Rackspace Reports Second Quarter 2016 Results 

SAN ANTONIO, Tex., Aug. 9 -- Rackspace (NYSE: RAX), the #1 managed cloud company, today announced financial results for the quarter that ended June 30, 2016.

On a GAAP basis, net revenue for the second quarter of 2016 was $524 million, up 7.0 percent from the second 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 normalized basis, net revenue grew 8.9 percent from the second quarter of 2015.

Net income for the second quarter of 2016 was $36 million, for a margin of 6.8 percent, up from 5.8 percent in the second quarter of 2015. Adjusted EBITDA for the second quarter of 2016 was $187 million, for a margin of 35.8 percent, up from 32.8 percent in the second quarter of 2015.

For the second quarter of 2016, cash flow from operating activities was $165 million and capital expenditures were $82 million. Free Cash Flow was $98 million. At the end of the second quarter of 2016, cash and cash equivalents were $544 million, and interest-bearing debt including capital lease obligations totaled $501 million. Return on Assets was 7.1 percent in the second quarter of 2016 compared to 6.4 percent in the second quarter of 2015. Return on Capital was 16.4 percent in the second quarter of 2016 compared to 11.8 percent in the second quarter of 2015. The company repurchased $66 million in shares in the second quarter of 2016.

"Demand is scaling rapidly for the expertise and managed services that we provide to businesses that use AWS, the Microsoft Cloud, and our OpenStack private cloud," said Taylor Rhodes, president and CEO of Rackspace. "We now serve almost 600 customers on these platforms, including some of the world's largest companies. During the second quarter, we demonstrated continued revenue growth, along with higher profitability, higher capital efficiency, strong operating cash flow and record free cash flow."

As Rackspace continues to focus on delivering expertise and Fanatical Support for the world's leading clouds, while serving more enterprise customers, it has been divesting services that are not core to this strategy. Rackspace signed an agreement in July to sell its Cloud Sites business to Liquid Web. Liquid Web is a global provider of professional cloud and application hosting services with over $90 million in annual revenue. The transaction is expected to close in the third quarter of 2016.

For the third quarter of 2016, Rackspace expects revenue to be between $510 million and $515 million. Excluding the expected negative impact of currency movements and asset divestitures, Rackspace expects its normalized year-over-year growth rate for the quarter to range between 5 percent and 6 percent. For the full year of 2016, Rackspace expects revenue to be between $2.06 billion and $2.08 billion. These revenue estimates factor in approximately $70 million of negative impact from currency movements and asset divestitures. Excluding the expected negative impact, Rackspace expects its normalized growth rate for the year to range between 6.5 percent and 7.5 percent. Adjusted EBITDA margins are expected to range between 33 percent and 35 percent for the third quarter and the full year. Capital expenditures as a percent of revenue are expected to range between 16 percent and 18 percent for the full year.

Recent Highlights

• Rackspace achieved AWS Marketing and Commerce Competency, and can help AWS customers architect, deploy and manage e-commerce solutions more effectively.
• Rackspace announced Fanatical Support® for Amazon Web Services (AWS) is now available for customers with Payment Card Industry (PCI) and Health Insurance Portability and Accountability Act (HIPAA) workloads on AWS.
• Fortune ranked Rackspace in its top 100 best places to work for millennials, who represent a major part of the talent pool in the cloud computing industry.
• Rackspace completed the $500 million share buyback commitment that was announced last August.
• Rackspace signed an agreement to sell its Cloud Sites business to Liquid Web, which is expected to close in the third quarter of 2016.

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 more than half 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