[June 21, 2018] |
|
Red Hat Reports First Quarter Results for Fiscal Year 2019
Red Hat, Inc. (NYSE: RHT), the world's leading provider of open source
solutions, today announced financial results for the first quarter of
fiscal year 2019 ended May 31, 2018.
"The move to hybrid cloud architecture continues to be a strategic
priority for our customers. We again delivered strong revenue growth in
Q1 as customers continued to adopt our cloud enabling technologies for
their applications," stated Jim Whitehurst, President and Chief
Executive Officer of Red Hat. "For instance, we are driving strong
growth in both subscription and services revenues for our OpenShift
technologies as more customers modernize their applications in Linux
containers for their hybrid cloud and digital transformation
initiatives."
"The first quarter of FY19 started as expected with double digit
year-over-year growth across a number of our financial metrics,
including 20% total revenue growth in U.S. dollars or 17% measured in
constant currency, 25% growth in GAAP operating income, 19% growth in
non-GAAP operating income, and 34% growth in operating cash flow. In
addition, we also drove 48% year-over-year growth in the number of deals
over one million dollars in the quarter which is evidence of our ability
to expand our technology footprint with customers," stated Eric Shander,
Executive Vice President and Chief Financial Officer of Red Hat. "As in
March when we gave our annual guidance, we continue to expect strong
demand for our hybrid cloud enabling technologies. Given the headwinds
that have developed in foreign exchange rates since that time, we are
adjusting our full year total revenue guidance by approximately $50
million, solely to account for the change in FX rates."
On March 1, 2018, we adopted Financial Accounting Standards Board
("FASB") Accounting Standards Update ("ASU") 2014-09, Revenue from
Contracts with Customers, now commonly referred to as Accounting
Standards Codification Topic 606 ("ASC 606"), using the
full retrospective method of transition, which requires that the
standard be applied to all periods presented. The adoption of ASC 606
did not materially impact our total revenues as previously reported for
fiscal years 2018 and 2017 and it had no impact on net cash provided by
or used in operating, investing or financing activities. The primary
impact of adopting ASC 606 relates to the deferral of incremental
commission and other costs of obtaining contracts with customers.
Previously, we deferred only direct and incremental commission costs to
obtain a contract and amortized those costs over the contract term as
the revenue was recognized and, under the new standard, we now also
defer related fringe benefit costs. The results in this Press Release
apply these changes to the current period and adjust prior periods,
which are detailed in the Supplemental Information section of the Press
Release.
Revenue: Total revenue for the quarter was $814 million, up 20%
in USD year-over-year, or 17% measured in constant currency. Constant
currency references in this release are detailed in the tables below.
Subscription revenue for the quarter was $712 million, up 19% in USD
year-over-year, or 16% measured in constant currency. Subscription
revenue in the quarter was 87% of total revenue.
Subscription Revenue Breakout: Subscription revenue from
Infrastructure-related offerings for the quarter was $522 million, an
increase of 14% in USD year-over-year, or 11% measured in constant
currency. Subscription revenue from Application Development-related and
other emerging technology offerings for the quarter was $189 million, an
increase of 37% in USD year-over-year, or 32% measured in constant
currency.
Operating Income: GAAP operating income for the quarter was $112
million, up 25% year-over-year. After adjusting for non-cash share-based
compensation expense, amortization of intangible assets, and transaction
costs related to business combinations, non-GAAP operating income for
the first quarter was $168 million, up 19% year-over-year. For the first
quarter, GAAP operating margin was 13.8% and non-GAAP operating margin
was 20.7%. Non-GAAP references in this release are detailed in the
tables below.
Net Income: GAAP net income for the quarter was $113 million, or
$0.59 diluted earnings per share ("EPS"), compared with GAAP net income
of $75 million, or $0.41 diluted 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 $133 million, or $0.72 diluted
EPS, as compared to $104 million, or $0.58 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.
Cash: Operating cash flow was $346 million for the first quarter,
an increase of 34% on a year-over-year basis. Total cash, cash
equivalents and investments as of May 31, 2018 was $2.5 billion after
repurchasing approximately $150 million, or 949,000 shares, of common
stock in the first quarter. The remaining balance in the current
repurchase authorization as of May 31, 2018 was approximately $249
million.
Deferred revenue: At the end of the first quarter, the company's
total deferred revenue balance was $2.4 billion, an increase of 19%
year-over-year. The positive impact to total deferred revenue from
changes in foreign exchange rates was $16 million year-over-year. On a
constant currency basis, total deferred revenue would have been up 18%
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 $3.375 billion to $3.410
billion in USD.
-
GAAP operating margin is expected to be approximately 16.4% and
non-GAAP operating margin is expected to be approximately 23.9%.
-
Diluted GAAP EPS is expected to be approximately $2.36 to $2.40,
assuming 191 million diluted shares outstanding. Diluted non-GAAP EPS
is expected to be approximately $3.44 to $3.48, 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 22.5% before discrete tax items.
-
Operating cash flow is expected to be approximately $1.035 billion to
$1.045 billion.
For the second quarter:
-
Revenue is expected to be approximately $822 to $830 million in USD.
-
GAAP operating margin is expected to be approximately 15.1% and
non-GAAP operating margin is expected to be approximately 23.0%.
-
Diluted GAAP EPS is expected to be approximately $0.50, assuming 191
million diluted shares outstanding. Diluted non-GAAP EPS is expected
to be approximately $0.81, 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 22.5%
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 $39 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 22.5% before discrete tax
items. Additionally, full year diluted non-GAAP EPS excludes
approximately $46 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 6 million
diluted shares related to the convertible notes, which are expected to
be offset by our convertible note hedge transactions.
Second quarter non-GAAP operating margin guidance is derived by
subtracting the estimated impact of non-cash share-based compensation
expense of approximately $55 million and amortization of intangible
assets of approximately $10 million. Second 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
22.5% before discrete tax items. Additionally, second quarter diluted
non-GAAP EPS excludes approximately $7 million of discrete tax benefits
related to share-based compensation that are included in second quarter
diluted GAAP EPS. Second quarter diluted non-GAAP EPS excludes
approximately 6 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; risks related to errors or defects in our
offerings and third-party products upon which our offerings depend;
risks related to the security of our offerings and other data security
vulnerabilities; 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; changes in and a
dependence on key personnel; the ability to meet financial and
operational challenges encountered in our international operations; and
ineffective management of, and control over, the Company's growth and
international operations, as well as other factors contained in our most
recent Annual Report on Form 10-K (copies of which may be accessed
through the Securities and Exchange Commission's website at http://www.sec.gov),
including those found therein under the captions "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations." In addition to these factors, actual future performance,
outcomes, and results may differ materially because of more general
factors including (without limitation) general industry and market
conditions and growth rates, economic and political conditions,
governmental and public policy changes and the impact of natural
disasters such as earthquakes and floods. The forward-looking statements
included in this press release represent the Company's views as of the
date of this press release and these views could change. However, while
the Company may elect to update these forward-looking statements at some
point in the future, the Company specifically disclaims any obligation
to do so. These forward-looking statements should not be relied upon as
representing the Company's views as of any date subsequent to the date
of this press release.
Red Hat and the Shadowman logo are trademarks or registered
trademarks of Red Hat, Inc. or its subsidiaries in the U.S. and other
countries. Linux® is the registered trademark of Linus Torvalds in the
U.S. and other countries.
|
RED HAT, INC.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
(In thousands - except per share amounts)
|
|
|
|
|
Three Months Ended
|
|
|
|
May 31,
|
|
May 31,
|
|
|
|
2018
|
|
2017 (1)
|
Revenue:
|
|
|
|
|
|
Subscriptions
|
|
|
$
|
711,521
|
|
|
$
|
596,508
|
|
Training and services
|
|
|
102,009
|
|
|
80,288
|
|
Total revenue
|
|
|
813,530
|
|
|
676,796
|
|
|
|
|
|
|
|
Cost of revenue:
|
|
|
|
|
|
Subscriptions
|
|
|
52,173
|
|
|
43,633
|
|
Training and services
|
|
|
70,526
|
|
|
57,063
|
|
Total cost of revenue
|
|
|
122,699
|
|
|
100,696
|
|
|
|
|
|
|
|
Gross profit
|
|
|
690,831
|
|
|
576,100
|
|
|
|
|
|
|
|
Operating expense:
|
|
|
|
|
|
Sales and marketing
|
|
|
348,815
|
|
|
294,323
|
|
Research and development
|
|
|
166,506
|
|
|
137,163
|
|
General and administrative
|
|
|
63,354
|
|
|
54,870
|
|
Total operating expense
|
|
|
578,675
|
|
|
486,356
|
|
|
|
|
|
|
|
Income from operations
|
|
|
112,156
|
|
|
89,744
|
|
Interest income
|
|
|
7,834
|
|
|
3,993
|
|
Interest expense
|
|
|
6,319
|
|
|
6,085
|
|
Other expense, net
|
|
|
(2,194
|
)
|
|
(586
|
)
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
111,477
|
|
|
87,066
|
|
(Benefit) provision for income taxes
|
|
|
(1,713
|
)
|
|
11,752
|
|
Net income
|
|
|
$
|
113,190
|
|
|
$
|
75,314
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
Basic
|
|
|
$
|
0.64
|
|
|
$
|
0.42
|
|
Diluted
|
|
|
$
|
0.59
|
|
|
$
|
0.41
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
Basic
|
|
|
177,302
|
|
|
177,243
|
|
Diluted
|
|
|
190,739
|
|
|
181,810
|
|
|
|
|
|
|
|
|
|
(1) As adjusted to reflect the impact of the retrospective
application of ASC 606.
|
RED HAT, INC.
|
CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
(In thousands)
|
|
|
|
|
May 31, 2018
|
|
February 28, 2018 (1)
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash, cash equivalents and restricted cash
|
|
|
$
|
1,768,480
|
|
|
$
|
1,724,132
|
|
Investments in debt and equity securities, short-term
|
|
|
329,872
|
|
|
318,358
|
|
Accounts receivable, net
|
|
|
498,964
|
|
|
806,744
|
|
Prepaid expenses
|
|
|
247,175
|
|
|
267,197
|
|
Other current assets
|
|
|
61,123
|
|
|
25,666
|
|
Total current assets
|
|
|
2,905,614
|
|
|
3,142,097
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
196,653
|
|
|
206,105
|
|
Goodwill
|
|
|
1,278,708
|
|
|
1,288,830
|
|
Identifiable intangibles, net
|
|
|
220,176
|
|
|
224,953
|
|
Investments in debt securities, long-term
|
|
|
428,777
|
|
|
430,442
|
|
Deferred tax assets, net
|
|
|
82,826
|
|
|
92,606
|
|
Other assets, net
|
|
|
78,807
|
|
|
89,460
|
|
Total assets
|
|
|
$
|
5,191,561
|
|
|
$
|
5,474,493
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
$
|
359,706
|
|
|
$
|
427,139
|
|
Deferred revenue, short-term
|
|
|
1,721,300
|
|
|
1,853,719
|
|
Other current obligations
|
|
|
685
|
|
|
843
|
|
Convertible notes
|
|
|
194,544
|
|
|
23,806
|
|
Total current liabilities
|
|
|
2,276,235
|
|
|
2,305,507
|
|
|
|
|
|
|
|
Deferred revenue, long-term
|
|
|
723,207
|
|
|
741,453
|
|
Convertible notes
|
|
|
554,503
|
|
|
744,194
|
|
Other long-term obligations
|
|
|
205,672
|
|
|
205,215
|
|
Stockholders' equity:
|
|
|
|
|
|
Common stock
|
|
|
24
|
|
|
24
|
|
Additional paid-in capital
|
|
|
2,399,925
|
|
|
2,416,080
|
|
Retained earnings
|
|
|
1,733,270
|
|
|
1,619,688
|
|
Treasury stock, at cost
|
|
|
(2,657,774
|
)
|
|
(2,525,072
|
)
|
Accumulated other comprehensive loss
|
|
|
(43,501
|
)
|
|
(32,596
|
)
|
Total stockholders' equity
|
|
|
1,431,944
|
|
|
1,478,124
|
|
Total liabilities and stockholders' equity
|
|
|
$
|
5,191,561
|
|
|
$
|
5,474,493
|
|
|
|
|
|
|
|
|
|
|
|
(1) Derived from audited financial statements except for line
items adjusted by the retrospective application of ASC 606.
|
RED HAT, INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
(In thousands)
|
|
|
|
|
Three Months Ended
|
|
|
|
May 31,
|
|
May 31,
|
|
|
|
2018
|
|
2017 (1)
|
Cash flows from operating activities:
|
|
|
|
|
|
Net income
|
|
|
$
|
113,190
|
|
|
$
|
75,314
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
|
27,054
|
|
|
21,817
|
|
Amortization of debt discount and transaction costs
|
|
|
5,838
|
|
|
5,540
|
|
Deferred income taxes
|
|
|
(3,395
|
)
|
|
7,917
|
|
Share-based compensation expense
|
|
|
46,005
|
|
|
43,718
|
|
Net amortization of bond premium on debt securities available for
sale
|
|
|
743
|
|
|
2,436
|
|
Other
|
|
|
1,097
|
|
|
961
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
|
299,439
|
|
|
208,761
|
|
Other receivables
|
|
|
(35,160
|
)
|
|
(19,397
|
)
|
|
Prepaid expenses
|
|
|
25,382
|
|
|
12,024
|
|
Accounts payable and accrued expenses
|
|
|
(28,642
|
)
|
|
(55,326
|
)
|
|
Deferred revenue
|
|
|
(104,592
|
)
|
|
(45,717
|
)
|
|
Other
|
|
|
(800
|
)
|
|
(176
|
)
|
|
Net cash provided by operating activities
|
|
|
346,159
|
|
|
257,872
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Purchase of investment in debt securities available for sale
|
|
|
(108,336
|
)
|
|
(149,524
|
)
|
|
Proceeds from maturities of investment in debt securities available
for sale
|
|
|
87,004
|
|
|
112,041
|
|
Proceeds from sales of investment in debt securities available for
sale
|
|
|
525
|
|
|
14,324
|
|
Proceeds from sales of strategic equity investments
|
|
|
1,300
|
|
|
-
|
|
Purchase of developed software and other intangible assets
|
|
|
(2,866
|
)
|
|
(1,774
|
)
|
|
Purchase of property and equipment
|
|
|
(12,963
|
)
|
|
(25,900
|
)
|
|
Other
|
|
|
(986
|
)
|
|
-
|
|
Net cash used in investing activities
|
|
|
(36,322
|
)
|
|
(50,833
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds from exercise of common stock options
|
|
|
875
|
|
|
2,968
|
|
Proceeds from employee stock purchase program
|
|
|
15,262
|
|
|
11,761
|
|
Payments related to net settlement of share-based compensation awards
|
|
|
(77,094
|
)
|
|
(41,010
|
)
|
|
Purchase of treasury stock
|
|
|
(150,019
|
)
|
|
(61,987
|
)
|
|
Payments on other borrowings
|
|
|
(299
|
)
|
|
(443
|
)
|
|
Repayments of convertible notes
|
|
|
(25,953
|
)
|
|
-
|
|
Net cash used in financing activities
|
|
|
(237,228
|
)
|
|
(88,711
|
)
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rates on cash, cash equivalents
and restricted cash
|
|
|
(28,261
|
)
|
|
21,321
|
|
Net increase in cash, cash equivalents and restricted cash
|
|
|
44,348
|
|
|
139,649
|
|
Cash, cash equivalents and restricted cash at beginning of the period
|
|
|
1,724,132
|
|
|
1,090,808
|
|
Cash, cash equivalents and restricted cash at end of the period
|
|
|
$
|
1,768,480
|
|
|
$
|
1,230,457
|
|
|
|
|
|
|
|
|
|
|
|
(1) As adjusted to reflect the impact of the retrospective
application of ASC 606.
|
RED HAT, INC.
|
RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED
RESULTS
|
(Unaudited)
|
(In thousands - except per share amounts)
|
|
|
|
|
Three Months Ended
|
|
|
|
May 31,
|
|
May 31,
|
|
|
|
2018
|
|
2017 (1)
|
|
|
|
|
|
|
Reconciliation items included in Consolidated Statements of
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash share-based compensation expense:
|
|
|
|
|
|
Cost of revenue
|
|
|
$
|
5,128
|
|
|
$
|
3,948
|
|
Sales and marketing
|
|
|
19,520
|
|
|
20,612
|
|
Research and development
|
|
|
14,782
|
|
|
13,447
|
|
General and administrative
|
|
|
6,575
|
|
|
5,711
|
|
Total share-based compensation expense
|
|
|
$
|
46,005
|
|
|
$
|
43,718
|
|
|
|
|
|
|
|
Amortization of intangible assets expense:
|
|
|
|
|
|
Cost of revenue
|
|
|
$
|
6,141
|
|
|
$
|
3,836
|
|
Sales and marketing
|
|
|
1,362
|
|
|
1,459
|
|
Research and development
|
|
|
34
|
|
|
34
|
|
General and administrative
|
|
|
2,373
|
|
|
1,826
|
|
Total amortization of intangible assets expense
|
|
|
$
|
9,910
|
|
|
$
|
7,155
|
|
|
|
|
|
|
|
Total non-cash interest expense related to the debt discount
|
|
|
$
|
5,007
|
|
|
$
|
4,867
|
|
|
|
|
|
|
|
Transaction costs related to business combinations
|
|
|
$
|
11
|
|
|
$
|
142
|
|
|
|
|
|
|
|
Reconciliation of GAAP results to non-GAAP adjusted results:
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
|
|
|
$
|
113,190
|
|
|
$
|
75,314
|
|
GAAP provision for income taxes
|
|
|
(1,713
|
)
|
|
11,752
|
|
GAAP income before provision for income taxes
|
|
|
$
|
111,477
|
|
|
$
|
87,066
|
|
|
|
|
|
|
|
Add: Non-cash share-based compensation expense
|
|
|
46,005
|
|
|
43,718
|
|
Add: Amortization of intangible assets expense
|
|
|
9,910
|
|
|
7,155
|
|
Add: Non-cash interest expense related to the debt discount
|
|
|
5,007
|
|
|
4,867
|
|
Add: Transaction costs related to business combinations
|
|
|
11
|
|
|
142
|
|
Non-GAAP adjusted income before provision for income taxes
|
|
|
$
|
172,410
|
|
|
$
|
142,948
|
|
Non-GAAP provision for income taxes (2)
|
|
|
39,302
|
|
|
38,702
|
|
Non-GAAP adjusted net income (basic and diluted)
|
|
|
$
|
133,108
|
|
|
$
|
104,246
|
|
|
|
|
|
|
|
Non-GAAP adjusted diluted weighted average shares outstanding:
|
|
|
|
|
|
GAAP diluted weighted average shares outstanding
|
|
|
190,739
|
|
|
181,810
|
|
Dilution offset from convertible note hedge transactions
|
|
|
(5,686
|
)
|
|
(1,593
|
)
|
|
Non-GAAP diluted weighted average shares outstanding
|
|
|
185,053
|
|
|
180,217
|
|
|
|
|
|
|
|
Non-GAAP adjusted net income per share:
|
|
|
|
|
|
Basic
|
|
|
$
|
0.75
|
|
|
$
|
0.59
|
|
Diluted
|
|
|
$
|
0.72
|
|
|
$
|
0.58
|
|
|
|
|
|
|
|
|
|
|
|
(1) As adjusted to reflect the impact of the retrospective
application of ASC 606.
|
RED HAT, INC.
|
RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED
RESULTS
|
(Unaudited)
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
May 31,
|
|
May 31,
|
|
|
|
2018
|
|
2017 (1)
|
(2) Non-GAAP provision for income taxes:
|
|
|
|
|
|
Non-GAAP adjusted income before provision for income taxes
|
|
|
$
|
172,410
|
|
|
$
|
142,948
|
|
GAAP estimated annual effective tax rate
|
|
|
22.5
|
%
|
|
26.8
|
%
|
Provision for income taxes on non-GAAP adjusted income before
discrete tax benefits
|
|
|
$
|
38,792
|
|
|
$
|
38,310
|
|
Discrete tax expense (benefit), excluding discrete benefits related
to share-based compensation
|
|
|
510
|
|
|
392
|
|
Provision for income taxes on non-GAAP adjusted income, excluding
impact from discrete tax benefits related to share-based compensation
|
|
|
$
|
39,302
|
|
|
$
|
38,702
|
|
|
|
|
|
|
|
GAAP gross profit
|
|
|
$
|
690,831
|
|
|
$
|
576,100
|
|
Add: Non-cash share-based compensation expense
|
|
|
5,128
|
|
|
3,948
|
|
Add: Amortization of intangible assets expense
|
|
|
6,141
|
|
|
3,836
|
|
Non-GAAP gross profit
|
|
|
$
|
702,100
|
|
|
$
|
583,884
|
|
|
|
|
|
|
|
Non-GAAP gross margin
|
|
|
86.3
|
%
|
|
86.3
|
%
|
|
|
|
|
|
|
GAAP operating expenses
|
|
|
$
|
578,675
|
|
|
$
|
486,356
|
|
Deduct: Non-cash share-based compensation expense
|
|
|
(40,877
|
)
|
|
(39,770
|
)
|
Deduct: Amortization of intangible assets expense
|
|
|
(3,769
|
)
|
|
(3,319
|
)
|
Deduct: Transaction costs related to business combinations
|
|
|
(11
|
)
|
|
(142
|
)
|
Non-GAAP adjusted operating expenses
|
|
|
$
|
534,018
|
|
|
$
|
443,125
|
|
|
|
|
|
|
|
GAAP operating income
|
|
|
$
|
112,156
|
|
|
$
|
89,744
|
|
Add: Non-cash share-based compensation expense
|
|
|
46,005
|
|
|
43,718
|
|
Add: Amortization of intangible assets expense
|
|
|
9,910
|
|
|
7,155
|
|
Add: Transaction costs related to business combinations
|
|
|
11
|
|
|
142
|
|
Non-GAAP adjusted operating income
|
|
|
$
|
168,082
|
|
|
$
|
140,759
|
|
|
|
|
|
|
|
Non-GAAP adjusted operating margin
|
|
|
20.7
|
%
|
|
20.8
|
%
|
|
|
|
|
|
|
|
|
(1) As adjusted to reflect the impact of the retrospective
application of ASC 606.
|
RED HAT, INC.
|
RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED
RESULTS
|
(Unaudited)
|
(In thousands)
|
|
|
|
|
Three Months Ended
|
|
|
|
May 31,
|
|
May 31,
|
|
Year-Over-Year
|
|
|
|
2018
|
|
2017
|
|
Growth Rate
|
Subscription and services revenue:
|
|
|
|
|
|
|
|
GAAP subscription revenue by offering type:
|
|
|
|
|
|
|
|
Infrastructure-related offerings
|
|
|
$
|
522,402
|
|
|
$
|
457,961
|
|
|
14.1
|
%
|
Adjustment for currency impact
|
|
|
(13,938
|
)
|
|
-
|
|
|
|
Non-GAAP Infrastructure-related subscription revenue on a constant
currency basis
|
|
|
$
|
508,464
|
|
|
$
|
457,961
|
|
|
11.0
|
%
|
|
|
|
|
|
|
|
|
Application Development-related and other emerging technology
offerings
|
|
|
$
|
189,119
|
|
|
$
|
138,547
|
|
|
36.5
|
%
|
Adjustment for currency impact
|
|
|
(6,130
|
)
|
|
-
|
|
|
|
Non-GAAP Application Development-related and other emerging
technology subscription revenue on a constant currency basis
|
|
|
$
|
182,989
|
|
|
$
|
138,547
|
|
|
32.1
|
%
|
|
|
|
|
|
|
|
|
GAAP subscription revenue
|
|
|
$
|
711,521
|
|
|
$
|
596,508
|
|
|
19.3
|
%
|
Adjustment for currency impact
|
|
|
(20,068
|
)
|
|
-
|
|
|
|
Non-GAAP subscription revenue on a constant currency basis
|
|
|
$
|
691,453
|
|
|
$
|
596,508
|
|
|
15.9
|
%
|
|
|
|
|
|
|
|
|
GAAP training and services revenue
|
|
|
$
|
102,009
|
|
|
$
|
80,288
|
|
|
27.1
|
%
|
Adjustment for currency impact
|
|
|
(2,450
|
)
|
|
-
|
|
|
|
Non-GAAP training and services revenue on a constant currency basis
|
|
|
$
|
99,559
|
|
|
$
|
80,288
|
|
|
24.0
|
%
|
|
|
|
|
|
|
|
|
GAAP total revenue
|
|
|
$
|
813,530
|
|
|
$
|
676,796
|
|
|
20.2
|
%
|
Adjustment for currency impact
|
|
|
(22,518
|
)
|
|
-
|
|
|
|
Non-GAAP total revenue on a constant currency basis
|
|
|
$
|
791,012
|
|
|
$
|
676,796
|
|
|
16.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RED HAT, INC.
|
SUPPLEMENTAL INFORMATION
|
(Unaudited)
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in deferred revenue balances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
Long-Term
|
|
Total
|
Balance at May 31, 2017
|
|
|
|
|
|
|
|
|
|
|
$
|
1,486,409
|
|
|
$
|
567,755
|
|
|
$
|
2,054,164
|
|
Constant currency change in deferred revenue
|
|
|
|
|
|
|
|
|
|
|
221,272
|
|
|
152,893
|
|
|
374,165
|
|
Impact from foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
13,619
|
|
|
2,559
|
|
|
16,178
|
|
Balance at May 31, 2018
|
|
|
|
|
|
|
|
|
|
|
$
|
1,721,300
|
|
|
$
|
723,207
|
|
|
$
|
2,444,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-over-year growth rate
|
|
|
|
|
|
|
|
|
|
|
15.8
|
%
|
|
27.4
|
%
|
|
19.0
|
%
|
Year-over-year growth rate on a constant currency basis
|
|
|
|
|
|
|
|
|
|
|
14.9
|
%
|
|
26.9
|
%
|
|
18.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue growth by geographical segment:
|
|
|
|
|
|
|
Americas
|
|
EMEA
|
|
APAC
|
|
Consolidated
|
Total revenue for the three months ended May 31, 2018
|
|
$
|
500,306
|
|
|
$
|
195,148
|
|
|
$
|
118,076
|
|
|
$
|
813,530
|
|
Adjustment for currency impact
|
|
1,970
|
|
|
(21,041
|
)
|
|
(3,447
|
)
|
|
(22,518
|
)
|
Total revenue on a constant currency basis for the three months
ended May 31, 2018
|
|
$
|
502,276
|
|
|
$
|
174,107
|
|
|
$
|
114,629
|
|
|
$
|
791,012
|
|
|
|
|
|
|
|
|
|
|
Total revenue for the three months ended May 31, 2017
|
|
$
|
438,380
|
|
|
$
|
143,671
|
|
|
$
|
94,745
|
|
|
$
|
676,796
|
|
|
|
|
|
|
|
|
|
|
Year-over-year growth rate
|
|
14.1
|
%
|
|
35.8
|
%
|
|
24.6
|
%
|
|
20.2
|
%
|
Year-over-year growth rate on a constant currency basis
|
|
14.6
|
%
|
|
21.2
|
%
|
|
21.0
|
%
|
|
16.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RED HAT, INC. SUPPLEMENTAL INFORMATION (Unaudited) (In
thousands - except per share amounts)
The primary impact of adopting ASC 606 related to the deferral of
incremental commission and other costs of obtaining contracts with
customers. Certain unaudited financial statement information as adjusted
to reflect the Company's adoption of ASC 606 is set forth below. The
adjustments resulting from ASC 606 are reflected in presentations of
both GAAP and non-GAAP financial information.
Consolidated balance sheets:
|
|
|
|
|
February 28, 2018
|
|
|
As Reported (1)
|
|
Adjustments
|
|
As Adjusted
|
Prepaid expenses
|
|
$
|
260,092
|
|
|
$
|
7,105
|
|
|
$
|
267,197
|
Deferred tax assets, net
|
|
$
|
93,300
|
|
|
$
|
(694
|
)
|
|
$
|
92,606
|
Other assets, net
|
|
$
|
87,924
|
|
|
$
|
1,536
|
|
|
$
|
89,460
|
Accounts payable and accrued expenses
|
|
$
|
427,086
|
|
|
$
|
53
|
|
|
$
|
427,139
|
Retained earnings
|
|
$
|
1,611,794
|
|
|
$
|
7,894
|
|
|
$
|
1,619,688
|
|
|
|
|
|
|
|
(1) Derived from audited financial statements.
Consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended May 31, 2017
|
|
|
|
|
|
As Reported
|
|
Adjustments
|
|
As Adjusted
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
|
|
$
|
296,459
|
|
|
$
|
(2,136
|
)
|
|
$
|
294,323
|
Net income
|
|
|
|
|
$
|
73,190
|
|
|
$
|
2,124
|
|
|
$
|
75,314
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
$
|
0.41
|
|
|
$
|
0.01
|
|
|
$
|
0.42
|
Diluted
|
|
|
|
|
$
|
0.40
|
|
|
$
|
0.01
|
|
|
$
|
0.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended August 31, 2017
|
|
|
|
|
|
As Reported
|
|
Adjustments
|
|
As Adjusted
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
|
|
$
|
278,548
|
|
|
$
|
(231
|
)
|
|
$
|
278,317
|
Net income
|
|
|
|
|
$
|
96,859
|
|
|
$
|
229
|
|
|
$
|
97,088
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
$
|
0.55
|
|
|
$
|
-
|
|
|
$
|
0.55
|
Diluted
|
|
|
|
|
$
|
0.53
|
|
|
$
|
-
|
|
|
$
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended November 30, 2017
|
|
|
|
|
|
As Reported
|
|
Adjustments
|
|
As Adjusted
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
|
|
$
|
308,388
|
|
|
$
|
(305
|
)
|
|
$
|
308,083
|
Net income
|
|
|
|
|
$
|
101,306
|
|
|
$
|
303
|
|
|
$
|
101,609
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
$
|
0.57
|
|
|
$
|
-
|
|
|
$
|
0.57
|
Diluted
|
|
|
|
|
$
|
0.54
|
|
|
$
|
0.01
|
|
|
$
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RED HAT, INC.
|
SUPPLEMENTAL INFORMATION
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(Unaudited)
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(In thousands - except per share amounts)
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Three Months Ended February 28, 2018
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As Reported
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Adjustments
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As Adjusted
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Operating expense:
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Sales and marketing
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$
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315,181
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$
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(618
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)
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$
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314,563
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Net income
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$
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(12,552
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)
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$
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392
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$
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(12,160
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)
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Net income per share:
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Basic
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$
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(0.07
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)
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$
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-
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$
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(0.07
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)
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Diluted
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$
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(0.07
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)
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$
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-
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$
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(0.07
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)
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Twelve Months Ended February 28, 2018
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As Reported (1)
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Adjustments
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As Adjusted
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Operating expense:
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Sales and marketing
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$
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1,198,576
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$
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(3,290
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)
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$
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1,195,286
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Net income
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$
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258,803
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|
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$
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3,048
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$
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261,851
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Net income per share:
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Basic
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$
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1.46
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$
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0.02
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$
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1.48
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Diluted
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$
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1.40
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$
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0.02
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$
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1.42
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(1) Derived from audited financial statements.
View source version on businesswire.com: https://www.businesswire.com/news/home/20180621005947/en/
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