Red Hat 8-K Red Hat Reports Fourth Quarter and Fiscal Year 2012 Results

Exhibit 99.1

Red Hat Reports Fourth Quarter and Fiscal Year 2012 Results

• Fourth quarter revenue of $297 million, up 21% year-over-year; full fiscal year revenue of $1.13 billion, up 25% year-over-year
• Fourth quarter GAAP EPS of $0.18, up 6% year-over-year; non-GAAP EPS of $0.29, up 12% year-over-year
• Fourth quarter operating cash flow of $128 million, up 35% year-over-year; full fiscal year operating cash flow of $392 million, up 35% year-over-year

RALEIGH, N.C.--(BUSINESS WIRE)--March 28, 2012--Red Hat, Inc. (NYSE: RHT), the world's leading provider of open source solutions, today announced financial results for its fiscal fourth quarter and fiscal year ended February 29, 2012.

Total revenue for the quarter was $297.0 million, an increase of 21% from the year ago quarter. Subscription revenue for the quarter was $255.2 million, up 22% year-over-year. For the full fiscal year 2012, total revenue was $1.13 billion, an increase of 25% over the prior year, and subscription revenue was $965.6 million, up 25% year-over-year.

“The strength of our fourth quarter was a fitting conclusion to a remarkably strong year for our business. Our investments to expand our geographic sales footprint and add sales people with targeted industry and product knowledge has accelerated our growth,” stated Jim Whitehurst, President and Chief Executive Officer of Red Hat. “Red Hat is the first pure-play, open source company, and one of only a select few software companies, to have achieved the billion dollar revenue milestone. The open source technologies which we provide are being selected by more customers every day as they re-architect the infrastructure of their data centers for greater efficiency, agility and cloud enablement.”

GAAP operating income for the fourth quarter and the full fiscal year 2012 was $48.5 million and $199.9 million, respectively. GAAP operating margin was 16.3% in the fourth quarter and 17.6% for the full year. After adjusting for stock compensation and amortization expenses, as detailed in the tables below, non-GAAP operating income for the quarter was $77.2 million, or a 26.0% operating margin, and full year non-GAAP operating income was $298.9 million. Full year non-GAAP operating margin was 26.4%, representing an increase of 160 basis points from the prior year.

GAAP net income for the fourth quarter was $36.0 million, or $0.18 per diluted share, compared with $38.2 million, or $0.19 per diluted share, for the prior quarter and $33.5 million, or $0.17 per diluted share, in the year ago quarter. Non-GAAP adjusted net income for the fourth quarter was $57.2 million, or $0.29 per diluted share, after adjusting for stock compensation and amortization expenses as detailed in the tables below. This compares to non-GAAP adjusted net income of $55.7 million, or $0.28 per diluted share in the prior quarter and $51.4 million, or $0.26 per diluted share in the year ago quarter. Both the GAAP and non-GAAP results for the year ago fourth quarter benefited by approximately $0.02 per share as a result of the retroactive reenactment in December 2010 of the US research tax credit.

For the full year, GAAP net income was $146.6 million or $0.75 per diluted share, compared with $107.3 million or $0.55 per diluted share in the prior year. After adjusting for stock compensation and amortization expenses, as detailed in the tables below, non-GAAP adjusted net income for the year was $216.4 million or $1.10 per diluted share, compared to $162.8 million and $0.83 per diluted share for the previous fiscal year.

Operating cash flow totaled $128.0 million for the fourth quarter and $391.9 million for the full year. At the end of the fiscal year, the company’s total deferred revenue balance was $946.7 million, an increase of 23% on a year-over-year basis and 16% sequentially. Cash and investments at February 29, 2012 totaled $1.3 billion after repurchasing approximately $76.3 million, or approximately 1.8 million shares, of common stock in the fourth quarter. For the full fiscal year 2012, Red Hat repurchased approximately $133.2 million, or approximately 3.2 million shares, of common stock.

“We experienced impressive breadth and depth of demand for our technologies this quarter whether by geography or by industry vertical. This resulted in record financial metrics for both the fourth quarter and the full fiscal year 2012,” stated Charlie Peters, Executive Vice President and Chief Financial Officer of Red Hat. “Our strategy for growth, coupled with relentless day-to-day execution of the business, has been successful. We experienced a significant increase in large deals, both in Q4 and for the full year which contributed to annual organic growth of 25% in revenue, 33% in non-GAAP operating income and 35% growth in operating cash flow.”

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 more than 70 offices spanning the globe. Red Hat provides high-quality, affordable technology with its operating system platform, Red Hat Enterprise Linux, together with cloud, virtualization, management, storage and service-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; the ability of the Company to compete effectively; uncertainty and adverse results in litigation and related settlements; the integration of acquisitions and the ability to market successfully acquired technologies and products; 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 and political conditions, governmental and public policy changes and the impact of natural disasters such as earthquakes and floods. 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.

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						Twelve Months Ended
					February 29,			February 28,			February 29,			February 28,
					2012			2011			2012			2011 (1)
Revenue:
		Subscriptions			$	255,167		$	209,303		$	965,575		$	773,404
		Training and services				41,844			35,493			167,528			135,873
				Total subscription, training and services revenue		297,011			244,796			1,133,103			909,277
Cost of revenue:
		Subscriptions				17,360			14,742			66,237			52,997
		Training and services				26,912			26,862			112,311			97,290
				Total cost of subscription, training and services revenue		44,272			41,604			178,548			150,287
	Total gross profit					252,739			203,192			954,555			758,990
Operating expense:
	Sales and marketing					115,018			88,273			419,635			327,408
	Research and development					55,147			45,150			208,662			171,253
	General and administrative					34,069			30,359			126,345			114,653
		Total operating expense				204,234			163,782			754,642			613,314
Income from operations						48,505			39,410			199,913			145,676
	Interest income					2,279			1,697			8,418			6,743
	Other income (expense), net					(155	)		(866	)		(322	)		1,275
Income before provision for income taxes						50,629			40,241			208,009			153,694
Provision for income taxes						14,661			6,707			61,383			46,416
Net income					$	35,968		$	33,534		$	146,626		$	107,278
Net income per share:
	Basic				$	0.19		$	0.17		$	0.76		$	0.56
	Diluted				$	0.18		$	0.17		$	0.75		$	0.55
Weighted average shares outstanding:
	Basic					193,117			192,996			193,151			190,294
	Diluted					195,879			197,878			196,451			196,353
			(1) Derived from audited financial statements

RED HAT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
			February 29,			February 28,
			2012			2011 (1)
			(Unaudited)
Current assets:
	Cash and cash equivalents		$	549,217		$	642,630
	Investments in debt and equity securities			264,298			217,970
	Accounts receivable, net			255,180			184,741
	Deferred tax assets, net			69,765			75,720
	Prepaid expenses			81,266			62,364
	Other current assets			1,629			1,133
		Total current assets		1,221,355			1,184,558
	Property and equipment, net			92,065			75,558
	Goodwill			591,563			463,673
	Identifiable intangibles, net			100,638			109,932
	Investments in debt securities			446,838			331,791
	Other assets, net			38,640			33,810
		Total assets	$	2,491,099		$	2,199,322
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable and accrued expenses		$	114,078		$	106,514
	Deferred revenue			711,408			572,637
	Other current obligations			819			650
		Total current liabilities		826,305			679,801
	Long term deferred revenue			235,328			199,617
	Other long term obligations			30,649			29,205
Stockholders' equity:
	Common stock			23			22
	Additional paid-in capital			1,709,082			1,610,238
	Retained earnings			391,676			245,050
	Treasury stock, at cost			(696,012	)		(562,792	)
	Accumulated other comprehensive (loss) income			(5,952	)		(1,819	)
		Total stockholders' equity		1,398,817			1,290,699
		Total liabilities and stockholders' equity	$	2,491,099		$	2,199,322
		(1) Derived from audited financial statements

RED HAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
		Three Months Ended						Twelve Months Ended
		February 29,			February 28,			February 29,			February 28,
		2012			2011			2012			2011 (1)
Cash flows from operating activities:
Net income		$	35,968		$	33,534		$	146,626		$	107,278
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization		13,094			12,757			51,372			47,997
	Share-based compensation expense		23,557			16,408			79,267			60,597
	Deferred income taxes		9,477			4,151			45,702			33,848
	Excess tax benefits from share-based payment arrangements		(5,633	)		(10,292	)		(29,931	)		(42,291	)
	Gain on sale of available-for-sale equity securities		(617	)		(903	)		(1,924	)		(3,746	)
	Other		(19	)		716			738			1,505
Changes in operating assets and liabilities net of effects of acquisitions:
	Accounts receivable		(46,981	)		(30,481	)		(70,410	)		(41,512	)
	Prepaid expenses		(12,866	)		(7,863	)		(19,190	)		(17,220	)
	Accounts payable and accrued expenses		(9,090	)		2,277			12,504			29,534
	Deferred revenue		120,688			73,540			176,855			112,724
	Other		433			1,157			274			2,034
	Net cash provided by operating activities		128,011			95,001			391,883			290,748
Cash flows from investing activities:
	Purchase of available-for-sale debt securities		(231,958	)		(216,327	)		(962,974	)		(751,420	)
	Proceeds from sales and maturities of available-for-sale debt securities		213,318			165,472			791,585			770,860
	Proceeds from sales of available-for-sale equity securities		633			939			1,979			3,938
	Acquisitions of businesses, net of cash acquired		-			-			(135,210	)		(31,381	)
	Net purchase of strategic equity investments		-			-			(2,622	)		-
	Purchase of developed technologies and other intangible assets		(1,104	)		(1,667	)		(5,349	)		(14,093	)
	Purchase of property and equipment		(14,974	)		(7,588	)		(46,269	)		(32,759	)
	Net cash used in investing activities		(34,085	)		(59,171	)		(358,860	)		(54,855	)
Cash flows from financing activities:
	Excess tax benefits from share-based payment arrangements		5,633			10,292			29,931			42,291
	Proceeds from exercise of common stock options		1,259			4,090			16,812			84,443
	Purchase of treasury stock		(76,268	)		(10,791	)		(133,220	)		(90,146	)
	Payments related to net settlement of employee share-based compensation awards		(4,229	)		(3,162	)		(36,332	)		(26,250	)
	Payments on other borrowings		(319	)		(16	)		(1,145	)		(876	)
	Proceeds from other borrowings		52			-			118			318
	Net cash provided by (used in) financing activities		(73,872	)		413			(123,836	)		9,780
Effect of foreign currency exchange rates on cash and cash equivalents			2,498			11,473			(2,600	)		8,839
Net increase (decrease) in cash and cash equivalents			22,552			47,716			(93,413	)		254,512
Cash and cash equivalents at beginning of the period			526,665			594,914			642,630			388,118
Cash and cash equivalents at end of period		$	549,217		$	642,630		$	549,217		$	642,630
	(1) Derived from audited financial statements

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						Twelve Months Ended
	February 29,			February 28,			February 29,			February 28,
	2012			2011			2012			2011
Cost of revenue	$	2,003		$	1,884		$	7,880		$	6,053
Sales and marketing		6,231			5,502			25,060			18,971
Research and development		7,126			4,244			21,570			15,639
General and administration		8,197			4,778			24,757			19,934
Total share-based compensation expense	$	23,557		$	16,408		$	79,267		$	60,597
Amortization of intangible assets expense included in Consolidated Statements of Operations:
	Three Months Ended						Twelve Months Ended
	February 29,			February 28,			February 29,			February 28,
	2012			2011			2012			2011
Cost of revenue	$	670		$	979		$	3,533		$	3,274
Sales and marketing		2,473			2,085			8,348			8,322
Research and development		940			1,250			4,194			4,025
General and administration		1,058			846			3,674			3,340
Total amortization of intangible assets expense	$	5,141		$	5,160		$	19,749		$	18,961
	Three Months Ended						Twelve Months Ended
	February 29,			February 28,			February 29,			February 28,
	2012			2011			2012			2011
GAAP net income	$	35,968		$	33,534		$	146,626		$	107,278
Provision for income taxes		14,661			6,707			61,383			46,416
GAAP income before provision for income taxes	$	50,629		$	40,241		$	208,009		$	153,694
Add: Non-cash share-based compensation expense		23,557			16,408			79,267			60,597
Add: Amortization of intangible assets		5,141			5,160			19,749			18,961
Non-GAAP adjusted income before provision for income taxes	$	79,327		$	61,809		$	307,025		$	233,252
Provision for income taxes (1)		22,082			10,437			90,603			70,442
Non-GAAP adjusted net income (basic and diluted)	$	57,245		$	51,372		$	216,422		$	162,810
Non-GAAP adjusted net income per share:
Basic	$	0.30		$	0.27		$	1.12		$	0.86
Diluted	$	0.29		$	0.26		$	1.10		$	0.83
(1) Provision for income taxes:
Non-GAAP adjusted net income before income tax provision	$	79,327		$	61,809		$	307,025		$	233,252
Estimated annual effective tax rate		27.8	%		16.9	%		30.2	%		30.2	%
Non-GAAP provision for income taxes before discrete tax benefit	$	22,082		$	10,437		$	92,668		$	70,442
Discrete tax benefit		-			-			2,065			-
Provision for income taxes on Non-GAAP adjusted net income	$	22,082		$	10,437		$	90,603		$	70,442

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						Twelve Months Ended
	February 29,			February 28,			February 29,			February 28,
	2012			2011			2012			2011
GAAP gross profit	$	252,739		$	203,192		$	954,555		$	758,990
Add: Non-cash share-based compensation expense		2,003			1,884			7,880			6,053
Add: Amortization of intangible assets		670			979			3,533			3,274
Non-GAAP gross profit	$	255,412		$	206,055		$	965,968		$	768,317
Non-GAAP gross margin		86.0	%		84.2	%		85.2	%		84.5	%
	Three Months Ended						Twelve Months Ended
	February 29,			February 28,			February 29,			February 28,
	2012			2011			2012			2011
GAAP operating expenses	$	204,234		$	163,782		$	754,642		$	613,314
Deduct: Non-cash share-based compensation expense		(21,554	)		(14,524	)		(71,387	)		(54,544	)
Deduct: Amortization of intangible assets		(4,471	)		(4,181	)		(16,216	)		(15,687	)
Non-GAAP adjusted operating expenses	$	178,209		$	145,077		$	667,039		$	543,083
	Three Months Ended						Twelve Months Ended
	February 29,			February 28,			February 29,			February 28,
	2012			2011			2012			2011
GAAP operating income	$	48,505		$	39,410		$	199,913		$	145,676
Add: Non-cash share-based compensation expense		23,557			16,408			79,267			60,597
Add: Amortization of intangible assets		5,141			5,160			19,749			18,961
Non-GAAP adjusted operating income	$	77,203		$	60,978		$	298,929		$	225,234
Non-GAAP adjusted operating margin		26.0	%		24.9	%		26.4	%		24.8	%

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Red Hat Inc.
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