What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-03-21 compared with 2024-03-15 · 372 added, 309 removed, 1296 unchanged (34% of the section changed)

44 unchanged sentences

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

On January 1, 2023, as a result of a reorganization of the Company’s business around a two-business unit operating model, the Company changed its reportable segments to Private Cloud and Public Cloud.

As a result of this change, goodwill was allocated from the former reporting units to the Public Cloud and Private Cloud reporting units based on their relative fair value and a quantitative goodwill impairment analysis was performed both prior and subsequent to the change.

The results of the quantitative impairment analysis performed as of January 1, subsequent to the change, indicated an impairment within the Private Cloud reporting unit resulting in a non-cash impairment charge of $270.8 million.

During the first and third quarters of 2023, the Company experienced a sustained decline in its stock price resulting in the market capitalization being less than the carrying value of the combined reporting units.

After considering all available evidence in the evaluation of goodwill impairment indicators, management determined it appropriate to perform interim quantitative assessments of the reporting units as of March 31, 2023 and September 30, 2023.

As a result of the quantitative assessments performed as of March 31, 2023 and September 30, 2023, management recorded non-cash impairment charges of $272.3 million and $165.7 million, respectively, for the Private Cloud reporting unit.

During the first and third quarters of 2024, management determined it appropriate to perform interim quantitative assessments of the reporting units as of February 29, 2024 and September 30, 2024 after considering all available evidence in the evaluation of goodwill impairment indicators.

As a result of the quantitative assessments performed as of February 29, 2024 and September 30, 2024, management recorded non-cash impairment charges of $187.8 million and $72.5 million, respectively, for the Private Cloud reporting unit and $385.4 million and $69.2 million, respectively, for the Public Cloud reporting unit.

Management estimated the fair values of each of the reporting units using the income approach, specifically the discounted cash flow method.

The discounted cash flow models reflect management’s assumptions and considerations regarding revenue growth rates, projected gross profit margins, projected operating costs, projected capital expenditures, risk-adjusted discount rates, terminal period growth rates, and economic market trends.

The discounted cash flow models reflect management’s assumptions and considerations regarding revenue growth rates, projected gross profit margins, project operating costs, projected EBITDA margins, projected capital expenditures, risk-adjusted discount rates, terminal period growth rates, and economic market trends.

The principal considerations for our determination that performing procedures relating to the interim goodwill impairment assessments of the Private Cloud and Public Cloud reporting units is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the Private Cloud and Public Cloud reporting units;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing audit procedures and evaluating management’s significant assumptions related to revenue growth rates, projected gross profit margins, projected operating costs, projected capital expenditures, risk-adjusted discount rate and terminal period growth rate for the Private Cloud reporting unit and revenue growth rates, projected gross profit margins, projected operating costs, risk-adjusted discount rate, and terminal period growth rate, for the Public Cloud reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, projected EBITDA margins, projected capital expenditures, risk-adjusted discount rates and terminal period growth rates;

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

1 unchanged sentence

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Private Cloud and Public Cloud reporting units.

These procedures also included, among others, (i) testing management’s process for developing the fair value estimates of the Private Cloud and Public Cloud reporting units, (ii) evaluating the appropriateness of the discounted cash flow models used by management, (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow models, and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates, projected gross profit margins, projected operating costs, projected capital expenditures and risk-adjusted discount rates for the Private Cloud reporting unit and revenue growth rates, projected gross profit margins, projected operating costs and risk-adjusted discount rates for the Public Cloud reporting unit.

Evaluating management’s significant assumptions related to revenue growth rates, projected gross profit margins, projected operating costs and projected capital expenditures for the Private Cloud reporting unit and revenue growth rates, projected gross profit margins and projected operating costs for the Public Cloud reporting unit involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting units;

These procedures also included, among others, (i) testing management’s process for developing the fair value estimates of the Private Cloud and Public Cloud reporting units;

(ii) evaluating the appropriateness of the discounted cash flow models used by management;

(iii) testing the completeness and accuracy of underlying data used in the discounted cash flow models;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates, projected EBITDA margins, projected capital expenditures, risk-adjusted discount rates and terminal period growth rates.

Evaluating the reasonableness of the revenue growth rates, projected EBITDA margins, and projected capital expenditures assumptions involved considering (i) the current and past performance of the Private Cloud and Public Cloud reporting units;

(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 evaluating (i) the appropriateness of the Company’s discounted cash flow models and (ii) the reasonableness of the terminal period growth rate and risk-adjusted discount rate assumptions.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow models and (ii) the reasonableness of the risk-adjusted discount rates and terminal period growth rates assumptions.

/s/ PricewaterhouseCoopers LLP

18 unchanged sentences

Total assets $ 4,096.2 $ 3,054.1

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

18 unchanged sentences

Commitments and Contingencies (Note 10)

Stockholders' equity (deficit):

Stockholders' deficit:

Preferred stock, $ 0.01 par value per share:

11 unchanged sentences

( 31.0 ) ( 31.0 )

Total stockholders' equity (deficit) 629.5 ( 154.5 )

Total liabilities and stockholders' equity (deficit) $ 5,456.7 $ 4,096.2

Total stockholders' deficit ( 154.5 ) ( 1,004.2 )

Total liabilities and stockholders' deficit $ 4,096.2 $ 3,054.1

See accompanying notes to the consolidated financial statements.

9 unchanged sentences

Impairment of assets, net ( 146.1 ) ( 52.2 ) ( 20.0 )

Gain on sale of land 19.9 — —

Loss from operations ( 679.0 ) ( 899.4 ) ( 909.1 )

2 unchanged sentences

Gain (loss) on investments, net ( 0.2 ) 0.3 0.1

Debt modification costs and gain (loss) on debt extinguishment ( 37.5 ) — 271.3

Gain on debt extinguishment, net of debt modification costs — 271.3 147.2

Other expense, net

28 unchanged sentences

Impairment of assets, net 146.1 52.2 20.0

Gain on sale of land ( 19.9 ) — —

Debt modification costs and (gain) loss on debt extinguishment 37.5 — ( 271.3 )

Gain on debt extinguishment, net of debt modification costs — ( 271.3 ) ( 147.2 )

Unrealized loss on derivative contracts 18.5 15.5 —

1 unchanged sentence

Provision for bad debts and accrued customer credits 12.4 9.0 19.5

Amortization of debt issuance costs and debt discount 8.8 8.0 7.9

Amortization of debt issuance costs and debt discount and premium 8.0 7.9 2.2

Third party fees paid in connection with the March 2024 Refinancing Transactions — — ( 31.7 )

Non-cash fair value adjustments 3.2 ( 1.0 ) ( 2.2 )

11 unchanged sentences

Acquisitions, net of cash acquired ( 7.7 ) — —

Proceeds from sale of land 31.3 — —

Proceeds from sale of headquarters — — 16.9

Purchase of convertible promissory note ( 15.0 ) — —

7 unchanged sentences

Payments on long-term debt ( 23.0 ) ( 241.9 ) ( 163.0 )

Payments for debt issuance costs ( 34.5 ) — —

Debt extinguishment costs — — ( 22.1 )

Payments on financing component of interest rate swap ( 17.2 ) ( 18.8 ) ( 17.3 )

4 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 5.8 ) 2.2 ( 3.0 )

Increase (decrease) in cash, cash equivalents, and restricted cash 167.3 ( 44.0 ) ( 31.7 )

Decrease in cash, cash equivalents, and restricted cash ( 44.0 ) ( 31.7 ) ( 52.7 )

Cash, cash equivalents, and restricted cash at beginning of period 275.4 231.4 199.7

6 unchanged sentences

Acquisition of property, equipment and software by financing obligations 7.1 25.0 4.4

Other non-cash additions — — 5.3

Increase (decrease) in property, equipment and software accrued in liabilities 17.6 ( 13.6 ) ( 9.9 )

Other non-cash activity — 5.3 ( 10.0 )

Non-cash purchases of property, equipment and software $ 61.4 $ 84.4 $ 25.3

8 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

(In millions) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Treasury Stock, at Cost Total Stockholders' Equity (Deficit)

(In millions) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income

Accumulated Deficit Treasury Stock, at Cost Total Stockholders' Equity (Deficit)

Shares Amount Shares Amount

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

Issuance of common stock 2.7 — — — — — — —

Exercise of stock options and release of stock awards 3.7 0.1 0.7 — — — — 0.8

3 unchanged sentences

Other comprehensive income — — — 64.5 — — — 64.5

Repurchase of common stock — — — — — 3.1 ( 31.0 ) ( 31.0 )

Balance at December 31, 2022 215.7 $ 2.2 $ 2,573.3 $ 71.4 $ ( 1,986.4 ) 3.1 $ ( 31.0 ) $ 629.5

Exercise of stock options and release of stock awards 3.7 0.1 0.7 — — — — 0.8

Exercise of stock options and release of stock awards, net of shares withheld 4.1 — ( 1.0 ) — — — — ( 1.0 )

Issuance of shares from Employee Stock Purchase Plan 0.7 — 1.3 — — — — 1.3

Share-based compensation expense — — 69.5 — — — — 69.5

Share-based compensation expense for equity classified awards — — 64.6 — — — — 64.6

Net loss — — — — ( 837.8 ) — — ( 837.8 )

Other comprehensive income — — — 64.5 — — — 64.5

Repurchase of common stock — — — — — 3.1 ( 31.0 ) ( 31.0 )

Other comprehensive loss — — — ( 11.1 ) — — — ( 11.1 )

Balance at December 31, 2023 220.5 $ 2.2 $ 2,638.2 $ 60.3 $ ( 2,824.2 ) 3.1 $ ( 31.0 ) $ ( 154.5 )

32 unchanged sentences

We are a highly leveraged company.

As of December 31, 2023, we had $ 2,892.5 million aggregate principal amount outstanding under our Term Loan Facility, 5.375 % Senior Notes, and 3.50 % Senior Secured Notes.

We primarily finance our operations and capital expenditures with internally-generated cash from operations and hardware leases, and if necessary, borrowings under our Revolving Credit Facility.

As of December 31, 2023, the Revolving Credit Facility provided for up to $ 375.0 million of borrowings, none of which was drawn and outstanding as of December 31, 2023.

As of December 31, 2024, we had $ 2,449.4 million aggregate principal amount outstanding under our debt instruments, which are comprised of the FLFO Term Loan Facility, the FLSO Term Loan Facility, the Term Loan Facility, the 3.50 % FLSO Senior Secured Notes, the 5.375 % Senior Notes, and the 3.50 % Senior Secured Notes.

We primarily finance our operations and capital expenditures with internally-generated cash from operations and hardware leases, and if necessary, borrowings under the New Revolving Credit Facility.

As of December 31, 2024, the New Revolving Credit Facility provided for up to $ 375.0 million of borrowings, none of which was drawn and outstanding as of December 31, 2024.

Our primary uses of cash are working capital requirements, debt service requirements and capital expenditures.

Based on our current level of operations and available cash and cash equivalents of $ 144.0 million as of December 31, 2024, we believe our sources will provide sufficient liquidity over at least the next twelve months.

We cannot provide assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available to us under the Revolving Credit Facility or from other sources in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.

Our ability to do so depends on prevailing economic conditions and other factors, many of which are beyond our control.

Subsequent Events

Private Exchange

On March 12, 2024, we (together with certain of our subsidiaries) closed a private debt exchange (the “Private Exchange”) with (i) certain holders of the 3.50 % Senior Secured Notes (the “Existing Secured Notes”) issued by Rackspace Technology Global (the “Existing Borrower”), representing more than 64 % of the aggregate principal amount of the outstanding Existing Secured Notes, and (ii) lenders representing more than 72 % of the aggregate principal amount of the outstanding term loans (the “Existing Term Loans”) under the First Lien Credit Agreement.

Pursuant to the Private Exchange, (i) $ 331.4 million aggregate principal amount of Existing Secured Notes and $ 1,588.8 million aggregate principal amount of Existing Term Loans were exchanged or purchased for cancellation and (ii) $ 267.3 million aggregate principal amount of new 3.50 % FLSO Notes and $ 1,312.0 million aggregate principal amount of new first lien second out term loans (the “New FLSO Term Loans”) were issued by Rackspace Finance, LLC, a new subsidiary of the company (the “New Borrower”).

As a result of the Private Exchange, the company eliminated more than $ 375.0 million of its debt and extended the maturity of $ 1,579.4 million of its debt until May 2028.

In addition, the New Borrower issued $ 275.0 million in aggregate principal amount of first lien first out senior secured term loans and the company repurchased and cancelled $ 69.3 million aggregate principal amount of its 5.375 % Senior Notes.

Public Exchanges

On March 13, 2024, the company launched an offer to all of the holders of the Existing Borrower’s remaining Existing Term Loans (the “Public Term Loan Exchange”).

Assuming full participation in the Public Term Loan Exchange, the company expects that (i) $ 592.3 million aggregate principal amount of Existing Term Loans will be exchanged or purchased for cancellation and (ii) $ 418.8 million aggregate principal amount of New FLSO Term Loans will be issued by the New Borrower.

On March 14, 2024, the company launched an offer to all of the holders of the Existing Borrower’s remaining Existing Secured Notes (the “Public Note Exchange” and, together with the Public Term Loan Exchange, the “Public Exchanges”).

Assuming full participation in the Public Note Exchange, the company expects that (i) $ 182.3 million aggregate principal amount of Existing Secured Notes will be exchanged or purchased for cancellation and (ii) $ 127.6 million aggregate principal amount of New Secured Notes will be issued by the New Borrower.

The Public Exchanges are subject to certain customary closing conditions and termination provisions and may not be consummated.

These disclosures are for informational purposes only and shall not constitute or form part of any offer or invitation to purchase or sell, or any solicitation of any offer to sell or purchase, notes or any other securities or debt instruments, and neither this report nor any part of it, nor the fact of its release, shall form the basis of, or be relied on or in connection with, any contract therefor.

The Public Note Exchange is made only by and pursuant to the terms and conditions of a confidential offering memorandum that will only be made available to eligible holders of the Existing Secured Notes.

The complete terms and conditions of the Public Note Exchange for the Existing Secured Notes are set forth in such confidential offering memorandum.

The Public Term Loan Exchange is made only by and pursuant to the terms and conditions of an exchange agreement that will only be made available to holders of the Existing Term Loans.

The complete terms and conditions of the Public Term Loan Exchange for the Existing Term Loans are set forth in such exchange agreement.

None of the company, the Existing Borrower, the New Borrower or any of their affiliates takes any position or makes any recommendation as to whether or not eligible holders should participate in the Public Note Exchange or the Public Term Loan Exchange.

New Revolving Credit Facility

On March 12, 2024, the New Borrower also established the New Revolving Credit Facility consisting of new first out first lien revolving credit commitments in an aggregate principal amount of $ 375.0 million.

All revolving lenders under the company’s prior Revolving Credit Facility agreed to exchange their revolving loan commitments for commitments in respect of the New Revolving Credit Facility, which replaces in full the company’s prior Revolving Credit Facility.

The New Revolving Credit Facility has a maturity date of May 15, 2028.

Accounting and Tax Impacts

We are evaluating the accounting impacts of the Private Exchange, Public Exchanges and New Revolving Credit Facility which are currently not estimable.

In addition, the tax consequences of debt exchanges are reasonably complex and could result in both the recognition of taxable income and/or the reduction of the tax basis of our assets.

We are in the process of evaluating these matters and expect that a portion of any income resulting from the Private Exchange and Public Exchanges could be taxable.

Any additional taxable income arising from these transactions could be substantially offset by tax attributes currently reported on our Consolidated Balance Sheets, which may also include attributes that have a valuation allowance against resulting in reversals of such valuation allowances.

We cannot provide assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available to us under the New Revolving Credit Facility or from other sources in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.

Our ability to do so depends on our ability to deliver on our strategic objectives and prevailing economic conditions and other factors, many of which are beyond our control.

Cash, Cash Equivalents, and Restricted Cash

Our cash is comprised of bank deposits, overnight sweep accounts and money market funds and is held with high-credit quality U.S.

and foreign financial institutions.

We consider all highly liquid investments, such as money market funds, with original maturities of three months or less when acquired to be cash equivalents.

19 unchanged sentences

Buildings and leasehold improvements 2 to 39 years

In the first quarter of 2024, 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 our business model and recent technological advances that have increased efficiencies in how we operate and manage customer gear.

The assessment resulted in an increase in the estimated useful life range of the “Computers and equipment” asset class from three -to- five years to five -to- seven years .

This change in accounting estimate took effect at the start of the first quarter of 2024.

The impact of this change was a reduction in depreciation expense of $ 46.0 million and an increase of $ 0.20 net basic loss per share compared to previous estimates for the year ended December 31, 2024.

Assets classified as held for sale are recorded at the lower of carrying value or its estimated fair value, less costs to sell, and no depreciation and amortization is recorded after the held for sale classification is met.

18 unchanged sentences

Goodwill and Indefinite-Lived Intangible Assets

Qualitative Goodwill Impairment Analysis

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

Our indefinite-lived intangible asset consists of our Rackspace trade name, which was recorded at fair value on our balance sheet at the date of the Rackspace Acquisition.

Goodwill and indefinite-lived intangible assets are not amortized but are subject to impairment testing on an annual basis as of October 1st or more frequently if events or circumstances indicate a potential impairment.

1 unchanged sentence

Potential impairment indicators may also include, but are not limited to, (i) significant changes to estimates and assumptions used in the most recent annual or interim impairment testing, (ii) downward revisions to internal forecasts, and the magnitude thereof, (iii) declines in our market capitalization below our book value, and the magnitude and duration of those declines, (iv) a reorganization resulting in a change to our operating segments, and (v) other macroeconomic factors, such as increases in interest rates that may affect the weighted average cost of capital, volatility in the equity and debt markets, or fluctuations in foreign currency exchange rates that may negatively impact our reported results of operations.

Year Ended December 31, 2024

In connection with the preparation of the debt refinancing transactions that were completed in March and April 2024, as further described in Note 7, “Debt”, we updated our internal forecasts.

Our updated internal forecasts considered our year-to-date operating performance, current customer bookings and revised expectations based on current performance, revisions to our expected growth and timing of such growth based on current and expected performance, current customer retention rates, revisions to the timing of the expected effects of our strategic initiatives and overall related risks, including macroeconomic factors, to achieving our forecasts.

Our Board reviewed and approved our internal budget for fiscal year 2024 on February 28, 2024.

As of February 29, 2024, we assessed our Board approved 2024 internal budget along with several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of our current and forecasted operating margins and cash flows, budgeted-to-actual performance, timing of the expected effects of our strategic initiatives, overall change in economic climate, changes in the industry and competitive environment, changes to our risk-adjusted discount rates and earnings quality and sustainability.

After considering all available evidence in our evaluation of goodwill impairment indicators, we determined it appropriate to perform an interim quantitative assessment of our reporting units as of February 29, 2024.

During the third quarter of 2024, as part our assessment of our annual plan, we updated our internal forecasts to consider our year-to-date operating performance, current customer bookings and revised expectations based on actuals, current customer retention rates, revisions to the timing of the expected effects of our strategic initiatives and overall related risks, including macroeconomic factors, to achieving our forecasts.

As of September 30, 2024, we assessed our internal budget along with several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount, if any, of excess carrying value over fair value, consistency of our current and forecasted operating margins and cash flows, budgeted-to-actual performance, timing of the expected effects of our strategic initiatives, overall change in economic climate, changes in the industry and competitive environment, changes to our risk-adjusted discount rates and earnings quality and sustainability.

During the fourth quarter of 2024, we performed our annual goodwill impairment test as of October 1, 2024 and the results of our test did not indicate any further impairment of goodwill.

Year Ended December 31, 2023

On January 1, 2023, as a result of the reorganization of our business around a two -business unit operating model, we changed our operating and reportable segments to Private Cloud and Public Cloud.

2 unchanged sentences

As a result of the segment change, we allocated the goodwill of our former Multicloud Services and Apps & Cross Platform reporting units to the Public Cloud and Private Cloud reporting units based on their relative fair value.

OpenStack Public Cloud remains a separate reporting unit for goodwill purposes.

OpenStack Public Cloud remained a separate reporting unit for goodwill purposes at that time.

Due to the change in our segment reporting and the allocation of goodwill, we completed a quantitative goodwill impairment analysis both prior and subsequent to the aforementioned change.

The results of the quantitative goodwill impairment analysis performed as of December 31, 2022, prior to the change, indicated an impairment within our former Apps & Cross Platform reporting unit, and we recorded a non-cash impairment charge of $ 129.3 million in the fourth quarter of 2022, as further discussed below.

We reassigned goodwill to the updated reporting units using a relative fair value approach.

The results of the quantitative goodwill impairment analysis performed as of January 1, 2023, subsequent to the reorganization, indicated an impairment within our Private Cloud reporting unit, and we recorded a non-cash impairment charge of $ 270.8 million in the first quarter of 2023.

During the first quarter of 2023, we experienced a sustained decline in our stock price resulting in our market capitalization being less than the carrying value of our combined reporting units.

11 unchanged sentences

Due to the change in our reporting units as of October 1, 2023, we completed a quantitative goodwill impairment analysis.

Year Ended December 31, 2022

During the third quarter of 2022, we experienced a sustained decline in our stock price resulting in our market capitalization being less than the carrying value of our combined reporting units.

As of September 1, 2022, we assessed several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including the significance of the amount of excess carrying value over fair value, consistency of operating margins and cash flows, budgeted-to-actual performance from prior year, overall change in economic climate, changes in the industry and competitive environment, and earnings quality and sustainability.

In addition, as of September 1, 2022, we lowered our projected operating results primarily due to product mix shifts and market concerns related to inflation and other macroeconomic factors.

As such, as of September 1, 2022, we determined it appropriate to perform an interim quantitative assessment of our reporting units.

The results of our annual goodwill impairment test as of October 1, 2022 did not indicate any impairments of goodwill.

During the fourth quarter of 2022, subsequent to our annual goodwill impairment analysis, we experienced a decline in our market capitalization following a ransomware incident in early December which caused service disruptions on our Hosted Exchange email business which was included in the former Apps & Cross Platform reporting unit.

Quantitative Goodwill Impairment Analysis

Goodwill is tested for impairment at the reporting unit level.

3 unchanged sentences

Certain assets and liabilities are shared by multiple reporting units, and thus, are allocated to each reporting unit based on the relative size of a reporting unit, primarily based on revenue.

For the goodwill impairment tests completed during the years ended December 31, 2021, 2022 and 2023, including the interim quantitative analyses, we compared the fair values of each of our reporting units to their respective carrying amounts.

For the goodwill impairment tests completed during the years ended December 31, 2022, 2023 and 2024, including the interim quantitative analyses, we compare 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.

The discounted cash flow models reflect our assumptions and considerations regarding revenue growth rates, projected gross profit margins, projected operating costs, projected capital expenditures, risk-adjusted discount rates, terminal period growth rates, and economic market trends .

As part of the goodwill impairment test, we also consider our market capitalization in assessing the reasonableness of the combined fair values estimated for our reporting units, including OpenStack Public Cloud.

The discounted cash flow models reflect our assumptions and considerations regarding revenue growth rates, projected gross profit margins, projected operating costs, projected EBITDA margins, projected capital expenditures, risk-adjusted discount rates, terminal period growth rates, and economic market trends .

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 quantitative goodwill impairment analyses as of January 1, 2023 and March 31, 2023 indicated an impairment of goodwill within our Private Cloud reporting unit, and we recorded non-cash impairment charges of $ 270.8 million and $ 272.3 million, respectively, within "Impairment of goodwill" in our Consolidated Statements of Comprehensive Loss in the first quarter of 2023.

The results of our quantitative goodwill impairment analysis as of September 30, 2023 indicated an impairment of goodwill within our Private Cloud reporting unit, and we recorded non-cash impairment charges of $ 165.7 million, within "Impairment of goodwill" in our Consolidated Statements of Comprehensive Loss in the third quarter of 2023.

Year Ended December 31, 2024

The results of our quantitative goodwill impairment analysis as of February 29, 2024 indicated an impairment of goodwill within our Public Cloud and Private Cloud reporting units of $ 385.4 million and $ 187.8 million, respectively.

We recorded these non-cash impairment charges within "Impairment of goodwill" in our Condensed Consolidated Statements of Comprehensive Loss in the first quarter of 2024.

The results of our quantitative goodwill impairment analysis as of September 30, 2024 indicated an impairment of goodwill within our Public Cloud and Private Cloud reporting units of $ 69.2 million and $ 72.5 million, respectively.

We recorded these non-cash impairment charges within "Impairment of goodwill" in our Condensed Consolidated Statements of Comprehensive Loss in the third quarter of 2024.

Year Ended December 31, 2023

The results of our quantitative goodwill impairment analyses as of January 1, 2023 and March 31, 2023 indicated an impairment of goodwill within our Private Cloud reporting unit, and we recorded non-cash impairment charges of $ 270.8 million and $ 272.3 million, respectively, within "Impairment of goodwill" in our Condensed Consolidated Statements of Comprehensive Loss in the first quarter of 2023.

The results of our quantitative goodwill impairment analysis as of September 30, 2023 indicated an impairment of goodwill within our Private Cloud reporting unit, and we recorded non-cash impairment charges of $ 165.7 million, within "Impairment of goodwill" in our Condensed Consolidated Statements of Comprehensive Loss in the third quarter of 2023.

The results of our quantitative goodwill impairment analysis as of October 1, 2023 indicated no impairment of goodwill.

During the third quarter of 2022, we experienced a sustained decline in our stock price resulting in our market capitalization being less than the carrying value of our combined reporting units.

In addition, as of September 1, 2022, we lowered our projected operating results primarily due to product mix shifts and market concerns related to inflation and other macroeconomic factors.

As such, as of September 1, 2022, we determined it appropriate to perform an interim quantitative assessment of our reporting units, which indicated an impairment of goodwill within the former Multicloud Services reporting unit, and we recorded a non-cash impairment charge of $ 405.2 million within "Impairment of goodwill" in our Consolidated Statements of Comprehensive Loss in the third quarter of 2022.

The results of our annual goodwill impairment test as of October 1, 2022 did not indicate any impairments of goodwill

After considering all available evidence in our evaluation of goodwill impairment indicators, including our lowered projected operating results within this reporting unit, we determined it appropriate to perform an interim quantitative assessment of our reporting units as of December 31, 2022, which indicated an impairment of goodwill within our former Apps & Cross Platform reporting unit, and we recorded a non-cash impairment charge of $ 129.3 million within "Impairment of goodwill" in our Consolidated Statements of Comprehensive Loss in the fourth quarter of 2022.

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

Year Ended December 31, 2022

The results of our quantitative goodwill impairment analysis as of September 1, 2022 indicated an impairment of goodwill within the former Multicloud Services reporting unit, and we recorded a non-cash impairment charge of $ 405.2 million within "Impairment of goodwill" in our Condensed Consolidated Statements of Comprehensive Loss in the third quarter of 2022.

The results of our quantitative goodwill impairment analysis as of December 31, 2022 indicated an impairment of goodwill within our former Apps & Cross Platform reporting unit, and we recorded a non-cash impairment charge of $ 129.3 million within "Impairment of goodwill" in our Consolidated Statements of Comprehensive Loss in the fourth quarter of 2022.

See Note 6, "Goodwill and Intangible Assets" for more information.

Indefinite-Lived Intangible Assets

Our indefinite-lived intangible asset consists of our Rackspace trade name, which was recorded at fair value on our balance sheet at the date of the Rackspace Acquisition.

Our indefinite-lived intangible asset is tested for impairment at the consolidated level.

1 unchanged sentence

Our estimate of the fair value of the Rackspace trade name is derived using the income approach, specifically the relief-from-royalty method.

We performed a quantitative assessment of our indefinite-lived intangible asset prior to testing our goodwill for impairment as of January 1, 2023, March 31, 2023, and December 31, 2023 which did not indicate any impairment of the Rackspace trade name.

Due to the factors discussed in the goodwill analyses above and prior to testing our goodwill for impairment, we performed a quantitative assessment of our indefinite-lived intangible asset as of September 1, 2022, December 31, 2022 and September 30, 2023.

The quantitative assessment performed as of those dates indicated the estimated fair value of the Rackspace trade name was less than its carrying value.

As a result, we recorded a $ 21.0 million, $ 12.0 million, and $ 57.0 million non-cash impairment charge as of September 1, 2022, December 31, 2022 and September 30, 2023, respectively.

These charges are included in "Impairment of assets, net" in our Consolidated Statements of Comprehensive Loss in the third quarter of 2022, fourth quarter of 2022, and third quarter of 2023, respectively.

The results of our annual indefinite-lived asset impairment test as of October 1, 2022 did not indicate any impairment of the Rackspace trade name.

The results of our indefinite-lived asset impairment test for the year ended December 31, 2021 did not indicate any impairments of the Rackspace trade name.

As a result, we recorded a $ 21.0 million, $ 12.0 million, $ 57.0 million and $ 20.0 million non-cash impairment charge as of September 1, 2022, December 31, 2022, September 30, 2023 and February 29, 2024, respectively.

These charges are included in "Impairment of assets, net" in our Consolidated Statements of Comprehensive Loss in the third quarter of 2022, fourth quarter of 2022, third quarter of 2023 and first quarter of 2024, respectively.

The quantitative assessments of our indefinite-lived intangible asset performed in conjunction with the other goodwill impairment testing dates, discussed above, did not indicate any impairment of the Rackspace trade name.

The fair value determination of our reporting units and our indefinite-lived intangible asset is judgmental in nature and requires the use of significant estimates and assumptions that are sensitive to changes.

Assumptions include estimation of the royalty rate for the trade name, estimation of future revenue and projected margins, which are dependent on internal cash flow forecasts, estimation of the terminal growth rates and capital spending, and determination of discount rates.

As a result, there can be no assurance that the estimates and assumptions made for purposes of the quantitative goodwill and indefinite-lived intangible impairment tests will prove to be an accurate prediction of future results.

Assumptions include estimation of the royalty rate for the trade name, estimation of future revenue growth rates, projected gross profit margins, projected operating costs, projected EBITDA margins, and projected capital expenditures, which are dependent on internal cash flow forecasts, estimation of the terminal growth rates and determination of risk-adjusted discount rates.

As a result, there can be no assurance that the estimates and assumptions made for purposes of the quantitative indefinite-lived intangible impairment tests will prove to be an accurate prediction of future results.

Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of our reporting units may include such items as:

(i) volatility in the equity and debt markets or other macroeconomic factors, (ii) an increase in the weighted-average cost of capital due to further increases in interest rates, (iii) decrease in future cash flows due to lower than expected sales, or (iv) fluctuations in foreign currency exchange rates that may negatively impact our reported results of operations.

Accordingly, if our current cash flow assumptions are not realized, we experience further sustained declines in our stock price or market capitalization, or increases in costs of capital, it is possible that an additional impairment charge may be recorded in the future, which could be material.

(i) volatility in the equity and debt markets or other macroeconomic factors, (ii) an increase in the weighted-average cost of capital due to further increases in interest rates, (iii) decrease in future cash flows due to lower than expected sales or greater than expected customer churn, or (iv) fluctuations in foreign currency exchange rates that may negatively impact our reported results of operations.

Accordingly, if our current cash flow assumptions are not realized, we experience sustained declines in our stock price or market capitalization, or increases in costs of capital, it is possible that an additional impairment charge may be recorded in the future, which could be material.

Business Combinations

43 unchanged sentences

We offset rental income against head lease operating costs within "Cost of revenue" or "Selling, general and administrative expenses," depending on whether the head lease is a data center or office space lease.

We are deemed a lessor in certain hosting arrangements where our equipment is located in a customer’s data center.

We are deemed a lessor in certain hosting arrangements where we have determined that the contract contains an identified asset and that control of that asset has transferred to the customer.

We account for these arrangements as either sales-type or direct finance leases.

16 unchanged sentences

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

6 unchanged sentences

We recognize revenue on a daily basis as services are provided in an amount that reflects the consideration to which we expect to be entitled in exchange for the services.

Certain hosting contracts contain terms that require us to evaluate whether an embedded lease arrangement exists.

If we determine the contract contains a lease arrangement within a multiple-element arrangement, the revenue associated with the lease component is recognized in accordance with the lease accounting standard ASC 842, whereas the revenue associated with the non-lease component is recognized in accordance with the ASC 606 revenue standard.

Our usage-based arrangements generally include variable consideration components consisting of monthly utility fees with a defined price and undefined quantity.

76 unchanged sentences

Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

We are under certain domestic and foreign tax audits.

We are periodically under certain domestic and foreign tax audits.

Due to the complexity involved with certain tax matters, there is the possibility that the various taxing authorities may disagree with certain tax positions filed on our income tax returns.

26 unchanged sentences

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

We recorded transaction losses of $ 3.3 million, losses of $ 10.1 million, and gains of $ 3.9 million for the years ended December 31, 2021, 2022 and 2023, respectively.

We recorded transaction losses of $ 10.1 million, gains of $ 3.9 million, and losses of $ 2.4 million for the years ended December 31, 2022, 2023 and 2024, respectively.

Derivative Instruments

3 unchanged sentences

Interest Rate Swaps

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

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

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

24 unchanged sentences

Recently 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 SOFR 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.

In December 2022, the FASB issued ASU No.

2022-06, Reference Rate Reform (ASC 848) - Deferral of the Sunset Date of Topic 848 , which extended the date to apply the practical expedients outlined in ASU No.

2020-04 from December 31, 2022 to December 31, 2024.

The guidance in these ASUs is optional and may be applied from March 12, 2020 through December 31, 2024 as reference rate reform activities occur.

During the second quarter of 2023, we elected to apply certain practical expedients in connection with the execution of amendments to our affected contracts that referenced LIBOR.

On April 26, 2023, we executed an amendment to our First Lien Credit Agreement, which governs our Senior Facilities borrowings, to establish Term SOFR as the benchmark rate for determining the applicable interest rate, replacing LIBOR.

In addition, effective May 9, 2023, we amended our interest rate swap agreement to change the index from three-month LIBOR to one-month Term SOFR.

See Note 7, Debt" and Note 15, "Derivatives" for more information.

We continue to evaluate the impact of the guidance and may apply other elections prior to December 31, 2024, as applicable, as additional changes in the market occur.

Not Yet Adopted

Segment Disclosures

Segment Reporting Disclosures

In November 2023, the FASB issued ASU No.

3 unchanged sentences

The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments.

This guidance is effective for Rackspace beginning with our 2024 Form 10-K for annual disclosures and the Q1 2025 Form 10-Q for interim disclosures, with early adoption permitted.

The guidance should be applied retrospectively to all periods presented in the financial statements.

The guidance, once adopted, will result in increased reportable segment disclosures.

We have applied this guidance retrospectively to our annual segment disclosures in Note 16, "Segment Reporting" and will apply the interim disclosures beginning with the first quarter 2025 Form 10-Q.

Recently Issued Accounting Pronouncements Not Yet Adopted

Income Tax Disclosures

5 unchanged sentences

The guidance should be applied on a prospective basis, but retrospective application is permitted.

The guidance, once adopted, will result in increased income tax disclosures.

SEC Rule Changes

In March 2024, the SEC adopted new rules that will require registrants to provide certain climate-related information in their registration statements and annual reports.

The rules require information about a registrant's climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition.

The required information about climate-related risks will also include disclosure of a registrant's greenhouse gas emissions.

In addition, the rules will require registrants to present certain climate-related financial metrics in their audited financial statements.

We are currently evaluating the potential impact of these rules on our consolidated financial statements and related disclosures.

We are currently evaluating the provisions of the ASU and, once adopted, will result in increased income tax disclosures.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU No.

2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses .

ASU 2024-03 requires disclosure, on an annual and interim basis, of detailed information about the types of expenses included in commonly presented income statement expense captions.

Specifically, the guidance requires disaggregated disclosure of specific expense categories including (a) purchases of inventory;

(b) employee compensation;

and (d) intangible asset amortization presented on the face of the income statement within continuing operations.

The guidance also requires inclusion of certain amounts already required to be disclosed under generally accepted accounting principles, a qualitative description of remaining amounts in relevant expense captions that are not separately disaggregated quantitatively, the total amount of selling expenses, and, in annual reporting periods, an entity’s definition of selling expenses.

This guidance is effective for Rackspace beginning with our 2027 Form 10-K for annual disclosures and interim disclosures beginning with the first quarter 2028 Form 10-Q, with early adoption permitted.

The guidance should be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements.

We are currently evaluating the provisions of this ASU and, once adopted, will result in additional disclosures about certain expenses in the notes to our financial statements.

Customer Contracts

37 unchanged sentences

As of December 31, 2023 and 2024, the fair value of the Note was $ 12.8 million and $ 15.0 million, respectively, and is included in "Other non-current assets" on our Consolidated Balance Sheets.

The increase in the fair value of the Note is included in “Other expense, net” in the Consolidated Statements of Comprehensive Loss.

Sale of Receivables

1 unchanged sentence

On February 12, 2024, the Receivables Purchase Facility was amended to include certain international subsidiaries of the company as parties to the agreement.

Under the Receivables Purchase Facility, certain indirect wholly-owned subsidiaries of the company have sold and/or contributed, and may continue to sell and/or contribute on a revolving basis, their current and future accounts receivable to the SPV, which, in turn, will sell and transfer, and may continue to sell and transfer, certain of the accounts receivable to PNC in exchange for cash.

Under the Receivables Purchase Facility, certain indirect wholly-owned subsidiaries of the company have sold and/or contributed, and may continue to sell and/or contribute on a revolving basis, their current and future accounts receivable to the SPVs, which, in turn, will sell and transfer, and may continue to sell and transfer, certain of the accounts receivable to PNC in exchange for cash.

The Receivables Purchase Facility will terminate on September 29, 2026 unless earlier terminated in accordance with its terms and the SPV can sell accounts receivable based upon the face amount of eligible receivables in the collateral pool up to an aggregate maximum limit of $ 300.0 million.

10 unchanged sentences

The company may incur a recourse obligation on the sold accounts receivable in limited circumstances.

Separate accruals have been established for recourse obligations and are immaterial as of December 31, 2023.

Separate accruals have been established for recourse obligations and are immaterial as of December 31, 2023 and 2024.

Cash collected on pledged accounts receivable, which have not been sold, are included in cash from operating activities in the Consolidated Statements of Cash Flows.

In connection with accounts receivable sold during 2023, we recorded $ 10.6 million of expense, consisting of $ 6.0 million of yield charges and fees and $ 4.6 million of upfront transaction costs associated with the execution of the agreement, within “Other expense, net” in the Consolidated Statements of Comprehensive Loss for the year ended December 31, 2023.

The outstanding portfolio of sold accounts receivable derecognized from our Consolidated Balance Sheet as of December 31, 2023 was $ 223.8 million.

The SPV holds unsold accounts receivable of $ 125.6 million as of December 31, 2023 that are pledged as collateral to PNC.

In connection with accounts receivable sold during 2023 and 2024, we recorded $ 10.6 million and $ 21.5 million of expense, respectively, within “Other expense, net” in the Consolidated Statements of Comprehensive Loss.

This expense consisted of $ 6.0 million and $ 20.5 million of yield charges and fees in 2023 and 2024, respectively, and $ 4.6 million and $ 1.0 million of upfront transaction costs associated with the execution of the agreement in 2023 and 2024, respectively.

The outstanding portfolio of sold accounts receivable derecognized from our Consolidated Balance Sheet as of December 31, 2023 and 2024 was $ 223.8 million and $ 218.7 million, respectively.

The SPVs hold unsold accounts receivable of $ 97.8 million as of December 31, 2024 that are pledged as collateral to PNC.

Net Loss Per Share

Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average shares outstanding during the period.

Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period.

Diluted net loss per share is calculated based on the weighted average number of shares of common stock plus the dilutive effect of potential common share equivalents outstanding during the period as determined under the treasury stock method.

The following table sets forth the computation of basic and diluted net loss per share:

22 unchanged sentences

Property, equipment and software, net $ 608.8 $ 601.0

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.

For the year ended December 31, 2022, we recognized property, equipment and software impairment charges of $ 15.3 million, included in "Impairment of assets, net", related to the OpenStack Public Cloud long-lived assets.

3 unchanged sentences

The property's previous carrying amount of $ 82.7 million was written down to its estimated fair value, less estimated cost to sell, of $ 12.1 million, resulting in a $ 70.6 million impairment charge which is included in "Impairment of assets, net" in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2022.

The property's estimated fair value, less estimated cost to sell, of $ 12.1 million was recorded in "Other current assets" in the Consolidated Balance Sheets as of December 31, 2022.

We recorded this impairment charge prior to performing the December 31, 2022 goodwill impairment test.

6 unchanged sentences

As such, we reduced the property’s estimated fair value, less estimated cost to sell, to $ 16.9 million as of December 31, 2023, resulting in a $ 3.8 million loss, which is included in "Impairment of assets, net" in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2023.

We are currently in negotiations with certain local governments and other parties to terminate the Master Economic Incentives Agreement associated with the property which could require us to pay a termination fee upon completion of the sale.

In March 2024, we completed the sale of the property.

The property’s estimated fair value, less estimated cost to sell prior to the sale was $ 16.9 million and we received cash proceeds of $ 17.5 million, less brokerage and professional fees of $ 0.6 million, resulting in net cash proceeds of $ 16.9 million.

In connection with the completion of the sale, we paid a $ 9.0 million early termination fee to certain local governments related to our termination of the MEIA associated with the property.

This amount is included in “Selling, general and administrative expenses” in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2024.

Depreciation expense related to property, equipment and software was $ 220.9 million, $ 208.7 million and $ 141.3 million for the years ended December 31, 2022, 2023 and 2024, respectively.

6 unchanged sentences

Accordingly, we reallocated the total consolidated net balance of goodwill as of January 1, 2023 under the new segments, shown below:

(In millions) Public Cloud Private Cloud Multicloud Services Apps & Cross Platform OpenStack Public Cloud Total Consolidated

(In millions) Public Cloud Private Cloud Multicloud Services Apps & Cross Platform OpenStack Public Cloud Total

Gross goodwill as of December 31, 2022

3 unchanged sentences

— — 1,956.4 198.7 — 2,155.1

Just Analytics acquisition — — — 5.9 — 5.9

Reallocation adjustment (1)

594.7 1,560.4 ( 1,956.4 ) ( 198.7 ) — —

Impairment of goodwill — ( 708.8 ) — — — ( 708.8 )

7 unchanged sentences

597.7 854.7 — — — 1,452.4

Reallocation adjustment (1)

594.7 1,560.4 ( 1,956.4 ) ( 198.7 ) — —

Impairment of goodwill ( 454.6 ) ( 260.3 ) — — — ( 714.9 )

9 unchanged sentences

(1) Represents the adjustment to reallocate goodwill of the former Multicloud Services and Apps & Cross Platform reportable segments to Public Cloud and Private Cloud reportable segments, using the relative fair value basis, as a result of the January 1, 2023 reorganization.

(2) On a consolidated basis, gross and net goodwill as of December 31, 2023 was $ 3,043.1 million and $ 1,452.4 million, respectively.

This includes $ 1,590.7 million of accumulated impairment charges as of December 31, 2023.

(2) On a consolidated basis, gross and net goodwill as of December 31, 2024 was $ 3,041.3 million and $ 735.7 , respectively.

Accumulated impairment charges on a consolidated basis was $ 2,305.6 million as of December 31, 2024.

Management exercised significant judgment related to the determination of the fair value of each reporting unit.

The fair value of each reporting unit was estimated using the discounted cash flow method.

The discounted cash flow methodology requires significant judgment, including estimation of our assumptions and considerations regarding future revenue growth rates, projected gross profit margins, projected operating costs, projected capital expenditures which are dependent on internal forecasts, estimation of the risk-adjusted discount rates, and economic and market trends.

The discounted cash flow methodology requires significant judgment, including estimation of our assumptions and considerations regarding (i) the estimation of future revenue growth rates, projected gross profit margins, projected operating costs, projected EBITDA margins, and projected capital expenditures, which are dependent on internal cash flow forecasts;

(ii) estimation of the terminal growth rates;

and (iii) determination of the risk-adjusted discount rates.

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

During the first quarter of 2024, we performed an interim quantitative assessment of our reporting units as of February 29, 2024.

The results of this goodwill impairment analysis indicated an impairment of goodwill within our Public Cloud and Private Cloud reporting units of $ 385.4 million and $ 187.8 million, respectively, and we recorded a non-cash impairment charge in the first quarter of 2024.

During the third quarter of 2024, we performed an interim quantitative assessment of our reporting units as of September 30, 2024.

The results of this goodwill impairment analysis indicated an impairment of goodwill within our Public Cloud and Private Cloud reporting units of $ 69.2 million and $ 72.5 million, respectively, and we recorded a non-cash impairment charge in the third quarter of 2024.

During the fourth quarter of 2024, we performed our annual goodwill impairment test as of October 1, 2024 and the results of our test did not indicate any further impairment of goodwill.

Due to the change in our segment reporting as a result of the business reorganization as of January 1, 2023, we completed a quantitative goodwill impairment analysis as of January 1, 2023, subsequent to the aforementioned change.

16 unchanged sentences

The impairment was driven by a decrease in forecasted revenues, margins, and cash flows within the reporting unit, primarily due to the Hosted Exchange incident and other macroeconomic factors.

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 fully impaired its goodwill by recording 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.

See Note 1, "Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies," for additional discussion of the goodwill impairment charges recorded during the years ended December 31, 2022, 2023 and 2024.

As of December 31, 2023, our accumulated goodwill impairment charges totaled $ 708.8 million.

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

6 unchanged sentences

Total intangible assets other than goodwill $ 2,119.8 $ ( 1,100.8 ) $ 1,019.0 $ 2,097.7 $ ( 1,253.0 ) $ 844.7

During the year ended December 31, 2023 we recognized impairment charges of $ 57.0 million related to our trade name indefinite-lived intangible asset.

During the years ended December 31, 2023 and 2024 we recognized impairment charges of $ 57.0 million and $ 20.0 million, respectively, related to our trade name indefinite-lived intangible asset.

Additionally, during the year ended December 31, 2022 we recognized impairment charges of $ 33.0 million and $ 22.4 million related to our trade name indefinite-lived intangible asset and the OpenStack Public Cloud definite-lived intangible assets, respectively.

These impairment charges are recorded in “Impairment of assets, net” in our Consolidated Statements of Comprehensive Loss for the years ended December 31, 2022 and 2023.

These impairment charges are recorded in “Impairment of assets, net” in our Consolidated Statements of Comprehensive Loss.

In connection with the classification of our corporate headquarters facility as held for sale as of December 31, 2022, we wrote-off the remaining $ 4.8 million net book value of the related property tax abatement asset to " Impairment of assets, net " in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2022.

9 unchanged sentences

Amount Interest Rate (1)

FLSO Term Loan Facility May 15, 2028 — % $ — 7.35 % $ 1,626.8

FLFO Term Loan Facility May 15, 2028 — % — 10.85 % 272.9

Term Loan Facility February 15, 2028 8.23 % 2,181.2 7.35 % 61.8

New Revolving Credit Facility May 15, 2028 —% — —% —

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

3.50 % FLSO Senior Secured Notes

May 15, 2028 —% — 3.50 % 318.6

3.50 % Senior Secured Notes

2 unchanged sentences

December 1, 2028 5.375 % 197.6 5.375 % 125.4

unamortized debt issuance costs ( 30.7 ) ( 21.4 )

unamortized debt discount ( 10.7 ) ( 8.5 )

Total principal amount outstanding 2,892.5 2,449.4

Unamortized debt issuance costs, debt premium, and debt discount ( 29.9 ) 336.2

Total debt 2,862.6 2,785.6

1 unchanged sentence

Debt, excluding current portion $ 2,839.6 $ 2,756.4

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

(1) Contractual interest rate as of each respective balance sheet date.

March 2024 Refinancing Transactions

Private Exchange

On March 12, 2024, we (together with certain of our subsidiaries) closed a private debt exchange (the “Private Exchange”) with (i) holders of the 3.50 % Senior Secured Notes (the “Existing Secured Notes”) issued by Rackspace Technology Global (the “Existing Borrower”) representing more than 64 % of the aggregate principal amount outstanding of the Existing Secured Notes as of December 31, 2023, and (ii) lenders representing more than 72 % of the aggregate principal amount of the outstanding term loan facility under the First Lien Credit Agreement (the “Existing Term Loans”) as of December 31, 2023.

Pursuant to the Private Exchange, (i) $ 331.4 million aggregate principal amount of Existing Secured Notes and $ 1,588.8 million aggregate principal amount of the Existing Term Loans were exchanged or purchased for cancellation and (ii) $ 267.3 million aggregate principal amount of the 3.50 % FLSO Senior Secured Notes and $ 1,312.0 million aggregate principal amount of the FLSO Term Loan Facility were issued by Rackspace Finance, a new subsidiary of the company (the “New Borrower”).

In addition, the New Borrower issued $ 275.0 million aggregate principal amount of the FLFO Term Loan Facility and we repurchased and cancelled $ 69.3 million aggregate principal amount of the 5.375 % Senior Notes.

See “ New Debt Instruments ” below for additional discussion of the new 3.50 % FLSO Senior Secured Notes, FLSO Term Loan Facility, and FLFO Term Loan Facility.

Public Exchanges

On March 13, 2024, we launched an offer to all of the holders of the Existing Borrower’s remaining Existing Term Loans (the “Public Term Loan Exchange”).

On March 26, 2024, we closed the Public Term Loan Exchange, pursuant to which (i) $ 529.9 million aggregate principal amount of the Existing Term Loans were exchanged or purchased for cancellation and (ii) $ 375.1 million aggregate principal amount of FLSO Term Loans was issued by the New Borrower.

On March 14, 2024, we launched an offer to all of the holders of the Existing Borrower’s remaining Existing Secured Notes (the “Public Note Exchange”).

On April 16, 2024, we completed the Public Note Exchange, pursuant to which (i) $ 138.4 million aggregate principal amount of Existing Secured Notes were exchanged or purchased for cancellation and (ii) $ 96.9 million aggregate principal amount of 3.50 % FLSO Senior Secured Notes were issued by the New Borrower.

New Revolving Credit Facility

On March 12, 2024, the New Borrower also established the New Revolving Credit Facility with commitments in an aggregate principal amount of $ 375.0 million.

All revolving lenders under the prior Revolving Credit Facility exchanged their revolving loan commitments for commitments in respect of the New Revolving Credit Facility, which replaces in full the prior Revolving Credit Facility.

The New Revolving Credit Facility matures on May 15, 2028.

See “ New Debt Instruments ” below for additional discussion of the New Revolving Credit Facility.

We refer to the Private Exchange, the Public Term Loan Exchange, the Public Note Exchange and the entry into the New Revolving Credit Facility, collectively, as the “March 2024 Refinancing Transactions.”

Accounting Impacts

We performed an assessment of the March 2024 Refinancing Transactions and determined it met the criteria to be accounted for as a troubled debt restructuring under ASC No.

470-60, Troubled Debt Restructurings by Debtors .

For each series of the Existing Debt Instruments exchanged, the undiscounted cash flows associated with the New Debt Instruments issued were compared to the carrying value of the Existing Debt Instruments exchanged for such New Debt Instruments and the applicable exchange was accounted for as follows:

(i) to the extent the undiscounted cash flows of the New Debt Instruments in question were lower than the carrying value of the applicable Existing Debt Instruments exchanged, the carrying value of the applicable New Debt Instruments was established at the total of these undiscounted cash flows, with a gain recorded for the remaining difference between this value and the carrying value of the applicable Existing Debt Instruments (as such, no interest expense will be recorded for the applicable 3.50 % FLSO Senior Secured Notes prospectively) and (ii) to the extent the undiscounted cash flows of the New Debt Instruments in question exceeded the carrying value of the applicable Existing Debt Instruments exchanged, the carrying value of the applicable New Debt Instruments was established at the carrying value of the applicable Existing Debt Instruments and the company established new effective interest rates based on the carrying value of the applicable Existing Term Loans prior to the March 2024 Refinancing Transactions.

The difference between the principal amount of the 3.50 % FLSO Senior Secured Notes and the carrying value was recorded as a premium and is included in long-term debt on our Consolidated Balance Sheets.

The premium recorded on the 3.50 % FLSO Senior Secured Notes was $ 39.1 million, which will be reduced as contractual interest payments are made on the 3.50 % FLSO Senior Secured Notes.

In connection with the March 2024 Refinancing Transactions, we recorded a gain in the first quarter of 2024 of $ 56.7 million after deducting third-party costs and lender fees incurred.

The gain is included in "Gain on debt extinguishment, net of debt modification costs" in our Consolidated Statements of Comprehensive Loss.

We incurred third party fees of $ 28.4 million.

The March 2024 Refinancing Transactions were completed in April 2024 with the closing of the Public Note Exchange.

In connection with the Public Note Exchange, we recorded a $ 23.3 million gain, after deducting $ 3.3 million of third-party fees, in the second quarter of 2024.

The gain is included in " Gain on debt extinguishment, net of debt modification costs " in our Consolidated Statements of Comprehensive Loss.

New Debt Instruments

New Senior Facilities

On March 12, 2024, Rackspace Finance Holdings, the New Borrower, the lenders and issuing banks party thereto and Citi, as the administrative agent and collateral agent, entered into the New First Lien Credit Agreement.

FLSO Term Loan Facility

The New Borrower issued the FLSO Term Loan Facility in an aggregate principal amount of $ 1,687.2 million.

The FLSO Term Loan Facility matures on May 15, 2028.

Borrowings under the FLSO Term Loan Facility bear interest at an annual rate equal to Term SOFR equal to the forward-looking term rate, based on the secured overnight financing rate as administered by the Federal Reserve Bank of New York, for the interest period relevant to such borrowing, plus a credit spread adjustment of 0.11 % for an interest period of one-month’s duration, 0.26 % for an interest period of three-months’ duration, and 0.43 % for an interest period of six-months’ duration, subject to a 0.75 % floor, plus an applicable margin of 2.75 %.

As of December 31, 2024, the contractual interest rate on the FLSO Term Loan Facility was 7.35 %.

We are required to make quarterly principal payments of $ 4.2 million, which began on March 31, 20 24.

See Note 14 , “ Derivatives ,” for information on interest rate swap agreements we utilize to manage the interest rate risk on the FLSO Term Loan Facility.

Affiliates of Apollo are FLSO Term Loan Facility lenders under the New First Lien Credit Agreement.

As of December 31, 2024, the outstanding principal amount of the FLSO Term Loan Facility was $ 1,626.8 million, of which $ 80.5 million, or 4.9 %, is due to Apollo affiliates.

Prior to September 12, 2025, the New Borrower may prepay some or all of the FLSO Term Loan Facility, together with accrued and unpaid interest, subject to the applicable “make-whole” premium.

On or after September 12, 2025, the New Borrower may prepay some or all of the FLSO Term Loan Facility, together with accrued and unpaid interest, without prepayment premium or penalty.

During the year ended December 31, 2024, the New Borrower repurchased and surrendered for cancellation $ 43.4 million principal amount of the FLSO Term Loan Facility for $ 20.6 million.

In connection with these repurchases, we recorded a gain, included in " Gain on debt extinguishment, net of debt modification costs ", of $ 32.1 million in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2024, which includes $ 9.0 million of unamortized debt issuance costs and debt premium write-offs.

The fair value of the FLSO Term Loan Facility as of December 31, 2024 was $ 943.5 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 FLSO Term Loan Facility is classified as Level 2 within the fair value hierarchy.

The New Borrower is the borrower and all obligations under the FLSO Term Loan Facility are guaranteed on a senior secured basis, jointly and severally, by Rackspace Finance Holdings on a limited-recourse basis and by certain of the New Borrower’s subsidiaries (the “Subsidiary Guarantors”).

The obligations under the FLSO Term Loan Facility are secured by a pledge of the New Borrower’s capital stock directly held by Rackspace Finance Holdings and substantially all of the New Borrower’s and the Subsidiary Guarantors’ assets, subject to exceptions.

The FLSO Term Loan Facility contains certain customary affirmative covenants, negative covenants, and events of default.

FLFO Term Loan Facility

The New Borrower issued the FLFO Term Loan Facility in an initial aggregate principal amount of $ 275.0 million.

The FLFO Term Loan Facility matures on May 15, 2028.

Borrowings under the FLFO Term Loan Facility bear interest at an annual rate equal to Term SOFR equal to the forward-looking term rate, based on the secured overnight financing rate as administered by the Federal Reserve Bank of New York, for the interest period relevant to such borrowing, plus a credit spread adjustment of 0.11 % for an interest period of one-month’s duration, 0.26 % for an interest period of three-months’ duration, and 0.43 % for an interest period of six-months’ duration, subject to a 0.75 % floor, plus an applicable margin of 6.25 % and were issued with 1.00 % of original issue discount.

As of December 31, 2024, the contractual interest rate on the FLFO Term Loan Facility was 10.85 %.

We are required to make quarterly principal payments of $ 0.7 million, which began on June 30, 2024 .

See Note 14 , “ Derivatives ,” for information on interest rate swap agreements we utilize to manage the interest rate risk on the FLFO Term Loan Facility.

Prior to September 12, 2025, the New Borrower may prepay some or all of the FLFO Term Loan Facility, together with accrued and unpaid interest, subject to the applicable “make-whole” premium.

On or after September 12, 2025 but prior to September 12, 2027, the New Borrower may prepay some or all of the FLFO Term Loan Facility, together with accrued and unpaid interest, subject to a prepayment fee equal to (x) 3.00 % of the principal amount of the FLFO Term Loan Facility so prepaid prior to September 12, 2026 and (y) 1.00 % of the principal amount of the FLFO Term Loan Facility so prepaid on or after September 12, 2026 but prior to September 12, 2027.

On or after September 12, 2027, the New Borrower may prepay some or all of the FLFO Term Loan Facility, together with accrued and unpaid interest, without prepayment premium or penalty.

The fair value of the FLFO Term Loan Facility as of December 31, 2024 was $ 280.7 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 FLFO Term Loan Facility is classified as Level 2 within the fair value hierarchy.

The New Borrower is the borrower and all obligations under the FLFO Term Loan Facility are guaranteed on a senior secured basis, jointly and severally, by Rackspace Finance Holdings on a limited-recourse basis and by the Subsidiary Guarantors.

The obligations under the FLFO Term Loan Facility are secured by the same collateral that secures the FLSO Term Loan Facility, the New Revolving Credit Facility and the 3.50 % FLSO Senior Secured Notes.

The FLFO Term Loan Facility contains certain customary affirmative covenants, negative covenants, and events of default.

New Revolving Credit Facility

The New Borrower established the New Revolving Credit Facility in an aggregate principal amount of $ 375.0 million of commitments.

The New Revolving Credit Facility matures on May 15, 2028 and bears interest at an annual rate equal to Term SOFR equal to the forward-looking term rate, based on the secured overnight financing rate as administered by the Federal Reserve Bank of New York, for the interest period relevant to such borrowing, subject to a 1.00 % floor, plus an applicable margin of initially 3.00 %.

After June 30, 2024, the applicable margin became subject to a net first lien leverage-based pricing grid as set forth in the New First Lien Credit Agreement.

In addition to paying interest on the outstanding principal under the New Revolving Credit Facility, the New Borrower is required to pay a commitment fee equal to initially 0.50 % per annum to the lenders under the New Revolving Credit Facility in respect of the unutilized commitments thereunder.

After June 30, 2024, the commitment fee became subject to a net first lien leverage-based pricing grid as set forth in the New First Lien Credit Agreement.

The New Borrower may prepay loans incurred under the New Revolving Credit Facility, together with accrued and unpaid interest, without prepayment premium or penalty.

The New Borrower is the borrower and all obligations under the New Revolving Credit Facility are guaranteed on a senior secured basis, jointly and severally, by Rackspace Finance Holdings on a limited-recourse basis and by the Subsidiary Guarantors.

The obligations under the New Revolving Credit Facility are secured by the same collateral that secures the FLSO Term Loan Facility, the FLFO Term Loan Facility and the 3.50 % FLSO Senior Secured Notes.

The New Revolving Credit Facility contains certain customary affirmative covenants, negative covenants, and events of default.

In addition, the New Revolving Credit Facility contains a financial covenant which limits the super-priority net senior secured leverage ratio to a maximum of 5.00 to 1.00;

however, this covenant is only applicable and tested if the aggregate amount of outstanding borrowings under the New 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 greater than 35 % of the New Revolving Credit Facility commitments as of the last day of such fiscal quarter.

As of December 31, 2024 , we had total commitments of $ 375.0 million, no outstanding borrowings under the New Revolving Credit Facility, and $ 23.5 million of letters of credit issued thereunder.

As such, as of December 31, 2024 , we had $ 375.0 million of available commitments remaining.

As of December 31, 2024, we were in compliance with all covenants under the New Senior Facilities.

3.50 % FLSO Senior Secured Notes due 2028

On March 12, 2024, the New Borrower issued $ 267.3 million initial aggregate principal amount of the 3.50 % FLSO Senior Secured Notes.

On April 2, 2024 and April 16, 2024, the New Borrower issued additional 3.50 % FLSO Senior Secured Notes in an aggregate principal amount of $ 93.3 million and $ 3.6 million, respectively.

The 3.50 % FLSO Senior Secured Notes will mature on May 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, 2024.

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

The New Borrower is the borrower and all obligations under the 3.50 % FLSO Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally, by Rackspace Finance Holdings on a limited-recourse basis and by the Subsidiary Guarantors.

The obligations under the 3.50 % FLSO Senior Secured Notes are secured by the same collateral that secures the FLSO Term Loan Facility, the FLFO Term Loan Facility and the New Revolving Credit Facility.

The New Borrower may redeem some or all of the 3.50 % FLSO Senior Secured Notes at its option prior to September 12, 2025 at a redemption price equal to 100 % of the principal amount of the 3.50 % FLSO Senior Secured Notes redeemed, plus a “make-whole” premium described in the 3.50 % FLSO Senior Secured Notes Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Commencing September 12, 2025, the New Borrower may redeem the 3.50 % FLSO Senior Secured Notes at its option, in whole at any time or in part from time to time, at a redemption price equal to 100 % of the principal amount of the 3.50 % FLSO Senior Secured Notes redeemed, plus accrued and unpaid interest, if any, to but excluding the redemption date.

During the year ended December 31, 2024, the New Borrower repurchased and surrendered for cancellation $ 45.7 million principal amount of the 3.50 % FLSO Senior Secured Notes for $ 19.3 million, including accrued interest of $ 0.4 million.

In connection with these repurchases, we recorded a gain, included in " Gain on debt extinguishment, net of debt modification costs ", of $ 33.0 million, in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2024, which includes $ 6.3 million of unamortized debt issuance costs and debt premium write-offs.

The 3.50 % FLSO Senior Secured 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 % FLSO Senior Secured Notes Indenture.

Additionally, upon the occurrence of a change of control (as defined in the 3.50 % FLSO Senior Secured Notes Indenture), we will be required to make an offer to repurchase all of the outstanding 3.50 % FLSO 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.

The 3.50 % FLSO Senior Secured Notes Indenture also contains customary events of default.

As of December 31, 2024, we were in compliance with all covenants under the 3.50 % FLSO Senior Secured Notes Indenture.

The fair value of the 3.50 % FLSO Senior Secured Notes as of December 31, 2024 was $ 191.3 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 % FLSO Senior Secured Notes are classified as Level 2 within the fair value hierarchy.

Existing Debt Instruments

Senior Facilities

The Senior Facilities include the Term Loan Facility and Revolving Credit Facility, and is governed by the First Lien Credit Agreement with Citi as the administrative agent.

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.

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.

The Senior Facilities include the Term Loan Facility and included the prior Revolving Credit Facility, and is governed by the First Lien Credit Agreement with Wilmington Trust, National Association as the administrative agent.

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 and our prior $ 375.0 million Revolving Credit Facility.

On April 26, 2023, we executed an amendment to our First Lien Credit Agreement to establish Term SOFR as the benchmark rate for determining the applicable interest rate, replacing LIBOR.

As a result of the amendment, borrowings under the Senior Facilities bear interest at an annual rate equal to an applicable margin plus, at our option, either (a) Term SOFR equal to the forward-looking term rate, based on the secured overnight financing rate as administered by the Federal Reserve Bank of New York, for the interest period relevant to such borrowing, plus a credit spread adjustment of 0.11 % for an interest period of one-month's duration, 0.26 % for an interest period of three-months' duration, and 0.43 % for an interest period of six-months' duration, 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) adjusted Term SOFR for a one-month tenor plus 1.00 %.

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

Borrowings under the Senior Facilities bear interest at an annual rate equal to an applicable margin plus, at our option, either (a) Term SOFR equal to the forward-looking term rate, based on the secured overnight financing rate as administered by the Federal Reserve Bank of New York, for the interest period relevant to such borrowing, plus a credit spread adjustment of 0.11 % for an interest period of one-month's duration, 0.26 % for an interest period of three-months' duration, and 0.43 % for an interest period of six-months' duration, subject to a 0.75 % floor, in the case of the Term Loan Facility, and a 1.00 % floor, in the case of the prior 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 last quoted by The Wall Street Journal and (iii) adjusted Term SOFR for a one-month tenor plus 1.00 %.

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

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

All other material terms and conditions of the First Lien Credit Agreement were unchanged.

In addition to paying interest on the outstanding principal under the Senior Facilities, 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.

In addition to paying interest on the outstanding principal under the Senior Facilities, the Revolving Credit Facility also included a commitment fee equal to 0.50 % per annum in respect of the unused commitments that was due quarterly.

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

As of December 31, 2024, the interest rate on the Term Loan Facility was 7.35 %.

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

We are required to make quarterly principal payments of $ 0.2 million.

See Note 14, "Derivatives" for information on interest rate swap agreements we utilize to manage the interest rate risk on the Term Loan Facility.

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

As of December 31, 2023, the outstanding principal amount of the Term Loan Facility was $ 2,181.2 million, of which $ 58.4 million, or 2.7 %, is due to ABRY affiliates.

Investment funds affiliated with ABRY are also co-investors in Rackspace Technology.

As of December 31, 2023, Apollo also held $ 24.2 million, or 1.1 %, of the outstanding principal amount of the Term Loan Facility.

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.

We may make voluntary prepayments at any time without penalty.

During the year ended December 31, 2023, Rackspace Technology Global repurchased and surrendered for cancellation $ 55.6 million principal amount of the Term Loan Facility for $ 29.5 million.

In connection with this repurchase, we recorded a gain on debt extinguishment of $ 25.5 million included in “Debt modification costs and gain (loss) on debt extinguishment” in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2023, which includes $ 0.6 million of unamortized debt issuance costs and debt discount write-offs.

The fair value of the Term Loan Facility as of December 31, 2023 was $ 935.3 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.

In connection with this repurchase, we recorded a gain on debt extinguishment of $ 25.5 million included in “ Gain on debt extinguishment, net of debt modification costs ” in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2023, which includes $ 0.6 million of unamortized debt issuance costs and debt discount write-offs.

As a result of the Private Exchange and the Public Term Loan Exchange, discussed within “ March 2024 Refinancing Transactions ” above, over 97 % of the $ 2,181.2 million aggregate principal amount of the Term Loan Facility outstanding as of December 31, 2023 was exchanged or purchased for cancellation.

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;

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.

The only financial covenant was with respect to the prior Revolving Credit Facility.

As discussed in “ March 2024 Refinancing Transactions ” above, on March 12, 2024, a ll revolving lenders under the prior Revolving Credit Facility exchanged their revolving loan commitments for commitments in respect of the New Revolving Credit Facility, which replaces in full the prior Revolving Credit Facility.

See “ New Revolving Credit Facility ” above for information regarding this new debt instrument.

As of December 31, 2024, we were in compliance with all covenants under the Senior Facilities.

The Revolving Credit Facility matures on August 7, 2025.

During the year ended December 31, 2023, we borrowed and fully repaid $ 50.0 million.

As of December 31, 2023, we had total commitments of $ 375.0 million, no outstanding borrowings under the Revolving Credit Facility, and $ 3.5 million of letters of credit issued thereunder.

As such, as of December 31, 2023, we had $ 375.0 million of available commitments remaining.

The fair value of the Term Loan Facility as of December 31, 2024 was $ 21.6 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.

3.50 % Senior Secured Notes due 2028

3 unchanged sentences

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.

7 unchanged sentences

During the year ended December 31, 2023, Rackspace Technology Global repurchased and surrendered for cancellation $ 36.3 million principal amount of 3.50 % Senior Secured Notes for $ 18.4 million, including accrued interest of $ 0.3 million.

In connection with this repurchase, we recorded a gain on debt extinguishment of $ 17.9 million included in “Debt modification costs and gain (loss) on debt extinguishment” in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2023, which includes $ 0.3 million of unamortized debt issuance costs write-offs.

In connection with this repurchase, we recorded a gain on debt extinguishment of $ 17.9 million included in “ Gain on debt extinguishment, net of debt modification costs ” in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2023, which includes $ 0.3 million of unamortized debt issuance costs write-offs.

As a result of the Private Exchange and the Public Note Exchange, discussed above, over 91 % of the $ 513.7 million aggregate principal amount of the 3.50 % Senior Secured Notes outstanding as of December 31, 2023 was exchanged or purchased for cancellation.

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.

14 unchanged sentences

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.

During the year ended December 31, 2023, Rackspace Technology Global repurchased and surrendered for cancellation $ 352.4 million principal amount of 5.375 % Senior Notes for $ 124.1 million, including accrued interest of $ 2.8 million.

In connection with these repurchases, we recorded a gain on debt extinguishment of $ 227.9 million included in “Debt modification costs and gain (loss) on debt extinguishment” in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2023, which includes $ 3.2 million of unamortized debt issuance costs write-offs.

In connection with these repurchases, we recorded a gain on debt extinguishment of $ 227.9 million included in “ Gain on debt extinguishment, net of debt modification costs ” in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2023, which includes $ 3.2 million of unamortized debt issuance costs write-offs.

As previously described in “ March 2024 Refinancing Transactions ” above, as part of the Private Exchange, we repurchased and cancelled $ 69.3 million aggregate principal amount of the 5.375 % Senior Notes during the year ended December 31, 2024.

In addition, during the year ended December 31, 2024, Rackspace Technology Global repurchased and surrendered for cancellation $ 2.9 million principal amount of 5.375 % Senior Notes for $ 0.8 million.

In connection with these repurchases, we recorded a gain, included in " Gain on debt extinguishment, net of debt modification costs ", of $ 2.1 million, in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2024.

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.

4 unchanged sentences

The fair value of the 5.375 % Senior Notes are classified as Level 2 within the fair value hierarchy.

Accounts Receivable Financing Agreement

Under the Receivables Financing Facility entered into in 2020, 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.

Rackspace Technology Global was the primary beneficiary of the SPV.

During the year ended December 31, 2021, the SPV repaid $ 15.0 million to cover a borrowing base deficit, repaid the 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 gain (loss) on debt extinguishment” 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 gain (loss) on debt extinguishment” 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.

Debt Maturities

2 unchanged sentences

Total $ 2,449.4

March 2024 Refinancing Transactions

See Note 1, "Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies-Subsequent Events," for a discussion of the public and private debt exchange and related transactions that impacted or are expected to impact the Senior Facilities, the 3.50 % Senior Secured Notes and the 5.375 % Senior Notes.

Assets recorded as property and equipment under finance leases, and the related accumulated depreciation balances as of December 31, 2023 and 2024 were as follows:

38 unchanged sentences

Future lease payments under operating and finance leases as of December 31, 2024 are as follows:

(In millions) Operating leases Finance leases (1)

(In millions) Operating leases (1)

Finance leases (1)

2025 $ 64.1 $ 77.0

7 unchanged sentences

Total lease liability $ 133.7 $ 346.2

(1) We excluded a $ 38.3 million finance lease, on an undiscounted basis, that has not yet commenced.

The lease, which is for our new corporate headquarter building, will commence in 2024 and has a lease term of approximately eleven years .

(1) There are no material finance or operating leases that have not yet commenced.

Financing Obligations

28 unchanged sentences

We are not a party to any litigation, the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material and adverse effect on our business, financial position or results of operations.

Hosted Exchange Incident

We were named in several lawsuits in connection with a previously disclosed ransomware incident which caused service disruptions on our Hosted Exchange email business.

The lawsuits sought, among other things, equitable and compensatory relief.

We vigorously defended these matters and do not expect any of these claims, individually or in the aggregate, to have a material adverse effect on our consolidated financial position or results of operations.

We maintain insurance, including coverage for cyber-attacks, subject to certain deductibles and policy limitations, in an amount that we believe appropriate.

During the years ended December 31, 2022 and 2023, we recorded $ 5.9 million and $ 5.2 million, respectively, of expenses related to the Hosted Exchange incident, including costs to investigate and remediate, legal and other professional services, and supplemental staff resources that were deployed to provide support to customers.

We recorded $ 10.0 million of loss recovery insu rance proceeds received or expected to be received during the year ended December 31, 2023.

As of December 31, 2023, $ 3.3 million of proceeds were recorded as a receivable and the payment was subsequently received on January 8, 2024.

Indemnifications

10 unchanged sentences

We had no material liabilities recorded for these agreements as of December 31, 2023 or 2024.

July 2021 Restructuring Plan

On July 21, 2021, we committed to the July 2021 Restructuring Plan to drive a change in the type and location of certain positions that was 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 have since exited the company.

During the year ended December 31, 2021 , we incurred employee related costs, which consisted 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 and non-cash charges related to 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 a contract termination with a third party.

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

Charges — — —

Cash payments ( 7.1 ) ( 0.6 ) ( 7.7 )

Liability as of December 31, 2022

Total cumulative costs incurred as of December 31, 2022

$ 13.8 $ 6.0 $ 19.8

We did no t incur any additional ASC 420 exit and disposal costs related to the July 2021 Restructuring Plan during the years ended December 31, 2022 or 2023.

Stockholders' Equity

3 unchanged sentences

• Voting Rights —The holders of our common stock are entitled to one vote per share on all matters submitted for action by the stockholders generally.

• Dividend Rights —Subject to any preferential rights of any then outstanding preferred stock, all shares of our common stock are entitled to share equally in any dividends our board of directors may declare from legally available sources.

• Dividend Rights —Subject to any preferential rights of any then outstanding preferred stock, all shares of our common stock are entitled to share equally in any dividends our Board may declare from legally available sources.

• Liquidation Rights —Upon our liquidation, dissolution or winding up, whether voluntary or involuntary, after payment in full of the amounts required to be paid to holders of any then outstanding preferred stock, all shares of our common stock are entitled to share equally in the assets available for distribution to stockholders after payment of all of our prior obligations.

2 unchanged sentences

Share Repurchase Program

On March 3, 2022, our board of directors authorized a program to repurchase up to $ 75.0 million of shares of our common stock from time to time through open-market transactions, privately negotiated transactions, accelerated share repurchases and other transactions in accordance with applicable security laws.

On March 3, 2022, our Board authorized a program to repurchase up to $ 75.0 million of shares of our common stock from time to time through open-market transactions, privately negotiated transactions, accelerated share repurchases and other transactions in accordance with applicable security laws.

During the year ended December 31, 2022 , we repurchased $ 31.0 million, or 3.1 million shares, of our common stock on the open market under this program.

4 unchanged sentences

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 a MOIC on any “Measurement Date” (which is defined in the Datapipe Merger Agreement as (i) each date following the occurrence of a change in control or closing date of the IPO on which Apollo receives cash distributions, cash proceeds and/or marketable securities of the company in respect of their ownership interest in the company and (ii) each day after the IPO on which the company’s shares of capital stock are (a) freely tradeable without violating any “lockup” agreements, other contractual restrictions or securities laws and (b) are listed on a public stock exchange).

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.

If the MOIC exceeds 3.0 x, which is indicated by a volume weighted average trading price of our common stock over 30 consecutive trading days of more than $ 25.00 , we will be required to issue an additional 2,665,935 shares.

If the MOIC exceeds 3.0 x, which is indicated by a volume weighted average trading price of our common stock over 30 consecutive trading days of more than $ 25.00 per share, we will be required to issue an additional 2,665,935 shares.

No shares were issued under the Datapipe Merger Agreement during the years ended December 31, 2022, 2023 or 2024.

Share-Based Compensation and Employee Benefit Plans

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.

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

On July 24, 2020, the Board 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.

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.

For the years ended December 31, 2022, 2023 and 2024, the company granted RSU's (including performance-based RSUs) and restricted stock (collectively "restricted stock") under the Incentive Plans.

4 unchanged sentences

The maximum number of shares of our common stock available for issuance under the 2020 Incentive Plan was originally 25.0 million shares.

In 2022, our board of directors and our stockholders voted to approve the maximum number of shares from 25.0 million shares to 50.0 million shares.

This amount was subsequently increased to 50.0 million in 2022 and 57.9 million in 2023.

On April 22, 2024 the Board approved a proposed amendment to increase the maximum number of shares to 87.9 million shares, which was subsequently approved by our stockholders as part of the 2024 Annual Meeting of Stockholders held on June 14, 2024.

9 unchanged sentences

Stock options have been granted for a term of 10 years and generally vest ratably over a three-year period, subject to continued service.

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.

15 unchanged sentences

(1) Forfeitures are recognized as they occur, rather than estimated .

The total pre-tax intrinsic value of the stock options exercised during the years ended December 31, 2021 and 2022 was $ 35.0 million and $ 0.1 million, respectively.

The total pre-tax intrinsic value of the stock options exercised during the years ended December 31, 2022 and 2023 was not material.

Share-based compensation expense is recognized over the awards requisite service period or over our best estimate of the period over which the performance condition will be met, as applicable.

As of December 31, 2023, there was $ 0.2 million of total unrecognized compensation cost related to stock options, which will be recognized over a weighted average period of 1.0 year.

As of December 31, 2024 total unrecognized compensation cost related to stock options was not material.

Restricted Stock

7 unchanged sentences

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, to a participant 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.

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.

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

These awards were forfeited upon the participant's separation from the company.

During 2022 and 2023, we granted 11.1 million and 28.5 million RSUs, respectively, under the 2020 Incentive Plan with a weighted average grant date fair value of $ 8.68 and $ 2.17 , respectively.

During 2022, 2023 and 2024, we granted 11.1 million, 28.5 million and 10.1 million RSUs, respectively, under the 2020 Incentive Plan with a weighted average grant date fair value of $ 8.68 , $ 2.17 and $ 1.89 , respectively.

The majority of the RSUs were granted as part of our annual compensation award process and vest ratable over a three-year period, subject to continued service.

In addition, during 2022 and 2023, 2.6 million and 2.8 million PSUs were granted, respectively, and in 2023, 5.5 million long-term incentive cash units (“LTIC units”) were granted under the 2020 Incentive Plan with a weighted-average fair value as of December 31, 2023 of $ 0.61 .

Both the PSUs and LTIC units represent the target amount of grants, and the actual number of shares or units awarded upon vesting may vary depending upon the achievement of the relevant market condition which is based on Rackspace’s Total Shareholder Return (“TSR”) relative to the TSR of a comparator group of IT and Cloud Services Companies.

In addition, during 2022, 2023 and 2024 , 2.6 million, 2.8 million and 0.6 million PSUs, respectively, were granted under the 2020 Incentive Plan.

The PSUs represent the target amount of grants, and the actual number of shares awarded upon vesting may vary depending upon the achievement of the relevant market condition which is based on Rackspace’s Total Shareholder Return (“TSR”) relative to the TSR of a comparator group of IT and Cloud Services Companies.

The awards are eligible to vest in equal annual installments over three years based on the attainment of the market condition and the employee’s continued service through the end of the applicable measurement period and were valued using a Monte Carlo simulation.

Lastly, during 2023 and 2024, 5.5 million and 32.1 million long-term incentive cash units (“LTIC units”) were granted under the 2020 Incentive Plan.

The LTIC units represent the target amount of grants, and the actual number of units awarded upon vesting may vary depending upon the achievement of the relevant market condition which is based on Rackspace’s TSR relative to the TSR of a comparator group of IT and Cloud Services Companies for LTIC units granted in 2023 and on the performance of our common stock for LTIC units granted in 2024.

As of December 31, 2024, the remaining outstanding LTIC units granted in 2023 and 2024 had a weighted average fair value of $ 0.49 and $ 1.04 , respectively.

As the company intends to settle the LTIC units in cash, they are classified as a liability within "Other current liabilities" and "Other non-current liabilities" in the Consolidated Balance Sheets.

1 unchanged sentence

Year Ended December 31,

2022 2023 2024

Expected stock volatility (1)

21 unchanged sentences

Employee Stock Purchase Plan

The ESPP was approved by the company's board of directors on July 24, 2020 and became effective on August 7, 2020.

The ESPP was approved by the Board on July 24, 2020 and became effective on August 7, 2020.

Under the ESPP, eligible employees may purchase a limited number of shares of our common stock at the lesser of 85 % of the market value on the enrollment date or 85 % of the market value on the purchase date.

3 unchanged sentences

The share-based compensation expense recognized for the ESPP was $ 1.9 million, $ 0.9 million and $ 0.8 million for the years ended December 31, 2022, 2023 and 2024, respectively.

As of December 31, 2023, there was no unrecognized compensation cost related to the ESP P.

As of December 31, 2024, there was no material unrecognized compensation cost related to the ESP P.

The shares available for issuance under the ESPP is 8.3 million shares as of December 31, 2024.

1 unchanged sentence

In connection with the departure of certain executives during the years ended December 31, 2022 and 2023, 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 $ 0.8 million during the year ended December 31, 2021 and a reduction in expense of $ 2.0 million and $ 0.6 million during the years ended December 31, 2022 and 2023, respectively .

These modifications resulted in a reduction in expense of $ 2.0 million and $ 0.6 million during the years ended December 31, 2022 and 2023 , respectively .

There were no modifications during the year ended December 31, 2024 .

Total share-based compensation expense is comprised of the following equity and liability classified award amounts:

44 unchanged sentences

Tax rate differentials for international jurisdictions ( 1.1 ) % 2.5 % ( 1.0 ) %

Research and development credit ( 0.4 ) % — % — %

Effects of other enacted tax law and rate changes 0.1 % ( 3.0 ) % ( 0.1 ) %

3 unchanged sentences

Tax impact of goodwill impairment ( 9.9 ) % ( 15.9 ) % ( 16.0 ) %

Tax impact of the March 2024 Refinancing Transactions

— % — % 11.7 %

Other, net — % ( 0.3 ) % — %

6 unchanged sentences

Deferred tax assets:

Deferred revenue $ — $ 13.9

Share-based compensation 13.9 9.7

7 unchanged sentences

Operating lease liabilities 28.6 35.4

March 2024 Refinancing Transactions — 100.5

Other 19.1 20.8

11 unchanged sentences

Net deferred tax liabilities $ 72.5 $ 17.2

As of December 31, 2023, we have $ 3.8 million of federal net operating loss carryforwards, all of which have an indefinite carryforward period.

Additionally, we have $ 58.0 million of federal tax credit carryforwards expiring at various dates through 2041.

As of December 31, 2024, we no longer have federal net operating loss carryforwards, federal research and development credits, and federal foreign tax credit carryforwards pursuant to IRC Section 108(b)(2) attribute reduction.

We have $ 93.6 million of foreign net operating losses, $ 5.4 million of which have carryforward periods ranging from 5 to 20 years, and $ 88.2 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 IRC and the applicable statutory foreign tax laws.

Certain foreign net operating loss carryforwards are subject to various limitations under the applicable statutory foreign tax laws.

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

1 unchanged sentence

We’ve recorded a valuation allowance with respect to certain of our deferred tax assets relating primarily to operating losses in certain U.S.

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

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

Additionally, we’ve recorded a valuation allowance with respect to disallowed interest that we do not expect to be realizable in the future.

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.

Furthermore, we recorded a valuation allowance with respect to other deferred tax assets based upon the determination that we would not generate enough income by reversing deferred tax liabilities to fully utilize all deferred tax assets prior to the expiration of any applicable carryforward periods.

Changes to valuation allowances consisted of the following:

4 unchanged sentences

Balance at December 31, $ 58.5 $ 66.1 $ 173.4

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.

The effective tax rate for the year ended December 31, 2022 was primarily impacted by the tax impact associated with the goodwill impairments, the geographic distribution of profits, tax effects from share-based compensation and executive compensation that in nondeductible under IRC Section 162(m) of the IRC.

The effective tax rate for the year ended December 31, 2023 was impacted by the tax impact associated with the goodwill impairments recorded in the first and third quarters of 2023, the majority of which were nondeductible for income tax purposes, executive compensation that is nondeductible under IRC Section 162(m), the net impact of the geographic distribution of our earnings, tax effects from nondeductible share-based compensation as well as changes in our valuation allowance.

The effective tax rate for the year ended December 31, 2022 was primarily impacted by the tax impact associated with the goodwill impairments, the geographic distribution of profits, tax effects from share-based compensation and executive compensation that is nondeductible under IRC Section 162(m) of the IRC.

The effective tax rate for the year ended December 31, 2023 was impacted by the tax impact associated with the goodwill impairments, executive compensation that is nondeductible under IRC Section 162(m), the net impact of the geographic distribution of our earnings, tax effects from nondeductible share-based compensation as well as changes in our valuation allowanc e.

The effective tax rate for the year ended December 31, 2024 was impacted by the tax impact associated with changes in valuation allowance, the tax impact associated with the goodwill impairment recorded in the first and third quarters of 2024, the majority of which was nondeductible for income tax purposes, and the tax impact of the March 2024 Refinancing Transactions discussed below.

The tax impact of the March 2024 Refinancing Transactions includes the exclusion of cancellation of indebtedness income (“CODI”), federal and state attribution reduction and changes in valuation allowance.

As a result of the March 2024 Refinancing Transactions, as further described in Note 7 , “ Debt ”, specifically upon the completion of the Private Exchange and Public Term Loan Exchange in March 2024, and the completion of the Public Note Exchange in April 2024, the company realized CODI for US tax purposes of $ 531.5 million and $ 80.5 million, respectively.

We realized an additional $ 13.1 million CODI for US tax purposes from third quarter 2024 debt repurchase activity, for a total $ 625.1 million for the year ended December 31, 2024 .

Pursuant to IRC Section 108, an insolvent debtor may exclude CODI from taxable income to the extent of the debtor’s insolvency (liabilities greater than the fair value of its assets) but must reduce its tax attributes, subject to certain limitations and according to prescribed ordering rules, based on the amount of CODI excluded from taxable income.

The company currently estimates that the level of its insolvency (as defined for US Tax purposes) exceeds the amount of CODI resulting from the March 2024 Refinancing Transactions, such that all resulting CODI will be excluded from the company’s taxable income.

As of December 31, 2024, we have reduced various tax attributes, including $ 14.8 million of federal and certain state net operating loss deferred tax assets, $ 29.2 million of federal research and development credits, and $ 12.6 million of federal foreign tax credits.

The process for determining the amount of tax attribute reduction is complex and the actual reduction to attributes does not occur until the first day of the company’s tax year subsequent to the date of the discharge event, or January 1, 2025.

Therefore, the estimated impact of the tax attribute reduction from the March 2024 Refinancing Transactions is subject to change until the finalization of the company’s tax returns for the year ending December 31, 2024.

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

14 unchanged sentences

Reductions for tax positions of prior years ( 1.9 ) ( 2.1 ) ( 5.0 )

Settlements ( 0.6 ) — —

Balance, end of period (1)

16 unchanged sentences

We currently have income tax examinations open in Texas for tax years 2014 through 2021 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.

Although the outcome of open tax audits is uncertain, in management’s opinion, adequate provisions for income taxes have been made.

28 unchanged sentences

The fixed rate also changed from 2.3820 % to 2.34150 % as a result of the swap agreement amendment.

As described in Note 1, “Company Overview, Basis of Presentation, and Summary of Significant Accounting Policies” we elected to apply certain practical expedients under GAAP to allow for this transition without any interruptions to hedge accounting treatment.

On a monthly basis, we net settle with the counterparty for the difference between the fixed rate of 2.34150 % and the variable rate based upon the one-month Term SOFR (subject to a floor of 0.75 %) as applied to the notional amount of the swap.

In conjunction with the March 2024 Refinancing Transactions, as discussed in Note 7, “Debt”, we issued additional borrowings and used the proceeds to repay previously hedged borrowings under the Term Loan Facility.

Given that the specific intent of the new borrowings was a replacement of the previously hedged borrowings and the economic characteristics were the same, we continue to apply hedge accounting on the replacement borrowings.

As of December 31, 2023 and 2024 , the cash flow hedge was highly effective.

6 unchanged sentences

Entered into December 2018:

February 3, 2019 2.7490 % — Terminated — Matured November 3, 2023

February 3, 2020 2.7350 % — Terminated — Matured November 3, 2023

February 3, 2021 2.7360 % — Terminated — Matured November 3, 2023

February 3, 2022 2.7800 % — Terminated — Matured November 3, 2023

February 3, 2019 2.7490 % — Matured — Matured November 3, 2023

February 3, 2020 2.7350 % — Matured — Matured November 3, 2023

February 3, 2021 2.7360 % — Matured — Matured November 3, 2023

February 3, 2022 2.7800 % — Matured — Matured November 3, 2023

Entered into February 2021:

14 unchanged sentences

Interest rate swaps Other non-current liabilities (1)

— 39.1 — 20.3

Total $ 83.8 $ 37.6 $ 46.2 $ 20.3

14 unchanged sentences

$ ( 18.5 ) $ ( 15.5 ) $ —

Foreign currency contracts (1)

Other income (expense), net

$ 2.1 $ — $ —

Derivatives designated as hedging instruments Location

1 unchanged sentence

$ 11.9 $ 55.5 $ 57.6

(1) Relates to two foreign currency forward contracts settled on November 30, 2021.

As of December 31, 2022 and 2023, we do not have any outstanding foreign currency hedging contracts.

Interest expense was $ 208.5 million, $ 221.6 million and $ 98.0 million for the years ended December 31, 2022, 2023 and 2024, respectively.

As of December 31, 2024, the amount of cash flow hedge gain included within "Accumulated other comprehensive income" that is expected to be reclassified as a reduction to "Interest expense" over the next 12 months is approximately $ 42.0 million.

See Note 16, "Accumulated Other Comprehensive Income (Loss)," for information regarding changes in fair value of our derivatives designated as hedging instruments.

See Note 15, "Accumulated Other Comprehensive Income," for information regarding changes in fair value of our derivatives designated as hedging instruments.

Credit-risk-related Contingent Features

1 unchanged sentence

As of December 31, 2024, our outstanding interest rate swap agreement was in a net asset position.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consisted of the following:

Accumulated Other Comprehensive Income

Accumulated other comprehensive income consisted of the following:

(In millions) Accumulated Foreign Currency Translation Adjustments Accumulated Gain (Loss) on Derivative Contracts

Accumulated Other Comprehensive Income (Loss)

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 expense of $ 3.9 million

Amount reclassified from Accumulated comprehensive income (loss) into earnings, net of tax benefit of $ 6.0 million (1)

Accumulated Other Comprehensive Income

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

9 unchanged sentences

Balance at December 31, 2023 $ ( 2.0 ) $ 62.3 $ 60.3

(1) 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.

Foreign currency translation adjustments, net of tax benefit of $ 0.3 million

( 8.2 ) — ( 8.2 )

Unrealized gain on derivative contracts, net of tax expense of $ 4.9 million

Amount reclassified from Accumulated comprehensive income (loss) into earnings, net of tax expense of $ 14.5 million (3)

— ( 43.1 ) ( 43.1 )

Balance at December 31, 2024 $ ( 10.2 ) $ 34.3 $ 24.1

(1) Includes amortization of off-market swap value and accumulated loss at hedge de-designation of $ 18.5 million for the year ended December 31, 2022, partially offset by a reduction to interest expense recognized of $ 12.1 million.

(2) Includes a reduction to interest expense recognized of $ 55.6 million related to the cash flow hedge gain for the year ended December 31, 2023, partially offset by an increase to interest expense for the amortization of off-market swap value and accumulated loss at hedge de-designation of $ 15.5 million.

Related Party Transactions

Apollo Global Securities, an affiliate of Apollo, received $ 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.

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.

(3) Includes a reduction to interest expense recognized of $ 57.7 million related to the cash flow hedge gain for the year ended December 31, 2024 .

Segment Reporting

Effective on January 1, 2023, we reorganized around a two -business unit operating model, Public Cloud and Private Cloud.

This two -business unit operating model ensures increased focus, delivery, and service quality for our customers.

This two -business unit operating model allows for each segment to be managed separately based on the different service offerings and respective operational and marketing strategies, ensuring increased focus, delivery, and service quality for our customers.

We have changed our segment reporting to reflect this reorganization under two operating segments, which correspond directly to our reportable segments:

3 unchanged sentences

Our prior Multicloud Services segment has been separated into its public and private cloud components and the offerings previously reported in our Apps & Cross Platform segment have been reassigned to either the Public Cloud or Private Cloud segment based on the nature of the offering.

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.

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 provided to our Chief Operating Decision Maker (“CODM”), who we have determined to be our Chief Executive Officer.

The CODM is responsible for making key operating and strategic decisions to assess performance for each segment.

We assess financial performance of our segments on the basis of revenue and segment operating profit.

The CODM utilizes both revenue and segment operating profit or loss before interest and income taxes to allocate resources and assesses performance of each segment by comparing actual revenue and operating profit or loss results, respectively, to historical results and previously forecasted financial information.

Segment operating profit includes expenses directly attributable to running the respective segments' business.

2 unchanged sentences

Corporate function costs that are not allocated to the segments are included in the row labeled "Corporate functions" in the table below.

The table below presents a reconciliation of revenue by reportable segment to consolidated revenue and a reconciliation of consolidated segment operating profit to consolidated loss before income taxes for the years ended December 31, 2021, 2022 and 2023.

During the first quarter of 2024, we identified that an immaterial amount of revenue for a certain Private Cloud product offering was incorrectly reported in the Public Cloud segment in historical periods.

Revenue by segment has been corrected in the table below by reducing Public Cloud revenue by $ 2.3 million and increasing Private Cloud revenue by $ 2.3 million for the year ended December 31, 2022 and reducing Public Cloud revenue by $ 4.7 million and increasing Private Cloud revenue by $ 4.7 million for the year ended December 31, 2023.

Beginning in the fourth quarter of 2024, we have updated the presentation of our segment operating profit to no longer exclude certain cash compensation paid to employees who remain employed with Rackspace which were previously included in “special bonuses and other compensation expenses” and “restructuring and transformation expenses” line items of our reconciliation below.

Additionally, we have removed “special bonuses and other compensation expenses” line item and the remaining adjustments are now presented within “restructuring and transformation expenses” line item.

All prior periods have been recasted to reflect current period presentation.

In connection with this presentation change, we also updated segment operating profit included in the financial information provided to our CODM.

Certain cash compensation paid to employees who remain employed with Rackspace is now included in the Public Cloud and Private Cloud segment operating profit performance measure.

The table below presents revenue and segment operating profit by reportable segment and a reconciliation of consolidated segment operating profit to consolidated loss before income taxes for the years ended December 31, 2022, 2023 and 2024.

Year Ended December 31,

(In millions) 2022 2023 2024

Revenue by segment:

Public Cloud $ 1,471.3 $ 1,740.8 $ 1,747.4

Private Cloud 1,538.2 1,381.5 1,209.7

Total consolidated revenue $ 3,009.5 $ 3,122.3 $ 2,957.1

$ 1,738.5 $ 1,742.7 $ 1,682.6

Third party infrastructure (1)

( 1,257.9 ) ( 1,320.7 ) ( 1,325.1 )

Other cost of revenue (2)

( 225.7 ) ( 228.6 ) ( 202.6 )

Other segment items (3)

( 134.2 ) ( 111.6 ) ( 110.7 )

Segment operating profit $ 120.7 $ 81.8 $ 44.2

Public Cloud $ 120.1 $ 124.9 $ 90.4

Private Cloud

Total consolidated segment operating profit 724.4 618.8 431.2

$ 1,383.8 $ 1,214.4 $ 1,054.5

Cost of revenue ( 758.6 ) ( 749.1 ) ( 646.8 )

Other segment items (3)

( 129.0 ) ( 122.3 ) ( 113.3 )

Segment operating profit $ 496.2 $ 343.0 $ 294.4

Total Consolidated

$ 3,122.3 $ 2,957.1 $ 2,737.1

Segment operating profit

$ 616.9 $ 424.8 $ 338.6

Corporate functions ( 297.5 ) ( 267.6 ) ( 233.0 )

Share-based compensation expense ( 69.5 ) ( 65.4 ) ( 63.4 )

Special bonuses and other compensation expense (1)

( 11.8 ) ( 10.0 ) ( 12.1 )

Transaction related adjustments, net (4)

8 unchanged sentences

Impairment of assets, net ( 146.1 ) ( 52.2 ) ( 20.0 )

Gain on sale of land 19.9 — —

Interest expense ( 208.5 ) ( 221.6 ) ( 98.0 )

Gain (loss) on investments, net ( 0.2 ) 0.3 0.1

Debt modification costs and gain (loss) on debt extinguishment ( 37.5 ) — 271.3

Gain on debt extinguishment, net of debt modification costs — 271.3 147.2

Other expense, net ( 10.0 ) ( 5.0 ) ( 21.7 )

Total consolidated loss before income taxes $ ( 897.7 ) $ ( 854.4 ) $ ( 881.5 )

(1) Includes expense related to retention bonuses, mainly relating to restructuring and integration projects, and the related payroll tax, senior executive signing bonuses and relocation costs, and payroll taxes associated with the exercise of stock options and vesting of restricted stock.

Beginning in the second quarter of 2023, includes expense related to the one-time grant of long-term incentive bonuses as a component of our annual compensation award process.

(2) Includes legal, professional, accounting and other advisory fees related to acquisitions, certain one-time compliance costs related to being a public company, integration costs of acquired businesses, purchase accounting adjustments, payroll costs for employees that dedicate significant time to supporting these projects and exploratory acquisition and divestiture costs and expenses related to financing activities.

(3) Includes consulting and advisory fees related to business transformation and optimization activities, payroll costs for employees that dedicate significant time to these projects, as well as associated severance, certain facility closure costs, and lease termination expenses.

This amount also includes employee related costs and other costs related to the July 2021 Restructuring Plan of $ 25.4 million for the year ended December 31, 2021, which are accounted for as exit and disposal costs under ASC 420.

In addition, it includes total charges of $ 25.1 million and $ 5.2 million for the years ended December 31, 2021 and 2022, respectively, related to 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.

(1) Represents usage charges from public cloud infrastructure providers.

(2) Other cost of revenue excludes third party infrastructure expenses and is comprised of certain license costs, labor, and other designated expenses.

Other segment items for each segment include directly allocable research and development expenses, sales and marketing expenses, and certain other general and administrative expenses.

Includes legal, professional, accounting and other advisory fees related to acquisitions, certain one-time compliance costs related to being a public company, integration costs of acquired businesses, purchase accounting adjustments, and exploratory acquisition and divestiture costs and expenses related to financing activities.

Includes consulting and advisory fees related to business transformation and optimization activities, as well as associated severance, certain facility closure costs, and lease termination expenses.

Also includes payroll taxes associated with the exercise of stock options and vesting of restricted stock.

The year ended December 31, 2022 includes charges of $ 5.2 million related to 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.

In addition, the year ended December 31, 2024 includes a $ 9.0 million MEIA early termination fee associated with the sale of our corporate headquarters in March 2024.

All of our intangible assets are attributable to acquisitions, including the Rackspace Acquisition in 2016.

26 unchanged sentences

(1) No other foreign country had revenue that exceeded 10% of total consolidated revenue for the years ended December 31, 2022, 2023 and 2024.

The table below presents property, equipment and software, net by country, based on the physical location of the assets, as of December 31, 2022 and 2023:

The table below presents property, equipment and software, net by country, based on the physical location of the assets:

(In millions) December 31,

2022 December 31,

2023 December 31,

United States $ 487.9 $ 478.4 $ 480.8

1 unchanged sentence

Other foreign countries (1)

23.7 21.4 19.9

Total property, equipment and software, net $ 628.3 $ 608.8 $ 601.0

(1) No other foreign country had property, equipment and software, net that exceeded 10% of total consolidated property, equipment and software, net as of December 31, 2022 and 2023.

(1) No other foreign country had property, equipment and software, net that exceeded 10% of total consolidated property, equipment and software, net.

Condensed Financial Information of Registrant (Parent Company Only)

6 unchanged sentences

Total assets $ ( 154.5 ) $ ( 1,004.2 )

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Stockholders' equity (deficit):

LIABILITIES AND STOCKHOLDERS' DEFICIT

Stockholders' deficit:

Preferred stock, $ 0.01 par value per share:

11 unchanged sentences

( 31.0 ) ( 31.0 )

Total stockholders' equity (deficit)

Total stockholders' deficit

( 154.5 ) ( 1,004.2 )

Total liabilities and stockholders' equity (deficit)

Total liabilities and stockholders' deficit

$ ( 154.5 ) $ ( 1,004.2 )

17 unchanged sentences

(“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 Indentures, 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’ New First Lien Credit Agreement, 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.

2 unchanged sentences

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