Rackspace Hosting Reports 4Q 2012 Results [Professional Services Close - Up]

(Professional Services Close - Up Via Acquire Media NewsEdge) Rackspace Hosting, Inc. announced financial results for the quarter ended Dec. 31, 2012.

In a release dated Feb. 12, the Company said that net revenue for the fourth quarter of 2012 was $353 million, up 5.0 percent from the previous quarter and 25 percent from the fourth quarter of 2011. Net revenue for the fourth quarter of 2012 was positively impacted by currency exchange rates when compared to the fourth quarter of 2011 by $1.8 million and positively impacted when compared to the previous quarter by $1.4 million.

Total server count increased to 90,524, up from 89,051 servers at the end of the previous quarter, and total customers increased to 205,538, up from 197,635 at the end of the previous quarter.

"We are very pleased with the financial results we have delivered in 2012. Even more importantly, we are excited about the growth opportunities that our new set of open cloud products will provide us in the future," said Karl Pichler, chief financial officer.

Adjusted EBITDA for the quarter was $130 million, a 6.6 percent increase compared to the third quarter of 2012 and a 27 percent increase compared to the fourth quarter of 2011. The adjusted EBITDA margin for the quarter was 36.8 percent compared to 36.2 percent in the previous quarter and 36.1 percent for the fourth quarter of 2011.

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 2012, the non-cash data center lease charge was $2.9 million.

Net income was $30 million for the quarter, up 10.0 percent from the previous quarter and up 19 percent from the fourth quarter of 2011. Net income margin for the quarter was 8.5 percent compared to 8.1 percent for the previous quarter and 8.8 percent in the fourth quarter of 2011.

Cash flow from operating activities was $121 million for the fourth quarter of 2012. Capital expenditures were $88 million, including $60 million for purchases of customer gear, $8 million for data center build outs, $2 million for office build outs and $18 million for capitalized software and other projects.

Adjusted free cash flow for the quarter was $39 million. Return on capital improved to 16.9 percent in the fourth quarter, compared to 16.0 percent in the prior quarter and 17.2 percent in the fourth quarter of 2011. Average monthly revenue per server grew for the fourteenth consecutive quarter to $1,310 from $1,287 in the prior quarter and $1,191 in the fourth quarter of 2011.

At the end of the fourth quarter of 2012, cash and cash equivalents were $292 million, and debt including capital lease obligations totaled $125 million.

On a worldwide basis, Rackspace employed 4,852 Rackers as of Dec. 31, 2012, up from 4,596 in the previous quarter.

"During 2012 we made significant investments across the business to bolster our systems, products, and service delivery capabilities. One of the most important projects we completed in 2012 was the launch of our Open Cloud platform," said Lanham Napier, chief executive officer.

Rackspace Developments and Business Highlights -Rackspace was featured at #34 on Fortune Magazine's "100 Best Companies to Work For" List. This is Rackspace's fifth time in six years making the list. We were chosen for enhanced pay and leave practices, all while preserving and improving the company's unique culture, even during growth.

-Rackspace also enhanced its service offerings for its open cloud platform through Managed and Critical Application Services. Critical Application Services allows companies to focus on their core business while Rackspace keeps their vital applications running smoothly. Rackspace's Managed Cloud Services became available for seven new products launched during the year as part of the open cloud platform. It offers customers access to a team that can help them plan, deploy, and run websites or applications on the Rackspace open cloud.

-Rackspace also improved its SharePoint Services, offering a complete end-to-end SharePoint solution that provides design, development, support and training services.

-Rackspace announced a strategic agreement with Hortonworks, a leader in Apache Hadoop development, implementation, support, operations and training, to empower customers with an enterprise- ready Hadoop platform that is easy to use in the Cloud. Together, Rackspace and Hortonworks will focus on eliminating the complexities that are required for implementing a Big Data solution. The joint effort will pursue an OpenStack-based Hadoop solution for the public and private cloud, which can easily be deployed in minutes.

-Rackspace expanded its OpenStack training offering by launching the industry's first certification program for the open source cloud computing software. Since launching the program for OpenStack in 2011, Rackspace has trained hundreds of students across North America, Europe, Asia, Africa and Australia. Rackspace currently offers a variety of public and private classes in which students learn how to use and operate OpenStack technology both in a public and private cloud environment.

-Rackspace won the UK Customer Experience Award for IT and Telecoms. Rackspace was recognized as an outstanding leader among organizations that place customer service at the forefront of their commercial operation, which Rackspace delivers through a service approach we refer to as Fanatical Support.

Rackspace Hosting is the open cloud company.

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