On Dec. 21, open-source software veteran Red Hat
- Earnings shrank by 37%, mostly because of 76% higher SG&A expenses and an unusually large income tax provision of $8.6 million, versus $701,000 last year. Owner earnings is telling the same story, which means that management is keeping the GAAP net income figure relatively free from obfuscation. And in the end, it's hard to complain about a 44.7% revenue boost.
- Mind you, rising SG&A costs can be a good sign in a fast grower like Red Hat. Double the research and development budget? That means the company is working harder on future products. Higher sales and marketing? Well, you have to tell the world about those spiffy new products. And administrative costs will rise to provide a bigger, stronger infrastructure for the units that make the money.
- Cash flow is much higher than net income because we're looking at year-to-date cash flow figures covering three quarters (Q3 FCF was $53.9 million). The rest of the difference results from deferred taxes and deferred revenue, and backing out stock-based compensation costs.
- 221 of 289 CAPS participants think that Red Hat will outperform the S&P 500. You can share your own thoughts on the company in CAPS.
(Figures in thousands, except per-share data)
Income Statement Highlights
|
Q3 2007 |
Q3 2006 |
Change |
|
|---|---|---|---|
|
Sales |
$105,826 |
$73,112 |
44.7% |
|
Net Profit |
$14,620 |
$23,203 |
(37%) |
|
EPS |
$0.07 |
$0.12 |
(41.7%) |
|
Diluted Shares |
219,458 |
211,783 |
3.6% |
|
$15,448 |
$22,947 |
(32.7%) |
Get back to basics with a look at the income statement.
Margin Checkup
|
Q3 2007 |
Q3 2006 |
Change* |
|
|---|---|---|---|
|
Gross Margin |
83.52% |
83.78% |
(0.26) |
|
Operating Margin |
12.84% |
25.64% |
(12.80) |
|
Net Margin |
13.82% |
31.74% |
(17.92) |
Margins are the earnings engine. See how they work.
Management Effectiveness
|
Liabilities |
Q3 2007 |
Q3 2006 |
Change* |
|---|---|---|---|
|
Return On Assets |
0.9% |
1.9% |
(1.0) |
|
Return On Equity |
1.9% |
5.8% |
(3.8) |
See how management puts its financial tools to work.
Balance Sheet Highlights
|
Assets |
Q3 2007 |
Q3 2006 |
Change |
|---|---|---|---|
|
Cash + ST Invest. |
$976,865 |
$668,340 |
46.2% |
|
Accounts Rec. |
$81,251 |
$55,656 |
46% |
|
Liabilities |
Q3 2007 |
Q3 2006 |
Change |
|---|---|---|---|
|
Accounts Payable |
$10,742 |
$5,161 |
108.1% |
|
Long-Term Debt |
$570,000 |
$570,000 |
0% |
Learn the ways of the balance sheet.
Cash Flow Highlights
|
Year To Date (9 Months) |
Q3 2007 |
Q3 2006 |
Change |
|---|---|---|---|
|
Cash From Ops. |
$155,932 |
$136,473 |
14.3% |
|
Capital Expenditures |
$14,751 |
$12,389 |
19.1% |
|
Free Cash Flow |
$141,181 |
$124,084 |
13.8% |
Find out why Fools always follow the money.
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-
Microsoft
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IBM
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Novell
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Sun Microsystems
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Related Foolishness:
Microsoft is a Motley Fool Inside Valuepick. Find out why with a free 30-day trial.
Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.
At the time of publication, Anders Bylund had no position in any company mentioned. Fool rules are here .
