Red Hat Gets Crushed on Earnings and CFO Departure

When Red Hat Inc. (NYSE: RHT) reported its fiscal third-quarter financial results after the markets closed on Wednesday, the software company posted $0.61 in earnings per share (EPS) and $615.3 million in revenue. The consensus estimates had called for $0.58 in EPS and revenue of $618.5 million. In the same period of last year, the company reported EPS of $0.48 and $523.6 million in revenue.

At the end of the third quarter, the company’s total deferred revenue balance was $1.7 billion, an increase of 15% year over year.

Subscription revenue for the quarter was $543 million, up 19% in U.S. dollars year over year, or 18% measured in constant currency. Subscription revenue in the quarter was 88% of total revenue.

In terms of the outlook for the fiscal fourth quarter, the company expects EPS to be $0.61 and revenues in the range of $614 million to $622 million. The consensus estimates are $0.61 in EPS and $637.44 million in revenue.

One of the main highlights from this report was that Frank Calderoni notified Red Hat of his decision to step down as Executive Vice President, Operations and chief financial officer, effective in late January 2017, to enable him to accept a chief executive position at another company.

Operating cash flow was $136 million for the third quarter, a decrease of 8% on a year-over-year basis. On the books, Red Hat cash and cash equivalents totaled $916.68 million at the end of the quarter, down from $927.78 million at the end of the previous fiscal year.

Jim Whitehurst, president and CEO of Red Hat, commented:

Enterprise and service provider customers continue to adopt a hybrid cloud strategy for developing, deploying and managing the life-cycle of their critical applications. Red Hat is uniquely positioned to address this need. In aggregate, customers utilizing our cloud-enabling technologies either on-premise or in the public cloud are spending more with Red Hat than customers that have not yet embraced our cloud-enabling technologies.

Shares of Red Hat were last seen down about 13% at $69.40 on Thursday, with a consensus analyst price target of $89.33 and a 52-week trading range of $59.59 to $84.44.