Open-source enterprise software-maker Red Hat (RHT) reported results for its first quarter of fiscal year 2013. The firm’s performance exceeded expectations, with earnings coming in at $0.30 per share compared to the Street consensus of $0.27 per share. Revenue came in at $314.7 million, up 19% compared to the first quarter of 2012, and slightly ahead of the Street’s expectations.
However, Red Hat reported an outlook below both its previously-issued guidance and the Street’s expectations. The firm guided to second-quarter earnings of $0.28-$0.29 per share, which is roughly in-line with the Street consensus of $0.29. Second-quarter revenue is expected to come in the range of $320-$322 million, well below the consensus of $330.8 million. For the full-year, Red Hat lowered its guidance for revenue to $1.32-$1.34 billion from its previous outlook of $1.34-$1.36 billion. Much like other companies we’ve seen, including Procter & Gamble (PG) and Oracle (ORCL), the company warned that hits to revenue and earnings will likely be a result of negative foreign exchange rates.
Nevertheless, the company generated $124.4 million in operating cash flow, up 38% compared to the same period a year ago. Red Hat now sits on $1.3 billion in cash and investments and was able to repurchase 550,000 shares for $30 million over its first quarter. The company also saw subscription revenue tick-up 21%, and management noted that demand for its Linux based solutions has been particularly strong in Southern and Central Europe.
Overall, Red Hat underscored the trend we’ve been seeing with multinational companies: unfavorable exchange rates have hurt earnings and thus guidance is being lowered. Red Hat, in particular, noted that Europe and Asia haven’t been very weak, so we think this bodes well for global business spending. Red Hat looks expensive to us, trading at over 50 times its FY2013 earnings. We prefer Microsoft () in the business enterprise software space.