What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-02-26 · 407 added, 442 removed, 1070 unchanged (44% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

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To the Board of Directors and Stockholders of Rackspace Technology, Inc.

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Rackspace Technology, Inc.

and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of comprehensive loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Impairment Assessment

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s consolidated net goodwill balance was $2,761.1 million as of December 31, 2020.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment - Multicloud Services Reporting Unit

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s consolidated net goodwill balance was $2,706.8 million as of December 31, 2021, and the goodwill associated with the Multicloud Services reporting unit was $2,384.0 million.

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of businesses acquired.

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Management conducts impairment testing on an annual basis as of October 1st or more frequently if events or circumstances indicate a potential impairment.

Management compared the fair values of each of the Company’s reporting units to their respective carrying amounts.

For the goodwill impairment test completed during the year ended December 31, 2021, management compared the fair values of each of the Company’s reporting units to their respective carrying amounts.

Impairment is measured as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill for that reporting unit.

Management estimates the fair value of the reporting units using the income approach, specifically the discounted cash flow method.

This requires the use of significant estimates and assumptions, including future revenues, projected margins and capital spending, terminal growth rates, and discount rates.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a critical audit matter are the significant judgment by management when developing the fair value measurements of the reporting units, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing audit procedures and evaluating audit evidence related to management’s significant assumptions related to future revenues, projected margins and capital spending, terminal growth rates, and discount rates.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, (i) testing management’s process for developing the fair value of the reporting units, (ii) evaluating the appropriateness of the discounted cash flow models, (iii) testing the completeness and accuracy of underlying data used in the models, and (iv) evaluating the significant assumptions used by management related to future revenues, projected margins and capital spending, terminal growth rates, and discount rates.

Evaluating management’s assumptions related to future revenues and projected margins and capital spending involved evaluating whether the assumptions used by management were reasonable considering the current and past performance of the reporting units, third-party industry data, and whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow models and the terminal growth rates and discount rates assumptions.

Indefinite-Lived Trade Name Impairment Assessment

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s consolidated indefinite-lived intangible asset balance was $250.0 million as of December 31, 2020.

The Company’s indefinite-lived intangible asset consists of the Rackspace trade name.

Management conducts an impairment test as of October 1st of each year, or more frequently if events or circumstances indicate a potential impairment.

Management estimates the fair value of the indefinite-lived trade name using the income approach, specifically the relief-from-royalty method.

The relief-from-royalty model requires significant judgment, including estimation of future revenues, the royalty rate and discount rate.

The principal considerations for our determination that performing procedures relating to the indefinite-lived trade name impairment assessment is a critical audit matter are the significant judgment by management when developing the fair value measurement of its indefinite-lived trade name, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing audit procedures and evaluating audit evidence related to management’s significant assumptions related to future revenues, the royalty rate and discount rate.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

This requires the use of significant estimates and assumptions, including estimation of future revenues and projected margins, estimation of the terminal growth rates and capital spending, and determination of discount rates.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Multicloud Services reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value of the reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing audit procedures and evaluating management’s significant assumptions related to the estimation of future revenues and projected margins;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, (i) testing management’s process for developing the fair value estimates, (ii) evaluating the appropriateness of the relief-from-royalty model, (iii) testing the completeness and accuracy of underlying data used in the model, and (iv) evaluating the significant assumptions used by management related to future revenues, royalty rate and discount rate.

Evaluating management’s assumptions related to future revenues involved evaluating whether the assumptions used by management were reasonable considering the current and past performance of the Company, third-party industry data, and whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s relief-from-royalty model and the royalty rate and discount rate assumptions.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Multicloud Services reporting unit.

These procedures also included, among others, (i) testing management’s process for developing the fair value estimate of the Multicloud Services reporting unit, (ii) evaluating the appropriateness of the discounted cash flow method, (iii) testing the completeness and accuracy of underlying data used in the method, and (iv) evaluating the significant assumptions used by management related to the estimation of future revenues and projected margins.

Evaluating management’s assumptions related to the estimation of future revenues and projected margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow method and the estimation of future revenues and projected margins assumptions.

/s/ PricewaterhouseCoopers LLP

Austin, Texas

February 26, 2021

March 1, 2022

We have served as the Company’s auditor since 2017.

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Operating lease liabilities 62.2 60.4

Finance lease liabilities 40.7 64.6

Financing obligations 48.8 48.0

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Impairment of goodwill — — ( 52.4 )

Gain on sale — 2.1 —

Gain on divestiture 2.1 — —

Gain on sale of land — — 19.9

Income (loss) from operations 101.6 24.7 ( 2.5 )

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Interest expense ( 329.9 ) ( 268.4 ) ( 205.1 )

Gain on investments, net 4.6 99.5 0.7

Gain (loss) on extinguishment of debt 0.5 9.8 ( 71.5 )

Gain (loss) on investments, net 99.5 0.7 ( 3.0 )

Debt modification costs and extinguishment gain (loss) 9.8 ( 71.5 ) ( 37.5 )

Other income (expense), net ( 3.3 ) 2.5 ( 1.0 )

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Foreign currency translation adjustments $ 12.0 $ 8.8 $ ( 3.6 )

Unrealized loss on derivative contracts — — ( 47.6 )

Unrealized gain (loss) on derivative contracts — ( 47.6 ) 11.5

Amount reclassified from accumulated other comprehensive income (loss) to earnings — 8.2 17.6

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Impairment of goodwill — — 52.4

Gain on sale — ( 2.1 ) —

(Gain) loss on extinguishment of debt ( 0.5 ) ( 9.8 ) 71.5

Gain on divestiture ( 2.1 ) — —

Gain on sale of land — — ( 19.9 )

Debt modification costs and extinguishment (gain) loss ( 9.8 ) 71.5 37.5

Unrealized (gain) loss on derivative contracts 54.0 ( 2.3 ) 16.8

Gain on investments, net ( 4.6 ) ( 99.5 ) ( 0.7 )

(Gain) loss on investments, net ( 99.5 ) ( 0.7 ) 3.0

Provision for bad debts and accrued customer credits 17.8 24.7 ( 2.0 )

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Acquisitions, net of cash acquired ( 316.1 ) ( 9.5 ) —

Proceeds from sales 0.1 16.8 —

Proceeds from sale of land — — 31.3

Proceeds from divestiture 16.8 — —

Proceeds from sales of investments 109.5 0.9 —

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Payments for debt issuance costs — ( 8.8 ) ( 34.5 )

Principal payments of capital leases ( 21.0 ) — —

Payments on financing component of interest rate swap — — ( 12.9 )

Principal payments of finance lease liabilities ( 19.9 ) ( 24.0 ) ( 50.6 )

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Non-cash Investing and Financing Activities

Acquisition of property and equipment by capital leases $ 0.3 $ — $ —

Acquisition of property and equipment by finance leases — 12.6 93.7

Acquisition of property, equipment and software by finance leases $ 12.6 $ 93.7 $ 60.4

Acquisition of property, equipment and software by financing obligations 3.1 27.8 44.7

Increase (decrease) in property, equipment and software accrued in liabilities 53.5 ( 4.0 ) ( 13.4 )

Decrease in property, equipment and software accrued in liabilities ( 4.0 ) ( 13.4 ) ( 10.6 )

Non-cash purchases of property, equipment and software $ 11.7 $ 108.1 $ 94.5

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Debt issuance costs included in accrued liabilities $ — $ 0.6 $ —

Additional finance obligations for build-to-suit leases and other non-cash investing and financing activities (1)

$ 2.5 $ 1.2 $ 2.3

(1) Represents additional finance obligations for build-to-suit arrangements for the year ended December 31, 2018 only, and other non-cash investing and financing activities for all years presented.

Other non-cash investing and financing activities $ 1.2 $ 2.3 $ —

The following table provides a reconciliation of cash, cash equivalents, and restricted cash to the total of such amounts shown on the Consolidated Statements of Cash Flows.

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Balance at December 31, 2018 165.2 $ 1.6 $ 1,577.3 $ — $ ( 671.1 ) $ 907.8

Issuance of common stock 0.2 — 3.2 — — 3.2

Share-based compensation expense — — 20.0 — — 20.0

Net loss — — — — ( 470.6 ) ( 470.6 )

Other comprehensive loss — — — ( 17.8 ) — ( 17.8 )

Balance at December 31, 2018 165.2 $ 1.6 $ 1,577.3 $ — $ ( 671.1 ) $ 907.8

Cumulative effect of adopting ASC 842 — — — — 55.9 55.9

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Exercise of stock options and release of stock awards, net of shares withheld 2.5 — 23.4 — — 23.4

Issuance of shares from Employee Stock Purchase Plans 0.4 — 5.6 — — 5.6

Issuance of shares from Employee Stock Purchase Plan 0.4 — 5.6 — — 5.6

Share-based compensation expense — — 74.5 — — 74.5

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Balance at December 31, 2020 201.8 $ 2.0 $ 2,363.6 $ ( 18.6 ) $ ( 963.3 ) $ 1,383.7

Issuance of common stock 2.7 — — — — —

Exercise of stock options and release of stock awards 6.0 0.1 50.7 — — 50.8

Issuance of shares from Employee Stock Purchase Plan 0.7 — 10.3 — — 10.3

Share-based compensation expense — — 75.4 — — 75.4

Net loss — — — — ( 218.3 ) ( 218.3 )

Other comprehensive income — — — 25.5 — 25.5

Balance at December 31, 2021 211.2 $ 2.1 $ 2,500.0 $ 6.9 $ ( 1,181.6 ) $ 1,327.4

See accompanying notes to the consolidated financial statements.

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Nature of Operations and Basis of Presentation

Rackspace Technology, Inc.

("Rackspace Technology") (formerly known as Rackspace Corp.

until its legal name change on June 11, 2020 and formerly known as Inception Topco, Inc.

until its legal name change on March 31, 2020), is a Delaware corporation controlled by investment funds affiliated with Apollo Global Management, Inc.

and its subsidiaries ("Apollo").

Rackspace Technology was formed on July 21, 2016 but had no assets, liabilities or operating results until November 3, 2016 (the "Closing Date") when Rackspace Hosting, Inc.

(now named Rackspace Technology Global, Inc., or "Rackspace Technology Global"), a global provider of modern information technology-as-a-service, was acquired by Inception Parent, Inc., a wholly-owned entity indirectly owned by Rackspace Technology (the "Rackspace Acquisition").

Rackspace Technology is a Delaware corporation controlled by investment funds affiliated with Apollo.

Rackspace Technology was formed on July 21, 2016 but had no assets, liabilities or operating results until November 3, 2016 when Rackspace Hosting (now named Rackspace Technology Global), a global provider of modern information technology-as-a-service, was acquired by Inception Parent, a wholly-owned entity indirectly owned by Rackspace Technology.

Rackspace Technology Global commenced operations in 1998 as a limited partnership, and was incorporated in Delaware in March 2000.

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For ease of reference, the terms "we," "our company," "the company," "us," or "our" as used in this report refer to Rackspace Technology and its consolidated subsidiaries.

On July 20, 2020, the board of directors of the company approved and effected a twelve -for-one stock split of the company’s common stock (the "Stock Split").

All common stock share and per-share data, excluding par value per share, included in the accompanying consolidated financial statements give effect to the Stock Split and have been adjusted retroactively for all periods presented.

On August 7, 2020, we completed our initial public offering (the "IPO"), in which we issued and sold 33,500,000 shares of our common stock at a public offering price of $ 21.00 per share.

We received net proceeds of $ 666.6 million from sales of shares in the IPO, after deducting underwriters' discounts and commissions of $ 36.9 million, but before deducting offering expenses of $ 8.8 million.

The accompanying consolidated financial statements include the accounts of Rackspace Technology, Inc.

and our wholly-owned subsidiaries.

On July 20, 2020, the board of directors of the company approved and effected a twelve -for-one stock split of the company’s common stock.

All common stock share and per-share data, excluding par value per share, included in the accompanying consolidated financial statements give effect to this split and have been adjusted retroactively for all periods presented.

On August 7, 2020, we completed the IPO, in which we issued and sold 33,500,000 shares of our common stock at a public offering price of $ 21.00 per share.

The accompanying consolidated financial statements include the accounts of Rackspace Technology and our wholly-owned subsidiaries.

Intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes.

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes.

On an ongoing basis, we evaluate our estimates, including those related to the allowance for doubtful accounts, useful lives of property, equipment and software, software capitalization, incremental borrowing rates for lease liability measurement, fair values of intangible assets and reporting units, useful lives of intangible assets, share-based compensation, contingencies, and income taxes, among others.

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In March 2020, the World Health Organization declared COVID-19 a global pandemic.

The effects of COVID-19 are rapidly evolving, and the full impact and duration of the virus are unknown.

The effects of COVID-19 (and any variations thereof) continue to evolve, and the full impact and duration of the virus are unknown.

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

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 and 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.

In addition, we face a greater degree of uncertainty in making estimates and assumptions needed to prepare our consolidated financial statements and footnotes.

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, the pace of economic recovery, the possible resurgence in the spread of the virus and 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.

We continue to face a greater degree of uncertainty in making estimates and assumptions needed to prepare our consolidated financial statements and footnotes as a result of COVID-19.

Cash, Cash Equivalents, and Restricted Cash

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Buildings and leasehold improvements 2 to 39 years

In March 2021, we completed an assessment of the useful lives of certain assets within the Computers and equipment asset class.

The timing of this review was based on a combination of factors accumulating over time that provided the company with updated information to make a better estimate on the economic lives of certain property and equipment.

These factors included changes in customer purchasing patterns, technological advancements and the availability of extended equipment warranties.

The assessment resulted in a revision within our policy ranges for certain useful lives in this asset class.

This change in accounting estimate was effective in the first quarter of 2021.

The effect of this change was a reduction in depreciation expense of $ 23.3 million for the year ended December 31, 2021.

The cost of assets and related accumulated depreciation and amortization are written off upon retirement or disposal and any resulting gain or loss is credited or charged to income or expense.

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Multicloud Services, Apps & Cross Platform, and OpenStack Public Cloud.

Beginning in 2018, we early adopted new accounting guidance that eliminated the second step from the goodwill impairment test.

For the goodwill impairment tests completed during the years ended December 31, 2019, 2020 and 2021, we compared the fair values of each of our reporting units to their respective carrying amounts.

The fair values of each of our reporting units were derived using the income approach, specifically the discounted cash flow method.

Under the new guidance, goodwill impairment is measured as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill for that reporting unit.

The results of our goodwill impairment test for the year ended December 31, 2018, indicated an impairment of goodwill within our Multicloud Services reporting unit, and we recorded a charge of $ 295.0 million within "Impairment of goodwill" in our Consolidated Statements of Comprehensive Loss.

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.

Goodwill impairment is measured as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill for that reporting unit.

The results of our goodwill impairment test for the year ended December 31, 2021 indicated an impairment of goodwill within our OpenStack Public Cloud reporting unit, and we recorded a charge of $ 52.4 million within "Impairment of goodwill" in our Consolidated Statements of Comprehensive Loss.

See Note 5, "Goodwill and Intangible Assets" for more information.

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If an impairment exists, we recognize an impairment charge equal to the amount by which the carrying value exceeds the fair value of the investment.

On January 1, 2019, we adopted Accounting Standards Codification No.

842, Leases ("ASC 842") using the modified retrospective method, with the cumulative-effect adjustment recorded to the opening balance of retained earnings as of the January 1, 2019 adoption date.

On January 1, 2019, we adopted ASC 842 using the modified retrospective method, with the cumulative-effect adjustment recorded to the opening balance of retained earnings as of the January 1, 2019 adoption date.

We also elected the transition option under ASC 842 whereby prior periods have not been retrospectively adjusted in the consolidated financial statements.

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See Note 9, "Financing Obligations" for disclosure of future minimum payments under vendor financing and failed sale-leaseback arrangements.

Restructuring Activities

We record restructuring activities including costs for one-time termination benefits in accordance with ASC 420 .

The timing of recognition for severance costs accounted for under ASC 420 depends on whether employees are required to render service until they are terminated in order to receive the termination benefits.

If employees are required to render service until they are terminated in order to receive the termination benefits, a liability is recognized ratably over the future service period.

Otherwise, a liability is recognized when management has committed to a restructuring plan and has communicated those actions to employees.

Under ASC 420-10, we establish a liability for a cost associated with an exit or disposal activity, including severance and non-lease contract termination obligations, and other related costs, when the liability is incurred, rather than at the date that we commit to an exit plan.

We reassess the expected cost to complete the exit or disposal activities at the end of each reporting period and adjust our remaining estimated liabilities, if necessary.

See Note 11, "July 2021 Restructuring Plan," for additional information.

Revenue Recognition

All of our revenue is from contracts with customers.

We account for a contract when it has approval and commitment from all parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectibility of consideration is probable.

We provide cloud computing to customers, which is broadly defined as the delivery of computing, storage and applications over the Internet.

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As these variable consideration components consist of a single distinct daily service provided on a single performance obligation, we account for this consideration as services are provided and earned.

In accordance with the series guidance within Accounting Standards Codification No.

606, Revenue from Contracts with Customers ("ASC 606"), regarding modification to a single performance obligation, when contracts are modified to add, remove or change existing services, the modification will only affect the accounting for the remaining distinct goods and services provided.

In accordance with the series guidance within ASC 606, regarding modification to a single performance obligation, when contracts are modified to add, remove or change existing services, the modification will only affect the accounting for the remaining distinct goods and services provided.

As such, our contract modifications are accounted for prospectively.

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Customers are generally invoiced monthly based on usage.

Contracts for these arrangements typically operate on a month-to-month basis and can be canceled at any time without penalty.

Contracts for these arrangements typically operate on a consumption model and can be canceled at any time without penalty.

We also provide customers with professional services for the design and implementation of application, security and data services.

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Arrangements can contain multiple performance obligations that are distinct, which are accounted for separately.

Each performance obligation is recognized as services are provided based on their standalone selling price ("SSP").

Each performance obligation is recognized as services are provided based on their SSP.

Judgment is required to determine the SSP for each of our distinct performance obligations.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses primarily consist of:

(i) employee-related costs for functions such as executive management, sales and marketing, research and development, finance and accounting, human resources, information technology, and legal;

SG&A expenses primarily consist of:

(i) employee-related costs for functions such as executive management, sales and marketing, R&D, finance and accounting, human resources, information technology, and legal;

(ii) costs for advertising and promoting our services and to generate customer demand;

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Advertising expense was $ 39.9 million, $ 42.5 million and $ 33.6 million for the years ended December 31, 2019, 2020 and 2021, respectively.

Research and development expense was $ 74.7 million, $ 56.0 million and $ 36.7 million, for the years ended December 31, 2018, 2019 and 2020, respectively.

R&D expense was $ 56.0 million, $ 36.7 million and $ 28.3 million, for the years ended December 31, 2019, 2020 and 2021, respectively.

Share-Based Compensation

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The fair values of our reporting units and indefinite-lived intangible assets are measured using Level 3 inputs.

As a result of our annual goodwill impairment test, during the year ended December 31, 2018, we reduced the carrying value of one of our reporting units by $ 295.0 million to its implied fair value.

See "Goodwill and Indefinite-lived Intangible Assets" above for more information on the inputs used to fair value our reporting units and indefinite-lived intangible assets.

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Transaction gains or losses in currencies other than the functional currency are included as a component of "Other income (expense), net" in the Consolidated Statements of Comprehensive Loss.

We recorded transaction losses of $ 1.8 million, gains of $ 5.8 million, and losses of $ 3.3 million for the years ended December 31, 2019, 2020 and 2021, respectively.

Derivative Instruments

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Interest Rate Swaps

We are exposed to interest rate risk associated with fluctuations in interest rates on the floating-rate first lien term loan facility ("Term Loan Facility").

We are exposed to interest rate risk associated with fluctuations in interest rates on the floating-rate Term Loan Facility.

The objective in using interest rate derivatives is to manage our exposure to interest rate movements.

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Interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

As of December 31, 2019, none of our interest rate swap agreements were designated as cash flow hedges of interest rate risk for accounting purposes, therefore, all changes in the fair value of the interest rate swap agreements were recorded to "Interest expense" in the Consolidated Statements of Comprehensive Loss.

On January 9, 2020, we designated certain of our swaps as cash flow hedges.

On the designation date, the cash flow hedges were in a $ 39.9 million liability position ("off-market swap value").

The cash flow hedges were expected to be highly effective on the designation date and, on a quarterly basis, we perform retrospective and prospective assessments to determine whether the cash flow hedges continue to be highly effective, which we have deemed to be a dollar-offset ratio between 80% to 125%.

As long as the cash flow hedges are highly effective, changes in fair value are recorded to "Accumulated other comprehensive income (loss)" in the Consolidated Balance Sheets and reclassified to "Interest expense" in the period when the underlying transaction affects earnings.

The off-market swap value is amortized as a reduction to "Interest expense" on a straight-line basis over the remaining term of each cash flow hedge.

The income tax effects of cash flow hedges are released from "Accumulated other comprehensive income (loss)" in the period when the underlying transaction affects earnings.

Any stranded income tax effects are released from "Accumulated other comprehensive income (loss)" into "Benefit (provision) for income taxes" under the portfolio approach.

As of December 31, 2020, all of our cash flow hedges were highly effective.

Our interest rate swaps are recognized at fair value in the Consolidated Balance Sheets and are valued using pricing models that rely on market observable inputs such as yield curve data, which are classified as Level 2 inputs within the fair value hierarchy.

On a quarterly basis, we net settle with the counterparty for the difference between the fixed rate specified in each swap agreement and the variable rate based upon the three-month LIBOR as applied to the notional amount of the swap.

Our interest rate swaps, excluding the portion treated as debt, are recognized at fair value in the Consolidated Balance Sheets and are valued using pricing models that rely on market observable inputs such as yield curve data, which are classified as Level 2 inputs within the fair value hierarchy.

Foreign Currency Hedging Contracts

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We evaluate every fixed price power contract to determine if the contract meets the definition of a derivative, which requires recognizing the contract at fair value on the Consolidated Balance Sheets with changes in the fair value recorded in the Consolidated Statements of Comprehensive Loss.

If a contract is deemed to be a derivative, we also determine if it qualifies for the normal purchases normal sales scope exception to derivative accounting, which would result in expensing electricity usage as incurred.

If a contract is deemed to be a derivative, we also determine if it qualifies for the normal purchases and normal sales scope exception to derivative accounting, which would result in expensing electricity usage as incurred.

Power contracts accounted for as derivatives are valued using pricing models that rely on market observable inputs such as current power prices, which are classified as Level 2 inputs within the fair value hierarchy.

We entered into a fixed price power contract for a London data center in September 2015 and accounted for it as a derivative that did not qualify for the normal purchases normal sales exception.

The contract, which ended in September 2018, was not designated as a cash flow hedge for accounting purposes, and therefore, any changes in fair value were recorded in "Cost of revenue." As of December 31, 2019 and 2020, we do not have any power contracts recorded at fair value on the Consolidated Balance Sheets.

Subsequent Events

On January 15, 2021, we completed the sale of a parcel of undeveloped land in the United Kingdom adjacent to one of our existing data centers.

The net book value of the land prior to the sale was $ 11 million and we received net cash proceeds of $ 32 million, which resulted in an approximate gain of $ 21 million.

On February 2, 2021, we issued 2,665,935 shares of common stock to DPH 123, LLC for no additional consideration pursuant to the Agreement and Plan of Merger, dated as of September 6, 2017, in connection with our November 15, 2017 acquisition of Datapipe Parent, Inc.

("Datapipe").

Refer to Note 11, "Stockholders' Equity" for more information.

On February 9, 2021, we issued $ 550.0 million of 3.50 % Senior Secured Notes due 2028 (" 3.50 % Senior Secured Notes") that will mature on February 15, 2028 and bear interest at a fixed rate of 3.50 % per year, payable semi-annually on each February 15 and August 15 through maturity.

The 3.50 % Senior Secured Notes are not subject to registration rights.

On February 9, 2021, we amended and restated our first lien credit agreement, which included a new seven-year $ 2,300.0 million senior secured first lien term loan facility (the "New Term Loan Facility") and our existing $ 375.0 million senior secured first lien revolving credit facility.

We borrowed the entire $ 2,300.0 million New Term Loan Facility and used the borrowings under the New Term Loan Facility, together with the proceeds from the issuance of the 3.50 % Senior Secured Notes described above, to repay all borrowings under our existing term loan facility, to pay related fees and expenses and for general corporate purposes.

Borrowings under the New Term Loan Facility bear interest at an annual rate equal to an applicable margin plus, at our option, either (a) a LIBOR rate determined by reference to the costs of funds for Eurodollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs, subject to a 0.75 % floor, or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 %, (ii) the prime rate of Citibank, N.A.

and (iii) the one-month adjusted LIBOR plus 1.00 %.

The applicable margin for the New Term Loan Facility is 2.75 % for LIBOR loans and 1.75 % for base rate loans.

Interest is due at the end of each interest period elected, not exceeding 90 days, for LIBOR loans and at the end of every calendar quarter for base rate loans.

Beginning June 30, 2021, we will also be required to make quarterly amortization payments on the New Term Loan Facility in an annual amount equal to 1.0 % of the original principal amount of the New Term Loan Facility, with the balance due at maturity on February 15, 2028.

On February 12, 2021, we restructured our interest rate swap positions using a strategy commonly referred to as a “blend and extend” in order to continue to manage our exposure to interest rate risk under the New Term Loan Facility.

We executed a new interest rate swap with a notional amount of $ 1.35 billion maturing on February 9, 2026, effectively blending the liability position of our existing interest rate swap agreements into the new swap and extending the term of our hedged position.

The new interest rate swap is indexed to three-month LIBOR and will be net settled on a quarterly basis with the counterparty for the difference between the fixed rate of 2.3820 % and the variable rate based upon three-month LIBOR (subject to a floor of 0.75 %) as applied to the notional amount of the swap.

In connection with this transaction, all existing interest rate swap agreements with the same counterparty were terminated.

Two additional interest rate swap agreements with other counterparties were not terminated;

however, we entered into an offsetting trade to net against those swap positions to remove the variability of the cash flows of the swaps but allow the original liability to be settled through February 2022.

Refer to Note 16, “Derivatives” for more information on our existing interest rate swap agreements.

As of December 31, 2020 and 2021, we do not have any power contracts recorded at fair value on the Consolidated Balance Sheets, as we have applied the normal purchases and normal sales scope exception to derivative accounting for all fixed priced power contracts.

Reclassifications

Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current period presentation.

Specifically, the non-current portion of "Finance lease liabilities" is now presented separately from "Other non-current liabilities" in the Consolidated Balance Sheets.

This presentation change is due to the modification of certain leases in June 2020 which resulted in a change of classification from operating leases to finance leases, increasing the balance of the non-current portion of "Finance lease liabilities."

Specifically, the current portion of "Finance lease liabilities" is now presented separately from "Other current liabilities" in the Consolidated Balance Sheets.

Recent Accounting Pronouncements

Recently Adopted

Financial Instruments-Credit Losses

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments , which requires financial assets measured at amortized cost to be presented at the net amount expected to be collected using an allowance for expected credit losses, to be estimated by management based on historical experience, current conditions, and reasonable and supportable forecasts.

We adopted this guidance on January 1, 2020, using the modified retrospective approach.

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Derivatives and Hedging-Targeted Improvements to Accounting for Hedging Activities

In August 2017, the FASB issued ASU No.

2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and to simplify the application of the hedge accounting guidance.

The guidance expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of hedging instruments and hedged items in the financial statements.

The guidance also amends the presentation and disclosure requirements and changes how entities assess hedge effectiveness.

We adopted this ASU on January 1, 2020.

The guidance applies to any existing hedges or new derivative instruments that are designated as hedges for derivative accounting purposes in future periods.

We have historically not designated our interest rate swaps or foreign currency hedging contracts as hedges for derivative accounting purposes, however, on January 9, 2020, we designated certain of our interest rate swap agreements as cash flow hedges.

Refer to Note 16, "Derivatives," and "Interest rate swaps" above for the cash flow hedge disclosures required by the provisions of this guidance.

Fair Value Measurement Disclosures

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"), which removes, modifies or adds certain disclosure requirements for fair value measurement disclosures.

We adopted this guidance on January 1, 2020 on a prospective basis.

The adoption did not have a material impact on our consolidated financial statements.

Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement

In August 2018, the FASB issued ASU No.

2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

We adopted this guidance on January 1, 2020 on a prospective basis.

The adoption of this guidance primarily resulted in changes to the presentation of certain implementation costs within our consolidated financial statements.

Historically, these costs were capitalized as part of "Property, equipment, and software, net" and amortized over the useful life of the related software or hosting arrangement.

Upon adoption, eligible costs incurred are now recorded within "Prepaid expenses" and "Other non-current assets" and amortized to either "Cost of revenue" or "Selling, general and administrative expenses" over the useful life of the related software or hosting arrangement.

In addition, the cash flow presentation of these costs changed from investing cash flows under previous guidance to operating cash flows under the new guidance.

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Reference Rate Reform

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

In July 2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Not Yet Adopted

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes , which removes certain exceptions to the general principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

The guidance is effective for us on January 1, 2021.

We are currently evaluating the impact this guidance will have on our consolidated financial statements.

2019-12, Income Taxes (ASC 740) - Simplifying the Accounting for Income Taxes , which removes certain exceptions to the general principles in ASC 740 and improves consistent application of and simplifies GAAP for other areas of ASC 740 by clarifying and amending existing guidance.

We adopted this guidance on January 1, 2021.

The adoption of the guidance did not have a material impact on our consolidated financial statements.

Not Yet Adopted

Reference Rate Reform

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 or other benchmark rates over the next several years.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (ASC 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting containing practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance in ASU 2020-04 is optional and may be applied from March 12, 2020 through December 31, 2022 as reference rate reform activities occur.

In January 2021, the FASB issued an update that provides supplemental guidance and clarification of the reference rate reform.

We have elected to apply certain practical expedients in the past.

We continue to evaluate the impact of the guidance and may apply other elections prior to December 31, 2022, as applicable, as additional changes in the market occur.

Currently, 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.

Business Combinations

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (ASC 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

ASU 2021-08 requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606.

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC 606 as if it had originated the contracts.

To achieve this, an acquirer may assess how the acquiree applied ASC 606 to determine what to record for the acquired revenue contracts.

This standard allows the company a practical expedient to remove the requirements to measure and recognize such contracts in accordance with ASC 606.

The guidance is applied prospectively upon adoption and is effective for us on January 1, 2023;

however, early adoption is permitted.

Customer Contracts

The following table presents the balances related to customer contracts as of December 31, 2019 and 2020:

The following table presents the balances related to customer contracts:

(In millions) Consolidated Balance Sheets Account December 31, 2020 December 31, 2021

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2021 16.2 5.4 ( 7.9 ) 13.7

(1) Additions to the allowance for doubtful accounts are charged to bad debt within selling, general and administrative expense.

(1) Additions to the allowance for doubtful accounts are charged to bad debt within "Selling, general and administrative expenses."

Amounts recognized in revenue for the years ended December 31, 2019, 2020 and 2021, which were included in deferred revenue as of the beginning of each period totaled $ 47.6 million, $ 59.5 million and $ 61.5 million, respectively.

2 unchanged sentences

These capitalized costs are included in "Other non-current assets" on the Consolidated Balance Sheets.

Amortization of capitalized sales commissions and implementation costs for the years ended December 31, 2018, 2019 and 2020 was as follows:

Amortization of capitalized sales commissions and implementation costs was as follows:

Year Ended December 31,

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Net loss per share $ ( 0.62 ) $ ( 1.37 ) $ ( 1.05 )

Potential common share equivalents consist of shares issuable upon the exercise of stock options, vesting of restricted stock or purchase under the Employee Stock Purchase Plan (the "ESPP"), as well as contingent shares associated with our acquisition of Datapipe.

Potential common share equivalents consist of shares issuable upon the exercise of stock options, vesting of restricted stock or purchase under the ESPP, as well as contingent shares associated with our acquisition of Datapipe.

Since we were in a net loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive.

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Property, Equipment and Software, net

Property, equipment and software, net, at December 31, 2019 and 2020 consisted of the following:

Property, equipment and software, net, consisted of the following:

(In millions) December 31,

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Property, equipment and software, net $ 884.6 $ 826.7

On January 15, 2021, we completed the sale of a parcel of undeveloped land in the United Kingdom adjacent to one of our existing data centers.

The net book value of the land prior to the sale was $ 11.4 million and we received cash proceeds of $ 32.2 million, less brokerage and professional fees of $ 0.9 million, resulting in net cash proceeds of $ 31.3 million.

Therefore, we recorded a gain on sale of land of $ 19.9 million to "Gain on sale of land" in the Consolidated Statements of Comprehensive Loss for the year ended December 31, 2021.

Depreciation expense related to property, equipment and software was $ 328.5 million, $ 289.8 million and $ 245.1 million for the years ended December 31, 2019, 2020 and 2021, respectively.

Depreciation expense for the year ended December 31, 2018 includes $ 20.9 million of accelerated depreciation resulting from a revision to the useful life of certain equipment assets.

Included in the balance of property, equipment and software as of December 31, 2020 and 2021 are assets recorded under finance leases.

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$ 2,371.6 $ 322.2 $ 52.0 $ 2,745.8

Onica acquisition 265.3 — — 265.3

Bright Skies acquisition 8.4 — — 8.4

Onica measurement period adjustments ( 0.5 ) — — ( 0.5 )

Foreign currency translation 6.5 0.4 0.5 7.4

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2,386.0 322.6 52.5 2,761.1

Bright Skies acquisition 8.4 — — 8.4

Onica measurement period adjustments ( 0.5 ) — — ( 0.5 )

Impairment of goodwill — — ( 52.4 ) ( 52.4 )

Foreign currency translation ( 1.7 ) ( 0.1 ) ( 0.1 ) ( 1.9 )

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Changes in these estimates and assumptions could materially affect the fair value of the reporting unit, potentially resulting in an impairment charge.

The results of our goodwill impairment test for the years ended December 31, 2019 and 2020 did not indicate any impairments of goodwill.

The following tables provide information regarding our intangible assets other than goodwill:

December 31, 2019

(In millions) Gross carrying amount Accumulated amortization Net carrying amount

Customer relationships $ 1,983.7 $ ( 459.9 ) $ 1,523.8

Property tax abatement 16.0 ( 5.6 ) 10.4

Other 43.8 ( 10.6 ) 33.2

Total definite-lived intangible assets 2,043.5 ( 476.1 ) 1,567.4

Trade name (indefinite-lived) 250.0 — 250.0

Total intangible assets other than goodwill $ 2,293.5 $ ( 476.1 ) $ 1,817.4

December 31, 2020

(In millions) Gross carrying amount Accumulated amortization Net carrying amount

During the fourth quarter of 2021, we performed our annual goodwill impairment test.

We determined that the carrying amount of our OpenStack Public Cloud reporting unit exceeded its fair value and recorded a goodwill impairment charge of $ 52.4 million.

The impairment was driven by deteriorating forecasted margins and cash flows within the reporting unit primarily due to operating costs declining at a slower rate than previously anticipated even after factoring in the long term impacts of the July 2021 Restructuring Plan.

Prior to calculating the goodwill impairment loss, based on review of the annual forecast and management's expectation of slower than previously anticipated growth in the OpenStack Public Cloud product line, we assessed the recoverability of long-lived assets other than goodwill and concluded such assets were not impaired.

The results of our goodwill impairment test for the year ended December 31, 2020 did not indicate any impairments of goodwill.

The following table provides information regarding our intangible assets other than goodwill:

December 31, 2020 December 31, 2021

(In millions) Gross carrying amount Accumulated amortization Net carrying amount Gross carrying amount Accumulated amortization Net carrying amount

Customer relationships $ 1,986.2 $ ( 624.0 ) $ 1,362.2 $ 1,983.0 $ ( 784.1 ) $ 1,198.9

Property tax abatement 16.0 ( 7.4 ) 8.6 16.0 ( 9.2 ) 6.8

Other 47.7 ( 22.2 ) 25.5

47.7 ( 22.2 ) 25.5 28.2 ( 17.4 ) 10.8

Total definite-lived intangible assets 2,049.9 ( 653.6 ) 1,396.3 2,027.2 ( 810.7 ) 1,216.5

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Total intangible assets other than goodwill $ 2,299.9 $ ( 653.6 ) $ 1,646.3 $ 2,277.2 $ ( 810.7 ) $ 1,466.5

(1) Includes $ 17.2 million gross carrying amount for AWS relationship recorded in connection with the Onica acquisition as described in Note 16, "Acquisitions."

Amortization expense related to intangibles was $ 167.5 million, $ 176.3 million and $ 179.7 million for the years ended December 31, 2019, 2020 and 2021, respectively.

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Total $ 1,216.5

In June 2019, CrowdStrike Holdings, Inc.

("CrowdStrike"), an entity in which Rackspace US, Inc.

held an equity investment, completed an initial public offering and became a publicly-traded company.

In June 2019, CrowdStrike, an entity in which Rackspace US held an equity investment, completed an initial public offering and became a publicly-traded company.

Prior to the date of CrowdStrike's initial public offering, our investment in CrowdStrike had a carrying value of $ 10.0 million and was accounted for as an equity investment without a readily determinable fair value.

With the availability of observable price changes following the completion of CrowdStrike's initial public offering, our investment in CrowdStrike was measured at fair value on a prospective basis using the end of period quoted stock price, which is classified as a Level 1 input within the fair value hierarchy.

In December 2019, Rackspace US, Inc.

sold the investment in CrowdStrike for $ 106.9 million in cash proceeds.

In December 2019, Rackspace US sold the investment in CrowdStrike for $ 106.9 million in cash proceeds.

We hold other equity investments that do not have readily determinable fair values.

The aggregate carrying value of these other equity investments was $ 0.1 million and $ 5.1 million as of December 31, 2019 and 2020, respectively.

For the year ended December 31, 2018, we recognized a net gain on investment activity of $ 4.6 million, of which $ 3.8 million related to the sale of shares in Mailgun Technologies, Inc.

(“Mailgun Technologies”).

See Note 14, “Divestitures” for more information.

The aggregate carrying value of these other equity investments was $ 5.1 million as of December 31, 2020 and 2021.

For the year ended December 31, 2019, we recognized a net gain on investment activity of $ 99.5 million which was primarily comprised of a $ 96.9 million realized gain related to the sale of the CrowdStrike investment.

For the year ended December 31, 2020, we recognized a net gain on investment activity of $ 0.7 million, primarily comprised of a realized gain upon the receipt of proceeds related to the 2017 sale of an equity investment.

We recognized a net gain on investment activity of $ 0.7 million for the year ended December 31, 2020 and a net loss on investment activity of $ 3.0 million for the year ended December 31, 2021.

Debt consisted of the following:

December 31, 2019

(In millions) Term Loan Facility 8.625 % Senior Notes due 2024

Principal balance $ 2,824.6 $ 1,120.2 $ 3,944.8

Unamortized debt issuance costs ( 48.6 ) ( 18.0 ) ( 66.6 )

Unamortized debt discount ( 4.9 ) — ( 4.9 )

Total debt 2,771.1 1,102.2 3,873.3

current portion of debt ( 29.0 ) — ( 29.0 )

Debt, excluding current portion $ 2,742.1 $ 1,102.2 $ 3,844.3

(In millions, except %) December 31, 2020 December 31, 2021

Debt Instrument Maturity Date Interest Rate (1)

Amount Interest Rate (1)

Prior Term Loan Facility November 3, 2023 4.00 % $ 2,795.6 —% $ —

Term Loan Facility February 15, 2028 —% — 3.50 % 2,282.8

Revolving Credit Facility August 7, 2025 —% — —% —

3.50 % Senior Secured Notes

February 15, 2028 —% — 3.50 % 550.0

5.375 % Senior Notes

December 1, 2028 5.375 % 550.0 5.375 % 550.0

(In millions) Term Loan Facility 5.375 % Senior Notes due 2028

Accounts Receivable Financing Agreement Total

Principal balance $ 2,795.6 $ 550.0 $ 65.0 $ 3,410.6

Receivables Financing Facility July 19, 2022 2.37 % 65.0 —% —

unamortized debt issuance costs ( 44.2 ) ( 36.3 )

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Debt, excluding current portion $ 3,319.3 $ 3,310.9

(1) Interest rates are as of each respective balance sheet date.

Senior Facilities

On November 3, 2016, in conjunction with the Rackspace Acquisition, Rackspace Technology Global entered into a secured First Lien Credit Agreement with Citibank, N.A.

("Citi") as the administrative agent.

The First Lien Credit Agreement includes a first lien term loan facility (the "Term Loan Facility") originally in the amount of $ 2,000.0 million, which was fully drawn at closing of the Rackspace Acquisition, and an undrawn revolving credit facility ("Revolving Credit Facility") originally in the amount of $ 225.0 million (together, the "Senior Facilities").

Rackspace Technology Global may request additional Revolving Credit Facility commitments, and had the right to request additional Term Loan Facility commitments, in each case, up to a specified dollar amount plus additional amounts, subject to compliance with applicable leverage ratios and certain terms and conditions.

The proceeds of the Term Loan Facility were used to fund the transactions associated with the Rackspace Acquisition.

The Term Loan Facility was set to mature on November 3, 2023 and the Revolving Credit Facility originally matured on November 3, 2021.

Borrowings under the Term Loan Facility bear interest at an annual rate equal to an applicable margin plus, at our option, either (a) a LIBOR rate determined by reference to the costs of funds for Eurodollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs, subject to a 1.00 % floor in the case of term loans, or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 %, (ii) the prime rate of Citi and (iii) the one-month adjusted LIBOR plus 1.00 %.

On November 3, 2016, in conjunction with the Rackspace Acquisition, Rackspace Technology Global entered into the First Lien Credit Agreement with Citi as the administrative agent.

The First Lien Credit Agreement included the Prior Term Loan Facility and the Revolving Credit Facility.

As of December 31, 2020, the Prior Term Loan Facility had an outstanding principal balance of $ 2,795.6 million and was set to mature on November 3, 2023.

The Revolving Credit Facility had total commitments of $ 375.0 million, with no outstanding borrowings as of December 31, 2020, and was set to mature on August 7, 2025.

On February 9, 2021, we amended and restated the First Lien Credit Agreement, which included a new seven-year $ 2,300.0 million senior secured first lien term loan facility due on February 15, 2028 (the Term Loan Facility) and our existing $ 375.0 million Revolving Credit Facility, which we refer to together as the Senior Facilities.

We used the borrowings under the Term Loan Facility, together with the proceeds from the issuance of the 3.50 % Senior Secured Notes described below (together, the February 2021 Refinancing Transaction), to repay all borrowings under the Prior Term Loan Facility, to pay related fees and expenses and for general corporate purposes.

Borrowings under the Senior Facilities bear interest at an annual rate equal to an applicable margin plus, at our option, either (a) a LIBOR rate determined by reference to the costs of funds for Eurodollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs, subject to a 0.75 % floor in the case of the Term Loan Facility and a 1.00 % floor, in the case of the Revolving Credit Facility, or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 %, (ii) the prime rate of Citi and (iii) the one-month adjusted LIBOR plus 1.00 %.

The applicable margin for the Term Loan Facility is 2.75 % for LIBOR loans and 1.75 % for base rate loans and the applicable margin for the Revolving Credit Facility is 3.00 % for LIBOR loans and 2.00 % for base rate loans.

Interest is due at the end of each interest period elected, not exceeding 90 days, for LIBOR loans and at the end of every calendar quarter for base rate loans.

Rackspace Technology Global was required to make quarterly amortization payments on the Term Loan Facility in an annual amount equal to 1.00 % of the original principal amount, including incremental borrowings since the Rackspace Acquisition, or $ 7.2 million per quarter, with the balance due at maturity.

On July 20, 2020, we entered into an amendment to the First Lien Credit Agreement that modified the terms of the Revolving Credit Facility effective upon the closing of the IPO on August 7, 2020.

The amendment (i) increased the amount of the commitments available under the Revolving Credit Facility from $ 225.0 million to $ 375.0 million, (ii) reduced the applicable margin with respect to the Revolving Credit Facility to 3.00 % for LIBOR loans and 2.00 % for base rate loans, but includes a 1.00 % LIBOR "floor" applicable to LIBOR loans, and (iii) extended the maturity date with respect to the Revolving Credit Facility from November 3, 2021 to August 7, 2025.

The amendment to the Revolving Credit Facility also modified the financial maintenance covenant applicable to the Revolving Credit Facility that limits our net first lien leverage ratio to be a maximum of 5.00 to 1.00 (as compared to 3.50 to 1.00 prior to giving effect to the amendment).

This financial maintenance covenant is only applicable and tested if the aggregate amount of outstanding borrowings under the Revolving Credit Facility and letters of credit issued thereunder (excluding $ 25.0 million of undrawn letters of credit and cash collateralized letters of credit) as of the last day of a fiscal quarter is equal to or greater than 35 % of the Revolving Credit Facility commitments as of the last day of such fiscal quarter.

Other than described in this and the previous paragraph, the terms and conditions of the Revolving Credit Facility remained the same, and the amendment did not amend or otherwise modify the terms of the Term Loan Facility.

We accounted for the amendment to the Revolving Credit Facility as a debt modification and recorded $ 0.6 million in debt issuance costs to "Other non-current assets" in the Consolidated Balance Sheets.

These are amortized, along with the unamortized debt issuance costs associated with the prior arrangement, on a straight-line basis to "Interest expense" in the Consolidated Statements of Comprehensive Loss over the five-year term of the modified arrangement.

As of December 31, 2020, the Revolving Credit Facility had total commitments of $ 375.0 million.

Over the course of the year ended December 31, 2020, Rackspace Technology Global borrowed and repaid an aggregate $ 245.0 million under the Revolving Credit Facility.

As of December 31, 2020, we had no outstanding borrowings under the Revolving Credit Facility.

The Revolving Credit Facility also includes a commitment fee equal to 0.50 % per annum in respect of the unused commitments that is due quarterly.

This commitment fee is subject to one step-down based on the net first lien leverage ratio.

As of December 31, 2021, the interest rate on the Term Loan Facility was 3.50 %.

We are required to make quarterly principal payments of $ 5.8 million, which began on June 30, 2021.

See Note 17, "Derivatives" for information on interest rate swap agreements we utilize to manage the interest rate risk on the Term Loan Facility.

In addition to the quarterly amortization payments discussed above, the Senior Facilities requires Rackspace Technology Global to make certain mandatory prepayments, including using (i) a portion of annual excess cash flow, as defined in the agreement, to prepay the New Term Loan Facility, (ii) net cash proceeds of certain non-ordinary assets sales or dispositions of property to prepay the New Term Loan Facility, and (iii) net cash proceeds of any issuance or incurrence of debt not permitted under the Senior Facilities to prepay the New Term Loan Facility.

Rackspace Technology Global can make voluntary prepayments at any time without penalty, subject to customary breakage costs.

Rackspace Technology Global is the borrower under the Senior Facilities, and all obligations under the Senior Facilities are (i) guaranteed by Inception Parent, Inc., Rackspace Technology Global’s immediate parent company, on a limited recourse basis and secured by the equity interests of Rackspace Technology Global held by Inception Parent, Inc.

and (ii) guaranteed by Rackspace Technology Global’s wholly-owned domestic restricted subsidiaries and secured by substantially all material owned assets of Rackspace Technology Global and the subsidiary guarantors, including the equity interests held by each, in each case subject to certain exceptions.

The only financial covenant is with respect to the Revolving Credit Facility which limits the net first lien leverage ratio to a maximum of 5.00 to 1.00, as discussed above;

however, this covenant is only applicable and tested if the aggregate amount of outstanding borrowings under the Revolving Credit Facility and letters of credit issued thereunder (excluding $ 25.0 million of undrawn letters of credit and cash collateralized letters of credit) is equal to or greater than 35 % of the Revolving Credit Facility commitments at the end of a fiscal quarter.

Other covenants include limitations on restricted payments, indebtedness, investments, liens, asset sales and transactions with affiliates.

In addition to the quarterly amortization payments discussed above, the Senior Facilities require us to make certain mandatory prepayments, including using (i) a portion of annual excess cash flow, as defined in the First Lien Credit Agreement, to prepay the Term Loan Facility, (ii) net cash proceeds of certain non-ordinary assets sales or dispositions of property to prepay the Term Loan Facility, and (iii) net cash proceeds of any issuance or incurrence of debt not permitted under the Senior Facilities to prepay the Term Loan Facility.

We may make voluntary prepayments at any time without penalty, except in connection with a repricing event, as defined in the First Lien Credit Agreement.

The fair value of the Term Loan Facility as of December 31, 2021 was $ 2,262.8 million, based on quoted market prices for identical assets that are traded in over-the-counter secondary markets that are not considered active.

The fair value of the Term Loan Facility is classified as Level 2 within the fair value hierarchy.

As of December 31, 2020, Rackspace Technology Global was in compliance with all covenants under the Senior Facilities.

8.625% Senior Notes

On November 3, 2016, in conjunction with the Rackspace Acquisition, Rackspace Technology Global completed the issuance of $ 1,200.0 million aggregate principal amount of 8.625 % Senior Notes due 2024 (the " 8.625 % Senior Notes") to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and outside the United States to non-U.S.

persons pursuant to Regulation S under the Securities Act.

The 8.625 % Senior Notes were set to mature on November 15, 2024 and bore interest at a rate of 8.625 % per year, payable semi-annually on May 15 and November 15.

The proceeds of the 8.625 % Senior Notes were used to fund the transactions associated with the Rackspace Acquisition, including consummation of the Rackspace Acquisition and payment of related fees and expenses.

We recorded $ 31.7 million of debt issuance costs related to the Rackspace Technology Global’s issuance of the 8.625 % Senior Notes.

During the year ended December 31, 2019, Rackspace Technology Global repurchased and surrendered for cancellation $ 77.3 million of principal amount of 8.625 % Senior Notes for $ 66.9 million including accrued interest of $ 0.8 million.

In connection with these repurchases, we recorded a gain on debt extinguishment of $ 9.8 million in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2019.

Between August and December 2020, Rackspace Technology Global repurchased and cancelled the remaining aggregate principal amount of the $ 1,120.2 million outstanding 8.625 % Senior Notes and paid related premiums, fees and accrued and unpaid interest for aggregate cash of $ 1,191.9 million.

In connection with these repurchases, we recorded a loss on debt extinguishment of $ 71.5 million in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2020, comprised of a $ 56.2 million aggregate premium on repurchase, $ 14.9 million write-off of unamortized debt issuance costs, and transaction fees of $ 0.4 million.

Following the cancellations, we had no remaining outstanding principal balance under the 8.625 % Senior Notes at December 31, 2020.

We funded the repurchases with proceeds from the IPO, the issuance of $ 550.0 million aggregate principal amount of senior notes due in 2028 in a private offering, (see discussion at " 5.375 % Senior Notes" below), and cash on hand.

5.375% Senior Notes

Rackspace Technology Global issued $ 550.0 million aggregate principal amount of 5.375 % Senior Notes due 2028 (the " 5.375 % Senior Notes") on December 1, 2020.

The 5.375 % Senior Notes will mature on December 1, 2028 and bear interest at a fixed rate of 5.375 % per year, payable semi-annually on each June 1 and December 1, commencing on June 1, 2021 through maturity.

Rackspace Technology Global is the borrower under the Senior Facilities, and all obligations under the Senior Facilities are (i) guaranteed by Inception Parent, Rackspace Technology Global’s immediate parent company, on a limited recourse basis and secured by the equity interests of Rackspace Technology Global held by Inception Parent, and (ii) guaranteed by Rackspace Technology Global’s wholly-owned domestic restricted subsidiaries and secured by substantially all material owned assets of Rackspace Technology Global and the subsidiary guarantors, including the equity interests held by each, in each case subject to certain exceptions.

The only financial covenant is with respect to the Revolving Credit Facility which limits the net first lien leverage ratio to a maximum of 5.00 to 1.00;

Other covenants include limitations on restricted payments, indebtedness, investments, liens, asset sales and transactions with affiliates.

As of December 31, 2021, we were in compliance with all covenants under the Senior Facilities.

The Revolving Credit Facility matures of August 7, 2025.

As of December 31, 2021, we had total commitments of $ 375.0 million and no outstanding borrowings under the Revolving Credit Facility or letters of credit issued thereunder.

3.50 % Senior Secured Notes due 2028

On February 9, 2021, Rackspace Technology Global issued $ 550.0 million aggregate principal amount of 3.50 % Senior Secured Notes due 2028.

The 3.50 % Senior Secured Notes will mature on February 15, 2028 and bear interest at an annual fixed rate of 3.50 %.

Interest is payable semiannually on each February 15 and August 15, commencing on August 15, 2021.

The 3.50 % Senior Secured Notes are not subject to registration rights.

As noted above, we used the net proceeds from the issuance of the 3.50 % Senior Secured Notes, together with borrowings under the Term Loan Facility described above, to repay all borrowings outstanding under the Prior Term Loan Facility, to pay related fees and expenses and for general corporate purposes.

Rackspace Technology Global is the issuer of the 3.50 % Senior Secured Notes, and obligations under the 3.50 % Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally, by all of Rackspace Technology Global’s wholly-owned domestic restricted subsidiaries (as subsidiary guarantors) that guarantee the Senior Facilities.

The 3.50 % Senior Secured Notes and the related guarantees are secured by first-priority security interests in substantially all material owned assets of Rackspace Technology Global and the subsidiary guarantors, including the equity interest held by each, subject to certain exceptions, which assets also secure the Senior Facilities.

Rackspace Technology Global may redeem the 3.50 % Senior Secured Notes at its option, in whole at any time or in part from time to time, at the following redemption prices:

prior to February 15, 2024, at a redemption price equal to 100.000 % of the principal amount, plus the applicable premium described in the 3.50 % Notes Indenture and accrued and unpaid interest, if any, to but excluding the redemption date;

from February 15, 2024 to February 14, 2025, at a redemption price equal to 101.750 % of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date;

from February 15, 2025 to February 14, 2026, at a redemption price equal to 100.875 % of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date;

and from February 15, 2026 and thereafter, at a redemption price equal to 100.000 % of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date.

Rackspace Technology Global may also redeem prior to February 15, 2024 up to 40.0 % of the aggregate principal amount of the 3.50 % Senior Secured Notes with funds in an aggregate amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 103.500 % of the principal amount of the 3.50 % Senior Secured Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Notwithstanding the foregoing, Rackspace Technology Global may redeem during each twelve-month period, commencing with February 9, 2021,

up to 10.0 % of the original aggregate principal amount of the 3.50 % Senior Secured Notes at a redemption price of 103.000 %, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

The 3.50 % Notes Indenture contains covenants that, among other things, limit our ability to incur certain additional debt, incur certain liens securing debt, pay certain dividends or make other restricted payments, make certain investments, make certain asset sales and enter into certain transactions with affiliates.

These covenants are subject to a number of exceptions, limitations, and qualifications as set forth in the 3.50 % Notes Indenture.

Additionally, upon the occurrence of a change of control (as defined in the 3.50 % Notes Indenture), we will be required to make an offer to repurchase all of the outstanding 3.50 % Senior Secured Notes at a price in cash equal to 101.000 % of the aggregate principal amount, plus accrued and unpaid interest, if any, to, but not including the purchase date.

As of December 31, 2021, Rackspace Technology Global was in compliance with all covenants under the 3.50 % Notes Indenture.

The fair value of the 3.50 % Senior Secured Notes as of December 31, 2021 was $ 519.8 million, based on quoted market prices for identical assets that are traded in over-the-counter secondary markets that are not considered active.

The fair value of the 3.50 % Senior Secured Notes are classified as Level 2 within the fair value hierarchy.

5.375 % Senior Notes due 2028

Rackspace Technology Global issued $ 550.0 million aggregate principal amount of the 5.375 % Senior Notes on December 1, 2020.

The 5.375 % Senior Notes will mature on December 1, 2028 and bear interest at an annual fixed rate of 5.375 % per year.

Interest is payable semi-annually on each June 1 and December 1, commencing on June 1, 2021.

The 5.375 % Senior Notes are not subject to registration rights.

We used the net proceeds from the issuance, together with cash on hand, to fund the repurchase of the outstanding 8.625 % Senior Notes due 2024 and to pay related fees and expenses.

Rackspace Technology Global is the issuer of the 5.375 % Senior Notes, and obligations under the 5.375 % Senior Notes are guaranteed on a senior unsecured basis by all of Rackspace Technology Global’s wholly-owned domestic restricted subsidiaries (as subsidiary guarantors) that guarantee the Senior Facilities.

The 5.375 % Senior Notes are effectively junior to the indebtedness under the Senior Facilities, to the extent of the collateral securing the Senior Facilities.

The indenture governing the 5.375 % Senior Notes (the " 5.375 % Indenture") describes certain terms and conditions under which other current and future domestic subsidiaries are required to become guarantors of the 5.375 % Senior Notes.

The 5.375 % Senior Notes are effectively junior to the indebtedness under the Senior Facilities and the 3.50 % Senior Secured Notes, to the extent of the collateral securing the Senior Facilities and the 3.50 % Senior Secured Notes.

The 5.375 % Notes Indenture describes certain terms and conditions under which other current and future domestic subsidiaries are required to become guarantors of the 5.375 % Senior Notes.

Rackspace Technology Global may redeem the 5.375 % Senior Notes at its option, in whole at any time or in part from time to time, at the following redemption prices:

prior to December 1, 2023, at a redemption price equal to 100.000 % of the principal amount, plus the applicable premium described in the 5.375 % Indenture and accrued and unpaid interest, if any, to but excluding the redemption date;

from December 1, 2023 to December 1, 2024, at a redemption price equal to 102.688 % of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date;

from December 1, 2024 to December 1, 2025, at a redemption price equal to 101.344 % of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date;

prior to December 1, 2023, at a redemption price equal to 100.000 % of the principal amount, plus the applicable premium described in the 5.375 % Notes Indenture and accrued and unpaid interest, if any, to but excluding the redemption date;

from December 1, 2023 to November 30, 2024, at a redemption price equal to 102.688 % of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date;

from December 1, 2024 to November 30, 2025, at a redemption price equal to 101.344 % of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date;

and from December 1, 2025 and thereafter, at a redemption price equal to 100.000 % of the principal amount, plus accrued and unpaid interest, if any, to but excluding the redemption date.

Rackspace Technology Global may also redeem up to 40 % of the aggregate principal amount of the 5.375 % Senior Notes with funds in an aggregate amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 105.375 % of the principal amount of the 5.375 % Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

The 5.375 % Indenture contains covenants that, among other things, limit our subsidiaries' ability to incur certain additional debt, incur certain liens securing debt, pay certain dividends or make other restricted payments, make certain investments, make certain asset sales and enter into certain transactions with affiliates.

As of December 31, 2020, Rackspace Technology Global was in compliance with all covenants under the 5.375 % Indenture.

Rackspace Technology Global may also redeem prior to December 1, 2023 up to 40 % of the aggregate principal amount of the 5.375 % Senior Notes with funds in an aggregate amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 105.375 % of the principal amount of the 5.375 % Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

The 5.375 % Notes Indenture contains covenants that, among other things, limit our ability to incur certain additional debt, incur certain liens securing debt, pay certain dividends or make other restricted payments, make certain investments, make certain asset sales and enter into certain transactions with affiliates.

These covenants are subject to a number of exceptions, limitations, and qualifications as set forth in the 5.375 % Notes Indenture.

Additionally, upon the occurrence of a change of control (as defined in the 5.375 % Notes Indenture), we will be required to make an offer to repurchase all of the outstanding 5.375 % Senior Notes at a price in cash equal to 101.000 % of the aggregate principal amount, plus accrued and unpaid interest, if any, to, but not including the purchase date.

As of December 31, 2021, Rackspace Technology Global was in compliance with all covenants under the 5.375 % Notes Indenture.

The fair value of the 5.375 % Senior Notes as of December 31, 2021 was $ 534.9 million, based on quoted market prices for identical assets that are traded in over-the-counter secondary markets that are not considered active.

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Accounts Receivable Financing Agreement

On March 19, 2020, a wholly owned subsidiary of the company entered into an accounts receivable financing agreement (the "Receivables Financing Facility").

Pursuant to the agreements evidencing the Receivables Financing Facility, Rackspace Receivables, LLC, a bankruptcy-remote special purpose vehicle ("SPV") wholly owned by Rackspace Technology Global, has granted a security interest in all of its current and future receivables and related assets in exchange for a credit facility permitting borrowings of up to a maximum aggregate amount of $ 100.0 million from time to time.

Such borrowings are used by the SPV to finance purchases of accounts receivable.

We recorded $ 1.0 million of fees and expenses related to the Receivables Financing Facility as debt issuance costs, which are included in "Other non-current assets" in the Consolidated Balance Sheets.

The amount of advances available are determined based on advance rates relating to the eligibility of the receivables held by the SPV at that time.

Advances bear interest based on LIBOR plus a margin.

The last date on which advances may be made is March 21, 2022, unless the maturity of the Receivables Financing Facility is otherwise accelerated.

In addition to other customary fees associated with financings of this type, the SPV is required to pay a monthly commitment fee based on the unused amount of the facility.

As of December 31, 2020, $ 65.0 million was borrowed and outstanding under the Receivables Financing Facility.

Subsequent to December 31, 2020, the SPV repaid a portion of the Receivables Financing Facility in the amount of $ 15.0 million to cover a borrowing base deficit.

The interest rate on the Receivables Financing Facility was 2.37 % as of December 31, 2020.

The agreements evidencing the Receivables Financing Facility contain customary representations and warranties, affirmative and negative covenants, and events of default.

As of December 31, 2020, the company was in compliance with all covenants under the Receivables Financing Facility.

On March 19, 2020, a wholly owned subsidiary of the company entered into the Receivables Financing Facility.

Pursuant to the agreements evidencing the Receivables Financing Facility, Rackspace Receivables, LLC, a bankruptcy-remote SPV indirectly wholly owned by Rackspace Technology Global, granted a security interest in all of its current and future receivables and related assets in exchange for a credit facility permitting borrowings of up to a maximum aggregate amount of $ 100.0 million from time to time.

Such borrowings were used by the SPV to finance purchases of accounts receivable.

Rackspace Technology Global was the primary beneficiary of the SPV.

We recorded $ 1.0 million of fees and expenses related to the Receivables Financing Facility as debt issuance costs for the year ended December 31, 2020, which were included in "Other non-current assets" in the Consolidated Balance Sheets.

The amount of advances available were determined based on advance rates relating to the eligibility of the receivables held by the SPV at that time.

Advances bore interest based on LIBOR plus a margin.

The last date on which advances could be made was March 21, 2022, unless the maturity of the Receivables Financing Facility was otherwise accelerated.

In addition to other customary fees associated with financings of this type, the SPV was required to pay a monthly commitment fee based on the unused amount of the facility.

During the year ended December 31, 2021, the SPV repaid $ 15.0 million to cover a borrowing base deficit, repaid the remaining outstanding balance of $ 50.0 million and terminated the Receivables Financing Facility.

The termination resulted in expense of $ 0.5 million recorded within "Debt modification costs and extinguishment gain (loss)" in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2021.

The expense was comprised of the write-off of the unamortized debt issuance costs, as well as third party fees associated with the termination.

February 2021 Refinancing Transaction

The February 2021 Refinancing Transaction represented an extinguishment and modification of debt.

We derecognized $ 2,795.6 million of the Prior Term Loan Facility and wrote off $ 9.4 million in unamortized debt issuance costs and debt discount associated with the portion of the Prior Term Loan Facility that was deemed extinguished.

We recognized $ 2,300.0 million borrowed under the Term Loan Facility and $ 41.0 million of associated debt issuance costs and debt discount, including amounts allocated from the Prior Term Loan Facility, both classified as a direct deduction from the carrying value of non-current debt on our Consolidated Balance Sheets.

We recognized $ 550.0 million aggregate principal amount of the 3.50 % Senior Secured Notes due 2028 and $ 6.8 million of associated debt issuance costs, including amounts allocated from the Prior Term Loan Facility.

The February 2021 Refinancing Transaction resulted in expense of $ 37.0 million recorded within "Debt modification costs and extinguishment gain (loss)" in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2021.

The expense was comprised of the write-off of unamortized debt issuance costs and debt discount associated with the portion of the Prior Term Loan Facility that was deemed extinguished, as well as $ 27.6 million in third party fees associated with the modification.

8.625 % Senior Notes Repurchases

In connection with these repurchases, we recorded a gain on debt extinguishment of $ 9.8 million within "Debt modification costs and extinguishment gain (loss)" in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2019.

During the year ended December 31, 2020, Rackspace Technology Global repurchased and cancelled the remaining aggregate principal amount of the $ 1,120.2 million outstanding 8.625 % Senior Notes and paid related premiums, fees and accrued and unpaid interest for aggregate cash of $ 1,191.9 million.

In connection with these repurchases, we recorded $ 71.5 million of expense within "Debt modification costs and extinguishment gain (loss)" in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2020, comprised of a $ 56.2 million aggregate premium on repurchase, $ 14.9 million write-off of unamortized debt issuance costs, and transaction fees of $ 0.4 million.

Following the cancellations, we had no remaining outstanding principal balance under the 8.625 % Senior Notes as of December 31, 2020.

Debt Maturities

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Net book value of property and equipment under finance leases $ 368.0 $ 368.7

(1) During the year ended December 31, 2020, we recorded $ 220.3 million to buildings and leasehold improvements related to lease modifications in June 2020 which resulted in a change of classification from operating leases to finance leases.

The current and non-current balances of finance lease liabilities as of December 31, 2019 and 2020 were as follows:

December 31, 2019 December 31, 2020

(In millions)

Finance lease liability balances included in:

Other current liabilities $ 9.2 $ 40.7

Non-current finance lease liabilities 88.4 358.1

Total finance lease liabilities $ 97.6 $ 398.8

The components of operating and finance lease expense for the years ended December 31, 2020 and 2021 were as follows:

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We had no material liabilities recorded for these agreements as of December 31, 2020 or 2021.

In connection with the Rackspace Acquisition, an affiliate of Apollo and Searchlight Capital Partners L.P ("Searchlight") (the "Affiliated Service Providers") each entered into a management consulting agreement with Rackspace Technology, Inc.

(the "Apollo/Searchlight Management Consulting Agreement") relating to the provision of certain management consulting and advisory services following the consummation of the Rackspace Acquisition.

In addition, on November 3, 2016, an affiliate of Apollo entered into a transaction fee agreement (the "Transaction Fee Agreement") with Rackspace Technology, Inc.

relating to the provision of certain preparation services in support of the Rackspace Acquisition.

On November 15, 2017, in connection with the Datapipe acquisition, ABRY Partners, LLC and ABRY Partners II, LLC (collectively, "ABRY") entered into a management consulting agreement (the "ABRY Management Consulting Agreement") with Rackspace Technology, Inc.

relating to the provision of certain management consulting and advisory services.

In connection with the Rackspace Acquisition, an affiliate of Apollo and Searchlight each entered into a management consulting agreement with Rackspace Technology Global relating to the provision of certain management consulting and advisory services following the consummation of the Rackspace Acquisition.

In addition, on November 3, 2016, an affiliate of Apollo entered into a transaction fee agreement with Rackspace Technology Global relating to the provision of certain preparation services in support of the Rackspace Acquisition.

On November 15, 2017, in connection with the Datapipe acquisition, ABRY entered into a management consulting agreement with Rackspace Technology Global relating to the provision of certain management consulting and advisory services.

Under the terms of the Transaction Fee Agreement, the Apollo/Searchlight Management Consulting Agreement and the ABRY Management Consulting Agreement, the company has obligations to indemnify affiliates and representatives of Apollo, Searchlight and ABRY, as applicable, for any losses or liabilities that they may incur as a result of their provision of services under those agreements (unless the losses or liabilities have resulted from the willful misconduct of the person seeking indemnification).

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We had no material liabilities recorded for these agreements as of December 31, 2020 or 2021.

July 2021 Restructuring Plan

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.

Substantially all of the employees impacted by the reduction in workforce were notified of the reduction on July 22, 2021 and will exit the company over the next 12 months.

During the year ended December 31, 2021 , we incurred employee related costs, primarily consisting of one-time termination benefits and certain contractual termination benefits with executives, and other costs, which are accounted for as exit and disposal costs under ASC 420.

Other costs consisted of professional fees, asset write-offs, and the impact of a contract termination with a third-party.

These costs are recorded within "Selling, general and administrative expenses" in the Consolidated Statements of Comprehensive Loss, the components of which were as follows:

(In millions) Year Ended December 31, 2021

Employee related costs $ 13.8

Total restructuring charges $ 25.4

A portion of the other costs are non-cash charges, representing $ 5.6 million in the year ended December 31, 2021.

This amount is related to asset write-offs and the contract termination.

Liability activity for restructuring costs that are expected to be settled in cash are presented in the table below.

(In millions) Employee Related Other Total

Liability as of December 31, 2020

Charges 13.8 6.0 19.8

Cash payments ( 6.7 ) ( 5.4 ) ( 12.1 )

Liability as of December 31, 2021

$ 7.1 $ 0.6 $ 7.7

Total cumulative costs incurred as of December 31, 2021

$ 13.8 $ 6.0 $ 19.8

Total expected costs to be incurred

$ 15.9 $ 6.5 $ 22.4

The liability for employee related costs was recorded in "Accrued compensation and benefits" in the Consolidated Balance Sheets as of December 31, 2021 .

The liabilities for other costs were recorded in "Other current liabilities" in the Consolidated Balance Sheets as of December 31, 2021 .

Stockholders' Equity

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On September 6, 2017, we entered into an Agreement and Plan of Merger (the "Datapipe Merger Agreement") pursuant to which we acquired Datapipe.

In addition, the Datapipe Merger Agreement provides that we will be required to issue additional shares of our common stock to an affiliate of ABRY based on the multiple of invested capital ("MOIC") on any “Measurement Date,” as defined in the Datapipe Merger Agreement.

In addition, the Datapipe Merger Agreement provides that we will be required to issue additional shares of our common stock to an affiliate of ABRY based on a MOIC on any “Measurement Date,” as defined in the Datapipe Merger Agreement.

The maximum number of shares of common stock issuable will not exceed 10,663,741 shares in the aggregate, subject to adjustment for stock splits, stock dividends, recombinations, reclassifications and similar equitable adjustments.

On February 2, 2021, we issued 2,665,935 shares of common stock for no additional consideration pursuant to the Datapipe Merger Agreement.

Share-Based Compensation, Settlement of Share-Based Awards, and Employee Benefit Plans

In April 2017, the Executive Committee of the board of directors authorized the company to adopt the Rackspace Technology, Inc.

Equity Incentive Plan (the "2017 Incentive Plan").

On July 24, 2020, the board of directors approved, effective on August 7, 2020, the Rackspace Technology, Inc.

2020 Equity Incentive Plan (the "2020 Incentive Plan" and, together with the 2017 Incentive Plan, the "Incentive Plans") and amendments to the 2017 Incentive Plan which, among other things, resulted in the termination of the 2017 Incentive Plan, except as it relates to outstanding awards, and any remaining shares reserved for future grants under the 2017 Incentive Plan were released.

The 2020 Incentive Plan provides for the grant of stock options, including incentive stock options ("ISOs"), and nonqualified stock options ("NSOs"), stock appreciation rights ("SARs"), restricted stock, restricted stock units ("RSUs"), other stock-based incentive awards, dividend equivalents and cash-based awards (collectively, "awards").

ISOs may be granted only to our employees or an employee of a parent or subsidiary.

In April 2017, the Executive Committee of the board of directors authorized the company to adopt the 2017 Incentive Plan.

On July 24, 2020, the board of directors approved, effective on August 7, 2020, the 2020 Incentive Plan and amendments to the 2017 Incentive Plan which, among other things, resulted in the termination of the 2017 Incentive Plan, except as it relates to outstanding awards, and any remaining shares reserved for future grants under the 2017 Incentive Plan were released.

The 2020 Incentive Plan provides for the grant of stock options, including incentive stock options, and nonqualified stock options, stock appreciation rights, restricted stock, RSUs, other stock-based incentive awards, dividend equivalents and cash-based awards (collectively, "awards").

Incentive stock options may be granted only to our employees or an employee of a parent or subsidiary.

All other awards may be granted to employees and consultants of the company and its parents and subsidiaries, as well as all non-employee members of our board of directors.

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Certain executives have received stock options that vest in part subject to continued service ratably over a five-year period and in part based upon the attainment of performance and market conditions.

In 2021, we shifted away from granting stock options as we had in previous years, to granting restricted stock.

As such, there were no stock options granted during the year ended December 31, 2021.

The following table summarizes the stock option activity for the year ended December 31, 2021:

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The total pre-tax intrinsic value of the stock options exercised during the years ended December 31, 2019, 2020 and 2021 was $ 1.8 million, $ 22.3 million, and $ 35.0 million, respectively.

We have granted stock options that include vesting terms dependent upon a service, performance and/or market condition.

For the years ended December 31, 2019 and 2020 we have granted stock options that include vesting terms dependent upon a service, performance and/or market condition.

The performance criteria for the performance and market based stock options is tied to a liquidity event and the achievement of targets based on a MOIC for Apollo.

The fair value of stock options with vesting conditions dependent upon market performance is determined using a Monte Carlo simulation.

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Year Ended December 31,

2018 2019 2020

Expected stock volatility (1)

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0.38 % - 1.73 %

Expected life (4)

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5.5 - 6.5 years

(1) Management estimates volatility based on the historical trading volatility of a public company peer group and the implied volatility of our assets and current leverage.

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The weighted-average grant-date fair value of options granted during the years ended December 31, 2019, and 2020 was $ 6.81 , and $ 8.09 , respectively.

As of December 31, 2020, there was $ 63.5 million of total unrecognized compensation cost related to stock options, which will be recognized over a weighted average period of 1.6 years.

As of December 31, 2021, there was $ 18.0 million of total unrecognized compensation cost related to stock options, which will be recognized using the straight-line method over a weighted average period of 1.6 years.

Restricted Stock

Restricted stock has been granted to certain executives that vest in part subject to continued service ratably over a three or five-year period and in part based upon the attainment of performance and market conditions.

In 2021, we shifted away from granting stock options as we had in previous years, to granting restricted stock.

The majority of our restricted stock grants were made as part of our annual compensation award process and vest ratably over a three-year period, subject to continued service.

Restricted stock has also been granted to certain executives that vest in part subject to continued service ratably over a three or five-year period and in part based upon the attainment of performance and market conditions.

The performance criteria is based upon various targets of the compound annual growth rate in EBITDA (as defined in the applicable award agreement) attained over specified trailing twelve month periods.

The fair value of the service-vesting awards is measured based on the fair value of the underlying common stock on the date of the grant.

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Share-based compensation expense is recognized on a straight-line basis over the service period or over our best estimate of the period over which the performance condition will be met, as applicable.

On the date of our IPO, we granted RSUs to all eligible employees.

In 2020, we granted restricted stock to all eligible employees on the date of our IPO.

The fair value of these awards was based on the fair value of the underlying common stock on the date of the grant, and share-based compensation expense is recognized on a straight-line basis over the service period of six months .

Additionally, we have granted certain awards with vesting dependent upon the attainment of predetermined financial performance results over the next two years .

The fair value of these performance-vesting awards is measured based on the fair value of the underlying common stock on the date of grant, and share-based compensation expense is recognized when it is probable that the performance condition will be achieved.

Certain non-executive board members elected to receive a portion of their annual compensation in the form of restricted stock.

The fair value of these service-vesting awards is measured based on the fair value of the underlying common stock on the date of grant, and share-based compensation expense is recognized on a straight-line basis over the one-year service period.

In August 2021, we granted certain awards, 0.6 million shares in total, with vesting dependent upon the attainment of predetermined financial performance results over the next three years .

The performance metric that will determine vesting of these awards is Non-GAAP Operating Profit (as defined in the applicable award agreement) measured over a trailing four-quarter period.

Probability is based upon probable achievement of the various targets in management's internal forecasts.

The following table summarizes our restricted stock activity for the year ended December 31, 2021:

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The weighted-average grant-date fair value of restricted stock granted during the years ended December 31, 2019 and 2020 was $ 12.88 and $ 17.74 , respectively.

The total pre-tax intrinsic value of the restricted stock released during the years ended December 31, 2019 and 2020 was $ 3.3 million and $ 3.6 million, respectively.

There was no restricted stock released during the year ended December 31, 2018.

As of December 31, 2020, there was $ 30.2 million of total unrecognized compensation cost related to restricted stock, which will be recognized over a weighted average period of 1.6 years.

The total pre-tax intrinsic value of the restricted stock released during the years ended December 31, 2019, 2020 and 2021 was $ 3.3 million, $ 3.6 million and $ 35.2 million, respectively.

As of December 31, 2021, there was $ 103.2 million of total unrecognized compensation cost related to restricted stock, which will be recognized using the straight-line method over a weighted average period of 2.1 years.

Employee Stock Purchase Plan

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Share-based compensation expense is recognized on a straight-line basis over the offering period.

We issued 0.4 million shares through the ESPP during the year ended December 31, 2020.

The share-based compensation expense recognized for the ESPP was $ 1.5 million during the year ended December 31, 2020.

We issued 0.4 million and 0.7 million shares through the ESPP during the years ended December 31, 2020 and 2021, respectively.

The share-based compensation expense recognized for the ESPP was $ 1.5 million and $ 4.5 million for the years ended December 31, 2020 and 2021, respectively.

As of December 31, 2021, there was no unrecognized compensation cost related to the ESPP.

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Share-Based Compensation Expense

In connection with the departure of certain executives during the year ended December 31, 2019, we accelerated vesting of options and restricted stock for awards with service-only vesting conditions and extended the post termination option exercise period.

In connection with the departure of certain executives during the year ended December 31, 2020, we accelerated vesting of options and restricted stock for awards with service-only vesting conditions, extended the period certain options with performance and/or market conditions would remain outstanding and eligible to vest and extended the post termination option exercise period.

These modifications resulted in incremental expense of $ 3.5 million and $ 3.5 million during the years ended December 31, 2019 and 2020, respectively.

In addition, during the years ended December 31, 2018 and 2019, modifications were made to the performance and/or market condition of awards for certain employees.

In connection with the departure of certain executives during the year ended December 31, 2019, 2020, and 2021 we accelerated vesting of options and restricted stock for awards with service-only vesting conditions and extended the post termination option exercise period.

These modifications resulted in incremental expense of $ 3.5 million, $ 3.5 million and $ 0.8 million during the years ended December 31, 2019, 2020 and 2021, respectively.

In addition, during the year ended December 31, 2019, modifications were made to the performance and/or market condition of awards for certain employees.

As these awards expired before a change in control event required for vesting, these modifications resulted in no incremental expense.

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Settlement of Share-Based Awards

As a result of the Rackspace Acquisition, Rackspace Technology Global had obligations related to the settlement of restricted stock units that were outstanding at the Closing Date.

As a result of the Rackspace Acquisition, Rackspace Technology Global had obligations related to the settlement of RSUs that were outstanding as of November 3, 2016.

These obligations required installment payments that began in November 2016 and ended in the first quarter of 2019.

We made cash payments of $ 46.3 million and $ 19.2 million during the years ended December 31, 2018 and 2019, respectively.

Compensation expense recognized related to these payments for the years ended December 31, 2018 and 2019 was as follows:

Year Ended December 31,

(In millions) 2018 2019

Cost of revenue $ 6.5 $ —

Selling, general and administrative expenses 19.8 2.7

Total cash settled equity compensation expense $ 26.3 $ 2.7

We made cash payments of $ 19.2 million during the year ended December 31, 2019 and recognized compensation expense of $ 2.7 million within "Selling, general and administrative expenses" in the Consolidated Statements of Comprehensive Loss for the year ended December 31, 2019.

In addition, in connection with an employee's departure, we settled options and restricted stock for a one-time cash payment of $ 1.5 million during the year ended December 31, 2019.

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Research and development credit 2.4 % 2.9 % ( 0.4 ) %

Tax Reform ( 1.9 ) % — % — %

Tax impact of goodwill impairment ( 12.3 ) % — % — %

Effects of other enacted tax law and rate changes ( 3.9 ) % ( 0.4 ) % ( 0.3 ) %

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Nondeductible compensation — % ( 2.2 ) % ( 2.5 ) %

Tax impact of goodwill impairment — % — % ( 4.4 ) %

Other, net ( 2.4 ) % 0.8 % ( 0.5 ) %

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Capitalized costs 13.9 12.4

Unremitted foreign earnings 0.1 —

Interest rate swaps — 5.4

Debt related 7.4 0.4

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We have $ 127.3 million of foreign net operating losses, $ 7.2 million of which have carryforward periods ranging from 5 to 20 years, and $ 120.1 million of which have an indefinite carryforward period.

Certain federal and foreign net operating loss carryforwards are subject to various limitations under Section 382 of the Internal Revenue Code and the applicable statutory foreign tax laws.

Certain federal and foreign net operating loss carryforwards are subject to various limitations under Section 382 of the IRC and the applicable statutory foreign tax laws.

We have disallowed interest expense carryforwards in the U.S.

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state and foreign jurisdictions and federal foreign tax credits that we believe are not likely to be realized.

For the rest of the deferred tax assets, valuation allowances were not deemed necessary based upon the determination that future profits are anticipated to utilize deferred tax assets prior to the expiration of any applicable carryforward periods.

The effective tax rate for the year ended December 31, 2018 was primarily impacted by new provisions of the Tax Cuts and Jobs Act (the “Act”) for foreign earnings, specifically global intangible low-taxed income (“GILTI”), as well as the tax impact associated with a goodwill impairment.

The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations and we have elected to treat any GILTI inclusions as a period cost.

There was also an amount recorded in the fourth quarter of 2018 as we completed our accounting for the Act.

We had initially recorded a provisional income tax benefit of $ 196.8 million for the year ended December 31, 2017, which was included within “Benefit for income taxes” in the Consolidated Statements of Comprehensive Loss.

Our final income tax benefit related to the Act was a net $ 186.3 million.

The effective tax rate for the year ended December 31, 2019 was impacted by the current year GILTI inclusion, the impact of changes in income tax rates, changes in valuation allowances, R&D credits, changes to income tax reserves and other permanently nondeductible items.

The effective tax rate for the year ended December 31, 2020 was primarily impacted by deductions disallowed by Section 162(m) of the Internal Revenue Code, the impact of changes in income tax rates, changes in valuation allowances, R&D credits, changes to income tax reserves and other permanently nondeductible items.

For the rest of the deferred tax assets, valuation allowances were not deemed necessary based upon the determination that income created by reversing deferred tax liabilities will be sufficient to utilize deferred tax assets prior to the expiration of any applicable carryforward periods.

The effective tax rate for the year ended December 31, 2019 was primarily impacted by the current year global intangible low-taxed income inclusion, the impact of changes in income tax rates, changes in valuation allowances, R&D credits, changes to income tax reserves and other permanently nondeductible items.

The effective tax rate for the year ended December 31, 2020 was primarily impacted by deductions disallowed by Section 162(m) of the IRC, the impact of changes in income tax rates, changes in valuation allowances, R&D credits, changes to income tax reserves and other permanently nondeductible items.

The effective tax rate for the year ended December 31, 2021 was impacted by deductions disallowed by Section 162(m) of the IRC, changes in valuation allowances, the tax impact associated with a goodwill impairment, changes to income tax reserves and other permanently nondeductible items.

We do not permanently reinvest our foreign earnings due to the debt service requirements of our capital structure.

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$ 53.2 $ 51.0 $ 52.4

(1) Included within non-current liabilities in the Consolidated Balance Sheets, except for $0.6 million of which is included in current liabilities as of December 31, 2020

(1) Included within non-current liabilities in the Consolidated Balance Sheets

Of the total amount of unrecognized tax benefits as of December 31, 2019, 2020 and 2021, $ 47.4 million, $ 42.3 million and $ 37.8 million, respectively, if recognized, would favorably impact our effective tax rate.

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We recognize interest expense and penalties related to income tax matters within “Benefit for income taxes” on our Consolidated Statements of Comprehensive Loss.

Accrued interest and penalties as of December 31, 2018, 2019 and 2020 were zero , $ 2.1 million and $ 2.4 million, respectively.

Accrued interest and penalties as of December 31, 2019, 2020 and 2021 were $ 2.1 million, $ 2.4 million and $ 3.5 million, respectively.

We are subject to U.S.

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federal and state income tax examinations for the tax years 2018 through 2021 and in the foreign jurisdictions in which we operate for varying periods from 2010 through 2021.

In December 2020, we concluded an Internal Revenue Service federal tax audit for the pre-Rackspace Acquisition period ended November 2, 2016, with respect to certain matters, but the statute for the period remains open until September 2021.

We currently have income tax examinations open in Texas for tax years 2014 through 2017, Pennsylvania for 2018 and New York City for the year ended November 3, 2016.

In the third quarter of 2021, we had a release of historic tax reserves that resulted in a tax benefit of $ 13.4 million, due to the lapse of statute of limitations.

We currently have income tax examinations open in Texas for tax years 2014 through 2017, Pennsylvania for 2018 and New York City for 2017 through 2019.

Additionally, we are currently under tax audit in India for the fiscal year ended March 31, 2020.

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To the extent additional information becomes available prior to resolution, such accruals are adjusted to reflect probable outcomes.

On July 27, 2015, the U.S.

Tax Court ("Tax Court") issued an opinion in Altera Corp.

("Altera") v.

Commissioner ("Tax Court Opinion"), which concluded that related parties in a cost sharing arrangement are not required to share expenses related to share-based compensation.

The Tax Court Opinion was appealed by the Commissioner to the Ninth Circuit Court of Appeals ("Ninth Circuit").

On June 7, 2019, a three-judge panel from the Ninth Circuit issued an opinion that reversed the Tax Court Opinion.

On July 22, 2019, the taxpayer requested a rehearing before the full Ninth Circuit, which the Ninth Circuit subsequently denied.

On February 10, 2020, Altera submitted a petition for writ of certiorari to the U.S.

Supreme Court.

On June 22, 2020, the U.S.

Supreme Court denied Altera’s petition for writ of certiorari and will not review the Ninth Circuit’s June 7, 2019 decision that upheld the inclusion of share-based compensation in a cost sharing arrangement.

Given the U.S.

Supreme Court’s denial of the petition for writ of certiorari, we believe it is appropriate to record the financial statement impact of including share-based compensation in historical cost sharing payments discretely in the year ended December 31, 2020 for years prior to 2020.

The aggregate income tax impact related to the Altera decision is less than $ 1.0 million.

If, at a future date, Altera secured a favorable ruling from the U.S.

Supreme Court, we would re-evaluate the decision to record an income tax benefit at that time.

In a referendum held on May 19, 2019, Switzerland passed the Federal Act on Tax Reform and AHV Financing (“TRAF”), effective January 1, 2020.

On October 25, 2019, the Zurich Canton published the amended cantonal tax law in the official cantonal tax law register.

The intent of these tax law changes was to replace certain preferential tax regimes with a new set of internationally accepted measures.

Based on these Federal/Cantonal events, our position is the enactment of Swiss tax reform for U.S.

GAAP purposes occurred during the fourth quarter of 2019, and we recorded a charge of $ 4.4 million due to a remeasurement of our deferred tax balances for the year ended December 31, 2019.

The future rate impacts of these Swiss tax reform law changes are effective starting January 1, 2020.

We will continue to monitor Swiss tax reform for any additional interpretative guidance that could result in changes to the amounts we have recorded.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law in response to the COVID-19 pandemic.

The CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020.

The modifications to Section 163(j) of the Internal Revenue Code increase the allowable business interest deduction for those years from 30% to 50% of adjusted taxable income.

This modification significantly increased our allowable interest expense deduction for 2019, resulting in less utilization of prior year net operating losses in that year.

Further, we expect to be able to fully deduct interest expense incurred in 2020, including previously disallowed interest expense carrying forward from 2018.

On February 1, 2017, we completed the sale of assets of our Mailgun business for total consideration of $ 40.2 million, which was comprised of an initial cash payment of $ 20.5 million, a promissory note receivable with principal amount of $ 20.0 million to be paid in annual installments over four years with a fair value of $ 14.8 million, and an equity interest in the new entity, Mailgun Technologies with a fair value of $ 4.9 million.

In October 2017, Mailgun Technologies began exercising call rights to repurchase a portion of shares.

During 2018, Mailgun Technologies exercised call rights and repurchased additional shares in multiple transactions throughout the year, which resulted in a total gain of $ 3.8 million.

The gain associated with these share repurchases are included within “Gain on investments, net” in the Consolidated Statements of Comprehensive Loss for the year ended December 31, 2018.

On February 1, 2017, we completed the sale of assets of our Mailgun business for total consideration $ 40.2 million, which was comprised of an initial cash payment of $ 20.5 million, a promissory note receivable with principal amount of $ 20.0 million to be paid in annual installments over four years with a fair value of $ 14.8 million, and an equity interest in the new entity, Mailgun Technologies with a fair value of $ 4.9 million.

As of December 31, 2018, we no longer had an equity interest in Mailgun Technologies.

In March 2019, we received $ 18.0 million in cash from Mailgun Technologies as repayment for the promissory note balance of $ 15.9 million, which included accrued interest of $ 1.2 million.

As such, we recorded a gain of $ 2.1 million, which is reflected within "Gain on sale" in the Consolidated Statements of Comprehensive Loss for the year ended December 31, 2019.

We did no t have any divestitures for the year ended December 31, 2020.

On May 14, 2018, we acquired 100 % of RelationEdge, LLC ("RelationEdge"), a full-service Salesforce Platinum Consulting Partner and digital agency that helps clients engage with their customers from lead to loyalty by improving business process, leveraging technology and integrating creative digital marketing.

The acquisition was completed for total consideration of $ 65.7 million, net of cash acquired of $ 0.4 million, for a net cash purchase price of $ 65.3 million.

We funded the acquisition and the related fees and expenses with cash on hand.

With this acquisition, we expanded our ability to be a preferred partner for managing a customer’s complete application portfolio through continuous transition to modern technologies, including software-as-a- service (“SaaS”) applications.

The final allocation of the purchase price as of the May 14, 2018 closing date is as follows:

(In millions) May 14, 2018

RelationEdge Acquisition Consideration $ 65.7

Allocated to:

Cash and cash equivalents $ 0.4

Intangible assets 22.1

Liabilities assumed, net of other assets acquired ( 1.1 )

Net assets acquired $ 21.4

Goodwill $ 44.3

Goodwill primarily consisted of assembled workforce and is deductible for tax purposes.

The fair value of identifiable intangible assets acquired includes $ 18.0 million for the relationship with Salesforce, and is recorded within “Other” in the intangible assets table disclosed in Note 5, “Goodwill and Intangible Assets.” The weighted average amortization period of identifiable intangible assets is approximately 4.6 years as of the date of the acquisition.

We recorded $ 1.6 million for the year ended December 31, 2018 of costs, including legal, professional, and other fees, related to the RelationEdge acquisition, within "Selling, general and administrative expenses" in the Consolidated Statements of Comprehensive Loss.

RelationEdge’s results of operations from the May 14, 2018 acquisition date through December 31, 2018 were not material to our consolidated financial statements.

Additionally, pro forma impacts of the RelationEdge acquisition were not material to our consolidated revenue or results of operations for the year ended December 31, 2018.

On November 15, 2019, we acquired 100 % of Onica Holdings LLC ("Onica"), an Amazon Web Services ("AWS") Partner Network Premier Consulting Partner and AWS Managed Service Provider providing cloud-native consulting and managed services, including strategic advisory, architecture and engineering and application development services.

As such, we recorded a gain of $ 2.1 million, which is reflected within "Gain on divestiture" in the Consolidated Statements of Comprehensive Loss for the year ended December 31, 2019.

We did no t have any divestitures for the years ended December 31, 2020 or 2021.

On November 15, 2019, we acquired 100 % of Onica, an AWS Partner Network Premier Consulting Partner and AWS Managed Service Provider providing cloud-native consulting and managed services, including strategic advisory, architecture and engineering and application development services.

Total consideration to acquire Onica was $ 323.4 million, net of cash acquired of $ 7.5 million, for a net purchase price of $ 315.9 million.

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Pro Forma Results

The following unaudited pro forma summary presents consolidated financial information for the years ended December 31, 2018 and 2019 as if the Onica acquisition had been completed as of January 1, 2018.

The following unaudited pro forma summary presents consolidated financial information for the year ended December 31, 2019 as if the Onica acquisition had been completed as of January 1, 2019.

This pro forma presentation does not include any impact of transaction synergies.

The pro forma results are not necessarily indicative of the results of operations that actually would have been achieved had the acquisition of Onica been consummated as of January 1, 2019:

Year Ended December 31,

(In millions) 2018 2019

(In millions) Year Ended December 31, 2019

Revenue $ 2,551.1

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The Purchase Price Adjustment is included in "Other investing activities" in the Consolidated Statements of Cash Flows.

The the impact of the adjustments recorded is as follows:

The impact of the adjustments recorded is as follows:

(In millions) As Previously Determined Measurement Period Adjustments Revised

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Liabilities assumed, net of other assets acquired 11.0 ( 0.3 ) 10.7

On November 5, 2020, we acquired 100 % of Bright Skies GmbH ("Bright Skies"), a cloud-native consulting and managed services provider.

On November 5, 2020, we acquired 100 % of Bright Skies, a cloud-native consulting and managed services provider.

The acquisition of Bright Skies was not material to the consolidated financial statements.

Interest Rate Swaps

In December 2016, we entered into seven floating-to-fixed interest rate swap agreements to manage our risk from interest rate fluctuations associated with the floating-rate Term Loan Facility.

The swap agreements became effective on February 3, 2017 with an aggregate notional amount of $ 1.50 billion.

Two swap agreements matured in 2018, one agreement matured in 2019, and one agreement matured in February 2020.

The remaining three swap agreements in effect as of December 31, 2020 have an aggregate notional amount of $ 1.05 billion and mature over the next two years .

On a quarterly basis, we net settle with the counterparty for the difference between the fixed rate specified in each swap agreement, ranging from 1.7625 % to 1.9040 %, and the variable rate based upon the three-month LIBOR as applied to the notional amount of the swap.

In December 2018, we entered into four additional floating-to-fixed interest rate swap agreements with an aggregate notional amount of $ 1.35 billion and a maturity date of November 3, 2023.

These swap agreements are forward-starting, and as of December 31, 2020, two swap agreements, with an aggregate notional amount of $ 300 million, were effective.

The remaining swap agreements become effective each year thereafter to coincide with the maturity dates of the outstanding December 2016 swap agreements.

On a quarterly basis, we net settle with the counterparty for the difference between the fixed rate specified in each swap agreement, ranging from 2.7350 % to 2.7490 %, and the variable rate based upon the three-month LIBOR as applied to the notional amount of the swap.

Prior to January 9, 2020, none of our floating-to-fixed interest rate swap agreements were designated as cash flow hedges of interest rate risk for accounting purposes, therefore, all changes in the fair value of the interest rate swap agreements were recorded to "Interest expense" in the Consolidated Statements of Comprehensive Loss.

On January 9, 2020, we designated certain of our swaps as cash flow hedges.

On the designation date, the cash flow hedges were in a $ 39.9 million liability position.

The cash flow hedges were expected to be highly effective on the designation date and, on a quarterly basis, we performed retrospective and prospective assessments to determine whether the cash flow hedges continued to be highly effective.

As long as the cash flow hedges were highly effective, changes in fair value were recorded to "Accumulated other comprehensive income (loss)" in the Consolidated Balance Sheets and reclassified to "Interest expense" in the period when the underlying transaction affected earnings.

The income tax effects of cash flow hedges were released from "Accumulated other comprehensive income (loss)" in the period when the underlying transaction affected earnings.

Any stranded income tax effects were released from "Accumulated other comprehensive income (loss)" into "Benefit (provision) for income taxes" under the portfolio approach.

As of December 31, 2020 , all of our cash flow hedges were highly effective.

During the year ended December 31, 2021, we completed a series of transactions to modify our interest rate swap positions as follows:

(i) All the interest rate swaps outstanding as of December 31, 2020, as shown in the table below, with the exception of the agreement that matured on February 3, 2021, were de-designated as cash flow hedges on January 31, 2021, (ii) on February 12, 2021, we entered into a $ 900.0 million receive-fixed interest rate swap which was designed to offset the terms of the remaining two December 2016 swaps, and (iii) on February 12, 2021, we terminated all December 2018 swaps and entered into a $ 1.35 billion pay-fixed interest rate swap, effectively blending the liability position of our existing interest rate swap agreements into the new swap and extending the term of our hedged position to February 2026.

The amount remaining in “Accumulated other comprehensive income (loss)" for the de-designated December 2016 and December 2018 swaps at the de-designation date was app roximately $ 51.6 million, and is being amortized as an increase to "Interest expense" over the effective period of the original swap agreements.

The new receive-fixed interest rate swap qualifies as a hybrid instrument in accordance with ASC No.

815, Derivatives and Hedging , consisting of a loan and an embedded derivative for which the fair value option has been elected.

This $ 900.0 million swap will remain undesignated to economically offset the now undesignated December 2016 swaps.

This new swap and the December 2016 swaps mature on February 3, 2022.

Cash settlements related to this receive-fixed interest rate swap will offset and are classified as operating activities in the Consolidated Statements of Cash Flows.

The new pay-fixed interest rate swap also qualifies as a hybrid instrument in accordance with ASC No.

815, Derivatives and Hedging , consisting of a loan and an embedded at-market derivative that was designated as a cash flow hedge.

The loan is accounted for at amortized cost over the life of the swap while the embedded at-market derivative is accounted for at fair value.

This new $ 1.35 billion swap is indexed to three-month LIBOR and is being net settled on a quarterly basis with the counterparty for the difference between the fixed rate of 2.3820 % and the variable rate based upon three-month LIBOR (subject to a floor of 0.75 %) as applied to the notional amount of the swap.

In connection with the transactions discussed above, no cash was exchanged between us and the counterparty.

The liability of the terminated interest rate swaps as well as the inception value of the receive-fixed interest rate swap was blended into the new pay-fixed interest rate swap.

The cash flows related to the portion treated as debt is classified in financing activities in the Consolidated Statements of Cash Flows while the portion treated as an at-market derivative is classified in operating activities.

As of December 31, 2021 , the cash flow hedge was highly effective.

The key terms of interest rate swaps outstanding are presented below:

Effective Date Fixed Rate Paid (Received) December 31, 2020 December 31, 2021

Notional Amount (in millions) Status Notional Amount (in millions) Status Maturity Date

Entered into December 2016:

February 3, 2017 1.7625 % $ 150.0 Active $ — Matured February 3, 2021

February 3, 2017 1.9040 % 450.0 Active 450.0 Active February 3, 2022

Entered into December 2018:

February 3, 2019 2.7490 % 150.0 Active — Terminated November 3, 2023

February 3, 2020 2.7350 % 150.0 Active — Terminated November 3, 2023

February 3, 2021 2.7360 % 150.0 Active — Terminated November 3, 2023

February 3, 2022 2.7800 % 900.0 Active — Terminated November 3, 2023

Entered into February 2021:

February 3, 2021 ( 1.9040 )% — N/A ( 900.0 ) Active February 3, 2022

February 9, 2021 2.3820 % — N/A 1,350.0 Active February 9, 2026

Total $ 2,400.0 $ 1,350.0

Foreign Currency Hedging Contracts

In November 2017, we entered into three forward contracts.

Under the terms of these contracts, we sold a total of £ 120 million at an average rate of 1.34378 British pound sterling to U.S.

dollar and received $ 161.3 million.

These contracts settled on November 30, 2018 and we received a final net payment of $ 7.9 million.

In November 2018, we entered into one foreign currency forward contract.

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During 2020, we entered into a series of foreign currency contracts to manage our exposure to movements in the British pound sterling, Euro, and Mexican peso.

These contracts had three-month terms and settled at various dates throughout the year, which resulted in the company making aggregate payments of $ 5.4 million.

These contracts had three-month terms and settled at various dates throughout the year, which resulted in us making aggregate payments of $ 5.4 million.

As of December 31, 2020, there was no notional amount outstanding related to these contracts.

During the fourth quarter of 2020, we entered into two foreign currency forward contracts.

Under the terms of these contracts, on November 30, 2021, we will sell a total of £ 80 million at an average rate of 1.3388 British pound sterling to U.S.

dollar and receive $ 107.1 million.

Fixed Price Power Contracts

We entered into a fixed price power contract for a London data center in September 2015 as part of our price risk management strategy and accounted for it as a derivative that did not qualify for the normal purchases normal sales exception.

The contract ended in September 2018 and we executed a new contract with a term of October 2018 through September 2021 that met the normal purchases normal sales exception.

Therefore, as of December 31, 2019 and 2020, we do not have any power contracts recorded at fair value on the Consolidated Balance Sheets.

Under the terms of these contracts, we sold a total of £ 80 million at an average rate of 1.3388 British pound sterling to U.S.

dollar and received $ 107.1 million.

These contracts settled on November 30, 2021 and we received a final net payment of $ 0.4 million.

Fair Values of Derivatives on the Consolidated Balance Sheets

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Derivatives not designated as hedging instruments Location

Interest rate swaps Other current assets (1)

$ — $ — $ 1.5 $ —

Interest rate swaps Other current liabilities — — — 1.5

Interest rate swaps Other non-current liabilities — 33.1 — —

Foreign currency contracts Other current assets 1.4 — — —

Foreign currency contracts Other current liabilities — 1.7 — —

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Derivatives designated as hedging instruments Location

Interest rate swaps Other non-current assets — — 23.6 —

Interest rate swaps Other current liabilities (2)

— 22.6 — 20.8

Interest rate swaps Other non-current liabilities (3)

— 64.4 — 56.4

Total $ — $ 87.0 $ 23.6 $ 77.2

(1) The entire balance as of December 31, 2021 is comprised of the receive-fixed interest rate swap for which the fair value option has been elected.

(2) The balance as of December 31, 2021 includes $ 17.2 million related to the financing component of the pay-fixed interest rate swap.

(3) The entire balance as of December 31, 2021 is comprised of the financing component of the pay-fixed interest rate swap.

For financial statement presentation purposes, we do not offset assets and liabilities under master netting arrangements and all amounts above are presented on a gross basis.

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(In millions) Gross Amounts on Balance Sheet Effect of Counter-Party Netting Net Amounts Gross Amounts on Balance Sheet Effect of Counter-Party Netting Net Amounts

Foreign currency contracts $ 1.4 $ ( 1.4 ) $ — $ — $ — $ —

Total $ 1.4 $ ( 1.4 ) $ — $ — $ — $ —

Interest rate swaps $ — $ — $ — $ 25.1 $ ( 25.1 ) $ —

Interest rate swaps $ 87.0 $ — $ 87.0 $ 78.7 $ ( 25.1 ) $ 53.6

Foreign currency contracts 1.7 — 1.7 — — —

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Interest rate swaps Interest expense $ ( 51.6 ) $ ( 3.2 ) $ ( 19.1 )

Power contracts Cost of revenue ( 0.5 ) — —

Foreign currency contracts Other income (expense), net ( 1.6 ) ( 3.8 ) 2.1

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As of December 31, 2021, our interest rate swap agreements with an aggregate fair value of $ 78.7 million were in a net liability position.

However, if we were in default, our master netting arrangements with certain of our interest rate swap counterparties contain provisions which could result in net settlement of all outstanding agreements.

Accumulated Other Comprehensive Income (Loss)

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Balance at December 31, 2018 $ — $ — $ —

Foreign currency translation adjustments, net of tax expense of $ 0.1 million

( 17.8 ) — ( 17.8 )

Balance at December 31, 2018 $ — $ — $ —

Foreign currency translation adjustments, net of tax benefit of $ 0.2 million

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Balance at December 31, 2020 $ 20.8 $ ( 39.4 ) $ ( 18.6 )

Foreign currency translation adjustments, net of tax benefit of $ 0.6 million

( 3.6 ) — ( 3.6 )

Unrealized gain on derivative contracts, net of tax expense of $ 3.9 million

Amount reclassified from Accumulated comprehensive income (loss) into earnings, net of tax benefit of $ 6.0 million (2)

Balance at December 31, 2021 $ 17.2 $ ( 10.3 ) $ 6.9

(1) Includes interest expense recognized of $ 16.8 million, partially offset by amortization of off-market swap value of $ 5.8 million for the year ended December 31, 2020.

(2) Includes interest expense recognized of $ 6.4 million and amortization of off-market swap value and accumulated loss at hedge de-designation of $ 17.1 million for the year ended December 31, 2021.

Related Party Transactions

On November 3, 2016, we entered into management consulting agreements with affiliates of Apollo and Searchlight and on November 15, 2017, in connection with the Datapipe acquisition, we entered into a management consulting agreement with ABRY.

Under these agreements, we are required to pay them a quarterly, nonrefundable fee for consulting services in areas such as finance, strategy, investment, and acquisitions based on EBITDA, as defined in the First Lien Credit Agreement.

For Apollo and Searchlight, the consulting fee is equal to 1.5 % of EBITDA, or a minimum annual consulting fee of $ 10.0 million.

Under the ABRY agreement, the consulting fee is equal to a specified percentage of 1.5 % of EBITDA.

For the years ended December 31, 2018, 2019 and 2020, we recorded $ 15.2 million, $ 12.9 million and $ 8.4 million, respectively, of management consulting fees within "Selling, general and administrative expenses" in the Consolidated Statements of Comprehensive Loss.

In addition, we are required to pay a fee related to acquisitions.

In connection with the 2018 acquisition of RelationEdge, we recorded $ 0.7 million in fees to affiliates of Apollo, Searchlight, and ABRY within "Selling, general and administrative expenses" in the Consolidated Statements of Comprehensive Loss.

On November 3, 2016, Rackspace Technology Global entered into management consulting agreements with affiliates of Apollo and Searchlight and on November 15, 2017, in connection with the Datapipe acquisition, Rackspace Technology Global entered into a management consulting agreement with ABRY.

Under these agreements, we were required to pay them a quarterly, nonrefundable fee for consulting services in areas such as finance, strategy, investment, and acquisitions based on EBITDA, as defined in the First Lien Credit Agreement.

For Apollo and Searchlight, the consulting fee was equal to 1.5 % of EBITDA, or a minimum annual consulting fee of $ 10.0 million.

Under the ABRY agreement, the consulting fee was equal to a specified percentage of 1.5 % of EBITDA.

For the years ended December 31, 2019 and 2020, we recorded $ 12.9 million and $ 8.4 million, respectively, of management consulting fees within "Selling, general and administrative expenses" in the Consolidated Statements of Comprehensive Loss.

In addition, we were required to pay a fee related to acquisitions.

In connection with the 2019 acquisition of Onica, we recorded $ 3.3 million in fees to affiliates of Apollo, Searchlight, and ABRY within "Selling, general and administrative expenses" in the Consolidated Statements of Comprehensive Loss.

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Therefore no management consulting or acquisition-related fees were accrued or were payable under any of these agreements for periods subsequent to August 4, 2020.

As part of the IPO, Apollo Global Securities, an affiliate of Apollo, received fees of $ 2.7 million in connection with their role as an underwriter in the IPO.

Apollo Global Securities also received $ 0.6 million in connection with their role as an initial purchaser of the 5.375 % Senior Notes issued on December 1, 2020, $ 0.6 million in connection with their role as an initial purchaser of the 3.50 % Senior Secured Notes issued on February 9, 2021, and $ 2.3 million in arranger fees in connection with the entry into the Term Loan Facility on February 9, 2021.

Affiliates of ABRY are also Term Loan Facility lenders under the First Lien Credit Agreement.

As of December 31, 2021, the outstanding principal amount of the Term Loan Facility was $ 2,282.8 million, of which $ 48.6 million, or 2.1 %, is due to ABRY affiliates.

As part of the IPO, Apollo Global Securities, LLC ("Apollo Global Securities"), an affiliate of Apollo, received fees of $ 2.7 million in connection with their role as an underwriter in the IPO.

Apollo Global Securities also received approximately $ 0.6 million in connection with their role as an initial purchaser of the 5.375 % Senior Notes issued on December 1, 2020.

On February 2, 2021, we issued 2,665,935 shares of common stock to DPH 123, LLC, an ABRY affiliate, for no additional consideration pursuant to the Agreement and Plan of Merger, dated as of September 6, 2017, in connection with our November 15, 2017 acquisition of Datapipe.

Segment Reporting

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Our segments are based upon a number of factors, including, the basis for our budgets and forecasts, organizational and management structure and the financial information regularly used by our Chief Operating Decision Maker to make key decisions and to assess performance.

We assess financial performance of our segments on the basis of revenue and non-GAAP gross profit, which is a non-GAAP measure of profitability.

For the calculation of non-GAAP gross profit, we allocate certain costs, such as data center operating costs, customer support costs, license expense, and depreciation, to our segments generally based on segment revenue.

The table below presents a reconciliation of revenue by reportable segment to consolidated revenue and a reconciliation of segment non-GAAP gross profit to total consolidated gross profit for the years ended December 31, 2018, 2019 and 2020.

We assess financial performance of our segments on the basis of revenue and segment gross profit.

For the calculation of segment gross profit, we allocate certain costs, such as data center operating costs, customer support costs, license expense, and depreciation, to our segments generally based on segment revenue.

The table below presents a reconciliation of revenue by reportable segment to consolidated revenue and a reconciliation of consolidated segment gross profit to consolidated loss before income taxes for the years ended December 31, 2019, 2020 and 2021.

Year Ended December 31,

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Total consolidated revenue $ 2,438.1 $ 2,707.1 $ 3,009.5

Non-GAAP gross profit by segment:

Segment gross profit:

Multicloud Services $ 774.7 $ 810.2 $ 793.4

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OpenStack Public Cloud 146.0 100.3 67.1

Total consolidated segment gross profit 1,039.4 1,026.0 996.4

Share-based compensation expense ( 5.7 ) ( 14.5 ) ( 16.7 )

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Purchase accounting impact on revenue (2)

( 1.2 ) 0.2 —

Purchase accounting impact on expense (2)

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( 10.3 ) ( 15.3 ) ( 35.5 )

Total consolidated gross profit $ 1,007.1 $ 1,011.2 $ 984.4

(1) Adjustments for expense related to the cash settlement of unvested equity awards that were outstanding at the consummation of the Rackspace Acquisition, retention bonuses, mainly in connection with restructuring and transformation projects, and the related payroll tax.

Selling, general and administrative expenses ( 911.7 ) ( 959.7 ) ( 906.8 )

Impairment of goodwill — — ( 52.4 )

Gain on divestiture 2.1 — —

Gain on sale of land — — 19.9

Interest expense ( 329.9 ) ( 268.4 ) ( 205.1 )

Gain (loss) on investments, net 99.5 0.7 ( 3.0 )

Debt modification costs and extinguishment gain (loss) 9.8 ( 71.5 ) ( 37.5 )

Other income (expense), net ( 3.3 ) 2.5 ( 1.0 )

Total consolidated loss before income tax $ ( 122.3 ) $ ( 312.0 ) $ ( 249.1 )

(1) Adjustments for retention bonuses, mainly in connection with restructuring and transformation projects, and the related payroll tax, and payroll taxes associated with the exercise of stock options and vesting of restricted stock.

(2) Adjustment for the impact of purchase accounting from the Rackspace Acquisition on revenue and expenses.

(3) Adjustment for the impact of business transformation and optimization activities, as well as associated severance, facility closure costs and lease termination expenses.

This amount also includes certain costs associated with the July 2021 Restructuring Plan which are not accounted for as exit and disposal costs under ASC 420, including one-time offshore build out costs.

Management does not use total assets by segment to evaluate segment performance or allocate resources.

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The tables below present revenue by geographic region and by country for the years ended December 31, 2019, 2020 and 2021.

Revenue amounts are based upon the location of the support function servicing the customer.

Revenue amounts are based upon the location of the support function servicing the cus tomer.

Year Ended December 31,

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The accompanying note is an integral part of these condensed financial statements.

A condensed statement of cash flows has not been presented as Rackspace Technology, Inc.

did not have any cash as of, or at any point in time during, the years ended December 31, 2018, 2019 and 2020.

A condensed statement of cash flows has not been presented as Rackspace Technology did not have any cash as of, or at any point in time during, the years ended December 31, 2019, 2020 and 2021.

NOTE TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT (Parent Company Only)

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(“Parent”) (as defined in Rule 4-08(e)(3) of Regulation S-X) exceed 25% of the consolidated net assets of the Parent.

The ability of Parent’s operating subsidiaries to pay dividends may be restricted due to the terms of the subsidiaries’ First Lien Credit Agreement and the indenture governing the 5.375 % Senior Notes, as described in Note 7, “Debt” to the audited consolidated financial statements.

The ability of Parent’s operating subsidiaries to pay dividends may be restricted due to the terms of the subsidiaries’ First Lien Credit Agreement and the Indentures, as described in Note 7, “Debt” to the audited consolidated financial statements.

These condensed parent company financial statements have been prepared using the same accounting principles and policies described in the notes to the consolidated financial statements, with the only exception being that the parent company accounts for its subsidiaries using the equity method.

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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 8. Financial Statements and Supplementary Data