Exhibit 99.2
Red Hat Reports Fiscal Fourth Quarter and Year End Results
RALEIGH, N.C.--(BUSINESS WIRE)--xx--
87,000 New Subscriptions, $32 Million in Cash Flow from Operations,
and 68% Sequential Growth in Deferred Revenue Highlight the Quarter
Red Hat, Inc. (NASDAQ: RHAT), the world's premier open source and
Linux provider, today reported financial results for the fourth
quarter and fiscal year ended February 29, 2004.
Revenue for the fourth quarter of fiscal 2004 was $37.0 million, a
sequential increase of 11% compared to $33.1 million in the third
quarter of fiscal 2004, and a year-over-year increase of 43%.
For the fourth quarter of fiscal 2004, the company reported net
income of $5.0 million, or $0.03 per share. This compares to a net
income of $4.1 million, or $0.02 per share, in the prior quarter, and
break-even results in the same quarter a year ago.
The company generated $32.2 million, or $0.17 per share, in
positive cash flow from operations during the fourth quarter, and a
total of $61 million, or $0.33 per share, in positive cash flow from
operations for the fiscal year ended February 29, 2004. The company
ended the year with a cash balance of $941 million, an increase of
$649 million as compared to the balance at the end of the prior fiscal
year.
In the fourth quarter of fiscal 2004, the company increased its
deferred revenue balance to $70.8 million, a sequential increase of
$28.6 million, or 68%, as compared to the third quarter of fiscal
2004.
Highlights for the fourth quarter include:
-- Fourth quarter sales of subscriptions for Red Hat Enterprise
Linux technologies increased by 87,000 new subscriptions,
comprised of 61,000 subscriptions sold into the enterprise IT
market and 26,000 subscriptions sold into the HPC and hosting
markets.
-- Renewal rates for sales of Red Hat Enterprise Linux remained
strong at approximately 90%.
-- Gross margins increased to record levels, with blended gross
margins at 76% and gross margins of Enterprise subscription
technologies at 91%.
-- Operating profit, before stock-based compensation, increased to
$4.6 million, or 12% of total revenue.
For the fiscal year ended February 29, 2004, the company reported
revenues of $126.1 million, an increase of 39% as compared to fiscal
2003 revenues of $90.9 million. The company reported net income of $14
million for fiscal 2004, or $0.08 per share, compared to a net loss of
$6.6 million, or a loss of $0.04 per share, for fiscal 2003. For the
fiscal year ended on February 29, 2004, the company reported over
160,000 cumulative sales of Red Hat Enterprise Linux technologies.
For Red Hat, fiscal 2004 was a year marked by great execution, as
we delivered strong growth in revenues, cash flows, and profitability
, stated Kevin Thompson, Executive Vice President and Chief Financial
Officer. "The growth rates in the adoption of Red Hat Enterprise Linux
has exceeded our expectations to date and we are positive on the
outlook for fiscal 2005".
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) 754-4439.
More information about Red Hat is available at www.redhat.com.
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 Twelve Months Ended
----------------------------- -----------------
Feb. 29, Nov. 30, Feb. 28, Feb. 29, Feb. 28,
2004 2003 2003 2004 2003
----------------------------- -----------------
(Unaudited)
Subscription and
services revenue:
Subscription:
Enterprise
technologies $23,944 $17,779 $10,777 $68,930 $30,438
Retail 1,604 3,727 2,845 12,914 14,833
Embedded 309 466 810 1,911 3,321
----------- -------- -------- -------- --------
Total
subscription
revenue 25,857 21,972 14,432 83,755 48,592
----------- -------- -------- -------- --------
Services:
Enterprise
technologies 9,691 9,887 10,691 37,764 38,522
Embedded
development
services 1,417 1,229 768 4,565 3,812
----------- -------- -------- -------- --------
Total services
revenue 11,108 11,116 11,459 42,329 42,334
----------- -------- -------- -------- --------
Total
subscription
and services
revenue 36,965 33,088 25,891 126,084 90,926
----------- -------- -------- -------- --------
Cost of subscription
and services revenue:
Subscription:
Enterprise
technologies and
retail 2,366 2,684 2,542 10,244 8,625
Embedded 69 69 122 357 496
----------- -------- -------- -------- --------
Total cost of
subscription
revenue 2,435 2,753 2,664 10,601 9,121
----------- -------- -------- -------- --------
Services:
Enterprise
technologies 5,536 5,356 4,936 20,733 18,595
Embedded
development
services 1,053 1,003 788 3,535 3,746
----------- -------- -------- -------- --------
Total cost of
services revenue 6,589 6,359 5,724 24,268 22,341
----------- -------- -------- -------- --------
Total cost of
subscription
and services
revenue 9,024 9,112 8,388 34,869 31,462
----------- -------- -------- -------- --------
Gross profit
enterprise
technologies and
retail 27,337 23,353 16,835 88,631 56,573
Gross profit
embedded 604 623 668 2,584 2,891
----------- -------- -------- -------- --------
Total gross profit 27,941 23,976 17,503 91,215 59,464
Operating expense:
Sales and marketing 11,477 10,064 8,435 39,863 32,969
Research and
development 6,677 7,002 6,248 25,562 21,274
General and
administrative 5,214 4,873 4,189 18,502 15,239
Mergers and
acquisitions and
other - - - - 2,268 (a)
Stock-based
compensation and
amortization of
intangibles 2,039 537 989 4,076 4,878
----------- -------- -------- -------- --------
Total operating
expense 25,407 22,476 19,861 88,003 76,628
----------- -------- -------- -------- --------
Income (loss) from
operations before
extraordinary item 2,534 1,500 (2,358) 3,212 (17,164)
Other income
(expense), net 2,463 2,645 2,085 10,786 10,826
----------- -------- -------- -------- --------
Net income (loss)
before
extraordinary item 4,997 4,145 (273) 13,998 (6,338)
----------- -------- -------- -------- --------
Extraordinary item-
loss on disposal of
discontinued
operations - - - - (261)
----------- -------- -------- -------- --------
Net income (loss) $4,997 $4,145 ($273) $13,998 ($6,599)
=========== ======== ======== ======== ========
Basic income (loss)
per common share
Net income (loss)
before
extraordinary item $0.03 $0.02 ($0.00) $0.08 ($0.04)
Extraordinary item-
loss on disposal of
discontinued
operations - - - - (0.00)
----------- -------- -------- -------- --------
Net income (loss) $0.03 $0.02 ($0.00) $0.08 ($0.04)
=========== ======== ======== ======== ========
Diluted income
(loss) per common
share
Net income (loss)
before
extraordinary item $0.03 $0.02 ($0.00) $0.08 ($0.04)
Extraordinary item-
loss on disposal of
discontinued
operations - - - - (0.00)
----------- -------- -------- -------- --------
Net income (loss) $0.03 $0.02 ($0.00) $0.08 ($0.04)
=========== ======== ======== ======== ========
Weighted average
shares outstanding:
Basic 178,847 173,996 170,656 174,003 170,158
Diluted 191,641 184,210 170,656 182,913 170,158
(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.
RED HAT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
Feb. 29, Feb. 28,
2004 2003
----------- ---------
Assets:
Cash and investments in debt securities $941,390 $292,340
Accounts receivable, net 38,346 17,429
Estimated earnings in excess of billings 4,326 6,978
Inventory 1,067 799
Prepaid expenses and other assets 25,338 8,993
Property and equipment, net 29,448 22,972
Goodwill and intangibles, net 69,713 40,828
----------- ---------
Total assets $1,109,628 $390,339
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $7,154 $5,502
Accrued expenses 15,623 7,614
Deferred revenue 70,844 17,779
Deferred lease credits 5,359 5,382
Convertible debentures 600,000 -
Other liabilities 1,440 17,641
----------- ---------
Total liabilities 700,420 53,918
Commitments and contingencies - -
Stockholders' equity:
Noncontrolling interest in subsidiary 360 115
Preferred stock - -
Common stock 18 17
Additional paid-in capital 695,722 630,798
Deferred compensation (9,294) (2,403)
Accumulated deficit (276,406) (290,404)
Treasury stock, at cost (7,436) (7,436)
Accumulated other comprehensive income 6,244 5,734
----------- ---------
Total stockholders' equity 409,208 336,421
----------- ---------
Total liabilities and stockholders' equity $1,109,628 $390,339
=========== =========
Note: Balance sheet as presented above is not classified with
regard to GAAP maturities of assets and liabilities.
RED HAT, INC.
CASH FLOW SUMMARY
(In thousands)
Three Months Ended Year Ended
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
2004 2003 2004 2003
--------- --------- --------- ---------
Net income $4,997 $(273) $13,998 $(6,599)
Non-cash expenses 4,705 3,213 12,357 14,017
Net change in working capital
items 22,518 60 34,758 (8,176)
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities 32,220 3,000 61,113 (758)
Cash flows from investing
activities:
Purchases of property
and equipment (6,882) (2,157) (13,208) (6,766)
Acquisitions of
businesses, net of
cash acquired 3,380 - 3,380 (1,222)
Net change in market
value of debt
securities 1,571 3,840 (1,263) 7,319
--------- --------- --------- ---------
Net cash provided by (used in)
investing activities (1,931) 1,683 (11,091) (669)
Net cash provided by financing
activities 582,293 1,048 599,028 6,790
--------- --------- --------- ---------
Net increase in cash and
investments 612,582 5,731 649,050 5,363
Cash and investments at
beginning of period 328,808 286,609 292,340 286,977
--------- --------- --------- ---------
Cash and investments at end of
period $941,390 $292,340 $941,390 $292,340
========= ========= ========= =========
Note: The cash flow summary presented above does not separately
identify the impact on cash and cash equivalents of changes
in foreign currency exchange rates.
CONTACT: Red Hat, Inc.
Leigh Day, 919-754-4369
lday@redhat.com
or
Gabriel Szulik, 919-754-4439
gszulik@redhat.com