Rackspace Technology, Inc. Q1 FY2025 earnings call

• Results in Q1 2025 exceeded expectations across key metrics, marking 11th consecutive quarter of meeting or exceeding guidance. • Bookings measured by annual contract value grew 9% YOY in Q1, with 13% growth in The Americas. Non-GAAP operating profit grew 83% YOY. • Announced strategic partnership with Rubrik to launch Cyber Recovery Cloud. • Private Cloud saw bookings flat YOY despite some deals slipping, with revenue at $250 million in line with guidance and moderation in revenue decline. Secured wins in healthcare and energy sectors, and launched new products like OpenStack Flex and UK Sovereign Secure. • Public Cloud bookings grew 16% YOY, revenue reached $416 million exceeding guidance, with wins in aircraft leasing and airlines, and launched enhanced Rackspace Managed Cloud and modern operations for databases. • AI progress with FAIR, Private Cloud launched AI-ready platform, Public Cloud introduced modern operations for data and AI.

For Private Cloud, GAAP revenue in the first quarter was $250 million, in line with guidance. Total revenue decreased 7% year-over-year due to customers rolling off older generation offerings, partially offset by revenue from new bookings. Private Cloud non-GAAP gross margin was 37.1%, down 1.8 points year-over-year, and non-GAAP segment operating margin was 24.4%, a year-over-year decline of 2.1 points. For Public Cloud, GAAP revenue was $416 million, surpassing the high end of guidance. Total revenue was down 2% year-over-year. Non-GAAP gross margin was 9.5%, up one point year-over-year, and non-GAAP segment operating margin was 4.2%, up 2.3 points year-over-year.

• Expect second quarter GAAP revenue of $653 million to $665 million, down 4% YOY at midpoint, driven by reduced forecast for low margin infrastructure resale volume. • Private Cloud expected revenue of $247 million to $253 million, flat sequentially and down 4% YOY at midpoint. • Public Cloud expected revenue of $406 million to $412 million, down 2% sequentially and down 4% YOY at midpoint. • Total non-GAAP operating profit expected to be $25 million to $27 million, and non-GAAP loss per share expected to be $0.04 to $0.06. Non-GAAP tax rate expected to be 26%, and non-GAAP other expenses in $42 million to $46 million range. Non-GAAP share count expected to be $244 million to $248 million shares.

• Broader macroeconomic environment may impact onboarding timelines for recently-closed deals and customer decision cycles in the short-term. • Cautious about booking to billing cycle, i.e., conversion of bookings to revenue.

Q: Continuing on large customers' upfront CapEx and regulated industries?

A: Seeing trend of large customers wanting to pay upfront CapEx, internally focused on reducing CapEx intensity through technology and operational discipline. In regulated industries, strong traction in healthcare, BFSI, Sovereign and energy. Closed large deal with European energy company, and seeing pipeline develop in energy sector