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Post Earnings Coverage as Red Hat Revenue Jumped 18%, Non-GAAP EPS Climbed 27%

Upcoming AWS Coverage on Fortinet

LONDON, UK / ACCESSWIRE / January 3, 2017 / Active Wall St. announces its post-earnings coverage on Red Hat, Inc. (RHT). The Company reported its third quarter fiscal 2017 financial results on December 21, 2016. The open-source enterprise-tech Company announced double digit growth in revenue and earnings, but revenue numbers came in below market expectations. Register with us now for your free membership at: http://www.activewallst.com/register/.

One of Red Hat's competitors within the Application Software space, Fortinet, Inc (FTNT), is estimated to report earnings on January 26, 2017. AWS will be initiating a research report on Fortinet in the coming days.

Today, AWS is promoting its earnings coverage on RHT; touching on FTNT. Get our free coverage by signing up to:



Earnings Reviewed

For the three months ended November 30, 2016, 2016, Red Hat reported total revenue of $615 million, up 18% in US dollars y-o-y, or 17% in constant currency from total revenue of $523.58 million in Q3 FY16. Excluding the $3 million impact of FX volatility, the Company's revenue numbers were in middle of the guidance provided in September 2016 of $613 million to $623 million, but were still below analysts' forecasts for revenue of $619 million.

On a non-GAAP basis, Red Hat's Q3 FY17 operating income of $143 million grew 16% on y-o-y basis and non-GAAP operating margin was 23.3%.

For Q3 FY17, Red Hat reported GAAP net income of $68 million, or $0.37 per diluted share, compared with $47 million, or $0.25 per diluted share, in the year ago same 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, Red Hat reported non-GAAP net income for Q1 FY17 of $111 million, or $0.61 per diluted share, compared to $89 million, or $0.48 per diluted share, in the year ago comparable quarter, outperforming Wall Street's estimates of adjusted earnings of $0.58 per diluted share.

Segment Details

During Q3 FY17, Red Hat generated Subscription revenue of $543 million, up 19% in US dollars year-over-year, or 18% measured in constant currency. The Company's subscription revenue continues to be the largest driver of its growth, with this renewable revenue stream now constitutes 88% of total revenue. During the reported quarter, subscription revenue from infrastructure-related offerings totaled $431 million, up 16% in US dollars y-o-y and 14% constant currency. Subscription revenue from Application development-related and other emerging technologies offerings for the reported quarter was $112 million, an increase of 33% in US dollars and 32% in constant currency.

Balance Sheet

For Q3 FY17, Red Hat's operating cash flow was $136 million, down 8% compared to the year earlier same quarter. Total cash, cash equivalents, and investments as of November 30, 2016, was $2.0 billion after repurchasing approximately $125 million, or approximately 1.6 million shares, of common stock in Q3 FY17. The Company stated that the remaining balance in the current repurchase authorization as of November 30, 2016 was approximately $775 million. At the end of Q3 FY17, Red Hat's total deferred revenue balance was $1.7 billion, an increase of 15% on y-o-y basis.


For FY17, Red Hat is expecting revenue to be in the range of $2.397 billion to $2.405 billion in US dollars. GAAP operating margin is expected to be approximately 13.5% and non-GAAP operating margin is expected to be approximately 23.0%. The Company expects diluted GAAP earnings per share (EPS) to be approximately $1.33 per share. Fully diluted non-GAAP EPS is expected to be approximately $2.27 per share. Operating cash flow guidance range is expected to be approximately $770 million to $785 million.

For Q4 FY17, Red Hat is projecting revenue guidance in the band of $614 million to $622 million. GAAP operating margin is expected to be approximately 14.0% and non-GAAP operating margin is expected to be approximately 24.0%. Fully diluted GAAP EPS is expected to be approximately $0.33 per share. Fully diluted non-GAAP EPS is expected to be approximately $0.61.

Stock Performance

At the close of trading session on December 30, 2016, Red Hat's stock price was marginally up by 0.07% to end the day at $69.70. A total volume of 1.62 million shares were exchanged during the session, which was above the 3-month average volume of 1.54 million shares. The stock is trading at a P/E of 53.17 and currently has a market cap of $12.51 billion.

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SOURCE: Active Wall Street