Rackspace Reports Q4 Results

(Ping! Zine Web Hosting Magazine) – Rackspace Hosting announced on Thursday the financial results for the quarter ended December 31, 2010.

Net revenue for the fourth quarter of 2010 was $214.7 million, up 7.5% from the previous quarter and 26.7% from the fourth quarter of 2009. Net revenue for the fourth quarter of 2010 was positively impacted by currency exchange rates when compared to the third quarter of 2010, but was negatively impacted when compared to the fourth quarter of 2009.

Changes in currency exchange rates had a positive impact on net revenue of $1.1 million quarter-over-quarter, and a negative impact on net revenue of $1.7 million on a year-over-year basis.

Managed hosting revenue for the quarter increased to $183.3 million, up from $172.9 million in the prior quarter. Cloud revenue increased to $31.4 million in the quarter, up from $26.8 million in the previous quarter.

Total server count increased to 66,015, up from 63,996 servers at the end of the third quarter of 2010, and total customers increased to 130,291, up from 118,732 at the end of the previous quarter.

“At the beginning of the year we outlined our objectives for 2010, to grow faster than 2009, while maintaining margins and investing in our business. We also said that we expected adjusted free cash flow to be positive at growth rates below 35%. With the year completed, I am very pleased to report that we delivered on all three objectives,” said Bruce Knooihuizen, chief financial officer.

Adjusted EBITDA for the quarter was $72.0 million, a 5.2% increase compared to the third quarter of 2010 and a 28.7% increase compared to the fourth quarter of 2009. The adjusted EBITDA margin for the quarter was 33.5%, down from 34.3% in the previous quarter and up from 33.0% in the fourth quarter of 2009. Adjusted EBITDA and adjusted EBITDA margin were negatively impacted by a non-cash charge of $2.9 million for the quarter relating to operating leases.

Net income was $13.5 million for the quarter, up 14.6% from the previous quarter and 49.9% from the fourth quarter of 2009. Net income margin for the quarter was 6.3% compared to 5.9% for the previous quarter and 5.3% in the fourth quarter of 2009.

“While we are pleased that we achieved our goals for 2010, we have even more ambitious plans for 2011 that are designed to position us to succeed well in the future,” said Lanham Napier, president and chief executive officer.

Cash flow from operating activities was $74.3 million for the fourth quarter of 2010. Capital expenditures were $63.5 million, including $38.1 million for purchases of customer gear, $9.8 million for data center build outs, $5.1 million for office build outs and $10.5 million for capitalized software and other projects.

Adjusted free cash flow for the quarter was $5.6 million.

At the end of the fourth quarter of 2010, cash and cash equivalents were $104.9 million. Debt obligations totaled $131.7 million consisting of $128.9 million related to capital leases and $2.8 million related to current and non-current debt.

On a worldwide basis, Rackspace employed 3,262 Rackers as of December 31, 2010, up from 3,130 Rackers as of September 30, 2010 and 2,774 Rackers as of December 31, 2009.

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