Red Hat Reports Its Best Results Yet

Open source and Linux provider Red Hat Inc. on Thursday reported its financial results for the second quarter of its fiscal year, which executives said were the strongest since its inception as a listed company.

CEO Matt Szulik told the media and analysts via a teleconference that the company reported a significant rise in net operating profit to $240,000 in the quarter under review from a net operating loss of $1.1 million in the prior quarter and of $4.7 million in the second quarter of the previous year.

Net income for the quarter more than doubled to $3.3 million, or $0.02 a share, compared with the $1.5 million posted the previous quarter and a net loss of $1.9 million in the same quarter a year ago.

Revenue rose 6 percent in the quarter to $28.8 million from last quarters $27.2 million, and was up 36 percent year-over-year.

“We generated $10.4 million, or $0.06 per share, in positive cash flow from operations during the second quarter, which represents an 89 percent increase from the first quarter and our fifth consecutive quarter of positive cash flow from operations,” Szulik said. “We ended the second quarter with a cash and investment balance of $307 million. That is an increase of $7 million and a year-over-year increase of $18 million.”

Kevin Thompson, Red Hats chief financial officer, said sales of annual subscriptions for Red Hat Enterprise Linux technologies grew by 10 percent, or 2,300, to about 26,000, with some 1,700 of these being new Red Hat Enterprise Linux customers. Subscription revenues from enterprise technologies grew 21 percent quarter-on-quarter and 123 percent year-over-year.

Renewal rates for the second quarter remained strong at 90 percent, Thompson said, adding that the company expects “a reasonable renewal rate of 75 percent going forward. Our strong quarterly operating results reflect the strong demand for standards-based Red Hat Enterprise Linux solutions in the enterprise,” he said.

Red Hat Chief Operating Officer Tim Buckley said many of the companys Red Hat Linux customers are upgrading to Enterprise Linux or have indicated that they will. Red Hat is also growing its federal government business and adding new customers in key vertical sectors.

Regarding the legal issues swirling around Linux, Thompson said the purpose of Red Hats legal filing is to put all the issues on the table.

“We are able to continue to grow our business despite all the noise. But to say it has not affected us would not be accurate; we continue to spend a lot of time with customers around this. Those who are sitting on the fence are using this as an excuse to continue to sit there,” Thompson said.

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