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Rackspace Hosting Reports Second Quarter 2013 Results

Rackspace ® Hosting, Inc. (NYSE: RAX), the open cloud company, announced financial results for the quarter ended June 30, 2013.

Net revenue for the second quarter of 2013 was $376 million, up 3.8% from the previous quarter and up 18% from the second quarter of 2012. Net revenue for the second quarter of 2013 was negatively impacted by currency exchange rates when compared to the previous quarter by $1.0 million and negatively impacted when compared to the second quarter of 2012 by $2.7 million.

Total server count increased to 98,884, up from 94,122 servers at the end of the previous quarter.

Adjusted EBITDA for the quarter was $123 million, a 1.5% decrease compared to the first quarter of 2013 and a 10% increase compared to the second quarter of 2012. The Adjusted EBITDA margin for the quarter was 32.8% compared to 34.5% in the previous quarter and 35.1% in the second quarter of 2012.

Consistent with prior periods, Adjusted EBITDA and Adjusted EBITDA margin were negatively impacted by a non-cash charge relating to data center operating leases. During the second quarter of 2013, the non-cash data center lease charge was $1.5 million.

Net income was $22 million for the quarter, down 18.0% from the previous quarter and down 11% from the second quarter of 2012. Net income margin for the quarter was 6.0% compared to 7.5% for the previous quarter and 7.9% in the second quarter of 2012.

Cash flow from operating activities was $106 million for the second quarter of 2013. Capital expenditures were $107 million, including $73 million for purchases of customer gear, $10 million for data center build outs, $2 million for office build outs and $22 million for capitalized software and other projects.

Adjusted Free Cash Flow (1) for the quarter was $11 million. Return on Capital (1) was 11.9% in the second quarter, compared to 15.1% in the prior quarter and 15.5% in the second quarter of 2012. Average monthly revenue per server was $1,298, compared to $1,308 in the prior quarter and $1,270 in the second quarter of 2012.

At the end of the second quarter of 2013, cash and cash equivalents were $263 million, and debt including capital lease obligations totaled $88 million.

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