Red Hat, Inc. (RHT)
Q2 2011 Earnings Call Transcript
September 22, 2010 5:00 p.m. ET

Executives

Thomas McCallum – Vice President of Investor Relations
James M. Whitehurst – President and Chief Executive Officer
Charles E. Peters Jr. – Executive Vice President and Chief Financial Officer

Analysts

Adam Holt – Morgan Stanley
Heather Bellini – ISI Group
Kash Rangan – Bank of America/Merrill Lynch
Sarah Friar – Goldman Sachs
Michael Turits – Raymond James & Associates
Trip Chowdhry – Global Equities Research
John Difucci – J.P. Morgan
Timothy Klasell – Stifel Nicolaus
Edward Maguire – CLSA Securities
Todd Raker – Deutsche Bank
Steve Ashley – Robert W. Baird
Nabil Elsheshai – Pacific Crest Securities
Katherine Egbert – Jefferies & Company
Brent Thill – UBS
Brad Whitt – Gleacher & Company
Joel Fishbein – Lazard Capital Markets

Presentation

Operator

Welcome, ladies and gentlemen. My name is Gerald and I will be your conference operator. At this time, I would like to welcome everyone to Red Hat''s Q2 2011 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers'' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. And we ask that today’s listeners limit themselves to one question. If you would like to withdraw your question, press the pound key. Thank you.

I would now like to turn the conference over to Mr. Tom McCallum, Vice President of Investor Relations. Sir, you may begin.

Thomas McCallum

Thank you. Hello, everyone. Welcome to Red Hat''s earnings call for Q2 of our fiscal year 2011. Speakers for today''s call will be Jim Whitehurst, President and CEO and Charlie Peters, Executive Vice President and CFO.

Our earnings press release was issued after the market closed today and may be downloaded from redhat.com on the Investor Relations page. Also on this page, you will be able to find a historic reconciliation schedule of GAAP to non-GAAP financial metrics as well as a schedule on currency rates.

Various remarks 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 Harbor 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 factors -- important factors, including those discussed in the company''s most recent Quarterly Report on Form 10-Q filed with the SEC.

In addition, any forward-looking statements represent our estimates or views only as of today, September 22, 2010, and these estimates and 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 Jim.

James M. Whitehurst

Thank you, Tom. And let me add my welcome to all of you joining on today''s call. I''m pleased to announce another quarter of strong execution by our Red Hat Associates, which drove financial results well above our expectations.

In the quarter, we saw solid demand for our Open Source products, strong renewals and continued spending on new projects. The combination of strong second quarter results and momentum going into the second half of the fiscal year provides us with the confidence to raise our full year growth outlook, which Charlie will talk more about in detail in a moment.

Here are a few of the financial highlights for the quarter. First, sales execution was once again strong in Q2. Demand for our subscriptions remain strong and demand for services have continued to rebound.

For the second quarter in a row, we delivered 20% year-over-year organic revenue growth. And despite foreign currency headwinds, our revenue growth rates through the first half of this year have outpaced last year''s double digit growth.