Rackspace Hosting (RAX) 8-K This presentation contains "forward-looking" statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever

Exhibit 99.1

Safe Harbor Statement

2

This presentation contains "forward-looking" statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever

materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements.

All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, any projections of financial

information; any statements about historical results that may suggest trends for our business; any statements of the plans, strategies, and objectives

of management for future operations; any statements of expectation or belief regarding future events, potential markets or market size, technology

developments, or enforceability of our intellectual property rights; and any statements of assumptions underlying any of the items mentioned.

These statements are based on estimates and information available to us at the time of this presentation and are not guarantees of future

performance. Actual results could differ materially from our current expectations as a result of many factors, including but not limited to: the

unpredictable nature of our rapidly evolving market and quarterly fluctuations in our business; the effects of competition; and any adverse changes in

our indirect channel relationships. These and other risks and uncertainties associated with our business are described in our annual report on Form

10-K for the 2008 fiscal year, filed with the SEC on March 2, 2009. We assume no obligation and do not intend to update these forward-looking

statements. 

Non-GAAP Financial Measures

Please note that certain financial measures used in this presentation, such as Adjusted EBITDA , are expressed on a non-GAAP basis. Adjusted

EBITDA has been adjusted to exclude charges relating to stock-based compensation. Our GAAP results and GAAP to non-GAAP reconciliation can

be found in this presentation, and have been posted on the Investors page of our website, which is found at www.rackspace.com.

2008 Highlights

3

•

Revenue of $532M, up 46.9%

•

Added 24,107 customers

•

Hired 590 Rackers

•

Adj. EBITDA $145M, up 59.1%

•

Net Income $21.7M, up 21.7%

•

Growing returns and margins since 2Q 2008

•

DC expansion in US, UK, Hong Kong

•

Cloud computing launch

Growth

Profits & Returns

Long Term Investments

Rackspace

Strategy

4

Specialist

Specialist

Fanatical Experience

Fanatical Experience

Hybrid Hosting Suite

Hybrid Hosting Suite

•

The Leader and                          in Hosted Computing

•

for Businesses

•

Complete                                        

of Hosted Computing Services

On Demand Computing: Customer Value Proposition

5

It’s Easier:

•

Automated and Productized

•

Plug and Play

It’s More Valuable:

•

Technical Headaches Belong to Us

•

Fit to Need

•

Offloads Maintenance

•

Redirects IT Focus to Higher Value

Work

It’s Cheaper:

•

Scale Economies

•

Shared for Higher Utilization

•

Frees Up Capital

•

Complex Asset to Routine Variable

Cost

Existing Market Opportunity is Large and Growing Rapidly

Adoption of Cloud Technologies Radically Increases an Already Attractive Opportunity

IT Services Market Today

IT Services Market Tomorrow

HOSTING

Captures a Greater

Share of the IT

Market Over Time

6

Source:

Tier1Research

(Managed

Hosting:

US

Market

Overview

Winter

2009);

IDC

estimates

for

Cloud

market

data

2011

2007

$17.8B

27.6% CAGR

$6.7B

Cloud Hosting Market:

2012

2008

$42.3B

27.1% CAGR

$16.2B

Managed Hosting Market:

Complete Hybrid Hosting Suite

7

Principles

•

Right solution for right job

•

Interoperability for more power and flexibility

Hybrid

Hosting

Suite

Example

–

IT

for

ShopLocal

8

(Gannett)

Why is Fanatical Support Key to Our Business Model? 

Fanatical Support drives higher profitability and returns

9

•

Lower Churn:  Extends customer lifecycle, reduces sales & marketing costs and increases capital efficiencies

•

Customer Promoters:  Viral selling opportunity drives lower customer acquisition costs and higher margins

•

More Engaged Employees: Higher-performing employees with lower employee churn

Rackspace –

Business Model Attributes

10

Hosting Suite Attracts Broad Group of Customers

•

General purpose technology service

•

53,300 customers as of 12/31/2008

•

No customer >1% of sales

Fanatical Support Differentiation Delivers Growth

•

Subscription based, recurring revenue model

•

World class technology service experience for businesses

•

Cloud offering experiencing hyper growth

“Loyalty Model”

Drives Profitability and Returns

•

Disciplined focus on profitable growth using unit based

economics

•

Lean services delivery model

•

$21.7M total net income in 2008

$56.6

$86.8

$138.8

$224.0

$362.0

$531.9

2003

2004

2005

2006

2007

2008

ANNUAL REVENUE($M)

$91.3

$145.3

$-

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

$180.0

$200.0

2007

2008

Annual

Adj

EBITDA

($M)

Annual Adj

EBITDA

Profits and Returns Trending Higher Despite Slower Economy

Quarterly Results 2008

11

10.6%

7.6%

8.5%

10.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

Q1

Q2

Q3

Q4

Return on Capital

$17.8

$21.7

$-

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

2007

2008

Annual NI ($M)

Annual NI

59.1% Growth

21.7% Growth

$31.9

$33.8

$37.0

$42.6

26.7%

25.9%

26.7%

29.7%

23.0%

24.0%

25.0%

26.0%

27.0%

28.0%

29.0%

30.0%

31.0%

$-

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

$40.0

$45.0

Q1

Q2

Q3

Q4

Adjusted EBITDA ($M)

Adjusted EBITDA

Margin

$5.4

$4.2

$5.2

$6.8

4.5%

3.2%

3.8%

4.8%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

$-

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

Q1

Q2

Q3

Q4

Net Income ($M)

Net Income

Margin

Strong Balance Sheet and Fully Funded

Capitalization and Leverage ($M)

Liquidity Highlights

•

Raised $145M of IPO proceeds in 2008

•

2009 Capex of $105M -

$160M down from $251M in

2008

•

2009 Capex estimates:

•

Customer Equipment $75-$100M

•

Data Centers $10-$25M

•

Office $10-$15M

•

Cap Software and Other $10-$20M

•

Any cash burn in 2009 will be minimal

•

Fully funded with IPO proceeds, existing $245M Credit

Facility and vendor financing leases

12

Cash and Cash Equivalents

$238.4

Capital Lease Obligations

$89.7

Debt

$210.7

Total Interest-bearing Debt

$300.4

Total Stockholder’s Equity

$269.7

Total Capitalization

$570.1

Total Debt/2008 Adj. EBITDA

2.07x

Net Debt/2008 Adj. EBITDA

0.43x

Note:  Capitalization as of December 31, 2008

2009 Strategic Plan

13

We expect to grow top line despite a tough economic environment

•

Continue to lead market share uptake, however, expect growth to be slower than 2008

•

Right

size

solution

for

our

customers

–

continue

rapid

traction

in

the

cloud

•

Maintain discipline of only adding profitable customers

Focus on higher profitability and returns in 2009

•

Continue

to

scale

Managed

Hosting

business

–

customer

acquisition,

service

delivery

and

administrative

functions

•

Improved internal systems and processes also expected to positively impact margins

Cash burn expected to be minimal and potential for FCF break-even in 2009

•

Capex

is highly success based

•

Capex

expected to be significantly lower in 2009

GAAP Reconciliation

14

(In thousands)

March 31, 2008

June 30, 2008

September 30, 2008

December 31, 2008

2007

2008

(Unaudited)

Net income

5,442

$                     

4,182

$                  

5,235

$                  

6,844

$                   

17,829

$            

21,703

$        

   Plus: Income taxes

1,083

1,661

2,199

2,620

9,965

10,985

   Plus: Total other (income) expense

3,613

2,553

2,056

2,661

2,815

7,461

   Plus: Depreciation and amortization

19,051

21,637

23,174

26,310

56,476

90,172

   Plus: Share-based compensation expense

2,752

3,804

4,317

4,144

4,252

15,017

Adjusted EBITDA

31,941

$                   

33,837

$                

36,981

$                

42,579

$                 

91,337

$            

145,338

$      

(In thousands, except effective tax rate and financial metrics)

March 31, 2008

June 30, 2008

September 30, 2008

December 31, 2008

Income from operations

10,138

$                   

8,396

$                  

9,490

$                  

12,125

$                 

Effective tax rate

39.9%

37.9%

29.6%

27.7%

Net operating profit after tax (NOPAT)

6,093

$                     

5,214

$                  

6,681

$                  

8,766

$                   

Net income

5,442

$                     

4,182

$                  

5,235

$                  

6,844

$                   

Average total assets

328,567

$                 

381,815

$              

546,761

$              

685,236

$               

Less: Average excess cash

-

-

(117,710)

(218,021)

Less: Average accounts payable and accrued expenses

(71,071)

(76,494)

(79,837)

(76,564)

Less: Average deferred revenues (current and non-current)

(18,684)

(19,762)

(20,077)

(20,111)

Less: Average other non-current liabilities

(9,200)

(9,624)

(12,892)

(20,043)

Average capital base

229,612

$                 

275,935

$              

316,245

$              

350,497

$               

Return on assets (Net income/Average total assets)

6.6%

4.4%

3.8%

4.0%

Return on capital (NOPAT/Average capital base)

10.6%

7.6%

8.5%

10.0%

Three Months Ended

Years Ended December 31,

(Unaudited)

Three Months Ended

(Unaudited)

15

Customer Economics

Loyalty Model Drives Lifetime Customer Value Potential

Illustrative Scenario

16

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

R

e

t

u

r

n

s

RAX Consolidated

Today

Hybrid Hosting

(Cloud + Managed)

Normalized churn

Normalized margins

(adj. for investments)

Margin increase

adjusted for growth

investments

Churn at 2006-07

pre-recession

levels

Enhanced capital

efficiency from

Cloud adoption

IRR: 37.5%

IRR: 41.0%

IRR: 44.0%

IRR: 29.5%

Adj. EBITDA Margin

27.3%

32.0%

33.0%

34.0%

Defection Churn /

Customer Life

1.3% / 38 months

1.3% / 38 months

0.9% / 56 months

0.8% / 63 months

Capex

(Customer

Gear) Multiple

3.25x

3.25x

3.12x

3.05x

Note: The

calculation

for

average

customer

life

set

forth

for

this

illustrative

scenario,

which

is

38

months,

is

derived

by

dividing

1

by

1.3%

(the

defection

churn

number

used)

and

then

dividing

that

number

by

2,

which

is

a

common

way

to

calculate

average

customer

life

for

operational

purposes

Change from previous case

Customer Level Economics –

RAX Consolidated

Illustrative Scenario

17

Financials:

Revenue (per sqft)

525

$      

Adj. EBITDA

143

$      

Cash Flow

114

$      

Cash Flow margin

21.7%

Avg. Customer Life

38 months

Summary

NPV

$1,050

Annual IRR

29.5%

Payback on DC

12 months

Payback on total capex

27 months

Cash Flows

Month 0

Month 1

Month 2

Month 36

Month 37

Month 38

Cash outlay (DC capex)

(1,388)

$      

-

$       

-

$       

-

$           

-

$       

-

$       

Cash outlay (customer capex)

(1,706)

$      

-

$       

-

$       

(1,706)

$      

-

$       

-

$       

Cash Inflow (MRR)

-

$           

114

$      

114

$      

114

$          

114

$      

114

$      

Cash Inflow (Unused cust capex)

-

$           

-

$       

-

$       

-

$           

-

$       

1,611

$    

Cash Inflow (Unused DC Capex

)

-

$           

-

$       

-

$       

-

$           

-

$       

948

$      

Net Cash Flow

(3,094)

$      

114

$      

114

$      

(1,592)

$      

114

$      

2,674

$    

PV of Net Cash Flow

(3,094)

$      

113

$      

112

$      

(1,113)

$      

79

$        

1,832

$    

Assumptions

DC Build (per sqft)

1,388

$    

Life (in months)

120

Customer Gear (per sqft)

1,706

$    

Life (in months)

36

Replacement Capex

1,706

$    

Life (in months)

36

Capex multiple

3.25x

Revenue (per sqft utilized)

525

$      

Defection churn rate

1.30%

Adj. EBITDA margin

27.3%

Tax rate

35.0%

Discount rate (annual)

12%

Note:  This

page

contains

certain

assumptions

including

but

not

limited

to,

assumptions

used

to

derive

metrics

such

as

the

capex

metrics

and

average

customer life

Customer Level Economics –

RAX Hybrid Hosting

Illustrative Scenario

18

Financials:

Revenue (per sqft)

525

$      

Adj. EBITDA

179

$      

Cash Flow

136

$      

Cash Flow margin

25.8%

Avg. Customer Life

63 months

Summary

NPV

$2,775

Annual IRR

44.0%

Payback on DC

10 months

Payback on total capex

22 months

Cash Flows

Month 0

Month 1

Month 2

Month 36

Month 37

Month 38

Month 63

Cash outlay (DC capex)

(1,388)

$      

-

$       

-

$       

-

$           

-

$       

-

$       

-

$      

Cash outlay (customer capex)

(1,601)

$      

-

$       

-

$       

(1,601)

$      

-

$       

-

$       

-

$      

Cash Inflow (MRR)

-

$           

136

$      

136

$      

136

$          

136

$      

136

$      

136

$      

Cash Inflow (Unused cust capex)

-

$           

-

$       

-

$       

-

$           

-

$       

-

$       

400

$      

Cash Inflow (Unused DC Capex

)

-

$           

-

$       

-

$       

-

$           

-

$       

-

$       

659

$      

Net Cash Flow

(2,989)

$      

136

$      

136

$      

(1,466)

$      

136

$      

136

$      

1,195

$   

PV of Net Cash Flow

(2,989)

$      

134

$      

133

$      

(1,024)

$      

94

$        

93

$        

639

$      

Assumptions

DC Build (per sqft)

1,388

$    

Life (in months)

120

Customer Gear (per sqft)

1,601

$    

Life (in months)

36

Replacement Capex

1,601

$    

Life (in months)

36

Capex multiple

3.05x

Revenue (per sqft utilized)

525

$      

Defection churn rate

0.80%

Adj. EBITDA margin

34.0%

Tax rate

35.0%

Discount rate (annual)

12%

Note:  Assumptions

include

all

adjustments

to

adjusted

EBITDA,

defection

churn,

customer

life

and

the

capex

metrics

set

forth

on

page

16,

some

or

all

of which

may not

result directly from

a Hybrid Hosting solution