- First quarter total revenue of $677
million, up 19% year-over-year or 20% in constant currency
- First quarter total subscription
revenue of $597 million, up 19% year-over-year or 20% in constant
currency
- First quarter Application
Development-related and other emerging technology subscription
revenue of $139 million, up 41% year-over-year or 42% in constant
currency
- Quarter-end deferred revenue balance of
$2.05 billion, up 21% year-over-year
Red Hat, Inc. (NYSE: RHT), the world's leading provider of open
source solutions, today announced financial results for the first
quarter of fiscal year 2018 ended May 31, 2017.
“The first quarter was a strong start to FY18, with double digit
growth across a number of our financial metrics, including 19%
total revenue growth in U.S. dollars or 20% measured in constant
currency and over 40% growth in our Application Development-related
and other emerging technology revenue," stated Jim Whitehurst,
President and Chief Executive Officer of Red Hat. "We continued to
benefit from our ability to deliver important foundational and
cloud enabling technologies, which help our customers to modernize
and manage their infrastructure and application development
platforms for the hybrid cloud."
"The strength of the first quarter results was driven in part by
robust global demand for our technologies and increased commitments
from our largest customers," stated Eric Shander, Executive Vice
President and Chief Financial Officer of Red Hat. "The combination
of our strong first quarter results, business momentum and solid
execution by Red Hat associates has enabled us to increase our full
year revenue outlook."
Revenue: Total revenue for the quarter was $677 million,
up 19% in USD year-over-year, or 20% measured in constant currency.
Constant currency references in this release are detailed in the
tables below. Subscription revenue for the quarter was $597
million, up 19% in USD year-over-year, or 20% measured in constant
currency. Subscription revenue in the quarter was 88% of total
revenue.
Subscription Revenue Breakout: Subscription revenue from
Infrastructure-related offerings for the quarter was $458 million,
an increase of 14% in USD year-over-year, and 14% as measured in
constant currency. Subscription revenue from Application
Development-related and other emerging technologies offerings for
the quarter was $139 million, an increase of 41% in USD
year-over-year, or 42% measured in constant currency.
Operating Income: GAAP operating income for the quarter
was $88 million, up 16% year-over-year. After adjusting for
non-cash share-based compensation expense, amortization of
intangible assets, and transaction costs related to business
combinations, non-GAAP operating income for the first quarter was
$139 million, up 12% year-over-year. Non-GAAP references in this
release are detailed in the tables below. For the first quarter,
GAAP operating margin was 12.9% and non-GAAP operating margin was
20.5%.
Net Income: GAAP net income for the quarter was $73
million, or $0.40 per diluted share, compared with $61 million, or
$0.33 per diluted share, in the year-ago quarter.
After adjusting for non-cash share-based compensation expense,
amortization of intangible assets, transaction costs related to
business combinations and non-cash interest expense related to the
debt discount, non-GAAP net income for the quarter was $102
million, or $0.56 per diluted share, as compared to $92 million, or
$0.50 per diluted share, in the year-ago quarter. Non-GAAP diluted
weighted average shares outstanding excludes any dilution resulting
from our convertible notes because any potential dilution is
expected to be offset by our convertible note hedge
transactions.
Cash: Operating cash flow was $258 million for the first
quarter, an increase of 11% on a year-over-year basis. Total cash,
cash equivalents and investments as of May 31, 2017 was $2.31
billion after repurchasing approximately $62 million, or 714,900
shares, of common stock in the first quarter. The remaining balance
in the current repurchase authorization as of May 31, 2017 was
approximately $574 million.
Deferred revenue: At the end of the first quarter, the
company’s total deferred revenue balance was $2.05 billion, an
increase of 21% year-over-year. The full year positive impact to
total deferred revenue from changes in foreign exchange rates was
$13 million year-over-year. On a constant currency basis, total
deferred revenue would have been up 21% year-over-year.
Outlook: Red Hat’s outlook assumes current business
conditions and current foreign currency exchange rates.
For the full year:
- Revenue is expected to be approximately
$2.785 billion to $2.825 billion in USD.
- GAAP operating margin is expected to be
approximately 15.4% and non-GAAP operating margin is expected to be
approximately 23.6%.
- Fully diluted GAAP earnings per share
(EPS) is expected to be approximately $1.76 to $1.80 per share,
assuming 181 million fully diluted shares outstanding. Fully
diluted non-GAAP EPS is expected to be approximately $2.66 to $2.70
per share, assuming 180 million fully diluted shares outstanding.
Both GAAP and non-GAAP EPS assume approximately $2 million per
quarter forecast for other income and an estimated annual effective
tax rate of approximately 28% before discrete tax items.
- Operating cash flow is expected to be
approximately $850 million to $870 million.
For the second quarter:
- Revenue is expected to be approximately
$695 million to $702 million.
- GAAP operating margin is expected to be
approximately 15.7% and non-GAAP operating margin is expected to be
approximately 24.0%.
- Fully diluted GAAP EPS is expected to
be approximately $0.43 per share, assuming 182 million fully
diluted shares outstanding. Fully diluted non-GAAP EPS is expected
to be approximately $0.67 per share, assuming 181 million fully
diluted shares outstanding. Both GAAP and non-GAAP EPS assume a $2
million per quarter forecast for other income and an estimated
annual effective tax rate of 28% before discrete tax items.
GAAP to non-GAAP reconciliation:
Full year non-GAAP operating margin guidance is derived by
subtracting the estimated full year impact of non-cash share-based
compensation expense of approximately $200 million, amortization of
intangible assets of approximately $30 million and transaction
costs related to business combinations of approximately $0.1
million. Full year fully diluted non-GAAP EPS guidance is derived
by subtracting the expenses listed in the previous sentence and the
full year impact of non-cash interest expense related to the debt
discount of approximately $20 million and an estimated annual
effective tax rate of approximately 28% before discrete tax items.
Additionally, full year fully diluted non-GAAP EPS excludes
approximately $20 million of discrete tax benefits related to
share-based compensation that are included in full year fully
diluted GAAP EPS. Full year fully diluted non-GAAP EPS excludes
approximately 1 million diluted shares resulting from the
convertible notes because any potential dilution is expected to be
offset by our convertible note hedge transactions.
Second quarter non-GAAP operating margin guidance is derived by
subtracting the estimated impact of non-cash share-based
compensation expense of approximately $50 million and amortization
of intangible assets of approximately $8 million. Second quarter
fully diluted non-GAAP EPS guidance is derived by subtracting the
expenses listed in the previous sentence and non-cash interest
expense related to the debt discount of approximately $5 million
and an estimated annual effective tax rate of 28% before discrete
tax items. Additionally, second quarter fully diluted non-GAAP EPS
excludes approximately $3 million of discrete tax benefits related
to share-based compensation that are included in second quarter
fully diluted GAAP EPS. Second quarter fully diluted non-GAAP EPS
excludes approximately 1 million diluted shares resulting from the
convertible notes because any potential dilution is expected to be
offset by our convertible note hedge transactions.
Webcast and Website Information
A live webcast of Red Hat's results will begin at 5:00 pm ET
today. The webcast, in addition to a copy of our prepared remarks
and slides containing financial highlights and supplemental
metrics, can be accessed by the general public at Red Hat's
investor relations website at http://investors.redhat.com. A replay
of the webcast will be available shortly after the live event has
ended. Additional information on Red Hat's reported results,
including a reconciliation of the non-GAAP adjusted results, are
included in the financial tables below.
About Red Hat, Inc.
Red Hat is the world's leading provider of open source software
solutions, using a community-powered approach to provide reliable
and high-performing cloud, Linux, middleware, storage and
virtualization technologies. Red Hat also offers award-winning
support, training, and consulting services. As a connective hub in
a global network of enterprises, partners, and open source
communities, Red Hat helps create relevant, innovative technologies
that liberate resources for growth and prepare customers for the
future of IT. Learn more at http://www.redhat.com.
Forward-Looking Statements
Certain statements contained in this press release may
constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements provide current expectations of future events based on
certain assumptions and include any statement that does not
directly relate to any historical or current fact. Actual results
may differ materially from those indicated by such forward-looking
statements as a result of various important factors, including:
risks related to the ability of the Company to compete effectively;
the ability to deliver and stimulate demand for new products and
technological innovations on a timely basis; delays or reductions
in information technology spending; the integration of acquisitions
and the ability to market successfully acquired technologies and
products; fluctuations in exchange rates; the effects of industry
consolidation; uncertainty and adverse results in litigation and
related settlements; the inability to adequately protect Company
intellectual property and the potential for infringement or breach
of license claims of or relating to third party intellectual
property; risks related to data and information security
vulnerabilities; changes in and a dependence on key personnel; the
ability to meet financial and operational challenges encountered in
our international operations; and ineffective management of, and
control over, the Company's growth and international operations, as
well as other factors contained in our most recent Annual Report on
Form 10-K (copies of which may be accessed through the Securities
and Exchange Commission's website at http://www.sec.gov), including
those found therein under the captions "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations". In addition to these factors, actual future
performance, outcomes, and results may differ materially because of
more general factors including (without limitation) general
industry and market conditions and growth rates, economic and
political conditions, governmental and public policy changes and
the impact of natural disasters such as earthquakes and floods. The
forward-looking statements included in this press release represent
the Company's views as of the date of this press release and these
views could change. However, while the Company may elect to update
these forward-looking statements at some point in the future, the
Company specifically disclaims any obligation to do so. These
forward-looking statements should not be relied upon as
representing the Company's views as of any date subsequent to the
date of this press release.
Red Hat and the Shadowman logo are trademarks
or registered trademarks of Red Hat, Inc. or its subsidiaries in
the U.S. and other countries. Linux® is the registered trademark of
Linus Torvalds in the U.S. and other countries.
RED HAT, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited) (In thousands - except per share
amounts)
Three Months Ended May 31,
May 31, 2017 2016 Revenue:
Subscriptions $596,508 $501,665 Training and services 80,288 66,234
Total subscription and training and services revenue 676,796
567,899 Cost of revenue: Subscriptions 43,633 36,545
Training and services 57,063 47,503 Total cost of
subscription and training and services revenue 100,696 84,048
Gross profit 576,100 483,851 Operating expense: Sales
and marketing 296,459 243,248 Research and development 137,163
115,016 General and administrative 54,870 50,224 Total
operating expense 488,492 408,488 Income from operations
87,608 75,363 Interest income 3,993 3,430 Interest expense 6,085
5,887 Other income (expense), net (586) (553) Income
before provision for income taxes 84,930 72,353 Provision for
income taxes 11,740 11,169 Net income $73,190 $61,184
Net income per share: Basic $0.41 $0.34 Diluted $0.40 $0.33
Weighted average shares outstanding: Basic 177,243 181,168 Diluted
181,810 184,187
RED HAT, INC. CONSOLIDATED
BALANCE SHEETS (Unaudited) (In thousands)
ASSETS
May 31, February 28, 2017 2017 (1)
Current assets: Cash and cash equivalents $1,230,457
$1,090,808 Investments in debt securities, short-term 408,026
369,983 Accounts receivable, net 429,908 634,821 Prepaid expenses
192,551 200,609 Other current assets 40,707 19,481 Total
current assets 2,301,649 2,315,702 Property and equipment,
net 195,281 189,629 Goodwill 1,047,038 1,040,709 Identifiable
intangibles, net 133,365 137,767 Investments in debt securities,
long-term 671,098 672,440 Deferred tax assets, net 92,829 104,833
Other assets, net 71,176 74,105 Total assets $4,512,436
$4,535,185
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Accounts payable and accrued expenses $303,668
$376,957 Deferred revenue, short-term 1,486,409 1,512,762 Other
current obligations 1,303 1,354 Total current liabilities
1,791,380 1,891,073 Deferred revenue, long-term 567,755
557,194 Convertible notes 751,173 745,633 Other long term
obligations 96,584 93,965 Stockholders' equity: Common stock 24 24
Additional paid-in capital 2,295,123 2,294,462 Retained earnings
1,426,181 1,352,991 Treasury stock, at cost (2,350,044) (2,311,805)
Accumulated other comprehensive loss (65,740) (88,352) Total
stockholders' equity 1,305,544 1,247,320 Total liabilities
and stockholders' equity $4,512,436 $4,535,185 (1) Derived
from audited financial statements
RED HAT,
INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended May
31, May 31, 2017 2016 Cash flows
from operating activities: Net income $73,190 $61,184
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 21,817 20,702 Amortization of debt
discount and transaction costs 5,540 5,365 Share-based compensation
expense 43,718 41,275 Deferred income taxes 7,917 (2,152) Net
amortization of bond premium on debt securities available for sale
2,436 3,540 Other 961 (765) Changes in operating assets and
liabilities net of effects of acquisitions: Accounts receivable
208,761 190,330 Prepaid expenses (7,708) (9,373) Accounts payable
and accrued expenses (55,338) (30,186) Deferred revenue (45,717)
(46,093) Other 2,295 (1,530) Net cash provided by operating
activities 257,872 232,297 Cash flows from investing
activities: Purchase of investment in debt securities available for
sale (149,524) (134,601) Proceeds from maturities of investment in
debt securities available for sale 112,041 99,033 Proceeds from
sales of investments in debt securities available for sale 14,324
18,149 Purchase of developed software and other intangible assets
(1,774) (2,868) Purchase of property and equipment (25,900)
(17,653) Other - (111) Net cash used in investing activities
(50,833) (38,051) Cash flows from financing activities:
Proceeds from exercise of common stock options 2,968 1,380 Proceeds
from employee stock purchase program 11,761 - Purchase of treasury
stock (61,987) (66,478) Payments related to net settlement of
share-based compensation awards (41,010) (31,079) Payments on other
borrowings (443) (445) Other - 500 Net cash used in
financing activities (88,711) (96,122) Effect of foreign
currency exchange rates on cash and cash equivalents 21,321 5,663
Net increase (decrease) in cash and cash equivalents 139,649
103,787 Cash and cash equivalents at beginning of the period
1,090,808 927,778 Cash and cash equivalents at end of period
$1,230,457 $1,031,565
RED HAT, INC.
RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED
RESULTS (Unaudited) (In thousands - except per share amounts)
Non cash share-based compensation expense included in
Consolidated Statements of Operations:
Three Months
Ended May 31, May 31, 2017 2016
Cost of revenue $3,948 $4,305 Sales and marketing 20,612
18,440 Research and development 13,447 12,002 General and
administration 5,711 6,528 Total share-based compensation expense
$43,718 $41,275 Amortization of intangible assets
expense included in Consolidated Statements of Operations:
Three Months Ended May 31, May 31, 2017
2016 Cost of revenue $3,836 $3,623 Sales and
marketing 1,459 1,916 Research and development 34 34 General and
administration 1,826 1,753 Total amortization of intangible assets
expense $7,155 $7,326 Non-cash interest expense
related to the debt discount included in Consolidated Statements of
Operations:
Three Months Ended May 31, May
31, 2017 2016 Total non-cash interest
expense related to the debt discount $4,867 $4,732
Transaction costs related to business combinations included in
Consolidated Statements of Operations:
Three Months
Ended May 31, May 31, 2017 2016
Transaction costs related to business combinations $142 -
Three Months Ended May 31, May
31, 2017 2016 GAAP net income $73,190
$61,184 GAAP provision for income taxes 11,740 11,169
GAAP income before provision for income taxes $84,930 $72,353
Add: Non-cash share-based compensation expense 43,718 41,275
Add: Amortization of intangible assets 7,155 7,326 Add: Non-cash
interest expense related to the debt discount 4,867 4,732 Add:
Transaction costs related to business combinations 142 -
Non-GAAP adjusted income before provision for income taxes $140,812
$125,686 Non-GAAP provision for income taxes (1) 39,115
33,507 Non-GAAP adjusted net income (basic and diluted)
$101,697 $92,179 Non-GAAP adjusted diluted weighted average
shares outstanding: GAAP diluted weighted average shares
outstanding 181,810 184,187 Dilution offset from convertible note
hedge transactions (1,593) - Non-GAAP diluted weighted average
shares outstanding 180,217 184,187 Non-GAAP adjusted net
income per share: Basic $0.57 $0.51 Diluted $0.56 $0.50
(1) Non-GAAP provision for income taxes: Non-GAAP adjusted
income before provision for income taxes $140,812 $125,686 GAAP
estimated annual effective tax rate 27.5% 27.0% Provision for
income taxes on Non-GAAP adjusted net income before discrete tax
benefits $38,723 $33,935 Discrete tax expense (benefit), excluding
discrete benefits related to share-based compensation 392 (428)
Provision for income taxes on Non-GAAP adjusted net income
excluding discrete benefits related to share-based compensation
$39,115 $33,507
RED HAT, INC.
RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED
RESULTS (Unaudited) (In thousands) Reconciliation
of GAAP results to non-GAAP adjusted results
Three Months
Ended May 31, May 31, 2017 2016
GAAP gross profit $576,100 $483,851 Add: Non-cash
share-based compensation expense 3,948 4,305 Add: Amortization of
intangible assets 3,836 3,623 Non-GAAP gross profit $583,884
$491,779 Non-GAAP gross margin 86.3% 86.6%
Three Months Ended May 31, May 31, 2017
2016 GAAP operating expenses $488,492 $408,488
Deduct: Non-cash share-based compensation expense (39,770) (36,970)
Deduct: Amortization of intangible assets (3,319) (3,703) Deduct:
Transaction costs related to business combinations (142) -
Non-GAAP adjusted operating expenses $445,261 $367,815
Three Months Ended May 31, May 31,
2017 2016 GAAP operating income $87,608
$75,363 Add: Non-cash share-based compensation expense
43,718 41,275 Add: Amortization of intangible assets 7,155 7,326
Add: Transaction costs related to business combinations 142 -
Non-GAAP adjusted operating income $138,623 $123,964
Non-GAAP adjusted operating margin 20.5% 21.8%
Three Months Ended May 31, May 31,
Year-Over-Year 2017 2016 Growth Rate
GAAP subscription revenue by offering type
Infrastructure-related offerings $457,961 $403,182 13.6% Adjustment
for currency impact 3,336 - Non-GAAP Infrastructure-related
subscription revenue on a constant currency basis $461,297 $403,182
14.4% Application development-related and other emerging
technology offerings $138,547 $98,483 40.7% Adjustment for currency
impact 1,087 - Non-GAAP Application development-related and other
emerging technology subscription revenue on a constant currency
basis $139,634 $98,483 41.8% GAAP subscription revenue
$596,508 $501,665 18.9% Adjustment for currency impact 4,423 -
Non-GAAP subscription revenue on a constant currency basis $600,931
$501,665 19.8% GAAP training and services revenue $80,288
$66,234 21.2% Adjustment for currency impact 722 - Non-GAAP
training and services revenue on a constant currency basis $81,010
$66,234 22.3% GAAP total subscription, training and services
revenue $676,796 $567,899 19.2% Adjustment for currency impact
5,145 - Non-GAAP total subscription, training and services revenue
on a constant currency basis $681,941 $567,899 20.1%
RED HAT, INC. SUPPLEMENTAL INFORMATION
(Unaudited) (In thousands)
Change in deferred
revenue balances
Current DeferredRevenue
Long-TermDeferredRevenue
Total DeferredRevenue
Balance at May 31, 2016 $1,251,096 $441,060
$1,692,156 Constant currency change in deferred revenue (1) 226,923
122,344 349,267 Impact from foreign currency translation 8,390
4,351 12,741 Balance at May 31, 2017 $1,486,409 $567,755 $2,054,164
Year-over-year growth rate 18.8% 28.7% 21.4% Year-over-year
growth rate on a constant currency basis 18.1% 27.7% 20.6%
(1) Change in deferred revenue includes approximately $0.4 million
acquired as part of a business combination.
Revenue growth by geographical segment Americas
EMEA APAC Consolidated Total revenue
for the three months ended May 31, 2017 $438,380 $143,671 $94,745
$676,796 Adjustment for currency impact (922) 5,654 413 5,145 Total
revenue on a constant currency basis for the three months ended May
31, 2017 $437,458 $149,325 $95,158 $681,941 Total revenue
for the three months ended May 31, 2016 $365,723 $124,299 $77,877
$567,899 Year-over-year growth rate 19.9% 15.6% 21.7% 19.2%
Year-over-year growth rate on a constant currency basis 19.6% 20.1%
22.2% 20.1%
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170620006353/en/
Media Contact:Red Hat, Inc.Stephanie Wonderlick,
571-421-8169swonderl@redhat.comorInvestor Relations:Red Hat,
Inc.Tom McCallum, 919-754-4630tmccallum@redhat.com
Red Hat (NYSE:RHT)
Historical Stock Chart
From Mar 2024 to Apr 2024
Red Hat (NYSE:RHT)
Historical Stock Chart
From Apr 2023 to Apr 2024