Delaware | 74-3016523 | |
(State or other jurisdiction of | (IRS Employer | |
incorporation) | Identification No.) |
Rackspace Hosting, Inc. | |||
Date: | May 7, 2012 | By: | /s/ Karl Pichler |
Karl Pichler | |||
Chief Financial Officer and Treasurer |
Exhibit No. | Description | |
EX-99.1 | Press Release of Rackspace Hosting, Inc., dated May 7, 2012, reporting financial results for the first quarter of 2012. |
• | Net revenue of $301 million grew 31% year-over-year |
• | Adjusted EBITDA(1) of $101 million grew 33% year-over-year |
• | Achieved adjusted EBITDA margin of 33.4%, up from 33.0% year-over-year |
• | Net income of $23 million grew 68% year-over-year |
• | OpenStack announces new products and newer versions of operating system. |
• | IBM and Red Hat join OpenStack and announce their support. |
• | Rackspace places 1st in the Magic Quadrant, surpassing our competitors. |
• | Rackspace acquires SharePoint911 to strengthen business. |
• | Sony adopts OpenStack. |
Three Months Ended | ||||||||||||
(In thousands, except per share data) | March 31, 2011 | December 31, 2011 | March 31, 2012 | |||||||||
Net revenue | $ | 230,002 | $ | 283,261 | $ | 301,355 | ||||||
Costs and expenses: | ||||||||||||
Cost of revenue | 69,742 | 82,851 | 87,240 | |||||||||
Sales and marketing | 29,738 | 33,452 | 38,502 | |||||||||
General and administrative | 62,441 | 72,349 | 83,378 | |||||||||
Depreciation and amortization | 44,098 | 54,844 | 55,151 | |||||||||
Total costs and expenses | 206,019 | 243,496 | 264,271 | |||||||||
Income from operations | 23,983 | 39,765 | 37,084 | |||||||||
Other income (expense): | ||||||||||||
Interest expense | (1,491 | ) | (1,304 | ) | (1,272 | ) | ||||||
Interest and other income (expense) | (78 | ) | (226 | ) | 137 | |||||||
Total other income (expense) | (1,569 | ) | (1,530 | ) | (1,135 | ) | ||||||
Income before income taxes | 22,414 | 38,235 | 35,949 | |||||||||
Income taxes | 8,593 | 13,188 | 12,769 | |||||||||
Net income | $ | 13,821 | $ | 25,047 | $ | 23,180 | ||||||
Net income per share | ||||||||||||
Basic | $ | 0.11 | $ | 0.19 | $ | 0.17 | ||||||
Diluted | $ | 0.10 | $ | 0.18 | $ | 0.17 | ||||||
Weighted average number of shares outstanding | ||||||||||||
Basic | 127,845 | 131,423 | 133,062 | |||||||||
Diluted | 136,224 | 138,912 | 139,964 |
(In thousands) | December 31, 2011 | March 31, 2012 | |||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 159,856 | $ | 186,531 | |||
Accounts receivable, net of allowance for doubtful accounts and customer credits of $3,420 as of December 31, 2011 and $3,633 as of March 31, 2012 | 68,709 | 77,095 | |||||
Deferred income taxes | 9,841 | 6,478 | |||||
Prepaid expenses | 22,006 | 19,563 | |||||
Other current assets | 2,953 | 3,793 | |||||
Total current assets | 263,365 | 293,460 | |||||
Property and equipment, net | 627,490 | 659,867 | |||||
Goodwill | 59,993 | 62,177 | |||||
Intangible assets, net | 26,034 | 25,470 | |||||
Other non-current assets | 49,600 | 48,419 | |||||
Total assets | $ | 1,026,482 | $ | 1,089,393 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 156,004 | $ | 153,668 | |||
Current portion of deferred revenue | 14,835 | 16,795 | |||||
Current portion of obligations under capital leases | 66,031 | 67,469 | |||||
Current portion of debt | 879 | 440 | |||||
Total current liabilities | 237,749 | 238,372 | |||||
Non-current deferred revenue | 3,446 | 3,400 | |||||
Non-current obligations under capital leases | 72,216 | 76,069 | |||||
Non-current deferred income taxes | 68,781 | 52,896 | |||||
Non-current deferred rent | 23,343 | 25,433 | |||||
Other non-current liabilities | 21,524 | 24,787 | |||||
Total liabilities | 427,059 | 420,957 | |||||
COMMITMENTS AND CONTINGENCIES | |||||||
Stockholders' equity: | |||||||
Common stock | 132 | 135 | |||||
Additional paid-in capital | 383,031 | 424,369 | |||||
Accumulated other comprehensive loss | (14,732 | ) | (10,240 | ) | |||
Retained earnings | 230,992 | 254,172 | |||||
Total stockholders’ equity | 599,423 | 668,436 | |||||
Total liabilities and stockholders’ equity | $ | 1,026,482 | $ | 1,089,393 |
Three Months Ended | |||||||||||
(in thousands) | March 31, 2011 | December 31, 2011 | March 31, 2012 | ||||||||
Cash Flows From Operating Activities | |||||||||||
Net income | $ | 13,821 | $ | 25,047 | $ | 23,180 | |||||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
Depreciation and amortization | 44,098 | 54,844 | 55,151 | ||||||||
Loss (gain) on disposal of equipment, net | 182 | (110 | ) | 279 | |||||||
Provision for bad debts and customer credits | 1,603 | 1,451 | 1,455 | ||||||||
Deferred income taxes | 3,680 | 4,802 | 4,275 | ||||||||
Deferred rent | 3,031 | 1,200 | 1,930 | ||||||||
Share-based compensation expense | 7,810 | 7,585 | 8,509 | ||||||||
Excess tax benefits from share-based compensation arrangements | (898 | ) | (8,711 | ) | (20,235 | ) | |||||
Changes in certain assets and liabilities | |||||||||||
Accounts receivable | (5,716 | ) | (9,442 | ) | (9,008 | ) | |||||
Prepaid expenses and other current assets | 1,210 | 7,494 | 1,708 | ||||||||
Accounts payable and accrued expenses | 16,690 | 19,261 | 1,989 | ||||||||
Deferred revenue | 153 | 614 | 1,496 | ||||||||
All other operating activities | 2,589 | 888 | (820 | ) | |||||||
Net cash provided by operating activities | 88,253 | 104,923 | 69,909 | ||||||||
Cash Flows From Investing Activities | |||||||||||
Purchases of property and equipment | (57,651 | ) | (67,020 | ) | (59,752 | ) | |||||
Acquisitions, net of cash acquired | (952 | ) | — | (712 | ) | ||||||
All other investing activities | — | 63 | 7 | ||||||||
Net cash used in investing activities | (58,603 | ) | (66,957 | ) | (60,457 | ) | |||||
Cash Flows From Financing Activities | |||||||||||
Principal payments of capital leases | (15,222 | ) | (16,924 | ) | (17,273 | ) | |||||
Principal payments of notes payable | (608 | ) | (437 | ) | (439 | ) | |||||
Payments of earn-out provisions for acquisitions | — | (2,399 | ) | (1,826 | ) | ||||||
Receipt of Texas Enterprise Fund Grant | — | — | 3,500 | ||||||||
Proceeds from employee stock plans | 13,751 | 8,505 | 12,381 | ||||||||
Excess tax benefits from share-based compensation arrangements | 898 | 8,711 | 20,235 | ||||||||
Net cash provided by (used in) financing activities | (1,181 | ) | (2,544 | ) | 16,578 | ||||||
Effect of exchange rate changes on cash and cash equivalents | 458 | (246 | ) | 645 | |||||||
Increase in cash and cash equivalents | 28,927 | 35,176 | 26,675 | ||||||||
Cash and cash equivalents, beginning of period | 104,941 | 124,680 | 159,856 | ||||||||
Cash and cash equivalents, end of period | $ | 133,868 | $ | 159,856 | $ | 186,531 | |||||
Supplemental cash flow information: | |||||||||||
Acquisition of property and equipment by capital leases | $ | 19,009 | $ | 12,335 | $ | 22,564 | |||||
Cash payments for interest, net of amount capitalized | $ | 1,463 | $ | 1,221 | $ | 1,258 | |||||
Cash payments for income taxes | $ | 4,570 | $ | 3,671 | $ | 1,955 |
Three Months Ended | |||||||||||||||||||
(Dollar amounts in thousands, except average monthly revenue per server) | March 31, 2011 | June 30, 2011 | September 30, 2011 | December 31, 2011 | March 31, 2012 | ||||||||||||||
Growth | |||||||||||||||||||
Dedicated Cloud, net revenue | $ | 192,895 | $ | 204,275 | $ | 213,899 | $ | 224,808 | $ | 236,604 | |||||||||
Public Cloud, net revenue | $ | 37,107 | $ | 42,954 | $ | 50,673 | $ | 58,453 | $ | 64,751 | |||||||||
Net revenue | $ | 230,002 | $ | 247,229 | $ | 264,572 | $ | 283,261 | $ | 301,355 | |||||||||
Revenue growth (year over year) | 28.6 | % | 32.0 | % | 32.5 | % | 31.9 | % | 31.0 | % | |||||||||
Net upgrades (monthly average) | 1.8 | % | 1.8 | % | 1.8 | % | 2.0 | % | 1.5 | % | |||||||||
Churn (monthly average) | -0.9 | % | -0.9 | % | -0.9 | % | -0.8 | % | -0.8 | % | |||||||||
Growth in installed base (monthly average) (2) | 0.9 | % | 0.9 | % | 0.9 | % | 1.2 | % | 0.7 | % | |||||||||
Number of customers at period end (3) | 142,441 | 152,578 | 161,422 | 172,510 | 180,866 | ||||||||||||||
Number of employees (Rackers) at period end | 3,492 | 3,712 | 3,799 | 4,040 | 4,335 | ||||||||||||||
Number of servers deployed at period end | 70,473 | 74,028 | 78,717 | 79,805 | 82,438 | ||||||||||||||
Average monthly revenue per server | $ | 1,123 | $ | 1,141 | $ | 1,155 | $ | 1,191 | $ | 1,238 | |||||||||
Profitability | |||||||||||||||||||
Income from operations | $ | 23,983 | $ | 28,653 | $ | 31,070 | $ | 39,765 | $ | 37,084 | |||||||||
Depreciation and amortization | $ | 44,098 | $ | 46,952 | $ | 49,518 | $ | 54,844 | $ | 55,151 | |||||||||
Share-based compensation expense | |||||||||||||||||||
Cost of revenue | $ | 1,412 | $ | 756 | $ | 1,005 | $ | 1,047 | $ | 1,236 | |||||||||
Sales and marketing (4) | $ | 1 | $ | 609 | $ | 864 | $ | 839 | $ | 1,114 | |||||||||
General and administrative | $ | 6,397 | $ | 4,618 | $ | 5,526 | $ | 5,699 | $ | 6,159 | |||||||||
Total share-based compensation expense | $ | 7,810 | $ | 5,983 | $ | 7,395 | $ | 7,585 | $ | 8,509 | |||||||||
Adjusted EBITDA (1) | $ | 75,891 | $ | 81,588 | $ | 87,983 | $ | 102,194 | $ | 100,744 | |||||||||
Adjusted EBITDA margin | 33.0 | % | 33.0 | % | 33.3 | % | 36.1 | % | 33.4 | % | |||||||||
Operating income margin | 10.4 | % | 11.6 | % | 11.7 | % | 14.0 | % | 12.3 | % | |||||||||
Income from operations | $ | 23,983 | $ | 28,653 | $ | 31,070 | $ | 39,765 | $ | 37,084 | |||||||||
Effective tax rate | 38.3 | % | 33.8 | % | 31.7 | % | 34.5 | % | 35.5 | % | |||||||||
Net operating profit after tax (NOPAT) (1) | $ | 14,798 | $ | 18,968 | $ | 21,221 | $ | 26,046 | $ | 23,919 | |||||||||
NOPAT margin | 6.4 | % | 7.7 | % | 8.0 | % | 9.2 | % | 7.9 | % | |||||||||
Capital efficiency and returns | |||||||||||||||||||
Interest bearing debt | $ | 134,905 | $ | 138,841 | $ | 144,152 | $ | 139,126 | $ | 143,978 | |||||||||
Stockholders' equity | $ | 478,307 | $ | 511,843 | $ | 551,049 | $ | 599,423 | $ | 668,436 | |||||||||
Less: Excess cash | $ | (106,268 | ) | $ | (102,358 | ) | $ | (92,931 | ) | $ | (125,865 | ) | $ | (150,368 | ) | ||||
Capital base | $ | 506,944 | $ | 548,326 | $ | 602,270 | $ | 612,684 | $ | 662,046 | |||||||||
Average capital base | $ | 499,180 | $ | 527,635 | $ | 575,298 | $ | 607,477 | $ | 637,365 | |||||||||
Capital turnover (annualized) | 1.84 | 1.87 | 1.84 | 1.87 | 1.89 | ||||||||||||||
Return on capital (annualized) (1) | 11.9 | % | 14.4 | % | 14.8 | % | 17.2 | % | 15.0 | % |
Three Months Ended | |||||||||||||||||||
(Dollar amounts in thousands, except average monthly revenue per server) | March 31, 2011 | June 30, 2011 | September 30, 2011 | December 31, 2011 | March 31, 2012 | ||||||||||||||
Capital expenditures | |||||||||||||||||||
Purchases of property and equipment | $ | 57,651 | $ | 74,754 | $ | 70,379 | $ | 67,020 | $ | 59,752 | |||||||||
Vendor-financed equipment purchases | $ | 19,009 | $ | 20,567 | $ | 23,179 | $ | 12,335 | $ | 22,564 | |||||||||
Total capital expenditures | $ | 76,660 | $ | 95,321 | $ | 93,558 | $ | 79,355 | $ | 82,316 | |||||||||
Customer gear | $ | 46,300 | $ | 48,777 | $ | 53,643 | $ | 47,376 | $ | 52,999 | |||||||||
Data center build outs | $ | 9,173 | $ | 17,491 | $ | 16,715 | $ | 6,568 | $ | 9,473 | |||||||||
Office build outs | $ | 2,957 | $ | 14,074 | $ | 8,806 | $ | 9,915 | $ | 4,666 | |||||||||
Capitalized software and other projects | $ | 18,230 | $ | 14,979 | $ | 14,394 | $ | 15,496 | $ | 15,178 | |||||||||
Total capital expenditures | $ | 76,660 | $ | 95,321 | $ | 93,558 | $ | 79,355 | $ | 82,316 | |||||||||
Infrastructure capacity and utilization | |||||||||||||||||||
Megawatts under contract at period end | 35.7 | 38.0 | 41.9 | 48.1 | 47.8 | ||||||||||||||
Megawatts available for use at period end | 24.7 | 27.0 | 29.7 | 30.7 | 32.2 | ||||||||||||||
Megawatts utilized at period end | 18.0 | 19.0 | 20.2 | 20.9 | 21.4 | ||||||||||||||
Annualized net revenue per average Megawatt of power utilized | $ | 53,026 | $ | 53,455 | $ | 53,994 | $ | 55,136 | $ | 56,994 |
Three Months Ended | |||||||||||||||||||
(In thousands) | March 31, 2011 | June 30, 2011 | September 30, 2011 | December 31, 2011 | March 31, 2012 | ||||||||||||||
Net revenue | $ | 230,002 | $ | 247,229 | $ | 264,572 | $ | 283,261 | $ | 301,355 | |||||||||
Costs and expenses: | |||||||||||||||||||
Cost of revenue | 69,742 | 74,057 | 82,445 | 82,851 | 87,240 | ||||||||||||||
Sales and marketing | 29,738 | 31,477 | 31,838 | 33,452 | 38,502 | ||||||||||||||
General and administrative | 62,441 | 66,090 | 69,701 | 72,349 | 83,378 | ||||||||||||||
Depreciation and amortization | 44,098 | 46,952 | 49,518 | 54,844 | 55,151 | ||||||||||||||
Total costs and expenses | 206,019 | 218,576 | 233,502 | 243,496 | 264,271 | ||||||||||||||
Income from operations | 23,983 | 28,653 | 31,070 | 39,765 | 37,084 | ||||||||||||||
Other income (expense): | |||||||||||||||||||
Interest expense | (1,491 | ) | (1,522 | ) | (1,531 | ) | (1,304 | ) | (1,272 | ) | |||||||||
Interest and other income (expense) | (78 | ) | (614 | ) | (276 | ) | (226 | ) | 137 | ||||||||||
Total other income (expense) | (1,569 | ) | (2,136 | ) | (1,807 | ) | (1,530 | ) | (1,135 | ) | |||||||||
Income before income taxes | 22,414 | 26,517 | 29,263 | 38,235 | 35,949 | ||||||||||||||
Income taxes | 8,593 | 8,956 | 9,281 | 13,188 | 12,769 | ||||||||||||||
Net income | $ | 13,821 | $ | 17,561 | $ | 19,982 | $ | 25,047 | $ | 23,180 | |||||||||
Three Months Ended | |||||||||||||||||||
(Percent of net revenue) | March 31, 2011 | June 30, 2011 | September 30, 2011 | December 31, 2011 | March 31, 2012 | ||||||||||||||
Net revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
Costs and expenses: | |||||||||||||||||||
Cost of revenue | 30.3 | % | 30.0 | % | 31.2 | % | 29.2 | % | 28.9 | % | |||||||||
Sales and marketing | 12.9 | % | 12.7 | % | 12.0 | % | 11.8 | % | 12.8 | % | |||||||||
General and administrative | 27.1 | % | 26.7 | % | 26.3 | % | 25.5 | % | 27.7 | % | |||||||||
Depreciation and amortization | 19.2 | % | 19.0 | % | 18.7 | % | 19.4 | % | 18.3 | % | |||||||||
Total costs and expenses | 89.6 | % | 88.4 | % | 88.3 | % | 86.0 | % | 87.7 | % | |||||||||
Income from operations | 10.4 | % | 11.6 | % | 11.7 | % | 14.0 | % | 12.3 | % | |||||||||
Other income (expense): | |||||||||||||||||||
Interest expense | (0.6 | )% | (0.6 | )% | (0.6 | )% | (0.5 | )% | (0.4 | )% | |||||||||
Interest and other income (expense) | 0.0 | % | (0.2 | )% | (0.1 | )% | (0.1 | )% | 0.0 | % | |||||||||
Total other income (expense) | (0.7 | )% | (0.9 | )% | (0.7 | )% | (0.5 | )% | (0.4 | )% | |||||||||
Income before income taxes | 9.7 | % | 10.7 | % | 11.1 | % | 13.5 | % | 11.9 | % | |||||||||
Income taxes | 3.7 | % | 3.6 | % | 3.5 | % | 4.7 | % | 4.2 | % | |||||||||
Net income | 6.0 | % | 7.1 | % | 7.6 | % | 8.8 | % | 7.7 | % | |||||||||
Due to rounding, totals may not equal the sum of the line items in the table above. |
Three Months Ended | |||||||||||||||||||
(Dollars in thousands) | March 31, 2011 | June 30, 2011 | September 30, 2011 | December 31, 2011 | March 31, 2012 | ||||||||||||||
Net revenue | $ | 230,002 | $ | 247,229 | $ | 264,572 | $ | 283,261 | $ | 301,355 | |||||||||
Income from operations | $ | 23,983 | $ | 28,653 | $ | 31,070 | $ | 39,765 | $ | 37,084 | |||||||||
Net income | $ | 13,821 | $ | 17,561 | $ | 19,982 | $ | 25,047 | $ | 23,180 | |||||||||
Plus: Income taxes | 8,593 | 8,956 | 9,281 | 13,188 | 12,769 | ||||||||||||||
Plus: Total other (income) expense | 1,569 | 2,136 | 1,807 | 1,530 | 1,135 | ||||||||||||||
Plus: Depreciation and amortization | 44,098 | 46,952 | 49,518 | 54,844 | 55,151 | ||||||||||||||
Plus: Share-based compensation expense | 7,810 | 5,983 | 7,395 | 7,585 | 8,509 | ||||||||||||||
Adjusted EBITDA | $ | 75,891 | $ | 81,588 | $ | 87,983 | $ | 102,194 | $ | 100,744 | |||||||||
Operating income margin | 10.4 | % | 11.6 | % | 11.7 | % | 14.0 | % | 12.3 | % | |||||||||
Adjusted EBITDA margin | 33.0 | % | 33.0 | % | 33.3 | % | 36.1 | % | 33.4 | % |
Three Months Ended | |||||||||||||||||||
(Dollars in thousands) | March 31, 2011 | June 30, 2011 | September 30, 2011 | December 31, 2011 | March 31, 2012 | ||||||||||||||
Income from operations | $ | 23,983 | $ | 28,653 | $ | 31,070 | $ | 39,765 | $ | 37,084 | |||||||||
Effective tax rate | 38.3 | % | 33.8 | % | 31.7 | % | 34.5 | % | 35.5 | % | |||||||||
Net operating profit after tax (NOPAT) | $ | 14,798 | $ | 18,968 | $ | 21,221 | $ | 26,046 | $ | 23,919 | |||||||||
Net income | $ | 13,821 | $ | 17,561 | $ | 19,982 | $ | 25,047 | $ | 23,180 | |||||||||
Total assets at period end | $ | 831,414 | $ | 887,576 | $ | 970,677 | $ | 1,026,482 | $ | 1,089,393 | |||||||||
Less: Excess cash | (106,268 | ) | (102,358 | ) | (92,931 | ) | (125,865 | ) | (150,368 | ) | |||||||||
Less: Accounts payable and accrued expenses | (132,308 | ) | (145,609 | ) | (148,464 | ) | (156,004 | ) | (153,668 | ) | |||||||||
Less: Deferred revenue (current and non-current) | (19,149 | ) | (18,687 | ) | (17,772 | ) | (18,281 | ) | (20,195 | ) | |||||||||
Less: Other non-current liabilities, deferred income taxes, and deferred rent | (66,745 | ) | (72,596 | ) | (109,240 | ) | (113,648 | ) | (103,116 | ) | |||||||||
Capital base | $ | 506,944 | $ | 548,326 | $ | 602,270 | $ | 612,684 | $ | 662,046 | |||||||||
Average total assets | $ | 796,496 | $ | 859,495 | $ | 929,127 | $ | 998,580 | $ | 1,057,938 | |||||||||
Average capital base | $ | 499,180 | $ | 527,635 | $ | 575,298 | $ | 607,477 | $ | 637,365 | |||||||||
Return on assets (annualized) | 6.9 | % | 8.2 | % | 8.6 | % | 10.0 | % | 8.8 | % | |||||||||
Return on capital (annualized) | 11.9 | % | 14.4 | % | 14.8 | % | 17.2 | % | 15.0 | % |
Three Months Ended | |||
(In thousands) | March 31, 2012 | ||
Adjusted EBITDA | $ | 100,744 | |
Non-cash deferred rent | 1,930 | ||
Total capital expenditures | (82,316 | ) | |
Cash payments for interest, net | (1,226 | ) | |
Cash payments for income taxes, net | (1,675 | ) | |
Adjusted free cash flow | $ | 17,457 |
As of | ||||
(Dollars in thousands) | March 31, 2012 | |||
Obligations under capital leases | $ | 143,538 | ||
Debt | 440 | |||
Total debt | $ | 143,978 | ||
Less: Cash and cash equivalents | (186,531 | ) | ||
Net debt | $ | (42,553 | ) | |
Adjusted EBITDA (trailing twelve months) | $ | 372,509 | ||
Net leverage | (0.11) | x |
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