Rackspace Hosting Reports First Quarter 2011 Results

SAN ANTONIO--(BUSINESS WIRE)--Rackspace® Hosting, Inc. (NYSE: RAX), the world's leading specialist in the hosting and cloud computing industry, announced financial results for the quarter ended March 31, 2011.
   
Net revenue for the first quarter of 2011 was $230.0 million, up 7.1% from the previous quarter and 28.6% from the first quarter of 2010. Net revenue for the first quarter of 2011 was positively impacted by currency exchange rates when compared to the fourth quarter of 2010 by $0.7 million and the first quarter of 2010 by $1.4 million.


Total server count increased to 70,473, up from 66,015 servers at the end of the fourth quarter of 2010, and total customers increased to 142,441, up from 130,291 at the end of the previous quarter.

“During the quarter we invested across the organization to drive higher growth as well as increase our service level capability and enhance our product portfolio,” said Karl Pichler, chief financial officer.

Adjusted EBITDA for the quarter was $75.9 million, a 5.4% increase compared to the fourth quarter of 2010 and a 27.8% increase compared to the first quarter of 2010. The adjusted EBITDA margin for the quarter was 33.0%, down from 33.5% in the previous quarter and 33.2% in the first quarter of 2010. Adjusted EBITDA and adjusted EBITDA margin were negatively impacted by a non-cash charge of $3.0 million for the quarter relating to data center operating leases.

Net income was $13.8 million for the quarter, up 2.1% from the previous quarter and 40.9% from the first quarter of 2010. Net income margin for the quarter was 6.0% compared to 6.3% for the previous quarter and 5.5% in the first quarter of 2010.

Cash flow from operating activities was $88.3 million for the first quarter of 2011. Capital expenditures were $76.7 million, including $46.3 million for purchases of customer gear, $9.2 million for data center build outs, $3.0 million for office build outs and $18.2 million for capitalized software and other projects.

Adjusted free cash flow (1) for the quarter was $(3.4) million.

At the end of the first quarter of 2011, cash and cash equivalents were $133.9 million. Debt obligations totaled $134.9 million, consisting of $132.7 million related to capital leases and $2.2 million related to current and non-current debt.

On a worldwide basis, Rackspace employed 3,492 Rackers as of March 31, 2011, up from 3,262 Rackers as of December 31, 2010 and 2,905 Rackers as of March 31, 2010.

“Our plan for 2011 is to become more competitive and seize the massive market opportunity ahead of us, while improving the economics of our model by becoming more capital efficient. The progress we made in Q1 shows that we are off to a great start executing on our plan,” said Lanham Napier, president and chief executive officer.

Rackspace Developments and Business Highlights

    European Cloud Traction: Since the launch of the European cloud infrastructure service in January, over 3,000 customers have adopted the offering, including system tracking experts Phantom and content management specialists Juicy Media.
    Launch of Cloud Builders Service: In March, Rackspace announced Rackspace Cloud Builders, a new business that will offer training and certification, deployment services, and ongoing support to enterprises and service providers through its team of OpenStack experts and its network of technology industry leaders. For the first time, Rackspace will extend its commitment to customer service, known as Fanatical Support®, beyond the company’s data centers to stand behind any OpenStack cloud deployment.
    Launch of Load Balancing as a Service: In April, Rackspace announced the availability of Rackspace Cloud Load Balancers. With this offering, businesses of all sizes can now have access to a new cloud-based load balancing solution that gives them the ability to scale mission critical applications or quickly build high availability configurations. The automated component distributes workloads across multiple Rackspace Cloud Servers to minimize response time and avoid server overload. Rackspace customers benefit from being able to intuitively set up a load balancer in minutes while providing application fault-tolerance cost-effectively.

Conference Call and Webcast

Management will host a conference call to discuss the results starting today at 4:30 p.m.

To access the conference call, please dial 888-339-3513 from the United States or dial 719-325-2378 from abroad and reference pass code 7358508. A live webcast and a replay of the conference call will be available on Rackspace’s website, located at ir.rackspace.com.

About Rackspace Hosting

Rackspace Hosting is the world leader in hosting. The San Antonio-based company provides its customers Fanatical Support® in their portfolio of hosted IT services, including Managed Hosting, Cloud Computing and Email and Apps. For more information, visit www.rackspace.com.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks, uncertainties and assumptions. If such risks or uncertainties materialize or such assumptions prove incorrect, the results of Rackspace Hosting could differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any statements concerning expected operational and financial results, long term investment strategies, growth plans, expected results from the integration of technologies and acquired businesses, the performance or market share relating to products and services; any statements of expectation or belief; and any statements or assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include infrastructure failures, the continuation or further deterioration of the current difficult economic conditions or further fluctuations, disruptions, instability or downturns in the economy, the effectiveness of managing company growth, technological and competitive factors, regulatory factors, and other risks that are described in Rackspace Hosting’s Form 10-K for the year ended December 31, 2010, filed with the SEC on February 22, 2011 and in Rackspace Hosting’s Form 10-Q for the quarter ended March 31, 2011, expected to be filed this week. Except as required by law, Rackspace Hosting assumes no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
     

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