Rackspace Technology, Inc.

Good afternoon and welcome to Rackspace Technologies' third quarter 2021 earnings conference call. As a reminder, today's call is being recorded. Kevin Jones, our CEO, and Amar Malatira, our president and CFO, join us today. The slide deck we will refer to today can be found on our IR website. On slide two, certain comments we make on this call will be forward-looking. Those statements are subject to risks and uncertainties, which could cause actual results to differ. The discussion of these risks and uncertainties is included in our SEC filings. RAC space technology assumes no obligation to update the information presented on the call, except that it is required by law. Our presentation includes certain non-GAAP financial measures and certain further adjustments to these measures, which we believe provide useful information to our investors. In accordance with SEC rules, we've provided a reconciliation of these measures to their respective and most directly comparable GAAP measures These reconciliations are in the tables included in our earnings release and presentation, both of which are available on our website. After our prepared remarks, we will take your questions. To queue up for questions, please use the Ask a Question function in Zoom. I'll now turn the call over to Kevin.

Good afternoon, and thanks for joining us. I'll discuss quarterly highlights and touch on some customer case studies, then Amar will go into detail on the financial results. Turning to slide five. As a best-in-class, pure-play cloud solutions company, Rackspace Technology is well-positioned in a market that is booming. Over the past five years, our cloud partners, AWS, Google Cloud, and Microsoft Azure, have grown their revenues tenfold. In the third quarter alone, AWS grew 39%, Azure grew 48%, and Google Cloud grew 45%. To put things in context, in 2020, incremental new cloud spending with our hyperscaler partners was $22 billion. That total is expected to grow to $34 billion in 2021. And next year, analysts estimate that new cloud spending will grow again to approximately $44 billion. As they move their business to the cloud, customers are grappling with the pace of change, especially mid-sized and commercial businesses and state and local governments. They need help, and Rackspace Technology is poised to be their partner of choice wherever they are in their cloud journey. In the third quarter, we took several steps to solidify our market-leading position. The financial results reflect this. Revenue, core revenue, non-GAAP operating profit, and non-GAAP EPS all grew at a healthy year-over-year clip. We delivered strong operating cash flow of over $100 million for the third quarter in a row. For the first three quarters of 2021, operating cash flow was now in excess of $300 million. We continue to introduce timely new product and service offerings that help our customers get the most out of their cloud investment. Our new Elastic Engineering model is seeing fast adoption, and we expanded it to several new areas. And we are very excited. about the launch of Rackspace Data Freedom, a new storage solution based on robust Rackspace-developed technology that gives customers a cloud-adjacent storage option to manage cost and increase data fluidity across multiple cloud platforms. Our broad customer base puts our finger on the pulse of the cloud market. Our service development strategy is driven by those insights. Because of this, Rackspace data freedom is targeted at a massive white space in the cloud market and addresses a pain point we see and hear about every day from our customers. Having our ears so close to such a diverse customer base, especially mid-sized and smaller businesses, is a key Rackspace advantage. On the ESG front, earlier this month, we launched our first comprehensive ESG report since returning to the public markets. I'll talk more about this later in the presentation. We are investing in our employees and culture to differentiate Rackspace technology as an employer of choice in the current war for talent. This helps us attract prospective employees and retain our most valuable assets, our dedicated Rackers. These investments are delivering results. In the third quarter alone, we were recognized as one of the 50 most engaged workplaces by achievers, a top 50 workplace in the country for Latinas by Latina style, and a top place to work for mothers, fathers, and parents working remotely by parents at work. Turning to slide six, we continued to deliver revenue growth well into the double digits. Total revenue was up 12%, and core revenue was up 15% compared to last year's third quarter. Non-GAAP operating profit was up 6%, and non-GAAP EPS was up 32%. We expect a strong fourth quarter for bookings and believe we will hit our full-year new business bookings target of $1 billion. In the third quarter, new sales bookings worth $200 million. On slide seven, a key growth strategy for Rackspace technology is to forge partnerships that bring best-in-class cloud solutions to our customers. Accordingly, in the third quarter, we strengthened our relationships with leading cloud solutions companies such as Snowflake, Datadog, CloudFlare, and Platform9.

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