Rackspace Hosting Reports 4Q & Year-End 2009 Results

For the quarter ended December 31, 2009:
—Net revenue of $169.5 million grew 18.4% year-over-year and 4.4% from Q3 2009

—Adjusted EBITDA (1) of $56.0 million grew 31.4% year-over-year and 8.8% from Q3 2009

—Achieved adjusted EBITDA margin of 33.0%, up from 29.7% in Q4 2008

—Net income of $9.0 million grew 32.0% year-over-year and 18.8% from Q3 2009

Rackspace Hosting, Inc. (RAX ) announced financial results for the quarter and year ended December 31, 2009.

Net revenue for the fourth quarter ended December 31, 2009 was $169.5 million, up 4.4% from the previous quarter and up 18.4% from the fourth quarter of 2008. Unfavorable changes in currency exchange rates had a minimal negative impact on fourth quarter net revenue. Net revenue for the year was $629.0 million, an increase of 18.2% relative to 2008. Unfavorable changes in currency exchange rates had a negative impact on full year net revenue of $28 million. 2009 net revenue growth on a constant currency basis was 23%.

Managed hosting revenue for the quarter increased to $152.4 million, up from $147.1 million in the third quarter of 2009. Cloud revenue increased to $17.1 million in the quarter, up from $15.3 million in the third quarter of 2009. For the full year, cloud net revenue was $56.4 million, an increase of 124.8% relative to 2008.

Total server count increased to 56,671, up from 54,655 servers at the end of the third quarter of 2009, and total customers increased to 90,925, up from 80,944 at the end of the third quarter of 2009.

“We have spent the past year preparing for the next cycle of growth and we are developing fast. We have a strong position in the market today because of our specialized focus on hosted computing, our unique culture of customer service, known as Fanatical Support(R), and our powerful hybrid portfolio approach that combines dedicated hosting and cloud hosting,” said Lanham Napier, president and chief executive officer. “In 2010, we plan to boost enterprise sales, continue to gain traction in the cloud, improve our SMB offering and mine our installed base for growth opportunities.”

Adjusted EBITDA for the quarter was $56.0 million, an 8.8% increase compared to the third quarter of 2009 and a 31.4% increase compared to the fourth quarter of 2008. For the full year, adjusted EBITDA was $200.6 million, an increase of 38.0% relative to 2008. The adjusted EBITDA margin for the quarter was 33.0%, up from 31.7% in the third quarter and 29.7% in the fourth quarter of 2008. For the full year, the adjusted EBITDA margin was 31.9%, up nearly 460 basis points from 2008.

Adjusted EBITDA and adjusted EBITDA margin were negatively impacted by a non-cash charge of $2.5 million for the quarter and $4.6 million for the full year relating to operating leases for the data centers in Northern Virginia and Chicago. Operations began in Northern Virginia in the second quarter of 2009 and Rackspace is now in the fifth of ten phases, while operations will begin in Chicago at the end of the first quarter of 2010.