Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May 31, 2019 | Jun. 27, 2019 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | RED HAT INC | |
Entity Central Index Key | 0001087423 | |
Current Fiscal Year End Date | --02-29 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | May 31, 2019 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Shell Company | false | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Entity Common Stock, Shares Outstanding | 178,093,007 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | May 31, 2019 | Feb. 28, 2019 | |
Current assets: | |||
Cash, cash equivalents and restricted cash | $ 2,295,396 | $ 1,883,096 | |
Investments in debt securities, short-term | 177,625 | 293,361 | |
Accounts receivable, net of allowances for doubtful accounts of $4,452 and $4,561, respectively | 529,115 | 980,188 | |
Prepaid expenses | 250,571 | 282,507 | |
Other current assets | 36,743 | 24,504 | |
Total current assets | 3,289,450 | 3,463,656 | |
Property and equipment, net of accumulated depreciation and amortization of $331,642 and $316,432, respectively | 200,015 | 198,969 | |
Operating right-of-use assets, net | [1] | 224,371 | 0 |
Goodwill | 1,273,494 | 1,276,853 | |
Identifiable intangibles, net | 198,914 | 206,083 | |
Investments in debt securities, long-term | 188,172 | 248,512 | |
Deferred tax assets, net | 119,128 | 112,568 | |
Other assets, net | 80,395 | 81,648 | |
Total assets | 5,573,939 | 5,588,289 | |
Current liabilities: | |||
Accounts payable and accrued expenses | 458,456 | 491,259 | |
Deferred revenue, short-term | 2,016,488 | 2,161,206 | |
Other current obligations | 256 | 282 | |
Convertible notes | 188,553 | 69,827 | |
Total current liabilities | 2,663,753 | 2,722,574 | |
Deferred revenue, long-term | 781,043 | 821,218 | |
Convertible notes | 0 | 231,540 | |
Operating lease liabilities | [1] | 188,133 | 0 |
Other long-term obligations | 183,074 | 199,025 | |
Commitments and contingencies (NOTES 10 and 11) | |||
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, 246,289,980 and 244,402,737 shares issued, and 178,083,153 and 176,800,502 shares outstanding, respectively | 25 | 24 | |
Additional paid-in capital | 2,853,105 | 2,791,895 | |
Retained earnings | 2,195,189 | 2,054,069 | |
Treasury stock, at cost, 68,206,827 and 67,602,235 shares, respectively | (3,242,725) | (3,189,434) | |
Accumulated other comprehensive loss | (47,658) | (42,622) | |
Total stockholders’ equity | 1,757,936 | 1,613,932 | |
Total liabilities and stockholders’ equity | $ 5,573,939 | $ 5,588,289 | |
[1] | Effective March 1, 2019, the Company adopted Accounting Standard Update 2016-02, Leases (Topic 842) (“ASC 842”). See NOTE 2 —Summary of Significant Accounting Policies and NOTE 4 —Leases for detailed information on adoption of ASC 842. |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | May 31, 2019 | Feb. 28, 2019 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowances for doubtful accounts | $ 4,452 | $ 4,561 |
Property and equipment, accumulated depreciation and amortization | $ 331,642 | $ 316,432 |
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) | 246,289,980 | 244,402,737 |
Common stock, shares outstanding (in shares) | 178,083,153 | 176,800,502 |
Treasury stock, shares (in shares) | 68,206,827 | 67,602,235 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
Revenue: | ||
Total revenue | $ 934,111 | $ 813,530 |
Cost of revenue: | ||
Total cost of revenue | 144,283 | 122,699 |
Gross profit | 789,828 | 690,831 |
Operating expense: | ||
Sales and marketing | 394,201 | 348,815 |
Research and development | 182,961 | 166,506 |
General and administrative | 80,548 | 63,354 |
Total operating expense | 657,710 | 578,675 |
Income from operations | 132,118 | 112,156 |
Interest income | 9,254 | 7,834 |
Interest expense | 1,959 | 6,319 |
Other expense, net | 766 | 2,194 |
Income before provision for income taxes | 138,647 | 111,477 |
Benefit for income taxes | (2,473) | (1,713) |
Net income | $ 141,120 | $ 113,190 |
Net income per share: | ||
Basic (in dollars per share) | $ 0.80 | $ 0.64 |
Diluted (in dollars per share) | $ 0.76 | $ 0.59 |
Weighted average shares outstanding: | ||
Basic (in shares) | 177,400 | 177,302 |
Diluted (in shares) | 186,635 | 190,739 |
Subscriptions | ||
Revenue: | ||
Total revenue | $ 814,952 | $ 711,521 |
Cost of revenue: | ||
Total cost of revenue | 61,899 | 52,173 |
Training and services | ||
Revenue: | ||
Total revenue | 119,159 | 102,009 |
Cost of revenue: | ||
Total cost of revenue | $ 82,384 | $ 70,526 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 141,120 | $ 113,190 |
Other comprehensive income (loss): | ||
Change in foreign currency translation adjustment, net of tax benefit of $465 and $0, respectively | (6,256) | (10,831) |
Available-for-sale securities: | ||
Unrealized gain on available-for-sale securities during the period | 2,023 | 38 |
Reclassification for gain realized on available-for-sale securities, reported in Other expense, net | (239) | (128) |
Tax (expense) benefit | (564) | 16 |
Net change in available-for-sale securities (net of tax) | 1,220 | (74) |
Total other comprehensive loss | (5,036) | (10,905) |
Comprehensive income | $ 136,084 | $ 102,285 |
Consolidation Statements of Com
Consolidation Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
Statement of Comprehensive Income [Abstract] | ||
Foreign currency translation adjustment, tax benefit | $ 465 | $ 0 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | ||
May 31, 2019 | May 31, 2018 | ||
Cash flows from operating activities: | |||
Net income | $ 141,120 | $ 113,190 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 36,754 | 27,054 | |
Amortization of debt discount and transaction costs | 1,885 | 5,838 | |
Repayments of convertible notes attributable to debt discount | (13,981) | 0 | |
Share-based compensation expense | [1] | 50,168 | 46,005 |
Net amortization of bond premium on debt securities available for sale | 271 | 743 | |
Other | (872) | (2,298) | |
Changes in operating assets and liabilities: | |||
Accounts receivable | 445,186 | 299,439 | |
Other receivables | (12,278) | (35,160) | |
Prepaid expenses | 28,844 | 25,382 | |
Accounts payable and accrued expenses | (58,271) | (28,642) | |
Deferred revenue | (158,729) | (104,592) | |
Other | (143) | (800) | |
Net cash provided by operating activities | 459,954 | 346,159 | |
Cash flows from investing activities: | |||
Purchase of investment in debt securities available for sale | 0 | (108,336) | |
Proceeds from maturities of investment in debt securities available for sale | 110,431 | 87,004 | |
Proceeds from sales of investment in debt securities available for sale | 64,899 | 525 | |
Proceeds from sales of strategic equity investments | 0 | 1,300 | |
Purchase of developed software and other intangible assets | (4,134) | (2,866) | |
Payments for property and equipment | (23,513) | (12,963) | |
Other | (124) | (986) | |
Net cash provided by (used in) investing activities | 147,559 | (36,322) | |
Cash flows from financing activities: | |||
Proceeds from exercise of common stock options | 369 | 875 | |
Proceeds from employee stock purchase program | 7,501 | 15,262 | |
Payments related to net settlement of share-based compensation awards | (81,274) | (77,094) | |
Purchase of treasury stock | 0 | (150,019) | |
Proceeds (payments) on other borrowings, net | 26 | ||
Proceeds (payments) on other borrowings, net | (299) | ||
Repayments of convertible notes attributable to principal | (102,163) | (25,953) | |
Net cash used in financing activities | (175,541) | (237,228) | |
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash | (19,672) | (28,261) | |
Net increase in cash, cash equivalents and restricted cash | 412,300 | 44,348 | |
Cash, cash equivalents and restricted cash at beginning of the period | 1,883,096 | 1,724,132 | |
Cash, cash equivalents and restricted cash at end of the period | 2,295,396 | 1,768,480 | |
Restricted cash included in cash, cash equivalents and restricted cash | $ 0 | $ 1,137 | |
[1] | Total share-based compensation expense included $1.7 million and $4.0 million , respectively, of expense related to the Company’s employee stock purchase plan (“ESPP”) for the three months ended May 31, 2019 and May 31, 2018 . |
Company
Company | 3 Months Ended |
May 31, 2019 | |
Accounting Policies [Abstract] | |
Company | Company and Merger Agreement 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 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, generally, is 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. Merger Agreement On October 28, 2018, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with International Business Machines Corporation, a New York corporation (“IBM”), and Socrates Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of IBM (“Sub”), pursuant to which, among other things, Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of IBM (the “Merger”). The Board of Directors of the Company and the Board of Directors of IBM each approved the Merger and the Merger Agreement. At the effective time of the Merger (the “Effective Time”), subject to the terms and conditions of the Merger Agreement, each share of common stock, par value $0.0001 per share, of the Company issued and outstanding immediately prior to the Effective Time (other than (i) cancelled shares, (ii) dissenting shares, and (iii) subsidiary converted shares) shall be converted into the right to receive $190.00 in cash without interest. On December 12, 2018, the Company filed its definitive proxy statement on Schedule 14A (the “Proxy Statement”) with the Securities and Exchange Commission (“SEC”) for a special meeting of its stockholders to be held on January 16, 2019 in connection with the Merger. The Merger Agreement was adopted and approved by the Company’s stockholders at the January 16, 2019 special meeting of stockholders. The Company continues to expect the transaction to close in the second half of 2019, subject to certain conditions, including receipt of regulatory approvals. Until the closing, the Company will continue to operate as an independent company. The Company has incurred Merger-related costs of $9.9 million , which are included in General and administrative expenses in the Company’s Consolidated Statement of Operations for the three months ended May 31, 2019 . Consummation of the Merger is subject to certain customary conditions, including, without limitation, (i) the receipt of approvals, or the expiration or termination of the applicable waiting periods, under certain antitrust laws (including the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and clearance under Council Regulation 139/2004 of the European Union); and (ii) the absence of any temporary restraining order, preliminary or permanent injunction or other judgment or law issued by certain courts of competent jurisdiction or other governmental entity, in each case prohibiting consummation of the Merger, and no action or proceeding by a governmental entity before any court or certain other governmental entities of competent jurisdiction seeking to enjoin, restrain or otherwise prohibit consummation of the Merger. As of the filing of this Form 10-Q, the U.S. Department of Justice has concluded its review of IBM’s proposed acquisition of the Company without remedies or conditions and the Company has received a notice of early termination of the waiting period under the HSR Act. As of the filing of this Form 10-Q, the European Commission has unconditionally approved the proposed acquisition of the Company by IBM under the European Union Merger Regulation. Each party’s obligation to consummate the Merger is subject to certain other customary conditions. The Merger Agreement contains certain customary termination rights for the Company and IBM. Subject to certain limitations, the Merger Agreement may be terminated by either IBM or the Company if (i) the Merger is not consummated on or before October 28, 2019, which is subject to extension for two consecutive three-month periods by either party if all conditions are satisfied other than receipt of regulatory approvals and absence of legal restraints and (ii) an order having the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger becomes final and non-appealable. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
May 31, 2019 | |
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 months ended May 31, 2019 have been prepared by the Company pursuant to the rules and regulations of 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 U.S. (“U.S. GAAP”). Operating results for the three months ended May 31, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending February 29, 2020 . 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, 2019 . Other than the accounting pronouncement adopted during the three months ended May 31, 2019 related to accounting for leases as described below, 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, 2019 . The Company adopted Accounting Standards Update 2016-02, Leases , now commonly referred to as Accounting Standards Codification Topic 842 (“ASC 842”), effective March 1, 2019, using the modified retrospective method, which does not require adjustments to comparative periods nor require modified disclosures in those comparative periods. Certain amounts for the three months ended May 31, 2018 have been reclassified to conform to the current period presentation. The Company’s fiscal year ends on the last day of February, and the Company identifies fiscal years by the calendar years in which they end. For example, the fiscal year ending February 29, 2020 is referred to as “fiscal 2020 .” 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 are eliminated in consolidation. There are no significant foreign exchange restrictions on 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. Estimates are used for, but not limited to, revenue recognition, goodwill and other long-lived assets, share-based compensation, income taxes and loss contingencies. Revenue recognition The Company derives its revenues from subscription contracts and training and service contracts. Revenue is recognized when performance obligations, as stipulated in the contracts, are transferred to a customer for an amount that reflects the consideration the Company expects to receive in exchange for those subscription contracts and training and service contracts. The Company applies the following five steps to recognize revenue: 1) Identify the contract with a customer. The Company determines that it has a contract with a customer when the contract is approved, the party’s rights regarding the products and services to be transferred can be identified, the payment terms for the products and services are identified, the customer’s ability and intent to pay can be determined, and the contract has commercial substance. Judgment is used to assess the customer’s ability and intent to pay, which is based upon factors including the customer’s historical payment experience or credit and financial information pertaining to the customer. 2) Identify the performance obligations in the contract. The Company’s performance obligations are identified based on the products and services that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract and consist of (i) subscription offerings, including non-proprietary open-source software code delivered to the customer, software support subscriptions delivered to the customer, software support subscriptions embedded in partner products and learning subscriptions and (ii) training and services, including professional services sold at a fixed fee, professional services sold on a time-and-material-basis, training courses or units, and consulting units. In limited cases, the option to purchase additional subscription offerings or training and services may be offered at a price representing a material right. In such cases, the option to purchase is considered a distinct performance obligation. 3) Determine the transaction price. The Company determines transaction price based on the consideration expected to be received in exchange for transferring certain performance obligations to the customer. In determining the transaction price, variable consideration, if any, would be considered if, in management’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. The Company’s contracts do not contain significant financing components. Specifically, the Company does not typically extend customer payment terms beyond a standard 30 - to 60 -day term and as a result the Company has elected the one-year-or-less safe harbor expedient and does not impute any interest. The Company has elected to exclude all taxes from the transaction price (e.g., sales, use, value-added, etc.). Revenue is recognized net of such taxes. 4) Allocate the transaction price to performance obligations in the contract. When a contract contains a single performance obligation, the entire transaction price is allocated to that one performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”). The Company typically determines SSP based on the observable price when the Company sells the subscriptions or training and services separately, taking into consideration the geographical region of the customer, type of offering and sales channel. In instances where SSP is not directly observable, the Company determines SSP either from the renewal rate paid for the performance obligation to the extent it is the same rate as stipulated in the initial customer contract or by using the expected-cost-plus-margin approach. 5) Recognize revenue when or as the performance obligation is satisfied. Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised subscription offerings and training and services to a customer. For each performance obligation, a determination is made as to whether the control is transferred over time or at a point in time. For performance obligations satisfied over time, a method to measure progress toward complete satisfaction is selected, based upon the most faithful depiction of performance. The selected method for each performance obligation type is applied consistently to similar contracts. Subscription revenue Subscription revenue is comprised of direct and indirect sales of subscriptions relating to Red Hat technologies. Accounts receivable and deferred revenue are recorded at the time a customer enters into a binding and non-cancellable subscription agreement for the purchase of a subscription, subscription services are made available to the customer and the customer is billed. The deferred revenue amount is recognized as revenue ratably over the subscription period. Red Hat technologies are generally offered with base subscription periods of either one year or three years ; the majority of the Company’s subscriptions have terms of one year. Under these subscription agreements, renewal rates are generally specified for renewal terms of one year or three years . Subscriptions generally entitle the end user to the technology itself and post-contract customer support, generally consisting of varying levels of support services as well as access to security updates, fixes, functionality enhancements, upgrades to the technologies, each on an if and when available basis, and compatibility with an ecosystem of certified hardware and software, during the term of the subscription. The Company sells its offerings through two principal channels: (1) direct, which includes sales by the Company’s sales force as well as web store sales, and (2) indirect, which includes certified cloud and service providers (“CCSPs”), distributors, original equipment manufacturers (“OEMs”), systems integrators and value added resellers. The Company recognizes revenue from the sale of Red Hat technologies ratably over the period of the subscription beginning on the commencement date of the subscription agreement. The Company has determined that the delivery of software code underlying the subscription is a distinct performance obligation as it is both capable of being distinct and is distinct within the context of a customer contract. The Company uses a non-proprietary open source development and licensing model to provide its software technologies to customers and therefore the amount of transaction price allocated to the underlying software code is negligible. The Company derives a portion of its revenue from CCSPs that provide public clouds with, and allow users to consume, computing resources as a service. The Company earns revenue based on subscription units consumed by the CCSP or its end users. The Company uses its historical cloud-usage data to estimate the amount of revenue earned and recognized each month and adjusts to actual amounts earned upon receipt of usage reports from the CCSPs in the following month. The differences between actual amounts earned and estimates made have generally been insignificant. Training and services revenue Training and services revenue is comprised of revenue for consulting, engineering and customer training courses or units and education services. Consulting services consist of time-based units or fixed-fee arrangements. For time-based arrangements, revenue is recognized over time as these services are performed and for fixed-fee arrangements, revenue is recognized based on the proportion of services performed. Engineering services represent revenue earned under fixed-fee arrangements with the Company’s OEM partners and other customers to provide for significant modification and customization of Red Hat technologies. The Company recognizes revenue for these fixed-fee engineering services based on a proportional performance basis using actual costs incurred to date over the estimated total projected costs, which includes a representative profit margin. A representative profit margin is determined based on analysis of a population of similar contracts by region. Revenue for customer training and education services is recognized on the dates the services are performed. See NOTE 17 —Segment Reporting for further information, including revenue by geographic area and significant product and service offerings. Contract Balances Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records a receivable when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to invoicing. For multi-year arrangements, the Company will generally invoice customers upfront or annually at the beginning of each annual coverage period. See below for the accounting policy related to receivables and see NOTE 13 —Deferred Revenue and Performance Obligations for further information on deferred revenue balances. Accounts receivable and allowance for doubtful accounts Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience and other qualitative factors. The Company reviews its allowance for doubtful accounts monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. All other balances are reviewed on a pooled basis by type of receivable. Account balances are charged off against the allowance when the Company determines it is probable the receivable will not be recovered. The Company does not have off-balance sheet credit exposure related to its customers. Unbilled receivables related to subscription and training and services contracts are included in accounts receivable. See NOTE 3 —Accounts Receivable for further information on accounts receivable balances. Deferred selling costs Deferred commissions are the incremental costs that are directly associated with non-cancellable subscription contracts with customers and consist of sales commissions and certain related fringe benefits earned by the Company’s sales force. The commissions are deferred and amortized on a straight-line basis over a period that approximates the subscription period. In determining the period that approximates the subscription period, the Company utilizes a portfolio approach that allows for the analysis of customer contracts with similar characteristics. The Company has determined that the effects on the financial statements of the portfolio approach would not differ materially from an individual customer contract analysis approach. The commission payments are paid in full subsequent to the month in which the customer’s service commences. The deferred commission amounts are recoverable through the future revenue streams under the non-cancellable customer contracts. In addition, the Company has the ability and intent under the commission plans with its sales force to recover commissions previously paid to its sales force in the event that customers breach the terms of their subscription agreements and do not fully pay for their subscription agreements. See NOTE 6 —Deferred Selling Costs for further information on deferred commissions and the related amortization of deferred commissions. Leases The Company determines if an arrangement is a lease at inception. As part of that determination, the Company considers whether there is an implicitly or explicitly identified asset in an arrangement and whether the Company, as the lessee, has the right to control that asset. Operating leases are included in operating right-of-use (“ROU”) assets, accounts payable and accrued expenses, and operating lease liabilities in the Company’s Consolidated Balance Sheets. Finance leases are included in property and equipment, other current obligations, and other long-term obligations in the Company’s Consolidated Balance Sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Variable lease payments, other than those based on a rate or index, are not included in the recognition of ROU assets and lease liabilities but instead are recognized in the Consolidated Statement of Operations in the period in which the obligation for those payments is incurred. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit borrowing rate, the Company’s incremental borrowing rate at commencement date is used to determine the present value of lease payments. The lease terms may include options to extend or to purchase when it is reasonably certain that the Company will exercise those options. For termination options, the Company will adjust the lease term unless it is reasonably certain that the option will not be taken. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease arrangements with both lease and non-lease components, which are generally accounted for as a single lease component. Additionally, for certain equipment leases, the Company applies a portfolio approach to effectively account for the operating lease ROU assets and liabilities. Recent accounting pronouncements Accounting pronouncements adopted In August 2018, the FASB issued Accounting Standards Update 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) (“ASU 2018-15”). The FASB issued ASU 2018-15 to align the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred for an internal-use software license. The Company early adopted this standard effective March 1, 2019. The adoption of this standard did not significantly impact the Company’s 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 by requiring the recognition of ROU assets and lease liabilities on the balance sheet. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Along with ASU 2016-02, the Company also adopted Accounting Standards Update 2018-10, Codification Improvements to Topic 842 Leases (“ASU 2018-10”), Accounting Standards Update 2018-11, Targeted Improvements to Topic 842 Leases (“ASU 2018-11”), Accounting Standards Update 2018-20, Leases (Topic 842) Narrow-Scope Improvements for Lessors (“ASU 2018-20”) and Accounting Standards Updated 2019-01, Leases (Topic 842): Codification Improvements (“ASU 2019-01”), now commonly referred to as Accounting Standards Codification Topic 842 (“ASC 842”). The Company adopted ASC 842 as of March 1, 2019. The Company adopted ASC 842 using the transition method, which does not require adjustments to comparative periods nor require modified disclosures in those comparative periods. The Company elected the transition package of practical expedients permitted within the new standard, which among other things, allows the carryforward of the historical lease classification. Further, upon adoption of the new guidance, the Company elected the practical expedients to combine lease and non-lease components for all asset classes and to not recognize ROU assets and lease liabilities for short-term leases for all asset classes. ASC 842 had a material impact on the Company’s Consolidated Balance Sheets, but did not have an impact on the Consolidated Statements of Operations. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases. At adoption, the Company recognized operating ROU assets of $237.4 million and operating lease liabilities of $244.5 million . Finance leases are not significant to the Company’s financials. The transition adjustment recognized in retained earnings as of March 1, 2019, was not material. See NOTE 4 —Leases for further information on the Company’s lease arrangements. |
Accounts Receivable
Accounts Receivable | 3 Months Ended |
May 31, 2019 | |
Receivables [Abstract] | |
Accounts Receivable | Accounts Receivable Accounts receivable are presented net of an allowance for doubtful accounts. Activity in the Company’s allowance for doubtful accounts is presented in the following table (in thousands): As of Balance at beginning of period Charged to (recovery of) expense Adjustments (1) Balance at end of period February 28, 2019 $ 2,167 3,247 (853 ) $ 4,561 May 31, 2019 $ 4,561 (195 ) 86 $ 4,452 _______________ (1) Represents foreign currency translation adjustments and amounts written-off as uncollectible accounts receivable. Included in accounts receivable, net of allowance for doubtful accounts, are unbilled receivables of $43.3 million and $40.2 million as of May 31, 2019 and February 28, 2019 , respectively. As of May 31, 2019 , no individual customer accounted for 10% or more of the Company’s total accounts receivable. As of February 28, 2019 , the Company had one customer whose accounts receivable balance individually represented 10% of total accounts receivable. |
Leases
Leases | 3 Months Ended |
May 31, 2019 | |
Leases [Abstract] | |
Leases | Leases The Company has operating and finance leases for office locations, research and development facilities, data centers and certain equipment. Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate): Balance Sheet Classification May 31, 2019 February 28, 2019 Assets: Operating Operating right-of-use assets, net $ 224,371 $ — Finance Property and equipment, net of accumulated depreciation and amortization 579 281 Total leased assets $ 224,950 $ 281 Liabilities: Current: Operating Accounts payable and accrued expenses $ 46,633 $ — Finance Other current obligations 256 282 Long-term: Operating Operating lease liabilities 188,133 — Finance Other long-term obligations 336 6 Total lease liabilities $ 235,358 $ 288 Prior to the adoption of ASC 842 on March 1, 2019, ROU assets and lease liabilities for operating leases were not recognized in the Consolidated Balance Sheets. The Company elected the practical expedient to not provide a comparable presentation in the Consolidated Balance Sheets for periods prior to adoption. Supplemental information related to leases was as follows: May 31, 2019 Weighted average remaining lease term: Operating leases 7.33 years Finance leases 3.45 years May 31, 2019 Weighted average discount rate: Operating leases 3.7 % Finance leases 3.3 % The components of lease expense were as follows (in thousands): Three Months Ended Statement of Operations Classification May 31, 2019 May 31, 2018 Operating lease expense Cost of revenue, Operating expense $ 14,666 see note (1) Variable lease expense Cost of revenue, Operating expense 1,176 see note (1) Finance lease expense: Amortization of leased assets Cost of revenue, Operating expense 146 276 Interest on lease liabilities Interest expense 6 7 Total lease expense (2) $ 15,994 $ 283 ____________________ (1) Rent expense under operating leases was $13.4 million for the three months ended May 31, 2018. (2) Sublease income is recognized as a reduction to operating expense in the Consolidated Statement of Operations and is not material. Supplemental cash flow information related to leases was as follows (in thousands): Three Months Ended May 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 14,043 Operating cash outflows from finance leases $ 6 Financing cash outflows from finance leases $ 112 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 762 Finance leases $ 133 Maturities of lease liabilities were as follows (in thousands): Fiscal Year Operating leases Finance leases 2020 (excluding the three months ended May 31, 2019) $ 40,737 $ 258 2021 47,858 101 2022 42,467 101 2023 33,438 101 2024 26,339 82 Thereafter 79,125 — Total lease payments 269,964 643 Less imputed interest (35,198 ) (51 ) Total $ 234,766 $ 592 The following table, which was included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2019 , depicts gross minimum lease payments under non-cancellable operating and capital leases (in thousands): Fiscal Year Operating Leases Capital Leases 2020 $ 60,722 $ 282 2021 51,060 6 2022 41,173 — 2023 32,016 — 2024 27,479 — Thereafter 79,530 — Total minimum lease payments $ 291,980 $ 288 The difference between the Company’s total lease commitments as reported at February 28, 2019 compared to the March 1, 2019 ROU asset balance in the Consolidated Balance Sheets is primarily due to the required use of a discount factor (imputed interest) under the new lease guidance and certain amounts that are not included in the ROU asset under the new lease guidance. |
Identifiable Intangible Assets
Identifiable Intangible Assets | 3 Months Ended |
May 31, 2019 | |
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 over the estimated useful life or the related asset’s pattern of economic benefit. Useful lives range from two years to 10 years . As of May 31, 2019 and February 28, 2019 , trademarks with an indefinite estimated useful life totaled $11.2 million and $11.4 million , respectively. The following is a summary of identifiable intangible assets (in thousands): May 31, 2019 February 28, 2019 Gross Accumulated Net Gross Accumulated Net Trademarks, copyrights and patents $ 180,240 $ (86,132 ) $ 94,108 $ 176,704 $ (82,967 ) $ 93,737 Purchased technologies 218,561 (118,705 ) 99,856 219,196 (113,617 ) 105,579 Customer and reseller relationships 105,562 (102,047 ) 3,515 105,737 (100,947 ) 4,790 Covenants not to compete 15,661 (14,800 ) 861 15,787 (14,728 ) 1,059 Other intangible assets 8,833 (8,259 ) 574 8,833 (7,915 ) 918 Total identifiable intangible assets $ 528,857 $ (329,943 ) $ 198,914 $ 526,257 $ (320,174 ) $ 206,083 Amortization expense associated with identifiable intangible assets recognized in the Company’s Consolidated Financial Statements is summarized as follows (in thousands): Three Months Ended May 31, 2019 May 31, 2018 Cost of revenue $ 6,660 $ 6,485 Sales and marketing 1,194 1,362 Research and development 34 34 General and administrative 2,517 2,373 Total amortization expense $ 10,405 $ 10,254 |
Deferred Selling Costs
Deferred Selling Costs | 3 Months Ended |
May 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Deferred Selling Costs | Deferred Selling Costs Deferred selling costs include commissions paid to the Company’s sales associates that are the incremental costs incurred to obtain contracts with customers. The commissions are deferred and amortized over a period to approximate the period of the subscription term. For further discussion on deferred commissions, see NOTE 2 —Summary of Significant Accounting Policies. Current and non-current deferred commissions are included in Prepaid expenses and Other assets, respectively, in the Company’s Consolidated Balance Sheets and are as follows (in thousands): May 31, 2019 February 28, 2019 Deferred commissions, current $ 183,462 $ 201,971 Deferred commissions, non-current 45,860 47,849 Total deferred commissions $ 229,322 $ 249,820 Amortization of deferred commissions is included in Sales and marketing expense in the Company’s Consolidated Statements of Operations. Amortization expense related to deferred commissions totaled $64.3 million and $56.2 million for the three months ended May 31, 2019 and May 31, 2018 , respectively. There was no impairment loss in relation to the costs capitalized for the periods presented. |
Derivative Instruments
Derivative Instruments | 3 Months Ended |
May 31, 2019 | |
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. From time to time, the Company 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 recognized in 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 recognized in the Consolidated Statements of Operations. See NOTE 16 —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 (in thousands): May 31, 2019 Classification of Three Months Ended May 31, 2019 Balance Sheet Fair Notional Assets—foreign currency forward contracts not designated as hedges Other current assets $ 233 $ 18,185 Other expense, net $ 645 Liabilities—foreign currency forward contracts not designated as hedges Accounts payable and accrued expenses (173 ) 42,821 Other expense, net (651 ) Total $ 60 $ 61,006 $ (6 ) May 31, 2018 Classification of Three Months Ended May 31, 2018 Balance Sheet Fair Notional Assets—foreign currency forward contracts not designated as hedges Other current assets $ 111 $ 21,554 Other expense, net $ 289 Liabilities—foreign currency forward contracts not designated as hedges Accounts payable and accrued expenses (790 ) 28,112 Other expense, net (1,136 ) Total $ (679 ) $ 49,666 $ (847 ) |
Income Taxes
Income Taxes | 3 Months Ended |
May 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The effective tax rate for the three months ended May 31, 2019 of (1.8)% differed from the U.S. federal statutory rate of 21% primarily due to excess tax benefits from share-based compensation, research tax credits and other discrete net tax benefits primarily related to an intra-entity transfer of assets. Tax expense for the three months ended May 31, 2019 included net discrete tax benefits of $28.8 million . For the three months ended May 31, 2018 , the Company’s then-effective tax rate of (1.5)% differed from the U.S. federal statutory rate of 21% primarily due to excess tax benefits from share-based compensation and research tax credits. Tax expense for the three months ended May 31, 2018 , included net discrete tax benefits of $26.8 million 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 Company believes that some of these audits and negotiations may conclude during the next 12 months. As of May 31, 2019 , it is reasonably possible that total unrecognized tax benefits, including interest, may be reduced by approximately $68.2 million within the next 12 months primarily as a result of audit settlements in various tax jurisdictions , most of which would affect the Company’s effective tax rate. |
Convertible Notes
Convertible Notes | 3 Months Ended |
May 31, 2019 | |
Debt Disclosure [Abstract] | |
Convertible Notes | Convertible Notes Convertible note offering On October 7, 2014, the Company completed its offering of $805.0 million aggregate principal amount of the 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 12—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, 2019 . 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. Effective 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. Upon conversion of the convertible notes on or after April 1, 2019, holders will receive on October 1, 2019 cash equal to the principal amount of the notes converted and shares of the Company’s common stock for the excess conversion value; provided that if the Merger is completed prior to October 1, 2019, then converting holders will receive cash for each $1,000 principal amount of convertible notes being converted equal to the conversion rate then in effect multiplied by the same per share cash consideration a common stockholder would receive in the Merger, subject to certain adjustments. During the first quarter of the fiscal year ending February 29, 2020 , the Company settled notices of conversion with respect to $116.2 million aggregate principal amount of the convertible notes and elected to settle such conversions by paying cash for the principal amount and issuing 943,513 shares of common stock for the excess conversion value. The Company recognized a loss on settled conversions of $0.2 million for the three months ended May 31, 2019 . Total settled conversions as of May 31, 2019 amounted to $614.6 million aggregate principal amount of the convertible notes. The Company settled conversions of $3.0 million in principal amount of the convertible notes in the second quarter of the fiscal year ending February 29, 2020 by paying cash for the principal amount and issuing shares of common stock for the excess conversion value. Based on the closing price of the Company’s common stock of $184.30 on the last trading day of the first quarter of the fiscal year ending February 29, 2020 , the if-converted value of the convertible notes as of May 31, 2019 exceeded their principal amount by approximately $287.6 million . The Company classified the net carrying amount of the convertible notes as a current liability as it is expected to be cash-settled on or prior to October 1, 2019. The equity component of the convertible notes continues to be classified as additional paid-in capital as of May 31, 2019 because the Company had the option to settle the principal amount in shares. 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 events 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 interest up to but excluding the fundamental change purchase date. If the Merger with IBM is consummated, it will constitute a “fundamental change” under the Indenture. 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. In addition, the debt discount is impacted by the derecognition of the original debt discount on early settlements of convertible notes. The convertible notes consisted of the following (in thousands): May 31, 2019 February 28, 2019 Liability component: Principal $ 190,396 $ 306,552 Less: debt issuance costs (211 ) (595 ) Less: debt discount (1,632 ) (4,590 ) Net carrying amount $ 188,553 $ 301,367 Equity component (1) $ 22,916 $ 36,897 __________ (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 (in thousands): Three Months Ended May 31, 2019 May 31, 2018 Coupon rate 0.25% per year, payable semiannually $ 69 $ 471 Amortization of convertible note issuance costs — liability component 384 831 Accretion of debt discount 1,501 5,007 Total interest expense related to convertible notes $ 1,954 $ 6,309 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 convertible notes (the carrying value excludes the equity component of the convertible notes classified in equity) is as follows (in thousands): May 31, 2019 Fair Value Carrying Value Convertible notes $ 188,798 $ 188,553 Convertible note hedge 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. In connection with the conversions of the convertible notes that settled in the first quarter of the fiscal year ending February 29, 2020 , the Company exercised a portion of the options that are part of the convertible note hedge transactions for 954,731 shares of the Company’s common stock. The convertible note hedge transactions are expected to offset, to the extent the Company’s common stock per share price does not exceed the $101.65 strike price of the warrants, which is subject to adjustments upon the occurrence of certain events, 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. For the three months ended May 31, 2019 and May 31, 2018 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
May 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies 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. Payments pursuant to these indemnification claims during the three months ended May 31, 2019 and May 31, 2018 were, in the aggregate, immaterial. |
Legal Proceedings
Legal Proceedings | 3 Months Ended |
May 31, 2019 | |
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. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
May 31, 2019 | |
Equity [Abstract] | |
Stockholders' Equity | Stockholders’ Equity The following table summarizes the changes in the Company’s stockholders’ equity during the three months ended May 31, 2019 (in thousands): Common Stock Additional Retained Treasury Accumulated Total Shares Amount Balance at February 28, 2019 244,403 $ 24 $ 2,791,895 $ 2,054,069 $ (3,189,434 ) $ (42,622 ) $ 1,613,932 Net income — — — 141,120 — — 141,120 Other comprehensive loss, net of tax — — — — — (5,036 ) (5,036 ) Vest and exercise of share-based awards 944 1 368 — — — 369 Common stock repurchase — — — — — — — Share-based compensation expense — — 50,168 — — — 50,168 Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards — — (81,274 ) — — — (81,274 ) Re-issuance of treasury stock under employee stock purchase plan — 23,323 — 16,614 — 39,937 Convertible note conversions 943 — (1,296 ) — — — (1,296 ) Exercises of convertible note hedges — — 69,380 — (69,364 ) — 16 Other adjustments 541 — (541 ) — — Balance at May 31, 2019 246,290 $ 25 $ 2,853,105 $ 2,195,189 $ (3,242,725 ) $ (47,658 ) $ 1,757,936 The following table summarizes the changes in the Company’s stockholders’ equity during the three months ended May 31, 2018 (in thousands): Common Stock Additional Retained Treasury Accumulated Total Shares Amount Balance at February 28, 2018 238,689 $ 24 $ 2,416,080 $ 1,619,688 $ (2,525,072 ) $ (32,596 ) $ 1,478,124 Net income — — — 113,190 — — 113,190 Other comprehensive loss, net of tax — — — — — (10,905 ) (10,905 ) Vest and exercise of share-based awards 905 — 875 — — — 875 Common stock repurchase — — (17,175 ) — (132,844 ) — (150,019 ) Share-based compensation expense — — 46,005 — — — 46,005 Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards — — (77,094 ) — — — (77,094 ) Re-issuance of treasury stock under employee stock purchase plan — 18,471 — 13,740 — 32,211 Convertible note conversions 185 — (835 ) — — — (835 ) Exercises of convertible note hedges — 13,598 — (13,598 ) — — Cumulative-effect adjustment from adoption of ASU 2016-01 — — 392 — — 392 Balance at May 31, 2018 239,779 $ 24 $ 2,399,925 $ 1,733,270 $ (2,657,774 ) $ (43,501 ) $ 1,431,944 Share repurchase programs On June 21, 2018, 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 new program commenced on July 1, 2018, and will expire on the earlier of (i) June 30, 2020 or (ii) a determination by the board of directors, Chief Executive Officer or Chief Financial Officer to discontinue the program. The new program replaced the previous $1.0 billion repurchase program, which expired on June 30, 2018 . During the three months ended May 31, 2019 , the Company did not repurchase any shares of its common stock under this repurchase plan program. From its commencement on July 1, 2018 through May 31, 2019 , the Company repurchased 1,838,241 shares of its common stock at an aggregate cost of $262.8 million under this repurchase program. As of May 31, 2019 , the amount available under this program for the repurchase of the Company’s common stock was $737.2 million , which remains unchanged from February 28, 2019. Pursuant to the Merger Agreement, the Company does not anticipate additional repurchases of the Company’s common stock prior to the consummation of the Merger with IBM. Accumulated other comprehensive loss Accumulated other comprehensive loss was comprised of the following (in thousands): May 31, 2019 February 28, 2019 Accumulated loss from foreign currency translation adjustment, net of tax $ (47,756 ) $ (41,500 ) Accumulated unrealized gain (loss), net of tax, on available-for-sale securities 98 (1,122 ) Accumulated other comprehensive loss $ (47,658 ) $ (42,622 ) |
Deferred Revenue and Performanc
Deferred Revenue and Performance Obligations | 3 Months Ended |
May 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Deferred Revenue and Performance Obligations | Deferred Revenue and Performance Obligations Activity in the Company’s deferred revenue accounts is presented in the following table (in thousands): February 28, 2019 Revenue recognized from opening balance Deferred revenue, net (1) May 31, 2019 Deferred revenue, short-term $ 2,161,206 $ (705,210 ) $ 560,492 $ 2,016,488 Deferred revenue, long-term 821,218 — (40,175 ) 781,043 Total deferred revenue $ 2,982,424 $ (705,210 ) $ 520,317 $ 2,797,531 ____________________ (1) Includes revenue recognized from current period customer contracts and the impact from foreign currency exchange rate fluctuations. As of May 31, 2019 , the value of customer contracts allocated to performance obligations not yet satisfied, including $2.80 billion of total deferred revenue, was approximately $3.75 billion , of which approximately 60% is expected to be recognized as revenue within the next 12 months and the remainder thereafter. In addition to the approximately $3.75 billion of customer contract value allocated to performance obligations not yet satisfied, as of May 31, 2019 , the Company has offered customers options to purchase additional services at an agreed-upon price per hour that total approximately $163.9 million . The summation of the customer contract value allocated to performance obligations not yet satisfied and the options to purchase additional services equals approximately $3.91 billion , which the Company considers as its total backlog. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
May 31, 2019 | |
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 available to common stockholders 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, vesting of share-based awards, settlement of convertible notes, or exercise of warrants. The following table reconciles the numerators and denominators of the earnings per share (“EPS”) calculation (in thousands, except per share amounts): Three Months Ended May 31, 2019 May 31, 2018 Net income available to common stockholders $ 141,120 $ 113,190 Weighted average common shares outstanding 177,400 177,302 Incremental shares attributable to assumed vesting or exercise of outstanding equity award shares 2,803 3,833 Dilutive effect of convertible notes 1,554 5,686 Dilutive effect of warrants 4,878 3,918 Diluted shares 186,635 190,739 Diluted net income per share $ 0.76 $ 0.59 With respect to the Company’s convertible notes, the Company will 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 9 —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 months ended May 31, 2019 and May 31, 2018 . For the three months ended May 31, 2019 and May 31, 2018 , the warrants were included in the computation of diluted EPS because the warrants’ exercise price was less than the average market price of the Company’s common stock during the related period. The following share awards are 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 May 31, 2019 May 31, 2018 Number of shares considered anti-dilutive for calculating diluted EPS 43 — |
Share-based Awards
Share-based Awards | 3 Months Ended |
May 31, 2019 | |
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 (in thousands): Three Months Ended May 31, 2019 May 31, 2018 Cost of revenue $ 4,945 $ 5,128 Sales and marketing 21,904 19,520 Research and development 16,002 14,782 General and administrative 7,317 6,575 Total share-based compensation expense (1) $ 50,168 $ 46,005 __________ (1) Total share-based compensation expense included $1.7 million and $4.0 million , respectively, of expense related to the Company’s employee stock purchase plan (“ESPP”) for the three months ended May 31, 2019 and May 31, 2018 . Share-based compensation expense qualifying for capitalization was insignificant for each of the three months ended May 31, 2019 and May 31, 2018 . Accordingly, no share-based compensation expense was capitalized during these periods. The following table summarizes the Company’s share-based awards granted, by type: Three Months Ended May 31, 2019 May 31, 2018 Shares and Share Units Underlying Awards Weighted Shares and Weighted Service-based shares and share units 885,436 (1)(2) $ 183.37 669,450 (1) $ 160.53 Performance share units—target — $ — 173,014 $ 163.56 Performance share awards — $ — 64,219 (2) $ 163.56 Total share-based awards 885,436 $ 183.37 906,683 $ 161.32 _________ (1) Service-based shares and share units granted during the three months ended May 31, 2019 include 639,439 share units that vest over a three-year period with one-third vesting on the first anniversary of the grant date and one-twelfth vesting quarterly over the remaining two years and 56,487 share units that vest over a three-year period with one-third vesting annually over the three-year period. Service-based share units granted during the three months ended May 31, 2018 vest over a four-year period with one-quarter vesting annually over the four- year period. (2) Service-based shares and share units granted during the three months ended May 31, 2019 include 189,510 restricted stock awards that vest over a three-year period with one-third vesting annually over the three-year period. Restricted stock awards granted during the three months ended May 31, 2018 were subject to the achievement of a specified dollar amount of revenue for fiscal 2019 (the “RSA Performance Goal”). Since the Company achieved the RSA Performance Goal, 25% of the restricted stock vests on or about July 16, 2019, 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. |
Assets and Liabilities Measured
Assets and Liabilities Measured at Fair Value on a Recurring Basis | 3 Months Ended |
May 31, 2019 | |
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 by 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 that 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 at May 31, 2019 (in thousands): May 31, 2019 Level 1 Level 2 Level 3 Assets: Money markets (1) $ 901,570 $ 901,570 $ — $ — Available-for-sale securities (1) : Commercial paper 255,780 — 255,780 — U.S. agency securities 203,135 — 203,135 — Corporate securities 162,662 — 162,662 — Foreign currency derivatives (2) 233 — 233 — Liabilities: Foreign currency derivatives (3) (173 ) — (173 ) — Total $ 1,523,207 $ 901,570 $ 621,637 $ — __________ (1) Included in Cash, cash equivalents and restricted cash, Investments in debt securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet at May 31, 2019 , in addition to $1.14 billion of cash. (2) Included in Other current assets in the Company’s Consolidated Balance Sheet at May 31, 2019 . (3) Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet at May 31, 2019 . The following table summarizes the composition and fair value hierarchy of the Company’s financial assets and liabilities at February 28, 2019 (in thousands): February 28, 2019 Level 1 Level 2 Level 3 Assets: Money markets (1) $ 398,056 $ 398,056 $ — $ — Interest-bearing deposits (1) 56,883 — 56,883 — Available-for-sale securities (1) : Commercial paper 541,753 — 541,753 — U.S. agency securities 222,298 — 222,298 — Corporate securities 262,692 — 262,692 — Foreign currency derivatives (2) 24 — 24 — Liabilities: Foreign currency derivatives (3) (245 ) — (245 ) — Total $ 1,481,461 $ 398,056 $ 1,083,405 $ — __________ (1) Included in Cash, cash equivalents and restricted cash, Investments in debt securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet at February 28, 2019 , in addition to $943.3 million of cash. (2) Included in Other current assets in the Company’s Consolidated Balance Sheet at February 28, 2019 . (3) Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet at February 28, 2019 . The following table represents the Company’s investments measured at fair value as of May 31, 2019 (in thousands): Balance Sheet Classification Amortized Gross Unrealized Aggregate Cash Equivalent Marketable Securities Investments in debt securities, short-term Investments in debt securities, long-term Gains Losses (1) Money markets $ 901,570 $ — $ — $ 901,570 $ 901,570 $ — $ — Commercial paper 255,780 — — 255,780 255,780 — — U.S. agency securities 203,746 13 (624 ) 203,135 — 68,682 134,453 Corporate securities 162,629 284 (251 ) 162,662 — 108,943 53,719 Total $ 1,523,725 $ 297 $ (875 ) $ 1,523,147 $ 1,157,350 $ 177,625 $ 188,172 __________ (1) As of May 31, 2019 , there were $0.9 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 investments with unrealized losses was $268.0 million . The following table summarizes the stated maturities of the Company’s investment in available-for-sale securities (in thousands): As of May 31, 2019 Less than 1 Year 1-5 Years More than 5 Years Maturity of available-for-sale debt securities $ 365,797 $ 177,625 $ 188,172 $ — The following table represents the Company’s investments measured at fair value as of February 28, 2019 (in thousands): Balance Sheet Classification Amortized Gross Unrealized Aggregate Cash Equivalent Marketable Securities Investments in debt securities, short-term Investments in debt securities, long-term Gains Losses (1) Money markets $ 398,056 $ — $ — $ 398,056 $ 398,056 $ — $ — Interest-bearing deposits 56,883 — — 56,883 — 56,883 — Commercial paper 541,753 — — 541,753 541,753 — — U.S. agency securities 224,293 — (1,995 ) 222,298 — 75,037 147,261 Corporate securities 263,059 299 (666 ) 262,692 — 161,441 101,251 Total $ 1,484,044 $ 299 $ (2,661 ) $ 1,481,682 $ 939,809 $ 293,361 $ 248,512 __________ (1) As of February 28, 2019 , there were $2.6 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 investments with unrealized losses was $387.8 million . |
Segment Reporting
Segment Reporting | 3 Months Ended |
May 31, 2019 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting The Company is organized primarily on the basis of three geographic business units: the Americas (U.S., Canada and Latin America), 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; income (loss) from operations; total cash, cash equivalents and available-for-sale investment securities and total assets by geographic segment (in thousands): Americas EMEA Asia Pacific Corporate (1) Consolidated Three Months Ended May 31, 2019 Revenue from unaffiliated customers $ 582,290 $ 216,951 $ 134,870 $ — $ 934,111 Income (loss) from operations $ 83,555 $ 54,909 $ 43,822 $ (50,168 ) $ 132,118 Total cash, cash equivalents, restricted cash and available-for-sale investment securities $ 1,429,795 $ 730,228 $ 501,170 $ — $ 2,661,193 Total assets $ 3,567,096 $ 1,258,782 $ 748,061 $ — $ 5,573,939 Three Months Ended May 31, 2018 Revenue from unaffiliated customers $ 500,306 $ 195,148 $ 118,076 $ — $ 813,530 Income (loss) from operations $ 71,864 $ 48,860 $ 37,437 $ (46,005 ) $ 112,156 Total cash, cash equivalents, restricted cash and available-for-sale investment securities $ 1,524,311 $ 576,171 $ 426,647 $ — $ 2,527,129 Total assets $ 3,559,900 $ 1,015,187 $ 616,474 $ — $ 5,191,561 _______________ (1) Amounts represent share-based compensation expense that was not allocated to geographic segments. Supplemental information about geographic areas The Company approximates its geographic sources of revenue based on the country of origin of its non-cancellable subscription and service agreements initiated during the year (commonly referred to as bookings). The following table lists revenue from unaffiliated customers in the U.S., the Company’s country of domicile, and revenue from foreign countries (in thousands): Three Months Ended May 31, 2019 May 31, 2018 U.S., the Company’s country of domicile $ 511,716 $ 442,421 Foreign 422,395 371,109 Total revenue from unaffiliated customers $ 934,111 $ 813,530 Total tangible long-lived assets located in the U.S., the Company’s country of domicile, and similar tangible long-lived assets held outside the U.S. are summarized in the following table (in thousands): May 31, 2019 February 28, 2019 U.S., the Company’s country of domicile $ 131,071 $ 129,387 Foreign 68,944 69,582 Total tangible long-lived assets $ 200,015 $ 198,969 Supplemental information about major customers For each of the three months ended May 31, 2019 and May 31, 2018 , the U.S. government and its agencies represented in the aggregate approximately 11% and 10% of the Company’s total revenue, respectively. Supplemental information about products and services The following table provides further detail, by type, of the Company’s subscription and services revenues. Subscription revenue for infrastructure-related offerings includes subscription revenue generated from Red Hat Enterprise Linux and related technologies such as Red Hat Satellite and Red Hat Virtualization. Subscription revenue generated from the Company’s Application Development-related and other emerging technology offerings includes Red Hat Middleware, Red Hat OpenShift, Red Hat Cloud Infrastructure, Red Hat OpenStack Platform, Red Hat Ansible Automation, Red Hat CloudForms and Red Hat Storage technologies (in thousands): Three Months Ended May 31, 2019 May 31, 2018 Subscription revenue: Infrastructure-related offerings $ 580,306 $ 522,402 Application Development-related and other emerging technology offerings 234,646 189,119 Total subscription revenue 814,952 711,521 Training and services revenue: Consulting services 93,423 79,147 Training 25,736 22,862 Total training and services revenue 119,159 102,009 Total revenue $ 934,111 $ 813,530 |
Business Combinations
Business Combinations | 3 Months Ended |
May 31, 2019 | |
Business Combinations [Abstract] | |
Business Combinations | Business Combinations Acquisition of Y.G. Noobaa Ltd. On November 27, 2018, the Company completed the acquisition of all of the shares of Y.G. Noobaa Ltd. (“Noobaa”). The addition of Noobaa, an early stage company developing software for managing data storage services, complements and enhances the Company’s portfolio of hybrid cloud technologies, including Red Hat OpenShift Container Platform, Red Hat OpenShift Container Storage and Red Hat Ceph Storage. The consideration paid was $11.8 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 $11.8 million was allocated to the Company’s assets and liabilities on a preliminary basis as follows: $3.5 million to goodwill, $9.3 million to identifiable intangible assets and $1.0 million to working capital as a net current liability. Pro forma consolidated financial information Pro forma consolidated financial information for the three months ended May 31, 2019 has not been provided because the acquisition of Noobaa would not have had a significant impact on consolidated operating results if the acquisition had closed on March 1, 2018. Goodwill and other business combinations The following is a summary of goodwill (in thousands): Balance at February 28, 2019 $ 1,276,853 Impact of foreign currency fluctuations (3,359 ) Balance at May 31, 2019 $ 1,273,494 The excess of purchase price paid for Noobaa 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, 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. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
May 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation The unaudited interim consolidated financial statements as of and for the three months ended May 31, 2019 have been prepared by the Company pursuant to the rules and regulations of 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 U.S. (“U.S. GAAP”). Operating results for the three months ended May 31, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending February 29, 2020 . 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, 2019 . Other than the accounting pronouncement adopted during the three months ended May 31, 2019 related to accounting for leases as described below, 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, 2019 . The Company adopted Accounting Standards Update 2016-02, Leases , now commonly referred to as Accounting Standards Codification Topic 842 (“ASC 842”), effective March 1, 2019, using the modified retrospective method, which does not require adjustments to comparative periods nor require modified disclosures in those comparative periods. Certain amounts for the three months ended May 31, 2018 have been reclassified to conform to the current period presentation. The Company’s fiscal year ends on the last day of February, and the Company identifies fiscal years by the calendar years in which they end. For example, the fiscal year ending February 29, 2020 is referred to as “fiscal 2020 .” |
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 are eliminated in consolidation. There are no significant foreign exchange restrictions on 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. Estimates are used for, but not limited to, revenue recognition, goodwill and other long-lived assets, share-based compensation, income taxes and loss contingencies. |
Revenue recognition | Revenue recognition The Company derives its revenues from subscription contracts and training and service contracts. Revenue is recognized when performance obligations, as stipulated in the contracts, are transferred to a customer for an amount that reflects the consideration the Company expects to receive in exchange for those subscription contracts and training and service contracts. The Company applies the following five steps to recognize revenue: 1) Identify the contract with a customer. The Company determines that it has a contract with a customer when the contract is approved, the party’s rights regarding the products and services to be transferred can be identified, the payment terms for the products and services are identified, the customer’s ability and intent to pay can be determined, and the contract has commercial substance. Judgment is used to assess the customer’s ability and intent to pay, which is based upon factors including the customer’s historical payment experience or credit and financial information pertaining to the customer. 2) Identify the performance obligations in the contract. The Company’s performance obligations are identified based on the products and services that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract and consist of (i) subscription offerings, including non-proprietary open-source software code delivered to the customer, software support subscriptions delivered to the customer, software support subscriptions embedded in partner products and learning subscriptions and (ii) training and services, including professional services sold at a fixed fee, professional services sold on a time-and-material-basis, training courses or units, and consulting units. In limited cases, the option to purchase additional subscription offerings or training and services may be offered at a price representing a material right. In such cases, the option to purchase is considered a distinct performance obligation. 3) Determine the transaction price. The Company determines transaction price based on the consideration expected to be received in exchange for transferring certain performance obligations to the customer. In determining the transaction price, variable consideration, if any, would be considered if, in management’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. The Company’s contracts do not contain significant financing components. Specifically, the Company does not typically extend customer payment terms beyond a standard 30 - to 60 -day term and as a result the Company has elected the one-year-or-less safe harbor expedient and does not impute any interest. The Company has elected to exclude all taxes from the transaction price (e.g., sales, use, value-added, etc.). Revenue is recognized net of such taxes. 4) Allocate the transaction price to performance obligations in the contract. When a contract contains a single performance obligation, the entire transaction price is allocated to that one performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”). The Company typically determines SSP based on the observable price when the Company sells the subscriptions or training and services separately, taking into consideration the geographical region of the customer, type of offering and sales channel. In instances where SSP is not directly observable, the Company determines SSP either from the renewal rate paid for the performance obligation to the extent it is the same rate as stipulated in the initial customer contract or by using the expected-cost-plus-margin approach. 5) Recognize revenue when or as the performance obligation is satisfied. Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised subscription offerings and training and services to a customer. For each performance obligation, a determination is made as to whether the control is transferred over time or at a point in time. For performance obligations satisfied over time, a method to measure progress toward complete satisfaction is selected, based upon the most faithful depiction of performance. The selected method for each performance obligation type is applied consistently to similar contracts. Subscription revenue Subscription revenue is comprised of direct and indirect sales of subscriptions relating to Red Hat technologies. Accounts receivable and deferred revenue are recorded at the time a customer enters into a binding and non-cancellable subscription agreement for the purchase of a subscription, subscription services are made available to the customer and the customer is billed. The deferred revenue amount is recognized as revenue ratably over the subscription period. Red Hat technologies are generally offered with base subscription periods of either one year or three years ; the majority of the Company’s subscriptions have terms of one year. Under these subscription agreements, renewal rates are generally specified for renewal terms of one year or three years . Subscriptions generally entitle the end user to the technology itself and post-contract customer support, generally consisting of varying levels of support services as well as access to security updates, fixes, functionality enhancements, upgrades to the technologies, each on an if and when available basis, and compatibility with an ecosystem of certified hardware and software, during the term of the subscription. The Company sells its offerings through two principal channels: (1) direct, which includes sales by the Company’s sales force as well as web store sales, and (2) indirect, which includes certified cloud and service providers (“CCSPs”), distributors, original equipment manufacturers (“OEMs”), systems integrators and value added resellers. The Company recognizes revenue from the sale of Red Hat technologies ratably over the period of the subscription beginning on the commencement date of the subscription agreement. The Company has determined that the delivery of software code underlying the subscription is a distinct performance obligation as it is both capable of being distinct and is distinct within the context of a customer contract. The Company uses a non-proprietary open source development and licensing model to provide its software technologies to customers and therefore the amount of transaction price allocated to the underlying software code is negligible. The Company derives a portion of its revenue from CCSPs that provide public clouds with, and allow users to consume, computing resources as a service. The Company earns revenue based on subscription units consumed by the CCSP or its end users. The Company uses its historical cloud-usage data to estimate the amount of revenue earned and recognized each month and adjusts to actual amounts earned upon receipt of usage reports from the CCSPs in the following month. The differences between actual amounts earned and estimates made have generally been insignificant. Training and services revenue Training and services revenue is comprised of revenue for consulting, engineering and customer training courses or units and education services. Consulting services consist of time-based units or fixed-fee arrangements. For time-based arrangements, revenue is recognized over time as these services are performed and for fixed-fee arrangements, revenue is recognized based on the proportion of services performed. Engineering services represent revenue earned under fixed-fee arrangements with the Company’s OEM partners and other customers to provide for significant modification and customization of Red Hat technologies. The Company recognizes revenue for these fixed-fee engineering services based on a proportional performance basis using actual costs incurred to date over the estimated total projected costs, which includes a representative profit margin. A representative profit margin is determined based on analysis of a population of similar contracts by region. Revenue for customer training and education services is recognized on the dates the services are performed. See NOTE 17 —Segment Reporting for further information, including revenue by geographic area and significant product and service offerings. Contract Balances |
Accounts receivable and allowance for doubtful accounts | Accounts receivable and allowance for doubtful accounts |
Deferred selling costs | Deferred selling costs |
Leases | Leases The Company determines if an arrangement is a lease at inception. As part of that determination, the Company considers whether there is an implicitly or explicitly identified asset in an arrangement and whether the Company, as the lessee, has the right to control that asset. Operating leases are included in operating right-of-use (“ROU”) assets, accounts payable and accrued expenses, and operating lease liabilities in the Company’s Consolidated Balance Sheets. Finance leases are included in property and equipment, other current obligations, and other long-term obligations in the Company’s Consolidated Balance Sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Variable lease payments, other than those based on a rate or index, are not included in the recognition of ROU assets and lease liabilities but instead are recognized in the Consolidated Statement of Operations in the period in which the obligation for those payments is incurred. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit borrowing rate, the Company’s incremental borrowing rate at commencement date is used to determine the present value of lease payments. The lease terms may include options to extend or to purchase when it is reasonably certain that the Company will exercise those options. For termination options, the Company will adjust the lease term unless it is reasonably certain that the option will not be taken. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease arrangements with both lease and non-lease components, which are generally accounted for as a single lease component. Additionally, for certain equipment leases, the Company applies a portfolio approach to effectively account for the operating lease ROU assets and liabilities. |
Recent accounting pronouncements | Recent accounting pronouncements Accounting pronouncements adopted In August 2018, the FASB issued Accounting Standards Update 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) (“ASU 2018-15”). The FASB issued ASU 2018-15 to align the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred for an internal-use software license. The Company early adopted this standard effective March 1, 2019. The adoption of this standard did not significantly impact the Company’s 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 by requiring the recognition of ROU assets and lease liabilities on the balance sheet. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Along with ASU 2016-02, the Company also adopted Accounting Standards Update 2018-10, Codification Improvements to Topic 842 Leases (“ASU 2018-10”), Accounting Standards Update 2018-11, Targeted Improvements to Topic 842 Leases (“ASU 2018-11”), Accounting Standards Update 2018-20, Leases (Topic 842) Narrow-Scope Improvements for Lessors (“ASU 2018-20”) and Accounting Standards Updated 2019-01, Leases (Topic 842): Codification Improvements (“ASU 2019-01”), now commonly referred to as Accounting Standards Codification Topic 842 (“ASC 842”). The Company adopted ASC 842 as of March 1, 2019. The Company adopted ASC 842 using the transition method, which does not require adjustments to comparative periods nor require modified disclosures in those comparative periods. The Company elected the transition package of practical expedients permitted within the new standard, which among other things, allows the carryforward of the historical lease classification. Further, upon adoption of the new guidance, the Company elected the practical expedients to combine lease and non-lease components for all asset classes and to not recognize ROU assets and lease liabilities for short-term leases for all asset classes. ASC 842 had a material impact on the Company’s Consolidated Balance Sheets, but did not have an impact on the Consolidated Statements of Operations. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases. At adoption, the Company recognized operating ROU assets of $237.4 million and operating lease liabilities of $244.5 million . Finance leases are not significant to the Company’s financials. The transition adjustment recognized in retained earnings as of March 1, 2019, was not material. See NOTE 4 —Leases for further information on the Company’s lease arrangements. |
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 over the estimated useful life or the related asset’s pattern of economic benefit. Useful lives range from two years to 10 years |
Derivative Instruments | The Company transacts business in various foreign countries and is, therefore, subject to risk of foreign currency exchange rate fluctuations. From time to time, the Company 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 recognized in 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 recognized 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 |
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 by 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 that 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. |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 3 Months Ended |
May 31, 2019 | |
Receivables [Abstract] | |
Schedule of Credit Losses for Financing Receivables, Current | Accounts receivable are presented net of an allowance for doubtful accounts. Activity in the Company’s allowance for doubtful accounts is presented in the following table (in thousands): As of Balance at beginning of period Charged to (recovery of) expense Adjustments (1) Balance at end of period February 28, 2019 $ 2,167 3,247 (853 ) $ 4,561 May 31, 2019 $ 4,561 (195 ) 86 $ 4,452 _______________ (1) Represents foreign currency translation adjustments and amounts written-off as uncollectible accounts receivable. |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
May 31, 2019 | |
Leases [Abstract] | |
Schedule of Right-of-Use Assets and Lease Liabilities | Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate): Balance Sheet Classification May 31, 2019 February 28, 2019 Assets: Operating Operating right-of-use assets, net $ 224,371 $ — Finance Property and equipment, net of accumulated depreciation and amortization 579 281 Total leased assets $ 224,950 $ 281 Liabilities: Current: Operating Accounts payable and accrued expenses $ 46,633 $ — Finance Other current obligations 256 282 Long-term: Operating Operating lease liabilities 188,133 — Finance Other long-term obligations 336 6 Total lease liabilities $ 235,358 $ 288 |
Schedule of Lease Term and Discount Rate | Supplemental information related to leases was as follows: May 31, 2019 Weighted average remaining lease term: Operating leases 7.33 years Finance leases 3.45 years May 31, 2019 Weighted average discount rate: Operating leases 3.7 % Finance leases 3.3 % |
Schedule of components of lease expense | The components of lease expense were as follows (in thousands): Three Months Ended Statement of Operations Classification May 31, 2019 May 31, 2018 Operating lease expense Cost of revenue, Operating expense $ 14,666 see note (1) Variable lease expense Cost of revenue, Operating expense 1,176 see note (1) Finance lease expense: Amortization of leased assets Cost of revenue, Operating expense 146 276 Interest on lease liabilities Interest expense 6 7 Total lease expense (2) $ 15,994 $ 283 ____________________ (1) Rent expense under operating leases was $13.4 million for the three months ended May 31, 2018. (2) Sublease income is recognized as a reduction to operating expense in the Consolidated Statement of Operations and is not material. |
Schedule of supplemental cash flow information related to leases | Supplemental cash flow information related to leases was as follows (in thousands): Three Months Ended May 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 14,043 Operating cash outflows from finance leases $ 6 Financing cash outflows from finance leases $ 112 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 762 Finance leases $ 133 |
Schedule of maturities of lease liabilities | Maturities of lease liabilities were as follows (in thousands): Fiscal Year Operating leases Finance leases 2020 (excluding the three months ended May 31, 2019) $ 40,737 $ 258 2021 47,858 101 2022 42,467 101 2023 33,438 101 2024 26,339 82 Thereafter 79,125 — Total lease payments 269,964 643 Less imputed interest (35,198 ) (51 ) Total $ 234,766 $ 592 |
Schedule of future minimum payments for operating and capital lease | The following table, which was included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2019 , depicts gross minimum lease payments under non-cancellable operating and capital leases (in thousands): Fiscal Year Operating Leases Capital Leases 2020 $ 60,722 $ 282 2021 51,060 6 2022 41,173 — 2023 32,016 — 2024 27,479 — Thereafter 79,530 — Total minimum lease payments $ 291,980 $ 288 |
Identifiable Intangible Assets
Identifiable Intangible Assets (Tables) | 3 Months Ended |
May 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived Intangible Assets | The following is a summary of identifiable intangible assets (in thousands): May 31, 2019 February 28, 2019 Gross Accumulated Net Gross Accumulated Net Trademarks, copyrights and patents $ 180,240 $ (86,132 ) $ 94,108 $ 176,704 $ (82,967 ) $ 93,737 Purchased technologies 218,561 (118,705 ) 99,856 219,196 (113,617 ) 105,579 Customer and reseller relationships 105,562 (102,047 ) 3,515 105,737 (100,947 ) 4,790 Covenants not to compete 15,661 (14,800 ) 861 15,787 (14,728 ) 1,059 Other intangible assets 8,833 (8,259 ) 574 8,833 (7,915 ) 918 Total identifiable intangible assets $ 528,857 $ (329,943 ) $ 198,914 $ 526,257 $ (320,174 ) $ 206,083 |
Schedule of Amortization Expense Associated with Identifiable Intangible Assets | Amortization expense associated with identifiable intangible assets recognized in the Company’s Consolidated Financial Statements is summarized as follows (in thousands): Three Months Ended May 31, 2019 May 31, 2018 Cost of revenue $ 6,660 $ 6,485 Sales and marketing 1,194 1,362 Research and development 34 34 General and administrative 2,517 2,373 Total amortization expense $ 10,405 $ 10,254 |
Deferred Selling Costs (Tables)
Deferred Selling Costs (Tables) | 3 Months Ended |
May 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Deferred Sales Commissions | Current and non-current deferred commissions are included in Prepaid expenses and Other assets, respectively, in the Company’s Consolidated Balance Sheets and are as follows (in thousands): May 31, 2019 February 28, 2019 Deferred commissions, current $ 183,462 $ 201,971 Deferred commissions, non-current 45,860 47,849 Total deferred commissions $ 229,322 $ 249,820 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 3 Months Ended |
May 31, 2019 | |
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 (in thousands): May 31, 2019 Classification of Three Months Ended May 31, 2019 Balance Sheet Fair Notional Assets—foreign currency forward contracts not designated as hedges Other current assets $ 233 $ 18,185 Other expense, net $ 645 Liabilities—foreign currency forward contracts not designated as hedges Accounts payable and accrued expenses (173 ) 42,821 Other expense, net (651 ) Total $ 60 $ 61,006 $ (6 ) May 31, 2018 Classification of Three Months Ended May 31, 2018 Balance Sheet Fair Notional Assets—foreign currency forward contracts not designated as hedges Other current assets $ 111 $ 21,554 Other expense, net $ 289 Liabilities—foreign currency forward contracts not designated as hedges Accounts payable and accrued expenses (790 ) 28,112 Other expense, net (1,136 ) Total $ (679 ) $ 49,666 $ (847 ) |
Convertible Notes (Tables)
Convertible Notes (Tables) | 3 Months Ended |
May 31, 2019 | |
Debt Disclosure [Abstract] | |
Components of Convertible Notes | The convertible notes consisted of the following (in thousands): May 31, 2019 February 28, 2019 Liability component: Principal $ 190,396 $ 306,552 Less: debt issuance costs (211 ) (595 ) Less: debt discount (1,632 ) (4,590 ) Net carrying amount $ 188,553 $ 301,367 Equity component (1) $ 22,916 $ 36,897 __________ (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 (in thousands): Three Months Ended May 31, 2019 May 31, 2018 Coupon rate 0.25% per year, payable semiannually $ 69 $ 471 Amortization of convertible note issuance costs — liability component 384 831 Accretion of debt discount 1,501 5,007 Total interest expense related to convertible notes $ 1,954 $ 6,309 |
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 convertible notes (the carrying value excludes the equity component of the convertible notes classified in equity) is as follows (in thousands): May 31, 2019 Fair Value Carrying Value Convertible notes $ 188,798 $ 188,553 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
May 31, 2019 | |
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 May 31, 2019 (in thousands): Common Stock Additional Retained Treasury Accumulated Total Shares Amount Balance at February 28, 2019 244,403 $ 24 $ 2,791,895 $ 2,054,069 $ (3,189,434 ) $ (42,622 ) $ 1,613,932 Net income — — — 141,120 — — 141,120 Other comprehensive loss, net of tax — — — — — (5,036 ) (5,036 ) Vest and exercise of share-based awards 944 1 368 — — — 369 Common stock repurchase — — — — — — — Share-based compensation expense — — 50,168 — — — 50,168 Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards — — (81,274 ) — — — (81,274 ) Re-issuance of treasury stock under employee stock purchase plan — 23,323 — 16,614 — 39,937 Convertible note conversions 943 — (1,296 ) — — — (1,296 ) Exercises of convertible note hedges — — 69,380 — (69,364 ) — 16 Other adjustments 541 — (541 ) — — Balance at May 31, 2019 246,290 $ 25 $ 2,853,105 $ 2,195,189 $ (3,242,725 ) $ (47,658 ) $ 1,757,936 The following table summarizes the changes in the Company’s stockholders’ equity during the three months ended May 31, 2018 (in thousands): Common Stock Additional Retained Treasury Accumulated Total Shares Amount Balance at February 28, 2018 238,689 $ 24 $ 2,416,080 $ 1,619,688 $ (2,525,072 ) $ (32,596 ) $ 1,478,124 Net income — — — 113,190 — — 113,190 Other comprehensive loss, net of tax — — — — — (10,905 ) (10,905 ) Vest and exercise of share-based awards 905 — 875 — — — 875 Common stock repurchase — — (17,175 ) — (132,844 ) — (150,019 ) Share-based compensation expense — — 46,005 — — — 46,005 Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards — — (77,094 ) — — — (77,094 ) Re-issuance of treasury stock under employee stock purchase plan — 18,471 — 13,740 — 32,211 Convertible note conversions 185 — (835 ) — — — (835 ) Exercises of convertible note hedges — 13,598 — (13,598 ) — — Cumulative-effect adjustment from adoption of ASU 2016-01 — — 392 — — 392 Balance at May 31, 2018 239,779 $ 24 $ 2,399,925 $ 1,733,270 $ (2,657,774 ) $ (43,501 ) $ 1,431,944 |
Summary of Accumulated Other Comprehensive Loss | Accumulated other comprehensive loss was comprised of the following (in thousands): May 31, 2019 February 28, 2019 Accumulated loss from foreign currency translation adjustment, net of tax $ (47,756 ) $ (41,500 ) Accumulated unrealized gain (loss), net of tax, on available-for-sale securities 98 (1,122 ) Accumulated other comprehensive loss $ (47,658 ) $ (42,622 ) |
Deferred Revenue and Performa_2
Deferred Revenue and Performance Obligations (Tables) | 3 Months Ended |
May 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Contract with Customer, Asset and Liability | Activity in the Company’s deferred revenue accounts is presented in the following table (in thousands): February 28, 2019 Revenue recognized from opening balance Deferred revenue, net (1) May 31, 2019 Deferred revenue, short-term $ 2,161,206 $ (705,210 ) $ 560,492 $ 2,016,488 Deferred revenue, long-term 821,218 — (40,175 ) 781,043 Total deferred revenue $ 2,982,424 $ (705,210 ) $ 520,317 $ 2,797,531 ____________________ (1) Includes revenue recognized from current period customer contracts and the impact from foreign currency exchange rate fluctuations. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
May 31, 2019 | |
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 (in thousands, except per share amounts): Three Months Ended May 31, 2019 May 31, 2018 Net income available to common stockholders $ 141,120 $ 113,190 Weighted average common shares outstanding 177,400 177,302 Incremental shares attributable to assumed vesting or exercise of outstanding equity award shares 2,803 3,833 Dilutive effect of convertible notes 1,554 5,686 Dilutive effect of warrants 4,878 3,918 Diluted shares 186,635 190,739 Diluted net income per share $ 0.76 $ 0.59 |
Shares Considered Anti-Dilutive for Calculating Diluted EPS | The following share awards are 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 May 31, 2019 May 31, 2018 Number of shares considered anti-dilutive for calculating diluted EPS 43 — |
Share-based Awards (Tables)
Share-based Awards (Tables) | 3 Months Ended |
May 31, 2019 | |
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 (in thousands): Three Months Ended May 31, 2019 May 31, 2018 Cost of revenue $ 4,945 $ 5,128 Sales and marketing 21,904 19,520 Research and development 16,002 14,782 General and administrative 7,317 6,575 Total share-based compensation expense (1) $ 50,168 $ 46,005 __________ (1) Total share-based compensation expense included $1.7 million and $4.0 million , respectively, of expense related to the Company’s employee stock purchase plan (“ESPP”) for the three months ended May 31, 2019 and May 31, 2018 . |
Summary of Share-Based Awards Granted During Period | The following table summarizes the Company’s share-based awards granted, by type: Three Months Ended May 31, 2019 May 31, 2018 Shares and Share Units Underlying Awards Weighted Shares and Weighted Service-based shares and share units 885,436 (1)(2) $ 183.37 669,450 (1) $ 160.53 Performance share units—target — $ — 173,014 $ 163.56 Performance share awards — $ — 64,219 (2) $ 163.56 Total share-based awards 885,436 $ 183.37 906,683 $ 161.32 _________ (1) Service-based shares and share units granted during the three months ended May 31, 2019 include 639,439 share units that vest over a three-year period with one-third vesting on the first anniversary of the grant date and one-twelfth vesting quarterly over the remaining two years and 56,487 share units that vest over a three-year period with one-third vesting annually over the three-year period. Service-based share units granted during the three months ended May 31, 2018 vest over a four-year period with one-quarter vesting annually over the four- year period. (2) Service-based shares and share units granted during the three months ended May 31, 2019 include 189,510 restricted stock awards that vest over a three-year period with one-third vesting annually over the three-year period. Restricted stock awards granted during the three months ended May 31, 2018 were subject to the achievement of a specified dollar amount of revenue for fiscal 2019 (the “RSA Performance Goal”). Since the Company achieved the RSA Performance Goal, 25% of the restricted stock vests on or about July 16, 2019, 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. |
Assets and Liabilities Measur_2
Assets and Liabilities Measured at Fair Value on a Recurring Basis (Tables) | 3 Months Ended |
May 31, 2019 | |
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 at May 31, 2019 (in thousands): May 31, 2019 Level 1 Level 2 Level 3 Assets: Money markets (1) $ 901,570 $ 901,570 $ — $ — Available-for-sale securities (1) : Commercial paper 255,780 — 255,780 — U.S. agency securities 203,135 — 203,135 — Corporate securities 162,662 — 162,662 — Foreign currency derivatives (2) 233 — 233 — Liabilities: Foreign currency derivatives (3) (173 ) — (173 ) — Total $ 1,523,207 $ 901,570 $ 621,637 $ — __________ (1) Included in Cash, cash equivalents and restricted cash, Investments in debt securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet at May 31, 2019 , in addition to $1.14 billion of cash. (2) Included in Other current assets in the Company’s Consolidated Balance Sheet at May 31, 2019 . (3) Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet at May 31, 2019 . The following table summarizes the composition and fair value hierarchy of the Company’s financial assets and liabilities at February 28, 2019 (in thousands): February 28, 2019 Level 1 Level 2 Level 3 Assets: Money markets (1) $ 398,056 $ 398,056 $ — $ — Interest-bearing deposits (1) 56,883 — 56,883 — Available-for-sale securities (1) : Commercial paper 541,753 — 541,753 — U.S. agency securities 222,298 — 222,298 — Corporate securities 262,692 — 262,692 — Foreign currency derivatives (2) 24 — 24 — Liabilities: Foreign currency derivatives (3) (245 ) — (245 ) — Total $ 1,481,461 $ 398,056 $ 1,083,405 $ — __________ (1) Included in Cash, cash equivalents and restricted cash, Investments in debt securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet at February 28, 2019 , in addition to $943.3 million of cash. (2) Included in Other current assets in the Company’s Consolidated Balance Sheet at February 28, 2019 . (3) Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet at February 28, 2019 . |
Investments Measured at Fair Value | The following table represents the Company’s investments measured at fair value as of May 31, 2019 (in thousands): Balance Sheet Classification Amortized Gross Unrealized Aggregate Cash Equivalent Marketable Securities Investments in debt securities, short-term Investments in debt securities, long-term Gains Losses (1) Money markets $ 901,570 $ — $ — $ 901,570 $ 901,570 $ — $ — Commercial paper 255,780 — — 255,780 255,780 — — U.S. agency securities 203,746 13 (624 ) 203,135 — 68,682 134,453 Corporate securities 162,629 284 (251 ) 162,662 — 108,943 53,719 Total $ 1,523,725 $ 297 $ (875 ) $ 1,523,147 $ 1,157,350 $ 177,625 $ 188,172 __________ (1) As of May 31, 2019 , there were $0.9 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 investments with unrealized losses was $268.0 million . The following table represents the Company’s investments measured at fair value as of February 28, 2019 (in thousands): Balance Sheet Classification Amortized Gross Unrealized Aggregate Cash Equivalent Marketable Securities Investments in debt securities, short-term Investments in debt securities, long-term Gains Losses (1) Money markets $ 398,056 $ — $ — $ 398,056 $ 398,056 $ — $ — Interest-bearing deposits 56,883 — — 56,883 — 56,883 — Commercial paper 541,753 — — 541,753 541,753 — — U.S. agency securities 224,293 — (1,995 ) 222,298 — 75,037 147,261 Corporate securities 263,059 299 (666 ) 262,692 — 161,441 101,251 Total $ 1,484,044 $ 299 $ (2,661 ) $ 1,481,682 $ 939,809 $ 293,361 $ 248,512 __________ (1) As of February 28, 2019 , there were $2.6 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 investments with unrealized losses was $387.8 million . |
Summary of Stated Maturities of Investment in Debt Securities | The following table summarizes the stated maturities of the Company’s investment in available-for-sale securities (in thousands): As of May 31, 2019 Less than 1 Year 1-5 Years More than 5 Years Maturity of available-for-sale debt securities $ 365,797 $ 177,625 $ 188,172 $ — |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
May 31, 2019 | |
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; income (loss) from operations; total cash, cash equivalents and available-for-sale investment securities and total assets by geographic segment (in thousands): Americas EMEA Asia Pacific Corporate (1) Consolidated Three Months Ended May 31, 2019 Revenue from unaffiliated customers $ 582,290 $ 216,951 $ 134,870 $ — $ 934,111 Income (loss) from operations $ 83,555 $ 54,909 $ 43,822 $ (50,168 ) $ 132,118 Total cash, cash equivalents, restricted cash and available-for-sale investment securities $ 1,429,795 $ 730,228 $ 501,170 $ — $ 2,661,193 Total assets $ 3,567,096 $ 1,258,782 $ 748,061 $ — $ 5,573,939 Three Months Ended May 31, 2018 Revenue from unaffiliated customers $ 500,306 $ 195,148 $ 118,076 $ — $ 813,530 Income (loss) from operations $ 71,864 $ 48,860 $ 37,437 $ (46,005 ) $ 112,156 Total cash, cash equivalents, restricted cash and available-for-sale investment securities $ 1,524,311 $ 576,171 $ 426,647 $ — $ 2,527,129 Total assets $ 3,559,900 $ 1,015,187 $ 616,474 $ — $ 5,191,561 _______________ (1) Amounts represent share-based compensation expense that was not allocated to geographic segments. |
Summary of Revenue from Unaffiliated Customers | The Company approximates its geographic sources of revenue based on the country of origin of its non-cancellable subscription and service agreements initiated during the year (commonly referred to as bookings). The following table lists revenue from unaffiliated customers in the U.S., the Company’s country of domicile, and revenue from foreign countries (in thousands): Three Months Ended May 31, 2019 May 31, 2018 U.S., the Company’s country of domicile $ 511,716 $ 442,421 Foreign 422,395 371,109 Total revenue from unaffiliated customers $ 934,111 $ 813,530 |
Summary of Tangible Long-Lived Assets | Total tangible long-lived assets located in the U.S., the Company’s country of domicile, and similar tangible long-lived assets held outside the U.S. are summarized in the following table (in thousands): May 31, 2019 February 28, 2019 U.S., the Company’s country of domicile $ 131,071 $ 129,387 Foreign 68,944 69,582 Total tangible long-lived assets $ 200,015 $ 198,969 |
Summary of Subscription Revenue and Services by Technology Classes | The following table provides further detail, by type, of the Company’s subscription and services revenues. Subscription revenue for infrastructure-related offerings includes subscription revenue generated from Red Hat Enterprise Linux and related technologies such as Red Hat Satellite and Red Hat Virtualization. Subscription revenue generated from the Company’s Application Development-related and other emerging technology offerings includes Red Hat Middleware, Red Hat OpenShift, Red Hat Cloud Infrastructure, Red Hat OpenStack Platform, Red Hat Ansible Automation, Red Hat CloudForms and Red Hat Storage technologies (in thousands): Three Months Ended May 31, 2019 May 31, 2018 Subscription revenue: Infrastructure-related offerings $ 580,306 $ 522,402 Application Development-related and other emerging technology offerings 234,646 189,119 Total subscription revenue 814,952 711,521 Training and services revenue: Consulting services 93,423 79,147 Training 25,736 22,862 Total training and services revenue 119,159 102,009 Total revenue $ 934,111 $ 813,530 |
Business Combinations (Tables)
Business Combinations (Tables) | 3 Months Ended |
May 31, 2019 | |
Business Combinations [Abstract] | |
Summary of Changes in Goodwill | The following is a summary of goodwill (in thousands): Balance at February 28, 2019 $ 1,276,853 Impact of foreign currency fluctuations (3,359 ) Balance at May 31, 2019 $ 1,273,494 |
Company Merger Agreement (Detai
Company Merger Agreement (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | ||
May 31, 2019 | Feb. 28, 2019 | Oct. 28, 2018 | |
Business Acquisition [Line Items] | |||
Common Stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 |
Merger with IBM | |||
Business Acquisition [Line Items] | |||
Business Acquisition, Share Price (in dollars per share) | $ 190 | ||
Business Combination, Acquisition Related Costs | $ 9.9 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Narrative (Detail) - USD ($) $ in Thousands | 3 Months Ended | ||||
May 31, 2019 | Mar. 01, 2019 | Feb. 28, 2019 | [1] | ||
Accounting Policies [Abstract] | |||||
Operating Lease, Right-of-Use Asset | $ 224,371 | [1] | $ 237,400 | $ 0 | |
Operating Lease, Liability | $ 234,766 | $ 244,500 | |||
Minimum | |||||
Disaggregation of Revenue [Line Items] | |||||
Contract payment terms | 30 days | ||||
Maximum | |||||
Disaggregation of Revenue [Line Items] | |||||
Contract payment terms | 60 days | ||||
Base Subscription [Member] | |||||
Disaggregation of Revenue [Line Items] | |||||
Revenue Recognition Customer Contract Period Minimum | 1 year | ||||
Revenue Recognition Customer Contract Period Maximum | 3 years | ||||
Renewal [Member] | |||||
Disaggregation of Revenue [Line Items] | |||||
Revenue Recognition Customer Contract Period Minimum | 1 year | ||||
Revenue Recognition Customer Contract Period Maximum | 3 years | ||||
[1] | Effective March 1, 2019, the Company adopted Accounting Standard Update 2016-02, Leases (Topic 842) (“ASC 842”). See NOTE 2 —Summary of Significant Accounting Policies and NOTE 4 —Leases for detailed information on adoption of ASC 842. |
Accounts Receivable (Detail)
Accounts Receivable (Detail) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
May 31, 2019 | Feb. 28, 2019 | ||
Allowance for Doubtful Accounts Receivable [Roll Forward] | |||
Balance at beginning of period | $ 4,561 | $ 2,167 | |
Charged to expense | 3,247 | ||
Recovery of expenses | (195) | ||
Adjustments | [1] | 86 | (853) |
Balance at end of period | 4,452 | 4,561 | |
Unbilled contracts receivable | $ 43,300 | $ 40,200 | |
One Customer [Member] | Accounts Receivable [Member] | Customer Concentration Risk | |||
Schedule of Customer Receivables [Line Items] | |||
Concentration risk, percentage | 10.00% | ||
[1] | Represents foreign currency translation adjustments and amounts written-off as uncollectible accounts receivable. |
Leases - Schedule of ROU Assets
Leases - Schedule of ROU Assets and Lease Liabilities (Details) - USD ($) $ in Thousands | May 31, 2019 | Mar. 01, 2019 | Feb. 28, 2019 | |||
Leases [Abstract] | ||||||
Operating right-of-use assets, net | $ 224,371 | [1] | $ 237,400 | $ 0 | [1] | |
Finance right-of-use assets, net | 579 | 281 | ||||
Total leased assets | 224,950 | 281 | ||||
Lease liabilities, current | ||||||
Operating lease liabilities, current | 46,633 | 0 | ||||
Finance lease liabilities, current | 256 | 282 | ||||
Lease liabilities, non current | ||||||
Operating lease liabilities, noncurrent | [1] | 188,133 | 0 | |||
Finance lease liabilities, noncurrent | 336 | 6 | ||||
Total lease liabilities | $ 235,358 | $ 288 | ||||
[1] | Effective March 1, 2019, the Company adopted Accounting Standard Update 2016-02, Leases (Topic 842) (“ASC 842”). See NOTE 2 —Summary of Significant Accounting Policies and NOTE 4 —Leases for detailed information on adoption of ASC 842. |
Leases - Schedule of Lease Term
Leases - Schedule of Lease Term and Discount Rate (Details) | May 31, 2019 |
Leases [Abstract] | |
Weighted average remaining lease term - operating leases | 7 years 3 months 29 days |
Weighted average remaining lease term - finance leases | 3 years 5 months 12 days |
Weighted average discount rate, operating leases | 3.70% |
Weighted average discount rate, finance leases | 3.30% |
Leases - Schedule of Component
Leases - Schedule of Component of Lease expense (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
May 31, 2019 | May 31, 2018 | ||
Leases [Abstract] | |||
Operating lease expense | $ 14,666 | ||
Variable lease expense | 1,176 | ||
Operating leases rent expense | $ 13,400 | ||
Finance lease expense | |||
Amortization of leased assets | 146 | 276 | |
Interest on lease liabilities | 6 | 7 | |
Total lease expense | [1] | $ 15,994 | $ 283 |
[1] | Sublease income is recognized as a reduction to operating expense in the Consolidated Statement of Operations and is not material. |
Leases - Schedule of Supplement
Leases - Schedule of Supplemental Cash Flow Information Related To Leases (Details) $ in Thousands | 3 Months Ended |
May 31, 2019USD ($) | |
Leases [Abstract] | |
Operating cash outflows from operating leases | $ 14,043 |
Operating cash outflows from finance leases | 6 |
Financing cash outflows from finance leases | 112 |
ROU Assets obtained in exchange of operating lease liability | 762 |
ROU asset obtained in exchange for finance lease liability | $ 133 |
Leases - Schedule of Maturities
Leases - Schedule of Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands | May 31, 2019 | Mar. 01, 2019 |
Operating Lease Liabilities, Payments Due [Abstract] | ||
2020 (excluding the three months ended May 31, 2019) | $ 40,737 | |
2021 | 47,858 | |
2022 | 42,467 | |
2023 | 33,438 | |
2024 | 26,339 | |
Thereafter | 79,125 | |
Total lease payments | 269,964 | |
Less: imputed interest | (35,198) | |
Total | 234,766 | $ 244,500 |
Finance Lease Liabilities, Payments, Due [Abstract] | ||
2020 (excluding the three months ended May 31, 2019) | 258 | |
2021 | 101 | |
2022 | 101 | |
2023 | 101 | |
2024 | 82 | |
Thereafter | 0 | |
Total lease payments | 643 | |
Less: imputed interest | (51) | |
Total | $ 592 |
Leases - Schedule of Future Min
Leases - Schedule of Future Minimum Payments for Operating and Capital Leases (Details) $ in Thousands | Feb. 28, 2019USD ($) |
Operating leases, future minimum payment due | |
2020 | $ 60,722 |
2021 | 51,060 |
2022 | 41,173 |
2023 | 32,016 |
2024 | 27,479 |
Thereafter | 79,530 |
Total minimum lease payments | 291,980 |
Capital Leases, future minimum payments due | |
2020 | 282 |
2021 | 6 |
2022 | 0 |
2023 | 0 |
2024 | 0 |
Thereafter | 0 |
Total minimum payment due | $ 288 |
Identifiable Intangible Asset_2
Identifiable Intangible Assets - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | |
May 31, 2019 | Feb. 28, 2019 | |
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Carrying amount for trademarks with an indefinite estimated useful life | $ 11.2 | $ 11.4 |
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 Asset_3
Identifiable Intangible Assets - Schedule of Identifiable Intangible Assets (Detail) - USD ($) $ in Thousands | May 31, 2019 | Feb. 28, 2019 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | $ 528,857 | $ 526,257 |
Accumulated Amortization | (329,943) | (320,174) |
Net Amount | 198,914 | 206,083 |
Trademarks, copyrights and patents | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | 180,240 | 176,704 |
Accumulated Amortization | (86,132) | (82,967) |
Net Amount | 94,108 | 93,737 |
Purchased technologies | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | 218,561 | 219,196 |
Accumulated Amortization | (118,705) | (113,617) |
Net Amount | 99,856 | 105,579 |
Customer and reseller relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | 105,562 | 105,737 |
Accumulated Amortization | (102,047) | (100,947) |
Net Amount | 3,515 | 4,790 |
Covenants not to compete | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | 15,661 | 15,787 |
Accumulated Amortization | (14,800) | (14,728) |
Net Amount | 861 | 1,059 |
Other intangible assets | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Amount | 8,833 | 8,833 |
Accumulated Amortization | (8,259) | (7,915) |
Net Amount | $ 574 | $ 918 |
Identifiable Intangible Asset_4
Identifiable Intangible Assets - Schedule of Amortization Expense Associated with Identifiable Intangible Assets (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
Finite-Lived Intangible Assets [Line Items] | ||
Total amortization expense | $ 10,405 | $ 10,254 |
Cost of revenue | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total amortization expense | 6,660 | 6,485 |
Sales and marketing | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total amortization expense | 1,194 | 1,362 |
Research and development | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total amortization expense | 34 | 34 |
General and administrative | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total amortization expense | $ 2,517 | $ 2,373 |
Deferred Selling Costs (Detail)
Deferred Selling Costs (Detail) - USD ($) | 3 Months Ended | ||
May 31, 2019 | May 31, 2018 | Feb. 28, 2019 | |
Revenue from Contract with Customer [Abstract] | |||
Deferred commissions, current | $ 183,462,000 | $ 201,971,000 | |
Deferred commissions, non-current | 45,860,000 | 47,849,000 | |
Total deferred commissions | 229,322,000 | $ 249,820,000 | |
Amortization expense | 64,300,000 | $ 56,200,000 | |
Impairment loss | $ 0 | $ 0 |
Derivative Instruments (Detail)
Derivative Instruments (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
Derivative [Line Items] | ||
Total, Fair Value | $ 60 | $ (679) |
Notional value of foreign currency forward contracts not designated as hedges | 61,006 | 49,666 |
Amount of unrealized gain (loss) recognized in income on derivatives | (6) | (847) |
Other current assets | ||
Derivative [Line Items] | ||
Assets—foreign currency forward contracts not designated as hedges | 233 | 111 |
Notional value of foreign currency forward contracts not designated as hedges, assets | 18,185 | 21,554 |
Accounts payable and accrued expenses | ||
Derivative [Line Items] | ||
Liabilities—foreign currency forward contracts not designated as hedges | (173) | (790) |
Notional value of foreign currency forward contracts not designated as hedges, liabilities | 42,821 | 28,112 |
Derivative Liabilities | Other expense, net | ||
Derivative [Line Items] | ||
Amount of unrealized gain (loss) recognized in income on derivatives | (651) | (1,136) |
Derivative Assets | Other expense, net | ||
Derivative [Line Items] | ||
Amount of unrealized gain (loss) recognized in income on derivatives | $ 645 | $ 289 |
Income Taxes (Detail)
Income Taxes (Detail) - USD ($) $ in Millions | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
Income Taxes [Line Items] | ||
Effective tax rate | (1.80%) | (1.50%) |
Federal statutory rate | 21.00% | 21.00% |
Net discrete tax benefits | $ 28.8 | $ 26.8 |
Decrease in unrecognized tax benefits | $ 68.2 | |
Significant change in unrecognized tax benefits, nature of event | as a result of audit settlements in various tax jurisdictions |
Convertible Notes - Additional
Convertible Notes - Additional Information (Detail) $ / shares in Units, $ in Thousands | Oct. 07, 2014USD ($)$ / shares | Oct. 01, 2014USD ($)$ / sharesshares | Aug. 31, 2019USD ($) | May 31, 2019USD ($)$ / sharesshares | Feb. 28, 2019USD ($) | May 31, 2018$ / shares |
Debt Instrument [Line Items] | ||||||
Closing price of common stock (in dollars per share) | $ / shares | $ 184.30 | |||||
If-converted value in excess of principal | $ 287,600 | |||||
Convertible notes, current | $ 188,553 | $ 69,827 | ||||
Strike price of warrants (in dollars per share) | $ / shares | $ 101.65 | $ 101.65 | $ 101.65 | |||
Purchase of convertible note hedges | $ 148,000 | |||||
Proceeds from issuance of warrants | $ 79,800 | |||||
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% | |||||
Ownership percentage of outstanding principal amount | 25.00% | |||||
0.25% Convertible Senior Notes due 2019 | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument, face amount | $ 805,000 | |||||
Debt instrument, interest rate | 0.25% | 0.25% | ||||
Converted instrument, amount | $ 116,200 | |||||
Converted instrument, shares issued (in shares) | shares | 943,513 | |||||
Loss on settled conversions | $ 200 | |||||
Debt Conversion, Converted Instrument, Total Amount | $ 614,600 | |||||
Options exercised under convertible note hedge transaction (in shares) | shares | 954,731 | |||||
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) | $ / shares | $ 73.41 | $ 73.41 | ||||
Subsequent Event | 0.25% Convertible Senior Notes due 2019 | ||||||
Debt Instrument [Line Items] | ||||||
Converted instrument, amount | $ 3,000 |
Convertible Notes - Components
Convertible Notes - Components of Convertible Notes (Detail) - USD ($) $ in Thousands | May 31, 2019 | Feb. 28, 2019 | |
Liability Component [Abstract] | |||
Net carrying amount | $ 0 | $ 231,540 | |
Unsecured Debt | 0.25% Convertible Senior Notes due 2019 | |||
Liability Component [Abstract] | |||
Principal | 190,396 | 306,552 | |
Less: debt issuance costs | (211) | (595) | |
Less: debt discount | (1,632) | (4,590) | |
Net carrying amount | 188,553 | 301,367 | |
Equity component | [1] | $ 22,916 | $ 36,897 |
[1] | Recognized in the Consolidated Balance Sheets in Additional paid-in capital. |
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 | |
May 31, 2019 | May 31, 2018 | |
Debt Instrument [Line Items] | ||
Coupon rate 0.25% per year, payable semiannually | $ 69 | $ 471 |
Amortization of convertible note issuance costs — liability component | 384 | 831 |
Accretion of debt discount | 1,501 | 5,007 |
Total interest expense related to convertible notes | $ 1,954 | $ 6,309 |
Coupon rate per year | 0.25% | 0.25% |
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 | May 31, 2019 | Feb. 28, 2019 |
Debt Instrument [Line Items] | ||
Carrying value, convertible notes | $ 0 | $ 231,540 |
Level 2 | ||
Debt Instrument [Line Items] | ||
Fair value, convertible notes | 188,798 | |
Unsecured Debt | 0.25% Convertible Senior Notes due 2019 | ||
Debt Instrument [Line Items] | ||
Carrying value, convertible notes | $ 188,553 | $ 301,367 |
Stockholders' Equity - Summary
Stockholders' Equity - Summary of Changes in Stockholders' Equity (Detail) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |||
May 31, 2019 | May 31, 2018 | Feb. 28, 2019 | Feb. 28, 2018 | |
Changes in Stockholders' Equity | ||||
Beginning Balance | $ 1,613,932 | $ 1,478,124 | ||
Net income | 141,120 | 113,190 | ||
Other comprehensive income (loss), net of tax | (5,036) | (10,905) | ||
Vest and exercise of share-based awards | 369 | 875 | ||
Common stock repurchase | 0 | (150,019) | ||
Share-based compensation expense | 50,168 | 46,005 | ||
Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards | (81,274) | (77,094) | ||
Re-issuance of treasury stock under employee stock purchase plan | 39,937 | 32,211 | ||
Convertible note conversions | (1,296) | (835) | ||
Exercise of convertible note hedges | 16 | 0 | ||
Other adjustments | 0 | |||
Cumulative Effect of New Accounting Principle in Period of Adoption | 392 | |||
Ending Balance | 1,757,936 | 1,431,944 | ||
Common Stock | ||||
Changes in Stockholders' Equity | ||||
Beginning Balance | $ 24 | $ 24 | ||
Vest and exercise of share-based awards (shares) | 944 | 905 | ||
Vest and exercise of share-based awards | $ 1 | |||
Convertible note conversions (shares) | 943 | 185 | ||
Shares, Issued | 246,290 | 239,779 | 244,403 | 238,689 |
Ending Balance | $ 25 | $ 24 | ||
Additional Paid-In Capital | ||||
Changes in Stockholders' Equity | ||||
Beginning Balance | 2,791,895 | 2,416,080 | ||
Vest and exercise of share-based awards | 368 | 875 | ||
Common stock repurchase | 0 | (17,175) | ||
Share-based compensation expense | 50,168 | 46,005 | ||
Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards | (81,274) | (77,094) | ||
Re-issuance of treasury stock under employee stock purchase plan | 23,323 | 18,471 | ||
Convertible note conversions | (1,296) | (835) | ||
Exercises of convertible note hedges | 69,380 | 13,598 | ||
Other adjustments | (541) | |||
Ending Balance | 2,853,105 | 2,399,925 | ||
Retained Earnings | ||||
Changes in Stockholders' Equity | ||||
Beginning Balance | 2,054,069 | 1,619,688 | ||
Net income | 141,120 | 113,190 | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | 392 | |||
Ending Balance | 2,195,189 | 1,733,270 | ||
Treasury Stock | ||||
Changes in Stockholders' Equity | ||||
Beginning Balance | (3,189,434) | (2,525,072) | ||
Common stock repurchase | 0 | (132,844) | ||
Re-issuance of treasury stock under employee stock purchase plan | 16,614 | 13,740 | ||
Convertible note conversions | 0 | |||
Exercises of convertible note hedges | (69,364) | (13,598) | ||
Other adjustments | (541) | |||
Ending Balance | (3,242,725) | (2,657,774) | ||
Accumulated Other Comprehensive Loss | ||||
Changes in Stockholders' Equity | ||||
Beginning Balance | (42,622) | (32,596) | ||
Other comprehensive income (loss), net of tax | (5,036) | (10,905) | ||
Ending Balance | $ (47,658) | $ (43,501) |
Stockholders' Equity - Addition
Stockholders' Equity - Additional Information (Detail) - USD ($) | Jun. 21, 2018 | Jun. 22, 2016 | May 31, 2019 | May 31, 2018 | May 31, 2019 |
Shareholders Equity [Line Items] | |||||
Aggregate cost of common stock repurchased | $ 0 | $ 150,019,000 | |||
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 | ||||
June 2018 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, 2020 | ||||
Common stock, purchased during the period (in shares) | 1,838,241 | ||||
Aggregate cost of common stock repurchased | $ 262,800,000 | ||||
Stock available for repurchase | $ 737,200,000 | $ 737,200,000 |
Stockholders' Equity - Summar_2
Stockholders' Equity - Summary of Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Thousands | May 31, 2019 | Feb. 28, 2019 |
Equity [Abstract] | ||
Accumulated loss from foreign currency translation adjustment, net of tax | $ (47,756) | $ (41,500) |
Accumulated unrealized gain (loss), net of tax, on available-for-sale securities | 98 | (1,122) |
Accumulated other comprehensive loss | $ (47,658) | $ (42,622) |
Deferred Revenue and Performa_3
Deferred Revenue and Performance Obligations - Summary of Deferred Revenue Activity (Detail) $ in Thousands | 3 Months Ended | |
May 31, 2019USD ($) | ||
Change in Contract with Customer, Liability [Roll Forward] | ||
Deferred revenue, short-term, beginning balance | $ 2,161,206 | |
Deferred revenue, long-term, beginning balance | 821,218 | |
Total deferred revenue, beginning balance | 2,982,424 | |
Revenue recognized from opening balance, current | (705,210) | |
Revenue recognized from opening balance, noncurrent | 0 | |
Revenue recognized from opening balance | (705,210) | |
Deferred revenue net, short-term | 560,492 | [1] |
Deferred revenue net, long-term | (40,175) | [1] |
Deferred revenue net | 520,317 | [1] |
Deferred revenue, short-term, ending balance | 2,016,488 | |
Deferred revenue, long-term, ending balance | 781,043 | |
Total deferred revenue, ending balance | $ 2,797,531 | |
[1] | Includes revenue recognized from current period customer contracts and the impact from foreign currency exchange rate fluctuations. |
Deferred Revenue and Performa_4
Deferred Revenue and Performance Obligations - Narrative (Detail) - USD ($) $ in Thousands | May 31, 2019 | Feb. 28, 2019 |
Revenue from Contract with Customer [Abstract] | ||
Total deferred revenue | $ 2,797,531 | $ 2,982,424 |
Remaining performance obligation | 3,750,000 | |
Amount of potential remaining performance obligation | 163,900 | |
Backlog | $ 3,910,000 |
Deferred Revenue and Performa_5
Deferred Revenue and Performance Obligations - Remaining Performance Obligation (Detail) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-06-01 | May 31, 2019 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, percentage | 60.00% |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 12 months |
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 | |
May 31, 2019 | May 31, 2018 | |
Earnings Per Share [Abstract] | ||
Net income available to common stockholders | $ 141,120 | $ 113,190 |
Weighted average common shares outstanding (in shares) | 177,400 | 177,302 |
Incremental shares attributable to assumed vesting or exercise of outstanding equity award shares (in shares) | 2,803 | 3,833 |
Dilutive effect of convertible notes (in shares) | 1,554 | 5,686 |
Dilutive effect of warrants (in shares) | 4,878 | 3,918 |
Diluted shares (in shares) | 186,635 | 190,739 |
Diluted net income per share (in dollars per share) | $ 0.76 | $ 0.59 |
Earnings Per Share - Additional
Earnings Per Share - Additional Information (Detail) - $ / shares | May 31, 2019 | May 31, 2018 | Oct. 01, 2014 |
Earnings Per Share [Abstract] | |||
Warrants outstanding (in shares) | 10,965,630 | 10,965,630 | |
Exercise price per share (in dollars per share) | $ 101.65 | $ 101.65 | $ 101.65 |
Earnings Per Share - Shares Con
Earnings Per Share - Shares Considered Anti-Dilutive for Calculating Diluted EPS (Detail) - shares shares in Thousands | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
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) | 43 | 0 |
Share-based Awards - Additional
Share-based Awards - Additional Information (Detail) - USD ($) | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Fair value assumptions, method used | Black-Scholes-Merton | |
Share-based compensation expense capitalized | $ 0 | $ 0 |
Share-based Awards - Share-Base
Share-based Awards - Share-Based Compensation Expense (Detail) - USD ($) $ in Thousands | 3 Months Ended | ||
May 31, 2019 | May 31, 2018 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||
Total share-based compensation expense | [1] | $ 50,168 | $ 46,005 |
Cost of revenue | |||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||
Total share-based compensation expense | 4,945 | 5,128 | |
Sales and marketing | |||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||
Total share-based compensation expense | 21,904 | 19,520 | |
Research and development | |||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||
Total share-based compensation expense | 16,002 | 14,782 | |
General and administrative | |||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||
Total share-based compensation expense | 7,317 | 6,575 | |
Employee Stock Purchase Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||
Total share-based compensation expense | $ 1,700 | $ 4,000 | |
[1] | Total share-based compensation expense included $1.7 million and $4.0 million , respectively, of expense related to the Company’s employee stock purchase plan (“ESPP”) for the three months ended May 31, 2019 and May 31, 2018 . |
Share-based Awards - Summary of
Share-based Awards - Summary of Share-Based Awards Granted During Period (Detail) - $ / shares | 3 Months Ended | ||||
May 31, 2019 | May 31, 2018 | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shares and Shares Underlying Awards (in shares) | 885,436 | 906,683 | |||
Weighted Average Per Share Award Fair Value (in dollars per share) | $ 183.37 | $ 161.32 | |||
Service-based shares and share units | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shares and Shares Underlying Awards (in shares) | [2] | 885,436 | [1] | 669,450 | |
Weighted Average Per Share Award Fair Value (in dollars per share) | $ 183.37 | $ 160.53 | |||
Vesting right description | Service-based share units granted during the three months ended May 31, 2018 vest over a four-year period with one-quarter vesting annually over the four- year period. | ||||
Vesting percentage | 25.00% | ||||
Vesting period | 4 years | ||||
Performance share units—target | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shares and Shares Underlying Awards (in shares) | 0 | 173,014 | |||
Weighted Average Per Share Award Fair Value (in dollars per share) | $ 0 | $ 163.56 | |||
Performance share awards | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shares and Shares Underlying Awards (in shares) | 0 | 64,219 | [1] | ||
Weighted Average Per Share Award Fair Value (in dollars per share) | $ 0 | $ 163.56 | |||
Vesting percentage | 25.00% | ||||
Vesting period | 3 years | ||||
Share-based Compensation Award, Tranche One | Service-based shares and share units | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shares and Shares Underlying Awards (in shares) | 639,439 | ||||
Vesting right description | vest over a three-year period with one-third vesting on the first anniversary of the grant date and one-twelfth vesting quarterly over the remaining two years | ||||
Percentage vested after one year of the grant date | 33.00% | ||||
Vesting period | 3 years | ||||
Share-based Compensation Award, Tranche Two | Service-based shares and share units | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shares and Shares Underlying Awards (in shares) | 56,487 | ||||
Vesting right description | vest over a three-year period with one-third vesting annually over the three-year period. | ||||
Vesting percentage | 33.00% | ||||
Vesting period | 3 years | ||||
Share-based Compensation Award, Tranche Three | Performance share awards | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shares and Shares Underlying Awards (in shares) | 189,510 | ||||
Vesting percentage | 33.00% | ||||
Vesting period | 3 years | ||||
[1] | Service-based shares and share units granted during the three months ended May 31, 2019 include 189,510 restricted stock awards that vest over a three-year period with one-third vesting annually over the three-year period. Restricted stock awards granted during the three months ended May 31, 2018 were subject to the achievement of a specified dollar amount of revenue for fiscal 2019 (the “RSA Performance Goal”). Since the Company achieved the RSA Performance Goal, 25% of the restricted stock vests on or about July 16, 2019, 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. | ||||
[2] | Service-based shares and share units granted during the three months ended May 31, 2019 include 639,439 share units that vest over a three-year period with one-third vesting on the first anniversary of the grant date and one-twelfth vesting quarterly over the remaining two years and 56,487 |
Assets and Liabilities Measur_3
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 | May 31, 2019 | Feb. 28, 2019 | |||
Assets: | |||||
Money markets | $ 901,570 | [1] | $ 398,056 | [2] | |
Interest-bearing deposits | [2] | 56,883 | |||
Available-for-sale securities, debt securities | 365,797 | ||||
Foreign currency derivatives | 233 | [3] | 24 | [4] | |
Liabilities: | |||||
Foreign currency derivatives | (173) | [5] | (245) | [6] | |
Total | 1,523,207 | 1,481,461 | |||
Cash | 1,140,000 | 943,300 | |||
Level 1 | |||||
Assets: | |||||
Money markets | 901,570 | [1] | 398,056 | [2] | |
Interest-bearing deposits | [2] | 0 | |||
Foreign currency derivatives | 0 | [3] | 0 | [4] | |
Liabilities: | |||||
Foreign currency derivatives | 0 | [5] | 0 | [6] | |
Total | 901,570 | 398,056 | |||
Level 2 | |||||
Assets: | |||||
Money markets | 0 | [1] | 0 | [2] | |
Interest-bearing deposits | [2] | 56,883 | |||
Foreign currency derivatives | [4] | 24 | |||
Liabilities: | |||||
Foreign currency derivatives | [6] | (245) | |||
Total | 621,637 | 1,083,405 | |||
Level 3 | |||||
Assets: | |||||
Money markets | 0 | [1] | 0 | [2] | |
Interest-bearing deposits | [2] | 0 | |||
Foreign currency derivatives | 0 | [3] | 0 | [4] | |
Liabilities: | |||||
Foreign currency derivatives | 0 | [5] | 0 | [6] | |
Total | 0 | 0 | |||
Commercial paper | |||||
Assets: | |||||
Available-for-sale securities, debt securities | 255,780 | [1] | 541,753 | [2] | |
Commercial paper | Level 1 | |||||
Assets: | |||||
Available-for-sale securities, debt securities | 0 | [1] | 0 | [2] | |
Commercial paper | Level 2 | |||||
Assets: | |||||
Available-for-sale securities, debt securities | 255,780 | [1] | 541,753 | [2] | |
Commercial paper | Level 3 | |||||
Assets: | |||||
Available-for-sale securities, debt securities | 0 | [1] | 0 | [2] | |
U.S. agency securities | |||||
Assets: | |||||
Available-for-sale securities, debt securities | 203,135 | [1] | 222,298 | [2] | |
U.S. agency securities | Level 1 | |||||
Assets: | |||||
Available-for-sale securities, debt securities | 0 | [1] | 0 | [2] | |
U.S. agency securities | Level 2 | |||||
Assets: | |||||
Available-for-sale securities, debt securities | 203,135 | [1] | 222,298 | [2] | |
U.S. agency securities | Level 3 | |||||
Assets: | |||||
Available-for-sale securities, debt securities | 0 | [1] | 0 | [2] | |
Corporate securities | |||||
Assets: | |||||
Available-for-sale securities, debt securities | 162,662 | [1] | 262,692 | [2] | |
Corporate securities | Level 1 | |||||
Assets: | |||||
Available-for-sale securities, debt securities | 0 | [1] | 0 | [2] | |
Corporate securities | Level 2 | |||||
Assets: | |||||
Available-for-sale securities, debt securities | 162,662 | [1] | 262,692 | [2] | |
Corporate securities | Level 3 | |||||
Assets: | |||||
Available-for-sale securities, debt securities | $ 0 | [1] | $ 0 | [2] | |
[1] | Included in Cash, cash equivalents and restricted cash, Investments in debt securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet at May 31, 2019 , in addition to $1.14 billion of cash. | ||||
[2] | Included in Cash, cash equivalents and restricted cash, Investments in debt securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet at February 28, 2019 , in addition to $943.3 million of cash. | ||||
[3] | Included in Other current assets in the Company’s Consolidated Balance Sheet at May 31, 2019 . | ||||
[4] | Included in Other current assets in the Company’s Consolidated Balance Sheet at February 28, 2019 . | ||||
[5] | Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet at May 31, 2019 . | ||||
[6] | Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet at February 28, 2019 . |
Assets and Liabilities Measur_4
Assets and Liabilities Measured at Fair Value on a Recurring Basis - Investments Measured at Fair Value (Detail) - USD ($) $ in Thousands | May 31, 2019 | Feb. 28, 2019 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Gross Unrealized Gains | $ 297 | $ 299 | |||
Gross Unrealized Losses | (875) | [1] | (2,661) | [2] | |
Available-for-sale securities, debt securities | 365,797 | ||||
Cash, cash equivalents and available-for-sale securities amortized cost | 1,523,725 | 1,484,044 | |||
Cash, cash equivalents and available-for-sale securities | 1,523,147 | 1,481,682 | |||
Accumulated unrealized losses related to investments in unrealized loss position 12 months or longer | 900 | 2,600 | |||
Fair value of investments with unrealized losses | 268,000 | 387,800 | |||
Cash Equivalent Marketable Securities | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Cash equivalent marketable securities | 1,157,350 | 939,809 | |||
Investments in debt securities, short-term | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Available-for-sale securities, debt securities | 177,625 | 293,361 | |||
Investments in debt securities, long-term | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Available-for-sale securities, debt securities | 188,172 | 248,512 | |||
Money markets | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Cash, cash equivalents and restricted cash | 901,570 | 398,056 | |||
Cash and cash equivalents, fair value disclosure | 901,570 | 398,056 | |||
Money markets | Cash Equivalent Marketable Securities | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Cash, cash equivalents and restricted cash | 901,570 | 398,056 | |||
Commercial paper | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Cash, cash equivalents and restricted cash | 255,780 | 541,753 | |||
Cash and cash equivalents, fair value disclosure | 255,780 | 541,753 | |||
Commercial paper | Cash Equivalent Marketable Securities | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Cash, cash equivalents and restricted cash | 255,780 | 541,753 | |||
Commercial paper | Investments in debt securities, short-term | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Cash, cash equivalents and restricted cash | 0 | ||||
Commercial paper | Investments in debt securities, long-term | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Cash, cash equivalents and restricted cash | 0 | ||||
Corporate securities | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Available-for-sale debt securities, amortized cost | 162,629 | 263,059 | |||
Gross Unrealized Gains | 284 | 299 | |||
Gross Unrealized Losses | (251) | [1] | (666) | [2] | |
Available-for-sale securities, debt securities | 162,662 | 262,692 | |||
Corporate securities | Cash Equivalent Marketable Securities | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Available-for-sale securities, debt securities | 0 | ||||
Corporate securities | Investments in debt securities, short-term | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Available-for-sale securities, debt securities | 108,943 | 161,441 | |||
Corporate securities | Investments in debt securities, long-term | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Available-for-sale securities, debt securities | 53,719 | 101,251 | |||
Interest-bearing deposits | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Available-for-sale debt securities, amortized cost | 56,883 | ||||
Gross Unrealized Gains | 0 | ||||
Gross Unrealized Losses | [2] | 0 | |||
Available-for-sale securities, debt securities | 56,883 | ||||
Interest-bearing deposits | Investments in debt securities, short-term | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Available-for-sale securities, debt securities | 56,883 | ||||
Interest-bearing deposits | Investments in debt securities, long-term | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Available-for-sale securities, debt securities | 0 | ||||
U.S. agency securities | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Available-for-sale debt securities, amortized cost | 203,746 | 224,293 | |||
Gross Unrealized Gains | 13 | 0 | |||
Gross Unrealized Losses | (624) | [1] | (1,995) | [2] | |
Available-for-sale securities, debt securities | 203,135 | 222,298 | |||
U.S. agency securities | Investments in debt securities, short-term | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Available-for-sale securities, debt securities | 68,682 | 75,037 | |||
U.S. agency securities | Investments in debt securities, long-term | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Available-for-sale securities, debt securities | $ 134,453 | $ 147,261 | |||
[1] | As of May 31, 2019 , there were $0.9 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 investments with unrealized losses was $268.0 million . | ||||
[2] | As of February 28, 2019 , there were $2.6 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 investments with unrealized losses was $387.8 million . |
Assets and Liabilities Measur_5
Assets and Liabilities Measured at Fair Value on a Recurring Basis - Summary of Stated Maturities of Investment in Debt Securities (Detail) $ in Thousands | May 31, 2019USD ($) |
Fair Value Disclosures [Abstract] | |
May 31, 2019 | $ 365,797 |
Less than 1 Year | 177,625 |
1-5 Years | 188,172 |
More than 5 Years | $ 0 |
Segment Reporting - Additional
Segment Reporting - Additional Information (Detail) - segment | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
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 | 11.00% | 10.00% |
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 | |||
May 31, 2019 | May 31, 2018 | Feb. 28, 2019 | ||
Segment Reporting Information [Line Items] | ||||
Total revenue from unaffiliated customers | $ 934,111 | $ 813,530 | ||
Income (loss) from operations | 132,118 | 112,156 | ||
Total cash, cash equivalents, restricted cash and available-for-sale investment securities | 2,661,193 | 2,527,129 | ||
Total assets | 5,573,939 | 5,191,561 | $ 5,588,289 | |
Corporate | ||||
Segment Reporting Information [Line Items] | ||||
Total revenue from unaffiliated customers | [1] | 0 | 0 | |
Income (loss) from operations | [1] | (50,168) | (46,005) | |
Total cash, cash equivalents, restricted cash and available-for-sale investment securities | [1] | 0 | 0 | |
Total assets | [1] | 0 | 0 | |
Americas | Operating Segment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenue from unaffiliated customers | 582,290 | 500,306 | ||
Income (loss) from operations | 83,555 | 71,864 | ||
Total cash, cash equivalents, restricted cash and available-for-sale investment securities | 1,429,795 | 1,524,311 | ||
Total assets | 3,567,096 | 3,559,900 | ||
EMEA | Operating Segment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenue from unaffiliated customers | 216,951 | 195,148 | ||
Income (loss) from operations | 54,909 | 48,860 | ||
Total cash, cash equivalents, restricted cash and available-for-sale investment securities | 730,228 | 576,171 | ||
Total assets | 1,258,782 | 1,015,187 | ||
Asia Pacific | Operating Segment | ||||
Segment Reporting Information [Line Items] | ||||
Total revenue from unaffiliated customers | 134,870 | 118,076 | ||
Income (loss) from operations | 43,822 | 37,437 | ||
Total cash, cash equivalents, restricted cash and available-for-sale investment securities | 501,170 | 426,647 | ||
Total assets | $ 748,061 | $ 616,474 | ||
[1] | Amounts represent share-based compensation expense that was not allocated to geographic segments. |
Segment Reporting - Summary o_2
Segment Reporting - Summary of Revenue from Unaffiliated Customers (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
Segment Reporting Information [Line Items] | ||
Total revenue from unaffiliated customers | $ 934,111 | $ 813,530 |
U.S., the Company’s country of domicile | ||
Segment Reporting Information [Line Items] | ||
Total revenue from unaffiliated customers | 511,716 | 442,421 |
Foreign | ||
Segment Reporting Information [Line Items] | ||
Total revenue from unaffiliated customers | $ 422,395 | $ 371,109 |
Segment Reporting - Summary o_3
Segment Reporting - Summary of Tangible Long-Lived Assets (Detail) - USD ($) $ in Thousands | May 31, 2019 | Feb. 28, 2019 |
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total tangible long-lived assets | $ 200,015 | $ 198,969 |
U.S., the Company’s country of domicile | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total tangible long-lived assets | 131,071 | 129,387 |
Foreign | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total tangible long-lived assets | $ 68,944 | $ 69,582 |
Segment Reporting - Summary o_4
Segment Reporting - Summary of Subscription and Services Revenue by Technology Product (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
May 31, 2019 | May 31, 2018 | |
Revenue from External Customer [Line Items] | ||
Total revenue | $ 934,111 | $ 813,530 |
Subscriptions | ||
Revenue from External Customer [Line Items] | ||
Total revenue | 814,952 | 711,521 |
Infrastructure-related offerings | ||
Revenue from External Customer [Line Items] | ||
Total revenue | 580,306 | 522,402 |
Application Development-related and other emerging technology offerings | ||
Revenue from External Customer [Line Items] | ||
Total revenue | 234,646 | 189,119 |
Training and services | ||
Revenue from External Customer [Line Items] | ||
Total revenue | 119,159 | 102,009 |
Consulting services | ||
Revenue from External Customer [Line Items] | ||
Total revenue | 93,423 | 79,147 |
Training | ||
Revenue from External Customer [Line Items] | ||
Total revenue | $ 25,736 | $ 22,862 |
Business Combinations - Additio
Business Combinations - Additional Information (Detail) - NoobaLtd. $ in Millions | Nov. 27, 2018USD ($) |
Business Acquisition [Line Items] | |
Cash paid | $ 11.8 |
Goodwill acquired | 3.5 |
Identifiable intangible assets acquired | 9.3 |
Net working capital | $ (1) |
Business Combinations - Summary
Business Combinations - Summary of Changes in Goodwill (Detail) $ in Thousands | 3 Months Ended |
May 31, 2019USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 1,276,853 |
Impact of foreign currency fluctuations | (3,359) |
Goodwill, ending balance | $ 1,273,494 |