Exhibit 99.1
Red Hat Reports Second Quarter Results
- Revenue of $220 million, up 20% from the prior year
- GAAP operating income up 24%, non-GAAP operating income up 25% from the prior year
- Deferred revenue of $650 million, up 12% from the prior year
RALEIGH, N.C.--(BUSINESS WIRE)--September 22, 2010--Red Hat, Inc. (NYSE: RHT), the world's leading provider of open source solutions, today announced financial results for its fiscal year 2011 second quarter ended August 31, 2010.
Total revenue for the quarter was $219.8 million, an increase of 20% from the year ago quarter. Subscription revenue for the quarter was $186.2 million, up 19% year-over-year.
“We continued to benefit from new project spending, expansion and cross selling of our product solutions and strong renewals in our top accounts. Our sales execution in the quarter resulted in organic revenue growth of 20% and the best billings growth rate in two years,” stated Jim Whitehurst, President and Chief Executive Officer of Red Hat. “During the quarter, we introduced our Cloud Foundations portfolio in an effort to help our customers take advantage of the benefits from cloud computing in an open and cost effective way. Our flexible cloud stack will enable customers to run enterprise applications across physical servers, virtual platforms, private clouds and multiple public clouds. We are beginning to see solid interest in our cloud and virtualization initiatives as well as some early deal activity, including our first private cloud management deal over a million dollars.”
GAAP operating income for the second quarter was $34.1 million, up 24% year-over-year. After adjusting for stock compensation and amortization expenses as detailed in the tables below, non-GAAP operating income for the second quarter was $54.3 million, up 25% year-over-year.
Net income for the quarter was $23.7 million, or $0.12 per diluted share, compared with $28.9 million, or $0.15 per diluted share, in the year ago quarter which included a one time tax benefit of $7.3 million, or approximately $0.04 per diluted share. Non-GAAP net income for the quarter was $36.8 million, or $0.19 per diluted share, after adjusting for stock compensation and amortization expenses as detailed in the tables below, as compared to $39.4 million, or $0.20 per diluted share, in the year ago quarter which also included the one time tax benefit of $7.3 million, or approximately $0.04 per diluted share.
Operating cash flow totaled $64.3 million, as compared to $62.0 million in the year ago quarter. At quarter end, the company’s total deferred revenue balance was $649.6 million, an increase of 12% on a year-over-year basis. Total cash, cash equivalents and investments as of August 31, 2010 was $1.05 billion.
“Our revenue and operating income growth continued this quarter with strong double digit gains in both, despite the foreign currency head wind,” stated Charlie Peters, Executive Vice President and Chief Financial Officer of Red Hat. “Our performance was broad based with strong results across all geographic regions and routes to market. It is clear that our value proposition is resonating with customers.”
Additional information on Red Hat's reported results, including a reconciliation of the non-GAAP adjusted results, are included in the financial tables below. A live webcast of Red Hat's results will begin at 5:00 pm ET today and can be accessed by the general public at Red Hat's investor relations website at http://investors.redhat.com. A replay of the webcast will be available shortly after the live event has ended.
About Red Hat, Inc.
Red Hat, the world's leading provider of open source solutions and an S&P 500 company, is headquartered in Raleigh, NC, with over 65 offices spanning the globe. CIOs ranked Red Hat as one of the top vendors delivering value in Enterprise Software for six consecutive years in the CIO Insight Magazine Vendor Value survey. Red Hat provides high-quality, affordable technology with its operating system platform, Red Hat Enterprise Linux, together with virtualization, applications, management and Services Oriented Architecture (SOA) solutions, including Red Hat Enterprise Virtualization and JBoss Enterprise Middleware. Red Hat also offers support, training and consulting services to its customers worldwide. Learn more: http://www.redhat.com.
Forward-Looking Statements
Certain statements contained in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: risks related to delays or reductions in information technology spending, the effects of industry consolidation, uncertainty and adverse results in litigation and related settlements, the integration of acquisitions and the ability to market successfully acquired technologies and products; the ability of the Company to effectively compete; the inability to adequately protect Company intellectual property and the potential for infringement or breach of license claims of or relating to third party intellectual property; the ability to deliver and stimulate demand for new products and technological innovations on a timely basis; risks related to data and information security vulnerabilities; ineffective management of, and control over, the Company's growth and international operations; fluctuations in exchange rates; and changes in and a dependence on key personnel, as well as other factors contained in our most recent Quarterly Report on Form 10-Q (copies of which may be accessed through the Securities and Exchange Commission's website at http://www.sec.gov), including those found therein under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations". In addition to these factors, actual future performance, outcomes, and results may differ materially because of more general factors including (without limitation) general industry and market conditions and growth rates, economic conditions, and governmental and public policy changes. The forward-looking statements included in this press release represent the Company's views as of the date of this press release and these views could change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of the press release.
© 2010 Red Hat, Inc. Red Hat, the Shadowman logo and JBoss are registered trademarks of Red Hat, Inc. in the U.S. and other countries. Linux is a registered trademark of Linus Torvalds.
| RED HAT, INC. | |||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
| (Unaudited) | |||||||||||
| (In thousands - except per share amounts) | |||||||||||
| Three Months Ended | Six Months Ended | ||||||||||
| August 31, | August 31, | August 31, | August 31, | ||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||
| Revenue: | |||||||||||
| Subscriptions | $186,183 | $156,273 | $365,259 | $305,063 | |||||||
| Training and services | 33,578 | 27,360 | 63,646 | 52,958 | |||||||
| Total subscription, training and services revenue | 219,761 | 183,633 | 428,905 | 358,021 | |||||||
| Cost of revenue: | |||||||||||
| Subscriptions | 12,256 | 10,972 | 24,920 | 21,023 | |||||||
| Training and services | 23,446 | 17,468 | 44,019 | 33,886 | |||||||
| Total cost of subscription, training and services revenue | 35,702 | 28,440 | 68,939 | 54,909 | |||||||
| Total gross profit | 184,059 | 155,193 | 359,966 | 303,112 | |||||||
| Operating expense: | |||||||||||
| Sales and marketing | 79,434 | 66,768 | 153,998 | 130,745 | |||||||
| Research and development | 42,361 | 36,360 | 83,019 | 71,462 | |||||||
| General and administrative | 28,193 | 24,523 | 54,638 | 48,308 | |||||||
| Total operating expense | 149,988 | 127,651 | 291,655 | 250,515 | |||||||
| Income from operations | 34,071 | 27,542 | 68,311 | 52,597 | |||||||
| Interest income | 1,775 | 2,524 | 3,438 | 5,955 | |||||||
| Other income, net | 548 | 3,192 | 1,677 | 3,189 | |||||||
| Income before provision for income taxes | 36,394 | 33,258 | 73,426 | 61,741 | |||||||
| Provision for income taxes | 12,738 | 4,321 | 25,699 | 14,290 | |||||||
| Net income | $23,656 | $28,937 | $47,727 | $47,451 | |||||||
| Net income-diluted | $23,656 | $28,937 | $47,727 | $47,451 | |||||||
| Net income per share: | |||||||||||
| Basic | $0.13 | $0.15 | $0.25 | $0.25 | |||||||
| Diluted | $0.12 | $0.15 | $0.25 | $0.25 | |||||||
| Weighted average shares outstanding: | |||||||||||
| Basic | 189,027 | 187,099 | 188,477 | 188,007 | |||||||
| Diluted | 193,560 | 192,659 | 193,457 | 193,060 | |||||||
| RED HAT, INC. | ||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||
| (In thousands) | ||||||||||
| ASSETS | ||||||||||
| August 31, | February 28, | |||||||||
| 2010 | 2010 | |||||||||
| (Unaudited) | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $669,227 | $388,118 | ||||||||
| Investments in debt and equity securities | 305,991 | 372,656 | ||||||||
| Accounts receivable, net | 125,993 | 139,436 | ||||||||
| Deferred tax assets, net | 68,618 | 57,951 | ||||||||
| Prepaid expenses | 48,076 | 44,116 | ||||||||
| Other current assets | 1,929 | 842 | ||||||||
| Total current assets | 1,219,834 | 1,003,119 | ||||||||
| Property and equipment, net | 71,544 | 71,708 | ||||||||
| Goodwill | 438,376 | 438,749 | ||||||||
| Identifiable intangibles, net | 101,412 | 108,213 | ||||||||
| Investments in debt securities | 74,933 | 209,411 | ||||||||
| Other assets, net | 37,496 | 39,672 | ||||||||
| Total assets | $1,943,595 | $1,870,872 | ||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $13,368 | $16,483 | ||||||||
| Accrued expenses | 70,267 | 68,334 | ||||||||
| Deferred revenue | 483,477 | 480,572 | ||||||||
| Other current obligations | 530 | 878 | ||||||||
| Total current liabilities | 567,642 | 566,267 | ||||||||
| Deferred lease credits | 4,257 | 4,184 | ||||||||
| Long term deferred revenue | 166,158 | 165,288 | ||||||||
| Other long term obligations | 23,546 | 24,081 | ||||||||
| Stockholders' equity: | ||||||||||
| Common stock | 22 | 22 | ||||||||
| Additional paid-in capital | 1,552,830 | 1,444,848 | ||||||||
| Retained earnings | 185,499 | 137,772 | ||||||||
| Treasury stock, at cost | (552,002) | (472,646) | ||||||||
| Accumulated other comprehensive (loss) income | (4,357) | 1,056 | ||||||||
| Total stockholders' equity | 1,181,992 | 1,111,052 | ||||||||
| Total liabilities and stockholders' equity | $1,943,595 | $1,870,872 | ||||||||
| RED HAT, INC. | |||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||
| (Unaudited) | |||||||||||||
| (In thousands) | |||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||
| August 31, | August 31, | August 31, | August 31, | ||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||
| Cash flows from operating activities: | |||||||||||||
| Net income | $23,656 | $28,937 | $47,727 | $47,451 | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||
| Depreciation and amortization | 11,689 | 11,442 | 23,411 | 22,252 | |||||||||
| Share-based compensation expense | 15,675 | 11,013 | 28,849 | 21,689 | |||||||||
| Deferred income taxes | 13,434 | (940) | 21,786 | 5,489 | |||||||||
| Excess tax benefits from share-based payment arrangements | (10,192) | (3,556) | (21,199) | (17,756) | |||||||||
| Gain on sale of available-for-sale equity securities | (601) | (3,465) | (1,117) | (3,663) | |||||||||
| Other | 319 | (80) | 116 | (6) | |||||||||
| Changes in operating assets and liabilities net of effects of acquisitions: | |||||||||||||
| Accounts receivable | (6,794) | (5,666) | 12,732 | 20,612 | |||||||||
| Prepaid assets | (4,153) | 2,945 | (4,744) | 3,371 | |||||||||
| Accounts payable | 2,187 | 4,790 | (2,882) | 7,788 | |||||||||
| Accrued expenses | 6,712 | 5,214 | 8,252 | 2,185 | |||||||||
| Deferred revenue | 13,439 | 10,155 | 12,381 | 12,516 | |||||||||
| Other | (1,087) | 1,216 | (384) | 1,280 | |||||||||
| Net cash provided by operating activities | 64,284 | 62,005 | 124,928 | 123,208 | |||||||||
| Cash flows from investing activities: | |||||||||||||
| Purchase of available-for-sale debt securities | (110,021) | (131,437) | (220,364) | (288,472) | |||||||||
| Proceeds from sales and maturities of available-for-sale debt securities | 215,811 | 83,655 | 414,129 | 206,104 | |||||||||
| Proceeds from sales of available-for-sale equity securities | 609 | 3,838 | 1,157 | 4,059 | |||||||||
| Purchase of developed technologies and other intangible assets | (1,324) | (1,081) | (2,945) | (2,070) | |||||||||
| Purchase of property and equipment | (8,371) | (6,635) | (15,093) | (12,662) | |||||||||
| Net cash provided by (used in) investing activities | 96,704 | (51,660) | 176,884 | (93,041) | |||||||||
| Cash flows from financing activities: | |||||||||||||
| Excess tax benefits from share-based payment arrangements | 10,192 | 3,556 | 21,199 | 17,756 | |||||||||
| Proceeds from exercise of common stock options | 18,011 | 14,189 | 55,699 | 18,589 | |||||||||
| Purchase of treasury stock | (4,994) | (47,186) | (79,355) | (93,957) | |||||||||
| Payments related to net settlement of employee share-based compensation awards | (1,135) | (502) | (8,190) | (2,300) | |||||||||
| Payments on other borrowings | - | - | (877) | (900) | |||||||||
| Net cash provided by (used in) financing activities | 22,074 | (29,943) | (11,524) | (60,812) | |||||||||
| Effect of foreign currency exchange rates on cash and cash equivalents | 7,795 | 2,034 | (9,179) | 8,149 | |||||||||
| Net increase (decrease) in cash and cash equivalents | 190,857 | (17,564) | 281,109 | (22,496) | |||||||||
| Cash and cash equivalents at beginning of the period | 478,370 | 510,616 | 388,118 | 515,548 | |||||||||
| Cash and cash equivalents at end of period | $669,227 | $493,052 | $669,227 | $493,052 | |||||||||
| RED HAT, INC. | |||||||||||||
| RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED RESULTS | |||||||||||||
| (Unaudited) | |||||||||||||
| (In thousands - except per share amounts) | |||||||||||||
| Non cash share-based compensation expense included in Consolidated Statements of Operations: | |||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||
| August 31, | August 31, | August 31, | August 31, | ||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||
| Cost of revenue | $1,370 | $759 | $2,561 | $1,560 | |||||||||
| Sales and marketing | 4,771 | 3,138 | 8,547 | 6,248 | |||||||||
| Research and development | 4,080 | 3,075 | 7,435 | 6,348 | |||||||||
| General and administration | 5,454 | 4,041 | 10,306 | 7,533 | |||||||||
| Total share-based compensation expense | $15,675 | $11,013 | $28,849 | $21,689 | |||||||||
| Amortization of intangible assets expense included in Consolidated Statements of Operations: | |||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||
| August 31, | August 31, | August 31, | August 31, | ||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||
| Cost of revenue | $704 | $989 | $1,408 | $1,949 | |||||||||
| Sales and marketing | 2,075 | 2,293 | 4,161 | 4,615 | |||||||||
| Research and development | 925 | 925 | 1,850 | 1,851 | |||||||||
| General and administration | 833 | 804 | 1,655 | 1,601 | |||||||||
| Total amortization of intangible assets expense | $4,537 | $5,011 | $9,074 | $10,016 | |||||||||
| Three Months Ended | Six Months Ended | ||||||||||||
| August 31, | August 31, | August 31, | August 31, | ||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||
| GAAP net income | $23,656 | $28,937 | $47,727 | $47,451 | |||||||||
| Provision for income taxes | 12,738 | 4,321 | 25,699 | 14,290 | |||||||||
| GAAP income before provision for income taxes | $36,394 | $33,258 | $73,426 | $61,741 | |||||||||
Add: Non-cash share-based compensation expense | 15,675 | 11,013 | 28,849 | 21,689 | |||||||||
| Add: Amortization of intangible assets | 4,537 | 5,011 | 9,074 | 10,016 | |||||||||
| Non-GAAP adjusted income before provision for income taxes | $56,606 | $49,282 | $111,349 | $93,446 | |||||||||
| Provision for income taxes (1) | 19,812 | 9,930 | 38,972 | 25,387 | |||||||||
| Non-GAAP adjusted net income | $36,794 | $39,352 | $72,377 | $68,059 | |||||||||
| Non-GAAP adjusted net income-diluted | $36,794 | $39,352 | $72,377 | $68,059 | |||||||||
| Non-GAAP adjusted net income per share: | |||||||||||||
| Basic | $0.19 | $0.21 | $0.38 | $0.36 | |||||||||
| Diluted | $0.19 | $0.20 | $0.37 | $0.35 | |||||||||
| (1) Provision for income taxes: | |||||||||||||
| Non-GAAP adjusted net income before income tax provision | $56,606 | $49,282 | $111,349 | $93,446 | |||||||||
| Estimated annual effective tax rate | 35% | 35% | 35% | 35% | |||||||||
| Non-GAAP provision for income taxes before discrete tax benefit | $19,812 | $17,249 | $38,972 | $32,706 | |||||||||
| Discrete tax benefit | - | 7,319 | - | 7,319 | |||||||||
| Provision for income taxes on Non-GAAP adjusted net income | $19,812 | $9,930 | $38,972 | $25,387 | |||||||||
| RED HAT, INC. | |||||||||||||
| RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED RESULTS | |||||||||||||
| (Unaudited) | |||||||||||||
| (In thousands - except per share amounts) | |||||||||||||
| Reconciliation of GAAP results to non-GAAP adjusted results | |||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||
| August 31, | August 31, | August 31, | August 31, | ||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||
| GAAP gross profit | $184,059 | $155,193 | $359,966 | $303,112 | |||||||||
Add: Non-cash share-based compensation expense | 1,370 | 759 | 2,561 | 1,560 | |||||||||
| Add: Amortization of intangible assets | 704 | 989 | 1,408 | 1,949 | |||||||||
| Non-GAAP gross profit | $186,133 | $156,941 | $363,935 | $306,621 | |||||||||
| Non-GAAP gross margin | 85% | 85% | 85% | 86% | |||||||||
| Three Months Ended | Six Months Ended | ||||||||||||
| August 31, | August 31, | August 31, | August 31, | ||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||
| GAAP operating expenses | $149,988 | $127,651 | $291,655 | $250,515 | |||||||||
Deduct: Non-cash share-based compensation expense | (14,305) | (10,254) | (26,288) | (20,129) | |||||||||
| Deduct: Amortization of intangible assets | (3,833) | (4,022) | (7,666) | (8,067) | |||||||||
| Non-GAAP adjusted operating expenses | $131,850 | $113,375 | $257,701 | $222,319 | |||||||||
| Three Months Ended | Six Months Ended | ||||||||||||
| August 31, | August 31, | August 31, | August 31, | ||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||
| GAAP operating income | $34,071 | $27,542 | $68,311 | $52,597 | |||||||||
Add: Non-cash share-based compensation expense | 15,675 | 11,013 | 28,849 | 21,689 | |||||||||
| Add: Amortization of intangible assets | 4,537 | 5,011 | 9,074 | 10,016 | |||||||||
| Non-GAAP adjusted operating income | $54,283 | $43,566 | $106,234 | $84,302 | |||||||||
| Non-GAAP adjusted operating margin | 24.7% | 23.7% | 24.8% | 23.5% | |||||||||
CONTACT:
Red Hat Inc.
Media Contact:
Kara Schiltz, 919-301-3002
kschiltz@redhat.com
Investor Relations:
Tom McCallum, 919-754-4630
tmccallum@redhat.com