[December 19, 2017] |
|
Red Hat Reports Third Quarter Results for Fiscal Year 2018
Red Hat, Inc. (NYSE: RHT), the world's leading provider of open source
solutions, today announced financial results for the third quarter of
fiscal year 2018 ended November 30, 2017.
"We again delivered over 20% year-over-year growth in both subscription
revenue and total revenue due to strong customer demand for hybrid cloud
technologies, including our core technologies, container platforms and
solutions that enable and manage multiple cloud and private cloud
environments," stated Jim Whitehurst, President and Chief Executive
Officer of Red Hat. "Our growing strategic position within enterprise IT
organizations is evidenced by the strong cross selling of our broad
portfolio of technologies, which led to 30% year-over-year growth in
deals over $1 million and over 40% growth in Application
Development-related and other emerging technology subscription revenue."
"In the third quarter, strong execution contributed to a powerful
combination of 22% total revenue growth, 47% GAAP operating income
growth, 25% non-GAAP operating income growth, and 18% operating cash
flow growth," stated Eric Shander, Executive Vice President and Chief
Financial Officer of Red Hat. "Based on our third quarter results, we
anticipate exiting the fiscal year with an annualized run-rate of
approximately $3 billion for total revenue."
Revenue: Total revenue for the quarter was $748 million, up 22%
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 $657 million, up 21% in USD
year-over-year, or 19% 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 $495 million, an
increase of 15% in USD year-over-year, or 14% measured in constant
currency. Subscription revenue from Application Development-related and
other emerging technology offerings for the quarter was $162 million, an
increase of 44% in USD year-over-year, or 42% measured in constant
currency.
Operating Income: GAAP operating income for the quarter was $118
million, up 47% 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 third quarter was $179 million, up 25% year-over-year. For the third
quarter, GAAP operating margin was 15.8% and non-GAAP operating margin
was 23.9%. Non-GAAP references in this release are detailed in the
tables below.
Net Income: GAAP net income for the quarter was $101 million, or
$0.54 per diluted share, compared with $68 million, or $0.37 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 $133 million, or $0.73 per
diluted share, as compared to $111 million, or $0.61 per diluted share,
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.
Cash: Operating cash flow was $160 million for the third quarter,
an increase of 18% on a year-over-year basis. Total cash, cash
equivalents and investments as of November 30, 2017 was $2.32 billion
after repurchasing approximately $100 million, or 838 thousand shares,
of common stock in the third quarter. The remaining balance in the
current repurchase authorization as of November 30, 2017 was
approximately $399 million.
Deferred revenue: At the end of the third quarter, the company's
total deferred revenue balance was $2.11 billion, an increase of 23%
year-over-year. The full year impact to total deferred revenue from
changes in foreign exchange rates was $69 million year-over-year. On a
constant currency basis, total deferred revenue would have been up 19%
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 $2.906 billion to $2.911
billion in USD.
-
GAAP operating margin is expected to be approximately 16.1% and
non-GAAP operating margin is expected to be approximately 23.9%.
-
Fully diluted GAAP earnings per share (EPS) is expected to be
approximately $2.02 per share, assuming 184 million fully diluted
shares outstanding. Fully diluted non-GAAP EPS is expected to be
approximately $2.88 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 approximately 27% before discrete tax items. This outlook
includes a one-time gain on a strategic investment which benefits GAAP
and non-GAAP EPS by $0.05.
-
Operating cash flow is expected to be approximately $900 million to
$910 million.
For the fourth quarter:
-
Revenue is expected to be approximately $758 million to $763 million.
-
GAAP operating margin is expected to be approximately 16.7% and
non-GAAP operating margin is expected to be approximately 24.6%.
-
Fully diluted GAAP EPS is expected to be approximately $0.54 per
share, assuming 186 million fully diluted shares outstanding. Fully
diluted non-GAAP EPS is expected to be approximately $0.81 per share,
assuming 182 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 27% before discrete tax items.
This outlook includes a one-time gain on a strategic investment which
benefits GAAP and non-GAAP EPS by $0.05.
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 $195 million, amortization of intangible assets
of approximately $30 million and transaction costs related to business
combinations of approximately $1.3 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 27% before discrete
tax items. Additionally, full year fully diluted non-GAAP EPS excludes
approximately $30 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 3
million diluted shares related to the convertible notes which are
expected to be offset by our convertible note hedge transactions.
Fourth quarter non-GAAP operating margin guidance is derived by
subtracting the estimated impact of non-cash share-based compensation
expense of approximately $52 million and amortization of intangible
assets of approximately $8 million. Fourth 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 27% before discrete tax items. Additionally, fourth quarter
fully diluted non-GAAP EPS excludes approximately $1 million of discrete
tax benefits related to share-based compensation that are included in
fourth quarter fully diluted GAAP EPS. Fourth quarter fully diluted
non-GAAP EPS excludes approximately 4 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 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
|
|
Nine Months Ended
|
|
|
November 30,
|
|
November 30,
|
|
November 30,
|
|
November 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenue:
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
$
|
656,832
|
|
|
$
|
543,318
|
|
|
$
|
1,890,902
|
|
|
$
|
1,576,192
|
|
Training and services
|
|
91,146
|
|
|
71,942
|
|
|
257,227
|
|
|
206,771
|
|
Total subscription and training and services revenue
|
|
747,978
|
|
|
615,260
|
|
|
2,148,129
|
|
|
1,782,963
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
47,277
|
|
|
40,660
|
|
|
137,234
|
|
|
116,882
|
|
Training and services
|
|
64,482
|
|
|
49,793
|
|
|
181,938
|
|
|
145,289
|
|
Total cost of subscription and training and services revenue
|
|
111,759
|
|
|
90,453
|
|
|
319,172
|
|
|
262,171
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
636,219
|
|
|
524,807
|
|
|
1,828,957
|
|
|
1,520,792
|
|
|
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
308,388
|
|
|
267,080
|
|
|
883,395
|
|
|
763,583
|
|
Research and development
|
|
145,580
|
|
|
122,469
|
|
|
424,552
|
|
|
358,750
|
|
General and administrative
|
|
63,838
|
|
|
54,485
|
|
|
180,430
|
|
|
160,439
|
|
Total operating expense
|
|
517,806
|
|
|
444,034
|
|
|
1,488,377
|
|
|
1,282,772
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
118,413
|
|
|
80,773
|
|
|
340,580
|
|
|
238,020
|
|
Interest income
|
|
4,864
|
|
|
3,346
|
|
|
13,469
|
|
|
10,167
|
|
Interest expense
|
|
6,180
|
|
|
6,009
|
|
|
18,346
|
|
|
17,820
|
|
Other income (expense), net
|
|
(1,187
|
)
|
|
(1,392
|
)
|
|
(3,033
|
)
|
|
(1,860
|
)
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
115,910
|
|
|
76,718
|
|
|
332,670
|
|
|
228,507
|
|
Provision for income taxes
|
|
14,604
|
|
|
8,775
|
|
|
61,315
|
|
|
40,607
|
|
Net income
|
|
$
|
101,306
|
|
|
$
|
67,943
|
|
|
$
|
271,355
|
|
|
$
|
187,900
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.57
|
|
|
$
|
0.38
|
|
|
$
|
1.53
|
|
|
$
|
1.04
|
|
Diluted
|
|
$
|
0.54
|
|
|
$
|
0.37
|
|
|
$
|
1.48
|
|
|
$
|
1.02
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
177,063
|
|
|
179,233
|
|
|
177,188
|
|
|
180,245
|
|
Diluted
|
|
186,160
|
|
|
182,682
|
|
|
183,397
|
|
|
183,453
|
|
|
|
|
|
|
RED HAT, INC.
|
CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
(In thousands)
|
|
|
|
|
|
|
|
November 30, 2017
|
|
February 28, 2017 (1)
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,331,172
|
|
|
$
|
1,090,808
|
|
Investments in debt securities, short-term
|
|
384,717
|
|
|
369,983
|
|
Accounts receivable, net
|
|
531,509
|
|
|
634,821
|
|
Prepaid expenses
|
|
216,036
|
|
|
200,609
|
|
Other current assets
|
|
41,276
|
|
|
19,481
|
|
Total current assets
|
|
2,504,710
|
|
|
2,315,702
|
|
|
|
|
|
|
Property and equipment, net
|
|
201,807
|
|
|
189,629
|
|
Goodwill
|
|
1,120,957
|
|
|
1,040,709
|
|
Identifiable intangibles, net
|
|
151,450
|
|
|
137,767
|
|
Investments in debt securities, long-term
|
|
605,284
|
|
|
672,440
|
|
Deferred tax assets, net
|
|
108,235
|
|
|
104,833
|
|
Other assets, net
|
|
67,041
|
|
|
74,105
|
|
Total assets
|
|
$
|
4,759,484
|
|
|
$
|
4,535,185
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
341,596
|
|
|
$
|
376,957
|
|
Deferred revenue, short-term
|
|
1,482,428
|
|
|
1,512,762
|
|
Other current obligations
|
|
1,022
|
|
|
1,354
|
|
Total current liabilities
|
|
1,825,046
|
|
|
1,891,073
|
|
|
|
|
|
|
Deferred revenue, long-term
|
|
623,150
|
|
|
557,194
|
|
Convertible notes
|
|
762,367
|
|
|
745,633
|
|
Other long-term obligations
|
|
115,781
|
|
|
93,965
|
|
Stockholders' equity:
|
|
|
|
|
Common stock
|
|
24
|
|
|
24
|
|
Additional paid-in capital
|
|
2,350,740
|
|
|
2,294,462
|
|
Retained earnings
|
|
1,624,346
|
|
|
1,352,991
|
|
Treasury stock, at cost
|
|
(2,506,075
|
)
|
|
(2,311,805
|
)
|
Accumulated other comprehensive loss
|
|
(35,895
|
)
|
|
(88,352
|
)
|
Total stockholders' equity
|
|
1,433,140
|
|
|
1,247,320
|
|
Total liabilities and stockholders' equity
|
|
$
|
4,759,484
|
|
|
$
|
4,535,185
|
|
|
|
|
|
|
(1) Derived from audited financial statements
|
|
|
|
|
|
|
|
|
|
RED HAT, INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
(In thousands)
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
November 30,
|
|
November 30,
|
|
November 30,
|
|
November 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
101,306
|
|
|
$
|
67,943
|
|
|
$
|
271,355
|
|
|
$
|
187,900
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
25,588
|
|
|
21,870
|
|
|
71,541
|
|
|
63,732
|
|
Amortization of debt discount and transaction costs
|
|
5,630
|
|
|
5,453
|
|
|
16,740
|
|
|
16,211
|
|
Share-based compensation expense
|
|
52,318
|
|
|
54,741
|
|
|
142,983
|
|
|
141,373
|
|
Deferred income taxes
|
|
273
|
|
|
13,818
|
|
|
7,831
|
|
|
6,199
|
|
Net amortization of bond premium on debt securities available for
sale
|
|
2,113
|
|
|
3,120
|
|
|
6,988
|
|
|
9,954
|
|
Other
|
|
(214
|
)
|
|
986
|
|
|
1,318
|
|
|
549
|
|
Changes in operating assets and liabilities, net of effects of
acquisitions:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(113,898
|
)
|
|
(73,149
|
)
|
|
111,899
|
|
|
86,496
|
|
Prepaid expenses
|
|
(6,756
|
)
|
|
(18,897
|
)
|
|
(26,026
|
)
|
|
(19,387
|
)
|
Accounts payable and accrued expenses
|
|
35,559
|
|
|
(4,413
|
)
|
|
(17,771
|
)
|
|
(14,836
|
)
|
Deferred revenue
|
|
57,275
|
|
|
64,181
|
|
|
(29,017
|
)
|
|
(8,865
|
)
|
Other
|
|
1,113
|
|
|
706
|
|
|
3,234
|
|
|
(3,868
|
)
|
Net cash provided by operating activities
|
|
160,307
|
|
|
136,359
|
|
|
561,075
|
|
|
465,458
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of investment in debt securities available for sale
|
|
(26,580
|
)
|
|
(118,152
|
)
|
|
(285,773
|
)
|
|
(415,796
|
)
|
Proceeds from maturities of investment in debt securities available
for sale
|
|
130,941
|
|
|
108,722
|
|
|
348,285
|
|
|
378,264
|
|
Proceeds from sales of investment in debt securities available for
sale
|
|
5,293
|
|
|
5,037
|
|
|
19,617
|
|
|
30,205
|
|
Acquisition of businesses, net of cash acquired
|
|
-
|
|
|
-
|
|
|
(83,965
|
)
|
|
(28,667
|
)
|
Purchase of developed software and other intangible assets
|
|
(3,426
|
)
|
|
(2,323
|
)
|
|
(12,871
|
)
|
|
(8,712
|
)
|
Purchase of property and equipment
|
|
(16,587
|
)
|
|
(17,244
|
)
|
|
(68,268
|
)
|
|
(50,436
|
)
|
Other
|
|
84
|
|
|
(92
|
)
|
|
(105
|
)
|
|
(203
|
)
|
Net cash provided by (used in) investing activities
|
|
89,725
|
|
|
(24,052
|
)
|
|
(83,080
|
)
|
|
(95,345
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from exercise of common stock options
|
|
711
|
|
|
1,205
|
|
|
4,541
|
|
|
3,273
|
|
Proceeds from employee stock purchase program
|
|
10,575
|
|
|
7,155
|
|
|
33,288
|
|
|
7,155
|
|
Payments related to net settlement of share-based compensation awards
|
|
(37,807
|
)
|
|
(25,769
|
)
|
|
(86,230
|
)
|
|
(63,245
|
)
|
Purchase of treasury stock
|
|
(100,000
|
)
|
|
(125,318
|
)
|
|
(237,002
|
)
|
|
(319,182
|
)
|
Payments on other borrowings
|
|
(346
|
)
|
|
(462
|
)
|
|
(1,207
|
)
|
|
(1,368
|
)
|
Other
|
|
(6
|
)
|
|
(84
|
)
|
|
(6
|
)
|
|
829
|
|
Net cash used in financing activities
|
|
(126,873
|
)
|
|
(143,273
|
)
|
|
(286,616
|
)
|
|
(372,538
|
)
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rates on cash and cash
equivalents
|
|
(2,295
|
)
|
|
(22,925
|
)
|
|
48,985
|
|
|
(8,675
|
)
|
Net increase (decrease) in cash and cash equivalents
|
|
120,864
|
|
|
(53,891
|
)
|
|
240,364
|
|
|
(11,100
|
)
|
Cash and cash equivalents at beginning of the period
|
|
1,210,308
|
|
|
970,569
|
|
|
1,090,808
|
|
|
927,778
|
|
Cash and cash equivalents at end of the period
|
|
$
|
1,331,172
|
|
|
$
|
916,678
|
|
|
$
|
1,331,172
|
|
|
$
|
916,678
|
|
|
|
|
|
|
RED HAT, INC.
|
RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED
RESULTS
|
(Unaudited)
|
(In thousands - except per share amounts)
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
November 30,
|
|
November 30,
|
|
November 30,
|
|
November 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
Reconciliation items included in Consolidated Statements of
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash share-based compensation expense:
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
$
|
4,199
|
|
|
$
|
4,037
|
|
|
$
|
12,408
|
|
|
$
|
12,396
|
|
Sales and marketing
|
|
23,278
|
|
|
26,624
|
|
|
64,708
|
|
|
65,426
|
|
Research and development
|
|
14,937
|
|
|
13,814
|
|
|
42,603
|
|
|
38,785
|
|
General and administrative
|
|
9,904
|
|
|
10,266
|
|
|
23,264
|
|
|
24,766
|
|
Total share-based compensation expense
|
|
$
|
52,318
|
|
|
$
|
54,741
|
|
|
$
|
142,983
|
|
|
$
|
141,373
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets expense:
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
$
|
4,329
|
|
|
$
|
4,234
|
|
|
$
|
12,491
|
|
|
$
|
11,702
|
|
Sales and marketing
|
|
1,592
|
|
|
1,695
|
|
|
4,634
|
|
|
5,515
|
|
Research and development
|
|
34
|
|
|
34
|
|
|
103
|
|
|
103
|
|
General and administrative
|
|
2,084
|
|
|
1,690
|
|
|
6,137
|
|
|
5,291
|
|
Total amortization of intangible assets expense
|
|
$
|
8,039
|
|
|
$
|
7,653
|
|
|
$
|
23,365
|
|
|
$
|
22,611
|
|
|
|
|
|
|
|
|
|
|
Total non-cash interest expense related to the debt discount
|
|
$
|
4,936
|
|
|
$
|
4,800
|
|
|
$
|
14,693
|
|
|
$
|
14,284
|
|
|
|
|
|
|
|
|
|
|
Transaction costs related to business combinations
|
|
$
|
(52
|
)
|
|
$
|
-
|
|
|
$
|
1,310
|
|
|
$
|
1,789
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP results to non-GAAP adjusted results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
|
|
$
|
101,306
|
|
|
$
|
67,943
|
|
|
$
|
271,355
|
|
|
$
|
187,900
|
|
GAAP provision for income taxes
|
|
14,604
|
|
|
8,775
|
|
|
61,315
|
|
|
40,607
|
|
GAAP income before provision for income taxes
|
|
$
|
115,910
|
|
|
$
|
76,718
|
|
|
$
|
332,670
|
|
|
$
|
228,507
|
|
|
|
|
|
|
|
|
|
|
Add: Non-cash share-based compensation expense
|
|
52,318
|
|
|
54,741
|
|
|
142,983
|
|
|
141,373
|
|
Add: Amortization of intangible assets expense
|
|
8,039
|
|
|
7,653
|
|
|
23,365
|
|
|
22,611
|
|
Add: Non-cash interest expense related to the debt discount
|
|
4,936
|
|
|
4,800
|
|
|
14,693
|
|
|
14,284
|
|
Add: Transaction costs related to business combinations
|
|
(52
|
)
|
|
-
|
|
|
1,310
|
|
|
1,789
|
|
Non-GAAP adjusted income before provision for income taxes
|
|
$
|
181,151
|
|
|
$
|
143,912
|
|
|
$
|
515,021
|
|
|
$
|
408,564
|
|
Non-GAAP provision for income taxes (1)
|
|
48,075
|
|
|
33,160
|
|
|
141,980
|
|
|
104,405
|
|
Non-GAAP adjusted net income (basic and diluted)
|
|
$
|
133,076
|
|
|
$
|
110,752
|
|
|
$
|
373,041
|
|
|
$
|
304,159
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted diluted weighted average shares outstanding:
|
|
|
|
|
|
|
GAAP diluted weighted average shares outstanding
|
|
186,160
|
|
|
182,682
|
|
|
183,397
|
|
|
183,453
|
|
Dilution offset from convertible note hedge transactions
|
|
(4,109
|
)
|
|
(514
|
)
|
|
(2,928
|
)
|
|
(228
|
)
|
Non-GAAP diluted weighted average shares outstanding
|
|
182,051
|
|
|
182,168
|
|
|
180,469
|
|
|
183,225
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted net income per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.75
|
|
|
$
|
0.62
|
|
|
$
|
2.11
|
|
|
$
|
1.69
|
|
Diluted
|
|
$
|
0.73
|
|
|
$
|
0.61
|
|
|
$
|
2.07
|
|
|
$
|
1.66
|
|
|
|
|
|
|
|
|
|
|
RED HAT, INC.
|
RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED
RESULTS
|
(Unaudited)
|
(In thousands - except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
November 30,
|
|
November 30,
|
|
November 30,
|
|
November 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
(1) Non-GAAP provision for income taxes:
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted income before provision for income taxes
|
|
$
|
181,151
|
|
|
$
|
143,912
|
|
|
$
|
515,021
|
|
|
$
|
408,564
|
|
GAAP estimated annual effective tax rate
|
|
26.0
|
%
|
|
27.0
|
%
|
|
27.0
|
%
|
|
27.0
|
%
|
Provision for income taxes on non-GAAP adjusted income before
discrete tax benefits
|
|
$
|
46,908
|
|
|
$
|
38,856
|
|
|
$
|
139,056
|
|
|
$
|
110,312
|
|
Discrete tax expense (benefit), excluding discrete benefits related
to share-based compensation
|
|
1,167
|
|
|
(5,696
|
)
|
|
2,924
|
|
|
(5,907
|
)
|
Provision for income taxes on non-GAAP adjusted income, excluding
discrete tax benefits related to share-based compensation
|
|
$
|
48,075
|
|
|
$
|
33,160
|
|
|
$
|
141,980
|
|
|
$
|
104,405
|
|
|
|
|
|
|
|
|
|
|
GAAP gross profit
|
|
$
|
636,219
|
|
|
$
|
524,807
|
|
|
$
|
1,828,957
|
|
|
$
|
1,520,792
|
|
Add: Non-cash share-based compensation expense
|
|
4,199
|
|
|
4,037
|
|
|
12,408
|
|
|
12,396
|
|
Add: Amortization of intangible assets expense
|
|
4,329
|
|
|
4,234
|
|
|
12,491
|
|
|
11,702
|
|
Non-GAAP gross profit
|
|
$
|
644,747
|
|
|
$
|
533,078
|
|
|
$
|
1,853,856
|
|
|
$
|
1,544,890
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP gross margin
|
|
86.2
|
%
|
|
86.6
|
%
|
|
86.3
|
%
|
|
86.6
|
%
|
|
|
|
|
|
|
|
|
|
GAAP operating expenses
|
|
$
|
517,806
|
|
|
$
|
444,034
|
|
|
$
|
1,488,377
|
|
|
$
|
1,282,772
|
|
Deduct: Non-cash share-based compensation expense
|
|
(48,119
|
)
|
|
(50,704
|
)
|
|
(130,575
|
)
|
|
(128,977
|
)
|
Deduct: Amortization of intangible assets expense
|
|
(3,710
|
)
|
|
(3,419
|
)
|
|
(10,874
|
)
|
|
(10,909
|
)
|
Deduct: Transaction costs related to business combinations
|
|
52
|
|
|
-
|
|
|
(1,310
|
)
|
|
(1,789
|
)
|
Non-GAAP adjusted operating expenses
|
|
$
|
466,029
|
|
|
$
|
389,911
|
|
|
$
|
1,345,618
|
|
|
$
|
1,141,097
|
|
|
|
|
|
|
|
|
|
|
GAAP operating income
|
|
$
|
118,413
|
|
|
$
|
80,773
|
|
|
$
|
340,580
|
|
|
$
|
238,020
|
|
Add: Non-cash share-based compensation expense
|
|
52,318
|
|
|
54,741
|
|
|
142,983
|
|
|
141,373
|
|
Add: Amortization of intangible assets expense
|
|
8,039
|
|
|
7,653
|
|
|
23,365
|
|
|
22,611
|
|
Add: Transaction costs related to business combinations
|
|
(52
|
)
|
|
-
|
|
|
1,310
|
|
|
1,789
|
|
Non-GAAP adjusted operating income
|
|
$
|
178,718
|
|
|
$
|
143,167
|
|
|
$
|
508,238
|
|
|
$
|
403,793
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted operating margin
|
|
23.9
|
%
|
|
23.3
|
%
|
|
23.7
|
%
|
|
22.6
|
%
|
|
|
|
RED HAT, INC.
|
RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED
RESULTS
|
(Unaudited)
|
(In thousands - except per share amounts)
|
|
|
|
|
|
Three Months Ended
|
|
|
November 30,
|
|
November 30,
|
|
Year-Over-Year
|
|
|
2017
|
|
2016
|
|
Growth Rate
|
Subscription and services revenue:
|
|
|
|
|
|
|
GAAP subscription revenue by offering type:
|
|
|
|
|
|
|
Infrastructure-related offerings
|
|
$
|
494,974
|
|
|
$
|
431,142
|
|
|
14.8
|
%
|
Adjustment for currency impact
|
|
(5,477
|
)
|
|
-
|
|
|
|
Non-GAAP Infrastructure-related subscription revenue on a constant
currency basis
|
|
$
|
489,497
|
|
|
$
|
431,142
|
|
|
13.5
|
%
|
|
|
|
|
|
|
|
Application Development-related and other emerging technology
offerings
|
|
$
|
161,858
|
|
|
$
|
112,176
|
|
|
44.3
|
%
|
Adjustment for currency impact
|
|
(2,652
|
)
|
|
-
|
|
|
|
Non-GAAP Application Development-related and other emerging
technology subscription revenue on a constant currency basis
|
|
$
|
159,206
|
|
|
$
|
112,176
|
|
|
41.9
|
%
|
|
|
|
|
|
|
|
GAAP subscription revenue
|
|
$
|
656,832
|
|
|
$
|
543,318
|
|
|
20.9
|
%
|
Adjustment for currency impact
|
|
(8,129
|
)
|
|
-
|
|
|
|
Non-GAAP subscription revenue on a constant currency basis
|
|
$
|
648,703
|
|
|
$
|
543,318
|
|
|
19.4
|
%
|
|
|
|
|
|
|
|
GAAP training and services revenue
|
|
$
|
91,146
|
|
|
$
|
71,942
|
|
|
26.7
|
%
|
Adjustment for currency impact
|
|
(1,433
|
)
|
|
-
|
|
|
|
Non-GAAP training and services revenue on a constant currency basis
|
|
$
|
89,713
|
|
|
$
|
71,942
|
|
|
24.7
|
%
|
|
|
|
|
|
|
|
GAAP total subscription and training and services revenue
|
|
$
|
747,978
|
|
|
$
|
615,260
|
|
|
21.6
|
%
|
Adjustment for currency impact
|
|
(9,562
|
)
|
|
|
-
|
|
|
|
Non-GAAP total subscription and training and services revenue on a
constant currency basis
|
|
$
|
738,416
|
|
|
$
|
615,260
|
|
|
20.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
November 30,
|
|
November 30,
|
|
Year-Over-Year
|
|
|
2017
|
|
2016
|
|
Growth Rate
|
GAAP subscription revenue by offering type:
|
|
|
|
|
|
|
Infrastructure-related offerings
|
|
$
|
1,440,383
|
|
|
$
|
1,261,359
|
|
|
14.2
|
%
|
Adjustment for currency impact
|
|
(3,599
|
)
|
|
-
|
|
|
|
Non-GAAP Infrastructure-related subscription revenue on a constant
currency basis
|
|
$
|
1,436,784
|
|
|
$
|
1,261,359
|
|
|
13.9
|
%
|
|
|
|
|
|
|
|
Application Development-related and other emerging technology
offerings
|
|
$
|
450,519
|
|
|
$
|
314,833
|
|
|
43.1
|
%
|
Adjustment for currency impact
|
|
(2,491
|
)
|
|
-
|
|
|
|
Non-GAAP Application Development-related and other emerging
technology subscription revenue on a constant currency basis
|
|
$
|
448,028
|
|
|
$
|
314,833
|
|
|
42.3
|
%
|
|
|
|
|
|
|
|
GAAP subscription revenue
|
|
$
|
1,890,902
|
|
|
$
|
1,576,192
|
|
|
20.0
|
%
|
Adjustment for currency impact
|
|
(6,090
|
)
|
|
-
|
|
|
|
Non-GAAP subscription revenue on a constant currency basis
|
|
$
|
1,884,812
|
|
|
$
|
1,576,192
|
|
|
19.6
|
%
|
|
|
|
|
|
|
|
GAAP training and services revenue
|
|
$
|
257,227
|
|
|
$
|
206,771
|
|
|
24.4
|
%
|
Adjustment for currency impact
|
|
(996
|
)
|
|
-
|
|
|
|
Non-GAAP training and services revenue on a constant currency basis
|
|
$
|
256,231
|
|
|
$
|
206,771
|
|
|
23.9
|
%
|
|
|
|
|
|
|
|
GAAP total subscription and training and services revenue
|
|
$
|
2,148,129
|
|
|
$
|
1,782,963
|
|
|
20.5
|
%
|
Adjustment for currency impact
|
|
(7,086
|
)
|
|
-
|
|
|
|
Non-GAAP total subscription and training and services revenue on a
constant currency basis
|
|
$
|
2,141,043
|
|
|
$
|
1,782,963
|
|
|
20.1
|
%
|
|
|
|
|
|
|
|
RED HAT, INC.
|
SUPPLEMENTAL INFORMATION
|
(Unaudited)
|
(In thousands)
|
|
|
|
|
|
|
|
Change in deferred revenue balances:
|
|
|
|
|
|
|
Deferred Revenue
|
|
|
Current
|
|
Long-Term
|
|
Total
|
Balance at November 30, 2016
|
|
$
|
1,225,421
|
|
|
$
|
482,557
|
|
|
$
|
1,707,978
|
|
Constant currency change in deferred revenue
|
|
210,575
|
|
|
117,832
|
|
|
328,407
|
|
Impact from foreign currency translation
|
|
46,432
|
|
|
22,761
|
|
|
69,193
|
|
Balance at November 30, 2017
|
|
$
|
1,482,428
|
|
|
$
|
623,150
|
|
|
$
|
2,105,578
|
|
|
|
|
|
|
|
|
Year-over-year growth rate
|
|
21.0
|
%
|
|
29.1
|
%
|
|
23.3
|
%
|
Year-over-year growth rate on a constant currency basis
|
|
17.2
|
%
|
|
24.4
|
%
|
|
19.2
|
%
|
|
|
|
|
|
RED HAT, INC.
|
SUPPLEMENTAL INFORMATION
|
(Unaudited)
|
(In thousands)
|
|
|
|
|
|
Revenue growth by geographical segment:
|
|
|
|
|
|
|
Americas
|
|
EMEA
|
|
APAC
|
|
Consolidated
|
Total revenue for the three months ended November 30, 2017
|
|
$
|
471,773
|
|
|
$
|
173,718
|
|
|
$
|
102,487
|
|
|
$
|
747,978
|
|
Adjustment for currency impact
|
|
(85
|
)
|
|
(11,478
|
)
|
|
2,001
|
|
|
(9,562
|
)
|
Total revenue on a constant currency basis for the three months
ended November 30, 2017
|
|
$
|
471,688
|
|
|
$
|
162,240
|
|
|
$
|
104,488
|
|
|
$
|
738,416
|
|
|
|
|
|
|
|
|
|
|
Total revenue for the three months ended November 30, 2016
|
|
$
|
393,589
|
|
|
$
|
132,568
|
|
|
$
|
89,103
|
|
|
$
|
615,260
|
|
|
|
|
|
|
|
|
|
|
Year-over-year growth rate
|
|
19.9
|
%
|
|
31.0
|
%
|
|
15.0
|
%
|
|
21.6
|
%
|
Year-over-year growth rate on a constant currency basis
|
|
19.8
|
%
|
|
22.4
|
%
|
|
17.3
|
%
|
|
20.0
|
%
|
|
|
|
|
|
|
|
|
|
Total revenue for the nine months ended November 30, 2017
|
|
$
|
1,373,512
|
|
|
$
|
477,110
|
|
|
$
|
297,507
|
|
|
$
|
2,148,129
|
|
Adjustment for currency impact
|
|
(953
|
)
|
|
(10,758
|
)
|
|
4,625
|
|
|
(7,086
|
)
|
Total revenue on a constant currency basis for the nine months ended
November 30, 2017
|
|
$
|
1,372,559
|
|
|
$
|
466,352
|
|
|
$
|
302,132
|
|
|
$
|
2,141,043
|
|
|
|
|
|
|
|
|
|
|
Total revenue for the nine months ended November 30, 2016
|
|
$
|
1,144,841
|
|
|
$
|
384,334
|
|
|
$
|
253,788
|
|
|
$
|
1,782,963
|
|
|
|
|
|
|
|
|
|
|
Year-over-year growth rate
|
|
20.0
|
%
|
|
24.1
|
%
|
|
17.2
|
%
|
|
20.5
|
%
|
Year-over-year growth rate on a constant currency basis
|
|
19.9
|
%
|
|
21.3
|
%
|
|
19.0
|
%
|
|
20.1
|
%
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20171219005948/en/
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