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Red Hat 2Q 2019 up 14% YoY, Buoyed By Subscription Revenue

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9/19/2018
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  • Second quarter total revenue of $823 million, up 14% year-over-year, or 14% in constant currency
  • Second quarter Application Development-related and other emerging technology subscription revenue of $196 million, up 31% year-over-year, or 31% in constant currency
  • Quarter-end deferred revenue balance of $2.4 billion, up 17% year-over-year, or 19% in constant currency

RALEIGH, N.C. -- Red Hat the world's leading provider of open source solutions, today announced financial results for the second quarter of fiscal year 2019 ended August 31, 2018.

"Customers continue to prioritize their digital transformation initiatives, and they are adopting Red Hat's hybrid cloud enabling technologies to modernize their applications and drive greater efficiency and effectiveness in their business," stated Jim Whitehurst, President and Chief Executive Officer of Red Hat. "The expansion of our technology portfolio has increased our strategic importance with customers, which is evidenced by the number of deals over five million dollars in the second quarter more than doubling year-over-year."

"Our second quarter results were consistent with our guidance and we drove 20% growth in total backlog to $3.3 billion," said Eric Shander, Executive Vice President and Chief Financial Officer for Red Hat. "We are re-affirming our full year growth in constant currency at 16%-17% year-over-year; however, we are adjusting our full year total revenue guidance in dollars by approximately $15 million, solely to account for the change in FX rates."

Revenue: Total revenue for the quarter was $823 million, up 14% in USD year-over-year, or 14% measured in constant currency. Constant currency references in this release are detailed in the tables below. Subscription revenue for the quarter was $723 million, up 13% in USD year-over-year, or 14% 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 $527 million, an increase of 8% in USD year-over-year, or 8% measured in constant currency. Subscription revenue from Application Development-related and other emerging technology offerings for the quarter was $196 million, an increase of 31% in USD year-over-year, or 31% measured in constant currency.

Operating Income: GAAP operating income for the quarter was $135 million. 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 second quarter was $197 million, up 3% year-over-year. For the second quarter, GAAP operating margin was 16.4% and non-GAAP operating margin was 23.9%. Non-GAAP references in this release are detailed in the tables below.

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 $3.360 billion to $3.395 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 $2.29 to $2.33, assuming 186 million diluted shares outstanding. Diluted non-GAAP EPS is expected to be approximately $3.45 to $3.49, assuming 184 million diluted shares outstanding. Both GAAP and non-GAAP EPS assume a $4 million per quarter forecast for other income. The GAAP estimated tax rate assumes a rate of 23.4% before discrete tax items and the non-GAAP estimated tax rate assumes a rate of approximately 22.5% before discrete tax items.
  • Non-GAAP operating cash flow is expected to be approximately $1.035 billion to $1.045 billion.

For the third quarter:

  • Revenue is expected to be approximately $848 to $856 million in USD.
  • GAAP operating margin is expected to be approximately 16.1% and non-GAAP operating margin is expected to be approximately 24.0%.
  • Diluted GAAP EPS is expected to be approximately $0.56, assuming 186 million diluted shares outstanding. Diluted non-GAAP EPS is expected to be approximately $0.87, assuming 184 million diluted shares outstanding. Both GAAP and non-GAAP EPS assume a $4 million forecast for other income. The GAAP estimated tax rate assumes a rate of 23.4% before discrete tax items and the non-GAAP estimated tax rate assumes a rate of approximately 22.5% before discrete tax items.

Red Hat Inc. (NYSE: RHT)

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Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
9/19/2018 | 8:52:00 PM
And yet
But the stock was down 5% after hours, trading at $135.89, as the company failed to hit expectations.
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