Currency fluctuations and deferred earnings
Red Hat’s (RHT) 2Q16 earnings report shows that the company increased its cash flow from operations to $120 million from $107 million in the corresponding quarter one year prior—an 11.64% rise. To a large extent, the company reduced its prepaid expenses, which was reflected in 2Q16 as a surplus of $13 million, compared to the $2.4 million deficit in the previous quarter.
Currency fluctuations had a severe impact on the company’s deferred revenues of $1.4 billion, which increased by 13% on a YoY (year-over-year) basis. But if the currency been constant throughout this period, deferred revenues would have increased by 21%. The company has returned part of these cash earnings to its shareholders through a $70 million share repurchase program.
The company reported a 5.33% reduction in cash and cash equivalents compared to the previous quarter. It also reported a 36% decline in receivables—$302 million, down from $468 million in the previous quarter. As Red Hat is solely dependent on equity financing, this quarter it increased its book value to $1.37 billion from $1.29 billion the previous year—an increase of 6.19%.
The company is expecting that its 3Q16 revenues will be between $519 million to $523 million. Its Non-GAAP operating margin and non-GAAP EPS (earnings per share) are estimated to fall at 23% and $0.47, respectively.
The First Trust ISE Cloud Computing Index Fund (SKYY) includes 36 stocks. The top four stocks are Amazon.com (AMZN), Netflix (NFLX), Facebook (FB), and Google (GOOG), which constitute 4.98%, 4.54%, 4.54%, and 4.52%, respectively, of the ETF.
In the next part of this series, we’ll look at Absolute Software and its plans in Europe.