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| Rackspace Hosting Reports Second Quarter 2008 Results |
SAN ANTONIO--(BUSINESS WIRE)--Sept. 10, 2008--Rackspace(R) Hosting, Inc. (NYSE: RAX), the world's leading hosting services provider, today reported quarterly results for the quarter ended June 30, 2008. Summary results were provided in the company's S-1 filed on August 5, 2008 for its subsequent Initial Public Offering. Rackspace continued to deliver on its growth strategy in the second quarter of 2008. Net revenues for the second quarter ended June 30, 2008 were $130.8 million, up 9.4% from the first quarter of 2008 and up 55.7% from the quarter ended June 30, 2007. Net revenues for the first six months of 2008 were $250.4 million, an increase of 57.3% relative to net revenues for the first six months of 2007. The installed base continued to provide a significant portion of growth during the second quarter 2008, growing at an average rate of 1.0% per month. Relative to the quarter ended March 31, 2008, customer count increased by 6.1% to more than 33,600 customers (including more than 13,800 mail customers) and server count increased by 6.7% to more than 42,400. "We delivered strong growth despite a challenging macroeconomic environment, which demonstrates the strength of Rackspace's Fanatical Support(R) and its ability to win and keep customers in a tough climate," said Lanham Napier, president and chief executive officer, Rackspace Hosting. "We are seeing significant global growth, and we will continue to make disciplined, long-term investments in order to capitalize on the demand for hosting." Adjusted EBITDA(1) was $33.8 million for the second quarter, a 5.9% increase compared to the previous quarter and a 56.5% increase compared to the same quarter last year. Net income was $4.2 million for the second quarter, a 23.2% decline compared to the previous quarter and a 13.1% decline compared to the same quarter last year. The reduction in net income was due mainly to current infrastructure projects and the associated increases in depreciation and amortization and interest expenses. Cash flow from operating activities was $32.8 million for the second quarter of 2008. Capital expenditures were $66.3 million, including $27.3 million for purchases of customer gear, $18.5 million for data center buildouts, $12.8 million for office buildouts, and $7.7 million for capitalized software and other expenditures. Of the $66.3 million in capital expenditures, $26.0 million were vendor financed equipment purchases. The company is reducing its anticipated capital expenditures estimate for 2008 to $310 million from $335 million. Of this reduction, $10 million is for office space that has been deferred to 2009. The remaining $15 million is in Other Capital that was originally budgeted for unspecified price increases that the company no longer anticipates to occur. This new estimate also includes the capital to build out the Hong Kong datacenter. Of the $20 million investment referred to in the company's September 8, 2008 press release, $10 million is scheduled to be spent this year, most of which is capital. At the end of the second quarter, cash and cash equivalents were $35.1 million. Debt obligations totaled $183.6 million. Of those, $109.9 million were related to current and non-current debt, and $73.7 million were related to obligations under capital and finance method leases. On a worldwide basis, Rackspace employed 2,422 Rackers as of June 30, 2008, up from 2,254 Rackers as of March 31, 2008, and 1,663 Rackers as of June 30, 2007. Significant Developments During the Second Quarter of 2008
Significant Recent Developments (after June 30, 2008) "We have marked a major milestone in Rackspace's history," said Bruce Knooihuizen, senior vice president and chief financial officer, Rackspace Hosting. "Completing the initial public offering provides us with the financial flexibility to pursue our growth plans. The proceeds of this offering, together with the committed debt capital available to us, allow for the necessary infrastructure investments to support our growth and the development of new products, geographies and markets. While the U.S. remains the most important market for the company for the foreseeable future, we are excited about the company's prospects in EMEA and Asia, which are attractive markets for us. Our returns in the core managed hosting services remain strong, and we continue to invest in this area as well as in our newer technologies such as email and cloud hosting services." Conference Call and Webcast Management will host a conference call to discuss its second quarter 2008 financial results today at 4:30 p.m. ET. To access the conference call, please dial 877-856-1969 and reference passcode 9143062. A live webcast of the conference call also will be available on Rackspace's website, located at www.rackspace.com. A replay of the call will be available through midnight, September 24, 2008 by calling 888-203-1112 in the United States or for calls from outside the United States, 719-457-0820. The replay passcode is 9143062. About Rackspace Hosting As the world's leader and specialist in hosting, Rackspace(R) Hosting is changing the way businesses worldwide buy IT. Rackspace delivers computing-as-a-service, integrating the industry's best technologies into a flexible service offering, making computing more reliable and affordable. A trusted partner to companies of all sizes, Rackspace enables IT departments to be more effective. Rackspace is distinguished by its award-winning Fanatical Support(R), furthering the company's mission to be one of the world's greatest service companies. Rackspace is recognized as one of FORTUNE'S(R) "100 Best Companies to Work For", ranking number 32 on the 2008 list. Rackspace's portfolio of hosted IT services includes managed hosting (www.rackspace.com), email hosting (www.mailtrust.com) and cloud hosting (www.mosso.com). For more information on Rackspace Hosting please visit www.rackspace.com or call 800-961-2888. Forward-Looking Statements This Press Release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks, uncertainties and assumptions. If such risks or uncertainties materialize or such assumptions prove incorrect, the results of Rackspace Hosting 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 expected operational and financial results, long term investment strategies, growth plans including international expansion plans, the performance or market share relating to products and services; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. These risks, uncertainties and assumptions include the effectiveness of managing company growth, infrastructure failures, changes in the economy, technological and competitive factors, regulatory factors, and other risks that are described in Rackspace's amended registration statement on Form S-1, filed with the SEC on August 5, 2008. Additional information will also be set forth in Rackspace's report on Form 10-Q for the quarter ended June 30, 2008, which will be filed with the SEC in September 2008. These forward-looking statements speak as of the date of this press release. Except as required by law, Rackspace 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.
Consolidated Statements of Income
Three months ended
-------------------------------
June 30, March 31, June 30,
(In thousands, except per share data) 2007 2008 2008
----------- --------- ---------
(Unaudited)
Net revenues $ 84,012 $119,613 $130,829
Costs and expenses:
Cost of revenues 26,148 39,223 42,842
Sales and marketing 12,609 17,568 19,846
General and administrative 24,279 33,633 38,108
Depreciation and amortization 13,133 19,051 21,637
----------- --------- ---------
Total costs and expenses 76,169 109,475 122,433
----------- --------- ---------
Income from operations 7,843 10,138 8,396
----------- --------- ---------
Other income (expense):
Interest expense (663) (1,330) (1,834)
Interest and other income 127 247 173
----------- --------- ---------
Total other income (expense) (536) (1,083) (1,661)
----------- --------- ---------
Income before income taxes 7,307 9,055 6,735
Income taxes 2,495 3,613 2,553
----------- --------- ---------
Net Income $ 4,812 $ 5,442 $ 4,182
=========== ========= =========
Net income per share
Basic $ 0.05 $ 0.05 $ 0.04
=========== ========= =========
Diluted $ 0.05 $ 0.05 $ 0.04
=========== ========= =========
Weighted average number of shares
outstanding
Basic 100,959 102,574 103,227
=========== ========= =========
Diluted 106,217 109,085 110,508
=========== ========= =========
Six Months Ended
---------------------
June 30, June 30,
(In thousands, except per share data) 2007 2008
----------- ---------
(Unaudited)
Net revenues $ 159,237 $250,442
Costs and expenses:
Cost of revenues 49,741 82,065
Sales and marketing 24,270 37,414
General and administrative 45,225 71,741
Depreciation and amortization 24,968 40,688
----------- ---------
Total costs and expenses 144,204 231,908
----------- ---------
Income from operations 15,033 18,534
----------- ---------
Other income (expense):
Interest expense (1,188) (3,164)
Interest and other income 227 420
----------- ---------
Total other income (expense) (961) (2,744)
----------- ---------
Income before income taxes 14,072 15,790
Income taxes 5,088 6,166
----------- ---------
Net Income $ 8,984 $ 9,624
=========== =========
Net income per share
Basic $ 0.09 $ 0.09
=========== =========
Diluted $ 0.08 $ 0.09
=========== =========
Weighted average number of shares outstanding
Basic 100,926 102,901
=========== =========
Diluted 106,007 109,810
=========== =========
Consolidated Balance Sheets
(In thousands, except share and per share December 31, June 30,
data)
2007 2008
------------ -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 24,937 $ 35,094
Accounts receivable, net of allowance for
doubtful accounts and
customer credits of $2,841 as of December
31, 2007, and $2,453
as of June 30, 2008 25,449 25,902
Prepaid expenses and other current assets 7,757 11,418
------------ -----------
Total current assets 58,143 72,414
Property and equipment, net 227,055 315,526
Goodwill 3,574 3,518
Intangible assets, net 5,812 9,760
Other non-current assets 7,229 7,092
------------ -----------
Total assets $ 301,813 $ 408,310
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 67,087 $ 77,933
Current portion of deferred revenue 13,540 15,516
Current portion of obligations under capital
and finance method leases 25,198 32,983
Current portion of debt 2,902 4,989
------------ -----------
Total current liabilities 108,727 131,421
Non-current deferred revenue 4,402 4,582
Non-current obligations under capital and
finance method leases 23,312 40,629
Non-current debt 60,039 104,952
Other non-current liabilities 8,460 9,309
------------ -----------
Total liabilities 204,940 290,893
COMMITMENTS AND CONTINGENCIES
Stockholders' equity:
Series A Convertible Preferred stock, $0.001
par value per share (aggregate
involuntary liquidation preference:
$13,412) 50,000,000 shares authorized
as of December 31, 2007, and June 30,
2008; 1,214,837, issued
and outstanding shares 1 1
Common stock, $0.001 par value per share:
300,000,000 shares authorized;
101,211,223 shares issued and 101,128,518
shares outstanding
as of December 31, 2007, 102,251,652
shares issued and 102,168,947 shares
outstanding as of June 30, 2008 101 102
Treasury stock, at cost: 82,705 common
shares held (126) (126)
Additional paid-in capital 40,082 51,152
Accumulated other comprehensive income 513 362
Retained earnings 56,302 65,926
------------ -----------
Total stockholders' equity 96,873 117,417
------------ -----------
Total liabilities and stockholders'
equity $ 301,813 $ 408,310
============ ===========
Consolidated Statements of Cash Flows
(In thousands) Three Months Ended
-----------------------------
June 30, March 31, June 30,
2007 2008 2008
--------- --------- ---------
(Unaudited)
Cash Flows From Operating Activities
Net income $ 4,812 $ 5,442 $ 4,182
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization 13,133 19,051 21,637
Loss on disposal and impairment of
equipment, net 676 1,327 650
Provision for bad debts and customer
credits 566 398 812
Deferred income taxes (597) 1,157 1,367
Share-based compensation expense 645 2,752 3,804
Other noncash compensation expense - 31 109
Excess tax benefits from share-based
compensation arrangements (96) (708) (1,913)
Changes in certain assets and
liabilities
Accounts receivables (2,974) 380 (2,020)
Prepaid expenses and other current
assets (52) (1,208) (1,381)
Accounts payable and accrued
expenses 14,721 6,268 4,809
Deferred revenues 1,598 1,484 673
Other non-current assets 59 9 93
Other non-current liabilities (1,729) (225) 24
--------- --------- ---------
Net cash provided by operating
activities 30,762 36,158 32,846
Cash Flows From Investing Activities
Purchases of property and equipment,
net (27,058) (47,248) (40,273)
--------- --------- ---------
Net cash used in investing
activities (27,058) (47,248) (40,273)
Cash Flows From Financing Activities
Principal payments of capital and
finance method leases (3,469) (7,549) (6,595)
Principal payments of notes payable (225) (1,152) (1,777)
Borrowings on line of credit 9,146 20,000 20,000
Payments for debt issuance costs (45) (158) -
Proceeds from sale leaseback
transactions - 761 782
Proceeds from issuance of common
stock, net - 548 -
Proceeds from exercise of stock
options 61 503 702
Excess tax benefits from share-based
compensation arrangements 96 708 1,913
--------- --------- ---------
Net cash provided by financing
activities 5,564 13,661 15,025
Effect of exchange rate changes on cash (76) (11) (1)
--------- --------- ---------
Increase in cash and cash equivalents 9,192 2,560 7,597
Cash and equivalents, beginning of
period 8,374 24,937 27,497
--------- --------- ---------
Cash and cash equivalents, end of period $ 17,566 $ 27,497 $ 35,094
========= ========= =========
Supplemental cash flow information:
Acquisition of property and
equipment by capital and finance
method leases $ 9,410 $ 18,512 $ 19,191
Acquisition of property and
equipment by notes payable 742 3,107 6,823
--------- --------- ---------
Vendor financed equipment
purchases $ 10,152 $ 21,619 $ 26,014
Cash payments for interest, net of
amount capitalized $ 446 $ 1,690 $ 1,586
Cash payments for income taxes 4,312 - 3,540
(In thousands) Six Months Ended
-------------------
June 30, June 30,
2007 2008
--------- ---------
(Unaudited)
Cash Flows From Operating Activities
Net income $ 8,984 $ 9,624
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 24,968 40,688
Loss on disposal and impairment of equipment,
net 1,041 1,977
Provision for bad debts and customer credits 1,471 1,210
Deferred income taxes (1,467) 2,524
Share-based compensation expense 1,236 6,556
Other noncash compensation expense 156 140
Excess tax benefits from share-based
compensation arrangements (150) (2,621)
Changes in certain assets and liabilities
Accounts receivables (4,982) (1,640)
Prepaid expenses and other current assets (922) (2,589)
Accounts payable and accrued expenses 25,079 11,077
Deferred revenues 2,523 2,157
Other non-current assets 98 102
Other non-current liabilities (1,482) (201)
--------- ---------
Net cash provided by operating activities 56,553 69,004
Cash Flows From Investing Activities
Purchases of property and equipment, net (50,409) (87,521)
--------- ---------
Net cash used in investing activities (50,409) (87,521)
Cash Flows From Financing Activities
Principal payments of capital and finance
method leases (5,735) (14,144)
Principal payments of notes payable (439) (2,929)
Borrowings on line of credit 14,146 40,000
Payments for debt issuance costs (277) (158)
Proceeds from sale leaseback transactions - 1,543
Proceeds from issuance of common stock, net - 548
Proceeds from exercise of stock options 76 1,205
Excess tax benefits from share-based
compensation arrangements 150 2,621
--------- ---------
Net cash provided by financing activities 7,921 28,686
Effect of exchange rate changes on cash (48) (12)
--------- ---------
Increase in cash and cash equivalents 14,017 10,157
Cash and equivalents, beginning of period 8,374 24,937
--------- ---------
Cash and cash equivalents, end of period $ 22,391 $ 35,094
========= =========
Supplemental cash flow information:
Acquisition of property and equipment by
capital and finance method leases $ 15,632 $ 37,703
Acquisition of property and equipment by
notes payable 742 9,930
--------- ---------
Vendor financed equipment purchases $ 16,374 $ 47,633
Cash payments for interest, net of amount
capitalized $ 800 $ 3,276
Cash payments for income taxes 5,147 3,540
Key Metrics
Three Months Ended
-----------------------------
June 30, March 31, June 30,
2007 2008 2008
--------- --------- ---------
(Unaudited)
Growth
Number of employees (Rackers) at
period end 1,663 2,254 2,422
Number of customers at period end
(a) 14,694 31,662 33,607
Number of servers deployed at
period end 31,140 39,755 42,424
Net upgrades (monthly average) 2.6% 2.1% 2.1%
Churn (monthly average) -0.8% -1.2% -1.1%
--------- --------- ---------
Growth in Installed Base (monthly
average) 1.8% 0.9% 1.0%
Net revenues (in thousands) $ 84,012 $119,613 $130,829
Revenue growth (year over year) 61.5% 59.0% 55.7%
Profitability
Income from Operations (in
thousands) $ 7,843 $ 10,138 $ 8,396
Depreciation and amortization (in
thousands) $ 13,133 $ 19,051 $ 21,637
Share-based compensation expense
(in thousands)
Cost of revenues $ 21 $ 365 $ 603
Sales & marketing $ 98 $ 401 $ 533
General & administrative $ 526 $ 1,986 $ 2,668
--------- --------- ---------
Total share-based compensation
expense $ 645 $ 2,752 $ 3,804
--------- --------- ---------
Adjusted EBITDA (in thousands) (1) $ 21,621 $ 31,941 $ 33,837
--------- --------- ---------
Adjusted EBITDA margin 25.7% 26.7% 25.9%
Operating income margin 9.3% 8.5% 6.4%
Income from Operations (in
thousands) $ 7,843 $ 10,138 $ 8,396
Effective Tax Rate 34.1% 39.9% 37.9%
--------- --------- ---------
Net Operating Profit After Tax
(NOPAT, in thousands) (1) $ 5,169 $ 6,093 $ 5,214
NOPAT margin 6.2% 5.1% 4.0%
Capital efficiency and returns
Interest bearing debt (in
thousands) $ 43,670 $145,130 $183,553
Shareholders' equity (in thousands) $ 81,299 $105,770 $117,417
--------- --------- ---------
Capital (in thousands) $124,969 $250,900 $300,970
Average capital base (in thousands) $114,302 $229,612 $275,935
Capital turnover (annualized) 2.94 2.08 1.90
Return on Capital (annualized) (1) 18.1% 10.6% 7.6%
Capital expenditures (in thousands)
Cash flows used in investing
activities $ 27,058 $ 47,248 $ 40,273
Vendor financed equipment purchases $ 10,152 $ 21,619 $ 26,014
--------- --------- ---------
Total capital expenditures $ 37,210 $ 68,867 $ 66,287
Customer gear $ 23,668 $ 27,558 $ 27,347
Data center build outs $ 4,320 $ 25,392 $ 18,509
Office build outs $ 1,052 $ 8,832 $ 12,815
Capitalized software and other $ 8,170 $ 7,085 $ 7,616
--------- --------- ---------
Total capital expenditures $ 37,210 $ 68,867 $ 66,287
Infrastructure capacity and
utilization
Technical square feet of data
center space at period end 91,905 114,749 133,462 (b)
Annualized net revenue per average
square foot $ 3,656 $ 4,170 $ 4,217
Utilization rate at period end 68.8% 67.3% 59.1%
Six Months Ended
-------------------
June 30, June 30,
2007 2008
--------- ---------
(Unaudited)
Growth
Number of employees (Rackers) at period end 1,663 2,422
Number of customers at period end (a) 14,694 33,607
Number of servers deployed at period end 31,140 42,424
Net upgrades (monthly average) 2.6% 2.1%
Churn (monthly average) -1.1% -1.2%
--------- ---------
Growth in Installed Base (monthly average) 1.5% 0.9%
Net revenues (in thousands) $159,237 $250,442
Revenue growth (year over year) 62.9% 57.3%
Profitability
Income from Operations (in thousands) $ 15,033 $ 18,534
Depreciation and amortization (in thousands) $ 24,968 $ 40,688
Share-based compensation expense (in
thousands)
Cost of revenues $ 55 $ 968
Sales & marketing $ 170 $ 934
General & administrative $ 1,011 $ 4,654
--------- ---------
Total share-based compensation expense $ 1,236 $ 6,556
--------- ---------
Adjusted EBITDA (in thousands) (1) $ 41,237 $ 65,778
--------- ---------
Adjusted EBITDA margin 25.9% 26.3%
Operating income margin 9.4% 7.4%
Income from Operations (in thousands) $ 15,033 $ 18,534
Effective Tax Rate 36.2% 39.1%
--------- ---------
Net Operating Profit After Tax (NOPAT, in
thousands) (1) $ 9,591 $ 11,287
NOPAT margin 6.0% 4.5%
Capital efficiency and returns
Interest bearing debt (in thousands) $ 43,670 $183,553
Shareholders' equity (in thousands) $ 81,299 $117,417
--------- ---------
Capital (in thousands) $124,969 $300,970
Average capital base (in thousands) $106,139 $253,399
Capital turnover (annualized) 3.00 1.98
Return on Capital (annualized) (1) 18.1% 8.9%
Capital expenditures (in thousands)
Cash flows used in investing activities $ 50,409 $ 87,521
Vendor financed equipment purchases $ 16,374 $ 47,633
--------- ---------
Total capital expenditures $ 66,783 $135,154
Customer gear $ 49,037 $ 54,906
Data center build outs $ 5,122 $ 43,901
Office build outs $ 1,221 $ 21,647
Capitalized software and other $ 11,403 $ 14,700
--------- ---------
Total capital expenditures $ 66,783 $135,154
Infrastructure capacity and utilization
Technical square feet of data center space at
period end 91,905 133,462 (b)
Annualized net revenue per average square foot$ 3,465 $ 4,140
Utilization rate at period end 68.8% 59.1%
(a) Includes 123 and 13,893 mail customers as of June 30, 2007 and
2008, and 13,376 customers as of March 31, 2008, respectively
(b) Includes 18,713 square feet added in June 2008
(1) See discussion and reconciliations of Non-GAAP financial measures
to the most comparable GAAP measure included within the document
(1) Non-GAAP Financial Measures
Adjusted EBITDA (Non-GAAP financial measure)
We define Adjusted EBITDA as Net Income, less Total Other Income (Expense), plus Income Taxes, Depreciation and Amortization, and non-cash charges for share-based compensation. Adjusted EBITDA is a metric that is used in our industry by the investment community for comparative and valuation purposes. We disclose this metric in order to support and facilitate the dialogue with research analysts and investors. Note that Adjusted EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States (GAAP) and should not be considered a substitute for operating income, which we consider to be the most directly comparable GAAP measure. Adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, you should not consider Adjusted EBITDA in isolation, or as a substitute for net income or other consolidated income statement data prepared in accordance with GAAP. Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. See our Adjusted EBITDA reconciliation in our key metrics table below.
Three Months Ended
------------------------------------------
(In thousands) June 30, 2007 March 31, 2008 June 30, 2008
------------- -------------- -------------
(Unaudited)
Net income $ 4,812 $ 5,442 $ 4,182
Less: Total other income
(expense) $ 536 $ 1,083 $ 1,661
Plus: Income taxes $ 2,495 $ 3,613 $ 2,553
Plus: Depreciation and
amortization $ 13,133 $ 19,051 $ 21,637
Plus: Share-based
compensation expense $ 645 $ 2,752 $ 3,804
------------- -------------- -------------
Adjusted EBITDA $ 21,621 $ 31,941 $ 33,837
Six Months Ended June 30,
-------------------------
(In thousands) 2007 2008
------------- -----------
(Unaudited)
Net income $ 8,984 $ 9,624
Less: Total other income (expense) $ 961 $ 2,744
Plus: Income taxes $ 5,088 $ 6,166
Plus: Depreciation and amortization $ 24,968 $ 40,688
Plus: Share-based compensation expense $ 1,236 $ 6,556
------------- -----------
Adjusted EBITDA $ 41,237 $ 65,778
Return on Capital (ROC) (Non-GAAP financial measure)
We define Return on Capital (ROC) as follows:
ROC=Net Operating Profit After Tax (NOPAT)/Average Capital Base
NOPAT = Income from operations x (1 - Effective tax rate)
Average Capital Base = Average of (Interest bearing debt + stockholders' equity) = Average of (Total assets - accounts payables and accrued expenses - deferred revenues - other non-current liabilities) We believe that ROC is an important metric for investors in evaluating a company's performance. ROC relates after-tax operating profits with the capital that is placed into service. It is therefore a performance metric that incorporates both the Statement of Income and the Balance Sheet. ROC measures how successfully capital is deployed within a company. Note that ROC is not a measure of financial performance under accounting principles generally accepted in the United States (GAAP) and should not be considered a substitute for return on assets, which we consider to be the most directly comparable GAAP measure, and may not be comparable to similarly titled measures reported by other companies. See our ROC reconciliation to return on assets below. ROC decreased from 18.1% for the six months ended June 30, 2007 to 8.9% for the six months ended June 30, 2008. This decrease was due to an increase in income from operations and a proportionately larger increase in the average capital base over the same time period. Included in the average capital base for the six months ended June 30, 2008 are capital expenditures related to our new corporate headquarter facilities and data centers that are in the process of being built out. Return on assets decreased from 11.3% to 5.4% for the six months ended June 30, 2007 and 2008, respectively. For the quarter ended June 30, 2008, ROC was 7.6% and return on assets was 4.4%.
Three Months Ended
------------------------------------------
(In thousands, except June 30, March 31, June 30,
financial metrics) 2007 2008 2008
------------- -------------- -------------
(Unaudited)
Income from operations $ 7,843 10,138 $ 8,396
Effective tax rate 34.1% 39.9% 37.9%
------------- -------------- -------------
Net operating profit
after tax (NOPAT) $ 5,169 $ 6,093 $ 5,214
Net income $ 4,812 $ 5,442 $ 4,182
Average total assets $ 172,399 $ 328,567 $ 381,815
Less: Average accounts
payable and accrued
expenses $ (43,645) $ (71,071) $ (76,494)
Less: Average deferred
revenues (current and
non-current) $ (11,691) $ (18,684) $ (19,762)
Less: Average other non-
current liabilities $ (2,761) $ (9,200) $ (9,624)
------------- -------------- -------------
Average capital base $ 114,302 $ 229,612 $ 275,935
Return on assets (Net
income/Average total
assets) 11.2% 6.6% 4.4%
Return on capital
(NOPAT/Average capital
base) 18.1% 10.6% 7.6%
Six Months Ended June 30,
-------------------------
(In thousands, except financial metrics) 2007 2008
------------- -----------
(Unaudited)
Income from operations $ 15,033 $ 18,534
Effective tax rate 36.2% 39.1%
------------- -----------
Net operating profit after tax (NOPAT) $ 9,591 $ 11,287
Net income $ 8,984 $ 9,624
Average total assets $ 159,260 $ 355,148
Less: Average accounts payable and accrued
expenses $ (38,683) $ (73,358)
Less: Average deferred revenues (current and
non-current) $ (11,101) $ (19,155)
Less: Average other non-current liabilities $ (3,337) $ (9,236)
------------- -----------
Average capital base $ 106,139 $ 253,399
Return on assets (Net income/Average total
assets) 11.3% 5.4%
Return on capital (NOPAT/Average capital
base) 18.1% 8.9%
CONTACT: Rackspace Hosting, Inc., San Antonio |
