Red Hat Q2 Profit Down On Costs, Outlook Weak

(RTTNews) - Red Hat Inc., (RHT), Wednesday reported a second-quarter profit that declined from a year ago, despite 14 percent growth in revenues, as operating costs increased. Earnings for the quarter trumped Wall Street estimates, however, revenues fell short of expectations. The company also provided a weak outlook.

Raleigh, North Carolina-based Red Hat reported second-quarter profit of $86.85 million or $0.46 per share, down from $97.09 million or $0.53 per share last year.

Adjusted earnings for the quarter were $156.58 million or $0.85 per share, up from $138.44 million or $0.77 per share last year. Analysts polled by Thomson Reuters estimated earnings of $0.82 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter grew 14 percent to $822.75 million from $723.36 million last year. Analysts had a consensus revenue estimate of $829.49 million for the quarter.

Total operating expenses increased to $569.26 million from $481.85 million last year.

Subscription revenue, which represents 88 percent of total revenues, increased 13 percent to $723 million. Subscription revenue from Infrastructure-related offerings for the quarter was up 8 percent to $527 million, while Application Development-related and other emerging technology offerings for the quarter was was up 31 percent to $196 million.

"Our second quarter results were consistent with our guidance and we drove 20% growth in total backlog to $3.3 billion," said Eric Shander, Executive Vice President and Chief Financial Officer. "We are re-affirming our full year growth in constant currency at 16%-17% year-over-year; however, we are adjusting our full year total revenue guidance in dollars by approximately $15 million, solely to account for the change in FX rates."

Looking forward to the full year, Red Hat expects adjusted earnings of about $3.45 to $3.49 per share and revenues of about $3.36 billion to $3.395 billion. Analysts currently estimate earnings of $3.47 per share and revenues of $3.40 billion.

For the third quarter, Red Hat expects adjusted earnings of about $0.87 per share and revenues of $848 million to $856 million. Analysts currently estimate earnings of $0.92 per share and revenues of $862.72 million.

RHT closed Wednesday's trading at $143.16, up $0.45 or 0.32% on the NYSE. The stock, however, slipped $2.96 or 2.07% in the after-hours trading.