| Red Hat's gross income grows, net disappoints |
Mar. 29, 2007
Red Hat Inc. reported its financial results today for its fourth fiscal quarter and full fiscal year, both of which ended Feb. 28. While total revenue was up, the market was disappointed at the report that net income for the quarter fell about 25 percent year-over-year.
Specifically, Q4 net income dropped from $28.75 million (13 cents per share) in 2006 to $21.5 million (10 cents per share) in 2007. Total revenue for the quarter was $111.1 million, an increase of 41 percent year-over-year and up 5 percent from the prior quarter. Subscription revenue was $95.9 million, up 44 percent year-over-year and 8 percent sequentially.
For the full year, total revenue was $400.6 million, an increase of 44 percent over fiscal 2006 revenue, and subscription revenue was $341.2 million, up 48 percent from the prior year.
Non-GAAP (generally accepted accounting principles) adjusted net income for the quarter was $32.7 million, or 15 cents per diluted share, after adjusting for stock compensation and tax expense. This compares to non-GAAP adjusted net income of $29.6 million, or 14 cents per diluted share, in the prior quarter.
The Thomson financial analyst survey, though, had predicted GAAP earnings of 15 cents a share, on $113 million in revenue. As a result, Red Hat's stock dropped slightly both before and after the bell.
For the full year, net income was $59.9 million (29 cents per diluted share), compared with $79.7 million (41 cents) in the prior year. Non-GAAP adjusted net income for the year was $113.6 million (54 cents), compared to $77.9 million (40 cents) the year before.
Red Hat CFO Charlie Peters said, "This past year was characterized by solid execution, rapid growth, and global expansion. We have invested in people, systems and technology to continually add value to our customers."
It had indeed been an eventful year for the Raleigh, N.C.-based open source software company. Red Hat acquired JBoss, a leading open source middleware company, and launched its new version of RHEL (Red Hat Enterprise Linux), version 5.0.
In addition, the company faced new challenges. Rival Linux company Novell partnered with Microsoft, and erstwhile partner Oracle came out with its own RHEL-based Unbreakable Linux.
During a conference call, Peters also explained that the quarter's revenue derived from training and services had grown less then expected because the company lost expected training days to the timing of Christmas- and New Year's-related holidays. "We probably lost a full two weeks" of training revenue because of the holidays, said Peters.
At fiscal year end, the company's total deferred revenue balance was $338.6 million, an increase of 52 percent on a year-over-year basis and 9 percent sequentially. The company's total cash, cash equivalents, and investments as of Feb. 28, 2007 were $1.2 billion.
- -Steven J. Vaughan-Nichols
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