Red Hats fourth-quarter earnings report, which ended Feb. 28, can be described in one word: Great.
The Raleigh, N.C.-based company reported that its annual subscription revenue was up 53 percent from the prior year, while quarterly cash flow was up 64 percent from the prior year, with quarterly operating income up 165 percent year-over-year.
The total revenue for the quarter was $78.7 million, an increase of 37 percent from the year-ago quarter and 8 percent from the prior quarter.
Of that, subscription revenue was $66.7 million, up 44 percent year-over-year and 11 percent sequentially.
For the full fiscal year, 2005, Red Hats total revenue was $278.3 million, an increase of 42 percent over fiscal 2005 revenue, and subscription revenue was $230.4 million, up 53 percent from the prior year.
The company reported operating income of $19.8 million for the quarter and $58.1 million for the year, representing increases of 165 percent over the fourth quarter of fiscal 2005 and 116 percent over the full fiscal year 2005.
Net income for the quarter was $27.3 million, up 131 percent year-over-year and 18 percent sequentially.
The quarterly gross margin improved to 84 percent from 81 percent in the year ago period.
At the same time, quarterly operating margin improved to 25 percent versus 13 percent in the year-ago period.
For the full year, net income rose 75 percent to $79.7 million over the prior fiscal year. The earnings per diluted share more than doubled to 13 cents for the fourth quarter, versus 6 cents in the year-ago quarter.
These tremendous numbers are based in part on Red Hat holding onto its top customers.
Matthew Szulik, Red Hats CEO, said that out of the companys 100 biggest support contracts, 99 have renewed during the year.
At year end, Red Hats total deferred revenue balance was $223.5 million, an increase of 63 percent on a year-over-year basis and 12 percent sequentially.
At the end of the fiscal year, the companys total cash, cash equivalents and investments as of Feb. 28, 2006, were $1.1 billion.
“This past years results affirmed our ability to scale for growth,” said Charlie Peters, Red Hats executive VP and CFO.
“Margins continued to expand even as we built out our infrastructure through investments in headcount and systems.”
Specifically, Szulik said that Red Hat would be hiring about 100 more employees per quarter going forward. Most of these will be in engineering, sales and marketing. The company now has 1,200 employees.
Red Hats business is growing, and it expects to continue to grow for several years to come.
Eventually, Peters said, Red Hat hopes to focus more on increasing its profit margin to Oracle-like levels (40 percent), but for now, the focus is growth—both with employees and improving its own IT infrastructure.
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