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
|
%
|
| | | | | | | | | | | | |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20180326006031/en/
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.