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 third quarter of fiscal year 2019 ended November 30, 2018.
“Adoption of Red Hat’s technologies that enable customers to build and deploy applications more securely and consistently across hybrid and multi-cloud environments continued to drive our growth in Q3,” stated Jim Whitehurst, President and Chief Executive Officer of Red Hat. “For instance, our Certified Cloud and Service Providers (CCSP) program reached the $300 million annualized run-rate milestone in Q3 with 25% year-over-year growth of Red Hat Enterprise Linux on-demand in the public clouds. In addition, we continue to experience strong customer growth in Red Hat OpenShift, our enterprise Kubernetes platform, and Red Hat Ansible Automation, both of which added more than 100 customers in Q3.”
“In Q3, we closed 100 deals over $1 million and delivered double digit total revenue growth of 13% year-over-year, or 15% in constant currency and deferred revenue growth of 20% year-over-year, or 23% in constant currency despite continued foreign exchange volatility. Moreover, our total backlog grew 22% year-over-year to approximately $3.5 billion,” said Eric Shander, Executive Vice President and Chief Financial Officer for Red Hat. “Strong renewals of our largest deals also helped drive these results with all of our top 25 deals renewing at an upsell rate above 120%.”
Revenue: Total revenue for the quarter was $847 million, up 13% year-over-year, or 15% measured in constant currency. Constant currency references in this release are detailed in the tables below. Subscription revenue for the quarter was $741 million, up 13% year-over-year, or 15% 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 $534 million, an increase of 8% year-over-year, or 9% measured in constant currency. Subscription revenue from Application Development-related and other emerging technology offerings for the quarter was $207 million, an increase of 28% year-over-year, or 30% measured in constant currency.
Operating Income: GAAP operating income for the quarter was $109 million, down 8% 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 adjusted operating income for the third quarter was $203 million, up 13% year-over-year. For the third quarter, GAAP operating margin was 12.9% and non-GAAP adjusted operating margin was 24.0%. Non-GAAP references in this release are detailed in the tables below.
Net Income: GAAP net income for the quarter was $94 million, or $0.51 diluted earnings per share (“EPS”), compared with GAAP net income of $102 million, or $0.55 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 adjusted net income for the quarter was $175 million, or $0.96 diluted EPS, as compared to $133 million, or $0.73 diluted EPS, in the year-ago quarter. Non-GAAP adjusted diluted weighted average shares outstanding excludes dilution that is expected to be offset by our convertible note hedge transactions.
Cash: GAAP and non-GAAP operating cash flow was $137 million for the third quarter, down 15% on a year-over-year basis compared to GAAP operating cash flow. Non-GAAP operating cash flow adjusts for the impact of our recent adoption of ASU 2016-15: Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which requires the portion of repayments of convertible notes during the third quarter that is attributable to debt discount to be classified as operating cash flow. GAAP and non-GAAP operating cash flow include approximately $23 million of business combinations expenses paid in the quarter. Total cash, cash equivalents and investments as of November 30, 2018 was $2.2 billion after repurchasing approximately $13 million, or approximately 0.1 million shares, of common stock in the third quarter. The remaining balance in the current repurchase authorization as of November 30, 2018 was approximately $737 million.
Deferred revenue: At the end of the third quarter, the Company’s total deferred revenue balance was $2.5 billion, an increase of 20% year-over-year. The negative impact to total deferred revenue from changes in foreign exchange rates was $53 million year-over-year. On a constant currency basis, total deferred revenue would have increased 23% year-over-year.
Due to the pending transaction with International Business Machines Corporation, Red Hat will not be updating its outlook for fiscal 2019 and will not be hosting a conference call for its third quarter 2019 business results.
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 enterprise open source software solutions, using a community-powered approach to deliver reliable and high-performing Linux, hybrid cloud, container, and Kubernetes technologies. Red Hat helps customers integrate new and existing IT applications, develop cloud-native applications, standardize on our industry-leading operating system, and automate, secure, and manage complex environments. Award-winning support, training, and consulting services make Red Hat a trusted adviser to the Fortune 500. As a strategic partner to cloud providers, system integrators, application vendors, customers, and open source communities, Red Hat can help organizations prepare for the digital future. Learn more at 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; changes in and a dependence on key personnel; 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; 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.
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RED HAT, INC. |
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CONSOLIDATED STATEMENTS OF OPERATIONS |
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| (Unaudited) | ||||||||||||||||
| (In thousands - except per share amounts) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| November 30, | November 30, | November 30, | November 30, | |||||||||||||
| 2018 | 2017 (1) | 2018 | 2017 (1) | |||||||||||||
| Revenue: | ||||||||||||||||
| Subscriptions | $ | 740,661 | $ | 656,832 | $ | 2,174,881 | $ | 1,890,902 | ||||||||
| Training and services | 106,134 | 91,146 | 308,191 | 257,227 | ||||||||||||
| Total revenue | 846,795 | 747,978 | 2,483,072 | 2,148,129 | ||||||||||||
| Cost of revenue: | ||||||||||||||||
| Subscriptions | 53,441 | 47,277 | 157,545 | 137,234 | ||||||||||||
| Training and services | 70,676 | 64,482 | 208,201 | 181,938 | ||||||||||||
| Total cost of revenue | 124,117 | 111,759 | 365,746 | 319,172 | ||||||||||||
| Gross profit | 722,678 | 636,219 | 2,117,326 | 1,828,957 | ||||||||||||
| Operating expense: | ||||||||||||||||
| Sales and marketing | 353,592 | 308,083 | 1,036,787 | 880,723 | ||||||||||||
| Research and development | 164,267 | 145,580 | 497,081 | 424,552 | ||||||||||||
| General and administrative | 95,861 | 63,838 | 227,788 | 180,430 | ||||||||||||
| Total operating expense | 613,720 | 517,501 | 1,761,656 | 1,485,705 | ||||||||||||
| Income from operations | 108,958 | 118,718 | 355,670 | 343,252 | ||||||||||||
| Interest income | 7,334 | 4,864 | 23,023 | 13,469 | ||||||||||||
| Interest expense | 4,299 | 6,180 | 15,426 | 18,346 | ||||||||||||
| Other expense, net | (464 | ) | (1,187 | ) | (5,115 | ) | (3,033 | ) | ||||||||
| Income before provision for income taxes | 111,529 | 116,215 | 358,152 | 335,342 | ||||||||||||
| Provision for income taxes | 17,079 | 14,606 | 63,658 | 61,331 | ||||||||||||
| Net income | $ | 94,450 | $ | 101,609 | $ | 294,494 | $ | 274,011 | ||||||||
| Net income per share: | ||||||||||||||||
| Basic | $ | 0.54 | $ | 0.57 | $ | 1.67 | $ | 1.55 | ||||||||
| Diluted | $ | 0.51 | $ | 0.55 | $ | 1.57 | $ | 1.49 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 176,231 | 177,063 | 176,762 | 177,188 | ||||||||||||
| Diluted | 186,062 | 186,160 | 187,501 | 183,397 | ||||||||||||
| (1) | As adjusted to reflect the impact of the retrospective application of ASC 606. | |
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RED HAT, INC. |
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| CONSOLIDATED BALANCE SHEETS | ||||||||
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(Unaudited) |
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(In thousands) |
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November 30, |
February 28, |
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| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash, cash equivalents and restricted cash | $ | 1,539,272 | $ | 1,724,132 | ||||
| Investments in debt and equity securities, short-term | 387,885 | 318,358 | ||||||
| Accounts receivable, net | 732,833 | 806,744 | ||||||
| Prepaid expenses | 241,145 | 267,197 | ||||||
| Other current assets | 69,356 | 25,666 | ||||||
| Total current assets | 2,970,491 | 3,142,097 | ||||||
| Property and equipment, net | 195,249 | 206,105 | ||||||
| Goodwill | 1,285,503 | 1,288,830 | ||||||
| Identifiable intangibles, net | 203,613 | 224,953 | ||||||
| Investments in debt securities, long-term | 295,870 | 430,442 | ||||||
| Deferred tax assets, net | 80,958 | 92,606 | ||||||
| Other assets, net | 71,330 | 89,460 | ||||||
| Total assets | $ | 5,103,014 | $ | 5,474,493 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 432,662 | $ | 427,139 | ||||
| Deferred revenue, short-term | 1,738,547 | 1,853,719 | ||||||
| Other current obligations | 404 | 843 | ||||||
| Convertible notes | 191,972 | 23,806 | ||||||
| Total current liabilities | 2,363,585 | 2,305,507 | ||||||
| Deferred revenue, long-term | 790,577 | 741,453 | ||||||
| Convertible notes | 324,153 | 744,194 | ||||||
| Other long-term obligations | 201,068 | 205,215 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock | 24 | 24 | ||||||
| Additional paid-in capital | 2,614,768 | 2,416,080 | ||||||
| Retained earnings | 1,914,574 | 1,619,688 | ||||||
| Treasury stock, at cost | (3,058,598 | ) | (2,525,072 | ) | ||||
| Accumulated other comprehensive loss | (47,137 | ) | (32,596 | ) | ||||
| Total stockholders’ equity | 1,423,631 | 1,478,124 | ||||||
| Total liabilities and stockholders’ equity | $ | 5,103,014 | $ | 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 | ||||||||||||||||
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(Unaudited) |
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(In thousands) |
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| Three Months Ended | Nine Months Ended | |||||||||||||||
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November 30, |
November 30, |
November 30, |
November 30, |
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| Cash flows from operating activities: | ||||||||||||||||
| Net income | $ | 94,450 | $ | 101,609 | $ | 294,494 | $ | 274,011 | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
| Depreciation and amortization | 26,775 | 25,588 | 80,495 | 71,541 | ||||||||||||
| Amortization of debt discount and transaction costs | 4,062 | 5,630 | 14,470 | 16,740 | ||||||||||||
| Repayments of convertible notes attributable to debt discount | (552 | ) | — | (33,115 | ) | — | ||||||||||
| Deferred income taxes | 1,983 | 273 | (1,705 | ) | 7,831 | |||||||||||
| Share-based compensation expense | 56,278 | 52,318 | 154,969 | 142,983 | ||||||||||||
| Net amortization of bond premium on debt securities available for sale | 256 | 2,113 | 1,542 | 6,988 | ||||||||||||
| Other | 274 | (214 | ) | 3,924 | 1,318 | |||||||||||
| Changes in operating assets and liabilities, net of effects of acquisitions: | ||||||||||||||||
| Accounts receivable | (219,184 | ) | (113,898 | ) | 58,206 | 111,899 | ||||||||||
| Other receivables | (23,310 | ) | 135 | (43,555 | ) | (20,211 | ) | |||||||||
| Prepaid expenses | 2,903 | (7,062 | ) | 34,565 | (6,831 | ) | ||||||||||
| Accounts payable and accrued expenses | 40,325 | 35,562 | 38,620 | (17,754 | ) | |||||||||||
| Deferred revenue | 153,111 | 57,275 | 14,733 | (29,017 | ) | |||||||||||
| Other | (643 | ) | 978 | (1,964 | ) | 1,577 | ||||||||||
| Net cash provided by operating activities | 136,728 | 160,307 | 615,679 | 561,075 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Purchase of investment in debt securities available for sale | (99,890 | ) | (26,580 | ) | (217,951 | ) | (285,773 | ) | ||||||||
| Proceeds from maturities of investment in debt securities available for sale | 66,406 | 130,941 | 259,460 | 348,285 | ||||||||||||
| Proceeds from sales of investment in debt securities available for sale | — | 5,293 | 8,491 | 19,617 | ||||||||||||
| Proceeds from sales of strategic equity investments | — | — | 1,300 | — | ||||||||||||
| Acquisition of businesses, net of cash acquired | (11,550 | ) | — | (11,550 | ) | (83,965 | ) | |||||||||
| Purchase of developed software and other intangible assets | (1,003 | ) | (3,426 | ) | (7,127 | ) | (12,871 | ) | ||||||||
| Purchase of property and equipment | (18,229 | ) | (16,587 | ) | (44,845 | ) | (68,268 | ) | ||||||||
| Other | — | 84 | (986 | ) | (105 | ) | ||||||||||
| Net cash (used in) provided by investing activities | (64,266 | ) | 89,725 | (13,208 | ) | (83,080 | ) | |||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Proceeds from exercise of common stock options | 767 | 711 | 1,831 | 4,541 | ||||||||||||
| Proceeds from employee stock purchase program | 14,409 | 10,575 | 43,356 | 33,288 | ||||||||||||
| Payments related to net settlement of share-based compensation awards | (32,873 | ) | (37,807 | ) | (127,605 | ) | (86,230 | ) | ||||||||
| Purchase of treasury stock | (12,791 | ) | (100,000 | ) | (412,845 | ) | (237,002 | ) | ||||||||
| Payments on other borrowings | (201 | ) | (346 | ) | (750 | ) | (1,207 | ) | ||||||||
| Repayments of convertible notes attributable to principal | (4,036 | ) | (6 | ) | (241,979 | ) | (6 | ) | ||||||||
| Net cash used in financing activities | (34,725 | ) | (126,873 | ) | (737,992 | ) | (286,616 | ) | ||||||||
| Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash | (1,980 | ) | (2,295 | ) | (49,339 | ) | 48,985 | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 35,757 | 120,864 | (184,860 | ) | 240,364 | |||||||||||
| Cash, cash equivalents and restricted cash at beginning of the period | 1,503,515 | 1,210,308 | 1,724,132 | 1,090,808 | ||||||||||||
| Cash, cash equivalents and restricted cash at end of the period | $ | 1,539,272 | $ | 1,331,172 | $ | 1,539,272 | $ | 1,331,172 | ||||||||
| (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) |
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(In thousands - except per share amounts) |
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| Three Months Ended | Nine Months Ended | |||||||||||||||
| November 30, | November 30, | November 30, | November 30, | |||||||||||||
| 2018 | 2017 (1) | 2018 | 2017 (1) | |||||||||||||
| Reconciliation items included in Consolidated Statements of Operations: | ||||||||||||||||
| Non-cash share-based compensation expense: | ||||||||||||||||
| Cost of revenue | $ | 4,803 | $ | 4,199 | $ | 14,678 | $ | 12,408 | ||||||||
| Sales and marketing | 25,218 | 23,278 | 67,562 | 64,708 | ||||||||||||
| Research and development | 17,003 | 14,937 | 48,091 | 42,603 | ||||||||||||
| General and administrative | 9,254 | 9,904 | 24,638 | 23,264 | ||||||||||||
| Total share-based compensation expense | $ | 56,278 | $ | 52,318 | $ | 154,969 | $ | 142,983 | ||||||||
| Amortization of intangible assets expense: | ||||||||||||||||
| Cost of revenue | $ | 5,864 | $ | 4,329 | $ | 17,880 | $ | 12,491 | ||||||||
| Sales and marketing | 1,396 | 1,592 | 4,158 | 4,634 | ||||||||||||
| Research and development | 34 | 34 | 103 | 103 | ||||||||||||
| General and administrative | 2,386 | 2,084 | 7,139 | 6,137 | ||||||||||||
| Total amortization of intangible assets expense | $ | 9,680 | $ | 8,039 | $ | 29,280 | $ | 23,365 | ||||||||
| Total non-cash interest expense related to the debt discount | $ | 3,347 | $ | 4,936 | $ | 12,223 | $ | 14,693 | ||||||||
| Transaction costs related to business combinations | $ | 27,968 | $ | (52 | ) | $ | 28,086 | $ | 1,310 | |||||||
| Reconciliation of GAAP results to non-GAAP adjusted results: | ||||||||||||||||
| GAAP net income | $ | 94,450 | $ | 101,609 | $ | 294,494 | $ | 274,011 | ||||||||
| GAAP provision for income taxes | 17,079 | 14,606 | 63,658 | 61,331 | ||||||||||||
| GAAP income before provision for income taxes | $ | 111,529 | $ | 116,215 | $ | 358,152 | $ | 335,342 | ||||||||
| Add: Non-cash share-based compensation expense | 56,278 | 52,318 | 154,969 | 142,983 | ||||||||||||
| Add: Amortization of intangible assets expense | 9,680 | 8,039 | 29,280 | 23,365 | ||||||||||||
| Add: Non-cash interest expense related to the debt discount | 3,347 | 4,936 | 12,223 | 14,693 | ||||||||||||
| Add: Transaction costs related to business combinations | 27,968 | (52 | ) | 28,086 | 1,310 | |||||||||||
| Non-GAAP adjusted income before provision for income taxes | $ | 208,802 | $ | 181,456 | $ | 582,710 | $ | 517,693 | ||||||||
| Non-GAAP provision for income taxes (2) | 33,487 | 48,116 | 117,704 | 141,666 | ||||||||||||
| Non-GAAP adjusted net income (basic and diluted) | $ | 175,315 | $ | 133,340 | $ | 465,006 | $ | 376,027 | ||||||||
| Non-GAAP adjusted diluted weighted average shares outstanding: | ||||||||||||||||
| GAAP diluted weighted average shares outstanding | 186,062 | 186,160 | 187,501 | 183,397 | ||||||||||||
| Dilution offset from convertible note hedge transactions | (3,648 | ) | (4,109 | ) | (3,730 | ) | (2,928 | ) | ||||||||
| Non-GAAP diluted weighted average shares outstanding | 182,414 | 182,051 | 183,771 | 180,469 | ||||||||||||
| Non-GAAP adjusted net income per share: | ||||||||||||||||
| Basic | $ | 0.99 | $ | 0.75 | $ | 2.63 | $ | 2.12 | ||||||||
| Diluted | $ | 0.96 | $ | 0.73 | $ | 2.53 | $ | 2.08 | ||||||||
| (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) |
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(In thousands) |
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| Three Months Ended | Nine Months Ended | |||||||||||||||
| November 30, | November 30, | November 30, | November 30, | |||||||||||||
| 2018 | 2017 (1) | 2018 | 2017 (1) | |||||||||||||
| (2) Non-GAAP provision for income taxes: | ||||||||||||||||
| Non-GAAP adjusted income before provision for income taxes | $ | 208,802 | $ | 181,456 | $ | 582,710 | $ | 517,693 | ||||||||
| GAAP estimated annual effective tax rate | 21.1 | % | 25.9 | % | 22.7 | % | 26.8 | % | ||||||||
| Provision for income taxes on non-GAAP adjusted income before adjustments | $ | 44,781 | $ | 46,949 | $ | 132,275 | $ | 138,742 | ||||||||
| Certain non-deductible share-based compensation | (3,535 | ) | — | (8,508 | ) | — | ||||||||||
| Non-deductible merger related costs | (8,566 | ) | — | (8,566 | ) | — | ||||||||||
| Discrete tax expense, excluding discrete benefits related to share-based compensation | 807 | 1,167 | 2,503 | 2,924 | ||||||||||||
| Provision for income taxes on non-GAAP adjusted income, excluding impact from certain non-deductible share-based compensation, non-deductible merger related costs and discrete tax benefits related to share-based compensation | $ | 33,487 | $ | 48,116 | $ | 117,704 | $ | 141,666 | ||||||||
| GAAP gross profit | $ | 722,678 | $ | 636,219 | $ | 2,117,326 | $ | 1,828,957 | ||||||||
| Add: Non-cash share-based compensation expense | 4,803 | 4,199 | 14,678 | 12,408 | ||||||||||||
| Add: Amortization of intangible assets expense | 5,864 | 4,329 | 17,880 | 12,491 | ||||||||||||
| Non-GAAP gross profit | $ | 733,345 | $ | 644,747 | $ | 2,149,884 | $ | 1,853,856 | ||||||||
| Non-GAAP gross margin | 86.6 | % | 86.2 | % | 86.6 | % | 86.3 | % | ||||||||
| GAAP operating expenses | $ | 613,720 | $ | 517,501 | $ | 1,761,656 | $ | 1,485,705 | ||||||||
| Deduct: Non-cash share-based compensation expense | (51,475 | ) | (48,119 | ) | (140,291 | ) | (130,575 | ) | ||||||||
| Deduct: Amortization of intangible assets expense | (3,816 | ) | (3,710 | ) | (11,400 | ) | (10,874 | ) | ||||||||
| Deduct: Transaction costs related to business combinations | (27,968 | ) | 52 | (28,086 | ) | (1,310 | ) | |||||||||
| Non-GAAP adjusted operating expenses | $ | 530,461 | $ | 465,724 | $ | 1,581,879 | $ | 1,342,946 | ||||||||
| GAAP operating income | $ | 108,958 | $ | 118,718 | $ | 355,670 | $ | 343,252 | ||||||||
| Add: Non-cash share-based compensation expense | 56,278 | 52,318 | 154,969 | 142,983 | ||||||||||||
| Add: Amortization of intangible assets expense | 9,680 | 8,039 | 29,280 | 23,365 | ||||||||||||
| Add: Transaction costs related to business combinations | 27,968 | (52 | ) | 28,086 | 1,310 | |||||||||||
| Non-GAAP adjusted operating income | $ | 202,884 | $ | 179,023 | $ | 568,005 | $ | 510,910 | ||||||||
| Non-GAAP adjusted operating margin | 24.0 | % | 23.9 | % | 22.9 | % | 23.8 | % | ||||||||
| GAAP net cash provided by operating activities | $ | 136,728 | $ | 160,307 | $ | 615,679 | $ | 561,075 | ||||||||
| Repayments of convertible notes attributable to debt discount | 552 | — | 33,115 | — | ||||||||||||
| Non-GAAP net cash provided by operating activities | $ | 137,280 | $ | 160,307 | $ | 648,794 | $ | 561,075 | ||||||||
| (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) |
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(In thousands) |
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| Three Months Ended | ||||||||||
| November 30, | November 30, | Year-Over-Year | ||||||||
| 2018 | 2017 | Growth Rate | ||||||||
| Subscription and services revenue: | ||||||||||
| GAAP subscription revenue by offering type: | ||||||||||
| Infrastructure-related offerings | $ | 534,051 | $ | 494,974 | 7.9% | |||||
| Adjustment for currency impact | 7,479 | — | ||||||||
| Non-GAAP Infrastructure-related subscription revenue on a constant currency basis | $ | 541,530 | $ | 494,974 | 9.4% | |||||
| Application Development-related and other emerging technology offerings | $ | 206,610 | $ | 161,858 | 27.6% | |||||
| Adjustment for currency impact | 4,340 | — | ||||||||
| Non-GAAP Application Development-related and other emerging technology subscription revenue on a constant currency basis | $ | 210,950 | $ | 161,858 | 30.3% | |||||
| GAAP subscription revenue | $ | 740,661 | $ | 656,832 | 12.8% | |||||
| Adjustment for currency impact | 11,819 | — | ||||||||
| Non-GAAP subscription revenue on a constant currency basis | $ | 752,480 | $ | 656,832 | 14.6% | |||||
| GAAP training and services revenue | $ | 106,134 | $ | 91,146 | 16.4% | |||||
| Adjustment for currency impact | 3,668 | — | ||||||||
| Non-GAAP training and services revenue on a constant currency basis | $ | 109,802 | $ | 91,146 | 20.5% | |||||
| GAAP total revenue | $ | 846,795 | $ | 747,978 | 13.2% | |||||
| Adjustment for currency impact | 15,487 | — | ||||||||
| Non-GAAP total revenue on a constant currency basis | $ | 862,282 | $ | 747,978 | 15.3% | |||||
| Nine Months Ended | ||||||||||
| November 30, | November 30, | Year-Over-Year | ||||||||
| 2018 | 2017 | Growth Rate | ||||||||
| GAAP subscription revenue by offering type: | ||||||||||
| Infrastructure-related offerings | $ | 1,583,154 | $ | 1,440,383 | 9.9% | |||||
| Adjustment for currency impact | (5,212 | ) | — | |||||||
| Non-GAAP Infrastructure-related subscription revenue on a constant currency basis | $ | 1,577,942 | $ | 1,440,383 | 9.6% | |||||
| Application Development-related and other emerging technology offerings | $ | 591,727 | $ | 450,519 | 31.3% | |||||
| Adjustment for currency impact | (890 | ) | — | |||||||
| Non-GAAP Application Development-related and other emerging technology subscription revenue on a constant currency basis | $ | 590,837 | $ | 450,519 | 31.1% | |||||
| GAAP subscription revenue | $ | 2,174,881 | $ | 1,890,902 | 15.0% | |||||
|
|
||||||||||
|
RED HAT, INC. |
|||||||||
|
RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED RESULTS |
|||||||||
| (Unaudited) | |||||||||
| (In thousands) | |||||||||
| Adjustment for currency impact | (6,102 | ) | — | ||||||
| Non-GAAP subscription revenue on a constant currency basis | $ | 2,168,779 | $ | 1,890,902 | 14.7% | ||||
| GAAP training and services revenue | $ | 308,191 | $ | 257,227 | 19.8% | ||||
| Adjustment for currency impact | 2,696 | — | |||||||
| Non-GAAP training and services revenue on a constant currency basis | $ | 310,887 | $ | 257,227 | 20.9% | ||||
| GAAP total revenue | $ | 2,483,072 | $ | 2,148,129 | 15.6% | ||||
| Adjustment for currency impact | (3,406 | ) | — | ||||||
| Non-GAAP total revenue on a constant currency basis | $ | 2,479,666 | $ | 2,148,129 | 15.4% | ||||
| RED HAT, INC. | ||||||||||||
| SUPPLEMENTAL INFORMATION | ||||||||||||
|
(Unaudited) |
||||||||||||
|
(In thousands) |
||||||||||||
| Change in deferred revenue balances: | ||||||||||||
| Deferred Revenue | ||||||||||||
| Current | Long-Term | Total | ||||||||||
| Balance at November 30, 2017 | $ | 1,482,428 | $ | 623,150 | $ | 2,105,578 | ||||||
| Constant currency change in deferred revenue | 288,895 | 187,871 | 476,766 | |||||||||
| Impact from foreign currency translation | (32,776 | ) | (20,444 | ) | (53,220 | ) | ||||||
| Balance at November 30, 2018 | $ | 1,738,547 | $ | 790,577 | $ | 2,529,124 | ||||||
| Year-over-year growth rate | 17.3 | % | 26.9 | % | 20.1 | % | ||||||
| Year-over-year growth rate on a constant currency basis | 19.5 | % | 30.1 | % | 22.6 | % | ||||||
| Revenue growth by geographical segment: | |||||||||||||||
| Americas | EMEA | APAC | Consolidated | ||||||||||||
| Total revenue for the three months ended November 30, 2018 | $ | 527,367 | $ | 198,730 | $ | 120,698 | $ | 846,795 | |||||||
| Adjustment for currency impact | 6,194 | 5,354 | 3,939 | 15,487 | |||||||||||
| Total revenue on a constant currency basis for the three months ended November 30, 2018 | $ | 533,561 | $ | 204,084 | $ | 124,637 | $ | 862,282 | |||||||
| Total revenue for the three months ended November 30, 2017 | $ | 471,773 | $ | 173,718 | $ | 102,487 | $ | 747,978 | |||||||
| Year-over-year growth rate | 11.8 | % | 14.4 | % | 17.8 | % | 13.2 | % | |||||||
| Year-over-year growth rate on a constant currency basis | 13.1 | % | 17.5 | % | 21.6 | % | 15.3 | % | |||||||
| Total revenue for the nine months ended November 30, 2018 | $ | 1,541,996 | $ | 583,181 | $ | 357,895 | $ | 2,483,072 | |||||||
| Adjustment for currency impact | 12,733 | (17,992 | ) | 1,853 | (3,406 | ) | |||||||||
| Total revenue on a constant currency basis for the nine months ended November 30, 2018 | $ | 1,554,729 | $ | 565,189 | $ | 359,748 | $ | 2,479,666 | |||||||
| Total revenue for the nine months ended November 30, 2017 | $ | 1,373,512 | $ | 477,110 | $ | 297,507 | $ | 2,148,129 | |||||||
| Year-over-year growth rate | 12.3 | % | 22.2 | % | 20.3 | % | 15.6 | % | |||||||
| Year-over-year growth rate on a constant currency basis | 13.2 | % | 18.5 | % | 20.9 | % | 15.4 | % | |||||||
|
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 |
||||||||||||
|
(Unaudited) |
||||||||||||
| (In thousands - except per share amounts) | ||||||||||||
| Three Months Ended February 28, 2018 | ||||||||||||
| As Reported | Adjustments | As Adjusted | ||||||||||
| Operating expense: | ||||||||||||
| Sales and marketing | $ | 315,181 | $ | (618 | ) | $ | 314,563 | |||||
| Net loss | $ | (12,552 | ) | $ | 392 | $ | (12,160 | ) | ||||
| Net loss per share: | ||||||||||||
| Basic | $ | (0.07 | ) | $ | — | $ | (0.07 | ) | ||||
| Diluted | $ | (0.07 | ) | $ | — | $ | (0.07 | ) | ||||
| Twelve Months Ended February 28, 2018 | ||||||||||||
| As Reported (1) | Adjustments | As Adjusted | ||||||||||
| Operating expense: | ||||||||||||
| Sales and marketing | $ | 1,198,576 | $ | (3,290 | ) | $ | 1,195,286 | |||||
| Net income | $ | 258,803 | $ | 3,048 | $ | 261,851 | ||||||
| Net income per share: | ||||||||||||
| Basic | $ | 1.46 | $ | 0.02 | $ | 1.48 | ||||||
| Diluted | $ | 1.40 | $ | 0.02 | $ | 1.42 | ||||||
| (1) Derived from audited financial statements. | ||||||||||||
