Red Hat Inc. Reports Operating Results (10-Q)
Red Hat Inc. has a market cap of $8.71 billion; its shares were traded at around $45.71 with a P/E ratio of 80.19 and P/S ratio of 11.64. Red Hat Inc. had an annual average earning growth of 22.7% over the past 5 years.RHT is in the portfolios of Columbia Wanger of Columbia Wanger Asset Management, Steven Cohen of SAC Capital Advisors, Bruce Kovner of Caxton Associates, Louis Moore Bacon of Moore Capital Management, LP.
Highlight of Business Operations: Revenue. For the three months ended November 30, 2010, total revenue increased 21.2% or $41.2 million to $235.6 million from $194.3 million for the three months ended November 30, 2009. Subscription revenue increased 20.9% or $34.4 million, driven primarily by additional subscriptions related to our principal RHEL technologies, which continue to gain broader market acceptance in mission-critical areas of computing, and our expansion of sales channels and geographic footprint. 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 solutions from proprietary technologies. Training and services revenue increased 22.8% or $6.8 million for the three months ended November 30, 2010 as compared to the same period ended November 30, 2009. The increase is driven primarily by an improving economic environment in which enterprises are increasing discretionary spending in areas such as IT training and consulting.
Deferred Revenue. Our deferred revenue, current and long-term, balance at November 30, 2010 was $685.2 million. Because of our subscription model and revenue recognition policies, deferred revenue improves predictability of future revenue. Deferred revenue at November 30, 2010 increased $39.4 million or 6.1% as compared to the balance at February 28, 2010 of $645.9 million.
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 November 30, 2010, approximately $104.6 million or 44.4% of our revenue was generated outside the United States compared to approximately $83.9 million or 43.2% for the three months ended November 30, 2009. Our international operations are expected to continue to grow 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 November 30, 2010, 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 November 30, 2010 totaled $1.1 billion. Cash generated from operating activities for the three months ended November 30, 2010 totaled $70.8 million, primarily as a result of the increase in subscription revenue and billings during the same period. Additionally, employees exercise of stock options generated $24.7 million of cash proceeds for the three months ended November 30, 2010.
Using the average foreign currency exchange rates from the third quarter of our prior fiscal year ended February 28, 2010, our revenue and operating expenses from non-U.S. operations for the three months ended November 30, 2010 would have been lower than we reported using the average exchange rates for the third quarter of our current fiscal year ending February 28, 2011 by approximately $2.3 million and $2.2 million, respectively, which would have resulted in income from operations being lower by $0.1 million.
We continue to assess the realizability of our deferred tax assets, which primarily consist of share-based compensation expense deductions, tax credit carryforwards and deferred revenue. In assessing the realizability of 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 November 30, 2010, the deferred tax asset balance was $57.1 million, of which $6.7 million was offset by a valuation allowance. We continue to maintain a valuation allowance against our deferred tax assets with respect to certain foreign net operating loss (NOL) carryforwards.
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