Exhibit 99.1
Red Hat Reports Fiscal Second Quarter Results
RALEIGH, N.C.--(BUSINESS WIRE)--Sept. 20, 2004--
144,000 Subscriptions, 31% Sequential Growth in Operating Income,
12% Sequential Growth in Deferred Revenue, and $31 Million in Cash
Flow from Operations Highlight a Strong Quarter
Red Hat, Inc. (Nasdaq:RHAT), the world's leading provider of open source
solutions to the enterprise, today announced financial results for the second
quarter ended August 31, 2004.
Revenue for the second quarter of fiscal 2005 was $46.3 million, 60% higher
than the second quarter of fiscal 2004 and a sequential increase of 11% when
compared to $41.8 million in the first quarter of fiscal 2005.
For the second quarter of fiscal 2005, the company reported net income of
$11.8 million, or $0.06 per share. This represents an increase of 225% over net
income in the same quarter a year ago, and an increase of 8% over net income of
$10.9 million, or $0.06 per share, in the prior quarter.
The company generated $30.8 million, or $0.16 per share, in cash flow from
operations during the second quarter of fiscal 2005. The company ended the
quarter with cash and investments totaling $997.7 million.
In the second quarter of fiscal 2005, the company increased its deferred
revenue balance to $99.7 million, a sequential increase of $11 million, or 12%,
as compared to the first quarter of fiscal 2005.
Highlights for the second quarter include:
Sales of subscriptions of Red Hat Enterprise Linux reached 144,000
units, including:
115,000 subscriptions to enterprise IT servers, which includes
new subscriptions and renewals.
29,000 new subscriptions to HPC/hosting marketplace and desktops.
Operating profit increased to $6.7 million, or 15% of total
revenue.
10% addition to the workforce as the company expands globally.
"We continue to see strong demand for our offerings, as reflected in our
results. The company executed successfully across the global business", stated
Charlie Peters, Executive Vice President and Chief Financial Officer.
About Red Hat, Inc.
Red Hat, the world's leading open source and Linux provider. Red Hat is
headquartered in Raleigh, N.C. With satellite offices spanning the globe. Red
Hat is leading Linux and open source solutions into the mainstream by making
high quality, low cost technology accessible. Red Hat provides operating system
software along with middleware, applications and management solutions. Red Hat
also offers support, training, and consulting services to its customers
worldwide and through top-tier partnerships. Red Hat's Open Source strategy
offers customers a long term plan for building infrastructures that are based on
and leverage open source technologies with focus on security and ease of
management. Learn more: http://www.redhat.com. For investor inquiries, contact
Gabriel Szulik at Red Hat, (919) 754-4439.
Forward-Looking Statements
Any statements in this press release about future expectations, plans and
prospects for the Company, including statements containing the words "believes,"
"anticipates," "plans," "expects," "will," and similar expressions, constitute
forward-looking statements within the meaning of The Private Securities
Litigation Reform Act of 1995. Actual results may differ materially from those
indicated by such forward-looking statements as a result of various important
factors, including: the factors discussed in our most recent Quarterly Report on
Form 10-Q filed with the SEC (a copy of which may be accessed through the SEC's
website at http://www.sec.gov), 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 and the
viability of the Internet. In addition, 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands - except per share amounts)
Three Months Ended Six Months Ended
------------------ ----------------
Aug. 31, Aug. 31,
2004 2003 2004 2003
------------------ ----------------
(Unaudited)
Subscription and services revenue:
Subscription:
Enterprise technologies $33,941 $14,202 $63,909 $26,074
Retail 561 3,947 936 7,768
Embedded 423 490 648 1,136
-------- -------- -------- --------
Total subscription revenue 34,925 18,639 65,493 34,978
-------- -------- -------- --------
Services:
Enterprise technologies 10,492 9,147 20,978 18,186
Embedded development
services 907 1,173 1,617 1,919
-------- -------- -------- --------
Total services revenue 11,399 10,320 22,595 20,105
-------- -------- -------- --------
Total subscription and
services revenue 46,324 28,959 88,088 55,083
-------- -------- -------- --------
Cost of subscription and services revenue:
Subscription:
Enterprise technologies and
retail 2,807 2,083 4,720 4,687
Embedded 62 90 131 219
-------- -------- -------- --------
Total cost of subscription
revenue 2,869 2,173 4,851 4,906
-------- -------- -------- --------
Services:
Enterprise technologies 5,241 4,976 10,727 9,841
Embedded development services 736 695 1,613 1,479
-------- -------- -------- --------
Total cost of services
revenue 5,977 5,671 12,340 11,320
-------- -------- -------- --------
Total cost of
subscription and
services revenue 8,846 7,844 17,191 16,226
-------- -------- -------- --------
Gross profit enterprise
technologies and retail 36,946 20,237 70,376 37,500
Gross profit embedded 532 878 521 1,357
-------- -------- -------- --------
Gross profit on enterprise
technologies, retail and
embedded revenue 37,478 21,115 70,897 38,857
Operating expense:
Sales and marketing 14,856 9,516 27,970 18,052
Research and development 8,387 6,104 15,470 11,883
General and administrative 6,181 4,356 12,646 8,415
Stock-based compensation and
amortization of intangibles 1,310 598 2,923 1,500
-------- -------- -------- --------
Total operating expense 30,734 20,574 59,009 39,850
-------- -------- -------- --------
Income (loss) from operations 6,744 541 11,888 (993)
Other income (expense), net 4,440 3,097 10,213 5,678
-------- -------- -------- --------
Income before provision for
income taxes 11,184 3,638 22,101 4,685
Provision for income taxes (641) - (641) -
-------- -------- -------- --------
Net income $11,825 $3,638 $22,742 $4,685
======== ======== ======== ========
Net income per share:
Basic $0.06 $0.02 $0.12 $0.03
Diluted $0.06 $0.02 $0.12 $0.03
Weighted average shares
outstanding:
Basic 183,422 172,127 182,952 171,636
Diluted 195,391 182,377 195,429 181,185
RED HAT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
Aug. 31, Feb. 29,
2004 2004
---------- ----------
Assets:
Cash and investments in debt securities $997,749 $941,384
Accounts receivable, net 32,997 38,346
Estimated earnings in excess of billings 6,354 4,326
Inventory 2,779 2,794
Prepaid expenses and other assets 26,592 25,642
Property and equipment, net 30,701 29,448
Goodwill and identifiable intangibles,
net 69,662 69,713
--------------- -----------
Total assets $1,166,834 $1,111,653
=============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $7,340 $7,154
Accrued expenses 15,575 15,619
Deferred revenue 99,735 73,696
Deferred lease credits 5,275 5,359
Convertible notes 600,000 600,000
Other liabilities 894 1,436
--------------- -----------
Total liabilities 728,819 703,264
Commitments and contingencies - -
Stockholders' equity:
Noncontrolling interest in subsidiary 404 359
Preferred stock - -
Common stock 18 18
Additional paid-in capital 708,704 695,722
Deferred compensation (6,895) (9,293)
Accumulated deficit (254,482) (277,224)
Treasury stock, at cost (7,436) (7,436)
Accumulated other comprehensive income (2,298) 6,243
--------------- -----------
Total stockholders' equity 438,015 408,389
--------------- -----------
Total liabilities and stockholders'
equity $1,166,834 $1,111,653
=============== ===========
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 Three
Months Months
Ended Ended
Aug. 31, Aug.31,
2004 2003
---------- ---------
Net income $11,825 $3,638
Non-cash expenses 3,898 2,506
Net change in working capital items 15,030 4,247
---------- ---------
Net cash provided by operating activities 30,753 10,391
Cash flows from investing activities:
Purchases of property and equipment (2,570) (2,351)
Net change in market value of debt
securities 4,198 (4,055)
---------- ---------
Net cash used in investing activities 1,628 (6,406)
Net cash provided by financing activities 890 2,742
---------- ---------
Net increase in cash and investments 33,271 6,727
Cash and investments at beginning of period 964,478 300,006
---------- ---------
Cash and investments at end of period $997,749 $306,733
========== =========
Note: The cash flow summary presented above does not seperately
identify the impact on cash and cash equivalents of changes in foreign
currency exchange rates.
CONTACT: Red Hat, Inc.
Company Contact, Leigh Day, 919-754-4369;
lday@redhat.com
or
Investor Contact: Gabriel Szulik, 919-754-4439;
gszulik@redhat.com