On Sept. 25, Linux developer and distributor Red Hat (NYSE:RHT) released second-quarter 2008 earnings for the period ending Aug. 31, 2007.

  • Red Hat's top 25 customers all renewed their software and support contracts this quarter, and they increased their average order size by 22%. That list of major customers includes IBM (NYSE:IBM),Stock Advisor pick Priceline.com (NASDAQ:PCLN), and Nokia (NYSE:NOK).
  • The Board of Directors just authorized management to repurchase as much as $250 million of common stock, and to buy back $75 million of the Convertible Senior Debentures that make up its long-term debt balance. The company hasn't paid back any debt in two years, and it bought back shares for $67 million in the same time period.
  • The Linux market is heating up, and you can follow the action at Red Hat, Novell (NASDAQ:NOVL), and Oracle (NASDAQ:ORCL) over in our Motley Fool CAPS investor community. It's now, it's wow, and how!

(Figures in thousands, except per-share data)

Income Statement Highlights

Q2 2008

Q2 2007

Change

Sales

$127,270

$99,673

27.7%

Net Profit

$18,157

$11,047

64.4%

EPS

$0.08

$0.05

60%

Diluted Shares

221,688

219,940

0.8%

Get back to basics with the income statement.

Margin Checkup

Q2 2008

Q2 2007

Change*

Gross Margin

84.2%

83.5%

0.7

Operating Margin

14%

9.5%

4.5

Net Margin

14.3%

11.1%

3.2

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q2 2008

Q2 2007

Change

Cash + ST Invest.

$878,383

$837,956

4.8%

Accounts Rec.

$89,125

$70,346

26.7%

Liabilities

Q2 2008

Q2 2007

Change

Accounts Payable

$10,085

$7,642

32%

Long-Term Debt

$570,000

$570,000

0%

The balance sheet reflects the company's health.

Cash Flow Highlights

Q2 2008

Q2 2007

Change

Cash From Ops.

$49,201

$43,884

12.1%

Capital Expenditures

$8,375

$5,107

64%

Free Cash Flow

$40,826

$38,777

5.3%

Owner Earnings

$18,001

$12,694

41.8%

Free cash flow is a Fool's best friend.

Related Foolishness:

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.

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At the time of publication, Anders Bylund had no position in any company mentioned, and his own server ran Ubuntu Linux. Fool rules are here.