 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 |