Post Earnings Coverage as Red Hat Posts Impressive Numbers

LONDON, UK / ACCESSWIRE / June 23, 2016 / Acquisition of 3scale and Authorised $1 billion Buyback Program ActiveWallSt.com announces its post-earnings coverage on Red Hat, Inc. (NYSE: RHT). The Linux Operating system maker announced its Q1 FY17 earnings release on Wednesday, June 22, 2016. Red Hat earnings came in line with analysts' expectation while revenue continued its double digit growth rate with an 18% jump, which beat market expectation. The company also announced a $1 billion buyback program; however Red Hat provided downbeat guidance because of an acquisition. Register with us now for your free membership and see our complete earnings coverage on this equity at:

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Earnings Review

For the period ended May 31, 2016, Red Hat reported adjusted earnings of $92 million, or $0.50 cents per share, up from $81 million, or $0.44 per share, in the year ago period. This was in line with analysts' expectation. Revenue for the period totalled $568 million, as compared to revenue of $481 million in Q1 FY16, thus topping analysts' $562.8 million estimate.

Red Hat reported that its subscription revenue for Q1 FY17 was $502 million, making up 88% of the total revenue. Subscription revenue from Infrastructure-related offerings for Q1 FY17 was $403 million, a rise of 14%, while subscription revenue for Q1 FY17 from Application Development-related and other emerging technologies offerings surged 39% to $98 million. At the end of Q1 FY17, the company's total deferred revenue balance was $1.69 billion, an increase of 18% on y-o-y basis. Operating cash flow for Q1 FY17 was reported at $232 million, while cash and cash equivalents totalled $2.12 billion after buying back $66 million of its shares.

3scale Acquisition

In another announcement, Red Hat said that it has reached an agreement to acquire 3scale, a leading developer of application programming interface (API) on Red Hat platforms, such as OpenShift and JBoss, for an undisclosed amount. Red Hat stated that the deal is expected to incur extra operating expenses of $0.30 per share for FY17.

Guidance

The North Carolina-based company also provided guidance for the fiscal year and current quarter. For FY17, the company expects adjusted earnings in the range of $2.19 to $2.23 per share, which is below analysts' estimate of $2.24 per share. Revenue is expected to come in the range of $2.38 billion to $2.42 billion, in line with the $2.40 billion analysts' consensus estimate. For Q2 FY17, the company expects to have EPS of $0.54 and revenues in the range of $587 million to $593 million. This is better than the consensus estimate of $0.55 in EPS on $588.6 million in revenue. The forecast includes the impact of an acquisition announced Wednesday.

Share Buyback

Additionally, Red Hat's board authorised a $1 billion share repurchase program, replacing the prior buyback program of $500 million, due to be expired on June 30, 2016. Stocks worth $329 million were repurchased under the previous program.

Stock Performance

Pre-earnings release and at the close of yesterday's session, the stock close down 0.80% at $79.75, reaching an intraday high of $81.81 during the session. Despite the strong top-line and bottom-line results, Red Hat's shares slumped 6.71% in after-hours trading post the earning release. Red Hat's stock has gained 6.62% in the past month.

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