Rackspace Reports First Quarter 2014 Results 

Rackspace Hosting, Inc. announced financial results for the quarter ended March 31, 2014.

Net revenue for the first quarter of 2014 was $421 million, up 3.2% from the previous quarter and 16% from the first quarter of 2013. Net revenue for the first quarter of 2014 was positively impacted by currency exchange rates when compared to the previous quarter by $2.4 million and positively impacted when compared to the first quarter of 2013 by$6.6 million.

For the second quarter of 2014, the company is forecasting quarter-over-quarter sequential net revenue growth of 3% to 4.5%, resulting in net revenue in the range of $434 million to $440 million.

“Our first quarter revenue growth came in as expected and we expect growth to improve in the second quarter,” saidGraham Weston, Chairman and CEO. “We are encouraged by qualitative factors, including the thousands of new customers we added in the quarter, including one of the largest we’ve ever landed. We also added significant new workloads for existing customers including Alex and Ani, Appboy, Clarks shoes, Under Armour and SunPower. Each of these customers values our managed cloud approach and chose us over providers of less expensive unmanaged infrastructure.”

Total server count increased to 106,229, up from 103,886 servers at the end of the previous quarter.

Adjusted EBITDA for the quarter was $140 million, a 5.8% increase compared to the fourth quarter of 2013. Adjusted EBITDA margin for the quarter was 33.2% compared to 32.4% in the previous quarter.

The company expects Adjusted EBITDA margin to be in the range of 32% to 34% in the second quarter of 2014.

Net income was $25 million for the quarter, up 22.3% from the previous quarter. Net income margin for the quarter was 6.0% compared to 5.1% for the previous quarter.

Cash flow from operating activities was $142 million for the first quarter of 2014. Capital expenditures were $101 million, including $61 million for purchases of customer gear, $11 million for data center build outs, $9 million for office build outs and $20 million for capitalized software and other projects.

Adjusted Free Cash Flow for the quarter was $40 million. Return on Capital was 11.4% in the first quarter, compared to 9.6% in the prior quarter. Average monthly revenue per server was $1,336, compared to $1,322 in the prior quarter.

At the end of the first quarter of 2014, cash and cash equivalents were $314 million, and interest-bearing debt including capital lease obligations totaled $53 million.

On a worldwide basis, Rackspace employed 5,743 Rackers as of March 31, 2014, up from 5,651 in the previous quarter.

Rackspace Business Highlights

• Rackspace appointed Ryan Neading chief information officer. Neading will be responsible for the Rackspace billing systems, internal IT systems and tools, technology operations, operational metrics and interfacing with external suppliers and resource providers. Neading brings with him over a decade of leadership experience and specialization in the high tech industry. Prior to joining Rackspace, Neading served as the co-leader of eBay’s development site in Austin.
• Rackspace launched its Digital Services Practice to provide digital marketing expertise. Rackspace Digital delivers expertise to help companies more effectively engage with customers via a website, portal/extranet, mobile app or online store. By working hand-in-hand with software platforms and system integrators, Rackspace Digital provides reliable, fully managed service to help ensure the customer’s brand is never compromised.
• Rackspace ranked No. 26 on the Sunday Times "Top 100 Best Companies to Work for in London" list. This is the ninth consecutive year Rackspace has received this award. The Sunday Times recognized Rackspace for its attitude towards Racker training and personal development and reports that Rackspace employees love their jobs, have competitive salaries, and have opportunities for personal career development.
• Rackspace, along with Digital Realty Trust, Inc., broke ground on a new 130,000 square foot data center facility located in Crawley, West Sussex. The 15 acre campus will eventually consist of four data suites with 10 MW of total capacity. The initial outlay, which provides 6 MW across two data suites, is due to be delivered in the first half of 2015.
• Rackspace launched ObjectRocket, its NoSQL MongoDB Database-as-a-Service (DBaaS), in its UK data center. With the open source-based MongoDB solution, Rackspace will broaden its portfolio to offer European customers a NoSQL DBaaS for big data applications. This offering will be built upon hardware optimized specifically for MongoDB and will be easily accessed and integrated into existing systems. ObjectRocket is a sharded and fully managed MongoDB service built with a set of tools and APIs designed to maximize uptime and reduce administration time - all supported by Rackspace Fanatical Support.