Rackspace Reports First Quarter Results
May 10 -- Rackspace (NYSE: RAX), the #1 managed cloud company, has announced financial results for the quarter that ended March 31, 2016.
On a GAAP basis, net revenue for the first quarter of 2016 was $518 million, up 7.9 percent from the first quarter of 2015. These results were adversely affected by shifts in currency exchange rates and the sale of its Jungle Disk business. Adjusted for those factors, on a constant currency basis, net revenue grew 9.9 percent from the first quarter of 2015.
Adjusted EBITDA for the first quarter of 2016 was $179 million, for a margin of 34.5 percent, up 11.7 percent from the first quarter of 2015. Adjusted Free Cash Flow reached a new record of $94 million. Net income for the first quarter of 2016 was $49 million, for a margin of 9.4 percent, up from 5.7 percent in the first quarter of 2015.
For the first quarter of 2016, cash flow from operating activities was $156 million and capital expenditures were $79 million. At the end of the first quarter of 2016, cash and cash equivalents were $534 million, and interest-bearing debt including capital lease obligations totaled $501 million. Return on Capital was 14.4 percent in the first quarter of 2016 compared to 12.3 percent in the first quarter of 2015. The company repurchased $68 million in shares in the first quarter of 2016.
"We've continued to build market power behind our managed cloud strategy," said Taylor Rhodes, president and CEO of Rackspace. "Demand for Rackspace's managed services for AWS, the Microsoft cloud, and our OpenStack private cloud is scaling rapidly. Collectively, we now deliver expertise and support for more than 400 customers on these cloud platforms, including some of the world's largest companies and leading brands such as Digitas. While we are experiencing hyper-growth in these new offers, we also continued to reduce our capital intensity and boost our free cash flow."
For the second quarter of 2016, Rackspace expects revenue to be between $519 million and $524 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 8 percent and 9 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 second 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.
Recent Highlights
Rackspace and Cloud Technology Partners Align Efforts
The new strategic relationship between Rackspace and CTP delivers professional and managed services for enterprises using leading cloud platforms. The combination of Fanatical Support with CTP's best-of-breed services provides enterprise customers with a holistic solution for cloud adoption by addressing key areas such as cloud strategy and economics, security and governance, DevOps and automation, and ongoing cloud operations and managed services.
Rackspace Became an AWS DevOps Competency Partner
The DevOps Competency within the AWS Partner Competency Program recognizes members of the AWS Partner Network who have completed a rigorous third-party audit demonstrating their expertise in DevOps practices, tools, and proven customer success. Rackspace customers can access this expertise and 24x7 operational support through Fanatical Support for AWS architects and engineers, who collectively hold more than 260 AWS professional and associate certifications across the globe.
Rackspace Delivers Managed Private Cloud Everywhere
The new OpenStack Everywhere offering allows companies to run a fully-managed private cloud in any data center around the world without bearing the high cost, risk and operational burden of doing it themselves. This integrated software, hardware and services solution answers CIOs' demand for managed services for private cloud on their own terms -- whether it is in a customer or third-party data center, a Rackspace-supported third-party colocation facility or a Rackspace data center.
Rackspace Expanded OpenStack Leadership with Next Generation Bare Metal Servers
The next generation of OnMetal Cloud Servers powered by OpenStack consists of bare metal, single-tenant servers that are API-provisioned in two minutes, providing near-instant scalability and elasticity. The latest version of OnMetal Cloud Servers delivers innovative connectivity between public cloud and dedicated hardware and enables unprecedented hybrid cloud performance.
Rackspace Launched Private Cloud Powered by Red Hat
Rackspace Private Cloud powered by Red Hat delivers OpenStack private clouds as-a-service using the Red Hat Enterprise Linux OpenStack Platform. The new offering expands the Rackspace OpenStack-as-a-Service product portfolio, further extending the company's strategy to deliver the most reliable and easy-to-use OpenStack private and hybrid clouds in the world.
Revision of Prior Period Financial Statements
During the first quarter of 2016, we discovered an error in the reporting of the expense associated with certain software licenses for the period from July 2013 through December 2015, which resulted in a reduction to net income (net of the related income tax impact), of $1.4 million, $3.2 million, and $3.8 million in the years ended December 31, 2013, 2014, and 2015, respectively. Since the amount of the error in any prior period was not material, we have retrospectively revised our financial statements to reflect this immaterial correction for these prior periods.
About Rackspace
Rackspace (NYSE: RAX), the #1 managed cloud company, helps businesses tap the power of cloud computing without the complexity and cost of managing it on their own. Rackspace engineers deliver specialized expertise, easy-to-use tools, and Fanatical Support for leading technologies developed by AWS, Google, Microsoft, OpenStack, VMware and others. The company serves customers in 120 countries, 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 by Fortune, Forbes, and others as one of the best companies to work for. Learn more at www.rackspace.com.
Source: Rackspace
