Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Nov. 30, 2017 | Dec. 29, 2017 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | RED HAT INC | |
Entity Central Index Key | 1,087,423 | |
Current Fiscal Year End Date | --02-28 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Nov. 30, 2017 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 177,004,300 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Nov. 30, 2017 | Feb. 28, 2017 | [1] |
Current assets: | |||
Cash and cash equivalents | $ 1,331,172 | $ 1,090,808 | |
Investments in debt and equity securities, short-term | 384,717 | 369,983 | |
Accounts receivable, net of allowances for doubtful accounts of $2,398 and $2,791, respectively | 531,509 | 634,821 | |
Prepaid expenses | 216,036 | 200,609 | |
Other current assets | 41,276 | 19,481 | |
Total current assets | 2,504,710 | 2,315,702 | |
Property and equipment, net of accumulated depreciation and amortization of $277,411 and $231,533, respectively | 201,807 | 189,629 | |
Goodwill | 1,120,957 | 1,040,709 | |
Identifiable intangibles, net | 151,450 | 137,767 | |
Investments in debt securities, long-term | 605,284 | 672,440 | |
Deferred tax assets, net | 108,235 | 104,833 | |
Other assets, net | 67,041 | 74,105 | |
Total assets | 4,759,484 | 4,535,185 | |
Current liabilities: | |||
Accounts payable and accrued expenses | 341,596 | 376,957 | |
Deferred revenue, short-term | 1,482,428 | 1,512,762 | |
Other current obligations | 1,022 | 1,354 | |
Total current liabilities | 1,825,046 | 1,891,073 | |
Deferred revenue, long-term | 623,150 | 557,194 | |
Convertible notes | 762,367 | 745,633 | |
Other long-term obligations | 115,781 | 93,965 | |
Commitments and contingencies (NOTES 11 and 12) | |||
Stockholders’ equity: | |||
Preferred stock, $0.0001 per share par value, 5,000,000 shares authorized, none outstanding | 0 | 0 | |
Common stock, $0.0001 per share par value, 300,000,000 shares authorized, 238,617,591 and 236,804,594 shares issued, and 177,002,948 and 176,901,936 shares outstanding at November 30, 2017 and February 28, 2017, respectively | 24 | 24 | |
Additional paid-in capital | 2,350,740 | 2,294,462 | |
Retained earnings | 1,624,346 | 1,352,991 | |
Treasury stock at cost, 61,614,643 and 59,902,658 shares at November 30, 2017 and February 28, 2017, respectively | (2,506,075) | (2,311,805) | |
Accumulated other comprehensive loss | (35,895) | (88,352) | |
Total stockholders’ equity | 1,433,140 | 1,247,320 | |
Total liabilities and stockholders’ equity | $ 4,759,484 | $ 4,535,185 | |
[1] | Derived from audited financial statements. |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Nov. 30, 2017 | Feb. 28, 2017 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowances for doubtful accounts | $ 2,398 | $ 2,791 |
Property and equipment, accumulated depreciation and amortization | $ 277,411 | $ 231,533 |
Preferred stock, per share par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, per share par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 300,000,000 | 300,000,000 |
Common stock, shares issued (in shares) | 238,617,591 | 236,804,594 |
Common stock, shares outstanding (in shares) | 177,002,948 | 176,901,936 |
Treasury stock, shares (in shares) | 61,614,643 | 59,902,658 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Revenue: | ||||
Subscriptions | $ 656,832 | $ 543,318 | $ 1,890,902 | $ 1,576,192 |
Training and services | 91,146 | 71,942 | 257,227 | 206,771 |
Total subscription and training and services revenue | 747,978 | 615,260 | 2,148,129 | 1,782,963 |
Cost of subscription and training and services revenue: | ||||
Cost of subscriptions | 47,277 | 40,660 | 137,234 | 116,882 |
Cost of training and services | 64,482 | 49,793 | 181,938 | 145,289 |
Total cost of subscription and training and services revenue | 111,759 | 90,453 | 319,172 | 262,171 |
Gross profit | 636,219 | 524,807 | 1,828,957 | 1,520,792 |
Operating expense: | ||||
Sales and marketing | 308,388 | 267,080 | 883,395 | 763,583 |
Research and development | 145,580 | 122,469 | 424,552 | 358,750 |
General and administrative | 63,838 | 54,485 | 180,430 | 160,439 |
Total operating expense | 517,806 | 444,034 | 1,488,377 | 1,282,772 |
Income from operations | 118,413 | 80,773 | 340,580 | 238,020 |
Interest income | 4,864 | 3,346 | 13,469 | 10,167 |
Interest expense | 6,180 | 6,009 | 18,346 | 17,820 |
Other expense, net | (1,187) | (1,392) | (3,033) | (1,860) |
Income before provision for income taxes | 115,910 | 76,718 | 332,670 | 228,507 |
Provision for income taxes | 14,604 | 8,775 | 61,315 | 40,607 |
Net income | $ 101,306 | $ 67,943 | $ 271,355 | $ 187,900 |
Basic net income per common share (in dollars per share) | $ 0.57 | $ 0.38 | $ 1.53 | $ 1.04 |
Diluted net income per common share (in dollars per share) | $ 0.54 | $ 0.37 | $ 1.48 | $ 1.02 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 177,063 | 179,233 | 177,188 | 180,245 |
Diluted (in shares) | 186,160 | 182,682 | 183,397 | 183,453 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 101,306 | $ 67,943 | $ 271,355 | $ 187,900 |
Other comprehensive income: | ||||
Change in foreign currency translation adjustment | (1,371) | (17,630) | 53,160 | (14,185) |
Available-for-sale securities: | ||||
Unrealized loss on available-for-sale securities during the period | (2,206) | (2,725) | (1,052) | (779) |
Reclassification for gain realized on available-for-sale securities, reported in Other expense, net | (1) | (23) | (1) | (32) |
Tax benefit | 859 | 982 | 350 | 327 |
Net change in available-for-sale securities (net of tax) | (1,348) | (1,766) | (703) | (484) |
Total other comprehensive (loss) income | (2,719) | (19,396) | 52,457 | (14,669) |
Comprehensive income | $ 98,587 | $ 48,547 | $ 323,812 | $ 173,231 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | ||
Cash flows from operating activities: | |||||
Net income | $ 101,306 | $ 67,943 | $ 271,355 | $ 187,900 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Depreciation and amortization | 25,588 | 21,870 | 71,541 | 63,732 | |
Amortization of debt discount and transaction costs | 5,630 | 5,453 | 16,740 | 16,211 | |
Share-based compensation expense | 52,318 | 54,741 | 142,983 | 141,373 | |
Deferred income taxes | 273 | 13,818 | 7,831 | 6,199 | |
Net amortization of bond premium on debt securities available for sale | 2,113 | 3,120 | 6,988 | 9,954 | |
Other | (214) | 986 | 1,318 | 549 | |
Changes in operating assets and liabilities, net of effects of acquisitions: | |||||
Accounts receivable | (113,898) | (73,149) | 111,899 | 86,496 | |
Prepaid expenses | (6,756) | (18,897) | (26,026) | (19,387) | |
Accounts payable and accrued expenses | 35,559 | (4,413) | (17,771) | (14,836) | |
Deferred revenue | 57,275 | 64,181 | (29,017) | (8,865) | |
Other | 1,113 | 706 | 3,234 | (3,868) | |
Net cash provided by operating activities | 160,307 | 136,359 | 561,075 | 465,458 | |
Cash flows from investing activities: | |||||
Purchase of investment in debt securities available for sale | (26,580) | (118,152) | (285,773) | (415,796) | |
Proceeds from maturities of investment in debt securities available for sale | 130,941 | 108,722 | 348,285 | 378,264 | |
Proceeds from sales of investment in debt securities available for sale | 5,293 | 5,037 | 19,617 | 30,205 | |
Acquisition of businesses, net of cash acquired | 0 | 0 | (83,965) | (28,667) | |
Purchase of developed software and other intangible assets | (3,426) | (2,323) | (12,871) | (8,712) | |
Purchase of property and equipment | (16,587) | (17,244) | (68,268) | (50,436) | |
Other | 84 | (92) | (105) | (203) | |
Net cash provided by (used in) investing activities | 89,725 | (24,052) | (83,080) | (95,345) | |
Cash flows from financing activities: | |||||
Proceeds from exercise of common stock options | 711 | 1,205 | 4,541 | 3,273 | |
Proceeds from employee stock purchase program | 10,575 | 7,155 | 33,288 | 7,155 | |
Payments related to net settlement of share-based compensation awards | (37,807) | (25,769) | (86,230) | (63,245) | |
Purchase of treasury stock | (100,000) | (125,318) | (237,002) | (319,182) | |
Payments on other borrowings | (346) | (462) | (1,207) | (1,368) | |
Other | (6) | (84) | (6) | 829 | |
Net cash used in financing activities | (126,873) | (143,273) | (286,616) | (372,538) | |
Effect of foreign currency exchange rates on cash and cash equivalents | (2,295) | (22,925) | 48,985 | (8,675) | |
Net increase (decrease) in cash and cash equivalents | 120,864 | (53,891) | 240,364 | (11,100) | |
Cash and cash equivalents at beginning of the period | 1,210,308 | 970,569 | 1,090,808 | [1] | 927,778 |
Cash and cash equivalents at end of the period | $ 1,331,172 | $ 916,678 | $ 1,331,172 | $ 916,678 | |
[1] | Derived from audited financial statements. |
Company
Company | 9 Months Ended |
Nov. 30, 2017 | |
Accounting Policies [Abstract] | |
Company | Company Red Hat, Inc., incorporated in Delaware, together with its subsidiaries (“Red Hat” or the “Company”) is a leading global provider of open source software solutions, using a community-powered approach to develop and offer reliable and high-performing operating system, virtualization, management, middleware, cloud, mobile and storage technologies. Open source software is an alternative to proprietary software and represents a different model for the development and licensing of commercial software code than that typically used for proprietary software. Because open source software code is often freely shared, there are customarily no licensing fees for the use of open source software. Therefore, the Company does not recognize revenue from the licensing of the code itself. The Company provides value to its customers through the development, aggregation, integration, testing, certification, delivery, maintenance, enhancement and support of its Red Hat technologies, and by providing a level of performance, scalability, flexibility, reliability and security for the technologies the Company packages and distributes. Moreover, because communities of developers not employed by the Company assist with the creation of the Company’s open source offerings, opportunities for further innovation of the Company’s offerings are supplemented by these communities. The Company derives its revenue and generates cash from customers primarily from two sources: (i) subscription revenue and (ii) training and services revenue. These arrangements typically involve subscriptions to Red Hat technologies. The arrangements with the Company’s customers that produce this revenue and cash are explained in further detail in NOTE 2—Summary of Significant Accounting Policies to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2017 . |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Nov. 30, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of presentation The unaudited interim consolidated financial statements as of and for the three and nine months ended November 30, 2017 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary for a fair statement of the consolidated balance sheets, consolidated operating results, consolidated other comprehensive income and consolidated cash flows for the periods presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Operating results for the three and nine months ended November 30, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending February 28, 2018 . Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the SEC’s rules and regulations for interim reporting. These unaudited financial statements should be read in conjunction with the Company’s Consolidated Financial Statements, including notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2017 . There have been no changes to the Company’s significant accounting policies from those described in NOTE 2—Summary of Significant Accounting Policies to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2017 . Certain amounts for the three and nine months ended November 30, 2016 have been reclassified to conform to the current year presentation. Consolidation policy The accompanying Consolidated Financial Statements include the accounts of the Company and all of its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. There are no foreign currency exchange restrictions that are significant to the Company’s foreign subsidiaries. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from such estimates. Recent accounting pronouncements Accounting pronouncements adopted In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). The FASB issued ASU 2017-09 to clarify and reduce both (i) diversity in practice and (ii) cost and complexity when applying the guidance in Topic 718, to a change to the terms and conditions of a share-based payment award. The Company has early adopted ASU 2017-09 as of the second quarter of its fiscal year ending February 28, 2018. The adoption of this update did not impact the Company’s Consolidated Financial Statements. In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”) . The FASB issued ASU 2017-04 to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under this updated standard, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, but the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity also should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if any. The FASB also eliminated the requirement for reporting units with a zero or negative carrying amount to first perform a qualitative assessment. The Company adopted ASU 2017-04 during the second quarter of its fiscal year ending February 28, 2018. The adoption of this update did not impact the Company’s Consolidated Financial Statements. Accounting pronouncements being evaluated In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). In November 2016, the FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ( “ASU 2016-18”). The FASB issued ASU 2016-15 and ASU 2016-18 to decrease the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in these updates provide guidance on nine specific cash flow issues. The guidance is effective for the Company as of the first quarter of its fiscal year ending February 28, 2019 and should be applied using the retrospective transition method to each period presented. Early adoption is permitted but all amendments must be adopted in the same period. The Company is currently evaluating the impact that these updated standards will have on its consolidated financial statements. In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842) (“ASU 2016-02”). The FASB issued ASU 2016-02 to increase transparency and comparability among organizations with respect to accounting for leases. Under ASU 2016-02, lessees will recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. This guidance is effective for the Company as of the first quarter of its fiscal year ending February 28, 2020. The Company is currently evaluating the impact that this updated standard will have on its consolidated financial statements. In January 2016, the FASB issued Accounting Standards Update 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The FASB issued ASU 2016-01 to require equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income. Equity investments that do not have readily determinable fair values are allowed to be remeasured upon the occurrence of an observable price change or upon identification of an impairment. This guidance is effective for the Company as of the first quarter of the fiscal year ending February 28, 2019. The Company is currently evaluating the impact that this updated standard will have on its consolidated financial statements. In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers , now referred to as Accounting Standards Codification Topic 606 (“ASC 606”). The FASB issued ASC 606 to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes the current revenue recognition guidance. This guidance is effective for the Company beginning the first quarter of its fiscal year ending February 28, 2019. The standard must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. The Company has substantially completed its preliminary assessment of the potential impact that the implementation of this updated standard will have on its consolidated financial statements. With respect to the Company’s software subscription offerings, the Company provides value to its customers through continuous aggregation, integration, testing, certification, maintenance, enhancement and support of the open source technologies that it distributes. The Company currently recognizes subscription revenue ratably over the subscription period. Under the updated standard, these subscription attributes represent a series of performance obligations that are delivered over time, primarily on a stand-ready basis (for example, attributes such as updates, upgrades, and support are not forced upon subscribers but rather made available to subscribers). As a result, the Company believes that its subscription revenue meets the criteria for revenue recognition over time and will continue to be recognized ratably under the updated standard. The Company also offers professional consulting and training services that are designed to help customers derive additional value from Red Hat technologies. Under the updated guidance, revenue from professional consulting and training services that were previously sold on a standalone basis will continue to be recognized over time as the Company satisfies its performance obligations by delivering such services to the customer. With respect to customer contracts with multiple elements (such as software subscriptions and professional consulting and training services), under the current standard the Company allocates total contract revenue to each element’s relative fair value when the Company can demonstrate sufficient vendor-specific objective evidence (“VSOE”) of the fair value of at least those elements that are undelivered. For multiple-element contracts in which one or more of the undelivered elements lacks VSOE, the Company defers recognition of any revenue until the elements lacking VSOE have been delivered. However, under the updated standard, the Company will be required to allocate total contract revenue to each element (referred to as a distinct performance obligation under the updated standard) based on either an established or estimated standalone selling price. The Company would then recognize the allocated revenue as each element (performance obligation) is delivered. Because the Company has historically established VSOE for most of its offerings and as a result has not been required to defer a significant amount of revenue due to insufficient VSOE, the Company does not anticipate the updated standard’s requirement to establish or estimate a standalone selling price, rather than defer revenues in the absence of VSOE, to have a significant impact on the Company’s financial statements. The Company continues to assess the impact of the updated guidance, including for example, any potential changes to and investments in the Company’s policies, processes, systems and internal controls over financial reporting that may be required to comply with new guidance related to variable consideration, contract modifications, allocation of discounts and expanded disclosures. The Company currently expects to adopt ASC 606 using the full retrospective method. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Nov. 30, 2017 | |
Equity [Abstract] | |
Stockholders' Equity | Stockholders’ Equity The following table summarizes the changes in the Company’s stockholders’ equity during the three months ended November 30, 2017 (in thousands): Common Additional Retained Treasury Accumulated Total Balance at August 31, 2017 $ 24 $ 2,335,518 $ 1,523,040 $ (2,425,059 ) $ (33,176 ) $ 1,400,347 Net income — — 101,306 — — 101,306 Other comprehensive loss, net of tax — — — — (2,719 ) (2,719 ) Exercise of common stock options — 711 — — — 711 Common stock repurchase — — — (100,000 ) — (100,000 ) Share-based compensation expense — 52,318 — — — 52,318 Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards — (37,807 ) — — — (37,807 ) Re-issuance of treasury stock under employee stock purchase plan — — — 18,984 — 18,984 Balance at November 30, 2017 $ 24 $ 2,350,740 $ 1,624,346 $ (2,506,075 ) $ (35,895 ) $ 1,433,140 The following table summarizes the changes in the Company’s stockholders’ equity during the three months ended November 30, 2016 (in thousands): Common Additional Retained Treasury Accumulated Total Balance at August 31, 2016 $ 24 $ 2,215,856 $ 1,219,246 $ (2,047,008 ) $ (69,722 ) $ 1,318,396 Net income — — 67,943 — — 67,943 Other comprehensive loss, net of tax — — — — (19,396 ) (19,396 ) Exercise of common stock options — 1,205 — — — 1,205 Common stock repurchase — — — (125,318 ) — (125,318 ) Share-based compensation expense — 54,741 — — — 54,741 Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards — (25,769 ) — — — (25,769 ) Other adjustments — 1 (1 ) — — — Balance at November 30, 2016 $ 24 $ 2,246,034 $ 1,287,188 $ (2,172,326 ) $ (89,118 ) $ 1,271,802 The following table summarizes the changes in the Company’s stockholders’ equity during the nine months ended November 30, 2017 (in thousands): Common Additional Retained Treasury Accumulated Total Balance at February 28, 2017 $ 24 $ 2,294,462 $ 1,352,991 $ (2,311,805 ) $ (88,352 ) $ 1,247,320 Net income — — 271,355 — — 271,355 Other comprehensive income, net of tax — — — — 52,457 52,457 Exercise of common stock options — 4,541 — — — 4,541 Common stock repurchase — — — (237,002 ) — (237,002 ) Share-based compensation expense — 142,983 — — — 142,983 Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards — (86,230 ) — — — (86,230 ) Re-issuance of treasury stock under employee stock purchase plan — — — 42,732 — 42,732 Other adjustments — (5,016 ) — — — (5,016 ) Balance at November 30, 2017 $ 24 $ 2,350,740 $ 1,624,346 $ (2,506,075 ) $ (35,895 ) $ 1,433,140 The following table summarizes the changes in the Company’s stockholders’ equity during the nine months ended November 30, 2016 (in thousands): Common Additional Retained Treasury Accumulated Total Balance at February 29, 2016 $ 23 $ 2,162,264 $ 1,099,738 $ (1,853,144 ) $ (74,449 ) $ 1,334,432 Net income — — 187,900 — — 187,900 Other comprehensive loss, net of tax — — — — (14,669 ) (14,669 ) Exercise of common stock options 1 3,272 — — — 3,273 Common stock repurchase — — — (319,182 ) — (319,182 ) Share-based compensation expense — 141,373 — — — 141,373 Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards — (63,245 ) — — — (63,245 ) Other adjustments — 1 — — — 1 Cumulative-effect adjustment from adoption of ASU 2016-09 — 2,369 (450 ) — — 1,919 Balance at November 30, 2016 $ 24 $ 2,246,034 $ 1,287,188 $ (2,172,326 ) $ (89,118 ) $ 1,271,802 Share Repurchase Programs On June 22, 2016, the Company announced that its Board of Directors authorized the repurchase of up to $1.0 billion of Red Hat’s common stock from time to time on the open market or in privately negotiated transactions. The program commenced on July 1, 2016, and will expire on the earlier of (i) June 30, 2018 or (ii) a determination by the Board, Chief Executive Officer or Chief Financial Officer to discontinue the program. The program replaced the previous $500.0 million repurchase program authorized on March 25, 2015, which was discontinued by the Board effective June 30, 2016 . During the nine months ended November 30, 2017 , the Company repurchased 2,318,584 shares of its common stock for $237.0 million under the repurchase program. From its commencement on July 1, 2016 through November 30, 2017 , the Company has repurchased 7,219,233 shares of its common stock under the program. As of November 30, 2017 , the amount available under the program for the repurchase of the Company’s common stock was $398.7 million . Accumulated other comprehensive loss The following is a summary of accumulated other comprehensive loss as of November 30, 2017 and February 28, 2017 (in thousands): As of November 30, 2017 As of February 28, 2017 Accumulated loss from foreign currency translation adjustment $ (34,624 ) $ (87,784 ) Accumulated unrealized loss, net of tax, on available-for-sale securities (1,271 ) (568 ) Accumulated other comprehensive loss $ (35,895 ) $ (88,352 ) |
Identifiable Intangible Assets
Identifiable Intangible Assets | 9 Months Ended |
Nov. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Identifiable Intangible Assets | Identifiable Intangible Assets Identifiable intangible assets consist primarily of trademarks, copyrights and patents, purchased technologies, customer and reseller relationships and covenants not to compete, all of which are amortized over the estimated useful life, generally on a straight-line basis, with the exception of customer and reseller relationships, which are generally amortized over the greater of straight-line or the related asset’s pattern of economic benefit. Useful lives range from two to 10 years . As of November 30, 2017 and February 28, 2017 , trademarks with an indefinite estimated useful life totaled $11.7 million and $10.9 million , respectively. See NOTE 13 —Business Combinations for information regarding identifiable intangible assets acquired. The following is a summary of identifiable intangible assets (in thousands): As of November 30, 2017 As of February 28, 2017 Gross Accumulated Net Gross Accumulated Net Trademarks, copyrights and patents $ 162,818 $ (67,838 ) $ 94,980 $ 148,850 $ (59,440 ) $ 89,410 Purchased technologies 130,235 (90,143 ) 40,092 107,078 (80,536 ) 26,542 Customer and reseller relationships 105,810 (93,703 ) 12,107 104,438 (88,046 ) 16,392 Covenants not to compete 15,669 (14,036 ) 1,633 14,081 (12,329 ) 1,752 Other intangible assets 8,833 (6,195 ) 2,638 8,833 (5,162 ) 3,671 Total identifiable intangible assets $ 423,365 $ (271,915 ) $ 151,450 $ 383,280 $ (245,513 ) $ 137,767 Amortization expense associated with identifiable intangible assets recognized in the Company’s Consolidated Financial Statements for the three and nine months ended November 30, 2017 and November 30, 2016 is summarized as follows (in thousands): Three Months Ended Nine Months Ended November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016 Cost of revenue $ 4,674 $ 4,578 $ 13,524 $ 12,734 Sales and marketing 1,592 1,695 4,634 5,515 Research and development 34 34 103 103 General and administrative 2,084 1,690 6,137 5,291 Total amortization expense $ 8,384 $ 7,997 $ 24,398 $ 23,643 |
Income Taxes
Income Taxes | 9 Months Ended |
Nov. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The effective tax rates for the three and nine months ended November 30, 2017 of 12.6% and 18.4% , respectively, differed from the U.S. federal statutory rate of 35% primarily due to excess tax benefits from share-based compensation, foreign income taxed at lower rates, research tax credits and the domestic-production-activities deduction. Tax expense for the three and nine months ended November 30, 2017 included net discrete tax benefits of $15.5 million and $28.5 million , respectively, primarily related to net excess tax benefits from share-based compensation. For the three and nine months ended November 30, 2016 , the Company’s then-effective tax rates of 11.4% and 17.8% , respectively, differed from the U.S. federal statutory rate of 35% primarily due to excess tax benefits from share-based compensation, foreign income taxes at lower rates, research tax credits and the domestic-production-activities deduction. Tax expense for the three and nine months ended November 30, 2016 , included net discrete tax benefits of $11.9 million and $21.1 million , respectively, primarily related to net excess tax benefits from share-based compensation. The Company files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous state and international jurisdictions. The Company is currently subject to examination by various taxing jurisdictions. The Company regularly assesses the potential outcomes of both ongoing and future examinations for the current and prior years, and believes that its provision for income taxes is adequate. The outcome of any one examination is not expected to have a material impact on the Company’s consolidated financial statements. The Company believes that some of these audits and negotiations may conclude during the next 12 months. As of November 30, 2017 , it is reasonably possible that total gross unrecognized tax benefits may be reduced by up to $2.0 million within the next 12 months as a result of statutes of limitations expirations in various tax jurisdictions , all of which would reduce the Company’s effective tax rate. |
Assets and Liabilities Measured
Assets and Liabilities Measured at Fair Value on a Recurring Basis | 9 Months Ended |
Nov. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | Assets and Liabilities Measured at Fair Value on a Recurring Basis Fair value is defined as the exchange price that would be received for the purchase of an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for such asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3—Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. The Company’s investments are comprised primarily of debt securities that are classified as available for sale and recorded at their fair values. Liquid investments with effective maturities of three months or less at the date of purchase are classified as cash equivalents. Investments with remaining effective maturities of twelve months or less from the balance sheet date are classified as short-term investments. Investments with remaining effective maturities of more than twelve months from the balance sheet date are classified as long-term investments. The Company’s Level 1 financial instruments are valued using quoted prices in active markets for identical instruments. The Company’s Level 2 financial instruments, including derivative instruments, are valued using quoted prices for identical instruments in less active markets or using other observable market inputs for comparable instruments. Unrealized gains and temporary losses on investments classified as available for sale are included within accumulated other comprehensive income, net of any related tax effect. Realized gains and losses are recorded using the specific identification method and upon realization, such amounts are reclassified from accumulated other comprehensive income to Other expense, net . Realized gains and losses and other than temporary impairments, if any, are reflected in the Company’s Consolidated Statements of Operations as Other expense, net . The Company does not recognize changes in the fair value of its investments in income unless a decline in value is considered other than temporary. The vast majority of the Company’s investments are priced with the assistance of pricing vendors. These pricing vendors use the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs. In the event observable inputs are not available, the Company assesses other factors to determine the security’s fair value, including broker quotes or model valuations. Independent price verifications of all holdings are performed by pricing vendors, which are then reviewed by the Company. In the event a price fails a pre-established tolerance check, it is researched so that the Company can assess the cause of the variance to determine what the Company believes is the appropriate fair value. The Company minimizes its credit risk associated with investments by investing primarily in investment-grade, liquid securities. The Company’s policy is designed to limit exposures to any one issuer depending on credit quality. Periodic evaluations of the relative credit standing of those issuers are considered in the Company’s investment strategy. The following table summarizes the composition and fair value hierarchy of the Company’s financial assets and liabilities as of November 30, 2017 (in thousands): As of November 30, 2017 Level 1 Level 2 Level 3 Assets: Money markets (1) $ 217,456 $ 217,456 $ — $ — Interest-bearing deposits (1) 59,312 — 59,312 — Available-for-sale securities (1): Commercial paper 250,794 — 250,794 — U.S. agency securities 309,489 — 309,489 — Corporate securities 620,479 — 620,479 — Equity securities 721 721 — — Foreign currency derivatives (2) 156 — 156 — Liabilities: Foreign currency derivatives (3) (174 ) — (174 ) — Total $ 1,458,233 $ 218,177 $ 1,240,056 $ — __________ (1) Included in Cash and cash equivalents, Investments in debt and equity securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet as of November 30, 2017 , in addition to $862.9 million of cash. (2) Included in Other current assets in the Company’s Consolidated Balance Sheet as of November 30, 2017 . (3) Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet as of November 30, 2017 . The following table summarizes the composition and fair value hierarchy of the Company’s financial assets and liabilities as of February 28, 2017 (in thousands): As of February 28, 2017 Level 1 Level 2 Level 3 Assets: Money markets (1) $ 258,188 $ 258,188 $ — $ — Available-for-sale securities (1): U.S. agency securities 327,430 — 327,430 — Corporate securities 714,993 — 714,993 — Foreign currency derivatives (2) 135 — 135 — Liabilities: Foreign currency derivatives (3) (160 ) — (160 ) — Total $ 1,300,586 $ 258,188 $ 1,042,398 $ — __________ (1) Included in Cash and cash equivalents, Investments in debt and equity securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet as of February 28, 2017 , in addition to $832.6 million of cash. (2) Included in Other current assets in the Company’s Consolidated Balance Sheet as of February 28, 2017 . (3) Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet as of February 28, 2017 . The following table represents the Company’s investments measured at fair value as of November 30, 2017 (in thousands): Balance Sheet Classification Amortized Gross Unrealized Aggregate Cash Equivalent Marketable Securities Investments in debt and equity securities, short-term Investments in debt securities, long-term Gains Losses (1) Money markets $ 217,456 $ — $ — $ 217,456 $ 217,456 $ — $ — Interest-bearing deposits 59,312 — — 59,312 — 59,312 — Commercial paper 250,794 — — 250,794 250,794 — — U.S. agency securities 312,391 — (2,902 ) 309,489 — 78,231 231,258 Corporate securities 620,121 1,270 (912 ) 620,479 — 246,453 374,026 Equity securities 650 71 — 721 — 721 — Total $ 1,460,724 $ 1,341 $ (3,814 ) $ 1,458,251 — $ 468,250 $ 384,717 $ 605,284 __________ (1) As of November 30, 2017 , there were $3.0 million of accumulated unrealized losses related to investments that have been in a continuous unrealized loss position for 12 months or longer. The aggregate related fair value of all investments with unrealized losses was $540.1 million . The following table summarizes the stated maturities of the Company’s investments in debt securities (in thousands): Total Less than 1 Year 1-5 Years More than 5 Years Maturity of current and long-term investments in debt securities $ 989,280 $ 383,996 $ 605,284 $ — The following table represents the Company’s investments measured at fair value as of February 28, 2017 (in thousands): Balance Sheet Classification Amortized Gross Unrealized Aggregate Cash Equivalent Marketable Securities Investments in debt and equity securities, short-term Investments in debt securities, long-term Gains Losses (1) Money markets $ 258,188 $ — $ — $ 258,188 $ 258,188 $ — $ — U.S. agency securities 329,617 37 (2,224 ) 327,430 — 27,593 299,837 Corporate securities 714,226 1,416 (649 ) 714,993 — 342,390 372,603 Total $ 1,302,031 $ 1,453 $ (2,873 ) $ 1,300,611 $ 258,188 $ 369,983 $ 672,440 __________ (1) As of February 28, 2017 , there were $0.6 million of accumulated unrealized losses related to investments that have been in a continuous unrealized loss position for 12 months or longer. The aggregate related fair value of all investments with unrealized losses was $605.9 million . |
Derivative Instruments
Derivative Instruments | 9 Months Ended |
Nov. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | Derivative Instruments The Company transacts business in various foreign countries and is, therefore, subject to risk of foreign currency exchange rate fluctuations. The Company from time to time enters into forward contracts to economically hedge transactional exposure associated with commitments arising from trade accounts receivable, trade accounts payable and fixed purchase obligations denominated in a currency other than the functional currency of the respective operating entity. All derivative instruments are recorded on the Consolidated Balance Sheets at their respective fair values. The Company has elected not to prepare and maintain the documentation required to qualify for hedge accounting treatment and, therefore, changes in fair value are recorded in the Consolidated Statements of Operations. See NOTE 6 —Assets and Liabilities Measured at Fair Value on a Recurring Basis for information regarding the fair value hierarchy of derivative instruments. The effects of derivative instruments on the Company’s Consolidated Financial Statements are as follows as of November 30, 2017 and for the three and nine months then ended (in thousands): As of November 30, 2017 Classification of Three Months Ended November 30, 2017 Nine Months Ended November 30, 2017 Balance Sheet Fair Notional Assets—foreign currency forward contracts not designated as hedges Other current assets $ 156 $ 20,394 Other expense, net $ 309 $ 1,589 Liabilities—foreign currency forward contracts not designated as hedges Accounts payable and accrued expenses (174 ) 35,210 Other expense, net (678 ) (1,261 ) Total $ (18 ) $ 55,604 $ (369 ) $ 328 The effects of derivative instruments on the Company’s Consolidated Financial Statements are as follows as of November 30, 2016 and for the three and nine months then ended (in thousands): As of November 30, 2016 Classification of Three Months Ended November 30, 2016 Nine Months Ended November 30, 2016 Balance Sheet Fair Notional Assets—foreign currency forward contracts not designated as hedges Other current assets $ 132 $ 25,849 Other expense, net $ 555 $ 2,958 Liabilities—foreign currency forward contracts not designated as hedges Accounts payable and accrued expenses (902 ) 15,765 Other expense, net (1,182 ) (2,181 ) Total $ (770 ) $ 41,614 $ (627 ) $ 777 |
Share-based Awards
Share-based Awards | 9 Months Ended |
Nov. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-based Awards | Share-based Awards The Company measures share-based compensation cost at the grant date, based on the estimated fair value of the award and recognizes the cost over the employee requisite service period, typically on a straight-line basis. The Company estimates the fair value of stock options using the Black-Scholes-Merton valuation model. The fair value of nonvested share awards, nonvested share units and performance share units are measured at their underlying closing share price on the day of grant. The following summarizes share-based compensation expense recognized in the Company’s Consolidated Financial Statements for the three and nine months ended November 30, 2017 and November 30, 2016 (in thousands): Three Months Ended Nine Months Ended November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016 Cost of revenue $ 4,199 $ 4,037 $ 12,408 $ 12,396 Sales and marketing 23,278 26,624 64,708 65,426 Research and development 14,937 13,814 42,603 38,785 General and administrative 9,904 10,266 23,264 24,766 Total share-based compensation expense (1) $ 52,318 $ 54,741 $ 142,983 $ 141,373 __________ (1) Total share-based compensation expense includes $2.9 million and $2.0 million respectively, of expense related to the Company’s employee stock purchase plan (“ESPP”) for the three months ended November 30, 2017 and November 30, 2016 and $8.8 million and $2.0 million , respectively, for the nine months ended November 30, 2017 and November 30, 2016 . Share-based compensation expense qualifying for capitalization was insignificant for each of the three and nine months ended November 30, 2017 and November 30, 2016 . Accordingly, no share-based compensation expense was capitalized during the three and nine months ended November 30, 2017 and November 30, 2016 . During the three and nine months ended November 30, 2017 and November 30, 2016 , the Company granted the following share-based awards: Three Months Ended November 30, 2017 November 30, 2016 Shares and Shares Underlying Awards Weighted Shares and Weighted Service-based shares and share units 699,066 $ 120.89 949,421 $ 76.19 Nine Months Ended November 30, 2017 November 30, 2016 Shares and Shares Underlying Awards Weighted Average Per Share Award Fair Value Shares and Shares Underlying Awards Weighted Average Per Share Award Fair Value Service-based shares and share units 1,585,904 $ 101.85 2,017,861 $ 75.62 Performance share units—target 261,760 (1) $ 87.99 362,502 $ 76.68 Performance share awards 104,362 (2) $ 87.99 140,182 $ 76.70 Total awards 1,952,026 $ 99.25 2,520,545 $ 75.83 __________ (1) Certain executives and senior management were awarded a target number of performance share units (“PSUs”). PSU grantees may earn up to 200% of the target number of PSUs. Half of the target number of PSUs can be earned by the grantees depending upon the Company’s financial performance measured against the financial performance of specified peer companies during a three-year performance period beginning on March 1, 2017. The remaining target number of PSUs can be earned by the grantees depending upon the Company’s total shareholder return performance measured against the total shareholder return performance of specified peer companies during a three-year period beginning on March 1, 2017. (2) Certain executives were granted restricted stock awards. These shares were awarded subject to the achievement of a specified dollar amount of revenue for the fiscal year ending February 28, 2018 (the “RSA Performance Goal”). If the Company fails to achieve the RSA Performance Goal for the fiscal year ending February 28, 2018 , then all such shares are forfeited. If the Company achieves the RSA Performance Goal for the fiscal year ending February 28, 2018 , then 25% of the restricted stock vests on or about July 16, 2018, and the remainder vests ratably on a quarterly basis over the course of the subsequent three -year period, provided that the grantee’s business relationship with the Company has not ceased. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Nov. 30, 2017 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share The Company computes basic net income per common share by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted net income per common share is computed by dividing net income by the weighted average number of common shares and dilutive potential common share equivalents then outstanding. Potential common share equivalents consist of shares issuable upon the exercise of stock options or vesting of share-based awards. The following table reconciles the numerators and denominators of the earnings per share (“EPS”) calculation for the three and nine months ended November 30, 2017 and November 30, 2016 (in thousands, except per share amounts): Three Months Ended Nine Months Ended November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016 Net income, basic and diluted $ 101,306 $ 67,943 $ 271,355 $ 187,900 Weighted average common shares outstanding 177,063 179,233 177,188 180,245 Incremental shares attributable to assumed vesting or exercise of outstanding equity award shares 3,518 2,935 3,281 2,980 Dilutive effect of convertible notes 4,109 514 2,928 228 Dilutive effect of warrants 1,470 — — — Diluted shares 186,160 182,682 183,397 183,453 Diluted net income per share $ 0.54 $ 0.37 $ 1.48 $ 1.02 With respect to the Company’s 0.25% Convertible Senior Notes due 2019 (the “convertible notes”), the Company has the option to pay cash or deliver, as the case may be, either cash, shares of its common stock or a combination of cash and shares of its common stock for the aggregate amount due upon conversion of the convertible notes. The Company’s intent is to settle the principal amount of the convertible notes in cash upon conversion. As a result, upon conversion of the convertible notes, only the amounts payable in excess of the principal amounts of the convertible notes are considered in diluted EPS under the treasury stock method. See NOTE 14 —Convertible Notes for detailed information on the convertible notes. Warrants to purchase 10,965,630 shares of the Company’s common stock at $101.65 per share were outstanding during the three and nine months ended November 30, 2017 and November 30, 2016 . For the three months ended November 30, 2017 , the warrants were included in the computation of diluted EPS because the warrants’ exercise price was lower than the average market price of the Company’s common stock during the related period. For the nine months ended November 30, 2017 , the warrants were not included in the computation of diluted EPS because the warrants’ exercise price was greater than the average market price of the Company’s common stock during the related period. The following share awards were not included in the computation of diluted EPS because the aggregate value of proceeds considered received upon either exercise or vesting was greater than the average market price of the Company’s common stock during the related periods and the effect of including such share awards in the computation would be anti-dilutive (in thousands): Three Months Ended Nine Months Ended November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016 Number of shares considered anti-dilutive for calculating diluted EPS 353 71 117 938 |
Segment Reporting
Segment Reporting | 9 Months Ended |
Nov. 30, 2017 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting The Company is organized primarily on the basis of three geographic business units: the Americas (U.S., Latin America and Canada), Europe, Middle East and Africa (“EMEA”) and Asia Pacific. These business units are aggregated into one reportable segment due to the similarity in nature of products and services provided, financial performance economic characteristics (e.g. revenue growth and gross margin), methods of production and distribution and customer classes (e.g. cloud service providers, distributors, reseller and enterprise). The following summarizes revenue from unaffiliated customers and income (loss) from operations for the three and nine months ended November 30, 2017 and November 30, 2016 and total cash, cash equivalents and available-for-sale investment securities and total assets as of November 30, 2017 and November 30, 2016 , by geographic segment (in thousands): Americas EMEA Asia Pacific Corporate (1) Consolidated Three Months Ended November 30, 2017 Revenue from unaffiliated customers $ 471,773 $ 173,718 $ 102,487 $ — $ 747,978 Income (loss) from operations $ 99,937 $ 42,086 $ 28,708 $ (52,318 ) $ 118,413 Three Months Ended November 30, 2016 Revenue from unaffiliated customers $ 393,589 $ 132,568 $ 89,103 $ — $ 615,260 Income (loss) from operations $ 87,899 $ 22,608 $ 25,007 $ (54,741 ) $ 80,773 Nine Months Ended November 30, 2017 Revenue from unaffiliated customers $ 1,373,512 $ 477,110 $ 297,507 $ — $ 2,148,129 Income (loss) from operations $ 284,229 $ 112,333 $ 87,001 $ (142,983 ) $ 340,580 Total cash, cash equivalents and available-for-sale investment securities $ 1,071,638 $ 855,164 $ 394,371 $ — $ 2,321,173 Total assets $ 2,877,183 $ 1,306,074 $ 576,227 $ — $ 4,759,484 Nine Months Ended November 30, 2016 Revenue from unaffiliated customers $ 1,144,841 $ 384,334 $ 253,788 $ — $ 1,782,963 Income (loss) from operations $ 229,251 $ 76,506 $ 73,636 $ (141,373 ) $ 238,020 Total cash, cash equivalents and available-for-sale investment securities $ 1,060,721 $ 611,380 $ 299,269 $ — $ 1,971,370 Total assets $ 2,661,792 $ 981,044 $ 442,257 $ — $ 4,085,093 __________ (1) Amounts represent share-based compensation expense that was not allocated to geographic segments. Supplemental information about geographic areas The following table lists, for each of the three and nine months ended November 30, 2017 and November 30, 2016 , revenue from unaffiliated customers in the United States, the Company’s country of domicile, and revenue from unaffiliated customers from foreign countries (in thousands): Three Months Ended Nine Months Ended November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016 United States, the Company’s country of domicile $ 415,900 $ 352,109 $ 1,227,645 $ 1,024,404 Foreign 332,078 263,151 920,484 758,559 Total revenue from unaffiliated customers $ 747,978 $ 615,260 $ 2,148,129 $ 1,782,963 Total tangible long-lived assets, net of accumulated depreciation, located in the United States, the Company’s country of domicile, and similar tangible long-lived assets, net of accumulated depreciation, held outside the United States are summarized in the following table as of November 30, 2017 and February 28, 2017 (in thousands): November 30, 2017 February 28, 2017 United States, the Company’s country of domicile $ 134,943 $ 133,492 Foreign 66,864 56,137 Total tangible long-lived assets $ 201,807 $ 189,629 Supplemental information about major customers For each of the three months ended November 30, 2017 and November 30, 2016 , the U.S. government and its agencies represented in the aggregate approximately 10% of the Company’s total revenue. For each of the nine months ended November 30, 2017 and November 30, 2016 , the U.S. government and its agencies represented in the aggregate approximately 11% and 10% of the Company’s total revenue, respectively. At November 30, 2017 , the Company had one customer whose accounts receivable balance individually represented 11% of total accounts receivable. As of February 28, 2017 , no individual customer accounted for 10% or more of the Company’s total accounts receivable. Supplemental information about products and services The following table, for each of the three and nine months ended November 30, 2017 and November 30, 2016 , provides further detail, by type, of the Company’s subscription and services revenues. Infrastructure-related offerings subscription revenue includes subscription revenue generated from Red Hat Enterprise Linux and related technologies such as Red Hat Satellite and Red Hat Enterprise Virtualization. Subscription revenue generated from the Company’s Application Development-related and other emerging technology offerings includes Red Hat JBoss Middleware, Red Hat Storage, Red Hat Mobile Application Platform and Red Hat cloud offerings such as Red Hat OpenStack Platform, Red Hat OpenShift and Red Hat CloudForms (in thousands): Three Months Ended Nine Months Ended November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016 Subscription revenue: Infrastructure-related offerings $ 494,974 $ 431,142 $ 1,440,383 $ 1,261,359 Application Development-related and other emerging technology offerings 161,858 112,176 450,519 314,833 Total subscription revenue 656,832 543,318 1,890,902 1,576,192 Training and services revenue: Consulting services 69,499 53,517 196,161 155,103 Training 21,647 18,425 61,066 51,668 Total training and services revenue 91,146 71,942 257,227 206,771 Total subscription and training and services revenue $ 747,978 $ 615,260 $ 2,148,129 $ 1,782,963 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Nov. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Operating leases As of November 30, 2017 , the Company had leases of office space and certain equipment under various non-cancellable operating leases. Rent expense under operating leases for the three months ended November 30, 2017 and November 30, 2016 was $12.9 million and $11.8 million , respectively. Rent expense under operating leases for the nine months ended November 30, 2017 and November 30, 2016 was $38.1 million and $32.6 million , respectively. Product indemnification The Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party from losses arising in connection with the Company’s services or products, or from losses arising in connection with certain events defined within a particular contract, which may include litigation or claims relating to intellectual property infringement, certain losses arising from damage to property or injury to persons or other matters. In each of these circumstances, payment by the Company is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, which procedures typically allow the Company to challenge the other party’s claims. Further, the Company’s obligations under these agreements may in certain cases be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments made by the Company. It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of the Company’s obligations and the facts and circumstances involved in each particular agreement. The Company does not record a liability for claims related to indemnification unless the Company concludes that the likelihood of a material claim is probable and estimable. Historically, payments pursuant to these indemnifications have been immaterial. |
Legal Proceedings
Legal Proceedings | 9 Months Ended |
Nov. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Legal Proceedings | Legal Proceedings The Company experiences routine litigation in the normal course of its business, including patent litigation. The Company presently believes that the outcome of this routine litigation will not have a material adverse effect on its financial position, results of operations or cash flows. |
Business Combinations
Business Combinations | 9 Months Ended |
Nov. 30, 2017 | |
Business Combinations [Abstract] | |
Business Combinations | Business Combinations Acquisition of Permabit Technology Corporation On July 31, 2017, the Company acquired the assets and technology of Permabit Technology Corporation (“Permabit”), a provider of software for data deduplication, compression and thin provisioning. Adding Permabit’s data deduplication and compression capabilities to the Company’s Red Hat Enterprise Linux platform will better enable enterprise digital transformation through more efficient storage options. The consideration paid was $49.8 million in cash. Based on management’s provisional assessment of the acquisition-date fair value of the assets acquired and liabilities assumed, the total consideration transferred of $49.8 million was allocated to the Company’s assets and liabilities on a preliminary basis as follows: $39.4 million to goodwill, $10.4 million to identifiable intangible assets and a nominal amount to working capital. The goodwill acquired is expected to be deductible for tax purposes. Acquisition of Codenvy S. A. On June 1, 2017, the Company completed its acquisition of all of the shares of Codenvy S.A. (“Codenvy”), a provider of cloud-native development tools that enable developers to more easily create modern container-based and cloud-native applications. By adding Codenvy to its existing portfolio of developer tools and application platforms, including Red Hat JBoss Middleware and Red Hat OpenShift, the Company continues its efforts to provide solutions that enable developers to create applications for hybrid cloud environments. The Company plans to make Codenvy an integral part of OpenShift.io, the Company’s recently announced hosted development environment for building hybrid cloud services on OpenShift. During the three months ended November 30, 2017, the Company completed its assessment of the acquisition-date fair value of the assets acquired and liabilities assumed. As a result of the Company’s completed assessment, the total consideration transferred of $34.2 million was allocated to the Company’s assets and liabilities as follows: $25.4 million to goodwill, $11.3 million to identifiable intangible assets and $2.5 million to working capital as a net current liability. Transaction costs The Company incurred approximately $1.3 million in transaction costs, including legal and accounting fees, relating to both the Permabit and Codenvy acquisitions. These transaction costs have been expensed as incurred and included in General and administrative expense on the Company’s Consolidated Statement of Operations for the nine months ended November 30, 2017 . Acquisition of 3scale, Inc. On June 24, 2016, the Company completed its acquisition of all of the shares of 3scale, Inc. (“3scale”), a provider of application programming interface (“API”) management technology. By adding 3scale to its existing portfolio, including Red Hat JBoss Middleware, Red Hat OpenShift and Red Hat Mobile Application Platform, the Company strengthens its enablement of the API economy with simplified cloud integration and microservices-based architectures. The consideration paid was $29.1 million in cash. Management has completed its assessment of the acquisition-date fair value of the assets acquired and liabilities assumed. The total consideration transferred of $29.1 million was allocated to the Company’s assets and liabilities as follows: $16.9 million to goodwill, $13.1 million to identifiable intangible assets and $0.9 million to working capital as a net current liability. Pro forma consolidated financial information Pro forma consolidated financial information for the three and nine months ended November 30, 2017 and November 30, 2016 have not been provided because the acquisitions of Permabit, Codenvy and 3scale would not have had a significant impact on consolidated operating results if the acquisitions had closed on March 1, 2016. Goodwill The following is a summary of changes in goodwill for the nine months ended November 30, 2017 (in thousands): Balance at February 28, 2017 $ 1,040,709 Acquisitions 64,837 Impact of foreign currency fluctuations 15,411 Balance at November 30, 2017 $ 1,120,957 The excess of purchase price paid for Permabit, Codenvy, 3scale and other acquisitions over the fair value of the net assets acquired was recognized as goodwill. Goodwill comprises the majority of the purchase price paid for each of the acquired businesses because these businesses were focused on emerging technologies such as development and operations automation, mobile technologies, cloud-enabling technologies and software-defined storage technologies, which consequently—at the time of acquisition—generated relatively little revenue. However, these acquired businesses, with their assembled, highly-specialized workforces and community of contributors, are expected to both expand the Company’s existing technology portfolio and advance the Company’s market position overall in open source solutions. |
Convertible Notes
Convertible Notes | 9 Months Ended |
Nov. 30, 2017 | |
Debt Disclosure [Abstract] | |
Convertible Notes | Convertible Notes Convertible note offering On October 7, 2014, the Company completed its offering of convertible notes. The convertible notes were sold in a private placement under a purchase agreement, dated as of October 1, 2014 , entered into by and among the Company and the initial purchasers, for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. For additional information, see NOTE 21—Convertible Notes to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2017 . Indenture On October 7, 2014, the Company entered into an indenture (the “Indenture”) with respect to the convertible notes with U.S. Bank National Association, as trustee (the “Trustee”). Under the Indenture, the convertible notes are senior unsecured obligations of the Company and bear interest at a rate of 0.25% per year, payable semiannually in arrears on April 1 and October 1 of each year, beginning on April 1, 2015. The convertible notes will mature on October 1, 2019 , unless previously purchased or converted. The convertible notes are convertible into shares of the Company’s common stock at an initial conversion rate of 13.6219 shares per $1,000 principal amount of the convertible notes (which is equivalent to an initial conversion price of approximately $73.41 per share), subject to adjustment upon the occurrence of certain events. Upon conversion of the convertible notes, holders will receive cash or shares of the Company’s common stock or a combination thereof, at the Company’s election. At their option, holders may convert their convertible notes prior to the close of business on the business day immediately preceding April 1, 2019, only upon the occurrence of certain circumstances. For example, during any fiscal quarter commencing after the fiscal quarter ended on November 30, 2014 (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price, the convertible notes become convertible at the holders’ option. The price of the Company’s common stock was greater than or equal to 130% of the conversion price, which is $95.43 , for at least 20 trading days during the 30 consecutive trading days ending on the last trading day of the fiscal quarters ended August 31, 2017 and November 30, 2017 . Therefore, as of November 30, 2017 , the convertible notes remain convertible at the holders’ option until February 28, 2018. On and after April 1, 2019, holders may convert their convertible notes at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the convertible notes. Based on the closing price of the Company’s common stock of $126.76 on the last trading day of the third quarter of the fiscal year ending February 28, 2018 , the if-converted value of the convertible notes as of November 30, 2017 exceeded their principal amount by approximately $585.0 million . The Company continues to classify the net carrying amount of the convertible notes as a long-term liability and the equity component of the convertible notes as additional paid-in capital because the Company has the option to settle the principal amount in shares and the convertible notes’ maturity date is more than 12 months away. However, it is the Company’s intent to settle the principal amount of the convertible notes in cash. The conversion rate is subject to customary anti-dilution adjustments. If certain corporate events described in the Indenture occur prior to the maturity date, the conversion rate will be increased for a holder who elects to convert its convertible notes in connection with such corporate event in certain circumstances. The convertible notes are not redeemable prior to maturity, and no sinking fund is provided for the notes. If the Company undergoes a “fundamental change,” as defined in the Indenture, subject to certain conditions, holders may require the Company to purchase for cash all or any portion of their convertible notes. The fundamental change purchase price will be 100% of the principal amount of the convertible notes to be purchased plus any accrued and unpaid special interest up to but excluding the fundamental change purchase date. The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% in principal amount of the outstanding convertible notes may declare 100% of the principal of, and accrued and unpaid interest, if any, on, all the convertible notes to be due and payable. In accounting for the issuance of the convertible notes, the Company separated the convertible notes into liability and equity components. The Company allocated the total transaction costs incurred to the liability and equity components based on their relative fair values. Issuance costs attributable to the liability component are being amortized to interest expense over the term of the convertible notes. The excess of the face value of the convertible notes as a whole over the carrying amount of the liability component (the “debt discount”) is being amortized to interest expense over the term of the convertible notes. As of November 30, 2017 and February 28, 2017 , the convertible notes consisted of the following (in thousands): November 30, 2017 February 28, 2017 Liability component: Principal $ 804,994 $ 805,000 Less: debt issuance costs (5,395 ) (7,442 ) Less: debt discount (37,232 ) (51,925 ) Net carrying amount $ 762,367 $ 745,633 Equity component (1) $ 96,890 $ 96,890 __________ (1) Recognized in the Consolidated Balance Sheets in Additional paid-in capital. The following table includes total interest expense recognized related to the convertible notes for the three and nine months ended November 30, 2017 and November 30, 2016 (in thousands): Three Months Ended Nine Months Ended November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016 Coupon rate 0.25% per year, payable semiannually $ 503 $ 503 $ 1,509 $ 1,509 Amortization of convertible note issuance costs — liability component 694 653 2,047 1,927 Accretion of debt discount 4,936 4,800 14,693 14,284 Total interest expense related to convertible notes $ 6,133 $ 5,956 $ 18,249 $ 17,720 The fair value of the convertible notes, which was determined based on inputs that are observable in the market (Level 2), and the carrying value of the convertible notes (the carrying value excludes the equity component of the convertible notes classified in equity) are as follows (in thousands): As of November 30, 2017 Fair Value Carrying Value Convertible notes $ 776,424 $ 762,367 Convertible note hedge transactions and warrant transactions On October 1, 2014, the Company entered into convertible note hedge transactions and warrant transactions with certain of the initial purchasers of the convertible notes or their respective affiliates. The convertible note hedge transactions are expected to offset, to the extent the Company’s common stock per share price does not exceed $101.65 , the potential dilution with respect to shares of the Company’s common stock upon any conversion of the convertible notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted notes, as the case may be. To partially offset the $148.0 million cost of the convertible note hedge transactions, the Company issued warrants and received proceeds of $79.8 million . The number of shares of the Company’s common stock underlying the warrants total 10,965,630 , the number of shares originally underlying the convertible notes and the convertible note hedge transactions. The combination of the convertible note hedge transactions and the warrant transactions effectively increases the initial conversion price of the convertible notes from $73.41 per share to $101.65 per share. As a result, the warrant transactions will have a dilutive effect with respect to the Company’s common stock to the extent that the market price per share of the Company’s common stock, as measured under the terms of the warrant transactions, exceeds the $101.65 strike price of the warrants. However, subject to certain conditions, the Company may elect to settle all of the warrants in cash. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Nov. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law. This new law includes significant changes to the U.S. corporate income tax system, including a permanent reduction in the corporate income tax rate from 35% to 21% , limitations on the deductibility of interest expense and executive compensation and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. While the Company continues to assess the impact of the new law on its consolidated financial statements, the Company anticipates an estimated increase to tax expense of between $100 million to $120 million for one-time items to be included in the Company’s financial results for the fourth fiscal quarter ending February 28, 2018 related to the transition tax associated with deemed repatriation of foreign earnings and the re-measurement of deferred tax assets and liabilities. The portion of this anticipated increase to tax expense attributable to the transition tax is payable over a period of up to eight years. This preliminary estimate may be impacted by a number of additional considerations, including but not limited to the issuance of the final regulations, our ongoing analysis of the new law and our actual earnings for the fiscal year ending February 28, 2018. As a result of the transition tax associated with deemed repatriation of foreign earnings discussed above, the Company currently expects to repatriate a portion of its Euro-denominated earnings. In an effort to mitigate the impact of foreign currency fluctuations on the U.S. dollar value of these to-be repatriated earnings, the Company has entered into a foreign currency forward contract with a third-party financial institution. This forward contract will settle February 15, 2018 and has been designated as a net-investment hedge. As a result of electing to designate this forward contract as a net-investment hedge, any gain or loss recognized from changes in Euro to U.S. dollar exchange rates during the hedge period will be credited or charged, respectively, to Accumulated other comprehensive loss in the Company’s Consolidated Balance Sheet as of February 28, 2018. |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Nov. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation The unaudited interim consolidated financial statements as of and for the three and nine months ended November 30, 2017 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary for a fair statement of the consolidated balance sheets, consolidated operating results, consolidated other comprehensive income and consolidated cash flows for the periods presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Operating results for the three and nine months ended November 30, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending February 28, 2018 . Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the SEC’s rules and regulations for interim reporting. These unaudited financial statements should be read in conjunction with the Company’s Consolidated Financial Statements, including notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2017 . There have been no changes to the Company’s significant accounting policies from those described in NOTE 2—Summary of Significant Accounting Policies to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2017 . Certain amounts for the three and nine months ended November 30, 2016 have been reclassified to conform to the current year presentation. |
Consolidation policy | Consolidation policy The accompanying Consolidated Financial Statements include the accounts of the Company and all of its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. There are no foreign currency exchange restrictions that are significant to the Company’s foreign subsidiaries. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from such estimates. |
Recent accounting pronouncements | Recent accounting pronouncements Accounting pronouncements adopted In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). The FASB issued ASU 2017-09 to clarify and reduce both (i) diversity in practice and (ii) cost and complexity when applying the guidance in Topic 718, to a change to the terms and conditions of a share-based payment award. The Company has early adopted ASU 2017-09 as of the second quarter of its fiscal year ending February 28, 2018. The adoption of this update did not impact the Company’s Consolidated Financial Statements. In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”) . The FASB issued ASU 2017-04 to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under this updated standard, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, but the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity also should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if any. The FASB also eliminated the requirement for reporting units with a zero or negative carrying amount to first perform a qualitative assessment. The Company adopted ASU 2017-04 during the second quarter of its fiscal year ending February 28, 2018. The adoption of this update did not impact the Company’s Consolidated Financial Statements. Accounting pronouncements being evaluated In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). In November 2016, the FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ( “ASU 2016-18”). The FASB issued ASU 2016-15 and ASU 2016-18 to decrease the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in these updates provide guidance on nine specific cash flow issues. The guidance is effective for the Company as of the first quarter of its fiscal year ending February 28, 2019 and should be applied using the retrospective transition method to each period presented. Early adoption is permitted but all amendments must be adopted in the same period. The Company is currently evaluating the impact that these updated standards will have on its consolidated financial statements. In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842) (“ASU 2016-02”). The FASB issued ASU 2016-02 to increase transparency and comparability among organizations with respect to accounting for leases. Under ASU 2016-02, lessees will recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. This guidance is effective for the Company as of the first quarter of its fiscal year ending February 28, 2020. The Company is currently evaluating the impact that this updated standard will have on its consolidated financial statements. In January 2016, the FASB issued Accounting Standards Update 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The FASB issued ASU 2016-01 to require equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income. Equity investments that do not have readily determinable fair values are allowed to be remeasured upon the occurrence of an observable price change or upon identification of an impairment. This guidance is effective for the Company as of the first quarter of the fiscal year ending February 28, 2019. The Company is currently evaluating the impact that this updated standard will have on its consolidated financial statements. In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers , now referred to as Accounting Standards Codification Topic 606 (“ASC 606”). The FASB issued ASC 606 to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes the current revenue recognition guidance. This guidance is effective for the Company beginning the first quarter of its fiscal year ending February 28, 2019. The standard must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. The Company has substantially completed its preliminary assessment of the potential impact that the implementation of this updated standard will have on its consolidated financial statements. With respect to the Company’s software subscription offerings, the Company provides value to its customers through continuous aggregation, integration, testing, certification, maintenance, enhancement and support of the open source technologies that it distributes. The Company currently recognizes subscription revenue ratably over the subscription period. Under the updated standard, these subscription attributes represent a series of performance obligations that are delivered over time, primarily on a stand-ready basis (for example, attributes such as updates, upgrades, and support are not forced upon subscribers but rather made available to subscribers). As a result, the Company believes that its subscription revenue meets the criteria for revenue recognition over time and will continue to be recognized ratably under the updated standard. The Company also offers professional consulting and training services that are designed to help customers derive additional value from Red Hat technologies. Under the updated guidance, revenue from professional consulting and training services that were previously sold on a standalone basis will continue to be recognized over time as the Company satisfies its performance obligations by delivering such services to the customer. With respect to customer contracts with multiple elements (such as software subscriptions and professional consulting and training services), under the current standard the Company allocates total contract revenue to each element’s relative fair value when the Company can demonstrate sufficient vendor-specific objective evidence (“VSOE”) of the fair value of at least those elements that are undelivered. For multiple-element contracts in which one or more of the undelivered elements lacks VSOE, the Company defers recognition of any revenue until the elements lacking VSOE have been delivered. However, under the updated standard, the Company will be required to allocate total contract revenue to each element (referred to as a distinct performance obligation under the updated standard) based on either an established or estimated standalone selling price. The Company would then recognize the allocated revenue as each element (performance obligation) is delivered. Because the Company has historically established VSOE for most of its offerings and as a result has not been required to defer a significant amount of revenue due to insufficient VSOE, the Company does not anticipate the updated standard’s requirement to establish or estimate a standalone selling price, rather than defer revenues in the absence of VSOE, to have a significant impact on the Company’s financial statements. The Company continues to assess the impact of the updated guidance, including for example, any potential changes to and investments in the Company’s policies, processes, systems and internal controls over financial reporting that may be required to comply with new guidance related to variable consideration, contract modifications, allocation of discounts and expanded disclosures. The Company currently expects to adopt ASC 606 using the full retrospective method. |
Identifiable Intangible Assets | Identifiable intangible assets consist primarily of trademarks, copyrights and patents, purchased technologies, customer and reseller relationships and covenants not to compete, all of which are amortized over the estimated useful life, generally on a straight-line basis, with the exception of customer and reseller relationships, which are generally amortized over the greater of straight-line or the related asset’s pattern of economic benefit. Useful lives range from two to 10 years . |
Assets and Liabilities Measured at Fair Value | Fair value is defined as the exchange price that would be received for the purchase of an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for such asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3—Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. The Company’s investments are comprised primarily of debt securities that are classified as available for sale and recorded at their fair values. Liquid investments with effective maturities of three months or less at the date of purchase are classified as cash equivalents. Investments with remaining effective maturities of twelve months or less from the balance sheet date are classified as short-term investments. Investments with remaining effective maturities of more than twelve months from the balance sheet date are classified as long-term investments. The Company’s Level 1 financial instruments are valued using quoted prices in active markets for identical instruments. The Company’s Level 2 financial instruments, including derivative instruments, are valued using quoted prices for identical instruments in less active markets or using other observable market inputs for comparable instruments. Unrealized gains and temporary losses on investments classified as available for sale are included within accumulated other comprehensive income, net of any related tax effect. Realized gains and losses are recorded using the specific identification method and upon realization, such amounts are reclassified from accumulated other comprehensive income to Other expense, net . Realized gains and losses and other than temporary impairments, if any, are reflected in the Company’s Consolidated Statements of Operations as Other expense, net . The Company does not recognize changes in the fair value of its investments in income unless a decline in value is considered other than temporary. The vast majority of the Company’s investments are priced with the assistance of pricing vendors. These pricing vendors use the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs. In the event observable inputs are not available, the Company assesses other factors to determine the security’s fair value, including broker quotes or model valuations. Independent price verifications of all holdings are performed by pricing vendors, which are then reviewed by the Company. In the event a price fails a pre-established tolerance check, it is researched so that the Company can assess the cause of the variance to determine what the Company believes is the appropriate fair value. The Company minimizes its credit risk associated with investments by investing primarily in investment-grade, liquid securities. The Company’s policy is designed to limit exposures to any one issuer depending on credit quality. Periodic evaluations of the relative credit standing of those issuers are considered in the Company’s investment strategy. |
Derivative Instruments | The Company transacts business in various foreign countries and is, therefore, subject to risk of foreign currency exchange rate fluctuations. The Company from time to time enters into forward contracts to economically hedge transactional exposure associated with commitments arising from trade accounts receivable, trade accounts payable and fixed purchase obligations denominated in a currency other than the functional currency of the respective operating entity. All derivative instruments are recorded on the Consolidated Balance Sheets at their respective fair values. The Company has elected not to prepare and maintain the documentation required to qualify for hedge accounting treatment and, therefore, changes in fair value are recorded in the Consolidated Statements of Operations. |
Share Based Awards | The Company measures share-based compensation cost at the grant date, based on the estimated fair value of the award and recognizes the cost over the employee requisite service period, typically on a straight-line basis. The Company estimates the fair value of stock options using the Black-Scholes-Merton valuation model. The fair value of nonvested share awards, nonvested share units and performance share units are measured at their underlying closing share price on the day of grant. |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Nov. 30, 2017 | |
Equity [Abstract] | |
Summary of Changes in Stockholders' Equity | The following table summarizes the changes in the Company’s stockholders’ equity during the three months ended November 30, 2017 (in thousands): Common Additional Retained Treasury Accumulated Total Balance at August 31, 2017 $ 24 $ 2,335,518 $ 1,523,040 $ (2,425,059 ) $ (33,176 ) $ 1,400,347 Net income — — 101,306 — — 101,306 Other comprehensive loss, net of tax — — — — (2,719 ) (2,719 ) Exercise of common stock options — 711 — — — 711 Common stock repurchase — — — (100,000 ) — (100,000 ) Share-based compensation expense — 52,318 — — — 52,318 Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards — (37,807 ) — — — (37,807 ) Re-issuance of treasury stock under employee stock purchase plan — — — 18,984 — 18,984 Balance at November 30, 2017 $ 24 $ 2,350,740 $ 1,624,346 $ (2,506,075 ) $ (35,895 ) $ 1,433,140 The following table summarizes the changes in the Company’s stockholders’ equity during the three months ended November 30, 2016 (in thousands): Common Additional Retained Treasury Accumulated Total Balance at August 31, 2016 $ 24 $ 2,215,856 $ 1,219,246 $ (2,047,008 ) $ (69,722 ) $ 1,318,396 Net income — — 67,943 — — 67,943 Other comprehensive loss, net of tax — — — — (19,396 ) (19,396 ) Exercise of common stock options — 1,205 — — — 1,205 Common stock repurchase — — — (125,318 ) — (125,318 ) Share-based compensation expense — 54,741 — — — 54,741 Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards — (25,769 ) — — — (25,769 ) Other adjustments — 1 (1 ) — — — Balance at November 30, 2016 $ 24 $ 2,246,034 $ 1,287,188 $ (2,172,326 ) $ (89,118 ) $ 1,271,802 The following table summarizes the changes in the Company’s stockholders’ equity during the nine months ended November 30, 2017 (in thousands): Common Additional Retained Treasury Accumulated Total Balance at February 28, 2017 $ 24 $ 2,294,462 $ 1,352,991 $ (2,311,805 ) $ (88,352 ) $ 1,247,320 Net income — — 271,355 — — 271,355 Other comprehensive income, net of tax — — — — 52,457 52,457 Exercise of common stock options — 4,541 — — — 4,541 Common stock repurchase — — — (237,002 ) — (237,002 ) Share-based compensation expense — 142,983 — — — 142,983 Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards — (86,230 ) — — — (86,230 ) Re-issuance of treasury stock under employee stock purchase plan — — — 42,732 — 42,732 Other adjustments — (5,016 ) — — — (5,016 ) Balance at November 30, 2017 $ 24 $ 2,350,740 $ 1,624,346 $ (2,506,075 ) $ (35,895 ) $ 1,433,140 The following table summarizes the changes in the Company’s stockholders’ equity during the nine months ended November 30, 2016 (in thousands): Common Additional Retained Treasury Accumulated Total Balance at February 29, 2016 $ 23 $ 2,162,264 $ 1,099,738 $ (1,853,144 ) $ (74,449 ) $ 1,334,432 Net income — — 187,900 — — 187,900 Other comprehensive loss, net of tax — — — — (14,669 ) (14,669 ) Exercise of common stock options 1 3,272 — — — 3,273 Common stock repurchase — — — (319,182 ) — (319,182 ) Share-based compensation expense — 141,373 — — — 141,373 Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards — (63,245 ) — — — (63,245 ) Other adjustments — 1 — — — 1 Cumulative-effect adjustment from adoption of ASU 2016-09 — 2,369 (450 ) — — 1,919 Balance at November 30, 2016 $ 24 $ 2,246,034 $ 1,287,188 $ (2,172,326 ) $ (89,118 ) $ 1,271,802 |
Summary of Accumulated Other Comprehensive Loss | The following is a summary of accumulated other comprehensive loss as of November 30, 2017 and February 28, 2017 (in thousands): As of November 30, 2017 As of February 28, 2017 Accumulated loss from foreign currency translation adjustment $ (34,624 ) $ (87,784 ) Accumulated unrealized loss, net of tax, on available-for-sale securities (1,271 ) (568 ) Accumulated other comprehensive loss $ (35,895 ) $ (88,352 ) |
Identifiable Intangible Assets
Identifiable Intangible Assets (Tables) | 9 Months Ended |
Nov. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived Intangible Assets | The following is a summary of identifiable intangible assets (in thousands): As of November 30, 2017 As of February 28, 2017 Gross Accumulated Net Gross Accumulated Net Trademarks, copyrights and patents $ 162,818 $ (67,838 ) $ 94,980 $ 148,850 $ (59,440 ) $ 89,410 Purchased technologies 130,235 (90,143 ) 40,092 107,078 (80,536 ) 26,542 Customer and reseller relationships 105,810 (93,703 ) 12,107 104,438 (88,046 ) 16,392 Covenants not to compete 15,669 (14,036 ) 1,633 14,081 (12,329 ) 1,752 Other intangible assets 8,833 (6,195 ) 2,638 8,833 (5,162 ) 3,671 Total identifiable intangible assets $ 423,365 $ (271,915 ) $ 151,450 $ 383,280 $ (245,513 ) $ 137,767 |
Schedule of Amortization Expense Associated with Identifiable Intangible Assets | Amortization expense associated with identifiable intangible assets recognized in the Company’s Consolidated Financial Statements for the three and nine months ended November 30, 2017 and November 30, 2016 is summarized as follows (in thousands): Three Months Ended Nine Months Ended November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016 Cost of revenue $ 4,674 $ 4,578 $ 13,524 $ 12,734 Sales and marketing 1,592 1,695 4,634 5,515 Research and development 34 34 103 103 General and administrative 2,084 1,690 6,137 5,291 Total amortization expense $ 8,384 $ 7,997 $ 24,398 $ 23,643 |
Assets and Liabilities Measur25
Assets and Liabilities Measured at Fair Value on a Recurring Basis (Tables) | 9 Months Ended |
Nov. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following table summarizes the composition and fair value hierarchy of the Company’s financial assets and liabilities as of November 30, 2017 (in thousands): As of November 30, 2017 Level 1 Level 2 Level 3 Assets: Money markets (1) $ 217,456 $ 217,456 $ — $ — Interest-bearing deposits (1) 59,312 — 59,312 — Available-for-sale securities (1): Commercial paper 250,794 — 250,794 — U.S. agency securities 309,489 — 309,489 — Corporate securities 620,479 — 620,479 — Equity securities 721 721 — — Foreign currency derivatives (2) 156 — 156 — Liabilities: Foreign currency derivatives (3) (174 ) — (174 ) — Total $ 1,458,233 $ 218,177 $ 1,240,056 $ — __________ (1) Included in Cash and cash equivalents, Investments in debt and equity securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet as of November 30, 2017 , in addition to $862.9 million of cash. (2) Included in Other current assets in the Company’s Consolidated Balance Sheet as of November 30, 2017 . (3) Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet as of November 30, 2017 . The following table summarizes the composition and fair value hierarchy of the Company’s financial assets and liabilities as of February 28, 2017 (in thousands): As of February 28, 2017 Level 1 Level 2 Level 3 Assets: Money markets (1) $ 258,188 $ 258,188 $ — $ — Available-for-sale securities (1): U.S. agency securities 327,430 — 327,430 — Corporate securities 714,993 — 714,993 — Foreign currency derivatives (2) 135 — 135 — Liabilities: Foreign currency derivatives (3) (160 ) — (160 ) — Total $ 1,300,586 $ 258,188 $ 1,042,398 $ — __________ (1) Included in Cash and cash equivalents, Investments in debt and equity securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet as of February 28, 2017 , in addition to $832.6 million of cash. (2) Included in Other current assets in the Company’s Consolidated Balance Sheet as of February 28, 2017 . (3) Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet as of February 28, 2017 . |
Investments Measured at Fair Value | The following table represents the Company’s investments measured at fair value as of February 28, 2017 (in thousands): Balance Sheet Classification Amortized Gross Unrealized Aggregate Cash Equivalent Marketable Securities Investments in debt and equity securities, short-term Investments in debt securities, long-term Gains Losses (1) Money markets $ 258,188 $ — $ — $ 258,188 $ 258,188 $ — $ — U.S. agency securities 329,617 37 (2,224 ) 327,430 — 27,593 299,837 Corporate securities 714,226 1,416 (649 ) 714,993 — 342,390 372,603 Total $ 1,302,031 $ 1,453 $ (2,873 ) $ 1,300,611 $ 258,188 $ 369,983 $ 672,440 __________ (1) As of February 28, 2017 , there were $0.6 million of accumulated unrealized losses related to investments that have been in a continuous unrealized loss position for 12 months or longer. The aggregate related fair value of all investments with unrealized losses was $605.9 million . The following table represents the Company’s investments measured at fair value as of November 30, 2017 (in thousands): Balance Sheet Classification Amortized Gross Unrealized Aggregate Cash Equivalent Marketable Securities Investments in debt and equity securities, short-term Investments in debt securities, long-term Gains Losses (1) Money markets $ 217,456 $ — $ — $ 217,456 $ 217,456 $ — $ — Interest-bearing deposits 59,312 — — 59,312 — 59,312 — Commercial paper 250,794 — — 250,794 250,794 — — U.S. agency securities 312,391 — (2,902 ) 309,489 — 78,231 231,258 Corporate securities 620,121 1,270 (912 ) 620,479 — 246,453 374,026 Equity securities 650 71 — 721 — 721 — Total $ 1,460,724 $ 1,341 $ (3,814 ) $ 1,458,251 — $ 468,250 $ 384,717 $ 605,284 __________ (1) As of November 30, 2017 , there were $3.0 million of accumulated unrealized losses related to investments that have been in a continuous unrealized loss position for 12 months or longer. The aggregate related fair value of all investments with unrealized losses was $540.1 million . |
Summary of Stated Maturities of Investment in Debt Securities | The following table summarizes the stated maturities of the Company’s investments in debt securities (in thousands): Total Less than 1 Year 1-5 Years More than 5 Years Maturity of current and long-term investments in debt securities $ 989,280 $ 383,996 $ 605,284 $ — |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 9 Months Ended |
Nov. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Summary of Effects of Derivative Instruments | The effects of derivative instruments on the Company’s Consolidated Financial Statements are as follows as of November 30, 2017 and for the three and nine months then ended (in thousands): As of November 30, 2017 Classification of Three Months Ended November 30, 2017 Nine Months Ended November 30, 2017 Balance Sheet Fair Notional Assets—foreign currency forward contracts not designated as hedges Other current assets $ 156 $ 20,394 Other expense, net $ 309 $ 1,589 Liabilities—foreign currency forward contracts not designated as hedges Accounts payable and accrued expenses (174 ) 35,210 Other expense, net (678 ) (1,261 ) Total $ (18 ) $ 55,604 $ (369 ) $ 328 The effects of derivative instruments on the Company’s Consolidated Financial Statements are as follows as of November 30, 2016 and for the three and nine months then ended (in thousands): As of November 30, 2016 Classification of Three Months Ended November 30, 2016 Nine Months Ended November 30, 2016 Balance Sheet Fair Notional Assets—foreign currency forward contracts not designated as hedges Other current assets $ 132 $ 25,849 Other expense, net $ 555 $ 2,958 Liabilities—foreign currency forward contracts not designated as hedges Accounts payable and accrued expenses (902 ) 15,765 Other expense, net (1,182 ) (2,181 ) Total $ (770 ) $ 41,614 $ (627 ) $ 777 |
Share-based Awards (Tables)
Share-based Awards (Tables) | 9 Months Ended |
Nov. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation Expense | The following summarizes share-based compensation expense recognized in the Company’s Consolidated Financial Statements for the three and nine months ended November 30, 2017 and November 30, 2016 (in thousands): Three Months Ended Nine Months Ended November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016 Cost of revenue $ 4,199 $ 4,037 $ 12,408 $ 12,396 Sales and marketing 23,278 26,624 64,708 65,426 Research and development 14,937 13,814 42,603 38,785 General and administrative 9,904 10,266 23,264 24,766 Total share-based compensation expense (1) $ 52,318 $ 54,741 $ 142,983 $ 141,373 __________ (1) Total share-based compensation expense includes $2.9 million and $2.0 million respectively, of expense related to the Company’s employee stock purchase plan (“ESPP”) for the three months ended November 30, 2017 and November 30, 2016 and $8.8 million and $2.0 million , respectively, for the nine months ended November 30, 2017 and November 30, 2016 . |
Summary of Share-Based Awards Granted During Period | During the three and nine months ended November 30, 2017 and November 30, 2016 , the Company granted the following share-based awards: Three Months Ended November 30, 2017 November 30, 2016 Shares and Shares Underlying Awards Weighted Shares and Weighted Service-based shares and share units 699,066 $ 120.89 949,421 $ 76.19 Nine Months Ended November 30, 2017 November 30, 2016 Shares and Shares Underlying Awards Weighted Average Per Share Award Fair Value Shares and Shares Underlying Awards Weighted Average Per Share Award Fair Value Service-based shares and share units 1,585,904 $ 101.85 2,017,861 $ 75.62 Performance share units—target 261,760 (1) $ 87.99 362,502 $ 76.68 Performance share awards 104,362 (2) $ 87.99 140,182 $ 76.70 Total awards 1,952,026 $ 99.25 2,520,545 $ 75.83 __________ (1) Certain executives and senior management were awarded a target number of performance share units (“PSUs”). PSU grantees may earn up to 200% of the target number of PSUs. Half of the target number of PSUs can be earned by the grantees depending upon the Company’s financial performance measured against the financial performance of specified peer companies during a three-year performance period beginning on March 1, 2017. The remaining target number of PSUs can be earned by the grantees depending upon the Company’s total shareholder return performance measured against the total shareholder return performance of specified peer companies during a three-year period beginning on March 1, 2017. (2) Certain executives were granted restricted stock awards. These shares were awarded subject to the achievement of a specified dollar amount of revenue for the fiscal year ending February 28, 2018 (the “RSA Performance Goal”). If the Company fails to achieve the RSA Performance Goal for the fiscal year ending February 28, 2018 , then all such shares are forfeited. If the Company achieves the RSA Performance Goal for the fiscal year ending February 28, 2018 , then 25% of the restricted stock vests on or about July 16, 2018, and the remainder vests ratably on a quarterly basis over the course of the subsequent three -year period, provided that the grantee’s business relationship with the Company has not ceased. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Nov. 30, 2017 | |
Earnings Per Share [Abstract] | |
Reconciliation of Numerators and Denominators of Earnings Per Share Calculation | The following table reconciles the numerators and denominators of the earnings per share (“EPS”) calculation for the three and nine months ended November 30, 2017 and November 30, 2016 (in thousands, except per share amounts): Three Months Ended Nine Months Ended November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016 Net income, basic and diluted $ 101,306 $ 67,943 $ 271,355 $ 187,900 Weighted average common shares outstanding 177,063 179,233 177,188 180,245 Incremental shares attributable to assumed vesting or exercise of outstanding equity award shares 3,518 2,935 3,281 2,980 Dilutive effect of convertible notes 4,109 514 2,928 228 Dilutive effect of warrants 1,470 — — — Diluted shares 186,160 182,682 183,397 183,453 Diluted net income per share $ 0.54 $ 0.37 $ 1.48 $ 1.02 |
Shares Considered Anti-Dilutive for Calculating Diluted EPS | The following share awards were not included in the computation of diluted EPS because the aggregate value of proceeds considered received upon either exercise or vesting was greater than the average market price of the Company’s common stock during the related periods and the effect of including such share awards in the computation would be anti-dilutive (in thousands): Three Months Ended Nine Months Ended November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016 Number of shares considered anti-dilutive for calculating diluted EPS 353 71 117 938 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Nov. 30, 2017 | |
Segment Reporting [Abstract] | |
Summary of Revenue, Income (Loss) from Operations, Total Assets and Total Cash, Cash Equivalents and Available-for-Sale Investment Securities by Geographic Segment | The following summarizes revenue from unaffiliated customers and income (loss) from operations for the three and nine months ended November 30, 2017 and November 30, 2016 and total cash, cash equivalents and available-for-sale investment securities and total assets as of November 30, 2017 and November 30, 2016 , by geographic segment (in thousands): Americas EMEA Asia Pacific Corporate (1) Consolidated Three Months Ended November 30, 2017 Revenue from unaffiliated customers $ 471,773 $ 173,718 $ 102,487 $ — $ 747,978 Income (loss) from operations $ 99,937 $ 42,086 $ 28,708 $ (52,318 ) $ 118,413 Three Months Ended November 30, 2016 Revenue from unaffiliated customers $ 393,589 $ 132,568 $ 89,103 $ — $ 615,260 Income (loss) from operations $ 87,899 $ 22,608 $ 25,007 $ (54,741 ) $ 80,773 Nine Months Ended November 30, 2017 Revenue from unaffiliated customers $ 1,373,512 $ 477,110 $ 297,507 $ — $ 2,148,129 Income (loss) from operations $ 284,229 $ 112,333 $ 87,001 $ (142,983 ) $ 340,580 Total cash, cash equivalents and available-for-sale investment securities $ 1,071,638 $ 855,164 $ 394,371 $ — $ 2,321,173 Total assets $ 2,877,183 $ 1,306,074 $ 576,227 $ — $ 4,759,484 Nine Months Ended November 30, 2016 Revenue from unaffiliated customers $ 1,144,841 $ 384,334 $ 253,788 $ — $ 1,782,963 Income (loss) from operations $ 229,251 $ 76,506 $ 73,636 $ (141,373 ) $ 238,020 Total cash, cash equivalents and available-for-sale investment securities $ 1,060,721 $ 611,380 $ 299,269 $ — $ 1,971,370 Total assets $ 2,661,792 $ 981,044 $ 442,257 $ — $ 4,085,093 __________ (1) Amounts represent share-based compensation expense that was not allocated to geographic segments. |
Summary of Revenue from Unaffiliated Customers | The following table lists, for each of the three and nine months ended November 30, 2017 and November 30, 2016 , revenue from unaffiliated customers in the United States, the Company’s country of domicile, and revenue from unaffiliated customers from foreign countries (in thousands): Three Months Ended Nine Months Ended November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016 United States, the Company’s country of domicile $ 415,900 $ 352,109 $ 1,227,645 $ 1,024,404 Foreign 332,078 263,151 920,484 758,559 Total revenue from unaffiliated customers $ 747,978 $ 615,260 $ 2,148,129 $ 1,782,963 |
Summary of Tangible Long-Lived Assets | Total tangible long-lived assets, net of accumulated depreciation, located in the United States, the Company’s country of domicile, and similar tangible long-lived assets, net of accumulated depreciation, held outside the United States are summarized in the following table as of November 30, 2017 and February 28, 2017 (in thousands): November 30, 2017 February 28, 2017 United States, the Company’s country of domicile $ 134,943 $ 133,492 Foreign 66,864 56,137 Total tangible long-lived assets $ 201,807 $ 189,629 |
Summary of Subscription Revenue and Services by Technology Classes | The following table, for each of the three and nine months ended November 30, 2017 and November 30, 2016 , provides further detail, by type, of the Company’s subscription and services revenues. Infrastructure-related offerings subscription revenue includes subscription revenue generated from Red Hat Enterprise Linux and related technologies such as Red Hat Satellite and Red Hat Enterprise Virtualization. Subscription revenue generated from the Company’s Application Development-related and other emerging technology offerings includes Red Hat JBoss Middleware, Red Hat Storage, Red Hat Mobile Application Platform and Red Hat cloud offerings such as Red Hat OpenStack Platform, Red Hat OpenShift and Red Hat CloudForms (in thousands): Three Months Ended Nine Months Ended November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016 Subscription revenue: Infrastructure-related offerings $ 494,974 $ 431,142 $ 1,440,383 $ 1,261,359 Application Development-related and other emerging technology offerings 161,858 112,176 450,519 314,833 Total subscription revenue 656,832 543,318 1,890,902 1,576,192 Training and services revenue: Consulting services 69,499 53,517 196,161 155,103 Training 21,647 18,425 61,066 51,668 Total training and services revenue 91,146 71,942 257,227 206,771 Total subscription and training and services revenue $ 747,978 $ 615,260 $ 2,148,129 $ 1,782,963 |
Business Combinations (Tables)
Business Combinations (Tables) | 9 Months Ended |
Nov. 30, 2017 | |
Business Combinations [Abstract] | |
Summary of Changes in Goodwill | The following is a summary of changes in goodwill for the nine months ended November 30, 2017 (in thousands): Balance at February 28, 2017 $ 1,040,709 Acquisitions 64,837 Impact of foreign currency fluctuations 15,411 Balance at November 30, 2017 $ 1,120,957 |
Convertible Notes (Tables)
Convertible Notes (Tables) | 9 Months Ended |
Nov. 30, 2017 | |
Debt Disclosure [Abstract] | |
Components of Convertible Notes | As of November 30, 2017 and February 28, 2017 , the convertible notes consisted of the following (in thousands): November 30, 2017 February 28, 2017 Liability component: Principal $ 804,994 $ 805,000 Less: debt issuance costs (5,395 ) (7,442 ) Less: debt discount (37,232 ) (51,925 ) Net carrying amount $ 762,367 $ 745,633 Equity component (1) $ 96,890 $ 96,890 __________ (1) Recognized in the Consolidated Balance Sheets in Additional paid-in capital. |
Schedule of Total Interest Expense Recognized Related to Convertible Notes | The following table includes total interest expense recognized related to the convertible notes for the three and nine months ended November 30, 2017 and November 30, 2016 (in thousands): Three Months Ended Nine Months Ended November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016 Coupon rate 0.25% per year, payable semiannually $ 503 $ 503 $ 1,509 $ 1,509 Amortization of convertible note issuance costs — liability component 694 653 2,047 1,927 Accretion of debt discount 4,936 4,800 14,693 14,284 Total interest expense related to convertible notes $ 6,133 $ 5,956 $ 18,249 $ 17,720 |
Summary of Fair Value of Convertible Notes and Carrying Value of Convertible Notes | The fair value of the convertible notes, which was determined based on inputs that are observable in the market (Level 2), and the carrying value of the convertible notes (the carrying value excludes the equity component of the convertible notes classified in equity) are as follows (in thousands): As of November 30, 2017 Fair Value Carrying Value Convertible notes $ 776,424 $ 762,367 |
Stockholders' Equity - Summary
Stockholders' Equity - Summary of Changes in Stockholders' Equity (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | Feb. 29, 2016 | ||
Changes in Stockholders' Equity | ||||||
Beginning Balance | $ 1,400,347 | $ 1,318,396 | $ 1,247,320 | [1] | $ 1,334,432 | |
Net income | 101,306 | 67,943 | 271,355 | 187,900 | ||
Other comprehensive income (loss), net of tax | (2,719) | (19,396) | 52,457 | (14,669) | ||
Exercise of common stock options | 711 | 1,205 | 4,541 | 3,273 | ||
Common stock repurchase | (100,000) | (125,318) | (237,002) | (319,182) | ||
Share-based compensation expense | 52,318 | 54,741 | 142,983 | 141,373 | ||
Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards | (37,807) | (25,769) | (86,230) | (63,245) | ||
Re-issuance of treasury stock under employee stock purchase plan | 18,984 | 42,732 | ||||
Other adjustments | 0 | (5,016) | 1 | |||
Cumulative-effect adjustment from adoption of ASU 2016-09 | $ 1,919 | |||||
Ending Balance | 1,433,140 | 1,271,802 | 1,433,140 | 1,271,802 | ||
Common Stock | ||||||
Changes in Stockholders' Equity | ||||||
Beginning Balance | 24 | 24 | 24 | 23 | ||
Exercise of common stock options | 1 | |||||
Ending Balance | 24 | 24 | 24 | 24 | ||
Additional Paid-In Capital | ||||||
Changes in Stockholders' Equity | ||||||
Beginning Balance | 2,335,518 | 2,215,856 | 2,294,462 | 2,162,264 | ||
Exercise of common stock options | 711 | 1,205 | 4,541 | 3,272 | ||
Share-based compensation expense | 52,318 | 54,741 | 142,983 | 141,373 | ||
Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards | (37,807) | (25,769) | (86,230) | (63,245) | ||
Other adjustments | 1 | (5,016) | 1 | |||
Cumulative-effect adjustment from adoption of ASU 2016-09 | 2,369 | |||||
Ending Balance | 2,350,740 | 2,246,034 | 2,350,740 | 2,246,034 | ||
Retained Earnings | ||||||
Changes in Stockholders' Equity | ||||||
Beginning Balance | 1,523,040 | 1,219,246 | 1,352,991 | 1,099,738 | ||
Net income | 101,306 | 67,943 | 271,355 | 187,900 | ||
Other adjustments | (1) | |||||
Cumulative-effect adjustment from adoption of ASU 2016-09 | $ (450) | |||||
Ending Balance | 1,624,346 | 1,287,188 | 1,624,346 | 1,287,188 | ||
Treasury Stock | ||||||
Changes in Stockholders' Equity | ||||||
Beginning Balance | (2,425,059) | (2,047,008) | (2,311,805) | (1,853,144) | ||
Common stock repurchase | (100,000) | (125,318) | (237,002) | (319,182) | ||
Re-issuance of treasury stock under employee stock purchase plan | 18,984 | 42,732 | ||||
Ending Balance | (2,506,075) | (2,172,326) | (2,506,075) | (2,172,326) | ||
Accumulated Other Comprehensive Loss | ||||||
Changes in Stockholders' Equity | ||||||
Beginning Balance | (33,176) | (69,722) | (88,352) | (74,449) | ||
Other comprehensive income (loss), net of tax | (2,719) | (19,396) | 52,457 | (14,669) | ||
Ending Balance | $ (35,895) | $ (89,118) | $ (35,895) | $ (89,118) | ||
[1] | Derived from audited financial statements. |
Stockholders' Equity - Addition
Stockholders' Equity - Additional Information (Detail) - USD ($) | Jun. 22, 2016 | Mar. 25, 2015 | Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 |
Shareholders Equity [Line Items] | |||||||
Aggregate cost of common stock repurchased | $ 100,000,000 | $ 125,318,000 | $ 237,002,000 | $ 319,182,000 | |||
June 2016 Share Repurchase Program | |||||||
Shareholders Equity [Line Items] | |||||||
Common stock amount authorized for stock repurchase program | $ 1,000,000,000 | ||||||
Stock repurchase program termination date | Jun. 30, 2018 | ||||||
Stock repurchase program expiration description | The program commenced on July 1, 2016, and will expire on the earlier of (i) June 30, 2016 or (ii) a determination by the Board, Chief Executive Officer or Chief Financial Officer to discontinue the program. | ||||||
Common stock, purchased during the period (in shares) | 2,318,584 | 7,219,233 | |||||
Aggregate cost of common stock repurchased | $ 237,000,000 | ||||||
Stock available for repurchase | $ 398,700,000 | $ 398,700,000 | $ 398,700,000 | ||||
March 2015 Share Repurchase Program | |||||||
Shareholders Equity [Line Items] | |||||||
Common stock amount authorized for stock repurchase program | $ 500,000,000 | ||||||
Stock repurchase program termination date | Jun. 30, 2016 |
Stockholders' Equity - Summar34
Stockholders' Equity - Summary of Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Thousands | Nov. 30, 2017 | Feb. 28, 2017 | |
Equity [Abstract] | |||
Accumulated loss from foreign currency translation adjustment | $ (34,624) | $ (87,784) | |
Accumulated unrealized loss, net of tax, on available-for-sale securities | (1,271) | (568) | |
Accumulated other comprehensive loss | $ (35,895) | $ (88,352) | [1] |
[1] | Derived from audited financial statements. |
Identifiable Intangible Asset35
Identifiable Intangible Assets - Additional Information (Detail) - USD ($) $ in Millions | 9 Months Ended | |
Nov. 30, 2017 | Feb. 28, 2017 | |
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Carrying amount for trademarks with an indefinite estimated useful life | $ 11.7 | $ 10.9 |
Minimum | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Total identified intangible assets, useful life (in years) | 2 years | |
Maximum | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Total identified intangible assets, useful life (in years) | 10 years |
Identifiable Intangible Asset36
Identifiable Intangible Assets - Schedule of Identifiable Intangible Assets (Detail) - USD ($) $ in Thousands | Nov. 30, 2017 | Feb. 28, 2017 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | $ 423,365 | $ 383,280 |
Accumulated Amortization | (271,915) | (245,513) |
Net Amount | 151,450 | 137,767 |
Trademarks, copyrights and patents | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | 162,818 | 148,850 |
Accumulated Amortization | (67,838) | (59,440) |
Net Amount | 94,980 | 89,410 |
Purchased technologies | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | 130,235 | 107,078 |
Accumulated Amortization | (90,143) | (80,536) |
Net Amount | 40,092 | 26,542 |
Customer and reseller relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | 105,810 | 104,438 |
Accumulated Amortization | (93,703) | (88,046) |
Net Amount | 12,107 | 16,392 |
Covenants not to compete | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | 15,669 | 14,081 |
Accumulated Amortization | (14,036) | (12,329) |
Net Amount | 1,633 | 1,752 |
Other intangible assets | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | 8,833 | 8,833 |
Accumulated Amortization | (6,195) | (5,162) |
Net Amount | $ 2,638 | $ 3,671 |
Identifiable Intangible Asset37
Identifiable Intangible Assets - Schedule of Amortization Expense Associated with Identifiable Intangible Assets (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization expense | $ 8,384 | $ 7,997 | $ 24,398 | $ 23,643 |
Cost of revenue | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization expense | 4,674 | 4,578 | 13,524 | 12,734 |
Sales and marketing | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization expense | 1,592 | 1,695 | 4,634 | 5,515 |
Research and development | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization expense | 34 | 34 | 103 | 103 |
General and administrative | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization expense | $ 2,084 | $ 1,690 | $ 6,137 | $ 5,291 |
Income Taxes (Detail)
Income Taxes (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Income Taxes [Line Items] | ||||
Effective tax rate | 12.60% | 11.40% | 18.40% | 17.80% |
Federal statutory rate | 35.00% | 35.00% | 35.00% | 35.00% |
Net discrete tax benefits | $ 15.5 | $ 11.9 | $ 28.5 | $ 21.1 |
Significant change in unrecognized tax benefits, nature of event | as a result of statutes of limitations expirations in various tax jurisdictions | |||
Maximum | ||||
Income Taxes [Line Items] | ||||
Decrease in unrecognized tax benefits | $ 2 | $ 2 |
Assets and Liabilities Measur39
Assets and Liabilities Measured at Fair Value on a Recurring Basis - Summary of Financial Assets and Liabilities Measured at Fair Value (Detail) - USD ($) $ in Thousands | Nov. 30, 2017 | Feb. 28, 2017 |
Assets: | ||
Money markets | $ 217,456 | $ 258,188 |
Interest-bearing deposits | 59,312 | |
Foreign currency derivatives | 156 | 135 |
Liabilities: | ||
Foreign currency derivatives | (174) | (160) |
Total | 1,458,233 | 1,300,586 |
Cash | 862,900 | 832,600 |
Level 1 | ||
Assets: | ||
Money markets | 217,456 | 258,188 |
Interest-bearing deposits | 0 | |
Foreign currency derivatives | 0 | 0 |
Liabilities: | ||
Foreign currency derivatives | 0 | 0 |
Total | 218,177 | 258,188 |
Level 2 | ||
Assets: | ||
Money markets | 0 | 0 |
Interest-bearing deposits | 59,312 | |
Foreign currency derivatives | 156 | 135 |
Liabilities: | ||
Foreign currency derivatives | (174) | (160) |
Total | 1,240,056 | 1,042,398 |
Level 3 | ||
Assets: | ||
Money markets | 0 | 0 |
Interest-bearing deposits | 0 | |
Foreign currency derivatives | 0 | 0 |
Liabilities: | ||
Foreign currency derivatives | 0 | 0 |
Total | 0 | 0 |
Commercial paper | ||
Assets: | ||
Available-for-sale securities | 250,794 | |
Commercial paper | Level 1 | ||
Assets: | ||
Available-for-sale securities | 0 | |
Commercial paper | Level 2 | ||
Assets: | ||
Available-for-sale securities | 250,794 | |
Commercial paper | Level 3 | ||
Assets: | ||
Available-for-sale securities | 0 | |
U.S. agency securities | ||
Assets: | ||
Available-for-sale securities | 309,489 | 327,430 |
U.S. agency securities | Level 1 | ||
Assets: | ||
Available-for-sale securities | 0 | 0 |
U.S. agency securities | Level 2 | ||
Assets: | ||
Available-for-sale securities | 309,489 | 327,430 |
U.S. agency securities | Level 3 | ||
Assets: | ||
Available-for-sale securities | 0 | 0 |
Corporate securities | ||
Assets: | ||
Available-for-sale securities | 620,479 | 714,993 |
Corporate securities | Level 1 | ||
Assets: | ||
Available-for-sale securities | 0 | 0 |
Corporate securities | Level 2 | ||
Assets: | ||
Available-for-sale securities | 620,479 | 714,993 |
Corporate securities | Level 3 | ||
Assets: | ||
Available-for-sale securities | 0 | $ 0 |
Equity securities | ||
Assets: | ||
Available-for-sale securities | 721 | |
Equity securities | Level 1 | ||
Assets: | ||
Available-for-sale securities | 721 | |
Equity securities | Level 2 | ||
Assets: | ||
Available-for-sale securities | 0 | |
Equity securities | Level 3 | ||
Assets: | ||
Available-for-sale securities | $ 0 |
Assets and Liabilities Measur40
Assets and Liabilities Measured at Fair Value on a Recurring Basis - Investments Measured at Fair Value (Detail) - USD ($) $ in Thousands | Nov. 30, 2017 | Aug. 31, 2017 | Feb. 28, 2017 | Nov. 30, 2016 | Aug. 31, 2016 | Feb. 29, 2016 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Cash and cash equivalents | $ 1,331,172 | $ 1,210,308 | $ 1,090,808 | [1] | $ 916,678 | $ 970,569 | $ 927,778 |
Gross Unrealized Gains | 1,341 | 1,453 | |||||
Gross Unrealized Losses | (3,814) | (2,873) | |||||
Cash, Cash Equivalents And Available-for-sale Debt Securities | 1,458,251 | 1,300,611 | |||||
Cash, Cash Equivalents And Available-for-sale Debt Securities Amortized Cost | 1,460,724 | 1,302,031 | |||||
Accumulated unrealized losses related to investments in unrealized loss position 12 months or longer | 3,000 | 600 | |||||
Fair value of investments with unrealized losses | 540,100 | 605,900 | |||||
Cash Equivalent Marketable Securities | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Cash and cash equivalents | 250,794 | ||||||
Cash Equivalent Marketable Securities | 468,250 | 258,188 | |||||
Investments in debt and equity securities, short-term | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Aggregate Fair Value | 384,717 | 369,983 | |||||
Investments in debt securities, long-term | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Aggregate Fair Value | 605,284 | 672,440 | |||||
Interest-bearing deposits | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Amortized Cost | 59,312 | ||||||
Gross Unrealized Gains | 0 | ||||||
Gross Unrealized Losses | 0 | ||||||
Aggregate Fair Value | 59,312 | ||||||
Interest-bearing deposits | Investments in debt and equity securities, short-term | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Aggregate Fair Value | 59,312 | ||||||
Interest-bearing deposits | Investments in debt securities, long-term | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Aggregate Fair Value | 0 | ||||||
U.S. agency securities | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Amortized Cost | 312,391 | 329,617 | |||||
Gross Unrealized Gains | 0 | 37 | |||||
Gross Unrealized Losses | (2,902) | (2,224) | |||||
Aggregate Fair Value | 309,489 | 327,430 | |||||
U.S. agency securities | Investments in debt and equity securities, short-term | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Aggregate Fair Value | 78,231 | 27,593 | |||||
U.S. agency securities | Investments in debt securities, long-term | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Aggregate Fair Value | 231,258 | 299,837 | |||||
Corporate securities | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Amortized Cost | 620,121 | 714,226 | |||||
Gross Unrealized Gains | 1,270 | 1,416 | |||||
Gross Unrealized Losses | (912) | (649) | |||||
Aggregate Fair Value | 620,479 | 714,993 | |||||
Corporate securities | Investments in debt and equity securities, short-term | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Aggregate Fair Value | 246,453 | 342,390 | |||||
Corporate securities | Investments in debt securities, long-term | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Aggregate Fair Value | 374,026 | 372,603 | |||||
Equity securities | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Amortized Cost | 650 | ||||||
Gross Unrealized Gains | 71 | ||||||
Gross Unrealized Losses | 0 | ||||||
Aggregate Fair Value | 721 | ||||||
Equity securities | Investments in debt and equity securities, short-term | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Aggregate Fair Value | 721 | ||||||
Equity securities | Investments in debt securities, long-term | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Aggregate Fair Value | 0 | ||||||
Money markets | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Cash and cash equivalents | 217,456 | 258,188 | |||||
Cash and Cash Equivalents, Fair Value Disclosure | 217,456 | 258,188 | |||||
Money markets | Cash Equivalent Marketable Securities | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Cash and cash equivalents | 217,456 | $ 258,188 | |||||
Commercial paper | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Cash and cash equivalents | 250,794 | ||||||
Cash and Cash Equivalents, Fair Value Disclosure | $ 250,794 | ||||||
[1] | Derived from audited financial statements. |
Assets and Liabilities Measur41
Assets and Liabilities Measured at Fair Value on a Recurring Basis - Summary of Stated Maturities of Investment in Debt Securities (Detail) $ in Thousands | Nov. 30, 2017USD ($) |
Fair Value Disclosures [Abstract] | |
Total | $ 989,280 |
Less than 1 Year | 383,996 |
1-5 Years | 605,284 |
More than 5 Years | $ 0 |
Derivative Instruments (Detail)
Derivative Instruments (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Derivative [Line Items] | ||||
Total, Fair Value | $ (18) | $ (770) | $ (18) | $ (770) |
Notional value of foreign currency forward contracts not designated as hedges | 55,604 | 41,614 | 55,604 | 41,614 |
Amount of unrealized gain (loss) recognized in income on derivatives | (369) | (627) | 328 | 777 |
Other current assets | ||||
Derivative [Line Items] | ||||
Assets—foreign currency forward contracts not designated as hedges | 156 | 132 | 156 | 132 |
Notional value of foreign currency forward contracts not designated as hedges, assets | 20,394 | 25,849 | 20,394 | 25,849 |
Accounts payable and accrued expenses | ||||
Derivative [Line Items] | ||||
Liabilities—foreign currency forward contracts not designated as hedges | (174) | (902) | (174) | (902) |
Notional value of foreign currency forward contracts not designated as hedges, liabilities | 35,210 | 15,765 | 35,210 | 15,765 |
Derivative Liabilities | Other expense, net | ||||
Derivative [Line Items] | ||||
Amount of unrealized gain (loss) recognized in income on derivatives | (678) | (1,182) | (1,261) | (2,181) |
Derivative Assets | Other expense, net | ||||
Derivative [Line Items] | ||||
Amount of unrealized gain (loss) recognized in income on derivatives | $ 309 | $ 555 | $ 1,589 | $ 2,958 |
Share-based Awards - Additional
Share-based Awards - Additional Information (Detail) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||
Fair value assumptions, method used | Black-Scholes-Merton | |||
Share-based compensation expense capitalized | $ 0 | $ 0 | $ 0 | $ 0 |
Share-based Awards - Share-Base
Share-based Awards - Share-Based Compensation Expense (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total share-based compensation expense (1) | $ 52,318 | $ 54,741 | $ 142,983 | $ 141,373 |
Cost of revenue | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total share-based compensation expense (1) | 4,199 | 4,037 | 12,408 | 12,396 |
Sales and marketing | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total share-based compensation expense (1) | 23,278 | 26,624 | 64,708 | 65,426 |
Research and development | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total share-based compensation expense (1) | 14,937 | 13,814 | 42,603 | 38,785 |
General and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total share-based compensation expense (1) | 9,904 | 10,266 | 23,264 | 24,766 |
Employee Stock Purchase Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total share-based compensation expense (1) | $ 2,900 | $ 2,000 | $ 8,800 | $ 2,000 |
Share-based Awards - Summary of
Share-based Awards - Summary of Share-Based Awards Granted During Period (Detail) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares and Shares Underlying Awards (in shares) | 1,952,026 | 2,520,545 | ||
Weighted Average Per Share Award Fair Value (in dollars per share) | $ 99.25 | $ 75.83 | ||
Service-based shares and share units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares and Shares Underlying Awards (in shares) | 699,066 | 949,421 | 1,585,904 | 2,017,861 |
Weighted Average Per Share Award Fair Value (in dollars per share) | $ 120.89 | $ 76.19 | $ 101.85 | $ 75.62 |
Performance share units—target | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares and Shares Underlying Awards (in shares) | 261,760 | 362,502 | ||
Weighted Average Per Share Award Fair Value (in dollars per share) | $ 87.99 | $ 76.68 | ||
Targeted percentage of performance share units earned by executive | 200.00% | |||
Performance share awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares and Shares Underlying Awards (in shares) | 104,362 | 140,182 | ||
Weighted Average Per Share Award Fair Value (in dollars per share) | $ 87.99 | $ 76.70 | ||
Vesting right description | These shares were awarded subject to the achievement of a specified dollar amount of revenue for the fiscal year ending February 28, 2018 (the “RSA Performance Goal”). If the Company fails to achieve the RSA Performance Goal for the fiscal year ending February 28, 2018, then all such shares are forfeited. If the Company achieves the RSA Performance Goal for the fiscal year ending February 28, 2018, then 25% of the restricted stock vests on or about July 16, 2018, and the remainder vests ratably on a quarterly basis over the course of the subsequent three-year period, provided that the grantee’s business relationship with the Company has not ceased. | |||
Percentage vested after one year if performance conditions achieved | 25.00% | |||
Vesting period | 3 years | |||
Share-based Compensation Award, Tranche One | Performance share units—target | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting right description | Half of the target number of PSUs can be earned by the grantees depending upon the Company’s financial performance measured against the financial performance of specified peer companies during a three-year performance period beginning on March 1, 2017. | |||
Vesting period | 3 years | |||
Share-based Compensation Award, Tranche Two | Performance share units—target | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting right description | The remaining target number of PSUs can be earned by the grantees depending upon the Company’s total shareholder return performance measured against the total shareholder return performance of specified peer companies during a three-year period beginning on March 1, 2017. | |||
Vesting period | 3 years |
Earnings Per Share - Reconcilia
Earnings Per Share - Reconciliation of Numerators and Denominators of Earnings Per Share Calculation (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Earnings Per Share [Abstract] | ||||
Net income, basic and diluted | $ 101,306 | $ 67,943 | $ 271,355 | $ 187,900 |
Weighted average common shares outstanding (in shares) | 177,063 | 179,233 | 177,188 | 180,245 |
Incremental shares attributable to assumed vesting or exercise of outstanding equity award shares (in shares) | 3,518 | 2,935 | 3,281 | 2,980 |
Dilutive effect of convertible notes (in shares) | 4,109 | 514 | 2,928 | 228 |
Dilutive effect of warrants (in shares) | 1,470 | 0 | 0 | 0 |
Diluted shares (in shares) | 186,160 | 182,682 | 183,397 | 183,453 |
Diluted net income per share (in dollars per share) | $ 0.54 | $ 0.37 | $ 1.48 | $ 1.02 |
Earnings Per Share - Additional
Earnings Per Share - Additional Information (Detail) - $ / shares | 3 Months Ended | 9 Months Ended | ||||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | Oct. 07, 2014 | Oct. 01, 2014 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||
Exercise price per share (in dollars per share) | $ 101.65 | $ 101.65 | $ 101.65 | $ 101.65 | $ 101.65 | |
Warrants | ||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||
Number of shares considered anti-dilutive for calculating diluted EPS (in shares) | 10,965,630 | 10,965,630 | 10,965,630 | 10,965,630 | ||
0.25% Convertible Senior Notes due 2019 | ||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||
Debt instrument, interest rate | 0.25% | 0.25% | 0.25% | 0.25% | ||
Unsecured Debt | 0.25% Convertible Senior Notes due 2019 | ||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||
Debt instrument, interest rate | 0.25% |
Earnings Per Share - Shares Con
Earnings Per Share - Shares Considered Anti-Dilutive for Calculating Diluted EPS (Detail) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Stock Options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Number of shares considered anti-dilutive for calculating diluted EPS (in shares) | 353 | 71 | 117 | 938 |
Segment Reporting - Summary of
Segment Reporting - Summary of Revenue, Income (Loss) from Operations, Total Assets and Total Cash, Cash Equivalents and Available-for-Sale Investment Securities by Geographic Segments (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | Feb. 28, 2017 | [1] | |
Segment Reporting Information [Line Items] | ||||||
Revenue from unaffiliated customers | $ 747,978 | $ 615,260 | $ 2,148,129 | $ 1,782,963 | ||
Income (loss) from operations | 118,413 | 80,773 | 340,580 | 238,020 | ||
Total cash, cash equivalents and available-for-sale investment securities | 2,321,173 | 1,971,370 | 2,321,173 | 1,971,370 | ||
Total assets | 4,759,484 | 4,085,093 | 4,759,484 | 4,085,093 | $ 4,535,185 | |
Corporate | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenue from unaffiliated customers | 0 | 0 | 0 | 0 | ||
Income (loss) from operations | (52,318) | (54,741) | (142,983) | (141,373) | ||
Total cash, cash equivalents and available-for-sale investment securities | 0 | 0 | 0 | 0 | ||
Total assets | 0 | 0 | 0 | 0 | ||
Americas | Operating Segment | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenue from unaffiliated customers | 471,773 | 393,589 | 1,373,512 | 1,144,841 | ||
Income (loss) from operations | 99,937 | 87,899 | 284,229 | 229,251 | ||
Total cash, cash equivalents and available-for-sale investment securities | 1,071,638 | 1,060,721 | 1,071,638 | 1,060,721 | ||
Total assets | 2,877,183 | 2,661,792 | 2,877,183 | 2,661,792 | ||
EMEA | Operating Segment | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenue from unaffiliated customers | 173,718 | 132,568 | 477,110 | 384,334 | ||
Income (loss) from operations | 42,086 | 22,608 | 112,333 | 76,506 | ||
Total cash, cash equivalents and available-for-sale investment securities | 855,164 | 611,380 | 855,164 | 611,380 | ||
Total assets | 1,306,074 | 981,044 | 1,306,074 | 981,044 | ||
Asia Pacific | Operating Segment | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenue from unaffiliated customers | 102,487 | 89,103 | 297,507 | 253,788 | ||
Income (loss) from operations | 28,708 | 25,007 | 87,001 | 73,636 | ||
Total cash, cash equivalents and available-for-sale investment securities | 394,371 | 299,269 | 394,371 | 299,269 | ||
Total assets | $ 576,227 | $ 442,257 | $ 576,227 | $ 442,257 | ||
[1] | Derived from audited financial statements. |
Segment Reporting - Additional
Segment Reporting - Additional Information (Detail) - segment | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Segment Reporting Information [Line Items] | ||||
Number of operating segments | 3 | |||
Number of reportable segments | 1 | |||
U.S. Government and Agencies | Subscription Revenues | Customer Concentration Risk | ||||
Segment Reporting Information [Line Items] | ||||
Concentration risk, percentage | 10.00% | 10.00% | 11.00% | 10.00% |
One Customer | Accounts Receivable | Customer Concentration Risk | ||||
Segment Reporting Information [Line Items] | ||||
Concentration risk, percentage | 11.00% |
Segment Reporting - Summary o51
Segment Reporting - Summary of Revenue from Unaffiliated Customers (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Segment Reporting Information [Line Items] | ||||
Revenue from unaffiliated customers | $ 747,978 | $ 615,260 | $ 2,148,129 | $ 1,782,963 |
United States, the Company’s country of domicile | ||||
Segment Reporting Information [Line Items] | ||||
Revenue from unaffiliated customers | 415,900 | 352,109 | 1,227,645 | 1,024,404 |
Foreign | ||||
Segment Reporting Information [Line Items] | ||||
Revenue from unaffiliated customers | $ 332,078 | $ 263,151 | $ 920,484 | $ 758,559 |
Segment Reporting - Summary o52
Segment Reporting - Summary of Tangible Long-Lived Assets (Detail) - USD ($) $ in Thousands | Nov. 30, 2017 | Feb. 28, 2017 | |
Segment Reporting, Asset Reconciling Item [Line Items] | |||
Total tangible long-lived assets | $ 201,807 | $ 189,629 | [1] |
United States, the Company’s country of domicile | |||
Segment Reporting, Asset Reconciling Item [Line Items] | |||
Total tangible long-lived assets | 134,943 | 133,492 | |
Foreign | |||
Segment Reporting, Asset Reconciling Item [Line Items] | |||
Total tangible long-lived assets | $ 66,864 | $ 56,137 | |
[1] | Derived from audited financial statements. |
Segment Reporting - Summary o53
Segment Reporting - Summary of Subscription and Services Revenue by Technology Product (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Revenue from External Customer [Line Items] | ||||
Subscription revenue: | $ 656,832 | $ 543,318 | $ 1,890,902 | $ 1,576,192 |
Training and services revenue: | 91,146 | 71,942 | 257,227 | 206,771 |
Total subscription and training and services revenue | 747,978 | 615,260 | 2,148,129 | 1,782,963 |
Infrastructure-related offerings | ||||
Revenue from External Customer [Line Items] | ||||
Subscription revenue: | 494,974 | 431,142 | 1,440,383 | 1,261,359 |
Application Development-related and other emerging technology offerings | ||||
Revenue from External Customer [Line Items] | ||||
Subscription revenue: | 161,858 | 112,176 | 450,519 | 314,833 |
Consulting services | ||||
Revenue from External Customer [Line Items] | ||||
Training and services revenue: | 69,499 | 53,517 | 196,161 | 155,103 |
Training | ||||
Revenue from External Customer [Line Items] | ||||
Training and services revenue: | $ 21,647 | $ 18,425 | $ 61,066 | $ 51,668 |
Commitments and Contingencies (
Commitments and Contingencies (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | ||||
Rent expense under operating leases | $ 12.9 | $ 11.8 | $ 38.1 | $ 32.6 |
Business Combinations - Additio
Business Combinations - Additional Information (Detail) - USD ($) $ in Thousands | Jul. 31, 2017 | Jun. 01, 2017 | Jun. 24, 2016 | Nov. 30, 2017 |
Business Acquisition [Line Items] | ||||
Goodwill acquired | $ 64,837 | |||
Permabit Technology Corporation | ||||
Business Acquisition [Line Items] | ||||
Cash paid | $ 49,800 | |||
Goodwill acquired | 39,400 | |||
Identifiable intangible assets acquired | $ 10,400 | |||
Codenvy S. A. | ||||
Business Acquisition [Line Items] | ||||
Cash paid | $ 34,200 | |||
Goodwill acquired | 25,400 | |||
Identifiable intangible assets acquired | 11,300 | |||
Net working capital | $ 2,500 | |||
3scale, Inc. | ||||
Business Acquisition [Line Items] | ||||
Cash paid | $ 29,100 | |||
Goodwill acquired | 16,900 | |||
Identifiable intangible assets acquired | 13,100 | |||
Net working capital | $ 900 | |||
General and administrative | ||||
Business Acquisition [Line Items] | ||||
Acquisition transaction costs | $ 1,300 |
Business Combinations - Summary
Business Combinations - Summary of Changes in Goodwill (Detail) $ in Thousands | 9 Months Ended | |
Nov. 30, 2017USD ($) | ||
Goodwill [Roll Forward] | ||
Goodwill, beginning balance | $ 1,040,709 | [1] |
Acquisitions | 64,837 | |
Impact of foreign currency fluctuations | 15,411 | |
Goodwill, ending balance | $ 1,120,957 | |
[1] | Derived from audited financial statements. |
Convertible Notes - Additional
Convertible Notes - Additional Information (Detail) $ / shares in Units, $ in Millions | Oct. 07, 2014day$ / shares | Oct. 01, 2014USD ($)$ / sharesshares | Nov. 30, 2017USD ($)$ / shares | Nov. 30, 2016$ / shares |
Debt Instrument [Line Items] | ||||
Convertible threshold, trading days | day | 20 | |||
Convertible threshold, consecutive trading days | day | 30 | |||
Percentage of stock price trigger | 130.00% | |||
Stock price trigger (in dollars per share) | $ 95.43 | |||
Closing price of common stock (in dollars per share) | $ 126.76 | |||
If-converted value in excess of principal | $ | $ 585 | |||
Strike price of warrants (in dollars per share) | $ 101.65 | $ 101.65 | $ 101.65 | |
Purchase of convertible note hedges | $ | $ 148 | |||
Proceeds from issuance of warrants | $ | $ 79.8 | |||
Number of shares of common stock underlying the warrants | shares | 10,965,630 | |||
Fundamental Change | ||||
Debt Instrument [Line Items] | ||||
Repurchase of note principal amount | 100.00% | |||
Default | ||||
Debt Instrument [Line Items] | ||||
Repurchase of note principal amount | 100.00% | |||
0.25% Convertible Senior Notes due 2019 | ||||
Debt Instrument [Line Items] | ||||
Debt instrument, interest rate | 0.25% | 0.25% | ||
Frequency of interest payment | Semiannually | |||
0.25% Convertible Senior Notes due 2019 | Unsecured Debt | ||||
Debt Instrument [Line Items] | ||||
Debt instrument, offering date | Oct. 1, 2014 | |||
Debt instrument, interest rate | 0.25% | |||
Frequency of interest payment | semiannually in arrears on April 1 and October 1 of each year, beginning on April 1, 2015. | |||
Debt instrument, maturity date | Oct. 1, 2019 | |||
Common stock conversion rate | 0.0136219 | |||
Debt instrument, convertible, conversion price (in dollars per share) | $ 73.41 | $ 73.41 |
Convertible Notes - Components
Convertible Notes - Components of Convertible Notes (Detail) - USD ($) $ in Thousands | Nov. 30, 2017 | Feb. 28, 2017 | |
Debt Instrument [Line Items] | |||
Net carrying amount | $ 762,367 | $ 745,633 | [1] |
Unsecured Debt | 0.25% Convertible Senior Notes due 2019 | |||
Debt Instrument [Line Items] | |||
Principal | 804,994 | 805,000 | |
Less: debt issuance costs | (5,395) | (7,442) | |
Less: debt discount | (37,232) | (51,925) | |
Net carrying amount | 762,367 | 745,633 | |
Equity component | $ 96,890 | $ 96,890 | |
[1] | Derived from audited financial statements. |
Convertible Notes - Interest Ex
Convertible Notes - Interest Expense Related to Convertible Notes (Detail) - 0.25% Convertible Senior Notes due 2019 - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 | |
Debt Instrument [Line Items] | ||||
Coupon rate 0.25% per year, payable semiannually | $ 503 | $ 503 | $ 1,509 | $ 1,509 |
Amortization of convertible note issuance costs — liability component | 694 | 653 | 2,047 | 1,927 |
Accretion of debt discount | 4,936 | 4,800 | 14,693 | 14,284 |
Total interest expense related to convertible notes | $ 6,133 | $ 5,956 | $ 18,249 | $ 17,720 |
Coupon rate per year | 0.25% | 0.25% | 0.25% | 0.25% |
Frequency of coupon payment | Semiannually |
Convertible Notes - Fair Value
Convertible Notes - Fair Value of Notes Based on Inputs Observable in Market (Level 2) and Carrying Value of Debt Instruments (Detail) - USD ($) $ in Thousands | Nov. 30, 2017 | Feb. 28, 2017 | [1] |
Debt Instrument [Line Items] | |||
Carrying value, convertible notes | $ 762,367 | $ 745,633 | |
Level 2 | |||
Debt Instrument [Line Items] | |||
Fair value, convertible notes | $ 776,424 | ||
[1] | Derived from audited financial statements. |
Subsequent Events (Detail)
Subsequent Events (Detail) - USD ($) $ in Millions | Jan. 01, 2018 | Feb. 28, 2018 | Nov. 30, 2017 | Nov. 30, 2016 | Nov. 30, 2017 | Nov. 30, 2016 |
Subsequent Event [Line Items] | ||||||
U.S. tax rate | 35.00% | 35.00% | 35.00% | 35.00% | ||
Forecast | ||||||
Subsequent Event [Line Items] | ||||||
U.S. tax rate | 21.00% | |||||
Forecast | Minimum | ||||||
Subsequent Event [Line Items] | ||||||
Estimated increase to tax expense | $ 100 | |||||
Forecast | Maximum | ||||||
Subsequent Event [Line Items] | ||||||
Estimated increase to tax expense | $ 120 |