Red Hat blows out its Q3: The data behind the numbers

Red Hat continues to demonstrate its dominance of the enterprise Linux market. The company reported a blow-out third quarter, with total revenue of $135.4 million, an increase of 28% from the year ago quarter and 6% from the prior quarter. Subscription revenue was $115.7 million, up 30% year-over-year and 6% sequentially.

The company also boosted its profitability, with net income for the quarter at $20.3 million, or $0.10 per diluted share, compared with $18.2 million, or $0.09 per diluted share, for the prior quarter and $14.6 million, or $0.07 per diluted share, in the year ago quarter. Red Hat continues to exceed expectations, but perhaps because analysts continue to foolishly second guess the company (presumably because few of the analysts really understand open source).

Szulik talked up the progress of RHEL in the quarter (e.g., ), but also emphasized the growth of the JBoss business:

Renewed 100% of its top-25 customers at 128% of their contract value;

Renewed 148 of its top 150 customers over the past year [Oracle being one of the two that didn't renew];

Strength in every geographic reason. (Had been at least one $5 million deal each quarter, and three such deals in Q2 2007, but this quarter was more broad-based in sales);

Red Hat nailed its first $1M+ Latin American deal - a switch from CentOS and unsuppported Fedora software;

Red Hat is heavily investing in sales and sales automation;

Red Hat's channel produced 51% of bookings and direct sales delivered 49%;

Geographies: 58% of bookings came from the Americas; 27% came from EMEA; 15% came from APAC (Increased 52% sequentially);

"Disciplined approach to pricing has not changed in three years";

Subscriptions were 85% of revenue;

The company has $1.3 billion in cash on its balance sheet;

Expecting to hit $139M to $141M in Q4 2007;

Revenue for its fiscal year 2007 will exceed previous guidance, coming in at $521M to 523M for 2007;

JBoss traction in Q3 was up significantly. The pipeline is "excellent" for JBoss.

All good (though I would have liked to hear the JBoss numbers, given all the speculation about JBoss bringing Red Hat down). Red Hat is clearly the leader in open-source software. But I just can't shake my concern that Szulik's departure will hurt the company's morale and its fighting spirit.

[RicABlair]

If you have any vested interest in Red Hat, it should be disclosed.

[royrusso]

"If you have any vested interest in Red Hat, it should be disclosed."

Anyone involved in OSS has an interest in RHT (and MySQL) doing well.

[Matt Asay]

I own no stock (sold it a few years ago, though not out of a lack of confidence in the company - quite the opposite - I bought at 14 and sold at 23 or so) and have no other "vested interest" in the company, other than a strong Red Hat is good for all open-source companies, as Roy suggests. I always disclose my ties with companies. I have no ties to Red Hat other than personal affection.

[Savio.Rodrigues]

30% YTY growth on a $500M yearly base is a blow out?

Wow...who knew?

[kaafree]

Regarding the analysts - some of them are not so simple I guess.

http://www.researchconnect.com/researchers/expert_212.asp

MS FUD again ?