Earlier this week Red Hat, Inc. (NYSE: RHT), a provider of open source and enterprise IT solutions, reported its fourth quarter and fiscal year 2017 financials, including fourth quarter subscription revenue of $560 million, a 17 percent increase year-over-year. For the full fiscal year ended February 28, 2017, Red Hat brought in $2.1 billion in subscription revenue, an 18 percent increase year-over-year.

Net income (GAAP) for the quarter was $66 million, or $0.36 per diluted share, compared to $53 million, or $0.29 per diluted share, year-over-year. For the full fiscal year, net income (GAAP) was $254 million, or $1.39 per diluted share, compared to $199 million, or $1.07 per diluted share.

Other Q4 FY 2017 highlights include:

• Total revenue was $629 million, a 16 percent increase year-over-year.
• Subscription revenue of $560 million represented 89 percent of the company’s total revenue.
• Subscription revenue broken down was $435 million from infrastructure-related offerings and $125 million application-development-related and other emergency technologies was $125 million.
• Training and services revenue of $69.3 million made up the remaining income for the quarter.
• GAAP operating income was $94 million, a 31 percent increase year-over-year.

Full fiscal year 2017 highlights include:

• Total revenue was $2.4 billion, an 18 percent increase year-over-year.
• Subscription revenue of $2.1 billion represented 89 percent of the company’s total revenue.
• Subscription revenue broken down was $1.7 billion from infrastructure-related offerings and $125 million application-development-related and other emergency technologies was $439 million.
• Training and services revenue of $276 million made up the remaining income for the year.
• GAAP operating income was $332 million, a 15 percent increase year-over-year.
• Year-end deferred revenue balance was $2.1 billion, a 20 percent year-over-year.

In addition, Red Hat reported that the number of deals over $1 million grew by 30 percent during the year. They also closed a record number of deals over $20 million, including a deal worth approximately $100 million in Q4. The company is still in search of a CFO to replace Frank Calderoni. Eric Shander is the acting CFO.

“We closed the year with an exceptional performance. The fourth quarter marked our 60^th consecutive quarter of revenue growth, and we crossed the $2 billion milestone in subscription revenue and total deferred revenue for the fiscal year,” said Jim Whitehurst, president and CEO of Red Hat, in an announcement.

“As customers embrace digital transformation, they are turning to Red Hat as a strategic partner to deliver solutions that can help them realize the benefits of these initiatives. Enterprises and service providers are increasingly adopting hybrid cloud infrastructures and open source technologies, which is fueling our growth and positioning Red Hat for the long-term.”

The outlook for Q1 of fiscal year 2018 is as follows:

• Revenue is estimated to be between $643 million to $650 million.
• GAAP operating margin is estimated to be approximately 11.7 percent.
• Fully diluted GAAP earnings per share is estimated to be between $0.34 to $0.35 per share.

The outlook for fiscal year 2018 is as follows:

• Revenue is estimated to be between $2.72 billion to $2.76 billion.
• GAAP operating margin is estimated to be approximately 15.2 percent.
• Fully diluted GAAP earnings per share is estimated to be between $1.69 to $1.73 per share.
• Operating cash flow is expected to be between $850 million to $870 million.

Investors reacted favorably to the change. The day of the announcement, March 27, 2017, the stock price closed at $82.32. As of 4 PM EDT yesterday, the stock price was $85.92. This is more than $10 per share than stock was a year ago – $74.51 per share on March 31, 2016.

Insider Take:

For the fourth quarter, Red Hat exceed revenue projections. Its outlook was projected to be between $614 million and $622 million, and it finished the quarter at $629 million. Its total revenue for the year was right on the money, estimated to be between $2.397 billion and $2.405 billion and finishing at $2.4 billion. According to ZDNet, Wall Street projected earnings of $0.61 per share and $521 million in revenue. Non-GAAP earnings were $0.61 per share and $629 million in revenue. With solid deferred revenue and continued growth in the deals department, Red Hat is in position to post attainable Q1 results.