Rackspace Technology, Inc.
For the period ended Jun 30, 2025. Filed Aug 11, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 11, 2025
RXT$2.53+6.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-12.
0001810019-25-000069
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-11.
0001810019-25-000110
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 179 previous paragraphs and 197 current paragraphs.
119 unchanged; 43 reworded; 18 added; 16 removed; 1 previous and 17 current paragraphs rearranged.
Tables are not compared: 16 previous and 23 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (18)
Current report
Public Cloud revenue in the three months ended June 30, 2025 decreased 2.0% on an actual basis and 2.2% on a constant currency basis, from the three months ended June 30, 2024. The decline was due to lower infrastructure volumes, as services revenue remained relatively flat.
Current report
Selling, general and administrative expenses decreased $31 million, or 17%, to $154 million in the three months ended June 30, 2025 from $185 million in the three months ended June 30, 2024. Declining personnel costs had the largest impact due to a reduction in headcount between periods and decreases in share-based compensation, non-equity incentive compensation and severance expense.
Current report
As a percentage of revenue, selling, general and administrative expenses decreased 380 basis points, to 23.2% in the three months ended June 30, 2025 from 27.0% in the three months ended June 30, 2024 due to personnel costs, as discussed above.
Current report
Interest expense increased $3 million, or 16%, to $21 million in the three months ended June 30, 2025 from $18 million in the three months ended June 30, 2024. This increase was due to borrowings on the New Revolving Credit Facility in 2025 and a reduction in interest income from money market funds due to a lower cash balance between periods.
Current report
We recorded a$73 million gain on debt extinguishment, net of debt modification costs in the three months ended June 30, 2024, which included a $49 million gain on debt extinguishment related to repurchases of an aggregate $68 million principal amount of 3.50% FLSO Senior Secured Notes, FLSO Term Loan Facility, and 5.375% Senior Notes during the period. The remaining amount is related to the closing of the Public Note Exchange in April 2024, which was initiated as part of the March 2024 Refinancing Transactions.
Current report
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2025
Current report
NM = not meaningful.
Current report
Revenue
Current report
Private Cloud revenue in the six months ended June 30, 2025 decreased 5.5% on an actual basis and 5.7% on a constant currency basis, from the six months ended June 30, 2024, due to customers rolling off legacy private cloud offerings.
Current report
Cost of Revenue
Current report
As a percentage of revenue, cost of revenue was 80.8% in both the six months ended June 30, 2024 and June 30, 2025.
Current report
Gross Profit
Current report
Our gross profit was $256 million in the six months ended June 30, 2025, a decrease of $8 million from $264 million in the six months ended June 30, 2024. Our gross margin was 19.2% in both the six months ended June 30, 2024 and June 30, 2025.
Current report
Selling, General and Administrative Expenses
Current report
Our loss from operations was $64 million in the six months ended June 30, 2025 compared to $707 million in the six months ended June 30, 2024. Our Non-GAAP Operating Profit was $53 million in the six months ended June 30, 2025, an increase of $19 million from $34 million in the six months ended June 30, 2024. Non-GAAP Operating Profit is a non-GAAP financial measure. See "Non-GAAP Financial Measures" below for more information.
Current report
Interest Expense
Current report
Other Expense, Net
Current report
Benefit (Provision) for Income Taxes
Removed paragraphs (16)
Previous report
Goodwill and Indefinite-Lived Intangible Assets
Previous report
Goodwill
Previous report
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. Our indefinite-lived intangible assets consists of our Rackspace trade name, which was recorded at fair value on our balance sheet at the date of the Rackspace Acquisition.
Previous report
Application of the goodwill and other indefinite-lived intangible asset impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units and determination of the fair value of each reporting unit. We test goodwill and our indefinite-lived intangible asset, the Rackspace trade name, for impairment on an annual basis as of October 1st or more frequently if events or circumstances indicate a potential impairment. These events or circumstances could include a significant change in the business climate, regulatory environment, established business plans, operating performance indicators or competition. Potential impairment indicators may also include, but are not limited to, (i) the results of our most recent annual or interim impairment testing, (ii) downward revisions to internal forecasts, and the magnitude thereof, if any, (iii) declines in our market capitalization below our book value, and the magnitude and duration of those declines, if any, (iv) a reorganization resulting in a change to our operating segments, and (v) other macroeconomic factors, such as increases in interest rates that may affect the weighted average cost of capital, volatility in the equity and debt markets, or fluctuations in foreign currency exchange rates that may negatively impact our reported results of operations.
Previous report
Goodwill is tested for impairment at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (referred to as a component). We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. Assets and liabilities are assigned to each of our reporting units if they are employed by a reporting unit and are considered in the determination of the reporting unit fair value. Certain assets and liabilities are shared by multiple reporting units, and thus, are allocated to each reporting unit based on the relative size of a reporting unit, primarily based on revenue. We currently have two reporting units: Public Cloud and Private Cloud.
Previous report
We estimate the fair values of our reporting units and the Rackspace trade name using the discounted cash flow method and relief-from-royalty method, respectively. These calculations require the use of significant estimates and assumptions, such as: (i) the royalty rate; (ii) the estimation of future revenue growth rates, projected gross profit margins, projected operating costs, projected EBITDA margins, and projected capital expenditures, which are dependent on internal cash flow forecasts; (iii) estimation of the terminal growth rates; and (iv) determination of the risk-adjusted discount rates. The discount rates used are based on our weighted average cost of capital and are adjusted for risks and uncertainties inherent in our business and in our estimation of future cash flows. As part of the goodwill impairment test, we also consider our market capitalization in assessing the reasonableness of the combined fair values estimated for our reporting units, including OpenStack Public Cloud. The estimates and assumptions used to calculate the fair value of our reporting units and the Rackspace trade name from year to year are based on operating results, market conditions, and other factors. Changes in these estimates and assumptions could produce materially different results.
Previous report
For the quantitative goodwill impairment analysis, we utilize the income approach to determine the fair value of our reporting units. The income approach utilizes a discounted cash flow method which is based on the present value of projected cash flows. The discounted cash flow models reflect our assumptions and considerations regarding revenue growth rates, projected gross profit margins, projected operating costs, projected EBITDA margins, projected capital expenditures, risk-adjusted discount rates, terminal period growth rates, and economic market trends. The terminal period growth rate is selected based on economic conditions and consideration of growth rates used in the forecast period and historical performance of the reporting unit.
Previous report
February 29, 2024 Assessment
Previous report
For the quantitative goodwill impairment analysis performed as of February 29, 2024, we utilized a range of our weighted-average cost of capital of 13.0% to 14.0% as our base rate, which was then subsequently risk-adjusted to determine the discount rate used for each reporting unit. After determining the fair value of our reporting units, we reconciled the combined fair value of the reporting units to the company's market capitalization as of February 29, 2024. As a result, we determined that the carrying amount of our Public Cloud and Private Cloud reporting units exceeded their fair value. We recorded a goodwill impairment charge of $385 million and $188 million for Public Cloud and Private Cloud, respectively, during the first quarter of 2024, which is included in "Impairment of goodwill" in our Condensed Consolidated Statements of Comprehensive Loss. The impairment was driven by the company's cash flow projections as revised in the first quarter of 2024 to reflect current market conditions and expected business performance, including strategic business shifts and the timing when the benefits of such shifts will be realized.
Previous report
We performed sensitivity analyses on the key inputs and assumptions used in determining the estimated fair value of our reporting units by utilizing changes in assumptions that reflect reasonably likely future changes in the discount rate used in the weighted-average cost of capital calculation and the terminal growth rate. Assuming all other assumptions and inputs used in the discounted cash flow analysis are held constant, a 50 basis point increase or decrease in the discount rate assumption would result in decreases or increases in fair value of our Private Cloud and Public Cloud reporting units of approximately $101 million and $14 million, respectively.
Previous report
Indefinite-Lived Intangible Assets
Previous report
As of February 29, 2024, due to the factors discussed above, we performed a quantitative assessment of our indefinite-lived intangible asset utilizing a relief from royalty method. Significant estimates and assumptions included in the relief from royalty method are expectations of revenue growth rates, and selection of royalty rate and discount rate. We utilized a royalty rate of 0.5% and a discount rate of 13.7% as of February 29, 2024.
Previous report
The quantitative test as of February 29, 2024 indicated that the estimated fair value of the Rackspace trade name was less than its carrying value. As a result, we recorded a $20 million non-cash impairment charge during the first quarter of 2024 which is included in "Impairment of assets, net" in our Condensed Consolidated Statements of Comprehensive Loss.
Previous report
The fair value determination of our reporting units and our indefinite-lived intangible asset is judgmental in nature and requires the use of estimates and assumptions that are sensitive to changes. Assumptions include estimation of the royalty rate for the trade name, estimation of future revenue growth rates, projected gross profit margins, projected operating costs, projected EBITDA margins, projected capital expenditures, which are dependent on internal cash flow forecasts, estimation of the terminal growth rates, and determination of risk-adjusted discount rates. As a result, there can be no assurance that the estimates and assumptions made for purposes of the quantitative goodwill and indefinite-lived intangible impairment tests will prove to be an accurate prediction of future results. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of our reporting units may include such items as: (i) volatility in the equity and debt markets or other macroeconomic factors, (ii) an increase in the weighted-average cost of capital due to further increases in interest rates, (iii) decrease in future cash flows due to lower than expected sales, or (iv) fluctuations in foreign currency exchange rates that may negatively impact our reported results of operations. Accordingly, if our current cash flow assumptions are not realized, we experience further sustained declines in our stock price or market capitalization, or increases in costs of capital, it is possible that an additional impairment charge may be recorded in the future, which could be material.
Previous report
Long-Lived Assets
Previous report
We also performed recoverability tests of our long-lived assets in conjunction with the goodwill impairment analysis as of February 29, 2024, which did not result in any impairment charges.
Reworded paragraphs (43)
Previous wording
Revenue decreased $25 million, or 3.7%, to $665 million in the three months ended March 31, 2025 from $691 million in the three months ended March 31, 2024. Revenue declined due to decreases in both Private Cloud and Public Cloud revenue, as discussed below.
Current wording
Revenue decreased $19 million, or 2.7%, to $666 million in the three months ended June 30, 2025 from $685 million in the three months ended June 30, 2024. Revenue declined due to decreases in both Private Cloud and Public Cloud revenue, as discussed below.
Previous wording
After removing the impact of foreign currency fluctuations, on a constant currency basis, revenue decreased 3.4% year-over-year. The following table presents revenue growth by segment:
Current wording
After removing the impact of foreign currency fluctuations, on a constant currency basis, revenue decreased 3.2% year-over-year. The following table presents revenue by segment:
Previous wording
Private Cloud revenue in the three months ended March 31, 2025 decreased 6.9% on an actual basis and 6.6% on a constant currency basis, from the three months ended March 31, 2024, due to customers rolling off legacy private cloud offerings.
Current wording
Private Cloud revenue in the three months ended June 30, 2025 decreased 4.0% on an actual basis and 4.8% on a constant currency basis, from the three months ended June 30, 2024, due to customers rolling off legacy private cloud offerings.
Previous wording
As a percentage of revenue, cost of revenue increased 10 basis points in the three months ended March 31, 2025 to 80.9% from 80.8% in the three months ended March 31, 2024.
Current wording
As a percentage of revenue, cost of revenue declined 20 basis points in the three months ended June 30, 2025 to 80.6% from 80.8% in the three months ended June 30, 2024.
Previous wording
Our gross profit was $127 million in the three months ended March 31, 2025, a decrease of $6 million from $133 million in the three months ended March 31, 2024. Our gross margin was 19.1% in the three months ended March 31, 2025, a decrease of 10 basis points from 19.2% in the three months ended March 31, 2024.
Current wording
Our gross profit was $129 million in the three months ended June 30, 2025, a decrease of $2 million from $131 million in the three months ended June 30, 2024. Our gross margin was 19.4% in the three months ended June 30, 2025, an increase of 20 basis points from 19.2% in the three months ended June 30, 2024.
Previous wording
Our loss from operations was $38 million in the three months ended March 31, 2025 compared to $653 million in the three months ended March 31, 2024. Our Non-GAAP Operating Profit was $26 million in the three months ended March 31, 2025, an increase of $12 million from $14 million in the three months ended March 31, 2024. Non-GAAP Operating Profit is a non-GAAP financial measure. See "Non-GAAP Financial Measures" below for more information.
Current wording
Our loss from operations was $25 million in the three months ended June 30, 2025 compared to $54 million in the three months ended June 30, 2024. Our Non-GAAP Operating Profit was $27 million in the three months ended June 30, 2025, an increase of $7 million from $20 million in the three months ended June 30, 2024. Non-GAAP Operating Profit is a non-GAAP financial measure. See "Non-GAAP Financial Measures" below for more information.
Previous wording
Public Cloud operating profit increased 111% in the three months ended March 31, 2025 from the three months ended March 31, 2024. Segment operating profit as a percentage of segment revenue increased by 230 basis points, reflecting a 4% decrease in segment operating expenses, partially offset by a 2% decrease in segment revenue. The decrease in expenses was mainly driven by operational improvements and cost optimization initiatives executed during 2024.
Current wording
Public Cloud operating profit increased 51% in the three months ended June 30, 2025 from the three months ended June 30, 2024. Segment operating profit as a percentage of segment revenue increased by 140 basis points, reflecting a 3% decrease in segment operating expenses, partially offset by a 2% decrease in segment revenue. The decrease in expenses was mainly driven by operational improvements and cost optimization initiatives executed during 2024.
Previous wording
Private Cloud operating profit decreased 14% in the three months ended March 31, 2025 from the three months ended March 31, 2024. Segment operating profit as a percentage of segment revenue decreased by 210 basis points due to a 7% decrease in segment revenue, partially offset by a 4% decrease in segment operating expenses. The decrease in expenses was mainly driven by cost optimization activities executed throughout 2024.
Current wording
Private Cloud operating profit decreased 11% in the three months ended June 30, 2025 from the three months ended June 30, 2024. Segment operating profit as a percentage of segment revenue decreased by 190 basis points due to a 4% decrease in segment revenue, partially offset by a 2% decrease in segment operating expenses. The decrease in expenses was mainly driven by cost optimization activities executed throughout 2024.
Previous wording
Centralized corporate functions that provide services to the segments in areas such as accounting, information technology, marketing, legal and human resources are not allocated to the segments and are included in "corporate functions" in the table above. This expense decreased 19% in the three months ended March 31, 2025 from the three months ended March 31, 2024 due to our continued focus on cost management.
Current wording
Centralized corporate functions that provide services to the segments in areas such as accounting, information technology, marketing, legal and human resources are not allocated to the segments and are included in "corporate functions" in the table above. This expense decreased 15% in the three months ended June 30, 2025 from the three months ended June 30, 2024 due to our continued focus on cost management.
Previous wording
We had $5 million and $6 million of other expense inthe three months ended March 31, 2025 and 2024, respectively. This line item is primarily comprised ofexpense related to our accounts receivable purchase agreement.
Current wording
We had $4 million and $5 million of other expense inthe three months ended June 30, 2025 and 2024, respectively. This line item is primarily comprised ofexpense related to our accounts receivable purchase agreement.
Previous wording
Our income tax expense was$8 million in the three months ended March 31, 2025 compared to$5 million income tax benefit in the three months ended March 31, 2024. Our effective tax rate decreased to (12.9)% in the three months ended March 31, 2025 from 0.7% in the three months ended March 31, 2024. The decrease in the effective tax rate year-over-year is primarily due to the tax impact associated with changes in valuation allowance, executive compensation that is nondeductible under Internal Revenue Code (“IRC”) Section 162(m), the net impact of the geographic distribution of our earnings, tax effects from nondeductible share-based compensation, and the tax impact of the March 2024 Refinancing Transactions. The difference between the effective tax rate and the statutory rate for the three months ended March 31, 2025 is primarily due to the tax impact associated with changes in valuation allowance, executive compensation that is nondeductible under IRC Section 162(m), the net impact of the geographic distribution of our earnings, and tax effects from nondeductible share-based compensation.
Current wording
Our income tax expense was $5 million in the three months ended June 30, 2025 compared to a $30 million income tax benefit in the three months ended June 30, 2024. Our effective tax rate decreased to (9.3)% in the three months ended June 30, 2025 from 612.6% in the three months ended June 30, 2024. The decrease in the effective tax rate year-over-year is primarily due to the tax impact associated with changes in valuation allowance, the net impact of the geographic distribution of our earnings, the incremental tax impact associated with goodwill impairments recorded in the first quarter of 2024, the majority of which were nondeductible for income tax purposes, and the tax impact of the March 2024 Refinancing Transactions. The difference between the effective tax rate and the statutory rate for the three months ended June 30, 2025 is primarily due to the tax impact associated with changes in valuation allowance, executive compensation that is non-deductible under Internal Revenue Code (“IRC”) Section 162(m), and the net impact of the geographic distribution of our earnings.
Previous wording
Public Cloud revenue in the three months ended March 31, 2025 decreased 1.6% on an actual basis and 1.3% on a constant currency basis, from the three months ended March 31, 2024. The decline was due to lower infrastructure volumes and a reduction in services revenue.
Current wording
Public Cloud revenue in the six months ended June 30, 2025 decreased 1.8% on an actual basis and 1.7% on a constant currency basis, from the six months ended June 30, 2024. The decline was mainly due to lower infrastructure volumes and a reduction in services revenue.
Previous wording
Cost of revenue decreased $20 million, or 3%, to $539 million in the three months ended March 31, 2025 from $558 million in the three months ended March 31, 2024. The largest driver of the decrease was a reduction in license expense due to decreased usage between periods. Usage charges for third-party infrastructure also declined, consistent with the decrease in revenue. Also contributing to the overall reduction in cost of revenue was a decline in personnel costs, driven by a decrease in headcount between periods, and data center expense as a result of continued optimization initiatives.
Current wording
Cost of revenue decreased $36 million, or 3%, to $1,076 million in the six months ended June 30, 2025 from $1,112 million in the six months ended June 30, 2024. The largest driver of the decrease was a reduction in usage charges for third-party infrastructure, consistent with the decrease in revenue. Also contributing to the overall decrease in cost of revenue was a reduction in license expense, due to decreased usage between periods, and a reduction in data center expense as a result of continued optimization initiatives. Personnel costs declined, to a lesser extent, driven by a decrease in headcount between periods.
Previous wording
Selling, general and administrative expenses decreased $27 million, or 14%, to $165 million in the three months ended March 31, 2025 from $192 million in the three months ended March 31, 2024, driven by a $9 million early termination fee associated with the sale of our corporate headquarters in the first quarter of 2024. Other cost fluctuations between periods included a reduction in depreciation and amortization expense and personnel costs. Personnel costs decreased primarily due to a decline in headcount between periods and a reduction in non-equity incentive compensation, partially offset by an increase in severance expense.
Current wording
Selling, general and administrative expenses decreased$58 million, or 15%, to $320 million in the six months ended June 30, 2025 from $378 million in the six months ended June 30, 2024, primarily due to a reduction in personnel costs. The decrease in personnel costs was largely due to a decline in headcount between periods and a reduction in share-based compensation and non-equity incentive compensation. Also driving the overall decrease in selling, general and administrative expenses was a $9 million early termination fee associated with the sale of our corporate headquarters in the first quarter of 2024.
Previous wording
As a percentage of revenue, selling, general and administrative expenses decreased 310 basis points, to 24.8% in the three months ended March 31, 2025 from 27.9% in the three months ended March 31, 2024 for the reasons discussed above.
Current wording
As a percentage of revenue, selling, general and administrative expenses decreased 350 basis points, to 24.0% in the six months ended June 30, 2025 from 27.5% in the six months ended June 30, 2024 for the reasons discussed above.
Previous wording
In connection with the March 2024 Refinancing Transactions that were completed in March and April 2024, as further described in Item 1 of Part I, Financial Statements - Note 7, “Debt", we updated our internal forecasts. As of February 29, 2024, we assessed our Board of Directors approved 2024 internal budget along with several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of our current and forecasted operating margins and cash flows, budgeted-to-actual performance, timing of the expected effects of our strategic initiatives, overall change in economic climate, changes in the industry and competitive environment, changes to our risk-adjusted discount rates and earnings quality and sustainability. After considering all available evidence in our evaluation of goodwill impairment indicators, we determined it appropriate to perform an interim quantitative assessment of our reporting units as of February 29, 2024. The results of this goodwill impairment analysis indicated an impairment of goodwill within our Public Cloud and Private Cloud reporting units of $385 million and $188 million, respectively, recorded in the first quarter of 2024.
Current wording
In connection with the March 2024 Refinancing Transactions that were completed in March and April 2024, as further described in Item 1 of Part I, Financial Statements - Note 7, "Debt", we updated our internal forecasts. As of February 29, 2024, we assessed our Board of Directors approved 2024 internal budget along with several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of our current and forecasted operating margins and cash flows, budgeted-to-actual performance, timing of the expected effects of our strategic initiatives, overall change in economic climate, changes in the industry and competitive environment, changes to our risk-adjusted discount rates and earnings quality and sustainability. After considering all available evidence in our evaluation of goodwill impairment indicators, we determined it appropriate to perform an interim quantitative assessment of our reporting units as of February 29, 2024. The results of this goodwill impairment analysis indicated an impairment of goodwill within our Public Cloud and Private Cloud reporting units of $385 million and $188 million, respectively, recorded in the six months ended June 30, 2024.
Previous wording
There was no such impairment in the first quarter of 2025.
Current wording
There was no such impairment in thesix months ended June 30, 2025.
Previous wording
We evaluated our indefinite-lived intangible asset for impairment as of February 29, 2024. As a result of this evaluation, we recorded a $20 million impairment of our indefinite-lived intangible asset in the first quarter of 2024.
Current wording
We evaluated our indefinite-lived intangible asset for impairment as of February 29, 2024. As a result of this evaluation, we recorded a$20 million impairment of our indefinite-lived intangible asset in the six months ended June 30, 2024.
Previous wording
There was no such impairment in the first quarter of 2025.
Current wording
There was no such impairment in thesix months ended June 30, 2025.
Previous wording
Interest expense decreased $24 million, or 56%, to $19 million in the three months ended March 31, 2025 from $44 million in the three months ended March 31, 2024, primarily due to the accounting for contractual interest payments on debt instruments entered into as part of the March 2024 Refinancing Transactions, portions of which are recorded as a reduction of related premiums and not as interest expense, which reduces interest expense relative to contractual interest cost.
Current wording
Interest expense decreased $21 million, or 34%, to $41 million in the six months ended June 30, 2025 from $62 million in the six months ended June 30, 2024, primarily due to the accounting for contractual interest payments on debt instruments entered into as part of the March 2024 Refinancing Transactions, portions of which are recorded as a reduction of related premiums and not as interest expense, which reduces interest expense relative to contractual interest cost.
Previous wording
We recorded a $57 million gain on debt extinguishment, net of debt modification costs in the three months ended March 31, 2024 related to the March 2024 Refinancing Transactions.
Current wording
We recorded an $80 million gain on debt extinguishment, net of debt modification costs in the six months ended June 30, 2024 related to the March 2024 Refinancing Transactions. In addition, we recorded a $49 million total gain on debt extinguishment related to repurchases of an aggregate $68 million principal amount of 3.50% FLSO Senior Secured Notes, FLSO Term Loan Facility, and 5.375% Senior Notes during the six months ended June 30, 2024.
Previous wording
The following table presents, by segment, actual and constant currency revenue and constant currency revenue growth rates, for and between the periods indicated:
Current wording
The following tables present, by segment, actual and constant currency revenue and constant currency revenue growth rates, for and between the periods indicated:
Previous wording
Net loss reconciliation to Non-GAAP Net Loss
Current wording
Net income (loss) reconciliation to Non-GAAP Net Loss
Previous wording
Net loss reconciliation to Adjusted EBITDA
Current wording
Net income (loss) reconciliation to Adjusted EBITDA
Previous wording
We define Non-GAAP Earnings (Loss) Per Share as Non-GAAP Net Income (Loss) divided by our GAAP weighted average number of shares outstanding for the period on a diluted basis and further adjusted for the weighted average number of shares associated with securities which are anti-dilutive to GAAP loss per share but dilutive to Non-GAAP Earnings (Loss) Per Share. Management uses Non-GAAP Earnings (Loss) Per Share to evaluate the performance of our business on a comparable basis from period to period, including by adjusting for the impact of the issuance of shares that would be dilutive to Non-GAAP Earnings (Loss) Per Share. The following table reconciles Non-GAAP Loss Per Share to our GAAP net loss per share on a diluted basis:
Current wording
We define Non-GAAP Earnings (Loss) Per Share as Non-GAAP Net Income (Loss) divided by our GAAP weighted average number of shares outstanding for the period on a diluted basis and further adjusted for the weighted average number of shares associated with securities which are anti-dilutive to GAAP loss per share. Management uses Non-GAAP Earnings (Loss) Per Share to evaluate the performance of our business on a comparable basis from period to period, including by adjusting for the impact of the issuance of shares. The following table reconciles Non-GAAP Loss Per Share to our GAAP net earnings (loss) per share on a diluted basis:
Previous wording
We primarily finance our operations and capital expenditures with internally-generated cash from operations and hardware leases, and if necessary, borrowings under the New Revolving Credit Facility. As of March 31, 2025, the New Revolving Credit Facility provided for up to $375 million of borrowings, $30 million of which was drawn and outstanding as of March 31, 2025. Our primary uses of cash are working capital requirements, debt service requirements and capital expenditures. Based on our current level of operations and available cash, we believe our sources will provide sufficient liquidity over at least the next twelve months. We cannot provide assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available to us under the New Revolving Credit Facility or from other sources in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. Our ability to do so depends on prevailing economic conditions and other factors, many of which are beyond our control. In addition, upon the occurrence of certain events, such as a change of control, we could be required to repay or refinance our indebtedness. We cannot assure that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. Any future acquisitions, joint ventures or other similar transactions will likely require additional capital, and there can be no assurance that any such capital will be available to us on acceptable terms or at all.
Current wording
We primarily finance our operations and capital expenditures with internally-generated cash from operations and hardware leases, and if necessary, borrowings under the New Revolving Credit Facility. As of June 30, 2025, the New Revolving Credit Facility provided for up to $375 million of borrowings, $65 million of which was drawn and outstanding as of June 30, 2025. Our primary uses of cash are working capital requirements, debt service requirements and capital expenditures. Based on our current level of operations and available cash, we believe our sources will provide sufficient liquidity over at least the next twelve months. We cannot provide assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available to us under the New Revolving Credit Facility or from other sources in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. Our ability to do so depends on prevailing economic conditions and other factors, many of which are beyond our control. In addition, upon the occurrence of certain events, such as a change of control, we could be required to repay or refinance our indebtedness. We cannot assure that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. Any future acquisitions, joint ventures or other similar transactions will likely require additional capital, and there can be no assurance that any such capital will be available to us on acceptable terms or at all.
Previous wording
At March 31, 2025, we held $128 million in cash and cash equivalents (not including $3 million in restricted cash, which is included in "Other non-current assets"), of which $102 million was held by foreign entities.
Current wording
At June 30, 2025, we held $104 million in cash and cash equivalents (not including $2 million in restricted cash, which is included in "Other non-current assets"), of which $74 million was held by foreign entities.
Previous wording
We have entered into installment payment arrangements with certain equipment and software vendors, along with sale-leaseback arrangements for equipment and certain property leases that are considered financing obligations. We had $49 million outstanding with respect to these arrangements as of March 31, 2025. We may choose to utilize these various sources of funding in future periods.
Current wording
We have entered into installment payment arrangements with certain equipment and software vendors, along with sale-leaseback arrangements for equipment and certain property leases that are considered financing obligations. We had $44 million outstanding with respect to these arrangements as of June 30, 2025. We may choose to utilize these various sources of funding in future periods.
Previous wording
We also lease certain equipment and real estate under operating and finance lease agreements. We had $492 million outstanding with respect to operating and finance lease agreements as of March 31, 2025. We may choose to utilize such leasing arrangements in future periods.
Current wording
We also lease certain equipment and real estate under operating and finance lease agreements. We had $476 million outstanding with respect to operating and finance lease agreements as of June 30, 2025. We may choose to utilize such leasing arrangements in future periods.
Previous wording
As of March 31, 2025, we had $2,444 million aggregate principal amount outstanding under the FLSO Term Loan Facility, the FLFO Term Loan Facility, the Term Loan Facility, 3.50% FLSO Senior Secured Notes,5.375% Senior Notes, and 3.50% Senior Secured Notes. The New Revolving Credit Facility provides for up to $375 million of borrowings, $30 million of which was drawn and outstanding as of March 31, 2025. Our liquidity requirements are significant, primarily due to debt service requirements.
Current wording
As of June 30, 2025, we had $2,439 million aggregate principal amount outstanding under the FLSO Term Loan Facility, the FLFO Term Loan Facility, the Term Loan Facility, 3.50% FLSO Senior Secured Notes,5.375% Senior Notes, and 3.50% Senior Secured Notes. The New Revolving Credit Facility provides for up to $375 million of borrowings, $65 million of which was drawn and outstanding as of June 30, 2025. Our liquidity requirements are significant, primarily due to debt service requirements.
Previous wording
As of March 31, 2025, the contractual interest rate on the FLSO Term Loan Facility was 7.19%. We are required to make quarterly principal payments of $4 million, which began on March 31, 2024.
Current wording
As of June 30, 2025, the contractual interest rate on the FLSO Term Loan Facility was 7.18%. We are required to make quarterly principal payments of $4 million, which began on March 31, 2024.
Previous wording
As of March 31, 2025, $1,623 million in aggregate principal amount of the FLSO Term Loan Facility remained outstanding.
Current wording
As of June 30, 2025, $1,618 million in aggregate principal amount of the FLSO Term Loan Facility remained outstanding.
Previous wording
As of March 31, 2025, the contractual interest rate on the FLFO Term Loan Facility was 10.69%. We are required to make quarterly principal payments of $0.7 million, which began on June 30, 2024.
Current wording
As of June 30, 2025, the contractual interest rate on the FLFO Term Loan Facility was 10.68%. We are required to make quarterly principal payments of $0.7 million, which began on June 30, 2024.
Previous wording
As of March 31, 2025, we had total commitments of $375 million, $30 million of outstanding borrowings under the New Revolving Credit Facility, and $24 million of letters of credit issued thereunder. As such, as of March 31, 2025, we had $345 million of available commitments remaining.
Current wording
As of June 30, 2025, we had total commitments of $375 million, $65 million of outstanding borrowings under the New Revolving Credit Facility, and $24 million of letters of credit issued thereunder. As such, as of June 30, 2025, we had $310 million of available commitments remaining.
Previous wording
Interest on the Term Loan Facility is due at the end of each interest period elected, not exceeding 90 days, for SOFR loans and at the end of every calendar quarter for base rate loans. As of March 31, 2025, the contractual interest rate on the Term Loan Facility was 7.19%. We are required to make quarterly amortization payments of $0.2 million. The Revolving Credit Facility included a commitment fee equal to 0.50% per annum in respect of the unused commitments that was due quarterly. This fee was subject to one step-down based on the net first lien leverage ratio. The Senior Facilities require us to make certain mandatory prepayments under certain conditions defined in the First Lien Credit Agreement.
Current wording
Interest on the Term Loan Facility is due at the end of each interest period elected, not exceeding 90 days, for SOFR loans and at the end of every calendar quarter for base rate loans. As of June 30, 2025, the contractual interest rate on the Term Loan Facility was 7.18%. We are required to make quarterly amortization payments of $0.2 million. The Revolving Credit Facility included a commitment fee equal to 0.50% per annum in respect of the unused commitments that was due quarterly. This fee was subject to one step-down based on the net first lien leverage ratio. The Senior Facilities require us to make certain mandatory prepayments under certain conditions defined in the First Lien Credit Agreement.
Previous wording
As of March 31, 2025, $62 million aggregate principal amount of the Term Loan Facility remained outstanding and the prior Revolving Credit Facility was replaced in full by the New Revolving Credit Facility. See Item 1 of Part I, Financial Statements - Note 7, “Debt,” for more information regarding our Senior Facilities.
Current wording
As of June 30, 2025, $61 million aggregate principal amount of the Term Loan Facility remained outstanding and the prior Revolving Credit Facility was replaced in full by the New Revolving Credit Facility. See Item 1 of Part I, Financial Statements - Note 7, “Debt,” for more information regarding our Senior Facilities.
Previous wording
Our "consolidated EBITDA," as defined under our debt instruments, is calculated in the same manner as our Adjusted EBITDA, presented elsewhere in this report, except that our debt instruments allow us to adjust for additional items, including certain start-up costs, and to give pro forma effect to acquisitions, including resulting synergies, and internal cost savings initiatives. In addition, under the Indentures, the calculation of consolidated EBITDA does not take into account substantially any changes in GAAP subsequent to the date of issuance, whereas under the New Senior Facilities and Senior Facilities the calculation of consolidated EBITDA takes into account the impact of certain changes in GAAP subsequent to December 1, 2020 other than with respect to capital leases.
Current wording
Our "consolidated EBITDA," as defined under our debt instruments, is calculated in the same manner as our Adjusted EBITDA, presented elsewhere in this report, except that our debt instruments allow us to adjust for additional items, including certain start-up costs, and to give pro forma effect to acquisitions, including resulting synergies, and internal cost savings initiatives. In addition, under the Indentures, the calculation of consolidated EBITDA does not take into account any changes in GAAP subsequent to the date of issuance, whereas under the New Senior Facilities and Senior Facilities the calculation of consolidated EBITDA takes into account the impact of certain changes in GAAP subsequent to December 1, 2020 other than with respect to capital leases.
Previous wording
As of March 31, 2025, the New Credit Group had total assets of $2,931 million and total liabilities of $3,794 million, which included total debt of $2,558 million. The financial information for the New Credit Group differs from the financial information for the company and its consolidated subsidiaries primarily because Rackspace Technology Global has (i) debt that is not guaranteed by the New Credit Group, which debt was $229 million as of March 31, 2025, and (ii) Rackspace Technology Global is the party to the interest rate swap which had a net asset value of $19 million as of March 31, 2025.
Current wording
As of June 30, 2025, the New Credit Group had total assets of $2,870 million and total liabilities of $3,773 million, which included total debt of $2,571 million. The financial information for the New Credit Group differs from the financial information for the company and its consolidated subsidiaries primarily because Rackspace Technology Global has (i) debt that is not guaranteed by the New Credit Group, which debt was $229 million as of June 30, 2025, and (ii) Rackspace Technology Global is the party to the interest rate swap which had a net asset value of $14 million as of June 30, 2025.
Previous wording
Capital expenditures were $27 million in the three months ended March 31, 2025, compared to $46 million in the three months ended March 31, 2024, a decrease of $19 million. The decrease in capital expenditures was driven by an internal focus on optimizing current inventory of assets, purchases of gear early last year to support several large healthcare deals, and lower capital requirements on recent deals.
Current wording
Capital expenditures were $58 million in the six months ended June 30, 2025, compared to $79 million in the six months ended June 30, 2024, a decrease of $21 million. The decrease in capital expenditures was driven by an internal focus on optimizing current inventory of assets, purchases of gear during the first half of 2024 to support several large healthcare deals, and lower capital requirements on recent deals.
Previous wording
Net cash provided by operating activities was $13 million in the three months ended March 31, 2025 compared to$90 million of net cash used in operating activities in the three months ended March 31, 2024. The increase in operating cash between periods was primarily driven by a decrease of $58 million of cash paid for operating expenses in the first quarter of 2025 compared to the first quarter of 2024. Additionally, in the first quarter of 2024, $28 million in third party fees were paid in connection with the March 2024 Refinancing Transactions and a $9 million early termination fee associated with the sale of our corporate headquarters was paid. There were no similar one time fees paid in the first quarter of 2025.
Current wording
Net cash provided by operating activities was $21 million in the six months ended June 30, 2025 compared to$66 million of net cash used in operating activities in the six months ended June 30, 2024. The increase in operating cash between periods was primarily driven by a decrease of $22 million of cash paid for operating expenses in thesix months ended June 30, 2025 compared to thesix months ended June 30, 2024. Additionally, there was an increase in cash proceeds related to accounts receivable soldof $28 million in thesix months ended June 30, 2025 compared to a decrease of $18 million in thesix months ended June 30, 2024. Lastly, in thesix months ended June 30, 2024, $32 million in third party fees were paid in connection with the March 2024 Refinancing Transactions and a $9 million early termination fee associated with the sale of our corporate headquarters was paid. There were no similar one time fees paid inthe six months ended June 30, 2025. These increases in cash from operating activities were partially offset by a reduction in cash receipts from customers between periods.
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Rearranged current paragraphs (17)
Current report — wording carried from elsewhere
Cost of revenue decreased $16 million, or 3%, to $537 million in the three months ended June 30, 2025 from $554 million in the three months ended June 30, 2024. The largest driver of the decrease was a reduction in usage charges for third-party infrastructure, consistent with the decrease in revenue. Also contributing to the overall reduction in cost of revenue was a decline in personnel costs, driven by a decrease in headcount between periods and a reduction in severance expense, and data center expense as a result of continued optimization initiatives.
Current report — wording carried from elsewhere
The following table sets forth our results of operations for the specified periods, as well as changes between periods and as a percentage of revenue for those same periods (totals in table may not foot due to rounding):
Current report — wording carried from elsewhere
Revenue decreased $44 million, or 3.2%, to $1,332 million in the six months ended June 30, 2025 from $1,376 million in the six months ended June 30, 2024. Revenue declined due to decreases in both Private Cloud and Public Cloud revenue, as discussed below.
Current report — wording carried from elsewhere
After removing the impact from foreign currency fluctuations, on a constant currency basis, revenue decreased 3.3% year-over-year. The following table presents revenue by segment:
Current report — wording carried from elsewhere
(a) Refer to "Non-GAAP Financial Measures" in this section for further explanation and reconciliation.
Current report — wording carried from elsewhere
Loss from Operations, Segment Operating Profit, and Non-GAAP Operating Profit
Current report — wording carried from elsewhere
The table below presents a reconciliation of loss from operations to Non-GAAP Operating Profit.
Current report — wording carried from elsewhere
Our segment operating profit and segment operating margin for the periods indicated, and the change between periods is shown in the table below:
Current report — wording carried from elsewhere
Public Cloud operating profit increased 77% in the six months ended June 30, 2025 from the six months ended June 30, 2024. Segment operating profit as a percentage of segment revenue increased by 180 basis points, reflecting a 4% decrease in segment operating expenses, partially offset by a 2% decrease in segment revenue. The decrease in expenses was mainly driven by operational improvements and cost optimization initiatives executed during 2024.
Current report — wording carried from elsewhere
Private Cloud operating profit decreased 12% in the six months ended June 30, 2025 from the six months ended June 30, 2024. Segment operating profit as a percentage of segment revenue decreased by 200 basis points, due to a 6% decrease in segment revenue, partially offset by a 3% decrease in segment operating expenses. The decrease in expenses was mainly driven by cost optimization activities executed throughout 2024.
Current report — wording carried from elsewhere
Centralized corporate functions that provide services to the segments in areas such as accounting, information technology, marketing, legal and human resources are not allocated to the segments and are included in "corporate functions" in the table above. This expense decreased 17% in the six months ended June 30, 2025 from the six months ended June 30, 2024 due to our continued focus on cost management.
Current report — wording carried from elsewhere
For more information about our segment operating profit, see Item 1 of Part I, Financial Statements - Note 13, "Segment Reporting."
Current report — wording carried from elsewhere
Gain on Debt Extinguishment, Net of Debt Modification Costs
Current report — wording carried from elsewhere
For more information, see Item 1 of Part I, Financial Statements - Note 7, "Debt."
Current report — wording carried from elsewhere
We had $9 millionand$11 million of other expense in the six months ended June 30, 2025 and 2024, respectively. This line item is primarily comprised ofexpense related to our accounts receivable purchase agreement.
Current report — wording carried from elsewhere
For more information, see Item 1 of Part I, Financial Statements - Note 3, "Sale of Receivables."
Current report — wording carried from elsewhere
Our income tax expense was $13 million in the six months ended June 30, 2025 compared to a $35 million income tax benefit in the six months ended June 30, 2024. Our effective tax rate decreased to (11.3)% in the six months ended June 30, 2025 from 5.3% in the six months ended June 30, 2024. The decrease in the effective tax rate year-over-year is primarily due to the tax impact associated with changes in the valuation allowance, geographic distribution of profits, the tax impact associated with goodwill impairments recorded in the first quarter of 2024, the majority of which were nondeductible for income tax purposes, and the income tax benefit related to the March 2024 Refinancing Transactions. The difference between the effective tax rate and the statutory rate for the six months ended June 30, 2025 is primarily due to the tax impact associated with changes in valuation allowance, executive compensation that is non-deductible under IRC Section 162(m), the net impact of the geographic distribution of our earnings, and tax effects from non-deductible share-based compensation.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
In connection with the debt refinancing transactions that were completed in March and April 2024, as further described in Item 1 of Part I, Financial Statements - Note 7, “Debt”, we updated our internal forecasts. Our updated internal forecasts considered our year-to-date operating performance, current customer bookings and revised expectations based on current performance, revisions to our expected growth and timing of such growth based on current and expected performance, current customer retention rates, revisions to the timing of the expected effects of our strategic initiatives and overall related risks, including macroeconomic factors, to achieving our forecasts. Our Board of Directors reviewed and approved our internal budget for fiscal year 2024 on February 28, 2024. As of February 29, 2024, we assessed our Board of Directors approved 2024 internal budget along with several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of our current and forecasted operating margins and cash flows, budgeted-to-actual performance, timing of the expected effects of our strategic initiatives, overall change in economic climate, changes in the industry and competitive environment, changes to our risk-adjusted discount rates and earnings quality and sustainability. After considering all available evidence in our evaluation of goodwill impairment indicators, we determined it appropriate to perform an interim quantitative assessment of our reporting units as of February 29, 2024.