Rackspace Technology, Inc. 10-Q

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rates We are exposed to interest rate risk associated with fluctuations in interest rates on our floating-rate debt under our Senior Facilities and New Senior Facilities, which includes our $375 million New Revolving Credit Facility and $2,020 million outstanding under the Term Loan Facility, FLSO Term Loan Facility, and FLFO Term Loan Facility. As of March 31, 2024, there was no out standing borrowings under the New Revolving Credit Facility and therefore our only variable-rate debt outstanding was the $2,020 million outstanding under the Term Loan Facility, FLSO Term Loan Facility, and FLFO Term Loan Facility. As of March 31, 2024, assuming the New Revolving Credit Facility was fully drawn, each 0.125% change in assumed blended interest rates would res ult in a $3 million cha nge in annual interest expense on indebtedness under the Senior Facilities and New Senior Facilities. Our Term Loan Facility, FLSO Term Loan Facility, and FLFO Term Loan Facility bear interest at an annual rate equal to an applicable margin plus one-month Term SOFR, subject to a 0.75% floor. We have entered into an interest rate swap agreement indexed to one-month Term SOFR (subject to a floor of 0.75%) in order to manage our risk from fluctuations in one-month Term SOFR above the 0.75% floor. The key terms of the swap outstanding as of March 31, 2024 are presented below: Transaction Date Effective Date Notional Amount (in millions) Fixed Rate Paid Maturity Date February 2021 February 9, 2021 $ 1,350.0 2.34150% February 9, 2026 See Item 1 of Part I, Financial Statements - Note 11, "Derivatives," for more information on interest rate swaps. Foreign Currencies We are subject to foreign currency translation risk due to the translation of the results of our subsidiaries from their respective functional currencies to the U.S. dollar, our functional currency. As a result, we discuss our revenue on a constant currency as well as actual basis, highlighting our sensitivity to changes in foreign exchange rates. See " Constant Currency Revenue ." While the majority of our customers are invoiced, and the majority of our expenses are paid, by us or our subsidiaries in their respective functional currencies, we also have exposure to foreign currency transaction gains and losses as the result of certain receivables due from our foreign subsidiaries. As such, the results of operations and cash flows of our foreign subsidiaries are subject to fluctuations in foreign currency exchange rates. In the three months ended March 31, 2024, we recognized foreign currency transaction gains of $0.2 million wit hin "Other income (expense), net" in our Condensed Consolidated Statements of Comprehensive Loss. As we grow our international operations, our exposure to foreign currency translation and transaction risk could become more significant. We have in the past and may in the future enter into foreign currency hedging instruments to limit our exposure to foreign currency risk. Power Prices We are a large consumer of power. In the three months ended March 31, 2024, we expensed a pproximately $11 million for utility companies to power our data centers, representing approximately 2% of our revenue. Power costs vary by geography, the source of power generation and seasonal fluctuations and are subject to certain proposed legislation that may increase our exposure to increased power costs. We have power contracts for data centers in the Dallas-Fort Worth, San Jose, Somerset, New Jersey and London areas that allow us to procure power either on a fixed price or on a variable price basis. - 57 - Table of Contents