Red Hat Earnings Call Insights: Vertical Perspective and Service Workload
Red Hat, Inc. (NYSE:RHT) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Brent Thill – UBS: I’m curious, if you could just walk through the verticals, financial services and government, Charlie, to give us a sense of what you are seeing there; and structurally as we head into the fiscal year end on the government how fixing the pipeline build there?
Charlie Peters – EVP and CFO: From a vertical perspective, in the top deals, although I said government and technology/media were the top two, financial was right there. It was a very close third. So, the financial sector from our perspective is still doing well. The government performance in Q2 was no surprise to us. In fact, I had guided that on the Q1 call. I think the open question to everybody is what happens in the next couple of weeks with the federal government budget deliberations and that’s kind of a wild card. It’s going to affect everybody the same way. I would expect that what happens in most years with the month of September for us and probably for everybody else will still be good in the federal government, and then we’ll see what happens on October 1. I really don’t have any predictions beyond that relative to what’s happening about the U.S. federal budget discussion. However, I would say that the government sector for us has historically been a good sector.
Brent Thill – UBS: Just as a quick follow-up on the billings number, Charlie, relative to history, it’s one of the lowest growth rates you’ve seen in a while. Can you just give us a sense to what you think is going on impacting that?
Charlie Peters – EVP and CFO: Yeah, so the one item I clearly called out is when we have these really large deals, they tend to be much more tailored and negotiated to the specific situation and two of the top three deals as I said total — the two of them totaled over $20 million and billed only 15% in the quarter. So, and obviously, if it doesn’t bill, the alternative is it, it goes into off-balance sheet backlog for a future billing date. So, that has an impact and that was — it was one of the larger items for the quarter.