Wed, Sep 20 2017, 12:56 pm

Red Hat’s annual revenue touches $2.7 billion globally

By Digital Edge Bureau, 30.03.2017, 10:28
 
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Red Hat: Reaping bumper revenues

Red Hat, world’s frontline open source software platform and solutions provider, has harnessed a bumper revenue touching $2.7 billion in the fiscal year ending February 28 2017. Red Hat attributes this to the ongoing digital transformation through which enterprises have been undergoing.
“Enterprises are turning to Red Hat as a strategic partner to deliver solutions that can help them realize the benefits of these initiatives.  Enterprises and service providers are increasingly adopting hybrid cloud infrastructures and open source technologies, which is fueling our growth and positioning Red Hat for the long-term”, says Jim Whitehurst of Red Hat Inc.
Eric Shander, acting Chief Financial Officer of Red Hat, says, “Our strategic position with customers is evidenced by the continued growth in large commitments to Red Hat.  The number of deals greater than $1 million in fiscal 2017 grew by over 30 percent annually, and we closed a record number of deals over $20 million, including our first-ever deal of approximately $100 million in the fourth quarter.” “This performance also drove a record backlog of $2.7 billion in U.S. dollars, up 28 percent year-over-year which contributes to our fiscal year 2018 revenue outlook of 13 percent to 14 percent growth and should help drive expanded GAAP operating margin of 15.2 percent and non-GAAP operating margin of 23.6 percent”, adds he.

Details
Revenue
: The total revenue for the quarter was $629 million, up 16 percent year-over-year both in U.S. dollars and measured in constant currency.  Constant currency references in this release are detailed in the tables below.  Subscription revenue for the quarter was $560 million, up 17 percent year-over-year both in U.S. dollars and measured in constant currency.  Subscription revenue in the quarter was 89 percent of total revenue.
Full fiscal year 2017 total revenue was $2.4 billion, up 18 percent in U.S. dollars year-over-year, or 17 percent measured in constant currency. Subscription revenue for the full fiscal year was $2.1 billion, up 18% year-over-year both in U.S. dollars and measured in constant currency. Subscription revenue in the full fiscal year was 89 percent of total revenue.

Subscription Revenue Breakout: Subscription revenue from Infrastructure-related offerings for the quarter was $435 million, an increase of 11 percent in U.S. dollars year-over-year and 12 percent measured in constant currency.  Subscription revenue from Application development-related and other emerging technologies offerings for the quarter was $125 million, an increase of 40 percent year-over-year both in U.S. dollars and measured in constant currency.
Full fiscal year subscription revenue from Infrastructure-related offerings was $1.7 billion, an increase of 15 percent in U.S. dollars year-over-year and 14 percent measured in constant currency. Full fiscal year subscription revenue from Application Development-related and other emerging technologies offerings was $439 million, an increase of 36 percent year-over-year both in U.S. dollars and measured in constant currency.

Operating Income: GAAP operating income for the quarter was $94 million, up 31 percent 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 $153 million, up 23 percent year-over-year.  Non-GAAP references in this release are detailed in the tables below.  For the fourth quarter, GAAP operating margin was 15.0 percent and non-GAAP operating margin was 24.3 percent.
Full fiscal year GAAP operating income was $332 million, up 15 percent 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 $556 million, up 15 percent year-over-year. Full fiscal year GAAP operating margin was 13.8 percent and non-GAAP operating margin was 23.1 percent.

Net Income: GAAP net income for the quarter was $66 million, or $0.36 per diluted share, compared with $53 million, or $0.29 per diluted share, in the year-ago quarter.  During the fourth quarter of fiscal year 2017, GAAP net income and earnings per diluted share benefited by approximately $1 million from the adoption of Accounting Standards Update 2016-09 (ASU 2016-09) in the first fiscal quarter of 2017. 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 $110 million, or $0.61 per diluted share, as compared to $97 million, or $0.52 per diluted share, in the year-ago quarter.  Non-GAAP diluted weighted average shares outstanding excludes any dilution resulting from the convertible notes because any potential dilution is expected to be offset by our convertible note hedge transactions.

Cash: Operating cash flow was $318 million for the fourth quarter, an increase of 27 percent on a year-over-year basis.  Full fiscal year operating cash flow was $784 million.  Total cash, cash equivalents and investments as of February 28, 2017 was $2.1 billion after repurchasing approximately $139 million, or approximately 1.9 million shares, of common stock in the fourth quarter.  The remaining balance in the current repurchase authorization as of February 28, 2017 was approximately $636 million.
Deferred revenue and backlog: Total backlog for fiscal year 2017 was in excess of $2.7 billion, up 28 percent year-over-year. We define 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 service 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 $2.1 billion, an increase of 20 percent year-over-year.  The full year negative impact to total deferred revenue from changes in foreign exchange rates was approximately $1 million year-over-year.  On a constant currency basis, total deferred revenue would have been up 20 percent year-over-year.

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