Rackspace Technology, Inc.

Thank you for standing by. My name is Prila and I will be your conference operator today. At this time, I would like to welcome everyone to the Rackspace Technologies second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, this time seem to press restore followed by the number one on your telephone keypad. If you would like to withdraw your question, please press restore. followed by the number one again. Thank you. I would now like to turn the conference over to Sagar Hebar, Head of Investor Relations. Please go ahead.

Thank you, and welcome to Rackspace Technologies' second quarter 2024 earnings conference call. I'm Sagar Hebar, Head of Investor Relations. Joining me on today's call are Amar Malatira, our Chief Executive Officer, and Mark Marino, our Chief Financial Officer. As a reminder, certain comments we make on this call will be forward-looking. These statements involve risks and uncertainties, which could cause actual results to differ. A discussion of these risks and uncertainties is included in RSAC filings. Back-based technology assumes no obligation to update the information presented on the call, except as required by law. Our presentation includes certain non-GAAP financial measures and adjustments to these measures which we believe provide useful information to our investors. In accordance with SEC rules, we have provided a reconciliation of these measures to the most directly comparable gap measures in the earnings press release and presentation, both of which are available on our investor relations website. I will now turn the call over to Omar for an update on the business. Thank you, Sader, and welcome everyone to our earnings call.

Results in the second quarter exceeded the high end of our guidance for revenue, profit, and EPS. This marks the eighth consecutive quarter in which we have either met or exceeded our guidance. We continue to execute to our plan and focus on advancing our three strategic priorities. First, we are making steady progress on our operational turnaround. I will cover this in detail later in my prepared remarks. Second, we are repositioning Rackspace as a forward-leading innovative hybrid cloud and AI solutions company. We are now well-placed to catch the next big secular waves of both hybrid cloud and AI. And third, we are right-sizing our capital structure to support long-term and sustainable profitable growth. We have ample liquidity and flexibility to focus on our operational priorities. We further improved our capital structure in the second quarter through opportunistic repurchases of a debt. Over the next two to three years, from a market perspective, we anticipate an exploration in digital transformation spending driven by the ongoing transition to hybrid cloud as well as AI. We see customers taking a more strategic approach to their use of both public and private cloud with a notable shift towards a more hybrid environment. In the realm of AI, we are winning business and helping leading companies prepare for AI and Gen AI applications. The first step to AI starts with data and we are seeing strong demand in data services and solutions partially driven by AI. Now let me get into our business performance starting with private cloud. Private cloud gap revenue of $260 million was down 3% sequentially in the quarter and within our guided range. We are working both to accelerate the pace of new wins and slow the rate of revenue runoff. Bookings were slightly down sequentially driven by deal lumpiness. We see our new private cloud strategy gaining traction. Our pipeline was up over 35% year-over-year with strength across all regions. Within our pipeline, we are seeing large opportunities as enterprises develop a better understanding of which workloads fit in private cloud versus public cloud versus on-prem. While those larger deals typically have longer sales cycle, they align with our key objective of building a solid book of business from long-term commits of high-quality recurring revenue. One of our marquee private cloud engagements is with Seattle Children's Hospital. Leveraging our healthcare cloud solution, we migrated their Epic Health Records platform onto Rackspace's fully managed private cloud. Additionally, Seattle Children's made strides in pediatric research with the launch of cutting edge high performance computing. Rackspace collaborated with Dell to design and implement this system that leverages the power of blazing fast NVIDIA A100 GPUs. Rackspace is hosting and managing this high-performance compute environment for the hospital. Another large U.S. healthcare payer awarded us similar EPIC migrate and operate managed services contract that enables payer-provider collaboration. I expect to see continued growth in healthcare. We are leading with Epic Hosting as a service, but building a foundation for customers to consolidate more of their data center footprint with Rackspace. We see similar opportunities in other regulated industry verticals. For example, we're also seeing traction in our banking, financial services, and insurance vertical. In our December quarter last year, A large UK retail bank chose Rackspace's software-defined data center solution for their mission-critical banking applications. We're in the midst of this implementation, and a customer is already experiencing significant improvement in transaction response times for their ATM and point-of-sale applications. This is yet another good validation of our differentiated solutions in private cloud. From an offerings perspective, in Private Cloud, we launched 16 new and enhanced 17 other products and solutions in the quarter. Overall, Private Cloud is still navigating a challenging transition, but our strategy is being increasingly validated through recent wins, a growing pipeline, and positive customer feedback. We are positioning Private Cloud for durable and profitable growth, in what we believe to be an underserved $50 billion total addressable market. Now, moving to public cloud. Public cloud gap revenue of $425 million was up 1% sequentially, exceeding the high end of a guided range due to better than expected performance in both services and infrastructure resale. Overall bookings grew double digits year-over-year and low single digits sequentially. I'm particularly pleased with our services bookings, which represented 70% of total public cloud bookings for the quarter, growing high single digits year-over-year and sequentially. I attribute that success to a shift in our go-to-market strategy of leading with services combined with better execution. We're seeing particularly strong market demand for data services, specifically in data engineering. There are bookings in the quarter more than doubled year over year. Our strategic positioning in data services, driven by both digital transformation and AI, is clearly paying off. Additionally, we have become much better in attaching services to our infrastructure resale deals. 85% of our largest infrastructure resale deals this quarter also had services attached. We also started offering Rackspace Elastic Engineering services through AWS Marketplace. Some notable customer wins demonstrate the progress of our go-to-market strategy of leading with services. For instance, we were selected to implement a digital transformation program for a large media company, rewriting a major customer-facing application and migrating it onto one of the hyperscalers. Rackspace is supporting the strategic multi-year effort with a skilled, multidisciplinary team. For a major consumer web company, we are deeply engaged across several service offerings in professional services, platform support, and security, driven by a strength in delivering full-stack services and our deep cloud expertise. I'm very encouraged by the success we have seen in public cloud and believe that the progress we have made across various initiatives will lead to even stronger performance going forward. We continue to target attractive opportunities with a winning mindset, positioning ourselves for ongoing success. Now, when it comes to AI, we continue to take an optimistic long-term but realistic short-term approach. Our fair initiative is developing innovative new ways to help our customers on their AI journey with over 40 engagements. We are closely partnering with hyperscalers and we are one of the select few global AWS AI partners. As noted previously, we are driving strong growth in data services, helping customers take their first step towards leveraging AI. We are also planning for general availability of a private cloud AI offering called AI Anywhere. While our operational turnaround is not dependent on short-term benefits from the secular wave in AI, we are maintaining our strategy and approach of thoughtfully developing AI capabilities so we can become the partner of choice for organizations as they embark on their AI journey. We'll continue to do so without getting too far in front of the market. In summary, I am pleased with the steady progress we have made despite a flat market. Our operational turnaround is focused on strengthening our pipeline and sales booking in both private and public cloud, stabilizing and growing revenue and profit while continuing to drive cost efficiencies. Although there is still work to be done, we are building momentum for consistent and sustainable growth in revenue, profits, and cash flows in the years to come. Before I wrap up, I'd like to thank our customers, partners, and all our actors. I'm proud of all we have achieved together already. I will now turn it over to Mark for an overview of our financial results and guidance.