if fiscal of XX% our just

So to we by significant of XX% mid expect And be fiscal to XXXX of this a close mix. our was change in mix. offshore that

company. this the that, within is Now across

across organization or functions. operations, is not the just it's G&A delivery So this

heavy the couple of lifting So quarters. we did in last a massive

Kevin Jones

at add undertaking transformation just the company with the and we're that far, to to still progress do. more that. so I'll I'm the pleased

that Of onshore our I'm very quality the course, working Frank, also our centers the delivery and of how and from customers. we're getting around for clock centers with pleased offshore we're together

they quality our -- things the of customer the the was for all fanatical the over and experience world. this of that one of we're reasons for service that reputation is us One selected BT customer because mentioned known

as quality, transform at look we So amongst service the and regarding daily statistics the we there. business, customer I continue best be our to

we're pleased that. So with

Operator

Keith we'll Bachman circle to Bank. going back with from Keane and then We're wrap Deutsche things up Bryan to BMO, from

Keith Bachman

you me hear okay? Can

Joseph Crivelli

Yes, we you can Keith, thank hear you. now,

Keith Bachman

Okay.

to, go over incremental wondering some could operating out. broadly, you're guiding happened what sure XX.X%, margins and was But which I margins expense, not for time. XXX alluded more year-over-year. to more And you last BT basis back choices. I'm carve mentioned And specifically, to it, that second. well a Amar, is you've And I call points Sorry, down to wanted you but if

In give thinking And some 'XX, 'XX. quarter, seem the stay margins you be margins how so through, look was at gross but the is what you're context will will said mix It I year as about flattish experience I of operating like calendar margins you past, of some so sort could flattish. doesn't you about December in ranges. to margins pressure to think, expected these QX because certainly September hoping in

'XX not thinking philosophically, just how I'm you if be specific about the CY So margins? wondering if then, numbers could review, should for we

Amar Maletira

Yes.

So thanks, Keith.

can roll give profile margins margins fiscal again, on we if the you certain the 'XX. see through I'll with the I the so of year. Keith, give here, margin well on business I'll as operating more you for gross the as and assumptions color And as clarity So transparency

give operating we the our range fiscal in to Keith, around we and internal that with, you ramp mix be plan the more okay? XX% So based that certain And rate Now current margins I'll shortly, more also color deal. business. XXXX, and, assumes stabilize margins our our certain the of assumes, expect investments XX% of are level It internal XX%. to on to importantly, on plan working of a BT Keith, a gross of of in

a changed assumptions have may these if So outcome. year, different during we the

had that in planned the double-digit I Keith, in mentioned is have from even a XXXX. the core for planned my By solid demand what way, XXXX remarks, for example, we than stronger growth prepared a in For we perspective.

growth the may long-term strategic I'm may our of the put quarter But if the said, and to may to pedal which versus decisions changes level you on every which down are, any material internal you So decide I XXXX as to this in very financial plan. increasing, update we after the model. that go investments make around opportunities, committed the we additional see and and we change demand mix

of expand after. term, the margins our the Keith. good to in And sold land and in gross do from might ecosystem, is in we baked our you're seeing, margins in growth, short of go in when seeing cloud want we plan, on And cloud based things sure we because once these everyone we some the the to have we we I'm this XXXX customers, go are what of some we deals. these hearing deals, right the roughly are plan. can all shown, providers So but start to quote growth impact it that onboarding our that's internal these investments level have the after

Keith Bachman

Okay.

I mean, are XX% about that, those XX% And bit investors lower think I little to thinking. is than a what I margins, think so if

model said operating of You some previously flow but through OCF XX% cash I would the pressure of that free profit. would on think. be as well, run my dollars yet, I mean suggests I haven't Obviously,

Amar Maletira

delivered is in X in so on we Yes, there below Keith, might sort think of of those we that free flow. you're mind XXXX. right, in in a absolutely expect free 'XX, also fiscal I won't you're percentage from balance right, that, fiscal cash I We revenue, that to put of think cash you right are as kind margins saw the charges that. restructuring But restructuring flow from fiscal I Directionally, out. keep see that cash XXXX. X.X% cash be pressure a will some that the a that charges But tailwind

Keith Bachman

in, Okay. were everybody to so mind 'XX, sneak in if model how charges just one Do that? you I knows what those cash just

Amar Maletira

Yes.

have don't -- to net-net, $XX you the, would on But be it $XX million, color net-net. about -- callbacks I which a more here. in million that say I should say, So I'll specific I would was in again, data give the

during for more you give you will data and I color at callbacks. the the So look

Operator

with final Bank. Keane question from Bryan Deutsche Our comes

Bryan Keane

you Can hear now? me

Joseph Crivelli

Yes, there you. Thank you go.

Bryan Keane

questions asked So most of my have answered. and been

Amar, on Is rev enterprise the to the implications their And a into savings, business Rackspace. customers lot guess about me, and of that to and if Is sell takes benefit agreement? you move I the margin that BT massive clarifications. when you use seeing model? X Enterprise Kevin, BT cost that for think cost we that there had it it are a offshore a that economics And year. to Just start secondly, how yet? to deal, this then to clear just does wasn't customers, relationship trying the share work? I off guess And

Kevin Jones

Yes.

the So I'll some little kind work, with start a second provide relationship of question. about bit the then color BT with on Bryan, and I'll how let Amar

in we're Europe so with enterprise largest just of mean, but this. yes, excited over has some relationships the about I So basically, BT got customers great not the all world.

is be which private to And are a hybrid Cloud, section cloud of us. hybrid of for good VMware cloud that our what's migrating And customers profiles of environment will so is, have business rest we of with BT's for of attributes. Services to part the kind combination going And margin similar it public to a of for happening kind our the cloud private partner. be those those cloud customers, environment, cloud Rackspace and we'll

depending the public enterprise need offerings some to offerings, customers and workloads. data our we our given applications cloud introduce but have itself, them we then opportunity upon did, where these then just BT offerings, we BT mentioned, something very Amar and engaged modernize as a do up only already throughout And kind ramping customers not BT that, chance of is as these to with of enterprise XXXX. work that further to acquisition their the of and it's we So have We're speak.

anything So to and we'll Amar, you updated it's as pretty progress. we exciting, add? keep

Amar Maletira

the have our cost in On all savings we side, in model. baked cost the savings

on of the We the And very laid we our into of actions. investments cost that that is internal net have cost of we plan. most our half on And in are XXXX already baked we to XXXX in savings the fiscal moved that's have some plan, execute basis the deferred out fast a how second the making business.

Bryan Keane

so we Is there charges? onetime different much the of way of types investments you're try of ongoing, to additional of a be just sense get this those is how making, kinds to can a could quantify Amar,

Amar Maletira

Yes.

or to all investments. -- most investments think on, the -- it I we et you big there X that's give of And as one So across X are let launching in continue depends product for in groups and me are bucket. buckets Freedom, example, in those And investments cetera, offerings private cloud, across Data big example. also make delivery, that's an new our product of

is we development bucket mentioned, right? big have as opportunities all So in X Kevin second data services, in The around across native the application cloud XX, platforms.

either get scaling We'll scaling capabilities at We also well have those side on of and we be same have of we'll we cost And show that. Onica demand. time, revenue Azure. And skills the the you and investments AWS because of a start in in acquired very because ahead got done up lot the GCP and to AWS.

be and So very an services for for sales we and because are productivity well investing of will we professional salespeople. be improving as as as hiring And architects, go-to-market the our resources migration also example, also in data services. we will selectively cloud

So need we make ahead investments will into see and market, may we in some be the the changes areas. if And we those all are -- selectively investing in case those baked in more growth in investments. go plan. But we to

onetime So that's flows of through is it's ongoing, by all -- it's supported but start-up some an not it investments as revenue. onetime, that

Joseph Crivelli

for you have and Well, a that, evening, or have follow-up, a joining didn't a to All thanks if me for us, question us. great If with ir@rackspace.com. your give please at thanks, right. shout everyone, joining everyone. get we And

Rackspace Technology (RXT) 23 Feb 222021 Q4 Earnings call transcript