Red Hat Reports Fourth Quarter and Fiscal Year 2019 Results

Red Hat, Inc. (NYSE: RHT), the world's leading provider of open source solutions, today announced financial results for the fourth quarter of fiscal year 2019 ended February 28, 2019.

“Enterprise organizations are continuing to move to hybrid cloud environments, which is contributing to strong growth in Red Hat’s cloud enabling technologies,” stated Jim Whitehurst, President and Chief Executive Officer of Red Hat. “Across the portfolio, our total number of customers with active subscriptions greater than $5 million increased 33% year-over-year in fiscal year 2019. Also key to that growth is the increasing number of Ansible and OpenShift customers, which now total more than 1,300 and 1,000, respectively, as of the end of fiscal year 2019.”

“In FY19, we continued to strengthen our strategic relationships with enterprise organizations, which was evidenced by continued growth in sizeable commitments. We saw a 17% year-over-year increase in the number of deals over $1 million, despite the smaller base of large renewals in fiscal year 2019. These deals included broad adoption across Red Hat’s portfolio of technologies, with cross-selling up 22% from the previous year,” said Eric Shander, Executive Vice President and Chief Financial Officer. “Additionally, our total backlog was $4.1 billion, a 22% increase year-over-year. This is the third consecutive year where backlog increased at a rate of more than 20% year-over-year, which further reflects the forward momentum of our business.”

Revenue: Total revenue for the quarter was $879 million, up 14% year-over-year, or 17% measured in constant currency. Constant currency references in this release are detailed in the tables below. Subscription revenue for the quarter was $774 million, up 13% year-over-year, or 16% measured in constant currency. Subscription revenue in the quarter was 88% of total revenue.

Full fiscal year 2019 total revenue was $3.4 billion, up 15% year-over-year, or 16% measured in constant currency. Subscription revenue for the full fiscal year was $2.9 billion, up 15% year-over-year, and 15% measured in constant currency. Subscription revenue in the full fiscal year was 88% of total revenue.

Subscription Revenue Breakout: Subscription revenue from Infrastructure-related offerings for the quarter was $549 million, an increase of 8% year-over-year, or 10% measured in constant currency. Subscription revenue from Application Development-related and other emerging technology offerings for the quarter was $225 million, an increase of 30% year-over-year, or 34% measured in constant currency.

Full fiscal year subscription revenue from Infrastructure-related offerings was $2.1 billion, an increase of 9% year-over-year, or 10% measured in constant currency. Full fiscal year subscription revenue from Application Development-related and other emerging technology offerings was $816 million, an increase of 31% year-over-year, or 32% measured in constant currency.

Operating Income: GAAP operating income for the quarter was $157 million, up 18% year-over-year. After adjusting for non-cash share-based compensation expense, amortization of intangible assets, and transaction costs related to business combinations, non-GAAP adjusted operating income for the fourth quarter was $227 million, up 19% year-over-year. For the fourth quarter, GAAP operating margin was 17.8% and non-GAAP adjusted operating margin was 25.8%. Non-GAAP references in this release are detailed in the tables below.

Full fiscal year GAAP operating income was $512 million, an increase of 8% year-over-year. After adjusting for non-cash share-based compensation expense, amortization of intangible assets, and transaction costs related to business combinations, non-GAAP operating income was $795 million, up 13% year-over-year. Full fiscal year GAAP operating margin was 15.2% and non-GAAP operating margin was 23.7%.

Net Income: GAAP net income for the quarter was $139 million, or $0.75 diluted earnings per share (“EPS”), compared with GAAP net loss of $12 million, or $0.07 diluted loss per share, in the year-ago quarter. The year-ago quarter included a one-time tax charge of $123 million related to the Tax Cuts and Jobs Act enacted into law in December 2017.

After adjusting for non-cash share-based compensation expense, amortization of intangible assets, transaction costs related to business combinations and non-cash interest expense related to the debt discount, non-GAAP adjusted net income for the quarter was $214 million, or $1.16 diluted EPS, as compared to $168 million, or $0.92 diluted EPS, in the year-ago quarter. Non-GAAP adjusted diluted weighted average shares outstanding excludes dilution that is expected to be offset by our convertible note hedge transactions.

Full fiscal year GAAP net income was $434 million, or $2.33 diluted EPS, compared with $262 million, or $1.42 diluted EPS, in the prior fiscal year. The prior fiscal year included a one-time tax charge of $123 million related to the Tax Cuts and Jobs Act enacted into law in December 2017.

After adjusting for non-cash share-based compensation expense, amortization of intangible assets, transaction costs related to business combinations and non-cash interest expense related to the debt discount, non-GAAP net income for the full fiscal year was $679 million, or $3.69 diluted EPS, as compared to $544 million, or $3.00 diluted EPS, in the prior fiscal year.

Cash: GAAP operating cash flow was $397 million for the fourth quarter, up 10% on a year-over-year basis. Non-GAAP operating cash flow adjusts for the impact of our adoption of ASU 2016-15: Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which requires the portion of repayments of convertible notes during the fourth quarter that is attributable to debt discount to be classified as operating cash flow. Non-GAAP operating cash flow, which excludes this impact of approximately $27 million, was $424 million, up 17% on a year-over-year basis compared to non-GAAP operating cash flow. Full fiscal year GAAP operating cash flow was $1.0 billion, up 10% on a year-over-year basis. Full fiscal year non-GAAP operating cash flow, which excludes approximately $60 million of impact from adoption of ASU 2016-15, was $1.1 billion, up 16% on a year-over-year basis compared to non-GAAP operating cash flow. Total convertible note repayments were $498 million as of February 28, 2019 with a remaining principal value of $307 million.

Total cash, cash equivalents and investments as of February 28, 2019 was $2.4 billion after repurchasing approximately $413 million, or approximately 0.9 million shares, of common stock in fiscal year 2019. The remaining balance in the current stock repurchase authorization as of February 28, 2019 was approximately $737.2 million.

Deferred revenue and backlog: Total backlog for fiscal year 2019 was in excess of $4.1 billion, up 22% year-over-year. We define total backlog as total deferred revenue, which has been billed, plus the value of non-cancellable subscription agreements not yet billed or reflected in our financial statements and the value of service agreements not yet billed or reflected in our financial statements that we believe to be firm. At the end of the fiscal year, the Company’s total deferred revenue balance was $3.0 billion, an increase of 15% year-over-year. The negative impact to total deferred revenue from changes in foreign exchange rates was $77 million year-over-year. On a constant currency basis, total deferred revenue would have increased 18% year-over-year.

The portion of total backlog to be billed in the future not reflected in our financial statements was in excess of $1.0 billion as of February 28, 2019, compared with the ending balance in excess of $775 million reported for fiscal year 2018. The portion of total backlog to be billed during fiscal year 2020 was in excess of $490 million as of February 28, 2019, compared with in excess of $450 million for the fiscal year ended February 28, 2018.

Due to the pending transaction with International Business Machines Corporation, Red Hat will not be hosting a conference call for its fourth quarter 2019 business results and will not be providing an outlook for its fiscal 2020.

Additional information on Red Hat's reported results, including a reconciliation of the non-GAAP adjusted results, are included in the financial tables below.

About Red Hat, Inc.

Red Hat is the world’s leading provider of enterprise open source software solutions, using a community-powered approach to deliver reliable and high-performing Linux, hybrid cloud, container, and Kubernetes technologies. Red Hat helps customers integrate new and existing IT applications, develop cloud-native applications, standardize on our industry-leading operating system, and automate, secure, and manage complex environments. Award-winning support, training, and consulting services make Red Hat a trusted adviser to the Fortune 500. As a strategic partner to cloud providers, system integrators, application vendors, customers, and open source communities, Red Hat can help organizations prepare for the digital future. Learn more at www.redhat.com.

Forward-Looking Statements

Certain statements contained in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: risks related to our pending merger with International Business Machines Corporation, the ability of the Company to compete effectively; the ability to deliver and stimulate demand for new products and technological innovations on a timely basis; delays or reductions in information technology spending; the integration of acquisitions and the ability to market successfully acquired technologies and products; risks related to errors or defects in our offerings and third-party products upon which our offerings depend; risks related to the security of our offerings and other data security vulnerabilities; fluctuations in exchange rates; changes in and a dependence on key personnel; the effects of industry consolidation; uncertainty and adverse results in litigation and related settlements; the inability to adequately protect Company intellectual property and the potential for infringement or breach of license claims of or relating to third party intellectual property; the ability to meet financial and operational challenges encountered in our international operations; and ineffective management of, and control over, the Company's growth and international operations, as well as other factors contained in our most recent Quarterly Report on Form 10-Q (copies of which may be accessed through the Securities and Exchange Commission's website at http://www.sec.gov), including those found therein under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations". In addition to these factors, actual future performance, outcomes, and results may differ materially because of more general factors including (without limitation) general industry and market conditions and growth rates, economic and political conditions, governmental and public policy changes and the impact of natural disasters such as earthquakes and floods. The forward-looking statements included in this press release represent the Company's views as of the date of this press release and these views could change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of this press release.

Red Hat and the Shadowman logo are trademarks or registered trademarks of Red Hat, Inc. or its subsidiaries in the U.S. and other countries. Linux is the registered trademark of Linus Torvalds in the U.S. and other countries.

RED HAT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands - except per share amounts)
		Three Months Ended								Fiscal Year Ended
		February 28,				February 28,				February 28,				February 28,
		2019				2018 (1)				2019				2018 (1)
Revenue:
Subscriptions		$	774,178			$	683,276			$	2,949,059			$	2,574,178
Training and services		104,819				89,056				413,010				346,283
Total revenue		878,997				772,332				3,362,069				2,920,461
Cost of revenue:
Subscriptions		56,298				48,105				213,843				185,339
Training and services		76,207				64,520				284,408				246,458
Total cost of revenue		132,505				112,625				498,251				431,797
Gross profit		746,492				659,707				2,863,818				2,488,664
Operating expense:
Sales and marketing		341,491				314,563				1,378,278				1,195,286
Research and development		171,461				153,778				668,542				578,330
General and administrative		76,978				58,886				304,766				239,316
Total operating expense		589,930				527,227				2,351,586				2,012,932
Income from operations		156,562				132,480				512,232				475,732
Interest income		7,508				5,024				30,531				18,493
Interest expense		4,412				6,223				19,838				24,569
Other income (expense), net		245				11,368				(4,870		)		8,335
Income before provision for income taxes		159,903				142,649				518,055				477,991
Provision for income taxes		20,409				154,809				84,067				216,140
Net income (loss)		$	139,494			$	(12,160	)		$	433,988			$	261,851
Net income (loss) per share:
Basic		$	0.79			$	(0.07	)		$	2.46			$	1.48
Diluted		$	0.75			$	(0.07	)		$	2.33			$	1.42
Weighted average shares outstanding:
Basic		176,808				177,034				176,773				177,150
Diluted		187,046				177,034				186,321				184,602
(1) As adjusted to reflect the impact of the retrospective application of ASC 606.

RED HAT, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
		February 28,				February 28,
		2019				2018 (1)
ASSETS
Current assets:
Cash, cash equivalents and restricted cash		$	1,883,096			$	1,724,132
Investments in debt and equity securities, short-term		293,361				318,358
Accounts receivable, net		980,188				806,744
Prepaid expenses		282,507				267,197
Other current assets		24,504				25,666
Total current assets		3,463,656				3,142,097
Property and equipment, net		198,969				206,105
Goodwill		1,276,853				1,288,830
Identifiable intangibles, net		206,083				224,953
Investments in debt securities, long-term		248,512				430,442
Deferred tax assets, net		112,568				92,606
Other assets, net		81,648				89,460
Total assets		$	5,588,289			$	5,474,493
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	491,259			$	427,139
Deferred revenue, short-term		2,161,206				1,853,719
Other current obligations		282				843
Convertible notes		69,827				23,806
Total current liabilities		2,722,574				2,305,507
Deferred revenue, long-term		821,218				741,453
Convertible notes		231,540				744,194
Other long-term obligations		199,025				205,215
Stockholders’ equity:
Common stock		24				24
Additional paid-in capital		2,791,895				2,416,080
Retained earnings		2,054,069				1,619,688
Treasury stock, at cost		(3,189,434		)		(2,525,072		)
Accumulated other comprehensive loss		(42,622		)		(32,596		)
Total stockholders’ equity		1,613,932				1,478,124
Total liabilities and stockholders’ equity		$	5,588,289			$	5,474,493

(1) Derived from audited financial statements except for line items adjusted by the retrospective application of ASC 606.

RED HAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
		Three Months Ended								Fiscal Year Ended
		February 28,				February 28,				February 28,				February 28,
		2019				2018 (1)				2019				2018 (1)
Cash flows from operating activities:
Net income (loss)		$	139,494			$	(12,160	)		$	433,988			$	261,851
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		28,551				25,597				109,046				97,138
Amortization of debt discount and transaction costs		4,295				5,661				18,765				22,401
Repayments of convertible notes attributable to debt discount		(26,878		)		—				(59,993		)		—
Deferred income taxes		(16,988		)		(26,526		)		(18,693		)		(18,695		)
Share-based compensation expense		54,127				49,266				209,096				192,249
Net amortization of bond premium on debt securities available for sale		81				1,417				1,623				8,405
Other		2,062				(12,818		)		5,986				(11,500		)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(247,186		)		(266,018		)		(188,980		)		(154,119		)
Other receivables		45,618				16,193				2,063				(4,019		)
Prepaid expenses		(51,014		)		(61,397		)		(16,449		)		(68,228		)
Accounts payable and accrued expenses		15,441				179,588				54,061				161,834
Deferred revenue		449,049				461,199				463,782				432,182
Other		451				2,061				(1,513		)		3,639
Net cash provided by operating activities		397,103				362,063				1,012,782				923,138
Cash flows from investing activities:
Purchase of investment in debt securities available for sale		—				(14,016		)		(217,951		)		(299,789		)
Proceeds from maturities of investment in debt securities available for sale		143,384				77,789				402,844				426,074
Proceeds from sales of investment in debt securities available for sale		—				179,997				8,491				199,614
Proceeds from sales of strategic equity investments		—				14,204				1,300				14,204
Acquisition of businesses, net of cash acquired		—				(231,200		)		(11,550		)		(315,081		)
Purchase of developed software and other intangible assets		(3,416		)		(3,849		)		(10,543		)		(16,720		)
Purchase of property and equipment		(16,421		)		(16,699		)		(61,266		)		(84,967		)
Other		(379		)		—				(1,365		)		(189		)
Net cash provided by (used in) investing activities		123,168				6,226				109,960				(76,854		)
Cash flows from financing activities:
Proceeds from exercise of common stock options		244				354				2,075				4,895
Proceeds from employee stock purchase program		18,706				16,809				62,062				50,097
Payments related to net settlement of share-based compensation awards		(4,290		)		(3,276		)		(131,895		)		(89,506		)
Purchase of treasury stock		—				—				(412,845		)		(237,002		)
Payments on other borrowings		(163		)		(340		)		(913		)		(1,547		)
Repayments of convertible notes attributable to principal		(196,431		)		(30		)		(438,410		)		(36		)
Net cash (used in) provided by in financing activities		(181,934		)		13,517				(919,926		)		(273,099		)
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash		5,487				11,154				(43,852		)		60,139
Net increase in cash, cash equivalents and restricted cash		343,824				392,960				158,964				633,324
Cash, cash equivalents and restricted cash at beginning of the period		1,539,272				1,331,172				1,724,132				1,090,808
Cash, cash equivalents and restricted cash at end of the period		$	1,883,096			$	1,724,132			$	1,883,096			$	1,724,132
(1) As adjusted to reflect the impact of the retrospective application of ASC 606.

RED HAT, INC.
RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED RESULTS
(Unaudited)
(In thousands - except per share amounts)
		Three Months Ended								Fiscal Year Ended
		February 28,				February 28,				February 28,				February 28,
		2019				2018 (1)				2019				2018 (1)
Reconciliation items included in Consolidated Statements of Operations:
Non-cash share-based compensation expense:
Cost of revenue		$	5,133			$	4,453			$	19,811			$	16,862
Sales and marketing			23,554				22,450				91,116				87,158
Research and development			16,795				14,405				64,886				57,008
General and administrative			8,645				7,958				33,283				31,221
Total share-based compensation expense		$	54,127			$	49,266			$	209,096			$	192,249
Amortization of intangible assets expense:
Cost of revenue		$	6,615			$	4,214			$	24,495			$	16,705
Sales and marketing			1,391				1,561				5,549				6,195
Research and development			35				35				138				138
General and administrative			2,451				2,270				9,590				8,407
Total amortization of intangible assets expense		$	10,492			$	8,080			$	39,772			$	31,445
Total non-cash interest expense related to the debt discount		$	2,442			$	4,961			$	14,665			$	19,654
Transaction costs related to business combinations		$	5,964			$	728			$	34,050			$	2,038
Reconciliation of GAAP results to non-GAAP adjusted results:
GAAP net income (loss)		$	139,494			$	(12,160	)		$	433,988			$	261,851
GAAP provision for income taxes			20,409				154,809				84,067				216,140
GAAP income before provision for income taxes		$	159,903			$	142,649			$	518,055			$	477,991
Add: Non-cash share-based compensation expense			54,127				49,266				209,096				192,249
Add: Amortization of intangible assets expense			10,492				8,080				39,772				31,445
Add: Non-cash interest expense related to the debt discount			2,442				4,961				14,665				19,654
Add: Transaction costs related to business combinations			5,964				728				34,050				2,038
Non-GAAP adjusted income before provision for income taxes		$	232,928			$	205,684			$	815,638			$	723,377
Non-GAAP provision for income taxes (2)			18,976				37,744				136,680				179,410
Non-GAAP adjusted net income (basic and diluted)		$	213,952			$	167,940			$	678,958			$	543,967
Non-GAAP adjusted diluted weighted average shares outstanding:
GAAP diluted weighted average shares outstanding			187,046				177,034				186,321				184,602
Dilutive effect of outstanding equity awards, convertible notes and warrants			—				10,699				—				—
Dilution offset from convertible note hedge transactions			(2,447	)			(4,728	)			(2,234	)			(3,445	)
Non-GAAP diluted weighted average shares outstanding			184,599				183,005				184,087				181,157
Non-GAAP adjusted net income per share:
Basic		$	1.21			$	0.95			$	3.84			$	3.07
Diluted		$	1.16			$	0.92			$	3.69			$	3.00
(1) As adjusted to reflect the impact of the retrospective application of ASC 606.

RED HAT, INC.
RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED RESULTS
(Unaudited)
(In thousands)
		Three Months Ended								Fiscal Year Ended
		February 28,				February 28,				February 28,				February 28,
		2019				2018 (1)				2019				2018 (1)
(2) Non-GAAP provision for income taxes:
Non-GAAP adjusted income before provision for income taxes		$	232,928			$	205,684			$	815,638			$	723,377
GAAP estimated annual effective tax rate			13.8	%			17.8	%			20.0	%			24.1	%
Provision for income taxes on non-GAAP adjusted income before adjustments		$	30,853			$	35,592			$	163,128			$	174,334
Certain non-deductible share-based compensation			(3,156	)			—				(11,664	)			—
Non-deductible merger related costs			(4,321	)			—				(12,887	)			—
Discrete tax (benefit) expense, excluding discrete benefits related to share-based compensation			(4,400	)			2,152				(1,897	)			5,076
Provision for income taxes on non-GAAP adjusted income, excluding impact from certain non-deductible share-based compensation, non-deductible merger related costs and discrete tax benefits related to share-based compensation		$	18,976			$	37,744			$	136,680			$	179,410
GAAP gross profit		$	746,492			$	659,707			$	2,863,818			$	2,488,664
Add: Non-cash share-based compensation expense			5,133				4,453				19,811				16,862
Add: Amortization of intangible assets expense			6,615				4,214				24,495				16,705
Non-GAAP gross profit		$	758,240			$	668,374			$	2,908,124			$	2,522,231
Non-GAAP gross margin			86.3	%			86.5	%			86.5	%			86.4	%
GAAP operating expenses		$	589,930			$	527,227			$	2,351,586			$	2,012,932
Deduct: Non-cash share-based compensation expense			(48,994	)			(44,813	)			(189,285	)			(175,387	)
Deduct: Amortization of intangible assets expense			(3,877	)			(3,866	)			(15,277	)			(14,740	)
Deduct: Transaction costs related to business combinations			(5,964	)			(728	)			(34,050	)			(2,038	)
Non-GAAP adjusted operating expenses		$	531,095			$	477,820			$	2,112,974			$	1,820,767
GAAP operating income		$	156,562			$	132,480			$	512,232			$	475,732
Add: Non-cash share-based compensation expense			54,127				49,266				209,096				192,249
Add: Amortization of intangible assets expense			10,492				8,080				39,772				31,445
Add: Transaction costs related to business combinations			5,964				728				34,050				2,038
Non-GAAP adjusted operating income		$	227,145			$	190,554			$	795,150			$	701,464
Non-GAAP adjusted operating margin			25.8	%			24.7	%			23.7	%			24.0	%
GAAP net cash provided by operating activities		$	397,103			$	362,063			$	1,012,782			$	923,138
Repayments of convertible notes attributable to debt discount			26,878				—				59,993				—
Non-GAAP net cash provided by operating activities		$	423,981			$	362,063			$	1,072,775			$	923,138
(1) As adjusted to reflect the impact of the retrospective application of ASC 606.

RED HAT, INC.
RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED RESULTS
(Unaudited)
(In thousands)
		Three Months Ended
		February 28,				February 28,				Year-Over-Year
		2019				2018				Growth Rate
Subscription and services revenue:
GAAP subscription revenue by offering type:
Infrastructure-related offerings		$	549,481			$	510,013			7.7	%
Adjustment for currency impact		12,389				—
Non-GAAP Infrastructure-related subscription revenue on a constant currency basis		$	561,870			$	510,013			10.2	%
Application Development-related and other emerging technology offerings		$	224,697			$	173,263			29.7	%
Adjustment for currency impact		6,972				—
Non-GAAP Application Development-related and other emerging technology subscription revenue on a constant currency basis		$	231,669			$	173,263			33.7	%
GAAP subscription revenue		$	774,178			$	683,276			13.3	%
Adjustment for currency impact		19,361				—
Non-GAAP subscription revenue on a constant currency basis		$	793,539			$	683,276			16.1	%
GAAP training and services revenue		$	104,819			$	89,056			17.7	%
Adjustment for currency impact		4,289				—
Non-GAAP training and services revenue on a constant currency basis		$	109,108			$	89,056			22.5	%
GAAP total revenue		$	878,997			$	772,332			13.8	%
Adjustment for currency impact		23,650				—
Non-GAAP total revenue on a constant currency basis		$	902,647			$	772,332			16.9	%
		Fiscal Year Ended
		February 28,				February 28,				Year-Over-Year
		2019				2018				Growth Rate
GAAP subscription revenue by offering type:
Infrastructure-related offerings		$	2,132,635			$	1,950,396			9.3	%
Adjustment for currency impact		6,826				—
Non-GAAP Infrastructure-related subscription revenue on a constant currency basis		$	2,139,461			$	1,950,396			9.7	%
Application Development-related and other emerging technology offerings		$	816,424			$	623,782			30.9	%
Adjustment for currency impact		5,779				—
Non-GAAP Application Development-related and other emerging technology subscription revenue on a constant currency basis		$	822,203			$	623,782			31.8	%
GAAP subscription revenue		$	2,949,059			$	2,574,178			14.6	%
Adjustment for currency impact		12,605				—
Non-GAAP subscription revenue on a constant currency basis		$	2,961,664			$	2,574,178			15.1	%
GAAP training and services revenue		$	413,010			$	346,283			19.3	%
Adjustment for currency impact		7,013				—
Non-GAAP training and services revenue on a constant currency basis		$	420,023			$	346,283			21.3	%
GAAP total revenue		$	3,362,069			$	2,920,461			15.1	%
Adjustment for currency impact		19,618				—
Non-GAAP total revenue on a constant currency basis		$	3,381,687			$	2,920,461			15.8	%

RED HAT, INC.
SUPPLEMENTAL INFORMATION
(Unaudited)
(In thousands)
Change in deferred revenue balances:
						Deferred Revenue
						Current				Long-Term				Total
Balance at February 28, 2018						$	1,853,719			$	741,453			$	2,595,172
Constant currency change in deferred revenue							355,812				107,970				463,782
Impact from foreign currency translation							(48,325	)			(28,205	)			(76,530	)
Balance at February 28, 2019						$	2,161,206			$	821,218			$	2,982,424
Year-over-year growth rate							16.6	%			10.8	%			14.9	%
Year-over-year growth rate on a constant currency basis							19.2	%			14.6	%			17.9	%
Revenue growth by geographical segment:
		Americas				EMEA				APAC				Consolidated
Total revenue for the three months ended February 28, 2019		$	550,333			$	203,322			$	125,342			$	878,997
Adjustment for currency impact			6,131				13,295				4,224				23,650
Total revenue on a constant currency basis for the three months ended February 28, 2019		$	556,464			$	216,617			$	129,566			$	902,647
Total revenue for the three months ended February 28, 2018		$	484,492			$	180,087			$	107,753			$	772,332
Year-over-year growth rate			13.6	%			12.9	%			16.3	%			13.8	%
Year-over-year growth rate on a constant currency basis			14.9	%			20.3	%			20.2	%			16.9	%
Total revenue for the fiscal year ended February 28, 2019		$	2,092,329			$	786,503			$	483,237			$	3,362,069
Adjustment for currency impact			19,093				(5,429	)			5,954				19,618
Total revenue on a constant currency basis for the fiscal year ended February 28, 2019		$	2,111,422			$	781,074			$	489,191			$	3,381,687
Total revenue for the fiscal year ended February 28, 2018		$	1,858,004			$	657,197			$	405,260			$	2,920,461
Year-over-year growth rate			12.6	%			19.7	%			19.2	%			15.1	%
Year-over-year growth rate on a constant currency basis			13.6	%			18.8	%			20.7	%			15.8	%

RED HAT, INC.

SUPPLEMENTAL INFORMATION

(Unaudited)

(In thousands - except per share amounts)

The primary impact of adopting ASC 606 related to the deferral of incremental commission and other costs of obtaining contracts with customers. Certain unaudited financial statement information as adjusted to reflect the Company’s adoption of ASC 606 is set forth below. The adjustments resulting from ASC 606 are reflected in presentations of both GAAP and non-GAAP financial information.

Consolidated balance sheets:
		February 28, 2018
		As Reported (1)			Adjustments				As Adjusted
Prepaid expenses		$	260,092		$	7,105			$	267,197
Deferred tax assets, net		$	93,300		$	(694	)		$	92,606
Other assets, net		$	87,924		$	1,536			$	89,460
Accounts payable and accrued expenses		$	427,086		$	53			$	427,139
Retained earnings		$	1,611,794		$	7,894			$	1,619,688
(1) Derived from audited financial statements.
Consolidated statements of operations:
		Three Months Ended May 31, 2017
		As Reported			Adjustments				As Adjusted
Operating expense:
Sales and marketing		$	296,459		$	(2,136	)		$	294,323
Net income		$	73,190		$	2,124			$	75,314
Net income per share:
Basic		$	0.41		$	0.01			$	0.42
Diluted		$	0.40		$	0.01			$	0.41
		Three Months Ended August 31, 2017
		As Reported			Adjustments				As Adjusted
Operating expense:
Sales and marketing		$	278,548		$	(231	)		$	278,317
Net income		$	96,859		$	229			$	97,088
Net income per share:
Basic		$	0.55		$	—			$	0.55
Diluted		$	0.53		$	—			$	0.53
		Three Months Ended November 30, 2017
		As Reported			Adjustments				As Adjusted
Operating expense:
Sales and marketing		$	308,388		$	(305	)		$	308,083
Net income		$	101,306		$	303			$	101,609
Net income per share:
Basic		$	0.57		$	—			$	0.57
Diluted		$	0.54		$	0.01			$	0.55

RED HAT, INC.
SUPPLEMENTAL INFORMATION
(Unaudited)
(In thousands - except per share amounts)
		Three Months Ended February 28, 2018
		As Reported				Adjustments				As Adjusted
Operating expense:
Sales and marketing		$	315,181			$	(618	)		$	314,563
Net loss		$	(12,552	)		$	392			$	(12,160	)
Net loss per share:
Basic		$	(0.07	)		$	—			$	(0.07	)
Diluted		$	(0.07	)		$	—			$	(0.07	)
		Twelve Months Ended February 28, 2018
		As Reported (1)				Adjustments				As Adjusted
Operating expense:
Sales and marketing		$	1,198,576			$	(3,290	)		$	1,195,286
Net income		$	258,803			$	3,048			$	261,851
Net income per share:
Basic		$	1.46			$	0.02			$	1.48
Diluted		$	1.40			$	0.02			$	1.42
(1) Derived from audited financial statements.

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