RHT
$88.58
Red Hat
($.19)
(.21%)
Earnings Details
4th Quarter February 2017
Monday, March 27, 2017 4:15:00 PM
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Summary

Red Hat Beats

Red Hat (RHT) reported 4th Quarter February 2017 earnings of $0.64 per share on revenue of $628.8 million. The consensus earnings estimate was $0.61 per share on revenue of $618.5 million. The Earnings Whisper number was $0.63 per share. Revenue grew 15.7% on a year-over-year basis.

The company said it expects first quarter earnings of $0.52 to $0.53 per share on revenue of $643.0 million to $650.0 million and fiscal 2018 earnings of $2.60 to $2.64 per share on revenue of $2.72 billion to $2.76 billion. The current consensus earnings estimate is $0.59 per share on revenue of $643.7 million for the quarter ending May 31, 2017 and $2.59 per share on revenue of $2.71 billion for the year ending February 28, 2018.

Red Hat Inc is a provider of open source software solutions, using a community-powered approach to develop and offer reliable and high-performing operating system, middleware, virtualization, storage and cloud technologies.

Results
Reported Earnings
$0.64
Earnings Whisper
$0.63
Consensus Estimate
$0.61
Reported Revenue
$628.8 Mil
Revenue Estimate
$618.5 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Red Hat Reports Fourth Quarter and Fiscal Year 2017 Results

Fourth quarter subscription revenue of $560 million, up 17% year-over-year; full fiscal year subscription revenue of $2.1 billion, up 18% year-over-year

Fourth quarter Application development-related and other emerging technology subscription revenue of $125 million, up 40% year-over-year; full fiscal year Application development-related and other emerging technology subscription revenue of $439 million, up 36% year-over-year

--Year-end deferred revenue balance of $2.1 billion, up 20% year-over-year

Red Hat, Inc. (RHT), the world’s leading provider of open source solutions, today announced financial results for its fiscal fourth quarter and fiscal year ended February 28, 2017.

"We closed the year with an exceptional performance. The fourth quarter marked our 60th consecutive quarter of revenue growth, and we crossed the $2 billion milestone in subscription revenue and total deferred revenue for the fiscal year," stated Jim Whitehurst. "As customers embrace digital transformation, they are turning to Red Hat as a strategic partner to deliver solutions that can help them realize the benefits of these initiatives. Enterprises and service providers are increasingly adopting hybrid cloud infrastructures and open source technologies, which is fueling our growth and positioning Red Hat for the long-term."

"Our strategic position with customers is evidenced by the continued growth in large commitments to Red Hat. The number of deals greater than $1 million in fiscal 2017 grew by over 30% annually, and we closed a record number of deals over $20 million, including our first-ever deal of approximately $100 million in the fourth quarter," stated Eric Shander, acting Chief Financial Officer of Red Hat. "This performance also drove a record backlog of $2.7 billion in U.S. dollars, up 28% year-over-year which contributes to our fiscal year 2018 revenue outlook of 13% to 14% growth and should help drive expanded GAAP operating margin of 15.2% and non-GAAP operating margin of 23.6%."

Revenue: Total revenue for the quarter was $629 million, up 16% year-over-year both in U.S. dollars and measured in constant currency. Constant currency references in this release are detailed in the tables below. Subscription revenue for the quarter was $560 million, up 17% year-over-year both in U.S. dollars and measured in constant currency. Subscription revenue in the quarter was 89% of total revenue.

Full fiscal year 2017 total revenue was $2.4 billion, up 18% in U.S. dollars year-over-year, or 17% measured in constant currency. Subscription revenue for the full fiscal year was $2.1 billion, up 18% year-over-year both in U.S. dollars and measured in constant currency. Subscription revenue in the full fiscal year was 89% of total revenue.

Subscription Revenue Breakout: Subscription revenue from Infrastructure-related offerings for the quarter was $435 million, an increase of 11% in U.S. dollars year-over-year and 12% measured in constant currency. Subscription revenue from Application development-related and other emerging technologies offerings for the quarter was $125 million, an increase of 40% year-over-year both in U.S. dollars and measured in constant currency.

Full fiscal year subscription revenue from Infrastructure-related offerings was $1.7 billion, an increase of 15% in U.S. dollars year-over-year and 14% measured in constant currency. Full fiscal year subscription revenue from Application Development-related and other emerging technologies offerings was $439 million, an increase of 36% year-over-year both in U.S. dollars and measured in constant currency.

Operating Income: GAAP operating income for the quarter was $94 million, up 31% 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 fourth quarter was $153 million, up 23% year-over-year. Non-GAAP references in this release are detailed in the tables below. For the fourth quarter, GAAP operating margin was 15.0% and non-GAAP operating margin was 24.3%.

Full fiscal year GAAP operating income was $332 million, up 15% 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 full fiscal year was $556 million, up 15% year-over-year. Full fiscal year GAAP operating margin was 13.8% and non-GAAP operating margin was 23.1%.

Net Income: GAAP net income for the quarter was $66 million, or $0.36 per diluted share, compared with $53 million, or $0.29 per diluted share, in the year-ago quarter. During the fourth quarter of fiscal year 2017, GAAP net income and earnings per diluted share benefited by approximately $1 million from the adoption of Accounting Standards Update 2016-09 ("ASU 2016-09") in the first fiscal quarter of 2017.

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 $110 million, or $0.61 per diluted share, as compared to $97 million, or $0.52 per diluted share, in the year-ago quarter. Non-GAAP diluted weighted average shares outstanding excludes any dilution resulting from the convertible notes because any potential dilution is expected to be offset by our convertible note hedge transactions.

Full fiscal year GAAP net income was $254 million, or $1.39 per diluted share, compared with $199 million, or $1.07 per diluted share, in the prior fiscal year. 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 full fiscal year was $414 million, or $2.27 per diluted share, as compared to $355 million, or $1.91 per diluted share, in the prior fiscal year.

Cash: Operating cash flow was $318 million for the fourth quarter, an increase of 27% on a year-over-year basis. Full fiscal year operating cash flow was $784 million. Total cash, cash equivalents and investments as of February 28, 2017 was $2.1 billion after repurchasing approximately $139 million, or approximately 1.9 million shares, of common stock in the fourth quarter. The remaining balance in the current repurchase authorization as of February 28, 2017 was approximately $636 million.

Deferred revenue and backlog: Total backlog for fiscal year 2017 was in excess of $2.7 billion, up 28% year-over-year. We define total backlog as the value of non-cancellable subscription and service agreements, including total deferred revenue, which is billed, plus the value of non-cancellable subscription and service agreements to be billed in the future not reflected in our financial statements. At the end of the fiscal year, the company’s total deferred revenue balance was $2.1 billion, an increase of 20% year-over-year. The full year negative impact to total deferred revenue from changes in foreign exchange rates was approximately $1 million year-over-year. On a constant currency basis, total deferred revenue would have been up 20% year-over-year.

The portion of total backlog to be billed in the future not reflected in our financial statements was in excess of $650 million as of February 28, 2017, compared with the ending balance in excess of $410 million reported for fiscal year 2016. The portion of total backlog to be billed during fiscal year 2018 was in excess of $330 million as of February 28, 2017, compared with in excess of $275 million for the fiscal year ended February 29, 2016.

Outlook: Red Hat’s outlook assumes current business condition and current foreign currency exchange rates.

For the full year:

Revenue is expected to be $2.720 billion to $2.760 billion in U.S. dollars.

GAAP operating margin is expected to be approximately 15.2% and non-GAAP operating margin is expected to be approximately 23.6%.

Fully diluted GAAP earnings per share (EPS) is expected to be approximately $1.69 to $1.73 per share, assuming 181 million fully diluted shares outstanding. Fully diluted non-GAAP EPS is expected to be approximately $2.60 to $2.64 per share, assuming 180 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.

Operating cash flow is expected to be approximately $850 million to $870 million.

For the first quarter:

-- Revenue is expected to be $643 million to $650 million.

GAAP operating margin is expected to be approximately 11.7% and non-GAAP operating margin is expected to be approximately 20.0%.

Fully diluted GAAP EPS is expected to be approximately $0.34 to $0.35 per share, assuming 182 million fully diluted shares outstanding. Fully diluted non-GAAP EPS is expected to be approximately $0.52 to $0.53 per share, assuming 180 million fully diluted shares outstanding. Both GAAP and non-GAAP EPS assume a $2 million 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 and amortization of intangible assets of approximately $30 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 $19 million and an estimated annual effective tax rate of 28% before discrete tax items. Additionally, full year fully diluted non-GAAP EPS excludes approximately $19 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.

First quarter non-GAAP operating margin guidance is derived by subtracting the estimated impact of non-cash share-based compensation expense of approximately $46 million and amortization of intangible assets of approximately $8 million. First 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, first quarter fully diluted non-GAAP EPS excludes approximately $10 million of discrete tax benefits related to share-based compensation that are included in first quarter fully diluted GAAP EPS. First quarter fully diluted non-GAAP EPS excludes approximately 2 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; the ability to meet financial and operational challenges encountered in our international operations; ineffective management of, and control over, the Company’s growth and international operations; and changes in and a dependence on key personnel, as well as other factors contained in our most recent Quarterly Report on Form 10-Q (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(R) 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
Twelve Months Ended
February 28,
February 29,
February 28,
February 29,
2017
2016
2017
2016 (1)
Revenue:
Subscriptions
$559,588
$479,642
$2,135,780
$1,803,449
Training and services
69,252
63,860
276,023
248,781
Total subscription and training and services revenue
628,840
543,502
2,411,803
2,052,230
Cost of revenue:
Subscriptions
42,095
33,575
158,977
126,663
Training and services
50,112
47,645
195,401
182,966
Total cost of subscription and training and services revenue
92,207
81,220
354,378
309,629
Gross profit
536,633
462,282
2,057,425
1,742,601
Operating expense:
Sales and marketing
272,438
229,193
1,036,021
848,950
Research and development
121,918
108,498
480,668
413,322
General and administrative
48,052
52,819
208,491
192,281
Total operating expense
442,408
390,510
1,725,180
1,454,553
Income from operations
94,225
71,772
332,245
288,048
Interest income
3,754
3,189
13,921
11,673
Interest expense
6,002
5,856
23,822
23,121
Other income (expense), net
(304)
(337)
(2,164)
(1,735)
Income before provision for income taxes
91,673
68,768
320,180
274,865
Provision for income taxes (2)
25,870
15,732
66,477
75,500
Net income
$65,803
$53,036
$253,703
$199,365
Net income per share:
Basic
$0.37
$0.29
$1.41
$1.09
Diluted
$0.36
$0.29
$1.39
$1.07
Weighted average shares outstanding:
Basic
177,802
182,099
179,642
182,817
Diluted
181,197
184,888
182,961
186,119
(1) Derived from audited financial statements
(2) Provision for income taxes for the three and twelve months ended
February 28, 2017 includes the impact of early adoption of ASU
2016-09. ASU 2016-09 requires that the amendment related to
accounting for income taxes be adopted on a prospective basis.
Accordingly, the provision for income taxes for the three and twelve
months ended February 29, 2016 has not been adjusted. The provision
for income taxes for the three and twelve months ended February 28,
2017 includes the effect of discrete tax benefits of $0.6 million
and $15.8 million, respectively, related to excess tax benefits from
share-based compensation.
RED HAT, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
ASSETS
February 28,
February 29,
2017
2016 (1)
Current assets:
Cash and cash equivalents
$1,090,808
$927,778
Investments in debt securities, short-term
369,983
281,142
Accounts receivable, net
634,821
509,715
Prepaid expenses
200,609
150,877
Other current assets
19,481
2,921
Total current assets
2,315,702
1,872,433
Property and equipment, net
189,629
166,886
Goodwill
1,040,709
1,027,277
Identifiable intangibles, net
137,767
146,071
Investments in debt securities, long-term
672,440
786,470
Deferred tax assets, net
104,833
111,456
Other assets, net
74,105
44,506
Total assets
$4,535,185
$4,155,099
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses
$376,957
$284,802
Deferred revenue, short-term
1,512,762
1,272,908
Other current obligations
1,354
1,467
Total current liabilities
1,891,073
1,559,177
Convertible notes
745,633
723,942
Deferred revenue, long-term
557,194
449,636
Other long term obligations
93,965
87,912
Stockholders’ equity:
Common stock
23
23
Additional paid-in capital
2,294,463
2,162,264
Retained earnings
1,352,991
1,099,738
Treasury stock, at cost
(2,311,805)
(1,853,144)
Accumulated other comprehensive loss
(88,352)
(74,449)
Total stockholders’ equity
1,247,320
1,334,432
Total liabilities and stockholders’ equity
$4,535,185
$4,155,099
(1) Derived from audited financial statements
RED HAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
Twelve Months Ended
February 28,
February 29,
February 28,
February 29,
2017
2016
2017
2016 (1)
Cash flows from operating activities:
Net income
$65,803
$53,036
$253,703
$199,365
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
21,547
19,144
85,279
76,088
Share-based compensation expense
51,157
45,768
192,530
166,234
Deferred income taxes
6,128
(17,585)
12,327
(13,673)
Excess tax benefits from share-based payment arrangements
527
2,244
16,024
20,231
Net amortization of bond premium on debt securities available for
2,669
3,378
12,623
12,169
sale
Accretion of debt discount and amortization of debt issuance costs
5,480
5,306
21,691
21,003
Other
427
1,657
976
4,418
Changes in operating assets and liabilities net of effects of
acquisitions:
Accounts receivable
(205,598)
(112,919)
(119,102)
(48,404)
Prepaid expenses
(57,400)
(28,104)
(76,787)
(24,486)
Accounts payable and accrued expenses
85,335
58,484
55,002
62,438
Deferred revenue
357,399
220,410
348,534
260,495
Other
(15,215)
(1,122)
(19,083)
445
Net cash provided by operating activities
318,259
249,697
783,717
736,323
Cash flows from investing activities:
Purchase of debt securities available for sale
(85,053)
(199,367)
(500,849)
(982,935)
Proceeds from sales and maturities of debt securities available for
92,514
66,491
500,983
655,622
sale
Acquisition of businesses, net of cash acquired
-
252
(28,667)
(126,459)
Purchase of developed software and other intangible assets
(3,062)
(5,870)
(11,774)
(13,964)
Purchase of property and equipment
(18,687)
(12,095)
(69,123)
(41,553)
Other
(500)
430
(703)
(2,819)
Net cash used in investing activities
(14,788)
(150,159)
(110,133)
(512,108)
Cash flows from financing activities:
Proceeds from exercise of common stock options
556
284
3,829
3,596
Proceeds from employee stock purchase program
11,697
-
18,852
-
Purchase of treasury stock
(139,479)
(114,392)
(458,661)
(262,643)
Payments related to settlement of employee share-based awards
(3,284)
(6,091)
(66,529)
(66,907)
Other
(1,145)
(491)
(1,684)
(1,843)
Net cash used in financing activities
(131,655)
(120,690)
(504,193)
(327,797)
Effect of foreign currency exchange rates on cash and cash
2,314
6,893
(6,361)
(16,113)
equivalents
Net increase (decrease) in cash and cash equivalents
174,130
(14,259)
163,030
(119,695)
Cash and cash equivalents at beginning of the period
916,678
942,037
927,778
1,047,473
Cash and cash equivalents at end of period
$1,090,808
$927,778
$1,090,808
$927,778
(1) Derived from audited financial statements
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
Twelve Months Ended
February 28,
February 29,
February 28,
February 29,
2017
2016
2017
2016
Cost of revenue
$4,157
$3,946
$16,553
$15,898
Sales and marketing
27,952
19,703
93,378
69,089
Research and development
13,639
12,511
52,424
48,466
General and administration
5,409
9,608
30,175
32,781
Total share-based compensation expense
$51,157
$45,768
$192,530
$166,234
Amortization of intangible assets expense included in Consolidated
Statements of Operations:
Three Months Ended
Twelve Months Ended
February 28,
February 29,
February 28,
February 29,
2017
2016
2017
2016
Cost of revenue
$3,861
$3,434
$15,562
$11,726
Sales and marketing
1,562
1,730
7,078
8,075
Research and development
35
(13)
138
842
General and administration
1,787
1,711
7,078
5,160
Total amortization of intangible assets expense
$7,245
$6,862
$29,856
$25,803
Non-cash interest expense related to the debt discount included in
Consolidated Statements of Operations:
Three Months Ended
Twelve Months Ended
February 28,
February 29,
February 28,
February 29,
2017
2016
2017
2016
Total non-cash interest expense related to the debt discount
$4,820
$4,686
$19,104
$18,570
Transaction costs related to business combinations included in
Consolidated Statements of Operations:
Three Months Ended
Twelve Months Ended
February 28,
February 29,
February 28,
February 29,
2017
2016
2017
2016
Transaction costs related to business combinations
-
$40
$1,789
$3,884
Three Months Ended
Twelve Months Ended
February 28,
February 29,
February 28,
February 29,
2017
2016
2017
2016
GAAP net income
$65,803
$53,036
$253,703
$199,365
GAAP provision for income taxes
25,870
15,732
66,477
75,500
GAAP income before provision for income taxes
$91,673
$68,768
$320,180
$274,865
Add: Non-cash share-based compensation expense
51,157
45,768
192,530
166,234
Add: Amortization of intangible assets
7,245
6,862
29,856
25,803
Add: Non-cash interest expense related to the debt discount
4,820
4,686
19,104
18,570
Add: Transaction costs related to business combinations
-
40
1,789
3,884
Non-GAAP adjusted income before provision for income taxes
$154,895
$126,124
$563,459
$489,356
Non-GAAP provision for income taxes (1)
45,203
29,094
149,608
134,431
Non-GAAP adjusted net income (basic and diluted)
$109,692
$97,030
$413,851
$354,925
Non-GAAP adjusted diluted weighted average shares outstanding:
GAAP diluted weighted average shares outstanding
181,197
184,888
182,961
186,119
Dilution offset from convertible note hedge transactions
(492)
(67)
(292)
(282)
Non-GAAP diluted weighted average shares outstanding
180,705
184,821
182,669
185,837
Non-GAAP adjusted net income per share:
Basic
$0.62
$0.53
$2.30
$1.94
Diluted
$0.61
$0.52
$2.27
$1.91
(1) Non-GAAP provision for income taxes:
Non-GAAP adjusted income before provision for income taxes
$154,895
$126,124
$563,459
$489,356
GAAP estimated annual effective tax rate
29.5%
23.1%
27.7%
27.5%
Provision for income taxes on Non-GAAP adjusted net income before
$45,698
$29,094
$156,010
$134,431
discrete tax benefits
Discrete tax expense (benefit), excluding discrete benefits related
(495)
-
(6,402)
-
to share-based compensation
Provision for income taxes on Non-GAAP adjusted net income excluding
$45,203
$29,094
$149,608
$134,431
discrete benefits related to share-based compensation
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
Twelve Months Ended
February 28,
February 29,
February 28,
February 29,
2017
2016
2017
2016
GAAP gross profit
$536,633
$462,282
$2,057,425
$1,742,601
Add: Non-cash share-based compensation expense
4,157
3,946
16,553
15,898
Add: Amortization of intangible assets
3,861
3,434
15,562
11,726
Non-GAAP gross profit
$544,651
$469,662
$2,089,540
$1,770,225
Non-GAAP gross margin
86.6%
86.4%
86.6%
86.3%
Three Months Ended
Twelve Months Ended
February 28,
February 29,
February 28,
February 29,
2017
2016
2017
2016
GAAP operating expenses
$442,408
$390,510
$1,725,180
$1,454,553
Deduct: Non-cash share-based compensation expense
(47,000)
(41,822)
(175,977)
(150,336)
Deduct: Amortization of intangible assets
(3,384)
(3,428)
(14,294)
(14,077)
Deduct: Transaction costs related to business combinations
-
(40)
(1,789)
(3,884)
Non-GAAP adjusted operating expenses
$392,024
$345,220
$1,533,120
$1,286,256
Three Months Ended
Twelve Months Ended
February 28,
February 29,
February 28,
February 29,
2017
2016
2017
2016
GAAP operating income
$94,225
$71,772
$332,245
$288,048
Add: Non-cash share-based compensation expense
51,157
45,768
192,530
166,234
Add: Amortization of intangible assets
7,245
6,862
29,856
25,803
Add: Transaction costs related to business combinations
-
40
1,789
3,884
Non-GAAP adjusted operating income
$152,627
$124,442
$556,420
$483,969
Non-GAAP adjusted operating margin
24.3%
22.9%
23.1%
23.6%
Three Months Ended
February 28,
February 29,
Year-Over-Year
2017
2016
Growth Rate
GAAP subscription revenue by offering type
Infrastructure-related offerings
$435,085
$390,706
11.4%
Adjustment for currency impact
950
-
Non-GAAP Infrastructure-related subscription revenue on a constant
$436,035
$390,706
11.6%
currency basis
Application development-related and other emerging technology
$124,503
$88,936
40.0%
offerings
Adjustment for currency impact
272
-
Non-GAAP Application development-related and other emerging
$124,775
$88,936
40.3%
technology subscription revenue on a constant currency basis
GAAP subscription revenue
$559,588
$479,642
16.7%
Adjustment for currency impact
1,222
-
Non-GAAP subscription revenue on a constant currency basis
$560,810
$479,642
16.9%
GAAP training and services revenue
$69,252
$63,860
8.4%
Adjustment for currency impact
348
-
Non-GAAP training and services revenue on a constant currency basis
$69,600
$63,860
9.0%
GAAP total subscription, training and services revenue
$628,840
$543,502
15.7%
Adjustment for currency impact
1,570
-
Non-GAAP total subscription, training and services revenue on a
$630,410
$543,502
16.0%
constant currency basis
Twelve Months Ended
February 28,
February 29,
Year-Over-Year
2017
2016
Growth Rate
GAAP subscription revenue by offering type
Infrastructure-related offerings
$1,696,443
$1,480,463
14.6%
Adjustment for currency impact
(8,895)
-
Non-GAAP Infrastructure-related subscription revenue on a constant
$1,687,548
$1,480,463
14.0%
currency basis
Application development-related and other emerging technology
$439,337
$322,986
36.0%
offerings
Adjustment for currency impact
(1,330)
-
Non-GAAP Application development-related and other emerging
$438,007
$322,986
35.6%
technology subscription revenue on a constant currency basis
GAAP subscription revenue
$2,135,780
$1,803,449
18.4%
Adjustment for currency impact
(10,225)
-
Non-GAAP subscription revenue on a constant currency basis
$2,125,555
$1,803,449
17.9%
GAAP training and services revenue
$276,023
$248,781
11.0%
Adjustment for currency impact
2,582
-
Non-GAAP training and services revenue on a constant currency basis
$278,605
$248,781
12.0%
GAAP total subscription, training and services revenue
$2,411,803
$2,052,230
17.5%
Adjustment for currency impact
(7,643)
-
Non-GAAP total subscription, training and services revenue on a
$2,404,160
$2,052,230
17.1%
constant currency basis
RED HAT, INC.
SUPPLEMENTAL INFORMATION
(Unaudited)
(In thousands)
Change in deferred revenue balances
Current Deferred
Long-Term
Total Deferred
Revenue
Deferred
Revenue
Revenue
Balance at February 29, 2016
$1,272,908
$449,636
$1,722,544
Constant currency change in deferred revenue (1)
239,771
109,121
348,892
Impact from foreign currency translation
83
(1,563)
(1,480)
Balance at February 28, 2017
$1,512,762
$557,194
$2,069,956
Year-over-year growth rate
18.8%
23.9%
20.2%
Year-over-year growth rate on a constant currency basis
18.8%
24.3%
20.3%
(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 February 28, 2017
$410,449
$131,308
$87,083
$628,840
Adjustment for currency impact
(1,220)
4,300
(1,510)
1,570
Total revenue on a constant currency basis for the three months
$409,229
$135,608
$85,573
$630,410
ended February 28, 2017
Total revenue for the three months ended February 29, 2016
$357,940
$115,468
$70,094
$543,502
Year-over-year growth rate
14.7%
13.7%
24.2%
15.7%
Year-over-year growth rate on a constant currency basis
14.3%
17.4%
22.1%
16.0%
Total revenue for the twelve months ended February 28, 2017
$1,555,290
$515,642
$340,871
$2,411,803
Adjustment for currency impact
6,062
876
(14,581)
(7,643)
Total revenue on a constant currency basis for the twelve months
$1,561,352
$516,518
$326,290
$2,404,160
ended February 28, 2017
Total revenue for the twelve months ended February 29, 2016
$1,354,345
$436,304
$261,581
$2,052,230
Year-over-year growth rate
14.8%
18.2%
30.3%
17.5%
Year-over-year growth rate on a constant currency basis
15.3%
18.4%
24.7%
17.1%

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SOURCE: Red Hat, Inc.

Media Contact:
Red Hat, Inc.
Stephanie Wonderlick, 571-421-8169
swonderl@redhat.com
or
Investor Relations:
Red Hat, Inc.
Tom McCallum, 919-754-4630
tmccallum@redhat.com