What changed in this filing

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Item 1A. Risk Factors

2022-03-01 compared with 2021-02-26 · 116 added, 109 removed, 681 unchanged (25% of the section changed)

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Moreover, we may face difficulty retaining existing customers over the long term.

Certain customer contracts, particularly within our Multicloud Services segment, typically have initial terms (typically from 12 to 36 months) and, unless terminated, may be renewed or automatically extended on a month-to-month basis.

Our customers have no obligation to renew their services after their initial contract periods expire and any termination fees associated with an early termination may not be sufficient to recover our costs associated with such contracts.

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Our overall performance depends in part on worldwide economic and geopolitical conditions.

The United States (the “U.S.”), the United Kingdom (the “U.K.”) and other key international economies have experienced cyclical downturns from time to time in which economic activity was impacted by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies and overall uncertainty with respect to the economy.

The U.S., the U.K.

and other key international economies have experienced cyclical downturns from time to time in which economic activity was impacted by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies and overall uncertainty with respect to the economy.

These economic conditions can arise suddenly and the full impact of such conditions can remain uncertain.

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Any of these effects could have a material and adverse impact on our business, financial condition and results of operations.

The recent outbreak of a novel strain of coronavirus, now referred to as COVID-19, has spread, and continues to spread, globally and the World Health Organization declared the outbreak to constitute a “pandemic” in March 2020.

The outbreak of a novel strain of coronavirus, referred to as COVID-19, has spread globally, including within the U.S., and resulted in the World Health Organization declaring the outbreak a “pandemic” in March 2020, with variant strains of the virus continuing to be identified globally.

Currently, COVID-19 has not had a significant impact on our operations or financial performance;

however, the extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, changes in governmental regulation in response to the virus, impact on our customers and our sales cycles, impact on our customer, employee or industry events and effect on our vendors, all of which are uncertain and cannot be predicted.

For example, in response to the COVID-19 pandemic, we have shifted to a work from home environment for all employees whose presence in the office is nonessential.

and if we continue to do so for extended periods of time, we may not meet our on-going employment commitments under certain economic incentive agreements which may result in our losing future tax benefits and having to repay certain tax benefits already received.

however, the ultimate extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, changes in governmental regulation in response to the virus, the pace of economic recovery, the possible resurgence in the spread of the virus or any variant strain(s) of the virus, advances in testing, treatment, and prevention, including the efficacy and availability of vaccines, its impact on our customers, vendors and employees and its impact on our sales cycles as well as industry events, all of which are uncertain and cannot be predicted.

For example, in response to the COVID-19 pandemic, many of our facilities have shifted to a work from home environment for employees whose presence in the office is nonessential and if we continue to do so for extended periods of time, we may not meet our on-going employment commitments under certain economic incentive agreements which may result in our losing future tax benefits and having to repay certain tax benefits already received.

In addition, we have and may in the future continue to postpone or cancel customer, employee or industry events, which could impact our brand visibility and our ability to obtain new customers.

Moreover, any deterioration in economic conditions resulting from the COVID-19 pandemic can affect the rate of IT spending, and any reductions may fall disproportionately on outsourced and cloud-based solutions like ours.

In addition, impacts of the COVID-19 pandemic may be exacerbated by the disproportionate impact it is having on the small and medium-size businesses that make a large portion of our customer base, many of which may be forced to shut down or limit operations for an indefinite period of time.

Economic weakness, customer financial difficulties and constrained spending on IT operations could adversely affect our customers’ ability or willingness to purchase our service offerings, delay purchasing decisions and lengthen our sales cycles, reduce the value or duration of their subscription contracts, or increase churn, all of which could have a material and adverse effect on our sales and operating results.

In addition, impacts of the COVID-19 pandemic may be exacerbated by the disproportionate impact it is having on small and medium businesses that make a large portion of our customer base, many of which may be forced to shut down or limit operations for an indefinite period of time.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to our high level of indebtedness, our need to generate sufficient cash flows to service our indebtedness and our ability to comply with the covenants contained in the agreements that govern our indebtedness.

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Any failure to successfully execute our strategies, including any failure to invest in strategic growth areas, could adversely affect our business, financial condition and results of operations.

We may not realize any or all of our estimated cost savings, which would have a negative effect on our results of operations.

On July 21, 2021, we committed to the July 2021 Restructuring Plan which will drive a change in the type and location of certain positions and is expected to result in the termination of approximately 10% of our workforce.

Any cost savings that we realize from such efforts may differ materially from our estimates.

The estimates contained herein are our current estimates, but they involve risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such estimates.

In addition, any cost savings that we realize may be offset, in whole or in part, by reductions in revenues, or through increases in other expenses.

Our cost savings plans are subject to numerous risks and uncertainties that may change at any time.

We cannot assure you that cost-savings initiatives will be completed as anticipated or that the benefits we expect will be achieved on a timely basis or at all.

Our strategies require significant investments that may adversely affect our near-term revenue growth and results of operations.

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Our period-to-period results of operations are not necessarily an indication of our future operating performance.

Similarly, our Bookings, Annualized Recurring Revenue and Quarterly Net Revenue Retention Rate metrics may not provide an accurate indication of our future or expected results of operations.

Similarly, our Bookings and ARR metrics may not provide an accurate indication of our future or expected results of operations.

For instance, we expect that Bookings could fluctuate significantly on a quarterly basis based on the timing of one or more customer purchase decisions, which we cannot control, and which makes it difficult for us to accurately predict Bookings for any future period.

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Our key operating metrics are subject to assumptions and limitations and may not provide an accurate indication of our future or expected results.

Our key operating metrics, including Bookings, Annualized Recurring Revenue ("ARR") and Quarterly Net Revenue Retention Rate, are based on numerous assumptions and limitations, are calculated using our internal data that have not been independently verified by third parties and may not provide an accurate indication of our future or expected results.

Our key operating metrics, including Bookings and ARR, are based on numerous assumptions and limitations, are calculated using our internal data that have not been independently verified by third parties and may not provide an accurate indication of our future or expected results.

For instance, our Bookings metric is calculated by annualizing the monthly value of recurring customer contracts entered into during a period and adding the actual (not annualized) estimated value of professional services consulting, advisory or project-based orders received during the period, but does not reflect actual or anticipated contract non-renewals or service cancellations (which we do not report), and to the extent we experience such contract non-renewals or service cancellations, will not result in revenue in future periods.

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As a result, the assumptions used in calculating Bookings are subject to several limitations.

Annualized Recurring Revenue is a historical measure that annualizes our revenue for a previously completed fiscal quarter and therefore is not a reliable indicator of our future or expected results, and Annualized Recurring Revenue also does not reflect any actual or anticipated reductions in revenue due to contract non-renewals or service cancellations.

Quarterly Net Revenue Retention Rate may fluctuate from quarter to quarter based on the customers that qualify to be included in the cohort used to calculate the metric.

ARR is a historical measure that annualizes our revenue for a previously completed fiscal quarter and therefore is not a reliable indicator of our future or expected results, and ARR also does not reflect any actual or anticipated reductions in revenue due to contract non-renewals or service cancellations.

As a result, our key operating metrics may not reflect our actual performance, and investors should consider each one of our key operating metrics in light of the assumptions used in calculating the metric and limitations as a result thereof.

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• adopt more aggressive pricing policies and devote greater resources to the promotion, marketing and sales of their services, which could cause us to have to lower prices for certain services to remain competitive in the market;

• devote greater resources to the research and development of their products and services.

• devote greater resources to the R&D of their products and services.

To the extent we face increased price competition, we may have to lower the prices of certain of our services in the future to stay competitive, while simultaneously seeking to maintain or improve our revenue and gross margin.

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We also receive payments and credits from some of our referral and reseller partners, including consideration under volume incentive programs and shared marketing expense programs.

Our referral and reseller partners may decide to terminate or reduce the benefits under their incentive programs, or change the conditions under which we may obtain such benefits.

Our referral and reseller partners may decide to terminate or reduce the benefits under their incentive programs, or change the conditions under which we may obtain such benefits, and we may fail to achieve the volumes on which our forecasts for incentive payments and credits are based.

Any sizable reduction, termination or significant delay in receiving benefits under these programs could adversely impact our business, financial condition and results of operations.

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Our ability to execute on our sales strategy is also dependent on our ability to identify, hire, train and retain a sufficient number of qualified sales personnel.

There is a shortage of qualified personnel in these fields.

There is a shortage of qualified personnel in these fields, and like many other companies we have recently encountered additional challenges in hiring and retaining qualified personnel.

We compete with other companies for this limited pool of potential employees.

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In addition, the industry in which we operate is generally characterized by significant competition for skilled personnel, and as our industry becomes more competitive, it could become especially difficult to retain personnel with unique in-demand skills and knowledge, whom we would expect to become recruiting targets for our competitors.

There is no assurance that we will be able to recruit or retain qualified personnel or successfully transition knowledge from departing employees, and this failure could cause a dilution of our service-oriented culture and our inability to develop and deliver new services, which could cause our business to be negatively impacted.

There is no assurance that we will be able to recruit or retain qualified personnel or successfully transition knowledge from departing employees, and this failure could cause a dilution of our service-oriented culture and our inability to develop and deliver existing or new operations and services, which could cause our business to be negatively impacted.

Security breaches, cyber-attacks and other interruptions to our or our third-party service providers’ infrastructure may disrupt our internal operations and we may be exposed to claims and liability, lose customers, suffer harm to our reputation, lose business-critical compliance certifications and incur additional costs.

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Additionally, other disruptions can occur, such as infrastructure gaps, hardware and software vulnerabilities, inadequate or missing security controls, exposed or unprotected customer data and the accidental or intentional disclosure of source code or other confidential information by former or current employees.

Any such incidents could (i) interfere with the delivery of services to our customers, (ii) impede our customers’ ability to do business, (iii) compromise the security of infrastructure, systems and data, (iv) lead to the dissemination to third parties of proprietary information or sensitive, personal, or confidential data about us, our employees or our customers, including personally identifiable information of individuals involved with our

customers and their end users and (v) impact our ability to do business in the ordinary course.

Each of these risks could further intensify as we maintain information in digital form stored on servers connected to the Internet, especially in light of the growing frequency, scope and well-documented sophistication of cyber-attacks and intrusions.

If a breach or other security incident were to occur, it could expose us to increased risk of claims and liability, including litigation, regulatory enforcement, notification obligations and indemnity obligations, as well as loss of existing or potential customers, harm to our reputation, increases in our security costs (including spending material resources to investigate or correct the breach or incident and to prevent future security breaches and incidents), disruption of normal business operations, the impairment or loss of industry certifications and government sanctions (including debarment), all of which could have a material and adverse effect on our business, financial condition and results of operations.

Some of our systems or vendors’ systems have experienced past security breaches, and, although they did not have a material adverse effect on our operating results, there can be no assurance of a similar result in the future.

our security costs (including spending material resources to investigate or correct the breach or incident and to prevent future security breaches and incidents), disruption of normal business operations, the impairment or loss of industry certifications and government sanctions (including debarment), all of which could have a material and adverse effect on our business, financial condition and results of operations.

The security of our services is important in our customers’ decisions to purchase or use our services.

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however, notwithstanding our contractual right to do so, raising prices may decrease the demand for our services, cause customers to terminate their existing relationships with us or limit our ability to attract new customers.

Our attempts to otherwise mitigate cost increases or achieve cost reductions can also cause disruptions and operational impacts in the near- and medium-term, including increased costs and distraction of management attention.

Our services depend in part on intellectual property and proprietary rights and technology licensed from third parties.

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Sales to enterprise customers involve risks that may not be present in or that are present to a greater extent than sales to smaller entities.

We continue to focus our sales efforts on enterprise customers.

We continue to focus a significant portion of our sales efforts on enterprise customers.

Sales to such customers generally have longer sales cycles, more complex customer requirements, substantial upfront sales costs and contract terms that are less favorable to us, including as it relates to pricing and limitations on liability.

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We also believe that the importance of brand recognition will increase as competition in our market increases.

In June 2020, we undertook a comprehensive rebranding effort, changing the legacy “Rackspace” brand to “Rackspace Technology”, which better communicates our enhanced value proposition to customers.

Successfully maintaining, enhancing and protecting our brand will depend largely on the effectiveness of our marketing efforts, our ability to provide reliable services that continue to meet the needs of our customers at competitive prices, our ability to maintain our customers’ trust, our ability to successfully differentiate our services and platform capabilities from competitive services and our ability to obtain, maintain, protect and enforce trademark and other intellectual property protection for our brand.

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The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability.

Legal, political and economic uncertainty surrounding the planned exit of the U.K.

from the European Union (the “E.U.”), or Brexit, could have a material and adverse effect on our business.

Legal, political and economic uncertainty surrounding the exit of the U.K.

from the E.U., or Brexit, could have a material and adverse effect on our business.

In June 2016, U.K.

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occurred on January 31, 2020, but the U.K.

remained in the E.U.’s customs union and single market until December 31, 2020 (the “Transition Period”).

During the Transition Period, the E.U.

conducted negotiations on trade as well as other matters relating to Brexit.

remained in the E.U.’s customs union and single market until December 31, 2020.

In late December 2020, the U.K.

agreed to a new trade agreement (the EU-UK Trade & Co-operation Agreement, or the “Trade Agreement”) to govern their relationship after the Transition Period.

agreed to a new trade agreement (the EU-UK Trade and Cooperation Agreement, or the “Trade Agreement”) to govern their relationship.

We have operations in the U.K.

and, as a result, we face risks associated with the uncertainty and disruptions as a consequence of Brexit that naturally arise from or have not been resolved by the Trade Agreement.

and, as a result, we face risks associated with the uncertainty and disruptions as a consequence of Brexit that naturally arise from the Trade Agreement.

These include increased cross-border checks and required customs documentation with respect to the movement of goods between the U.K and the E.U., disruption to the labor supply between the U.K.

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has lost the benefits of global trade agreements negotiated by the E.U.

on behalf of its members, which therefore requires the U.K.

to agree separate trade agreements with other nations (e.g.

the United States) which is likely to result in increased trade barriers that could make our doing business globally more difficult.

on behalf of its members, and therefore has had and will have to negotiate separate trade agreements with other nations (e.g.

the U.S.) which is likely to result in greater complexity and uncertainty that could make our doing business globally more difficult.

There may continue to be economic uncertainty surrounding the consequences of Brexit that adversely impact customer confidence resulting in customers reducing their spending budgets on our solutions, which could harm our business.

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We do not own the facilities occupied by our current data centers but occupy them pursuant to commercial leasing arrangements.

The initial terms of our main existing data center leases expire over the next 18 years.

The initial terms of our main existing data center leases expire over t he next 17 years.

Upon the expiration or termination of our data center facility leases, we may not be able to renew these leases on terms acceptable to us, if at all.

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In many jurisdictions, enforcement actions and consequences for noncompliance are rising.

In the United States, these include enforcement actions in response to rules and regulations promulgated under the authority of federal agencies, state attorneys general and legislatures and consumer protection agencies.

In the U.S., these include enforcement actions in response to rules and regulations promulgated under the authority of federal agencies, state attorneys general and legislatures and consumer protection agencies.

In addition, security advocates and industry groups have regularly proposed, and may propose in the future, self-regulatory standards with which we must legally comply or that contractually apply to us.

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Internationally, virtually every jurisdiction in which we operate has established its own data security and privacy legal framework with which we or our customers must comply, including but not limited to the U.K.

The E.U.’s data protection landscape recently changed, resulting in possible significant operational costs for internal compliance and risk to our business.

has adopted the General Data Protection Regulation, or GDPR, which went into effect in May 2018, and together with national legislation, regulations and guidelines of the E.U.

has adopted the General Data Protection Regulation ("E.U.

GDPR"), which went into effect in May 2018, and together with national legislation, regulations and guidelines of the E.U.

member states, contains numerous requirements and changes from previously existing E.U.

law, including the increased jurisdictional reach of the European Commission, more robust obligations on data processors and additional requirements for data protection compliance programs by companies.

member states are tasked under the GDPR to enact, and have enacted, certain legislation that adds to and/or further interprets the GDPR requirements and potentially extends our obligations and potential liability for failing to meet such obligations.

Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to the U.S.

member states are tasked under the E.U.

GDPR to enact, and have enacted, certain legislation that adds to and/or further interprets the E.U.

GDPR requirements and potentially extends our obligations and potential liability for failing to meet such obligations.

Among other requirements, the E.U.

GDPR regulates transfers of personal data subject to the E.U.

GDPR to the U.S.

as well as other third countries that have not been found to provide adequate protection to such personal data.

While we have taken steps to mitigate the impact on us with respect to transfers of data, such as implementing standard contractual clauses, the efficacy and longevity of these transfer mechanisms remains uncertain.

The GDPR also introduced numerous privacy-related changes for companies operating in the E.U., including greater control for data subjects (for example, the “right to be

forgotten”), increased data portability for E.U.

consumers, data breach notification requirements and increased fines.

In particular, under the GDPR, fines of up to 20 million euros or 4% of the annual global revenue of the noncompliant company, whichever is greater, could be imposed for violations of certain of the GDPR’s requirements.

Following Brexit, the U.K.

enacted a Data Protection Act substantially implementing the GDPR and amended to align with the E.U.

It is unclear how U.K.

data protection laws or regulations will develop in the medium to longer term.

We must comply with the E.U.

GDPR and the U.K.

GDPR, with each regime having the ability to fine up to the greater of €20 million (in the case of the E.U.

GDPR) or £17 million (in the case of the U.K.

GDPR) and 4% of total annual revenue.

Such penalties are in addition to any civil litigation claims by customers and data subjects.

The GDPR requirements apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information.

Non-compliance with relevant data privacy laws, directives and regulations, such as the GDPR, could result in proceedings against us by governmental entities, customers, data subjects or others.

Non-compliance with relevant data privacy laws, directives and regulations, such as the E.U.

GDPR, could result in proceedings against us by governmental entities, customers, data subjects or others.

We may also experience difficulty retaining or obtaining new European or multi-national customers due to the legal requirements, compliance cost, potential risk exposure and uncertainty for these entities, and we may experience significantly increased liability with respect to these customers pursuant to the terms set forth in our engagements with them.

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States are also constantly amending existing laws, requiring attention to frequently changing regulatory requirements.

Further, California recently enacted the California Consumer Privacy Act, or CCPA, which took effect on January 1, 2020 and imposes obligations on companies that process personal information of California residents.

The CCPA was amended prior to going into effect, and it is possible that further amendments will be enacted, but even in its current form it remains unclear how various provisions of the CCPA will be interpreted and enforced.

Further, the California Consumer Privacy Act ("CCPA") took effect on January 1, 2020 and imposes obligations on companies that process personal information of California residents.

It remains unclear how various provisions of the CCPA will be interpreted and enforced.

Among other things, the CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used.

The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

The CCPA may increase our compliance costs and potential liability.

Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.

Other states have enacted or are considering enacting their own data privacy laws.

The CCPA and these other state laws may increase our compliance costs and potential liability.

Because the interpretation and application of many privacy and data protection laws along with contractually imposed industry standards are uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our services and platform capabilities.

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Reported matters also could lead to audits or investigations and other civil, criminal or administrative sanctions.

In addition, contracting with Federal government bodies may subject us to operational requirements or prohibitions which would increase our compliance costs or increase the risk of non-compliance.

The occurrences or conditions described above could affect not only our business with the government entities involved, but also our business with other entities of the same or other governmental bodies or with certain commercial clients and could have a material and adverse effect on our results of operations.

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While it is our policy to implement compliance procedures to prohibit these practices, our due diligence policy and the procedures we undertake may not sufficiently vet our third-party channel partners for these risks prior to entering into a contractual relationship with them.

As a result, despite our policies and any safeguards and any future improvements made to them, our employees, contractors, third-party channel partners and agents may engage in conduct for which we might be held responsible, regardless of whether such conduct occurs within or outside the United States.

We may also be held responsible for any violations by an acquired company that occurs prior to an acquisition, or subsequent to the acquisition but before we are able to institute our compliance procedures.

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Any failure to comply with applicable legal and regulatory trading obligations could result in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from governmental contracts, seizure of shipments and loss of import and export privileges.

For example, in 2017, prior to our acquisition of Datapipe Parent, Inc.

("Datapipe"), one of Datapipe’s European subsidiaries provided network interconnectivity and distributed denial of attack protection service to an Iranian entity subject to OFAC sanctions.

For example, in 2017, prior to our acquisition of Datapipe, one of Datapipe’s European subsidiaries provided network interconnectivity and distributed denial of attack protection service to an Iranian entity subject to OFAC sanctions.

Datapipe self-reported the instance to OFAC and we have taken remedial measures to safeguard against re-occurrence.

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We consume a large quantity of power to operate our data centers and as such are exposed to risk associated with fluctuations in the price of power.

Dur ing 2020, we incurred approximately $40 million in costs to power our data centers.

During 2021, we incurred ap proximately $44 million in costs to power our data centers.

We anticipate an increase in our consumption of power in the future if our private cloud sales grow.

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We have been subject to suits, and could be subject to suits in the future, by parties claiming infringement of intellectual property rights with respect to what we believe to be open source software.

Litigation could be costly for us to defend, and in such an event, we could be required to seek licenses from third parties to continue using such software or offering certain of our services or to discontinue the use of such software or the sale of our affected services in the event we could not obtain such licenses, any of which could adversely affect our business, financial condition and results of operations.

Litigation could be costly for us to defend, and in such an event, we could be required to seek licenses from third parties to continue using such software or offering certain of our services.

If we are unable to obtain a required license, we may have to discontinue the use of such software or the sale of our affected services, which could cause us to breach customer agreements and incur liability to customers.

The cost of obtaining such licenses, or the consequences of failing to obtain them, could adversely affect our business, financial condition and results of operations.

We also participate in open source projects, including contributing portions of our proprietary software code to such open source projects.

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We are a highly leveraged company.

As of December 31, 2020, we had $3,410.6 million face value of outstanding indebtedness, in additio n to $375.0 m illion of undrawn commitments under our senior secured first lien revolving credit facility (the “Revolving Credit Facility”) (without any letters of credit outstanding ).

Our outstanding indebtedness as of Dec ember 31, 2020 included $2,795.6 million of borrowings under our senior secured first lien term loan facility (the “Term Loan Facility” and, together with the Revolving Credit Facility, the “Senior Facilities”), $550.0 million of 5.375% Senior Notes due 2028 (the "5.375% Senior Notes") and $65.0 million of borrowings under the Receivables Financing Facility.

For the years ended December 31, 2019 and 2020, we made total debt service payments, consisting of required principal and interest payments, of approximately $280.6 million and $245.6 million, respectively, which represented 95.8% and 210.4%, respectively, of our cash flow from operations (or 51.5% and 73.7%, respectively, of our cash flow from operations calculated prior to any deductions for cash interest payments).

As of December 31, 2020 , on an as adjusted basis after giving effect to the February 2021 refinancing transactions, as discussed elsewhere in this report, we would have had $3,465.0 million face value of outstanding indebtedness (excluding capital leases and finance lease obligations), in addition to $375.0 million of undrawn commitments under the Revolving Credit Facility (without any letters of credit outstanding).

For the year ended December 31, 2020 , on an as adjusted basis after giving effect to the February 2021 refinancing transactions, we would have had total debt service payment obligations, consisting of required principal and interest payments, of approximately $167.9 million.

As of December 31, 2021, we had $3,382.8 million face value of outstanding indebtedness, in addition to $375.0 m illion of undrawn commitments under the Revolving Credit Facility (without any letters of credit outstanding).

Our outstanding indebtedness as of December 31, 2021 included $2,282.8 million of borrowings under the Term Loan Facility, $550.0 million of 5.375% Senior Notes and $550.0 million of 3.50% Senior Secured Notes.

For the years ended December 31, 2020 and 2021, w e made total debt service payments, consisting of required principal and interest payments, of approximately $245.6 million and $176.0 million, respectively, which represented 210.4% and 47.5%, respectively, of our cash flow from operations (or 73.7% and 34.2%, respectively, of our cash flow from operations calculated prior to any deductions for cash interest payments).

Our substantial indebtedness could have important consequences.

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• limit our ability to borrow money for our working capital, capital expenditures, debt service requirements, strategic initiatives or other purposes;

• make it more difficult for us to satisfy our obligations with respect to our indebtedness and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the indenture governing the 5.375% Senior Notes (the “5.375% Indenture”), the indenture governing the 3.50% Senior Secured Notes due 2028 (the "3.50% Indenture" and, together with the 5.375% Indenture, the "Indentures"), the credit agreement governing the Senior Facilities (the “First Lien Credit Agreement”) and agreements governing other indebtedness;

• require us to dedicate a substantial portion of our cash flow from operations to the payment of interest and the repayment of our indebtedness, thereby reducing funds available to us for other purposes;

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• limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds or dispose of assets;

• prevent us from raising the funds necessary to repurchase all 5.375% Senior Notes or 3.50% Senior Secured Notes due 2028 (the "3.50% Senior Secured Notes") tendered to us upon the occurrence of certain changes of control, which failure to repurchase would constitute an event of default under the 5.375% Indenture or the 3.50% Indenture, or refinance the Senior Facilities upon a change of control, which is an event of default under the First Lien Credit Agreement;

• expose us to the risk of increased interest rates, as certain of our borrowings, including borrowings under the Senior Facilities and the Receivables Financing Facility, are at variable rates of interest.

In addition, the First Lien Credit Agreement, the 5.375% Indenture and the 3.50% Indenture contain restrictive covenants that will limit our ability to engage in activities that may be in our long-term best interest.

• prevent us from raising the funds necessary to repurchase all 5.375% Senior Notes or 3.50% Senior Secured Notes tendered to us upon the occurrence of certain changes of control, which failure to repurchase would constitute an event of default under the 5.375% Notes Indenture or the 3.50% Notes Indenture, or refinance the Senior Facilities upon a change of control, which is an event of default under the First Lien Credit Agreement;

• expose us to the risk of increased interest rates, as certain of our borrowings, including borrowings under the Senior Facilities, are at variable rates of interest.

In addition, the First Lien Credit Agreement, the 5.375% Notes Indenture and the 3.50% Notes Indenture contain restrictive covenants that will limit our ability to engage in activities that may be in our long-term best interest.

Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of substantially all of our indebtedness.

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We and our subsidiaries may be able to incur substantial indebtedness in the future.

Although the terms of the 5.375% Indenture, the 3.50% Indenture, and the First Lien Credit Agreement contain restrictions on our subsidiaries’ ability to incur additional indebtedness, these restrictions are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.

These restrictions do not prevent us from incurring indebtedness or our subsidiaries from incurring obligations that do not constitute indebtedness under the terms of the 5.375% Indenture, the 3.50% Indenture, and the First Lien Credit Agreement.

Although the terms of the 5.375% Notes Indenture, the 3.50% Notes Indenture, and the First Lien Credit Agreement contain restrictions on our subsidiaries’ ability to incur additional indebtedness, these restrictions are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.

These restrictions do not prevent us from incurring indebtedness or our subsidiaries from incurring obligations that do not constitute indebtedness under the terms of the 5.375% Notes Indenture, the 3.50% Notes Indenture, and the First Lien Credit Agreement.

To the extent that we incur additional indebtedness or such other obligations, the risk associated with our substantial indebtedness as described above under the risk factor “ Our substantial indebtedness could materially and adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from making debt service payments ,” including our potential inability to service our debt, will increase.

As of December 31, 2020, w e had $375.0 million available for additional borrowing under the Revolving Credit Facility portion of our Senior Facilities (without any letters of credit outstanding), all of which would be secured.

In addition to the 5.375% Senior Notes, the 3.50% Senior Secured Notes and our borrowings under the Senior Facilities and the Receivables Financing Facility, the covenants under the 5.375% Indenture, the 3.50% Indenture, and the First Lien Credit Agreement and the covenants under any other of our existing or future debt instruments allow us to incur a significant amount of additional indebtedness and, subject to certain limitations, such additional indebtedness could be secured.

As of December 31, 2021, we had $375.0 million available for additional borrowing under the Revolving Credit Facility portion of our Senior Facilities (without any letters of credit outstanding), all of which would be secured.

In addition to the 5.375% Senior Notes, the 3.50% Senior Secured Notes and our borrowings under the Senior Facilities, the covenants under the 5.375% Notes Indenture, the 3.50% Notes Indenture, and the First Lien Credit Agreement and the covenants under any other of our existing or future debt instruments allow us to incur a significant amount of additional indebtedness and, subject to certain limitations, such additional indebtedness could be secured.

We may not be able to generate sufficient cash to service all of our indebtedness and to fund our working capital and capital expenditures and may be forced to take other actions to satisfy our obligations under our indebtedness that may not be successful.

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• our future ability to borrow under our Revolving Credit Facility, the availability of which depends on, among other things, our compliance with the covenants in the First Lien Credit Agreement.

We cannot assure you that our business will generate cash flow from operations, or that we will be able to draw under our Revolving Credit Facility, Receivables Financing Facility or otherwise, in an amount sufficient to fund our liquidity needs.

We cannot assure you that our business will generate cash flow from operations, or that we will be able to draw under our Revolving Credit Facility or otherwise, in an amount sufficient to fund our liquidity needs.

If our cash flows and capital resources are insufficient to service our indebtedness and other liquidity needs, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness.

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We cannot assure you that we will be able to restructure or refinance any of our debt on commercially reasonable terms or at all.

In addition, the terms of existing or future debt agreements, including the First Lien Credit Agreement and the 5.375% Indenture and the 3.50% Indenture, may restrict us from adopting some of these alternatives.

In addition, the terms of existing or future debt agreements, including the First Lien Credit Agreement and the 5.375% Notes Indenture and the 3.50% Notes Indenture, may restrict us from adopting some of

these alternatives.

In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations.

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• designate our subsidiaries as unrestricted subsidiaries.

In addition, the Revolving Credit Facility requires us to comply with a net first lien leverage ratio under certain circumstances and the Receivables Financing Facility requires us to comply with a leverage ratio and an interest coverage ratio.

In addition, the Revolving Credit Facility requires us to comply with a net first lien leverage ratio under certain circumstances.

As a result of these covenants, we are limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs.

A failure to comply with the covenants in the First Lien Credit Agreement, the 5.375% Indenture, the 3.50% Indenture, the Receivables Financing Facility or any of our other existing or future indebtedness could result in an event of default under the applicable agreements governing such indebtedness, which, if not cured or waived, could have a material and adverse effect on our business, financial condition and results of operations.

In the event of any such event of default, the lenders under the Senior Facilities and/or the Receivables Financing Facility, as applicable:

A failure to comply with the covenants in the First Lien Credit Agreement, the 5.375% Notes Indenture, the 3.50% Notes Indenture or any of our other existing or future indebtedness could result in an event of default under the applicable agreements governing such indebtedness, which, if not cured or waived, could have a material and adverse effect on our business, financial condition and results of operations.

In the event of any such event of default, the lenders under the Senior Facilities, as applicable:

• will not be required to lend any additional amounts to us;

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• could effectively prevent us from making debt service payments on the 5.375% Senior Notes and the 3.50% Senior Secured Notes;

any of which could result in an event of default under the 5.375% Indenture and the 3.50% Indenture.

any of which could result in an event of default under the 5.375% Notes Indenture and the 3.50% Notes Indenture.

Such actions by the lenders could cause cross defaults under our other indebtedness.

If we were unable to repay those amounts, the lenders under the Senior Facilities and/or the Receivables Financing Facility and any of our other existing or future secured indebtedness could proceed against the collateral granted to them to secure the Senior Facilities, the Receivables Financing Facility or such other indebtedness.

We have pledged substantially all of our assets as collateral under the Senior Facilities and have pledged certain of our accounts receivable as collateral under the Receivables Financing Facility.

If any of our outstanding indebtedness under the Senior Facilities, the Receivables Financing Facility or our other indebtedness, including the 5.375% Senior Notes and the 3.50% Senior Secured Notes, were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness in full.

If we were unable to repay those amounts, the lenders under the Senior Facilities and any of our other existing or future secured indebtedness could proceed against the collateral granted to them to secure the Senior Facilities or such other indebtedness.

We have pledged substantially all of our assets as collateral under the Senior Facilities.

If any of our outstanding indebtedness under the Senior Facilities or our other indebtedness, including the 5.375% Senior Notes and the 3.50% Senior Secured Notes, were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness in full.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under the Senior Facilities and the Receivables Financing Facility are at variable rates of interest and expose us to interest rate risk.

As of December 31, 2020, on an as adjusted basis after giving effect to the February 2021 refinancing transactions and assuming the Revolving Credit Facility and the Receivables Financing Facility were each fully drawn, each 0.125% change in assumed blended interest rates would result in an approxima tely $3.4 million chang e in annual interest expense on indebtedness under the Senior Facilities and the Receivables Financing Facility.

Borrowings under the Senior Facilities are at variable rates of interest and expose us to interest rate risk.

As of December 31, 2021, assuming the Revolving Credit Facility was fully drawn, each 0.125% change in assumed blended interest rates would result in a $3 million change in annual interest expense on indebtedness under the Senior Facilities.

We have entered into, and in the future we may enter into, interest rate swaps that involve the exchange of floating for fixed rate interest payments to reduce interest rate volatility.

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The phase-out of LIBOR could increase our interest expense and have a material adverse effect on us.

Borrowings under our Senior Facilities and the Receivables Financing Facility use the London Interbank Offering Rate (“LIBOR”) as a benchmark for establishing the applicable interest rate.

The Financial Conduct Authority of the United Kingdom has announced that it plans to phase out LIBOR by June 2023.

It is unclear if LIBOR will cease to exist at that time or if new methods of calculating LIBOR will be established such that it continues to exist after June 2023.

Although our borrowing arrangements provide for alternative base rates, those alternative base rates historically would often have led to increased interest rates, in some cases significantly higher, than those we paid based on LIBOR, and may similarly be higher in the future.

Therefore, if LIBOR ceases to exist, the interest rates on our Senior Facilities and the Receivables Financing Facility will likely change.

On March 5, 2021, the United Kingdom's Financial Conduct Authority, which regulates LIBOR, announced that it will not compel panel banks to contribute to the overnight 1, 3, 6 and 12 months U.S.

dollar LIBOR tenors after June 30, 2023 and all other tenors after December 31, 2021.

dollar LIBOR may be replaced by the Secured Overnight Financing Rate (“SOFR”) or other benchmark rates over the next several years.

It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the U.K., the U.S.

or elsewhere.

Borrowings under our Senior Facilities use LIBOR as a benchmark for establishing the applicable interest rate, but the First Lien Credit Agreement includes provisions relating to the future discontinuance of LIBOR and sets forth mechanics for establishing the replacement of LIBOR with an alternative benchmark rate.

The consequences of the phase out of LIBOR cannot be entirely predicted at this time.

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• our operating and financial performance and prospects;

• quarterly variations in the rate of growth (if any) of our financial or operational indicators, such as earnings per share, net income, revenues, Non-GAAP Net Income, Non-GAAP Operating Profit, Adjusted EBITDA, Bookings, Annualized Recurring Revenue and Quarterly Net Revenue Retention Rate;

• quarterly variations in the rate of growth (if any) of our financial or operational indicators, such as EPS, net income, revenues, Non-GAAP Net Income, Non-GAAP Operating Profit, Adjusted EBITDA, Bookings, and ARR;

• the public reaction to our press releases, our other public announcements and our filings with the SEC;

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• the realization of any risks described under this “Risk Factors” section, or other risks that may materialize in the future.

The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies.

The stock mar kets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies.

These broad market fluctuations may adversely affect the trading price of our common stock.

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Future sales of our common stock in the public market, or the perception in the public market that such sales may occur, could reduce our stock price.

As of December 31, 2020, we had 201.8 million shares of common stock outstanding and approximately 21.3 million shares of common stock underlying outstanding options and restricted stock units under the Rackspace Technology, Inc.

Equity Incentive Plan (the “2017 Incentive Plan”) and the Rackspace Technology, Inc.

2020 Equity Incentive Plan (the “2020 Incentive Plan”), and we have reserved an additional 22.7 million shares of common stock for issuance under the 2020 Incentive Plan and 11.1 million shares of common stock for issuance under the Employee Stock Purchase Plan (the "ESPP") and we may be required to issue additional shares of common stock to an affiliate of ABRY Partners, LLC and ABRY Partners II, LLC (collectively, "ABRY") under the merger agreement related to the acquisition of Datapipe.

In addition, certain of our existing stockholders, including the Apollo Funds, Searchlight Capital Partners L.P ("Searchlight") and ABRY, have certain rights to require us to register the sale of common stock held by them including in connection with underwritten offerings.

As of December 31, 2021 , we had 211.2 million shares of common stock outstanding and approximately 18.9 million shares of common stock underlying outstanding options and RSUs under the 2017 Incentive Plan and the 2020 Incentive Plan, and we have reserved an additional 15.7 million shares of common stock for issuance under the 2020 Incentive Plan and 10.4 million shares of common stock for issuance under the ESPP and we may be required to issue additional shares of common stock to an affiliate of ABRY under the merger agreement related to the acquisition of Datapipe.

In addition, certain of our existing stockholders, including Apollo and ABRY, have certain rights to require us to register the sale of common stock held by them including in connection with underwritten offerings.

Additionally, we filed a registration statement in respect of all shares of common stock that we may issue under the 2017 Incentive Plan, the 2020 Incentive Plan and the ESPP.

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Sales of significant amounts of stock in the public market upon expiration of applicable lock-up agreements, the perception that such sales may occur, or early release of any lock-up agreements, could adversely affect prevailing market prices of our common stock or make it more difficult for you to sell your shares of common stock at a time and price that you deem appropriate.

We will incur significant costs and devote substantial management time as a result of operating as a public company.

As a public company, we will continue to incur significant legal, accounting and other expenses.

For example, we are required to comply with the requirements of Section 404(a) of the Sarbanes-Oxley Act beginning with our annual report for the year ended December 31, 2021, as well as rules and regulations subsequently implemented by the SEC and heightened auditing standards, and t he Nasdaq Stock Market LLC ("Nasdaq"), our stock exchange, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices.

The rules governing management’s assessment of our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

Compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time consuming and costly.

In addition, our management and other personnel may need to divert attention from operational and other business matters to devote substantial time to these public company requirements.

In particular, we expect to continue incurring significant expenses and devote substantial management effort toward ensuring compliance with the requirements of the Sarbanes-Oxley Act, including with respect to compliance with the requirements of Section 404(b) of the Sarbanes-Oxley Act beginning with our annual report for the year ended December 31, 2021.

In that regard, we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge.

Furthermore, if we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our consolidated financial statements and fail in meeting our reporting obligations, which would likely cause investors to lose confidence in our reported financial information.

Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from Nasdaq, regulatory investigations, civil or criminal sanctions and litigation, any of which would have a material and adverse effect on our business, financial condition and results of operations.

We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing and materiality of such costs.

We continue to be controlled by the Apollo Funds, and Apollo’s interests may conflict with our interests and the interests of other stockholders.

As of December 31, 2020, the Apollo Funds beneficially owned approximately 64% of the voting power of our outstanding common stock.

If we do not maintain effective internal controls, our financial statements may be inaccurate and the value of your investment in our common stock could decrease.

We expect to continue incurring significant expenses and devote substantial management effort toward ensuring compliance with the requirements of the Sarbanes-Oxley Act, including with respect to compliance with the requirements of Section 404(b) of the Sarbanes-Oxley Act.

If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our consolidated financial statements and fail in meeting our reporting obligations, which would likely cause investors to lose confidence in our reported financial information.

Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the Nasdaq, regulatory investigations, civil or criminal sanctions and litigation, any of which would have a material and adverse effect on our business, financial condition, results of operations and the market price of our common stock.

We continue to be controlled by Apollo, and Apollo’s interests may conflict with our interests and the interests of other stockholders.

As of December 31, 2021 , Apollo beneficially owned approximately 61% of the voting power of our outstanding common stock.

Therefore, individuals affiliated with Apollo will have effective control over the outcome of votes on all matters requiring approval by our stockholders, including the election of directors, entering into significant corporate transactions such as mergers, tender offers, the sale of all or substantially all of our assets and issuance of additional debt or equity.

The interests of Apollo and its affiliates, including the Apollo Funds, could conflict with or differ from our interests or the interests of our other stockholders.

For example, the concentration of ownership held by the Apollo Funds could delay, defer or prevent a change in control of our company or impede a merger, takeover or other business combination which may otherwise be favorable for us.

The interests of Apollo and its affiliates could conflict with or differ from our interests or the interests of our other stockholders.

For example, the concentration of ownership held by Apollo could delay, defer or prevent a change in control of our company or impede a merger, takeover or other business combination which may otherwise be favorable for us.

Additionally, Apollo and its affiliates are in the business of making investments in companies and may, from time to time, acquire and hold interests in or provide advice to businesses that compete directly or indirectly with us, or are suppliers or customers of ours.

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Any such investment may increase the potential for the conflicts of interest discussed in this risk factor.

So long as the Apollo Funds continue to directly or indirectly beneficially own a significant amount of our equity, even if such amount is less than 50%, the Apollo Funds will continue to be able to substantially influence or effectively control our ability to enter into corporate transactions.

The Apollo Funds also have a right to nominate a number of directors comprising a percentage of our board of directors in accordance with their beneficial ownership of the voting power of our outstanding common stock (rounded up to the nearest whole number), which currently represents at least a majority of our board of directors.

In addition, we have an executive committee that serves at the discretion of our board of directors and includes two members nominated by the Apollo Funds, who are authorized to take actions (subject to certain exceptions) that they reasonably determine are appropriate.

We are a “controlled company” within the meaning of Nasdaq’s rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements.

The Apollo Funds will continue to control a majority of the voting power of our outstanding voting stock, and as a result we will continue to be a controlled company within the meaning of Nasdaq’s corporate governance standards.

Under Nasdaq rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain corporate governance requirements, including the requirements that:

So long as Apollo continues to directly or indirectly beneficially own a significant amount of our equity, even if such amount is less than 50%, Apollo will continue to be able to substantially influence or effectively control our ability to enter into corporate transactions.

Apollo also has a right to nominate a number of directors comprising a percentage of our board of directors in accordance with their beneficial ownership of the voting power of our outstanding common stock (rounded up to the nearest whole number), which currently represents at least a majority of our board of directors.

In addition, we have an executive committee that serves at the discretion of our board of directors and includes two members nominated by Apollo, who are authorized to take actions (subject to certain exceptions) that they reasonably determine are appropriate.

We are a “controlled company” within the meaning of the Nasdaq’s rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements.

Apollo controls a majority of the voting power of our outstanding voting stock, and as a result we are a controlled company within the meaning of the Nasdaq’s corporate governance standards.

Under the Nasdaq rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to com ply with certain corporate governance requirements, including the requirements that:

• a majority of the board of directors consist of independent directors;

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• the compensation committee be composed entirely of independent directors.

We intend to utilize these exemptions as long as we remain a controlled company.

Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

We intend to utiliz e these exemptions as long as we remain a controlled company.

Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq.

There can be no assurances that we will remain a “controlled company” and, following the loss of such status, we may need to modify our board and committee compositions in order to be in compliance with applicable Nasdaq rules.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors