Red Hat, Inc. (RHT)

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Red Hat (RHT)

Q1 2012 Earnings Call

June 22, 2011 5:00 pm ET

Executives

Charles Peters - Chief Financial Officer and Executive Vice President

Paul Cormier - President of Products & Technologies and Executive Vice President of Engineering

Tom McCallum - Investor Relations

Analysts

Trip Chowdhry - Global Equities Research, LLC

Adam Holt - Morgan Stanley

S. Kirk Materne - Evercore Partners Inc.

Brad Reback - Oppenheimer & Co. Inc.

Brent Thill - UBS Investment Bank

Richard Williams - Cross Research LLC

Bhavan Suri - William Blair & Company L.L.C.

Matthew Hedberg - RBC Capital Markets, LLC

Steven Ashley - Robert W. Baird & Co. Incorporated

Edward Maguire - Credit Agricole Securities (USA) Inc.

Derrick Wood - Pacific Growth Equities

Kevin Buttigieg - Collins Stewart LLC

Michael Turits - Raymond James & Associates, Inc.

Bradley Whitt - Gleacher & Company, Inc.

Tim Klasell - Stifel, Nicolaus & Co., Inc.

Nabil Elsheshai - Pacific Crest Securities, Inc.

Marc Griffin - JP Morgan Chase & Co

Mark Murphy - Piper Jaffray Companies

Gregg Moskowitz - Cowen and Company, LLC

Kash Rangan - BofA Merrill Lynch

Presentation

Operator

Good afternoon. My name is Tanya, and I will be your conference operator today. At this time, I would like to welcome everyone to the Red Hat First Quarter 2012 Earnings Call. [Operator Instructions] I will now turn the call over to Mr. Tom McCallum, Vice President of Investor Relations. Sir, you may begin your conference.

Tom McCallum

Thank you. Hello, everyone, and welcome to Red Hat's earnings call for the first quarter of fiscal 2012. Speakers for today's call will be Charlie Peters, Executive Vice President and CFO; and Paul Cormier, Executive Vice President and President of Products and Technologies. Jim Whitehurst, President and CEO, is currently traveling on a multi-country trip, visiting customers and partners. Given the importance of the trip, combined with the potential logistic challenges, Jim will not be available for the call. Paul instead will join us on today's call and discuss the product and technology segment of our remarks. Jim will rejoin us on the next earnings call.

Our press release was issued today after the market closed and may be downloaded from redhat.com on the Investor Relations page. Also in this page, you will be able to find Historic Reconciliation schedule of GAAP to non-GAAP financial metrics as well as the schedule Currency Rates. Various remarks that we may make about the company's future expectations, plans and prospects, including the statements containing the words believe, anticipate, plan, project, estimate, expect, intend or will, constitute forward-looking statements for the purposes of the Safe Harbors provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's most recent annual report on Form 10-K filed with the SEC as well as the Safe Harbor statement in today's press release.

In addition, any forward-looking statement represents our estimates or views only as of today, June 22, 2011, and these estimates or views may change. While the company may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates or views do change. And therefore, you should not rely on these forward-looking statements as representing our estimates or views as any date subsequent to today.

With that, I'd like to turn the call over to Charlie Peters.

Charles Peters

Thanks, Tom. I'm pleased to announce that execution was strong in Q1 and resulted in better-than-expected results across all of our key financial metrics. Here are just a few of the highlights on a year-over-year basis: 28% billings growth, our highest Q1 billings growth rate in 4 years; revenue growth of 27%; non-GAAP operating income growth of 28%; non-GAAP earnings per share growth of 33%; total deferred revenue growth of 26%; and operating cash flow growth of 49%. Fiscal year 2012 is off to a great start with broad demand from enterprise customers who are driving a fundamental shift in the delivery of IT services.

Before discussing the detailed financial results and our improved outlook, let me turn the call over to Paul Cormier, who will discuss some of the exciting technologies we introduced this quarter to further enable customers to take advantage of the shift to cloud computing.

Paul Cormier

Thank you, Charlie. In Q1, we had several important technology, partner, product and customer announcements. Many of them were made during our premier user event, the Red Hat Summit and JBoss World, which hosted a record number of attendees in May. The vision for the future that we shared with our customers and partners is one where customers will be able to choose to run their applications on bare metal, virtualization, private cloud or among multiple certified public clouds.

Let me highlight just a few points that further articulate our strategy around the shift to cloud computing and what we are doing to allow Red Hat and our customers to benefit from this important shift. First, we announced Red Hat CloudForms. This offering is designed to bring true Infrastructure-as-a-Service functionality to the CIO for on-premise and off-premise cloud deployment. The goal of this Infrastructure-as-a-Service technology for managing hybrid clouds is to provide companies the ability to maintain significant control over the underlying infrastructure.

CloudForms is intended to be a comprehensive resource management solution that will offer a unique approach to application lifecycle management, dynamic image and template-based application stacks as well as next-generation operational management tools. We are currently working with select customers on this new set of technologies.

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