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Rackspace Hosting Reports First Quarter 2014 Results

Rackspace® Hosting, Inc. (NYSE: RAX) announced financial results for the quarter ended March 31, 2014.

Net revenue for the first quarter of 2014 was $421 million, up 3.2% from the previous quarter and 16% from the first quarter of 2013. Net revenue for the first quarter of 2014 was positively impacted by currency exchange rates when compared to the previous quarter by $2.4 million and positively impacted when compared to the first quarter of 2013 by $6.6 million.

For the second quarter of 2014, the company is forecasting quarter-over-quarter sequential net revenue growth of 3% to 4.5%, resulting in net revenue in the range of $434 million to $440 million.

“Our first quarter revenue growth came in as expected and we expect growth to improve in the second quarter,” said Graham Weston, Chairman and CEO. “We are encouraged by qualitative factors, including the thousands of new customers we added in the quarter, including one of the largest we’ve ever landed. We also added significant new workloads for existing customers including Alex and Ani, Appboy, Clarks shoes, Under Armour and SunPower. Each of these customers values our managed cloud approach and chose us over providers of less expensive unmanaged infrastructure.”

Total server count increased to 106,229, up from 103,886 servers at the end of the previous quarter.

Adjusted EBITDA(1) for the quarter was $140 million, a 5.8% increase compared to the fourth quarter of 2013. Adjusted EBITDA margin for the quarter was 33.2% compared to 32.4% in the previous quarter.

The company expects Adjusted EBITDA margin to be in the range of 32% to 34% in the second quarter of 2014.

Net income was $25 million for the quarter, up 22.3% from the previous quarter. Net income margin for the quarter was 6.0% compared to 5.1% for the previous quarter.

Cash flow from operating activities was $142 million for the first quarter of 2014. Capital expenditures were $101 million, including $61 million for purchases of customer gear, $11 million for data center build outs, $9 million for office build outs and $20 million for capitalized software and other projects.

Adjusted Free Cash Flow(1) for the quarter was $40 million. Return on Capital(1) was 11.4% in the first quarter, compared to 9.6% in the prior quarter. Average monthly revenue per server was $1,336, compared to $1,322 in the prior quarter.

At the end of the first quarter of 2014, cash and cash equivalents were $314 million, and interest-bearing debt including capital lease obligations totaled $53 million.

On a worldwide basis, Rackspace employed 5,743 Rackers as of March 31, 2014, up from 5,651 in the previous quarter.

Rackspace Business Highlights

  • Rackspace appointed Ryan Neading chief information officer. Neading will be responsible for the Rackspace billing systems, internal IT systems and tools, technology operations, operational metrics and interfacing with external suppliers and resource providers. Neading brings with him over a decade of leadership experience and specialization in the high tech industry. Prior to joining Rackspace, Neading served as the co-leader of eBay’s development site in Austin.
  • Rackspace launched its Digital Services Practice to provide digital marketing expertise. Rackspace Digital delivers expertise to help companies more effectively engage with customers via a website, portal/extranet, mobile app or online store. By working hand-in-hand with software platforms and system integrators, Rackspace Digital provides reliable, fully managed service to help ensure the customer’s brand is never compromised.
  • Rackspace ranked No. 26 on the Sunday Times "Top 100 Best Companies to Work for in London" list. This is the ninth consecutive year Rackspace has received this award. The Sunday Times recognized Rackspace for its attitude towards Racker training and personal development and reports that Rackspace employees love their jobs, have competitive salaries, and have opportunities for personal career development.
  • Rackspace, along with Digital Realty Trust, Inc., broke ground on a new 130,000 square foot data center facility located in Crawley, West Sussex. The 15 acre campus will eventually consist of four data suites with 10 MW of total capacity. The initial outlay, which provides 6 MW across two data suites, is due to be delivered in the first half of 2015.
  • Rackspace launched ObjectRocket, its NoSQL MongoDB Database-as-a-Service (DBaaS), in its UK data center. With the open source-based MongoDB solution, Rackspace will broaden its portfolio to offer European customers a NoSQL DBaaS for big data applications. This offering will be built upon hardware optimized specifically for MongoDB and will be easily accessed and integrated into existing systems. ObjectRocket is a sharded and fully managed MongoDB service built with a set of tools and APIs designed to maximize uptime and reduce administration time - all supported by Rackspace Fanatical Support®.

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 from the United States and Canada please dial 877-246-4118, from the United Kingdom please dial 0800-496-0445, and from Hong Kong please dial 800-900-872.

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 Hosting

Rackspace (NYSE: RAX) is a leader in managed 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 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, expected results from the integration of technologies and acquired businesses, or the performance or market share relating to products and services; any statements of expectation or belief; and any statements or assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include infrastructure failures; the deterioration of economic conditions or fluctuations, disruptions, instability or downturns in the economy; the effectiveness of managing company growth; technological and competitive factors; regulatory factors; and other risks that are described in Rackspace Hosting's Form 10-K for the year ended December 31, 2013, filed with the SEC on March 3, 2014, and in Rackspace Hosting’s Form 10-Q for the quarter ended March 31, 2014. 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.

   
Consolidated Statements of Income
(Unaudited)
 
Three Months Ended
(In thousands, except per share data)

March 31,
2013

   

December 31,
2013

   

March 31,
2014

Net revenue $ 362,200 $ 408,103 $ 421,047
Costs and expenses:
Cost of revenue (1) 113,610 133,821 140,417
Research and development (1) 18,375 24,849 25,192
Sales and marketing (1) 49,814 55,465 57,359
General and administrative (1) 67,477 79,128 71,150
Depreciation and amortization   70,111     87,683     87,805  
Total costs and expenses   319,387     380,946     381,923  
Income from operations   42,813     27,157     39,124  
Other income (expense):
Interest expense (940 ) (656 ) (495 )
Interest and other income (expense)   199     405     265  
Total other income (expense)   (741 )   (251 )   (230 )
Income before income taxes 42,072 26,906 38,894
Income taxes   14,811     6,108     13,448  
Net income $ 27,261   $ 20,798   $ 25,446  
 
Net income per share
Basic $ 0.20   $ 0.15   $ 0.18  
Diluted $ 0.19   $ 0.14   $ 0.18  
 
Weighted average number of shares outstanding
Basic   137,742     139,875     141,048  
Diluted   143,177     144,024     143,815  
 

(1) As previously reported in the 10-Q filing for the three months ended March 31, 2013, certain reclassifications have been made to prior period amounts in order to conform to the current period's presentation. For more information, refer to our Form 10-Q for the quarter ended March 31, 2014.

       

Consolidated Balance Sheets

 
(In thousands)

December 31,
2013

March 31,
2014

(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 259,733 $ 313,835
Accounts receivable, net of allowance for doubtful accounts and customer credits of $3,891 as of December 31, 2013 and $4,548 as of March 31, 2014 123,898 118,507
Deferred income taxes 12,637 11,592
Prepaid expenses 30,782 27,175
Other current assets   11,918     12,277  
Total current assets 438,968 483,386
 
Property and equipment, net 890,776 925,136
Goodwill 81,084 81,084
Intangible assets, net 23,880 21,863
Other non-current assets   57,089     55,480  
Total assets $ 1,491,797   $ 1,566,949  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 122,047 $ 148,180
Accrued compensation and benefits 62,459 57,316
Income and other taxes payable 11,388 18,927
Current portion of deferred revenue 22,868 21,550
Current portion of capital lease obligations 37,885 31,462
Current portion of debt   1,861     1,888  
Total current liabilities 258,508 279,323
 
Non-current liabilities:
Deferred revenue 3,662 2,935
Capital lease obligations 25,048 19,905
Finance lease obligations for assets under construction 17,604
Debt 124 71
Deferred income taxes 69,729 61,282
Deferred rent 43,046 45,377
Other liabilities   36,268     40,440  
Total liabilities 436,385 466,937
 
COMMITMENTS AND CONTINGENCIES
 
Stockholders' equity:
Common stock 141 142
Additional paid-in capital 636,660 652,994
Accumulated other comprehensive loss (4,536 ) (1,717 )
Retained earnings   423,147     448,593  
Total stockholders’ equity   1,055,412     1,100,012  
Total liabilities and stockholders’ equity $ 1,491,797   $ 1,566,949  
 
   
Consolidated Statements of Cash Flows
(Unaudited)
 
Three Months Ended
(in thousands)

March 31,
2013

   

December 31,
2013

   

March 31,
2014

Cash Flows From Operating Activities
Net income $ 27,261 $ 20,798 $ 25,446
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 70,111 87,683 87,805
Loss on disposal of equipment, net 240 100 228
Provision for bad debts and customer credits 1,060 655 1,813
Deferred income taxes 6,553 (12,407 ) (10,119 )
Deferred rent 3,965 2,279 2,256
Share-based compensation expense 12,183 17,188 12,732
Excess tax benefits from share-based compensation arrangements (4,299 ) (16,156 ) (15,100 )
Changes in certain assets and liabilities:
Accounts receivable (6,268 ) (10,344 ) 3,870
Prepaid expenses and other current assets (5,637 ) 6,290 3,337
Accounts payable and accrued expenses 3,062 8,355 30,251
Deferred revenue 1,242 4,176 (2,110 )
All other operating activities   4,320     901     1,250  
Net cash provided by operating activities 113,793 109,518 141,659
 
Cash Flows From Investing Activities
Purchases of property and equipment (105,541 ) (126,723 ) (84,953 )
Acquisitions, net of cash acquired (6,203 ) (3,727 )
All other investing activities   8     110     455  
Net cash used in investing activities (111,736 ) (130,340 ) (84,498 )
 
Cash Flows From Financing Activities
Principal payments of capital leases (18,938 ) (14,652 ) (12,586 )
Principal payments of notes payable (51 ) (52 ) (52 )
Payments for deferred acquisition obligations (1,179 ) (57 ) (57 )
Receipt of Texas Enterprise Fund grant 5,500
Common shares withheld for employee withholding taxes (13,620 )
Proceeds from employee stock plans 1,714 8,971 2,122
Excess tax benefits from share-based compensation arrangements   4,299     16,156     15,100  
Net cash provided by (used in) financing activities (14,155 ) 10,366 (3,593 )
 
Effect of exchange rate changes on cash and cash equivalents (1,336 ) 194 534
     
Increase (decrease) in cash and cash equivalents (13,434 ) (10,262 ) 54,102
 
Cash and cash equivalents, beginning of period 292,061 269,995 259,733
     
Cash and cash equivalents, end of period $ 278,627   $ 259,733   $ 313,835  
 
Supplemental Cash Flow Information:
Non-cash purchases of property and equipment $ 19,858 $ (4,116 ) $ 15,741
 
   
Key Metrics - Quarter to Date
(Unaudited)
 
Three Months Ended
(Dollar amounts in thousands, except average monthly revenue per server)

March 31,
2013

   

June 30,
2013

   

September 30,
2013

   

December 31,
2013

   

March 31,
2014

Growth
Dedicated cloud, net revenue $ 271,311 $ 276,845 $ 280,215 $ 291,265 $ 299,689
Public cloud, net revenue $ 90,889   $ 99,002   $ 108,421   $ 116,838   $ 121,358  
Net revenue $ 362,200 $ 375,847 $ 388,636 $ 408,103 $ 421,047
Revenue growth (year over year) 20.2 % 17.8 % 15.7 % 15.6 % 16.2 %
 
Net upgrades (monthly average) 0.9 % 1.5 % 1.5 % 1.1 % 0.9 %
Churn (monthly average)   -0.8 %   -0.8 %   -0.8 %   -0.7 %   -0.6 %
Growth in installed base (monthly average) (2) 0.1 % 0.7 % 0.7 % 0.4 % 0.3 %
 
Number of employees (Rackers) at period end 5,043 5,272 5,450 5,651 5,743
Number of servers deployed at period end 94,122 98,884 101,967 103,886 106,229
Average monthly revenue per server $ 1,308 $ 1,298 $ 1,290 $ 1,322 $ 1,336
 
Profitability
Income from operations $ 42,813 $ 35,404 $ 27,762 $ 27,157 $ 39,124
Depreciation and amortization $ 70,111 $ 74,460 $ 80,753 $ 87,683 $ 87,805
Share-based compensation expense
Cost of revenue $ 2,519 $ 2,735 $ 3,453 $ 3,877 $ 3,791
Research and development $ 1,528 $ 1,813 $ 2,306 $ 2,521 $ 2,780
Sales and marketing $ 1,658 $ 1,744 $ 2,149 $ 1,766 $ 2,091
General and administrative $ 6,478   $ 7,023   $ 9,051   $ 9,024   $ 4,070  
Total share-based compensation expense $ 12,183   $ 13,315   $ 16,959   $ 17,188   $ 12,732  
Adjusted EBITDA (1) $ 125,107 $ 123,179 $ 125,474 $ 132,028 $ 139,661
 
Adjusted EBITDA margin 34.5 % 32.8 % 32.3 % 32.4 % 33.2 %
 
Operating income margin 11.8 % 9.4 % 7.1 % 6.7 % 9.3 %
 
Income from operations $ 42,813 $ 35,404 $ 27,762 $ 27,157 $ 39,124
Effective tax rate   35.2 %   34.7 %   40.7 %   22.7 %   34.6 %
Net operating profit after tax (NOPAT) (1) $ 27,743 $ 23,119 $ 16,463 $ 20,992 $ 25,587
NOPAT margin 7.7 % 6.2 % 4.2 % 5.1 % 6.1 %
 
Capital efficiency and returns
Interest bearing debt $ 105,807 $ 88,434 $ 72,579 $ 64,918 $ 53,326
Stockholders' equity $ 879,035 $ 933,897 $ 988,708 $ 1,055,412 $ 1,100,012
Less: Excess cash $ (235,163 ) $ (217,950 ) $ (223,359 ) $ (210,761 ) $ (263,309 )
Capital base $ 749,679 $ 804,381 $ 837,928 $ 909,569 $ 890,029
Average capital base $ 734,493 $ 777,030 $ 821,155 $ 873,749 $ 899,799
Capital turnover (annualized) 1.97 1.93 1.89 1.87 1.87
 
Return on capital (annualized) (1) 15.1 % 11.9 % 8.0 % 9.6 % 11.4 %
 
Capital expenditures
Cash purchases of property and equipment $ 105,541 $ 119,836 $ 100,496 $ 126,723 $ 84,953
Non-cash purchases of property and equipment (3) $ 19,858   $ (13,311 ) $ 17,062   $ (4,116 ) $ 15,741  
Total capital expenditures $ 125,399 $ 106,525 $ 117,558 $ 122,607 $ 100,694
 
Customer gear $ 85,690 $ 73,022 $ 73,784 $ 65,291 $ 60,688
Data center build outs $ 13,228 $ 10,085 $ 12,441 $ 22,524 $ 10,963
Office build outs $ 7,860 $ 1,683 $ 6,700 $ 14,860 $ 9,212
Capitalized software and other projects $ 18,621   $ 21,735   $ 24,633   $ 19,932   $ 19,831  
Total capital expenditures $ 125,399 $ 106,525 $ 117,558 $ 122,607 $ 100,694
 
Infrastructure capacity and utilization
Megawatts under contract at period end 59.4 59.6 60.0 60.0 58.1
Megawatts available for use at period end 38.8 44.4 46.9 46.9 45.3
Megawatts utilized at period end 24.7 26.0 27.0 27.4 28.1
Annualized net revenue per average Megawatt of power utilized $ 59,499 $ 59,305 $ 58,662 $ 60,015 $ 60,691
 

(1) See discussion and reconciliation of our Non-GAAP financial measures to the most comparable GAAP measures below.

(2) Due to rounding, totals may not equal the sum of the line items in the table above.

(3) Non-cash purchases of property and equipment represents changes in amounts accrued for purchases under vendor financing and other deferred payment arrangements.

   
Consolidated Quarterly Statements of Income
(Unaudited)
 
Three Months Ended
(In thousands)

March 31,
2013

   

June 30,
2013

   

September 30,
2013

   

December 31,
2013

   

March 31,
2014

Net revenue $ 362,200 $ 375,847 $ 388,636 $ 408,103 $ 421,047
Costs and expenses:
Cost of revenue 113,610 117,658 127,404 133,821 140,417
Research and development 18,375 23,216 23,773 24,849 25,192
Sales and marketing 49,814 52,269 50,869 55,465 57,359
General and administrative 67,477 72,840 78,075 79,128 71,150
Depreciation and amortization   70,111     74,460     80,753     87,683     87,805  
Total costs and expenses   319,387     340,443     360,874     380,946     381,923  
Income from operations   42,813     35,404     27,762     27,157     39,124  
Other income (expense):
Interest expense (940 ) (833 ) (689 ) (656 ) (495 )
Interest and other income (expense)   199     (303 )   440     405     265  
Total other income (expense)   (741 )   (1,136 )   (249 )   (251 )   (230 )
Income before income taxes 42,072 34,268 27,513 26,906 38,894
Income taxes   14,811     11,901     11,202     6,108     13,448  
Net income $ 27,261   $ 22,367   $ 16,311   $ 20,798   $ 25,446  
 
 
Three Months Ended
(Percent of net revenue)

March 31,
2013

June 30,
2013

September 30,
2013

December 31,
2013

March 31,
2014

Net revenue 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Costs and expenses:
Cost of revenue 31.4 % 31.3 % 32.8 % 32.8 % 33.3 %
Research and development 5.1 % 6.2 % 6.1 % 6.1 % 6.0 %
Sales and marketing 13.8 % 13.9 % 13.1 % 13.6 % 13.6 %
General and administrative 18.6 % 19.4 % 20.1 % 19.4 % 16.9 %
Depreciation and amortization   19.4 %   19.8 %   20.8 %   21.5 %   20.9 %
Total costs and expenses   88.2 %   90.6 %   92.9 %   93.3 %   90.7 %
Income from operations   11.8 %   9.4 %   7.1 %   6.7 %   9.3 %
Other income (expense):
Interest expense (0.3 )% (0.2 )% (0.2 )% (0.2 )% (0.1 )%
Interest and other income (expense)   0.1 %   (0.1 )%   0.1 %   0.1 %   0.1 %
Total other income (expense)   (0.2 )%   (0.3 )%   (0.1 )%   (0.1 )%   (0.1 )%
Income before income taxes 11.6 % 9.1 % 7.1 % 6.6 % 9.2 %
Income taxes   4.1 %   3.2 %   2.9 %   1.5 %   3.2 %
Net income   7.5 %   6.0 %   4.2 %   5.1 %   6.0 %
 
Due to rounding, totals may not equal the sum of the line items in the table above.
 

(1) Non-GAAP Financial Measures

Adjusted EBITDA (Non-GAAP financial measure)

We use Adjusted EBITDA as a supplemental measure to review and assess our performance. We define Adjusted EBITDA as net income, plus income taxes, total other (income) expense, 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 reconciliation of Adjusted EBITDA to net income in the table below:

    Three Months Ended
(Dollars in thousands)

March 31,
2013

   

June 30,
2013

   

September 30,
2013

   

December 31,
2013

   

March 31,
2014

Net revenue $ 362,200 $ 375,847 $ 388,636 $ 408,103 $ 421,047
 
Income from operations $ 42,813 $ 35,404 $ 27,762 $ 27,157 $ 39,124
 
Net income $ 27,261 $ 22,367 $ 16,311 $ 20,798 $ 25,446
Plus: Income taxes 14,811 11,901 11,202 6,108 13,448
Plus: Total other (income) expense 741 1,136 249 251 230
Plus: Depreciation and amortization 70,111 74,460 80,753 87,683 87,805
Plus: Share-based compensation expense   12,183     13,315     16,959     17,188     12,732  
Adjusted EBITDA $ 125,107 $ 123,179 $ 125,474 $ 132,028 $ 139,661
 
Operating income margin 11.8 % 9.4 % 7.1 % 6.7 % 9.3 %
 
Adjusted EBITDA margin 34.5 % 32.8 % 32.3 % 32.4 % 33.2 %
 

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 – excess cash) = Average of (total assets – excess cash – accounts payable and accrued expenses, accrued compensation and benefits, and income and other taxes payable – deferred revenue – other non-current liabilities, deferred income taxes, deferred rent and finance lease obligations for assets under construction); calculated on a quarterly basis.

We define excess cash as the amount of cash and cash equivalents that exceeds our operating cash requirements, which is calculated as three percent of our annualized net revenue for the three months prior to the period end. We will periodically review the calculation and adjust it to reflect our projected cash requirements for the upcoming year.

We believe that ROC is an important metric for investors in evaluating our 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 Comprehensive 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 GAAP and should not be considered a substitute for return on assets, which we calculate directly from amounts on the Statement of Comprehensive Income and the Balance Sheet. ROC has limitations as an analytical tool, and when assessing our operating performance, you should not consider ROC in isolation or as a substitute for other financial data prepared in accordance with GAAP. Other companies may calculate ROC differently than we do, limiting its usefulness as a comparative measure.

See our reconciliation of the calculation of ROC to the calculation of return on assets in the table below:

    Three Months Ended
(Dollars in thousands)

March 31,
2013

   

June 30,
2013

   

September 30,
2013

   

December 31,
2013

   

March 31,
2014

Income from operations $ 42,813 $ 35,404 $ 27,762 $ 27,157 $ 39,124
Effective tax rate   35.2 %   34.7 %   40.7 %   22.7 %   34.6 %
Net operating profit after tax (NOPAT) $ 27,743 $ 23,119 $ 16,463 $ 20,992 $ 25,587
 
Net income $ 27,261 $ 22,367 $ 16,311 $ 20,798 $ 25,446
 
Total assets at period end $ 1,348,350 $ 1,377,928 $ 1,451,769 $ 1,491,797 $ 1,566,949
Less: Excess cash (235,163 ) (217,950 ) (223,359 ) (210,761 ) (263,309 )
Less: Accounts payable and accrued expenses, accrued compensation and benefits, and income and other taxes payable (197,686 ) (178,552 ) (213,268 ) (195,894 ) (224,423 )
Less: Deferred revenue (current and non-current) (21,811 ) (22,636 ) (22,211 ) (26,530 ) (24,485 )
Less: Other non-current liabilities, deferred income taxes, deferred rent, and finance lease obligations for assets under construction   (144,011 )   (154,409 )   (155,003 )   (149,043 )   (164,703 )
Capital base $ 749,679 $ 804,381 $ 837,928 $ 909,569 $ 890,029
 
Average total assets $ 1,321,951 $ 1,363,139 $ 1,414,849 $ 1,471,783 $ 1,529,373
Average capital base $ 734,493 $ 777,030 $ 821,155 $ 873,749 $ 899,799
 
Return on assets (annualized) 8.2 % 6.6 % 4.6 % 5.7 % 6.7 %
Return on capital (annualized) 15.1 % 11.9 % 8.0 % 9.6 % 11.4 %
 

Adjusted Free Cash Flow (Non-GAAP financial measure)

We define Adjusted Free Cash Flow as Adjusted EBITDA plus non-cash deferred rent, less total capital expenditures (including non-cash purchases of property and equipment), cash payments for interest, net, and cash payments for income taxes, net.

We believe that Adjusted Free Cash Flow is a performance metric used by investors to evaluate the strength and performance of a company's ongoing business. Note that Adjusted Free Cash Flow is not a measure of financial performance under GAAP and may not be comparable to similarly titled measures reported by other companies.

See our reconciliation of Adjusted Free Cash Flow to Adjusted EBITDA below, as well as our reconciliation of Adjusted EBITDA to net income provided above.

    Three Months Ended     Three Months Ended
(In thousands) March 31, 2013 March 31, 2014
Adjusted EBITDA $ 125,107 $ 139,661
Non-cash deferred rent 3,965 2,256
Total capital expenditures (125,399 ) (100,694 )
Cash payments for interest, net (1,051 ) (432 )
Cash payments for income taxes, net   (3,839 )   (886 )
Adjusted free cash flow $ (1,217 ) $ 39,905  

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SYS-CON Events announced today that Cloud Academy will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Cloud Academy is the industry’s most innovative, vendor-neutral cloud technology training platform. Cloud Academy provides continuous learning solutions for individuals and enterprise teams for Amazon Web Services, Microsoft Azure, Google Cloud Platform, and the most popular cloud computing technologies. Ge...
The best way to leverage your Cloud Expo presence as a sponsor and exhibitor is to plan your news announcements around our events. The press covering Cloud Expo and @ThingsExpo will have access to these releases and will amplify your news announcements. More than two dozen Cloud companies either set deals at our shows or have announced their mergers and acquisitions at Cloud Expo. Product announcements during our show provide your company with the most reach through our targeted audiences.
20th Cloud Expo, taking place June 6-8, 2017, at the Javits Center in New York City, NY, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy.
SYS-CON Events announced today that Outlyer, a monitoring service for DevOps and operations teams, has been named “Bronze Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Outlyer is a monitoring service for DevOps and Operations teams running Cloud, SaaS, Microservices and IoT deployments. Designed for today's dynamic environments that need beyond cloud-scale monitoring, we make monitoring effortless so you...
With major technology companies and startups seriously embracing Cloud strategies, now is the perfect time to attend @CloudExpo | @ThingsExpo, June 6-8, 2017, at the Javits Center in New York City, NY and October 31 - November 2, 2017, Santa Clara Convention Center, CA. Learn what is going on, contribute to the discussions, and ensure that your enterprise is on the right path to Digital Transformation.
Have you ever noticed how some IT people seem to lead successful, rewarding, and satisfying lives and careers, while others struggle? IT author and speaker Don Crawley uncovered the five principles that successful IT people use to build satisfying lives and careers and he shares them in this fast-paced, thought-provoking webinar. You'll learn the importance of striking a balance with technical skills and people skills, challenge your pre-existing ideas about IT customer service, and gain new in...
SYS-CON Events announced today that CrowdReviews.com has been named “Media Sponsor” of SYS-CON's 20th International Cloud Expo, which will take place on June 6–8, 2017, at the Javits Center in New York City, NY. CrowdReviews.com is a transparent online platform for determining which products and services are the best based on the opinion of the crowd. The crowd consists of Internet users that have experienced products and services first-hand and have an interest in letting other potential buyers...
With 10 simultaneous tracks, keynotes, general sessions and targeted breakout classes, Cloud Expo and @ThingsExpo are two of the most important technology events of the year. Since its launch over eight years ago, Cloud Expo and @ThingsExpo have presented a rock star faculty as well as showcased hundreds of sponsors and exhibitors! In this blog post, I provide 7 tips on how, as part of our world-class faculty, you can deliver one of the most popular sessions at our events. But before reading the...
While not quite mainstream yet, WebRTC is starting to gain ground with Carriers, Enterprises and Independent Software Vendors (ISV’s) alike. WebRTC makes it easy for developers to add audio and video communications into their applications by using Web browsers as their platform. But like any market, every customer engagement has unique requirements, as well as constraints. And of course, one size does not fit all. In her session at WebRTC Summit, Dr. Natasha Tamaskar, Vice President, Head of C...
TechTarget storage websites are the best online information resource for news, tips and expert advice for the storage, backup and disaster recovery markets. By creating abundant, high-quality editorial content across more than 140 highly targeted technology-specific websites, TechTarget attracts and nurtures communities of technology buyers researching their companies' information technology needs. By understanding these buyers' content consumption behaviors, TechTarget creates the purchase inte...
In the enterprise today, connected IoT devices are everywhere – both inside and outside corporate environments. The need to identify, manage, control and secure a quickly growing web of connections and outside devices is making the already challenging task of security even more important, and onerous. In his session at @ThingsExpo, Rich Boyer, CISO and Chief Architect for Security at NTT i3, will discuss new ways of thinking and the approaches needed to address the emerging challenges of securit...
As cloud adoption continues to transform business, today's global enterprises are challenged with managing a growing amount of information living outside of the data center. The rapid adoption of IoT and increasingly mobile workforce are exacerbating the problem. Ensuring secure data sharing and efficient backup poses capacity and bandwidth considerations as well as policy and regulatory compliance issues.
Almost two-thirds of companies either have or soon will have IoT as the backbone of their business. Though, IoT is far more complex than most firms expected with a majority of IoT projects having failed. How can you not get trapped in the pitfalls? In his session at @ThingsExpo, Tony Shan, Chief IoTologist at Wipro, will introduce a holistic method of IoTification, which is the process of IoTifying the existing technology portfolios and business models to adopt and leverage IoT. He will delve in...
SYS-CON Events announced today that Conference Guru has been named “Media Sponsor” of SYS-CON's 20th International Cloud Expo, which will take place on June 6–8, 2017, at the Javits Center in New York City, NY. A valuable conference experience generates new contacts, sales leads, potential strategic partners and potential investors; helps gather competitive intelligence and even provides inspiration for new products and services. Conference Guru works with conference organizers to pass great dea...
SYS-CON Events announced today that LeaseWeb USA, a cloud Infrastructure-as-a-Service (IaaS) provider, will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. LeaseWeb is one of the world's largest hosting brands. The company helps customers define, develop and deploy IT infrastructure tailored to their exact business needs, by combining various kinds cloud solutions.
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at Cloud Expo, Ed Featherston, a director and senior enterprise architect at Collaborative Consulting, discussed the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
WebRTC defines no default signaling protocol, causing fragmentation between WebRTC silos. SIP and XMPP provide possibilities, but come with considerable complexity and are not designed for use in a web environment. In his session at @ThingsExpo, Matthew Hodgson, technical co-founder of the Matrix.org, discussed how Matrix is a new non-profit Open Source Project that defines both a new HTTP-based standard for VoIP & IM signaling and provides reference implementations.
The Internet of Things is clearly many things: data collection and analytics, wearables, Smart Grids and Smart Cities, the Industrial Internet, and more. Cool platforms like Arduino, Raspberry Pi, Intel's Galileo and Edison, and a diverse world of sensors are making the IoT a great toy box for developers in all these areas. In this Power Panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists discussed what things are the most important, which will have the most profound e...
We all know that data growth is exploding and storage budgets are shrinking. Instead of showing you charts on about how much data there is, in his General Session at 17th Cloud Expo, Scott Cleland, Senior Director of Product Marketing at HGST, showed how to capture all of your data in one place. After you have your data under control, you can then analyze it in one place, saving time and resources.
910Telecom exhibited at the 19th International Cloud Expo, which took place at the Santa Clara Convention Center in Santa Clara, CA, in November 2016. Housed in the classic Denver Gas & Electric Building, 910 15th St., 910Telecom is a carrier-neutral telecom hotel located in the heart of Denver. Adjacent to CenturyLink, AT&T, and Denver Main, 910Telecom offers connectivity to all major carriers, Internet service providers, Internet backbones and exchanges.