Exhibit 99.1
Red Hat Reports Fiscal First Quarter Results
RALEIGH, N.C.--(BUSINESS WIRE)--June 17, 2003--
GAAP Net Income Of $1.5 Million and $0.01 Per Share, Record $5.5
Million in Operating Cash Flows, and 36% Increase in Deferred Revenues
Highlight the Quarter
Red Hat, Inc. (Nasdaq: RHAT), the world's premier open source and
Linux provider, today reported financial results for its first quarter
of fiscal year 2004. The company's fiscal first quarter ended on May
31, 2003. These results are provided in full GAAP format.
In the first quarter of fiscal 2004, Red Hat achieved revenue of
$27.2 million, a sequential increase of 5% compared to $25.9 million
in the fourth quarter of fiscal 2003, and a year-over-year increase of
39%.
For the first quarter of fiscal 2004, the company achieved net
income of $1.5 million, or $0.01 per share. This compares to a net
loss of $273,000, or break-even per share, in the prior quarter, and a
net loss of $4.6 million, or $0.03 per share, in the same quarter a
year ago.
The company generated $5.5 million in positive cash flows from
operations during the first quarter, which represents its fourth
consecutive quarter of positive cash flows from operations. The
company ended the first quarter with a cash and investments balance of
$300 million, a sequential increase of $7.7 million and a
year-over-year increase of $13.5 million.
For the first quarter of fiscal 2004, the company increased its
deferred revenue balance to $24.1 million, an increase of $6.3
million, or 36% as compared to the fourth quarter of fiscal 2003, and
an increase of $14.8 million or 159% as compared to the same prior
year quarter.
The company reported a net operating loss of $1.1 million,
compared to a net operating loss of $2.4 million in the prior quarter
and a net operating loss of $7.2 million in the first quarter of the
prior year.
Highlights for the first quarter include:
First quarter sales of annual subscriptions for the Red Hat
Enterprise Linux family of technologies increased sequentially by
2,000, or 10%, to 23,500 subscriptions.
Subscription revenues from Enterprise Technologies grew 14%
sequentially and 104% year-over-year.
Blended gross margins remained strong at 68%, while gross margins
of Enterprise subscription technologies, including retail revenues,
also remained strong at 82%.
Continued scaling of the business model, as the sequential
reduction in the company's operating loss of $1.3 million equated to
the sequential increase in revenues.
"Red Hat continues to show strong operating performance, including
solid growth in cash flows, deferred revenues, and net income, which
translates into continued leverage of our business model", stated
Kevin Thompson, Executive Vice President and Chief Financial Officer.
About Red Hat, Inc.
Red Hat is the world's premier open source and Linux provider. Red
Hat is headquartered in Raleigh, N.C. and has offices worldwide. For
investor inquiries, contact Gabriel Szulik at Red Hat, 919/754-3700,
x44439. More information about Red Hat is available at .
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this press release are made pursuant
to the safe harbor provisions of Section 21E of the Securities
Exchange Act of 1934. Investors are cautioned that statements in this
press release that are not strictly historical statements, including,
without limitation, management's plans and objectives for future
operations and management's assessment of market factors, constitute
forward-looking statements which involve risks and uncertainties.
These risks and uncertainties include, without limitation, reliance
upon strategic relationships, management of growth, the possibility of
undetected software errors, the risks of economic downturns generally,
and in Red Hat's industry specifically, the risks associated with
competition and competitive pricing pressures, the viability of the
Internet, and other risks detailed in Red Hat's filings with the
Securities and Exchange Commission, copies of which may be accessed
through the SEC's Web site at http://www.sec.gov.
RED HAT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands - except per share amounts)
Three Months Ended
-------------------------------
May 31, Feb. 28, May 31,
2003 2003 2002
-------------------------------
(Unaudited)
Subscription and services
revenue:
Subscription:
Enterprise technologies $ 12,289 $ 10,777 $ 6,029
Retail 4,462 2,845 3,586
Embedded 646 810 1,041
-------- -------- --------
Total subscription
revenue 17,397 14,432 10,656
-------- -------- --------
Services:
Enterprise technologies 9,039 10,691 7,817
Embedded development
services 746 768 1,049
-------- -------- --------
Total services
revenue 9,785 11,459 8,866
-------- -------- --------
Total subscription
and services revenue 27,182 25,891 19,522
-------- -------- --------
Cost of subscription and services
revenue:
Subscription:
Enterprise technologies and
retail 2,974 2,542 1,868
Embedded 129 122 121
-------- -------- --------
Total cost of
subscription
revenue 3,103 2,664 1,989
-------- -------- --------
Services:
Enterprise technologies 4,865 4,936 4,119
Embedded development
services 784 788 1,161
-------- -------- --------
Total cost of
services revenue 5,649 5,724 5,280
-------- -------- --------
Total cost of
subscription and
services revenue 8,752 8,388 7,269
-------- -------- --------
Gross profit enterprise
technologies and retail 17,951 16,835 11,445
Gross profit
embedded 479 668 808
-------- -------- --------
Total gross profit 18,430 17,503 12,253
Operating expense:
Sales and marketing 8,752 8,435 7,806
Research and development 5,779 6,248 4,787
General and administrative 4,072 4,189 3,375
Mergers and acquisitions and
other - - 2,164/a
Stock-based compensation and
amortization of intangibles 902/b 989/b 1,334/b
-------- -------- --------
Total operating expense 19,505 19,861 19,466
-------- -------- --------
Loss from operations (1,075) (2,358) (7,213)
Other income (expense), net 2,581 2,085 2,886
-------- -------- --------
Income (loss) before extraordinary
item 1,506 (273) (4,327)
Extraordinary item-loss on disposal
of discontinued operations - - (261)/c
-------- -------- --------
Net income (loss) $ 1,506 ($273) ($4,588)
======== ======== ========
Basic income (loss) per common
share
Net income (loss) before
extraordinary item $ 0.01 ($0.00) ($0.03)
Extraordinary item-loss on disposal
of discontinued operations - - ($0.00)
-------- -------- --------
Net income (loss) $ 0.01 ($0.00) ($0.03)
======== ======== ========
Diluted income (loss) per common
share
Net income (loss) before
extraordinary item $ 0.01 ($0.00) ($0.03)
Extraordinary item-loss on disposal
of discontinued operations - - ($0.00)
-------- -------- -------
Net income (loss) $ 0.01 ($0.00) ($0.03)
======== ======== ========
Weighted average shares
outstanding:
Basic 171,146 170,656 169,826
Diluted 180,671 170,656 169,826
/a This amount represents costs related to integration of
acquisitions, primarily severance and duplicate facilities,
that are not part of recurring operations and a restructuring
charge representing severance costs associated with the
completion of the restructuring of our embedded business which
began in Q4 of fiscal 2002.
/b This amount represents amortization of deferred compensation
which was primarily related to acquisitions made in prior
periods and amortization of intangible assets related to
acquisitions made by the Company.
/c This amount represents severance and facility closure costs.
RED HAT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
May 31, Feb. 28,
2003 2003
------- -------
Assets:
Cash and investments in debt
securities $300,007 $292,340
Accounts receivable, net 18,105 17,429
Estimated earnings in excess of billings 7,656 6,978
Inventory 818 799
Prepaid expenses and other assets 8,994 8,993
Property and equipment, net 23,975 22,972
Goodwill and intangibles, net 40,919 40,828
--------- ---------
Total assets $400,474 $390,339
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $3,493 $5,502
Accrued expenses 7,150 7,614
Deferred revenue 24,110 17,779
Deferred lease credits 5,476 5,382
Other liabilities 17,355 17,641
------- -------
Total liabilities 57,584 53,918
Commitments and contingencies - -
Stockholders' equity:
Noncontrolling interest in
subsidiary 143 115
Preferred stock - -
Common stock 17 17
Additional paid-in capital 632,813 630,798
Deferred compensation (1,501) (2,403)
Accumulated deficit (288,898) (290,404)
Treasury stock, at cost (7,436) (7,436)
Accumulated other comprehensive
income 7,752 5,734
-------- --------
Total stockholders' equity 342,890 336,421
-------- --------
Total liabilities and
stockholders' equity $400,474 $390,339
========= ========
Note: Balance sheet as presented above is not classified with
regard to GAAP maturities of cash and investments in debt
Securities.
CashFlow
RED HAT, INC.
CASH FLOW SUMMARY
(In thousands)
Three Months Three Months
Ended Ended
May 31, 2003 May 31, 2002
---------------------------------
Net income (loss) $ 1,506 $ (4,588)
Non-cash expenses 2,819 4,838
Net change in working capital items 1,179 (5,597)
---------------- ----------------
Net cash provided by (used in)
operating activities 5,504 (5,347)
Cash flows from investing
activities:
Purchases of property and
equipment (1,493) (1,459)
Net change in market value
of debt securities 1,422 779
---------------- -----------------
Net cash provided by (used in)
investing activities (71) (680)
Net cash provided by financing
activities 1,636 5,271
Effect of foreign currency exchange
rates on cash and cash equivalents 598 336
---------------- -----------------
Net increase in cash and investments 7,667 (420)
Cash and investments at beginning of
period 292,340 286,977
---------------- -----------------
Cash and investments at end of
period $ 300,007 $ 286,557
================= ================
CONTACT: Red Hat, Inc.
Leigh Day, 919/754-3700, lday@redhat.com;
Gabriel Szulik, Investor Relations Manager, 919/754-3700
gszulik@redhat.com