Red Hat Inc. (RHT) filed Quarterly Report for the period ended 2009-08-31.
Red Hat Inc. is a leading developer and provider of open source software and services including the Red Hat Linux operating system. Unlike proprietary software open source software has publicly available source code and can be copied modified and distributed with minimal restrictions. The web site REDHAT.COM is a leading online source of information and news about open source software and one of the largest online communities of open source software users and developers. Red Hat Inc. has a market cap of $5.03 billion; its shares were traded at around $26.73 with a P/E ratio of 43.82 and P/S ratio of 7.7. Red Hat Inc. had an annual average earning growth of 87.8% over the past 5 years.
Highlight of Business Operations:
Revenue. For the three months ended August 31, 2009 total revenue increased 11.7% or $19.3 million to $183.6 million from $164.4 million for the three months ended August 31, 2008. Subscription revenue increased 15.2% or $20.6 million, driven primarily by additional subscriptions related to our principal RHEL technologies, which have gained broader market acceptance in mission-critical areas of computing, and our international expansion. The increase is, in part, a result of the continued migration of enterprises in industries such as telecommunications, government and financial services to our open source platform from a proprietary Unix platform. Training and services revenue decreased 4.6% or $1.3 million for the three months ended August 31, 2009 as compared to the same period ended August 31, 2008. The decrease is driven primarily by a challenging economic environment in which enterprises are scaling back discretionary spending in areas such as training and travel.
Deferred Revenue. Our deferred revenue, current and long-term, balance at August 31, 2009 was $580.9 million. Because of our subscription model and revenue recognition policies, deferred revenue improves predictability of future revenue. Deferred revenue at August 31, 2009 increased $37.9 million or 7.0% as compared to the balance at February 28, 2009 of $543.1 million. As a result of changes in foreign currency exchange rates, our deferred revenue balance at August 31, 2009 was $25.3 million higher than what it would have been if spot exchange rates on that date were the same as at February 28, 2009.
Revenue by geography. We operate our business in three geographic regions: The Americas (U.S., Latin America and Canada); EMEA (Europe, Middle East and Africa); and Asia Pacific (principally Japan, Singapore, India, Australia, South Korea and China). In the three months ended August 31, 2009, approximately $78.1 million or 42.5% of our revenue was generated outside the United States compared to approximately $68.8 million or 41.9% for the three months ended August 31, 2008. Our international operations are expected to continue increasing as our international sales force and channels become more mature and as we enter new locations or expand our presence in existing locations. As of August 31, 2009, we had offices in more than 65 locations throughout the world.
Cash, cash equivalents, investments in debt and equity securities and cash flow from operations. Cash, cash equivalents and short-term and long-term available-for-sale investments in securities balances at August 31, 2009 totaled $911.8 million. During the three months ended August 31, 2009, we repurchased $47.2 million of our common stock under a previously announced common stock repurchase program. Cash generated from operating activities for the three months ended August 31, 2009 totaled $62.0 million, primarily as a result of the increase in subscription revenue during the same period. Our significant cash balance gives us a measure of flexibility to take advantage of opportunities such as acquisitions, increasing investment in international areas and repurchasing our own common stock.
Using the average foreign currency exchange rates from the second quarter of our prior fiscal year ended February 28, 2009, our revenue and operating expenses from non-U.S. operations for the three months ended August 31, 2009 would have been higher than we reported using the average exchange rates for the second quarter of our current fiscal year ending February 28, 2010 by approximately $4.0 million and $4.7 million, respectively, which would have resulted in income from operations being $0.7 million lower. Using the average foreign currency exchange rates from the six months ending August 31, 2008, our revenue and operating expenses from non-U.S. operations for the six months ended August 31, 2009 would have been higher than we reported using the average exchange rates for the six months ending August 31, 2009 by approximately $4.7 million and $5.0 million, respectively, which would have resulted in income from operations being $0.3 million lower.
these deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. As of August 31, 2009, the net deferred tax asset balance was $89.3 million, of which $13.1 million is offset by a valuation allowance. We continue to maintain a valuation allowance against our deferred tax assets with respect to certain foreign NOLs and tax carryforwards that are subject to limitations under Section 382 of the Internal Revenue Code.
RHT is in the portfolios of Bill Miller of Legg Mason Value Trust.
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