SAN ANTONIO–(BUSINESS WIRE)–Rackspace® Hosting, Inc. (NYSE: RAX), the open cloud company, announced financial results for the quarter ended December 31, 2013.

Net revenue for the fourth quarter of 2013 was $408 million, up 5.0% from the previous quarter and up 16% from the fourth quarter of 2012. Net revenue for the fourth quarter of 2013 was positively impacted by currency exchange rates when compared to the previous quarter by $4.2 million and positively impacted when compared to the fourth quarter of 2012 by $0.8 million.

Total server count increased to 103,886, up from 101,967 servers at the end of the previous quarter.

Adjusted EBITDA(1) for the quarter was $132 million, a 5.2% increase compared to the third quarter of 2013 and a 2% increase compared to the fourth quarter of 2012. The Adjusted EBITDA margin for the quarter was 32.4% compared to 32.3% in the previous quarter and 36.8% in the fourth 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 fourth quarter of 2013, the non-cash data center lease charge was $2.3 million, compared to $3.8 million in the previous quarter and $2.9 million in the fourth quarter of 2012.

Net income was $21 million for the quarter, up 27.5% from the previous quarter and down 30% from the fourth quarter of 2012. Net income margin for the quarter was 5.1% compared to 4.2% for the previous quarter and 8.5% in the fourth quarter of 2012.

Cash flow from operating activities was $110 million for the fourth quarter of 2013. Capital expenditures were $116 million, including $65 million for purchases of customer gear, $23 million for data center build outs, $8 million for office build outs and $20 million for capitalized software and other projects.

Adjusted Free Cash Flow(1) for the quarter was $15 million. Return on Capital(1) was 9.6%, compared to 8.0% in the prior quarter and 16.9% in the fourth quarter of 2012. Average monthly revenue per server was $1,322, compared to $1,290 in the prior quarter and $1,310 in the fourth quarter of 2012.

At the end of the fourth quarter of 2013, cash and cash equivalents were $260 million, and debt including capital lease obligations totaled $58 million.

On a worldwide basis, Rackspace employed 5,651 Rackers as of December 31, 2013, up from 5,450 in the previous quarter.

“With the leadership team and strategy we have in place, and the powerful position that we’ve established in the marketplace, I’m confident that we can make 2014 one of the best years in Rackspace history. In 2014, we will take the next step to carve out our differentiated position and help the next adoption wave of customers reach a hybrid cloud world. We will continue to invest in our portfolio of services and reinforce our differentiation in the market. We will win as we always have — one delighted customer at a time,” said Graham Weston, Chairman and CEO.

Rackspace Developments and Business Highlights

• Rackspace announced that Taylor Rhodes, the company’s Chief Customer Officer (CCO), has been appointed President, effective immediately. Mr. Rhodes joined Rackspace in 2007 and has served in a variety of leadership positions within the company. Prior to his role as CCO, Mr. Rhodes served as Senior Vice President and Managing Director of Rackspace International. In his various roles, Mr. Rhodes has guided the company towards its mission of bringing the power of Rackspace’s hybrid cloud portfolio, backed by Fanatical Support®, to global markets. Additionally, he has played an integral role in evolving Fanatical Support for the benefit of customers worldwide, which has enabled Rackspace to advance its position as the service leader in the industry.
• Rackspace announced it has been ranked 29 on the 2014 FORTUNE 100 Best Companies to Work For® list. FORTUNE has named Rackspace as one of America’s top workplaces in six of the past seven years. Rackspace was selected among hundreds of companies vying for a place on the list this year. Great Place to Work® chose Rackspace using its unique methodology based on five dimensions: credibility, respect, fairness, pride and camaraderie.
• Rackspace announced it is extending its Fanatical Support® to help customers automate their cloud infrastructure with a new managed support service for DevOps tools. The new DevOps Automation Service will help developers automate the process of deploying and scaling hybrid cloud infrastructure for fast-growing applications, while advancing the adoption of the DevOps methodology among software and IT teams.
• Rackspace announced it has given nearly £250,000 worth of cloud hosting services and support for free to 300 members of the Rackspace Startup Programme since it started in the UK six months ago. This is in addition to many other benefits members have received, such as mentoring, expert technical advice and access to networking events. All of these benefits are helping power new UK businesses to succeed and are provided by Rackspace through over 50 partners, including premier incubators, accelerators, associations and investors. The high profile partners involved in the Rackspace Startup Programme include Techstars, Dreamstake, Wayra, Seedcamp, Oxygen Accelerator and Accelerator Academy. Partners located outside of London – ensuring program access for startups throughout the UK – include ignite100 in Newcastle, dotForge in Sheffield and four organizations in Ireland: Wayra, NDRC, Propeller Venture Accelerator and Ustart.

Conference Call and Webcast

Management will host a conference call to discuss the results starting today at 4:30 p.m. ET.

To access the conference call, please dial 800-946-0712 from the United States and Canada or dial 719-325-2328 from abroad and reference pass code 2801570. A live webcast and a replay of the conference call will be available on Rackspace’s website, located at http://ir.rackspace.com.

About Rackspace

Rackspace (NYSE: RAX) is the global leader in hybrid cloud and founder of OpenStack®, the open-source operating system for the cloud. Hundreds of thousands of customers look to Rackspace to deliver the best-fit infrastructure for their IT needs, leveraging a product portfolio that allows workloads to run where they perform best—whether on the public cloud, private cloud, dedicated servers, or a combination of platforms. The company’s award-winning Fanatical Support helps customers successfully architect, deploy and run their most critical applications. Headquartered in San Antonio, TX, Rackspace operates data centers on four continents. Rackspace is featured on Fortune’s list of 100 Best Companies to Work For. For more information, visit www.rackspace.com.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks, uncertainties and assumptions. If such risks or uncertainties materialize or such assumptions prove incorrect, the results of Rackspace could differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any statements concerning anticipated operational and financial benefits from Rackspace strategies related to additions or changes in leadership, the success of leadership transition, company growth or success of new operational initiatives, any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the integration and effectiveness of new leadership into the Rackspace culture and business operations, instability or downturns in the economy, the effectiveness of managing company growth, infrastructure failures and other risks that are described in Rackspace Hosting’s Form 10-Q for the quarter ended September 30, 2013, filed with the SEC on November 12, 2013. Except as required by law, Rackspace Hosting assumes no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.