Red Hat's Q3 earnings: beats estimates, acquires ManageIQ

Open source software maker Red Hat beats estimates for its third quarter earnings with 30 cents a share on revenue of $343.6 million. It will also acquire cloud management provider ManageIQ for $104 million.
Written by Andrew Nusca, Contributor

Enterprise software maker Red Hat today reported third quarter earnings of 30 cents a share on revenue of $343.6 million, beating estimates of 29 cents a share on revenue of $337.9 million.

The company's quarterly revenue is up 18 percent year over year, not bad considering the uncertain economic environment in which it is operating. Its third quarter subscription revenue totaled $294 million, 19 percent more than the same time a year ago.

"Red Hat is benefiting from our position as a trusted vendor for IT," CEO Jim Whitehurst said in the release.

The company also announced the $104 million cash acquisition of privately-held cloud management and automation software provider (and certified partner) ManageIQ, "to expand our portfolio of open source solutions and enlarge our addressable market," Whitehurst said. One that Red Hat believes is worth $3 billion by 2016 as enterprises move to hybrid cloud architectures.

ManageIQ is the company's fourth acquisition in a year. The most recent was FuseSource, in September.

The numbers:

  • GAAP operating income for the third quarter was $49.9 million, down 7 percent year-over-year, largely from all those acquisitions.
  • GAAP operating margin was 14.5 percent.
  • Net income for the quarter was $34.8 million, or $0.18 per diluted share, compared with $38.2 million, or $0.19 per diluted share, in the year ago quarter.
  • Operating cash flow was $100.2 million for the third quarter, versus $96.6 million in the year ago quarter.
  • The company's total deferred revenue balance clocked in at $987.7 million, an increase of 21 percent on a year-over-year basis. The company says it has $1.35 billion in cash and related assets on hand.

As for the fourth quarter, Red Hat didn't offer any immediate guidance, but analysts are looking for earnings of 30 cents a share on revenue of $350.9 million.

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