RHT
$159.28
Red Hat
($.86)
(.54%)
Earnings Details
4th Quarter February 2018
Monday, March 26, 2018 4:15:00 PM
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Summary

Red Hat Beats

Red Hat (RHT) reported 4th Quarter February 2018 earnings of $0.95 per share on revenue of $772.3 million. The consensus earnings estimate was $0.81 per share on revenue of $762.0 million. The Earnings Whisper number was $0.84 per share. Revenue grew 22.8% on a year-over-year basis.

The company said it expects first quarter non-GAAP earnings of approximately $0.68 per share on revenue of $800.0 million to $810.0 million and fiscal 2019 earnings of $3.38 to $3.41 per share on revenue of $3.425 billion to $3.46 billion. The current consensus earnings estimate is $0.72 per share on revenue of $791.5 million for the quarter ending May 31, 2018 and $3.34 per share on revenue of $3.36 billion for the year ending February 28, 2019.

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
$0.95
Earnings Whisper
$0.84
Consensus Estimate
$0.81
Reported Revenue
$772.3 Mil
Revenue Estimate
$762.0 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Red Hat Reports Fourth Quarter and Fiscal Year 2018 Results

  • Fourth quarter total revenue of $772 million, up 23% year-over-year, or 18% in constant currency; full fiscal year total revenue of $2.9 billion, up 21% year-over-year, or 20% in constant currency
  • Fourth quarter subscription revenue of $683 million, up 22% year-over-year, or 18% in constant currency; full fiscal year subscription revenue of $2.6 billion, up 21% year-over-year, or 19% in constant currency
  • Year-end deferred revenue balance of $2.6 billion, up 25% year-over-year
  • Fourth quarter operating cash flow of $362 million, up 14% year-over-year; full fiscal year operating cash flow of $923 million, up 18% year-over-year

RALEIGH, N.C.--(BUSINESS WIRE)-- Red Hat, Inc. (NYSE: RHT), the world's leading provider of open source solutions, today announced financial results for the fourth quarter of fiscal year 2018 ended February 28, 2018.

“The fourth quarter was a strong finish to the year for Red Hat. We maintained strong subscription revenue growth in both of our major technology categories during the year, enabling Red Hat to exceed a $3 billion annualized revenue run-rate exiting the year,” stated Jim Whitehurst, President and Chief Executive Officer of Red Hat. “Red Hat continued to expand its position with customers as a trusted adviser and strategic technology partner, enabling initiatives focused on digital transformation and cloud computing. This position helped drive a 50% year-over-year increase in the number of deals over $1 million during the fourth quarter, as we benefited from strong cross selling and high renewal rates within our top deals.”

“We are pleased to deliver 21% revenue growth during fiscal year 2018, up from 18% growth in the prior year. In addition, a strong performance in the fourth quarter enabled the company to exit the year with a total backlog increase of 24% year-over-year. We believe our total backlog, along with continued demand for our technologies, will enable us to deliver strong growth in fiscal year 2019,” stated Eric Shander, Executive Vice President and Chief Financial Officer of Red Hat.

Revenue: Total revenue for the quarter was $772 million, up 23% in USD year-over-year, or 18% measured in constant currency. Constant currency references in this release are detailed in the tables below. Subscription revenue for the quarter was $683 million, up 22% in USD year-over-year, or 18% measured in constant currency. Subscription revenue in the quarter was 88% of total revenue.

Full fiscal year 2018 total revenue was $2.9 billion, up 21% in USD year-over-year, or 20% measured in constant currency. Subscription revenue for the full year was $2.6 billion, up 21% in USD year-over-year, or 19% measured in constant currency. Subscription revenue in the full fiscal year was 88% of total revenue.

Subscription Revenue Breakout: Subscription revenue from Infrastructure-related offerings for the quarter was $510 million, an increase of 17% in USD year-over-year, or 13% measured in constant currency. Subscription revenue from Application Development-related and other emerging technology offerings for the quarter was $173 million, an increase of 39% in USD year-over-year, or 34% measured in constant currency.

Full fiscal year subscription revenue from Infrastructure-related offerings was $2.0 billion, an increase of 15% in USD year-over-year or 14% measured in constant currency. Full fiscal year subscription revenue from Application Development-related and other emerging technology offerings was $624 million, an increase of 42% in USD year-over-year, or 40% measured in constant currency.

Operating Income: GAAP operating income for the quarter was $132 million, up 40% 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 $190 million, up 24% year-over-year. For the fourth quarter, GAAP operating margin was 17.1% and non-GAAP operating margin was 24.6%. Non-GAAP references in this release are detailed in the tables below.

Full fiscal year GAAP operating income was $472 million, an increase of 42% 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 $698 million, up 25% year-over-year. Full fiscal year GAAP operating margin was 16.2% and non-GAAP operating margin was 23.9%.

Provision for Income Taxes: GAAP provision for income taxes for the fourth quarter and full fiscal year included a one-time tax charge of $123 million related to the Tax Cuts and Jobs Act enacted into law in December 2017. The new law includes significant changes to the U.S. corporate income tax system, including a permanent reduction in the corporate income tax rate from 35% to 21%, effective January 1, 2018. The one-time tax charge resulted primarily from re-measurement of deferred tax assets and liabilities and the transition tax associated with deemed repatriation of foreign earnings.

Non-GAAP provision for income taxes excludes the one-time impact related to the Tax Cuts and Jobs Act as well as discrete tax benefits related to share-based compensation.

Net Income/Loss: GAAP net loss for the quarter was $13 million, or $0.07 diluted loss per share, compared with GAAP net income of $66 million, or $0.36 diluted earnings per share (“EPS”), 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 $167 million, or $0.91 diluted EPS, as compared to $110 million, or $0.61 diluted EPS, in the year-ago quarter. Non-GAAP diluted weighted average shares outstanding excludes dilution that is expected to be offset by our convertible note hedge transactions.

Full fiscal year GAAP net income was $259 million, or $1.40 diluted EPS, compared with $254 million, or $1.39 diluted EPS, 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 $540 million, or $2.98 diluted EPS, as compared to $414 million, or $2.27 diluted EPS, in the prior fiscal year.

Cash: Operating cash flow was $362 million for the fourth quarter, an increase of 14% on a year-over-year basis. Total cash, cash equivalents and investments as of February 28, 2018 was $2.5 billion. The remaining balance in the current repurchase authorization as of February 28, 2018 was approximately $399 million.

Deferred revenue and backlog: Total backlog for fiscal year 2018 was in excess of $3.4 billion, up 24% year-over-year. We defined 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 services 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 $2.6 billion, an increase of 25% year-over-year. The full year positive impact to total deferred revenue from changes in foreign exchange rates was $92 million year-over-year. On a constant currency basis, total deferred revenue would have been up 21% year-over-year.

The portion of total backlog to be billed in the future not reflected in our financial statements was in excess of $775 million as of February 28, 2018, compared with the ending balance in excess of $650 million reported for fiscal year 2017. The portion of total backlog to be billed during fiscal year 2019 was in excess of $450 million as of February 28, 2018, compared with in excess of $330 million for the fiscal year ended February 28, 2017.

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 $3.425 billion to $3.460 billion in USD.
  • GAAP operating margin is expected to be approximately 16.6% and non-GAAP operating margin is expected to be approximately 23.9%.
  • Diluted GAAP EPS is expected to be approximately $2.25 to $2.28, assuming 187 million diluted shares outstanding. Diluted non-GAAP EPS is expected to be approximately $3.38 to $3.41, assuming 185 million diluted shares outstanding. Both GAAP and non-GAAP EPS assume a $4 million per quarter forecast for other income and an estimated annual effective tax rate of approximately 25% before discrete tax items.
  • Operating cash flow is expected to be approximately $1.035 billion to $1.045 billion.

For the first quarter:

  • Revenue is expected to be approximately $800 million to $810 million.
  • GAAP operating margin is expected to be approximately 13.4% and non-GAAP operating margin is expected to be approximately 20.5%.
  • Diluted GAAP EPS is expected to be approximately $0.42, assuming 187 million diluted shares outstanding. Diluted non-GAAP EPS is expected to be approximately $0.68, assuming 185 million diluted shares outstanding. Both GAAP and non-GAAP EPS assume a $4 million forecast for other income and an estimated annual effective tax rate of 25% 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 $215 million and amortization of intangible assets of approximately $38 million. Full year 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 25% before discrete tax items. Additionally, full year diluted non-GAAP EPS excludes approximately $30 million of discrete tax benefits related to share-based compensation that are included in full year diluted GAAP EPS. Full year diluted non-GAAP EPS excludes approximately 2 million diluted shares related to the convertible notes, which are 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 $48 million and amortization of intangible assets of approximately $9.5 million. First quarter 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 25% before discrete tax items. Additionally, first quarter diluted non-GAAP EPS excludes approximately $1 million of discrete tax benefits related to share-based compensation that are included in first quarter diluted GAAP EPS. First quarter diluted non-GAAP EPS excludes approximately 2 million diluted shares related to the convertible notes, which are 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 defects in our offerings and third-party hardware upon which our offerings depend; risks related to the security of our offerings and other data 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 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® 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     Fiscal Year Ended
February 28,   February 28, February 28,   February 28,
2018 2017 2018 2017
Revenue:
Subscriptions $ 683,276 $ 559,588 $ 2,574,178 $ 2,135,780
Training and services 89,056   69,252   346,283   276,023  
Total revenue 772,332   628,840   2,920,461   2,411,803  
 
Cost of revenue:
Subscriptions 48,105 42,095 185,339 158,977
Training and services 64,520   50,112   246,458   195,401  
Total cost of revenue 112,625   92,207   431,797   354,378  
 
Gross profit 659,707 536,633 2,488,664 2,057,425
 
Operating expense:
Sales and marketing 315,181 272,438 1,198,576 1,036,021
Research and development 153,778 121,918 578,330 480,668
General and administrative 58,886   48,052   239,316   208,491  
Total operating expense 527,845   442,408   2,016,222   1,725,180  
 
Income from operations 131,862 94,225 472,442 332,245
Interest income 5,024 3,754 18,493 13,921
Interest expense 6,223 6,002 24,569 23,822
Other income (expense), net 11,368   (304 ) 8,335   (2,164 )
 
Income before provision for income taxes 142,031 91,673 474,701 320,180
Provision for income taxes 154,583   25,870   215,898   66,477  
Net (loss) income $ (12,552 ) $ 65,803   $ 258,803   $ 253,703  
 
Net (loss) income per share:
Basic $ (0.07 ) $ 0.37 $ 1.46 $ 1.41
Diluted $ (0.07 ) $ 0.36 $ 1.40 $ 1.39
Weighted average shares outstanding:
Basic 177,034 177,802 177,150 179,642
Diluted 177,034 181,197 184,602 182,961
 

RED HAT, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 
   

February 28,
2018

 

February 28,
2017 (1)

ASSETS
Current assets:
Cash, cash equivalents and restricted cash $ 1,724,132 $ 1,090,808
Investments in debt and equity securities, short-term 318,358 369,983
Accounts receivable, net 806,744 634,821
Prepaid expenses 260,092 200,609
Other current assets 25,666   19,481  
Total current assets 3,134,992 2,315,702
 
Property and equipment, net 206,105 189,629
Goodwill 1,288,830 1,040,709
Identifiable intangibles, net 224,953 137,767
Investments in debt securities, long-term 430,442 672,440
Deferred tax assets, net 93,300 104,833
Other assets, net 87,924   74,105  
Total assets $ 5,466,546   $ 4,535,185  

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses $ 427,086 $ 376,957
Deferred revenue, short-term 1,853,719 1,512,762
Other current obligations 843 1,354
Convertible notes 23,806    
Total current liabilities 2,305,454 1,891,073
 
Deferred revenue, long-term 741,453 557,194
Convertible notes 744,194 745,633
Other long-term obligations 205,215 93,965
Stockholders’ equity:
Common stock 24 24
Additional paid-in capital 2,397,097 2,294,462
Retained earnings 1,611,794 1,352,991
Treasury stock, at cost (2,506,089 ) (2,311,805 )
Accumulated other comprehensive loss (32,596 ) (88,352 )
Total stockholders’ equity 1,470,230   1,247,320  
Total liabilities and stockholders’ equity $ 5,466,546   $ 4,535,185  
 
(1) Derived from audited financial statements
 

 

RED HAT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 
    Three Months Ended   Fiscal Year Ended
February 28,   February 28, February 28,   February 28,
2018 2017 2018 2017
Cash flows from operating activities:
Net (loss) income $ (12,552 ) $ 65,803 $ 258,803 $ 253,703
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization 25,597 21,547 97,138 85,309
Amortization of debt discount and transaction costs 5,661 5,480 22,401 21,691
Deferred income taxes (26,746 ) 6,128 (18,915 ) 12,327
Share-based compensation expense 49,266 51,157 192,249 192,530
Net amortization of bond premium on debt securities available for sale 1,417 2,669 8,405 12,623
Other (12,818 ) 427 (11,500 ) 946
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable (266,018 ) (205,598 ) (154,119 ) (119,102 )
Prepaid expenses (60,779 ) (57,400 ) (86,805 ) (76,787 )
Accounts payable and accrued expenses 179,582 85,862 161,811 71,026
Deferred revenue 461,199 357,399 432,182 348,534
Other 18,254   (15,215 ) 21,488   (19,083 )
Net cash provided by operating activities 362,063   318,259   923,138   783,717  
 
Cash flows from investing activities:
Purchase of investment in debt securities available for sale (14,016 ) (85,053 ) (299,789 ) (500,849 )
Proceeds from maturities of investment in debt securities available for sale 77,789 79,446 426,074 457,710
Proceeds from sales of investment in debt securities available for sale 179,997 13,068 199,614 43,273
Proceeds from sales of strategic equity investments 14,204 14,204
Acquisition of businesses, net of cash acquired (231,200 ) (315,081 ) (28,667 )
Purchase of developed software and other intangible assets (3,849 ) (3,062 ) (16,720 ) (11,774 )
Purchase of property and equipment (16,699 ) (18,687 ) (84,967 ) (69,123 )
Other   (500 ) (189 ) (703 )
Net cash provided by (used in) investing activities 6,226   (14,788 ) (76,854 ) (110,133 )
 
Cash flows from financing activities:
Proceeds from exercise of common stock options 354 556 4,895 3,829
Proceeds from employee stock purchase program 16,809 11,697 50,097 18,852
Payments related to net settlement of share-based compensation awards (3,276 ) (3,284 ) (89,506 ) (66,529 )
Purchase of treasury stock (139,479 ) (237,002 ) (458,661 )
Payments on other borrowings (340 ) (1,145 ) (1,547 ) (1,684 )
Other (30 )   (36 )  
Net cash provided by (used in) financing activities 13,517   (131,655 ) (273,099 ) (504,193 )
 
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash 11,154   2,314   60,139   (6,361 )
Net increase in cash, cash equivalents and restricted cash 392,960 174,130 633,324 163,030
Cash, cash equivalents and restricted cash at beginning of the period 1,331,172   916,678   1,090,808   927,778  
Cash, cash equivalents and restricted cash at end of the period $ 1,724,132   $ 1,090,808   $ 1,724,132   $ 1,090,808  
 

 

RED HAT, INC.

RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED RESULTS

(Unaudited)

(In thousands - except per share amounts)

 
    Three Months Ended   Fiscal Year Ended
February 28,   February 28, February 28,   February 28,
2018 2017 2018 2017
 
Reconciliation items included in Consolidated Statements of Operations:
 
Non-cash share-based compensation expense:
Cost of revenue $ 4,453 $ 4,157 $ 16,862 $ 16,553
Sales and marketing 22,450 27,952 87,158 93,378
Research and development 14,405 13,639 57,008 52,424
General and administrative 7,958   5,409   31,221   30,175  
Total share-based compensation expense $ 49,266   $ 51,157   $ 192,249   $ 192,530  
 
Amortization of intangible assets expense:
Cost of revenue $ 4,214 $ 3,861 $ 16,705 $ 15,562
Sales and marketing 1,561 1,563 6,195 7,078
Research and development 35 35 138 138
General and administrative 2,270   1,787   8,407   7,078  
Total amortization of intangible assets expense $ 8,080   $ 7,246   $ 31,445   $ 29,856  
 
Total non-cash interest expense related to the debt discount $ 4,961   $ 4,820   $ 19,654   $ 19,104  
 
Transaction costs related to business combinations $ 728   $   $ 2,038   $ 1,789  
 
Reconciliation of GAAP results to non-GAAP adjusted results:
 
GAAP net (loss) income $ (12,552 ) $ 65,803 $ 258,803 $ 253,703
GAAP provision for income taxes 154,583   25,870   215,898   66,477  
GAAP income before provision for income taxes $ 142,031 $ 91,673 $ 474,701 $ 320,180
 
Add: Non-cash share-based compensation expense 49,266 51,157 192,249 192,530
Add: Amortization of intangible assets expense 8,080 7,246 31,445 29,856
Add: Non-cash interest expense related to the debt discount 4,961 4,820 19,654 19,104
Add: Transaction costs related to business combinations 728     2,038   1,789  
Non-GAAP adjusted income before provision for income taxes $ 205,066 $ 154,896 $ 720,087 $ 563,459
Non-GAAP provision for income taxes (1) 38,077   45,204   180,057   149,608  
Non-GAAP adjusted net income (basic and diluted) $ 166,989   $ 109,692   $ 540,030   $ 413,851  
 
Non-GAAP adjusted diluted weighted average shares outstanding:
GAAP diluted weighted average shares outstanding 177,034 181,197 184,602 182,961
Dilutive effect of outstanding equity awards, convertible notes and warrants 10,699
Dilution offset from convertible note hedge transactions (4,728 ) (492 ) (3,445 ) (292 )
Non-GAAP diluted weighted average shares outstanding 183,005   180,705   181,157   182,669  
 
Non-GAAP adjusted net income per share:
Basic $ 0.94 $ 0.62 $ 3.05 $ 2.30
Diluted $ 0.91 $ 0.61 $ 2.98 $ 2.27
 

 

RED HAT, INC.

RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED RESULTS

(Unaudited)

(In thousands - except per share amounts)

 
    Three Months Ended   Fiscal Year Ended
February 28,   February 28, February 28,   February 28,
2018 2017 2018 2017
(1) Non-GAAP provision for income taxes:
Non-GAAP adjusted income before provision for income taxes $ 205,066 $ 154,896 $ 720,087 $ 563,459
GAAP estimated annual effective tax rate 17.8 % 29.5 % 24.3 % 27.7 %
Provision for income taxes on non-GAAP adjusted income before discrete tax benefits $ 35,925 $ 45,698 $ 174,981 $ 156,010
Discrete tax expense (benefit), excluding discrete benefits related to share-based compensation 2,152   (494 ) 5,076   (6,402 )
Provision for income taxes on non-GAAP adjusted income, excluding impact from the Tax Cuts and Jobs Act and discrete tax benefits related to share-based compensation $ 38,077   $ 45,204   $ 180,057   $ 149,608  
 
GAAP gross profit $ 659,707 $ 536,633 $ 2,488,664 $ 2,057,425
Add: Non-cash share-based compensation expense 4,453 4,157 16,862 16,553
Add: Amortization of intangible assets expense 4,214   3,861   16,705   15,562  
Non-GAAP gross profit $ 668,374   $ 544,651   $ 2,522,231   $ 2,089,540  
 
Non-GAAP gross margin 86.5 % 86.6 % 86.4 % 86.6 %
 
GAAP operating expenses $ 527,845 $ 442,408 $ 2,016,222 $ 1,725,180
Deduct: Non-cash share-based compensation expense (44,813 ) (47,000 ) (175,387 ) (175,977 )
Deduct: Amortization of intangible assets expense (3,866 ) (3,385 ) (14,740 ) (14,294 )
Deduct: Transaction costs related to business combinations (728 )   (2,038 ) (1,789 )
Non-GAAP adjusted operating expenses $ 478,438   $ 392,023   $ 1,824,057   $ 1,533,120  
 
GAAP operating income $ 131,862 $ 94,225 $ 472,442 $ 332,245
Add: Non-cash share-based compensation expense 49,266 51,157 192,249 192,530
Add: Amortization of intangible assets expense 8,080 7,246 31,445 29,856
Add: Transaction costs related to business combinations 728     2,038   1,789  
Non-GAAP adjusted operating income $ 189,936   $ 152,628   $ 698,174   $ 556,420  
 
Non-GAAP adjusted operating margin 24.6 % 24.3 % 23.9 % 23.1 %
 

 

RED HAT, INC.

RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED RESULTS

(Unaudited)

(In thousands - except per share amounts)

 
    Three Months Ended
February 28,   February 28,   Year-Over-Year
2018 2017 Growth Rate
Subscription and services revenue:
GAAP subscription revenue by offering type:
Infrastructure-related offerings $ 510,013 $ 435,085 17.2 %
Adjustment for currency impact (16,622 )  
Non-GAAP Infrastructure-related subscription revenue on a constant currency basis $ 493,391 $ 435,085 13.4 %
 
Application Development-related and other emerging technology offerings $ 173,263 $ 124,503 39.2 %
Adjustment for currency impact (6,938 )  
Non-GAAP Application Development-related and other emerging technology subscription revenue on a constant currency basis $ 166,325 $ 124,503 33.6 %
 
GAAP subscription revenue $ 683,276 $ 559,588 22.1 %
Adjustment for currency impact (23,560 )  
Non-GAAP subscription revenue on a constant currency basis $ 659,716 $ 559,588 17.9 %
 
GAAP training and services revenue $ 89,056 $ 69,252 28.6 %
Adjustment for currency impact (3,674 )  
Non-GAAP training and services revenue on a constant currency basis $ 85,382 $ 69,252 23.3 %
 
GAAP total subscription and training and services revenue $ 772,332 $ 628,840 22.8 %
Adjustment for currency impact (27,234 )  
Non-GAAP total subscription and training and services revenue on a constant currency basis $ 745,098   $ 628,840   18.5 %
 
Fiscal Year Ended
February 28, February 28, Year-Over-Year
2018 2017 Growth Rate
GAAP subscription revenue by offering type:
Infrastructure-related offerings $ 1,950,396 $ 1,696,443 15.0 %
Adjustment for currency impact (20,016 )  
Non-GAAP Infrastructure-related subscription revenue on a constant currency basis $ 1,930,380 $ 1,696,443 13.8 %
 
Application Development-related and other emerging technology offerings $ 623,782 $ 439,337 42.0 %
Adjustment for currency impact (9,164 )  
Non-GAAP Application Development-related and other emerging technology subscription revenue on a constant currency basis $ 614,618 $ 439,337 39.9 %
 
GAAP subscription revenue $ 2,574,178 $ 2,135,780 20.5 %
Adjustment for currency impact (29,180 )  
Non-GAAP subscription revenue on a constant currency basis $ 2,544,998 $ 2,135,780 19.2 %
 
GAAP training and services revenue $ 346,283 $ 276,023 25.5 %
Adjustment for currency impact (4,552 )  
Non-GAAP training and services revenue on a constant currency basis $ 341,731 $ 276,023 23.8 %
 
GAAP total subscription and training and services revenue $ 2,920,461 $ 2,411,803 21.1 %
Adjustment for currency impact (33,732 )  
Non-GAAP total subscription and training and services revenue on a constant currency basis $ 2,886,729   $ 2,411,803   19.7 %
 

 

RED HAT, INC.

SUPPLEMENTAL INFORMATION

(Unaudited)

(In thousands)

 
Change in deferred revenue balances:    
    Deferred Revenue
Current Long-Term Total
Balance at February 28, 2017 $ 1,512,762 $ 557,194 $ 2,069,956
Constant currency change in deferred revenue (1) 279,293 153,747 433,040
Impact from foreign currency translation 61,664   30,512   92,176  
Balance at February 28, 2018 $ 1,853,719   $ 741,453   $ 2,595,172  
 
Year-over-year growth rate 22.5 % 33.1 % 25.4 %
Year-over-year growth rate on a constant currency basis 18.5 % 27.6 % 20.9 %
 

(1) Change in deferred revenue includes approximately $0.9 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, 2018 $ 484,492 $ 180,087 $ 107,753 $ 772,332
Adjustment for currency impact 147   (22,722 ) (4,659 ) (27,234 )
Total revenue on a constant currency basis for the three months ended February 28, 2018 $ 484,639   $ 157,365   $ 103,094   $ 745,098  
 
Total revenue for the three months ended February 28, 2017 $ 410,449   $ 131,308   $ 87,083   $ 628,840  
 
Year-over-year growth rate 18.0 % 37.1 % 23.7 % 22.8 %
Year-over-year growth rate on a constant currency basis 18.1 % 19.8 % 18.4 % 18.5 %
 
Total revenue for the fiscal year ended February 28, 2018 $ 1,858,004 $ 657,197 $ 405,260 $ 2,920,461
Adjustment for currency impact (782 ) (33,118 ) 168   (33,732 )
Total revenue on a constant currency basis for the fiscal year ended February 28, 2018 $ 1,857,222   $ 624,079   $ 405,428   $ 2,886,729  
 
Total revenue for the fiscal year ended February 28, 2017 $ 1,555,290   $ 515,642   $ 340,871   $ 2,411,803  
 
Year-over-year growth rate 19.5 % 27.5 % 18.9 % 21.1 %
Year-over-year growth rate on a constant currency basis 19.4 % 21.0 % 18.9 % 19.7 %
 

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

Source: Red Hat, Inc.