Rackspace Reports Fourth Quarter Results 

SAN ANTONIO, Tex., Feb. 17 -- Rackspace (NYSE: RAX), the #1 managed cloud company, today announced financial results for the quarter that ended December 31, 2015.

On a GAAP basis, net revenue for the fourth quarter of 2015 was $523 million, up 10.7 percent from the fourth quarter of 2014. These results were adversely affected by shifts in currency exchange rates. On a constant currency basis, net revenue grew 12.0 percent from the fourth quarter of 2014.

Adjusted EBITDA for the fourth quarter of 2015 was $184 million, for a margin of 35.1 percent, up 11.0 percent from the fourth quarter of 2014. Net income for the fourth quarter of 2015 was $32.1 million, for a margin of 6.1 percent, down from 7.8 percent in the fourth quarter of 2014.

For the fourth quarter of 2015, cash flow from operating activities was $204 million, capital expenditures were $97 million, and Adjusted Free Cash Flow was $85 million. At the end of the fourth quarter of 2015, cash and cash equivalents were $485 million, and interest-bearing debt including capital lease obligations totaled $502 million. Return on Capital was 12.8 percent in the fourth quarter of 2015 compared to 15.7 percent in the fourth quarter of 2014.

In the fourth quarter, pursuant to the buyback authorized by the Rackspace board of directors, the company purchased $117 million worth of shares.

"We made significant progress on our strategic and financial goals in the fourth quarter, including the launch of Fanatical Support for the world's leading clouds," said Taylor Rhodes, CEO and president of Rackspace. "We saw encouraging demand for our Fanatical Support for AWS offer, signing up our first 100 customers through the end of January. We intend to be the number one managed services provider for AWS, and we are well on our way toward that goal. Second, we showed that our business is becoming less capital intensive, resulting in higher free cash flow, which we continued to share with our stockholders through our buyback program."

For the first quarter of 2016, Rackspace expects revenue to be between $517 million and $521 million. Excluding the expected negative impact of currency movements and a small divestiture, we expect our normalized year-over-year growth rate for the quarter to range between 9.2 percent and 10.2 percent. For the full year of 2016, Rackspace expects revenue to be between $2.08 billion and $2.16 billion. Excluding the expected negative impact of currency movements and a small divestiture, we expect our normalized growth rate for the year to range between 6 percent and 10 percent. Adjusted EBITDA margins are expected to range between 33 percent and 35 percent for the first quarter and the full year. Capital expenditures as a percent of revenue are expected to range between 20 percent and 22 percent for the full year.

Highlights

• Rackspace launched support for Amazon Web Services (AWS), Microsoft's private cloud, Azure public cloud, and Microsoft Office 365. These strategic moves open up huge and fast-growing new markets, and strongly differentiate Rackspace as the only company that can provide expertise and service for the world's leading clouds.

• Since the October launch of Rackspace Fanatical Support for AWS, Rackspace has already secured 100 customers, while its technical support team has collectively earned more than 230 AWS technical certifications and more than 1,100 business and technical accreditations.

• Capital efficiency initiatives helped Rackspace reduce capital expenditures to 23 percent of revenue, and the company's Adjusted Free Cash Flow rose to $196 million for 2015.

• Rackspace shared its increased Adjusted Free Cash Flow with stockholders through a major share buyback that is still underway.

• Rackspace hired key leadership talent. The company's new global sales and marketing leader, Alex Pinchev, brings deep experience and proven success in the technology industry, including as a senior executive at Red Hat. Brian Stein, Rackspace's new head of global engineering who joined in January 2016, commands great respect in the technology industry for his innovative work at Red Hat and Puppet Labs.

Non-GAAP Financial Information

Adjusted EBITDA, constant currency revenue growth, Return on Capital, Adjusted Free Cash Flow, and Non-GAAP EPS are non-GAAP financial measures. Rackspace believes these measures provide helpful information with respect to evaluating the company's performance. Other companies may calculate non-GAAP measures differently, limiting their usefulness as a comparative measure. The financial statement tables that accompany this press release include reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures.

About Rackspace

Rackspace (NYSE: RAX), the #1 managed cloud company, helps businesses tap the power of cloud computing without the challenge and expense of managing complex IT infrastructure and application platforms on their own. Rackspace engineers deliver specialized expertise on top of leading technologies developed by AWS, Microsoft, OpenStack, VMware and others, through a results-obsessed service known as Fanatical Support. The company has more than 300,000 customers worldwide, including a majority of the FORTUNE 100. Rackspace was named a leader in the 2015 Gartner Magic Quadrant for Cloud-Enabled Managed Hosting, and has been honored as one of Fortune's Best Companies to Work For in six of the past eight years. Learn more at www.rackspace.com.

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Source: Rackspace