Red Hat, Inc.
Jun 19, 2013

Red Hat Reports First Quarter Results

RALEIGH, N.C.--(BUSINESS WIRE)-- Red Hat, Inc. (NYSE: RHT), the world's leading provider of open source solutions, today announced financial results for its fiscal year 2014 first quarter ended May 31, 2013.

Total revenue for the quarter was $363 million, an increase of 15% in U.S. dollars from the year ago quarter, or 17% measured in constant currency. Constant currency references in this release are as detailed in the tables below. Subscription revenue for the quarter was $316 million, up 16% in U.S. dollars year-over-year, or 18% measured in constant currency.

"The first quarter was a solid start to Fiscal 2014, with both revenue and profitability coming in above the high-end of our guidance. We delivered mid-teens revenue growth driven by customer demand for innovative open source technologies based on a high-value subscription model," stated Jim Whitehurst, President and Chief Executive Officer of Red Hat. "In Q1, we continued to execute against our strategy of significantly expanding our addressable market in the new cloud-centric data center."

GAAP operating income for the first quarter was $57 million, up 11% year-over-year. After adjusting for stock compensation, amortization expenses and certain facility exit costs, as detailed in the tables below, non-GAAP operating income for the first quarter was $87 million, up 7% year-over-year. For the first quarter, GAAP operating margin was 15.6% and non-GAAP operating margin was 23.9%.

Net income for the quarter was $40 million, or $0.21 per diluted share, compared with $37 million, or $0.19 per diluted share, in the year ago quarter. After adjusting for stock compensation, amortization expenses and certain facility exit costs, as detailed in the tables below, non-GAAP net income for the quarter was $62 million, or $0.32 per diluted share, as compared to $58 million, or $0.30 per diluted share, in the year ago quarter.

Operating cash flow was $142 million for the first quarter, as compared to $124 million in the year ago quarter. At quarter end, the company's total deferred revenue balance was $1.06 billion, an increase of 16% on a year-over-year basis. Total cash, cash equivalents and investments as of May 31, 2013 was $1.22 billion after repurchasing approximately $179 million, or approximately 3.6 million shares, of common stock in the first quarter.

"During the first quarter, we delivered solid growth in total revenue and subscription revenue. In addition, quarterly operating cash flow grew to a record $142 million. At the same time, we continued to invest in our long-term growth initiatives around the open hybrid cloud to deliver new technologies, in particular by ramping-up spending in R&D for cloud management, Red Hat Enterprise Linux OpenStack Platform and Red Hat's OpenShift platform-as-a-service technologies," stated Charlie Peters, Executive Vice President and Chief Financial Officer of Red Hat.

Additional information on Red Hat's reported results, including a reconciliation of the non-GAAP adjusted results, are included in the financial tables below. A live webcast of Red Hat's results will begin at 5:00 pm ET today and 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.

About Red Hat, Inc.

Red Hat is the world's leading provider of open source software solutions, using a community-powered approach to 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 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 delays or reductions in information technology spending; the effects of industry consolidation; the ability of the Company to compete effectively; the integration of acquisitions and the ability to market successfully acquired technologies and products; 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; the ability to deliver and stimulate demand for new products and technological innovations on a timely basis; risks related to data and information security vulnerabilities; ineffective management of, and control over, the Company's growth and international operations; fluctuations in exchange rates; and changes in and a dependence on key personnel, 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, the Shadowman logo, JBoss and OpenShift are registered trademarks of Red Hat, Inc. in the U.S. and other countries. Linux is a registered trademark of Linus Torvald and OpenStack is a registered trademark of OpenStack, LLC.

RED HAT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands - except per share amounts)
         
 
Three Months Ended
May 31, May 31,
2013 2012
Revenue:
 
Subscriptions $315,817 $272,571
Training and services 47,442 42,160
 
Total subscription, training and services revenue 363,259 314,731
 
Cost of revenue:
 
Subscriptions 23,375 17,940
Training and services 32,682 28,079
 
Total cost of subscription, training and services revenue 56,057 46,019
 
Total gross profit 307,202 268,712
 
Operating expense:
Sales and marketing 142,444 120,870
Research and development 73,802 59,880
General and administrative 34,333 33,912
Facility exit costs - 3,142
 
Total operating expense 250,579 217,804
 
Income from operations 56,623 50,908
Interest income 1,502 2,294
Other income (expense), net (424) 1,887
 
Income before provision for income taxes 57,701 55,089
Provision for income taxes 17,310 17,628
 
Net income $40,391 $37,461
 
Net income per share:
Basic $0.21 $0.19
Diluted $0.21 $0.19
 
Weighted average shares outstanding:
Basic 191,114 192,947
Diluted 192,969 195,937
 

RED HAT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
           
ASSETS
May 31, February 28,
2013 2013 (1)
(Unaudited)
Current assets:
Cash and cash equivalents $597,998 $487,084
Investments in debt and equity securities 255,638 392,381
Accounts receivable, net 227,747 302,942
Deferred tax assets, net 88,595 88,765
Prepaid expenses 90,141 94,421
Other current assets 2,414 3,156
 
Total current assets 1,262,533 1,368,749
 
Property and equipment, net 158,876 141,586
Goodwill 690,530 690,911
Identifiable intangibles, net 137,313 142,243
Investments in debt securities 374,652 438,908
Other assets, net 31,029 31,263
 
Total assets $2,654,933 $2,813,660
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $141,593 $154,202
Deferred revenue 800,791 830,486
Other current obligations 1,041 1,024
 
Total current liabilities 943,425 985,712
 
Long term deferred revenue 259,103 259,466
Other long term obligations 59,098 48,321
Stockholders' equity:
Common stock 23 23
Additional paid-in capital 1,819,251 1,802,899
Retained earnings 582,271 541,880
Treasury stock, at cost (996,010) (816,674)
Accumulated other comprehensive loss (12,228) (7,967)
 
Total stockholders' equity 1,393,307 1,520,161
 
Total liabilities and stockholders' equity $2,654,933 $2,813,660
 
 
(1) Derived from audited financial statements
 

RED HAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
         
 
Three Months Ended
May 31, May 31,
2013 2012