Red Hat Reports Q3 Results (RHT)

Shares of software solution provider, Red Hat Inc (NYSE: RHT) gained 5.5 percent in premarket trading on Friday after the company, following closing bell on Thursday, reported better-than-expected adjusted earnings (non-GAAP) for the third quarter even as revenue beat Street’s estimate.

Earnings on GAAP basis or non-adjusted earnings fell 9.1 percent due to higher compensation expenses and some other onetime expenses.

With aim to grow at brisk pave through inorganic route, Red Hat also announced its plans to acquire ManagelQ in a deal valued at $104 million.

Addressing analysts and investors, Red Hat’s President and Chief Executive said, “Since October of last year we have completed three acquisitions, and are announcing a fourth today to expand our portfolio of open source solutions and enlarge our addressable market.”

The company said that acquisition of New Jersey-based ManageIQ–a cloud management and automation company—will help expanding its clout in cloud management offerings. However, the deal will not make any impact on company’s current fiscal revenue which ends in February even as operating expenses are expected to rise by $2 million a quarter due to acquisition, said the Company.

Red Hat, which provides open source software products, witnessed consistently strong sales growth in previous quarters, although its bottom- line growth felt the pressure in recent times owing to rising operating costs. Besides the company incurred acquisitions-related expenses even as expenditures increased as it built up its storage business.

For the quarter which ended November 30, Red Hat reported non-adjusted profit of $34.8 million, or 18 cents a share, compared to $38.2 million, or 19 cents a share, in the year earlier quarter.

After excluding stock-based compensation and other items, adjusted earnings (non GAAP earnings) came at 29 cents, up from 28 cents, in the corresponding period of last year.

Revenue jumped 18% to $343.6 million. After omitting the impact of currency fluctuation, revenue soared 21%. Revenue from subscriptions, after excluding currency fluctuations, climbed 22 percent.

Earlier in September, the Company has earnings outlook of 28 cents to 29 cents while revenue was anticipated in the range of $336 million to $339 million.