Good afternoon and thank you for standing by. Welcome to Rackspace Technology's Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. Please be advised that today’s call is being recorded. I would now like to hand the call over to Robert Watson, Vice President of Corporate Finance. Please go ahead.

Thank you and good afternoon. I am joined today by Amar Maletira, our Chief Executive Officer, and Bobby Molu, our Chief Financial Officer, who recently joined in January. Supplemental materials to today's earnings announcement as well as a replay of today's call can be found on our Investor Relations website. As a reminder, certain comments we make on this call will be forward-looking. The statements involve risks and uncertainties which could cause actual results to differ. A discussion of these risks and uncertainties is included in our SEC filings. Rackspace Technology assumes no obligation to update the information presented on the call, except as required by law. Our presentation includes certain non-GAAP financial measures and adjustments to those measures, which we believe provide useful information to our investors. In accordance with SEC rules, we have provided a reconciliation of these measures to their most directly comparable GAAP measures in the earnings release and presentation, both of which are available on our IR website. I will now turn the call over to Amar for an update on the business.

Thank you, Robert. First, I'd like to quickly update you on the Ransomware incident we experienced late in Q4. On December 2, Rackspace detected suspicious activity in our hosted exchange email environment, which triggered our incident response team to act immediately to contain the threat. We quickly engaged an industry-leading cybersecurity firm to assist us with the forensic investigation, which was completed in roughly 30 days. The investigation determined this was the result of a zero-day exploit, which means the attack vector was not previously known, and it was a sophisticated attack. Due to the team's swift action to contain the threat, the impact was limited solely to the hosted exchange email environment, which makes up less than 1% of our total revenue. No enterprise customers were impacted, and no other Rackspace products, platforms, solutions, or businesses were affected as a result of this incident. We provided our hosted exchange customers with a path to migrate their email services to Microsoft 365 and assisted many customers with both email and data transmission. Security is extremely critical for our business, and we have the right focus and investments to continue to provide our customers with a secure environment. With that, let me share what else I've been doing since taking the helm in September. I've been laser-focused on transforming Rackspace Technology into a customer-first, cloud-first company and changing the trajectory of our performance. In just the last few months, we have achieved many significant milestones, which include implementing a two-business unit operating model, adding new leadership, strengthening the board, and introducing new products and services. We are now poised to drive these changes throughout the company and bring our strategy to life. We are very focused on fixing this business for the long term, even if it requires near-term disruption. While the next few quarters may be choppy, our focus is on positioning the company for sustainable growth heading into 2024. I'm pleased to share some of the progress since our last earnings call. First, we delivered fourth-quarter revenue and profitability above the high end of our guidance. This is a positive step as we continue to build a track record of meeting or exceeding our commitments. Second, I'm excited to welcome Bobby Molu, our new CFO, who joined in January and has hit the ground running with his service background and broad operational finance experience. Third, we have hired Brian Lillie as the President of our Private Cloud Business and have previously announced DK Sinha as the President of the Public Cloud business unit. Given this, we now have strong leadership for each of these two core segments. Brian's deep technology experience and focus on strategy and execution will be instrumental in transforming our private cloud business. Finally, Anthony Roberts has joined our board of directors. Anthony's extensive experience as a Senior Technology Executive will be a tremendous asset along with the recent elevation of Shashank Samant to lead director, which will help define and fortify our position as the industry's leading provider of multi-cloud solutions. While we are only a couple of months into the new operating model, I am encouraged by the early signs of progress. Although it will take time to fully reflect this progress in our financial results, I strongly believe we are headed in the right direction. As we navigate the challenging macro environment, we are experiencing some of the same trends highlighted by others in our industry. The growth of the product cloud market has slowed as customers are showing a heightened focus on efficiency. We are also experiencing longer sales cycles. The recent economic slowdown has also led many companies to take a more deliberate approach to evaluating whether workloads should operate in public or private cloud to optimize for performance and costs. The demand is shifting to the right; we're taking advantage of current macro conditions to complete our transformation, improve execution, and launch new offerings. In public cloud, we continue our accelerated pivot from an infrastructure retail-led motion to a services-led motion with deeper customer engagement. As we change the mix of the business, we are experiencing some near-term disruptions. We are committed to building a services backlog that will yield sustained long-term growth and improved margins. We have already taken several steps to accelerate a shift to a higher-margin suite of services and expand our existing offerings. Let me highlight a few examples. We recently announced an expanded long-term strategic partnership with Google Cloud. As part of this partnership, Rackspace will build out a Google Cloud Center of Excellence with 250 certified GCP resources. Together with GCP, we will drive joint business development around Rackspace as Google Cloud services focused on areas such as application migration, modernization, and data and AI. We also recently launched Modern Operations, which is a new managed service offering for public cloud that will provide customers across AWS, Azure, and GCP a 24/7 unified support model for a broad range of services. Modern Operations is a good example of the sticky annuity services we are focused on expanding. Our new operating model will ensure that we emerge from 2023 with the public cloud organizations focused on the high-value opportunities in this wide-open market space. To grow the public cloud has also spurred new demand for private cloud solutions. The public cloud is a great place for many new and emerging workloads. Companies are now realizing, however, that many workloads are most efficiently operated in their existing native environment. Many companies also no longer want to build or operate in-house data centers and need a safe, reliable partner to run mission-critical workloads. All of this sums up to a significant opportunity for Rackspace as one of the largest skilled players in private cloud. To address demand across a broad range of private cloud customers, we recently launched software-defined data center offerings, including enterprise, business, and flex options. These enhanced higher-value offerings position us well to meet unmet demand in private cloud. As Rackspace moves forward, you should expect a continued focus on higher-value innovations in both public and private cloud, which underpin our strategy and new operating model. In parallel, we are progressing on industry-specific offerings in both public and private cloud. We are building focused teams and solutions in verticals such as healthcare, telecom, tech and gaming, and the public sector to better leverage our core multi-cloud strengths and address the complex challenges facing our customers. As an example, we recently signed an important memorandum of understanding with the Saudi Data and Air Authority, a government agency with a mission to unlock the value of data as a national asset. This MoU will enable Rackspace and SDAIA to collaborate on strategic technology initiatives in support of Saudi Arabia's Vision 2030 and its ambitious blueprint for the kingdom's digital future. This partnership is an example of Rackspace's relevance in an exciting multi-cloud market. Before I conclude, I'd like to extend my heartfelt gratitude to each and every one of our talented team members, customers, and partners around the world. Over the past five months, we have accomplished a great deal and initiated critical changes within the company. Our two business unit structure is now fully operational, and we have assembled a strong leadership team to execute our strategy and plan. 2023 will be a transformational year for us as we continue to lay the foundation for long-term sustained performance in the future. I will now turn the call over to Bobby for an overview of our Q4 financials.

Thank you, Amar. Before I begin, I would like to say that I am extremely excited to join the Rackspace team. I strongly believe in the turnaround and look forward to being a part of the next chapter of the Rackspace story. I'm also looking forward to meeting and talking with our investors in the coming days and weeks. Now, on to the results. In the fourth quarter, both revenue and core revenue exceeded the high end of the guidance that was provided on the Q3 call in November. Total revenue was $787 million, which represents 3% year-over-year growth in constant currency and 1% growth on a reported basis. We continue to experience material year-over-year currency headwinds from our Europe business. Core revenue was $752 million, which grew 4% year-over-year in constant currency and 2% on a reported basis. Revenue in EMEA grew 7% in constant currency driven in part by the continued ramp of the BT contract but declined 1% on a reported basis. Americas grew 1%, and APJ grew 19% on an as-reported basis with minimal FX impact. Non-GAAP operating profit of $74 million also exceeded the high-end of our fourth quarter guidance. This was down 40% year-over-year primarily due to reduced gross profit from the ongoing revenue decline in our legacy OpenStack and private cloud businesses. Non-GAAP operating margin was 9%, and non-GAAP earnings per share was $0.06. In the fourth quarter, we generated cash flow from operations of $40 million and free cash flow of $25 million. On a full-year basis, we generated $259 million of cash flow from operations and $179 million of free cash flow. We ended the year with $241 million of cash, and our $375 million revolver remained undrawn, resulting in over $600 million of total available liquidity. We anticipate cash flow from operations to be negative in Q1, driven by seasonal cash outflows, but expect positive cash flow from operations in the remaining quarters. CapEx in the fourth quarter was in line with expectations with total CapEx of $43 million and cash CapEx of $15 million. CapEx intensity was 5% and 2% respectively. For the full year, we ended at 5% total CapEx intensity, which was at the low end of our 5% to 7% guided range. In the fourth quarter, we recorded $217 million of non-cash impairment charges driven primarily by $129 million of goodwill and a $75 million asset impairment. The goodwill impairment was in our apps and cross-platform segment and was driven primarily by the decline in market capitalization following the ransomware attack on our hosted exchange email business. The asset impairment was for our San Antonio headquarters office as we prepare for our relocation to a smaller footprint in North San Antonio later in 2023. Additional details of these non-cash expenses can be found in our press release and SEC filings. Now moving on to the Q1 guidance. Our guidance for the first quarter of 2023 reflects continued caution related to an uncertain macroeconomic environment and includes impacts from the December ransomware attack. For the first quarter, we expect total revenue in the range of $752 million to $762 million, core revenue in the range of $719 million to $729 million, non-GAAP operating profit of $47 million to $53 million, other income and expense of $55 million to $57 million and non-GAAP loss per share of $0.01 to $0.05. Before I conclude, I would like to remind everyone that beginning in Q1, we will start reporting revenue and profitability for our new operating segments, public cloud and private cloud. We will also continue to separately report our legacy OpenStack business as we have been doing. We anticipate providing historical financials in the new segmentation prior to our Q1 earnings release in May. And with that, we will take your questions.

Thank you. At this time, we'll conduct the question-and-answer session. Our first question comes from the line of Kevin McVeigh of Credit Suisse. Your line is open. Go ahead.

Great. Thanks so much. And congratulations on the Q4 results. I don't know if this will be for Amar, but can you give us a sense, as we're going through the restructuring? Just how we're thinking about free cash flow? It sounds like a use of cash in Q1, but any sense of how we should think about that holistically for all of 2023? Because it seems like you've got the capital to kind of shepherd through this restructuring. But just any thoughts on how free cash flow overall should shape up over 2023?

Yeah. Thanks, Kevin. Thanks for the question. So as Bobby mentioned in his prepared remarks, cash flow from operations in Q1 will be negative because of a seasonal impact due to two reasons. One is a company bonus payment as well as a payment to one of the vendors. So this is typically a low cash flow quarter for us in Q1. For the full year, we do expect free cash flow as well as cash flow from operations for the full year to be positive. And as we roll through the year, you should expect our cash flow from operations to be positive.

And I would just add, look, cash flow generation is going to be a major focus for us, a major focus for me. We are working on a number of initiatives to drive these improvements. So let me give you a little bit of color on this, Kevin. Just in terms of our cash conversion cycle, we're very focused on that, on receivables and payables. We're focused on our CapEx efficiency and improving that. We continue to look for cost optimization opportunities. And look, as the CFO of this company, my sole focus is going to be around managing cash and expenses and making sure that we're making the investments to drive our long-term growth.

Great. Thanks so much.

One moment for our next question, which comes from the line of Ashwin Shirvaikar of Barclays. Your line is open, Ashwin.

Yeah. It's Ashwin Shirvaikar from Citi. Amar, good to speak with you. Bobby, good to meet. Yeah, my first question is if you can provide maybe more granularity with regards to how the demand environment is evolving. What we've heard from other companies is that, obviously, a pretty strong slowdown in December, but by February, things have started picking up just a bit. Is that similar to or different than what you're seeing? Any color you can provide with regards to visibility that you have in the forward look would be great.

Thank you for the question, Ashwin. Good to hear your voice. So as you rightly said, all companies in the cloud ecosystem have been cautious about the demand environment and rightfully so, given the tough macro outlook. We work very closely with the hyperscalers, too. And as you know, hyperscalers have also cautioned that the growth rates are slowing, but still, they are reporting double-digit growth. We believe that the customers will maintain their IT spend on mission-critical projects but slow spending on lower-priority, less critical projects. This of course varies by customer as well as vertical. But broadly, customers will be more focused on cost optimization of existing high-usage workloads on projects that have a faster payback. We're also seeing customers, Ashwin, as we work with them on transformation projects that they want to accelerate their transformation projects so they can realize the returns of those projects within the year. So in this kind of environment, we are also seeing it's not very unusual to expect some changes in the size and scope of the deals that we pursue. We're also seeing longer sales cycles and also a slowdown in decision-making. And looking forward, I think the demand will definitely be there. What I'm seeing is after I've been talking to a lot of customers, I mean going around, I've been spending a lot of time on the road talking to our customers, to our partners. The demand is still there. I think the demand is just shifting to the right because of the slowdown in decision-making. We are also seeing that as budgets are getting released, this is the first quarter, so it takes time for the budgets to at least show up. So people are a bit cautious. Now given this backdrop, Rackspace is prepared. We will control what we can and manage what we cannot. We will have a very tight control on our expenses, as Bobby mentioned. We'll continue to execute on our ongoing cost efficiency programs. We have lined up those programs. We'll also make targeted investments to expand our services and solutions offerings to help customers optimize their costs and also deliver projects with faster payback. Whereas I mentioned, these projects are moving to the right, and we want to go capture those with the right offerings that we can provide to the customers. So we believe that the demand for multi-cloud will remain as I look into the future. And to be honest, Ashwin, as we go through a transformation here in the company, we are taking advantage of these current macro conditions to complete our transformation, improve our execution and also launch new offerings so that we can continue to meet the customer demand. So that's what I'm seeing from a demand perspective, what I've seen in the last few months and what I expect going forward.

Thank you. That's a lot of good detail, Amar. If I can follow up on that last part of what you said. Obviously, from a personnel standpoint, the organization seems complete now. But from the perspective of investors looking to figure out what the key initiatives or deliverables are, that we should hold management accountable for over the course of the year, if you could kind of comment a bit more on those. What goals have you set for your management team and for yourself?

Thank you for the question, Ashwin. I’ve been in my role for about four and a half to five months. As I mentioned earlier, the initial few months were focused on formalizing our strategy and creating the operating model. We undertook significant reorganization efforts in the December quarter across our two business units, and since January 1, we have been operating accordingly. We've implemented key leadership changes, and I’m pleased with the new leaders at Rackspace. Moving forward, our primary focus will be on execution. We expect some disruption during this heavy lifting process as we reorganize approximately 6,000 employees across the two business units. However, we anticipate that productivity will continue to improve. DK Sinha, Brian Lillie, and I are actively involved with our go-to-market team to ensure clarity in how we will operate as a multi-cloud company, offering both private and public cloud solutions. There are many developments underway, and we plan to provide more detailed financial visibility for our two business units. As Bobby highlighted, we will report in three segments: public cloud, private cloud, and OpenStack. Our external reporting will reflect our internal management structure. We aim to offer more insights into net revenue versus gross revenue as we transition from an infrastructure retail model to a services-led model. We see significant opportunities to sell multiple dollars’ worth of services for every dollar of infrastructure. We will provide various indicators of progress, starting with visibility into public and private cloud segments. Internally, we have established our financial plan and investment strategy for the next three years, aligning our operating plan for execution. Each business unit has defined and is closely managing its KPIs and OKRs. We are establishing a consistent operational rhythm to execute our strategy effectively.

All right. And Ashwin, I would just add that, look, this is a major pivot, right? And we're trying to focus more on services. And as you know, services is a longer sales cycle. So it's going to take a little bit longer for that sales engine to get going. And as Amar mentioned in his prepared remarks, it's going to be choppy for the next few quarters. So we've got to understand that as we make this pivot.

Yeah. And if I can just add to that. It's a great point, Bobby that you bring up, right? So we have two businesses; right? Let's think about private cloud. It's an Infrastructure as a Service business. That business has been largely sort of, I would say, not ignored, but it was not sort of deemphasized, although we are seeing a lot of demand in that business coming up. That's the reason we brought Brian Lillie, who has great experience in the private cloud space, because that's the business that we are going to transform and make sure that the business stops declining, stabilizes that business. On the public cloud side, Ashwin, we are going to sell cloud services on top of the infrastructure. That's the reason we have DK Sinha, who has a lot of experience in scaling digital services business. So stay tuned. This pivot takes time, but we are starting to see some initial traction there. For example, last quarter, we sold one of the largest private cloud deals in the history of the company. So we're starting to see some traction there. This quarter, we signed a very strategic deal and expanded the deal with Google on GCP that impacts the public cloud business. We also signed an MoU with SDAIA.

Thank you for all the detail.

Thank you. Our next question comes from the line of Ramsey El-Assal of Barclays. Your line is open.

Hi, this is Ryan on for Ramsey. Thank you for taking my question today. I was hoping for some additional color on the order book in the quarter and the backlog. As you make the shift to higher-value services and solutions, are you being more selective with the workloads you take on? And what strategy do you have to accelerate the percentage of the order book coming from these higher-value services?

Yes. Let me first give you some color on the bookings itself for Q4, and I will give you additional color on what we are doing so that we make this pivot. So that's a great question. In Q4, as we expected, we were seeing a bit of a slowdown in bookings volume, driven by the impact of our reorganization and also the macro trend that we're seeing in the market. As I mentioned earlier, we are seeing sales cycles are getting extended. Companies are reevaluating their IT spend, and there's a shift of focus to more of a cost optimization with the more critical projects getting done. So in terms of our performance specific to the fourth quarter, we saw good traction in the tip of the spear professional services for critical cloud projects related to cost optimization. We'll continue to drive the mix shift to services in our public cloud business. From a regional perspective, Asia-Pacific and Japan, I was very pleased with the performance, although it's a small base for us, it did exceptionally well with very high double-digit growth driven by our data business in cloud. We also had a couple of large deals across both public and private clouds. For example, in the public cloud, we signed a fairly good-sized professional services deal for application modernization with a major airline, as an example. In private cloud, we renewed and expanded the contract with a mobile SaaS company to support their data platform in a private cloud environment. So we are starting to see that pivot, Ryan. It does take time when you make that pivot. For us, the most important thing, as Bobby mentioned, is to build that services backlog. In some cases, we will walk away from some of the infrastructure resale deals, specifically if it is in the commercial side, which is in the SMB area, where there's no opportunity to land and expand. So we'll walk away from those low-margin deals where we cannot expand with services. That might impact our bookings, and it might also impact our overall revenue in the short term. But those are the decisions we want to make to shift the DNA of the company to more of a high-margin, services-led and high-value sales motion.

Thank you. Our next question comes from the line of Frank Louthan of Raymond James. Your line is open.

Thank you. I have two quick questions. What can we expect regarding the EBITDA margin for Q1 and moving forward, as well as the level of capital intensity? Additionally, you've made several changes in the management team. Is that process mostly complete, or do you still need to make more hires to strengthen the team? Thanks.

Yeah. So I will start with the guidance question, and then Bobby will jump in here. So let me start with the revenue first. And I will not give you the EBITDA margins, but I'll give you enough color so that you can model it. Because Q1, we already provided you the guidance on that. We continue to be a bit cautious, Frank, with our guidance. We took a conservative approach to our revenue given the uncertain macro environment. We also expect lower usage in public cloud as companies focus on optimizing their workloads in an effort to reduce the overall operational cost. We also had some revenue impact due to the hosted exchange ransomware attack. As we mentioned in my prepared remarks, we believe that there's a potential disruption from our operating model realignment that we are undertaking right now. So these impacts also flow through to our profit. Essentially, we expect based on the guidance provided, we expect the EBIT margin to be in the 6% to 7% range. Our CapEx would be roughly where we landed in Q4 of 2022. So you can calculate what the EBITDA margin is going to be based on that.

Yeah. The only thing I'd add there is, on CapEx, look, as we're focusing on the private cloud business, we will see CapEx increase, particularly if we're very successful. That would be a good problem to have. Amar mentioned the large deal that we signed in our history; there is a large CapEx associated with that. So you will see a spike in our CapEx in Q1.

Yeah. I think you have the second question. Frank, do you have a follow-up on that, or should I move on?

Yeah. So on the CapEx, with that deal, are they paying for any of that upfront? How should we think about that? And how will that get booked? And then what's sort of a long-term run rate for capital intensity of the business?

So I believe the contract is a long-term one, Frank. We make an initial capital expenditure investment, which is similar to what we do in our private cloud deals. We refer to this as success-based capital expenditure. Success-based capital expenditure means we only incur this cost when we have a confirmed order and contract from a customer. Therefore, it has substantial capital expenditure associated with it. Additionally, we will manage the maintenance capital expenditure very closely, and Bobby is on top of it. As we continue to drive innovation, we should also observe capital expenditure efficiency in the success-based capital expenditure.

Okay. Great. Are there any changes in the management team, or do you feel everything is in the right place for now?

Yeah. Listen, I think that's a good point. As noted in my prepared remarks, I feel strongly that we now have the right leadership team in place to drive us forward in our transformation. We hired DK a few months ago. We have Brian Lillie managing private cloud. We have Bobby Molu, who joined us as CFO. We now have seasoned leaders across all the functions. We also made some other leadership changes where necessary. I feel confident that a lot of the heavy lifting is behind us.

Okay, great. Thank you very much.

Thank you. Our next question comes from the line of Tien-Tsin Huang of JPMorgan. Your line is open.

Hey, guys. This is Brendan Biles on for Tien-Tsin. Thanks so much for your time. And welcome, Bobby. So first off, congrats on the quarter. Nicely done. Thanks for all the details on the changes. Just from sort of a personnel and cultural perspective, could you guys opine on the competitive environment in these new areas, these new incremental areas for the business and services both from competing for talent, any incremental adds like in subject matter experts in private cloud and then also incremental competitive dynamics from winning new business, especially in the challenging macro? Thanks so much.

Certainly. If I understood your question correctly, you’re asking about the competitive landscape regarding our new service offerings and the competition for talent. The market is quite active, with significant demand that we need to capture and fulfill. While there is competition in market opportunities, there is enough space for everyone to succeed. We have a distinct advantage as a pure-play, multi-cloud company, engaging in both public and private cloud solutions. This unique position allows us to remain neutral about where workloads should be placed. We serve all market segments, including commercial, mid-market, and enterprise, facing different competitors in each area. The private cloud market is particularly fragmented, and we are among the largest skilled providers, which presents a substantial chance to redefine that market in light of the rising demand. Many workloads in regulated industries prefer to stay within a hosted private cloud, as our customers often do not want to manage data centers. Some workloads require a pathway to public clouds without extensive refactoring, making private cloud an excellent option. Overall, we are well-positioned competitively, yet there is still considerable work to be done in our offerings and operations. Regarding talent, as a technology and automation-focused company, we differ from larger system integrators by not relying heavily on staff augmentation. Therefore, we don’t typically report attrition or hiring figures. Our approach emphasizes automation and intellectual property, which is appealing to our clients. We will need to compete for talent, but we're confident in attracting skilled individuals due to our brand, solid customer base, and the solutions we provide, so it's not a primary concern for us.

Thank you very much.

Thank you. Our next question comes from the line of James Breen of William Blair.

Thank you for taking the question. Can you discuss the margins a bit? I believe Frank asked about this. It's clear that the operating margin is decreasing sequentially in the first quarter. Is there any seasonality to this? How do you perceive this as a potential low point for the year? Additionally, looking at your gross margins across the three businesses, I realize this will change, but there was a notable decline in the third quarter. Following that, in this quarter's segment, do you have any thoughts on potentially accelerating attrition, sacrificing revenue to eliminate losses, especially considering the ongoing decline in gross margin?

Let me start. Let me talk to the sequential decline that you see there. So there are several factors causing that sequential decline in Q1. From a revenue standpoint, there is a seasonality impact, like you mentioned, right? So in Q4 to Q1, we normally do see that. There's also the impact of the December ransomware attack that's now fully baked into the forecast for Q1. And as you've seen, there continues to be a decline in private cloud as well as our legacy OpenStack business, as you mentioned. The reality is, as Amar mentioned early on, there's a deemphasis on private cloud. There's no surprise that that business has been declining, and we're trying to arrest the decline with the new focus and the new BU structure. A lot of these revenue impacts flow down to profit. In addition, there is a seasonality impact from Q4 to Q1 for seasonal payroll taxes and benefits. But look, we're looking for opportunities to reduce costs and offset some of these revenue impacts and profit impacts. We've still got to remain focused on growth. Amar, do you want to add anything?

No, I think you covered it well. On the OpenStack piece, I think that's another question you had, James. This business is declining; I think the rate of decline has actually lowered in that OpenStack business. We've already factored that in our financial plan and financial model. The continued decline is in line, which is why we consider it a legacy business. What we do is, as this happens, we continue to take cost out and basically optimize our costs so that we minimize the impact on the profit. That's all part of the plan.

Thank you. Our next question comes from the line of Bradley Clark of BMO. Your line is open.

Hi, thanks for taking my question. I just want to touch on the demand environment a little bit more. And most specifically, are you seeing any difference in behaviours across geographies in terms of demand or focus on certain types of deals? Any more granularity you can provide on geographical demand trends?

I mentioned earlier that our demand environment across all regions, particularly in public cloud infrastructure, has slowed down. Most of the hyperscalers are still reporting double-digit growth, indicating there remains significant demand. However, in sectors like retail, technology, and financial services, we've begun to notice some decline in demand. On the other hand, sectors such as healthcare are experiencing a slowdown as well, yet there is a substantial opportunity to aid in their transformation, particularly for healthcare providers accelerating their digital transition. We are also observing solid demand in telecom. Overall, it’s a mixed situation, but typically, demand has decreased across the board and in all geographies. In the Asia-Pacific region, we performed well and achieved double-digit growth, although it's based on a smaller base for us. This growth is mainly driven by data services, which continues to be an emphasis for us. Data migration, modernization, and AI remain key focus areas.

Have any other questions?

That's all our questions. So I would now like to turn it back to Robert Watson for closing remarks.

I just want to say thank you, everyone, for joining us. I think we got to all the questions. But if we didn't get to your question or you have any follow-ups, please reach out. You can email us at [email protected] or contact me directly. So thanks, everyone. Have a great evening.

Thank you for your participation in today's conference. This does conclude the program. And you may now disconnect.