Rackspace Technology, Inc. (RXT) Earnings Call Transcript & Summary

Good morning, and welcome to Rackspace Technology's CEO Transition Update Call. My name is Robert Watson, Vice President of Corporate Finance. As a reminder, today's call is being recorded. I am joined today by Amar Maletira, our new Chief Executive Officer. A press release discussing today's announcement can be found on our Investor Relations website. Certain comments we make on this call will be forward-looking. These statements are subject to 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 provided on the call, except as required by law. We will also discuss third quarter guidance, which includes certain non-GAAP financial measures and certain further adjustments to these measures, which we believe provide useful information to our investors. [ A reconciliation ] of these non-GAAP measures as well as reconciliations of our recent non-GAAP results to their relevant GAAP measures are available on our Investor Relations website. We will not be taking questions on this call. We look forward to answering your questions on our third quarter earnings call in November. With that, let me turn the call over to Amar.

Good morning, and thank you for joining the call. I'm humbled, honored and excited to lead Rackspace Technology's next chapter. I would like to thank the Board for this opportunity. I look forward to leading the company as we transition to the new strategy and operating model that we have discussed with investors over the past two quarters. I know it has not been easy ride for Rackspace investors over the past 2 years. So I want to talk about why I'm excited for this opportunity and why I truly believe we are building a high-performing, best-in-class company. First things first, I want to be clear that today's announcement does not reflect any short-term shift in our financial outlook. In fact, with one week remaining in the third quarter, we expect our results to be in line with our guidance as noted in the press release we distributed this morning. As a reminder, our third quarter guidance called for total revenue of $769 million to $79 million, core revenue of $733 million to $741 million, operating profit of $73 million to $77 million and non-GAAP earnings per share of $0.08 to $0.10. The opportunity for Rackspace in our two markets, public cloud and private [indiscernible] clear. We've already established our go-forward strategy and the best operating model to execute on it. We are now doing the heavy lifting drive to change. We'll sharpen our execution to drive sustained profitable revenue growth and strong cash generation in the long term. In my view, we have three immediate priorities today. First, we need to shift effectively to a new operating [ paradigm ] starting in 2023. We will realign the organization with the right talent in the right roles. Second, build on the existing Rackspace culture of fanatical customer experience to drive accountability, ownership and execution throughout the organization. And third, we will build a high-performing company oriented around technology, products and solutions focused on delivering value to our customers. This means we will accelerate our pivot from low-margin infrastructure resale to higher-margin, higher-value solutions in the cloud. Job one in this regard is sharpening our sales, product development and organizational focus. We will be a customer-first, cloud-first company. All of these changes may entail some short-term disruption. The change is, however, critical to position the company for long-term success. That is my mandate from the Board. Despite our recent challenges, we continue to enjoy many strengths. First, we operate in great markets, private cloud and public cloud. Second, we have a strong customer base. We do business with some of the finest companies in the world. Third, we have top-notch relationships with world-class partners, including the three hyperscalers and leading cloud software companies. Fourth, we have a strong and well-respected brand in the technology market. Fifth, we have a unique culture, which is a strong competitive advantage for our company. Rackspace is truly a great place to work. I want to take it to the next level. Our leadership team is absolutely convinced that we now have the right strategy and the right operating model in place. We simply must improve execution focus and accountability. I assure you that it's exactly why I stepped into this role and exactly the message I will send to every one of our leaders in the company. We have work to do. We will get it done. I know you probably have a lot of questions. We can't provide much additional color this morning, but we'll look forward to answering your questions and sharing our significant progress on the new strategic plan. We'll provide additional commentary on our third quarter call in November. With that, let me say, I appreciate your patience and support. And in closing, I truly believe the actions we are taking will better position our business for growth, profitability and success in both public and private cloud markets in the years to come. Thank you for joining the call.