Red Hat, Inc. (NYSE:RHT) Q4 2016 Earnings Conference Call - Final Transcript

Mar 22, 2016 • 05:00 pm ET

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Red Hat, Inc. (NYSE:RHT) Q4 2016 Earnings Conference Call - Final Transcript

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Presentation
Executive
Frank Calderoni

continued growth in our bookings. This quarter 64% of bookings came from the Americas, 23% from EMEA, 13% from Asia-Pacific versus 63/25/12 split in Q4 last year.

The Q4 sales route to market mix was 71% from the channel and 29% from our direct sales force, and that's compared to 68/32 split in Q4 last year. For the full fiscal year, we surpassed our multi-year annual goal with a 72/28 split. This quarter, we once again renewed all of the deals in our top 25 deals metric. The total subscription value of these top 25 renewals was approximately 120% of the prior value. Our ability to renew and increase our wallet share with large customers demonstrates Red Hat's increasing strategic importance with customers. This fiscal year, we renewed all of the deals in the top 25 deals metric per quarter, renewing all of our deals in each quarter with upsell growth between 115% to 120% for this metric. Over the past five years, we have had similar success renewing 498 out of 500 top deals, and this is a phenomenal track record.

While we never want to lose a deal, if we do so, we never give up trying to win-back the business. This quarter, I'm pleased to report that we closed a multi-million dollar win-back of one of these two former top deals from the 500 deals we reported. We won back this deal on RHEL because of our award winning support and expanded portfolio of technologies. In addition to now running RHEL, this customer is relying on Red Hat to help them modernize their application development with Red Hat JBoss Middleware and to realize the benefits from hybrid cloud computing with our OpenStack technology. Congratulations to the account team for an exceptional job of positioning Red Hat to win and expanding our footprint with this customer.

Now, I would like to turn to guidance. Our outlook assumes current business conditions and foreign currency. We are forecasting our full-year revenue guidance to be $2.380 billion to $2.420 billion, that's up approximately 18% at the high end of the range. Our non-GAAP operating margin forecast reflects our increased hiring in sales, R&D, services and support at the end of FY 2016, and our plan to continue to invest in business and emerging technologies, as well as the full-year impact of ongoing operational expenses from the Ansible acquisition. We expect operating income to grow by 14% to 16% with an operating margin of approximately 23.2%. Our plan includes adding approximately 1,400 net new associates, or 16% head count growth, down from 20% head count growth in FY 2016. We expect full-year non-GAAP earnings per share to be approximately $2.22 to $2.26 per share, assuming a $1 million to $2 million per quarter forecast for net other income, a lower annual effective tax rate of 27% and approximately 184 million diluted shares. At the top end of the guidance, this would be an 18% growth in earnings per share.

On a GAAP