Rackspace Technology, Inc.

Good day, and welcome to the Rackspace first quarter 2025 earnings webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would like to turn the call over to Sagar Habar, Head of Investor Relations. Please go ahead.

Thank you, and welcome to Rackspace Technologies' first quarter 2025 earnings conference call. I am 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 our SEC filings. Rackspace 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 their 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, Sagar, and welcome everyone to our first quarter 2025 earnings conference call. Results in the first quarter of 2025 exceeded our expectations across all key metrics. Revenue was at the high end of our guidance while profit and EPS exceeded our guidance range. This marks the 11th consecutive quarter in which we have either met or exceeded our guidance. Our operational turnaround is gaining steady momentum with growth in pipeline across both business units, increased bookings, and improved efficiency. Bookings measured by annual contract value grew 9% year-over-year in the first quarter. driven primarily by strong performance in the Americas, which saw a 13% increase. Our non-GAAP operating profit grew 83% year-over-year, and we also saw significant growth year-over-year in both cash flow from operations and free cash flow. As we drive our digital transformation agenda for our customers enabled by cloud and AI, we are also helping them with cyber resiliency. Last week, we announced a strategic partnership with Rubrik. Together, we launched the world's first fully managed end-to-end isolated recovery environment called Cyber Recovery Cloud, powered by Rubrik's leading technology and Rackspace's managed private cloud platform. This solution allows customers to recover clean data and restore critical business systems within hours, not weeks or months, following a cybersecurity breach significantly improving their cyber resiliency. Both Rubrik and Rackspace anticipate solid demand for this offering, and we expect it to drive revenue for Rackspace starting in 2025. Although DOT's cost-cutting measures have impacted federal agencies, I would like to highlight that Rackspace's exposure is minimal, with federal contracts comprising only 1% of 2024 revenue. That said, We remain cautious of the broader macroeconomic environment, which may impact onboarding timelines for recently closed deals and customer decision cycles in the short term. However, we remain well positioned to capitalize on long-term secular trends in public cloud, private cloud, and AI. Now, let me get into our business performance, starting with private cloud. On the heels of a record-setting fourth quarter of 2024 sales bookings in private cloud, we delivered good results in the first quarter of 2025 with bookings remaining flat year-over-year despite slippage of a couple of large deals into the second quarter, which we closed in the first two weeks in April. Factoring in these deals that subsequently closed, our private cloud bookings for the first quarter would have grown 20% year-over-year. Private cloud revenue for the first quarter came in at $250 million right in line with guidance and down single digits year over year. After many periods of double digits decline in private cloud, we saw moderation in revenue decline for two consecutive quarters. We have made meaningful progress stabilizing private cloud and believe it's on a path back to growth as this trend continues. This progress is a result of consistent bookings performance and steady improvement in revenue retention. We are winning higher value long-term business, underscoring the strength of our platform and our strategic expansion into the mid and large enterprise customer segments. In the first quarter, we continue to expand in the healthcare market by securing a new win with the healthcare provider in the Northwest that chose Rackspace Healthcare Cloud for their Epic and other clinical and non-clinical workloads. This move is designed to lower their IT costs while modernizing their IT infrastructure and improving service levels for their end users. We are also expanding across other regulated industries Rackspace was selected to design, build, and operate a customized private cloud solution for a leading European energy company. This is a long-term agreement to migrate two of the six data centers onto a private cloud platform. By partnering with Rackspace, the company is moving away from managing complex infrastructure internally and embracing a flexible platform-driven operating model. This win not only reflects the growing demand for private cloud solutions, but also marks a significant entry into the energy vertical. Private cloud is also pushing forward with new products and solutions. I shared details about a strategic partnership with Rubrik, which was largely driven by our ability to deliver the broad range of assets and operational expertise required to support cyber recovery and maintain critical business continuity in the event of a cyber attack. We also launched OpenStack Flex, an enterprise-grade on-demand infrastructure as a service offering that provides secure, fully supported, and monitored infrastructure. It simplifies hybrid cloud management by bridging the gap between dedicated and multi-tenant environments. Additionally, we introduced UK's Sovereign Secure, a next-generation platform built to address the stringent compliance and security requirements of UK's healthcare government, and public sector. This solution offers secure, reliable hosting tiers and advanced security operations and monitoring, purpose-built to meet UK public sector standards. We are encouraged by the success of the private cloud strategy in both defending and expanding our cloud business. As we focus on execution, we are seeing strong momentum across our pipeline, bookings, and new product offerings. reflecting growing customer demand for hybrid cloud environments. Now turning to public cloud. In the first quarter, public cloud bookings grew 16% year-over-year, driven by strong execution in the Americas, which delivered 26% year-over-year growth. This performance reflects continued progress on a land and expand strategy, enabling deeper customer relationships and higher value engagements. Public cloud revenue for the first quarter reached $416 million, exceeding our guidance range and was down low single digits year over year due to declines in lower margin in for resale and services. Public cloud delivered several notable wins this quarter. As a key highlight, we secured a significant fall on engagement with the top tier aircraft leasing company. We are designing and implementing a modern, flexible data infrastructure to support their business growth that is projected to save them multimillion dollars over five years. Additionally, we expanded our work with one of the largest U.S. airlines, securing new data, DevOps, and security services. On the product side, we launched an enhanced version of Rackspace Managed Cloud. a full-stack hybrid cloud-managed service built to meet the complex needs of mid-market and enterprise customers. The platform now supports two flexible delivery models, a shared services option powered by a Rackspace cloud management platform and a dedicated delivery team model that integrates with customers' existing tool sets. We also expanded our modern operations portfolio with the launch of modern operations for databases. a managed service that complements in-house teams by managing and optimizing cloud database environments. In summary, in public cloud, we remain focused on disciplined infrastructure resale, a pivot to services, and a lean operating model. While macroeconomic uncertainty adds complexity to forecasting, we anticipate services revenue to perform well in 2025, assuming no significant external disruptions. Turning to AI, we continue to make strong progress with FAIR, with approximately 60 wins and over 200 opportunities in a pipeline, nearly 20% of which are already in advanced stages, along with several active leads we are pursuing. This quarter, Private Cloud Business Unit launched Rackspace AI Business, a comprehensive AI-ready platform designed to optimize enterprise AI workloads. Built on a private cloud infrastructure, the solution is engineered to support a wide range of AI use cases. Additionally, in public cloud, we introduce modern operations for data and AI, a managed service that streamlines organization-wide data pipeline management. This offering automates data preparation, analysis, and integration tasks. Before I wrap up, I want to sincerely thank our customers, partners, and all our hackers. I'm proud of what we have achieved this quarter and encouraged to see continued momentum with new customers and expansion with existing customers. As we look ahead, our goal for 2025 is clear. Stay focused on our key strategic priorities and build a sustainable business model that consistently delivers revenue, profit, and cash flow growth. With that, I will turn it over to Mark to walk us through the financial results and guidance.