Red Hat 8-K Red Hat Reports First Quarter Results

Exhibit 99.1

Red Hat Reports First Quarter Results

• First quarter revenue of $315 million, up 19% year-over-year
• First quarter GAAP EPS of $0.19, up 12% year-over-year; non-GAAP EPS of $0.30, up 25% year-over-year
• First quarter operating cash flow of $124 million, up 38% year-over-year

RALEIGH, N.C.--(BUSINESS WIRE)--June 20, 2012--Red Hat, Inc. (NYSE: RHT), the world's leading provider of open source solutions, today announced financial results for its fiscal year 2013 first quarter ended May 31, 2012.

Total revenue for the quarter was $314.7 million, an increase of 19% from the year ago quarter. Subscription revenue for the quarter was $272.6 million, up 21% year-over-year.

“Our first quarter results represented a strong start to our fiscal 2013. Red Hat’s compelling value proposition and innovative, open source technologies continued to drive our financial success and market share gains.” stated Jim Whitehurst, President and Chief Executive Officer of Red Hat.

GAAP operating income for the first quarter was $50.9 million, or 16.2% operating margin. After adjusting for stock compensation, amortization expenses and certain facility exit costs, as detailed in the tables below, non-GAAP operating income for the first quarter was $81.1 million, up 22% year-over-year. Non-GAAP operating margin was 25.8%, up 70 basis points from the year ago quarter.

Net income for the quarter was $37.5 million, or $0.19 per diluted share, compared with $32.5 million, or $0.17 per diluted share, in the year ago quarter. After adjusting for stock compensation, amortization expenses and certain facility exit costs, as detailed in the tables below, non-GAAP net income for the quarter was $58.0 million, or $0.30 per diluted share, as compared to $47.0 million, or $0.24 per diluted share, in the year ago quarter.

Operating cash flow was $124.4 million for the first quarter, as compared to $90.2 million in the year ago quarter. At quarter end, the company’s total deferred revenue balance was $913.3 million, an increase of 16% on a year-over-year basis. Total cash, cash equivalents and investments as of May 31, 2012 was $1.3 billion after repurchasing approximately $30 million, or approximately 550,000 shares, of common stock in the first quarter.

“Red Hat continues to display an attractive combination of scale, revenue growth, profitability and cash flow. This type of performance has led to Red Hat’s inclusion among the highest growth technology companies in the 2012 Forbes Fast Tech 25,” stated Charlie Peters, Executive Vice President and Chief Financial Officer of Red Hat. “In Q1, we delivered non-GAAP operating income growth of 22% while continuing to invest in important growth initiatives in markets such as virtualization, cloud computing and storage.”

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 is the world's leading provider of open source software solutions, taking a community-powered approach to reliable and high-performing cloud, Linux, middleware, storage and virtualization technologies. Red Hat also offers award-winning support, training, and consulting services. As the connective hub in a global network of enterprises, partners, and open source communities, Red Hat helps create relevant, innovative technologies that liberate resources for growth and prepare customers for the future of IT. Learn more at 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 Annual Report on Form 10-K (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 this press release.

Red Hat and JBoss are trademarks of Red Hat, Inc., registered in the U.S. and other countries. Linux® is the registered trademark of Linus Torvalds in the U.S. and other countries

RED HAT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands - except per share amounts)
	Three Months Ended
	May 31,		May 31,
	2012		2011
Revenue:
Subscriptions	$	272,571	$	225,533
Training and services		42,160		39,213
Total subscription, training and services revenue		314,731		264,746
Cost of revenue:
Subscriptions		17,940		15,239
Training and services		28,079		27,208
Total cost of subscription, training and services revenue		46,019		42,447
Total gross profit		268,712		222,299
Operating expense:
Sales and marketing		120,870		97,325
Research and development		59,880		48,288
General and administrative		33,912		31,327
Facility exit costs		3,142		-
Total operating expense		217,804		176,940
Income from operations		50,908		45,359
Interest income		2,294		1,936
Other income (expense), net		1,887		(266	)
Income before provision for income taxes		55,089		47,029
Provision for income taxes		17,628		14,579
Net income	$	37,461	$	32,450
Net income per share:
Basic	$	0.19	$	0.17
Diluted	$	0.19	$	0.17
Weighted average shares outstanding:
Basic		192,947		193,155
Diluted		195,937		196,287

RED HAT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
		May 31,			February 29,
		2012			2012 (1)
		(Unaudited)
Current assets:
	Cash and cash equivalents	$	508,616		$	549,217
	Investments in debt and equity securities		310,342			264,298
	Accounts receivable, net		195,831			255,180
	Deferred tax assets, net		71,734			69,765
	Prepaid expenses		86,156			81,266
	Other current assets		1,282			1,629
Total current assets			1,173,961			1,221,355
	Property and equipment, net		101,538			92,065
	Goodwill		590,517			591,563
	Identifiable intangibles, net		97,574			100,638
	Investments in debt securities		481,142			446,838
	Other assets, net		39,886			38,640
Total assets		$	2,484,618		$	2,491,099
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	123,678		$	114,078
Deferred revenue			682,472			711,408
Other current obligations			918			819
Total current liabilities			807,068			826,305
	Long term deferred revenue		230,869			235,328
	Other long term obligations		30,960			30,649
Stockholders' equity:
	Common stock		23			23
	Additional paid-in capital		1,728,175			1,709,082
	Retained earnings		429,137			391,676
	Treasury stock, at cost		(726,023	)		(696,012	)
	Accumulated other comprehensive (loss) income		(15,591	)		(5,952	)
Total stockholders' equity			1,415,721			1,398,817
Total liabilities and stockholders' equity		$	2,484,618		$	2,491,099
(1) Derived from audited financial statements

RED HAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
	Three Months Ended
	May 31,			May 31,
	2012			2011
Cash flows from operating activities:
Net income	$	37,461		$	32,450
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		14,079			12,739
Share-based compensation expense		22,206			16,187
Deferred income taxes		10,026			11,055
Excess tax benefits from share-based payment arrangements		(10,200	)		(8,560	)
Other		(2,370	)		(77	)
Changes in operating assets and liabilities net of effects of acquisitions:
Accounts receivable		54,560			32,042
Prepaid expenses		(7,799	)		(3,293	)
Accounts payable and accrued expenses		11,098			(3,939	)
Deferred revenue		(5,122	)		1,270
Other		465			338
Net cash provided by operating activities		124,404			90,212
Cash flows from investing activities:
Purchase of available-for-sale debt securities		(322,741	)		(180,850	)
Proceeds from sales and maturities of available-for-sale debt securities		227,685			172,583
Proceeds from sales of available-for-sale equity securities		330			665
Purchase of other intangible assets		(2,522	)		(2,543	)
Purchase of property and equipment		(15,899	)		(8,657	)
Net cash used in investing activities		(113,147	)		(18,802	)
Cash flows from financing activities:
Excess tax benefits from share-based payment arrangements		10,200			8,560
Proceeds from exercise of common stock options		3,890			5,043
Purchase of treasury stock		(30,011	)		(18,946	)
Payments related to net settlement of employee share-based compensation awards		(18,832	)		(9,033	)
Payments on other borrowings	(264)			(594)
Net cash used in financing activities		(35,017	)		(14,970	)
Effect of foreign currency exchange rates on cash and cash equivalents		(16,841	)		11,153
Net increase (decrease) in cash and cash equivalents		(40,601	)		67,593
Cash and cash equivalents at beginning of the period		549,217			642,630
Cash and cash equivalents at end of period	$	508,616		$	710,223

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
	May 31,	May 31,
	2012	2011
Cost of revenue	$2,165	$1,790
Sales and marketing	7,362	5,571
Research and development	6,812	4,193
General and administration	5,867	4,633
Total share-based compensation expense	$22,206	$16,187
Amortization of intangible assets expense included in Consolidated Statements of Operations:
	Three Months Ended
	May 31,	May 31,
	2012	2011
Cost of revenue	$669	$979
Sales and marketing	2,076	1,959
Research and development	959	1,157
General and administration	1,144	846
Total amortization of intangible assets expense	$4,848	$4,941
Facility exit costs included in Consolidated Statements of Operations:
	Three Months Ended
	May 31,	May 31,
	2012	2011
Facility exit costs	$3,142	-
	Three Months Ended
	May 31,	May 31,
	2012	2011
GAAP net income	$37,461	$32,450
Provision for income taxes	17,628	14,579
GAAP income before provision for income taxes	$55,089	$47,029
Add: Non-cash share-based compensation expense	22,206	16,187
Add: Amortization of intangible assets	4,848	4,941
Add: Facility exit costs	3,142	-
Non-GAAP adjusted income before provision for income taxes	$85,285	$68,157
Provision for income taxes	27,291	21,129
Non-GAAP adjusted net income (basic and diluted)	$57,994	$47,028
Non-GAAP adjusted net income per share:
Basic	$0.30	$0.24
Diluted	$0.30	$0.24

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
	May 31,	May 31,
	2012	2011
GAAP gross profit	$268,712	$222,299
Add: Non-cash share-based compensation expense	2,165	1,790
Add: Amortization of intangible assets	669	979
Non-GAAP gross profit	$271,546	$225,068
Non-GAAP gross margin	86.3%	85.0%
	Three Months Ended
	May 31,	May 31,
	2012	2011
GAAP operating expenses	$217,804	$176,940
Deduct: Non-cash share-based compensation expense	(20,041)	(14,397)
Deduct: Amortization of intangible assets	(4,179)	(3,962)
Deduct: Facility exit costs	(3,142)	-
Non-GAAP adjusted operating expenses	$190,442	$158,581
	Three Months Ended
	May 31,	May 31,
	2012	2011
GAAP operating income	$50,908	$45,359
Add: Non-cash share-based compensation expense	22,206	16,187
Add: Amortization of intangible assets	4,848	4,941
Add: Facility exit costs	3,142	-
Non-GAAP adjusted operating income	$81,104	$66,487
Non-GAAP adjusted operating margin	25.8%	25.1%

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