Red Hat beats Q1 expectations for revenue, net income

Open source software company Red Hat posted fiscal first-quarter revenue and net income that were better than Wall Street analysts were expecting.

Nevertheless, shares of Raleigh-based Red Hat dipped in after-hours trading Thursday as the company’s billings, a leading indicator of future revenue, fell below expectations. The company released its quarterly results after the markets closed.

Revenue for the quarter that ended May 31 totaled $481 million, up 14 percent. Wall Street was anticipating revenue of $472.7 million, according to Bloomberg News.

After adjusting for currency fluctuations, revenue rose 22 percent. The company’s revenue has risen by the mid-teens or higher, percentage-wise, for 13 straight quarters.

“We’re seeing solid growth across the board,” CEO Jim Whitehurst said in a conference call. He added that some of the company’s cloud-based products, such as OpenShift and Red Hat Enterprise Linux OpenStack, “are growing really, really fast.”

“Open source is becoming more mainstream and considered more innovative in our customers’ minds,” Whitehurst said. “That means we have a very opportunity-rich environment, because we are seen as the leading, trusted open source company.”

Adjusted net income totaled $81 million, or 44 cents per share, up from $64 million a year ago. Analysts had projected 41 cents per share.

Red Hat's software is available for free; it makes money by charging its business customers for maintenance, support and related services. The company has about 1,200 workers at its downtown Raleigh headquarters.

The company’s billings rose $449 million, or 11 percent. The consensus projection of analysts was 13 percent, according to Bloomberg.

However, Charlie Peters, the company’s chief financial officer, said that there was a wide variation among the analysts’ billings projections and, by his calculations, about one-third of the analysts’ didn’t allow for the impact of weaker overseas currencies compared to the dollar.

Billings rose 20 percent after adjusting for currency, Peters said.

“We are very proud of the billings statistics this quarter,” he said.

Peters reaffirmed the company’s previous guidance that annual revenue this fiscal year will range between $1.99 billion and $2.02 billion. He added that he had “high confidence” that revenue would come in at the high end of that range.

In addition, he raised the company’s projections for earnings per share by 2 cents, to between $1.81 and $1.84.

Red Hat’s shares closed Thursday at $78.49, up 23 cents. The stock has risen 14 percent this year.