Red Hat Inc reports financial results for the quarter ended November 29, 2017.
The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:
| 2017-11-29 | 2017-08-30 | 2017-05-30 | 2017-02-27 | 2016-11-29 | |
|---|---|---|---|---|---|
| Relevant Numbers (Quarterly) | |||||
| Revenues (mil) | 747.98 | 723.36 | 676.8 | 628.84 | 615.26 |
| Revenue Growth (%YOY) | 21.57 | 20.6 | 19.18 | 15.7 | 17.51 |
| Earnings (mil) | 101.31 | 96.86 | 73.19 | 65.8 | 67.94 |
| Earnings Growth (%YOY) | 49.1 | 64.8 | 19.62 | 24.07 | 45.03 |
| Net Margin (%) | 13.54 | 13.39 | 10.81 | 10.46 | 11.04 |
| EPS | 0.54 | 0.53 | 0.4 | 0.36 | 0.37 |
| Return on Equity (%) | 7.15 | 7.16 | 5.73 | 5.22 | 5.25 |
| Return on Assets (%) | 8.62 | 8.47 | 6.47 | 6.11 | 6.64 |
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Compared to the same period last year, RHT-US’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if RHT-US’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 3.40% and earnings by 4.59% compared to the previous period.
The company’s gross margins showed no year-on-year improvement. In spite of this, the company’s earnings rose, influenced primarily by the improvement in operating margins (EBITDA margins) from 16.68% to 19.25%. For comparison, gross margins were 85.25% and EBITDA margins were 21.94% in the last period.
Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.
RHT-US’s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 73.98 days, compared to last year’s level of 53.36 days.
It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.
RHT-US’s year-on-year change in operating cash flow of 17.56% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.
The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 13.13% to 15.83% and (2) one-time items. The company’s pretax margins are now 15.50% compared to 12.47% for the same period last year.
Access our Ratings and Scores for Red Hat Inc
Red Hat, Inc. (Red Hat) provides open source software solutions, using a community-powered approach to develop and offer operating system, virtualization, management, middleware, cloud, mobile and storage technologies. Red Hat operates through three geographical segments: the Americas, including the United States, Canada and Latin America; EMEA, including Europe, Middle East and Africa, and Asia Pacific. Its products and services include infrastructure-related offerings, application development-related and other technology offerings, and consulting, support and training services. Its infrastructure-related offerings include Red Hat Enterprise Linux, Red Hat Satellite and Red Hat Enterprise Virtualization. Its application development-related and other technology offerings include Red Hat JBoss Middleware, Red Hat cloud offerings, Red Hat Mobile and Red Hat Storage. Its consulting services include upgrade planning, platform migrations, solution integration and application development.
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