Exhibit 99.1
Red Hat Reports Fiscal Fourth Quarter and Year End Results
RALEIGH, N.C.--(BUSINESS WIRE)--March 31, 2005--Red Hat, Inc.
(NASDAQ:RHAT):
-- Continued strong demand in Linux market spurs record revenue
-- Fourth quarter revenue exceeds guidance; EPS in-line with
expectations
-- Enterprise subscription revenue and deferred revenue grow 92%
and 86% on a year-over-year basis, respectively
-- Expanded stock repurchase program more than doubles the size
of the prior program
Red Hat, Inc. (NASDAQ: RHAT), the world's leading provider of open
source solutions to the enterprise, today announced financial results
for the fourth quarter and fiscal year ended February 28, 2005.
Total revenue for the fourth quarter of fiscal 2005 was $57.5
million, a year-over-year increase of 56% and a sequential increase of
13%. For the full fiscal year 2005, total revenue was $196.5 million,
an increase of 58% compared to fiscal year 2004.
Enterprise subscription revenue was $45.4 million in the fourth
quarter of fiscal 2005, an increase of 92% on a year-over-year basis
and 19% on a sequential basis. For the full fiscal year 2005,
enterprise subscription revenue was $147.4 million, or a 120%
year-over-year increase.
For the fourth quarter of fiscal 2005, the company reported net
income of $11.8 million, or $0.06 per diluted share. Earnings per
share for the fourth quarter of fiscal 2005 grew 200% on a
year-over-year basis and were in-line with the prior quarter. For the
full fiscal year, the company reported net income of $45.4 million, or
$0.24 per diluted share, up from $0.07 per diluted share a year ago.
The company generated $30.6 million in cash flow from operations
during the fourth quarter of fiscal 2005. This led to full fiscal year
2005 cash flow from operations of $122.2 million, representing an
increase of 100% compared to fiscal year 2004.
After investing $54.8 million to repurchase stock during the
quarter, cash and investments totaled $929 million as of February 28,
2005. (By separate press release, the company also announced today the
expansion of its share repurchase program, which more than doubled the
authorization of the prior share repurchase program.)
At the end of fiscal 2005, the company's total deferred revenue
balance was $137.3 million, an increase of 86% on a year-over-year
basis.
"We are very pleased with the strong momentum of the Linux market
place, and our business in particular," commented Charlie Peters,
Executive Vice President and Chief Financial Officer of Red Hat.
"Based on publicly available information, we believe our enterprise
subscription revenue run rate is more than six times that of the
number two Linux provider, and over the past year we have expanded our
market leadership position across the globe. A number of leading
industry analysts believe that Linux will continue to be the fastest
growing operating system over the next 3-5 years and we remain
confident in our ability to compete."
Charlie Peters also stated "We were very pleased with the
company's revenue and bookings performance during the quarter. Heading
into fiscal 2006, we feel optimistic about our business opportunity
based on the strength of the market and our competitive position, and
the growing visibility of our recurring revenue model. Finally, our
confidence in the future cash flow capabilities of the company is
evidenced by the expansion of our share repurchase program, which was
separately announced today."
Other highlights from the fourth quarter include:
-- For the first time in its history, Red Hat sold to over 10,000
customers in a single quarter, and sold a record 175,000 new
and renewed subscriptions.
-- During the quarter, Red Hat was rated the number one value and
reliability provider of all technology vendors in a survey of
over 1,000 CIOs and IT executives conducted by Ziff Davis.
-- Channel partner contribution continued to increase, with the
percentage of business coming from the indirect channel
growing to 56% of orders in the fourth quarter of fiscal 2005,
up from 51% in the prior quarter and 43% in the first quarter
of the fiscal year.
-- Significant investments in international operations
culminated in bookings from international operations growing
more than 60% year-over-year.
-- The number of software and hardware applications and platforms
supporting Red Hat Enterprise Linux exceeded 1,800 at the end
of fiscal 2005, an increase of over 80% compared to the end of
the prior fiscal year.
-- The company shipped Red Hat Enterprise Linux 4 during the
quarter, representing a major upgrade to the company's
flagship offering and setting the standard for enterprise
ready Linux platforms.
About Red Hat, Inc.
Red Hat, the world's leading open source and Linux provider, is
headquartered in Raleigh, N.C. with 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 directly to its customers worldwide and through
its channel partners. 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 a 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 Web site 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 Year Ended
---------------------------------------------
Feb. 28, Feb. 29, Feb. 28, Feb. 29,
2005 2004 2005 2004
-------- -------- -------- --------
(Unaudited) (Unaudited) (Unaudited)
Subscription and services
revenue:
Subscription:
Enterprise technologies $ 45,393 $ 23,688 $147,415 $ 66,972
Retail 499 1,666 1,947 13,525
Embedded 518 309 1,763 1,911
-------- -------- -------- --------
Total subscription
revenue 46,410 25,663 151,125 82,408
-------- -------- -------- --------
Services:
Enterprise
technologies 10,557 9,691 42,306 37,764
Embedded development
services 486 1,417 3,035 4,565
-------- -------- -------- --------
Total services
revenue 11,043 11,108 45,341 42,329
-------- -------- -------- --------
Total subscription
and services revenue 57,453 36,771 196,466 124,737
-------- -------- -------- --------
Cost of subscription and
services revenue:
Subscription:
Enterprise technologies and
retail 4,351 2,259 12,625 9,311
Embedded 59 69 249 357
-------- -------- -------- --------
Total cost of subscription
revenue 4,410 2,328 12,874 9,668
-------- -------- -------- --------
Services:
Enterprise technologies 5,493 5,536 21,904 20,733
Embedded development
services 690 1,053 3,095 3,535
-------- -------- -------- --------
Total cost of services
revenue 6,183 6,589 24,999 24,268
-------- -------- -------- --------
Total cost of
subscription and
services revenue 10,593 8,917 37,873 33,936
-------- -------- -------- --------
Gross profit enterprise
technologies and retail 46,605 27,250 157,139 88,217
Gross profit embedded 255 604 1,454 2,584
-------- -------- -------- --------
Gross profit on enterprise
technologies, retail and
embedded revenue 46,860 27,854 158,593 90,801
Operating expense:
Sales and marketing 18,222 11,601 61,844 39,715
Research and development 8,779 6,677 32,132 25,562
General and administrative 10,120 5,214 31,126 18,502
Stock-based compensation and
amortization of intangibles 2,272 2,039 6,545 4,076
-------- -------- -------- --------
Total operating expense 39,393 25,531 131,647 87,855
-------- -------- -------- --------
Income (loss) from operations 7,467 2,323 26,946 2,946
Other income (expense), net 5,716 3,310 24,431 11,866
Interest expense (1,634) (847) (6,436) (1,080)
-------- -------- -------- --------
Income before provision for
income taxes 11,549 4,786 44,941 13,732
Provision (benefit) for
income taxes (291) - (485) -
-------- -------- -------- --------
Net income $ 11,840 $ 4,786 $ 45,426 $ 13,732
======== ======== ======== ========
Net income-diluted $ 13,387 $ 5,554 $ 51,562 $ 14,500
======== ======== ======== ========
Net income per share:
Basic $ 0.07 $ 0.03 $ 0.25 $ 0.08
Diluted $ 0.06 $ 0.03 $ 0.24 $ 0.07
Weighted average shares
outstanding:
Basic 178,233 178,847 181,636 174,003
Diluted 210,956 215,086 215,882 206,358
RED HAT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
February 28, February 29,
2005 2004
-------------- ----------------
(unaudited)
Current assets:
Cash and cash equivalents $140,169 $461,304
Investments in debt securities $181,028 147,297
Accounts receivable, net 48,402 38,346
Estimated earnings in excess of
billings 3,557 4,326
Prepaid expenses and other current
assets 12,097 8,765
-------------- -----------------
Total current assets 385,253 660,038
Property and equipment, net 32,726 29,448
Goodwill and identifiable
intangibles, net 90,331 69,713
Investments in debt securities 607,566 332,783
Debt issue costs-convertible notes 12,269 15,103
Other assets, net 5,891 4,568
-------------- -----------------
Total assets $1,134,036 $1,111,653
============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $8,426 $7,154
Accrued expenses 21,065 15,619
Deferred revenue 109,426 62,751
Current portion of capital lease
obligations 282 898
-------------- -----------------
Total current liabilities 139,199 86,422
Deferred lease credits 5,179 5,359
Long term deferred revenue 27,890 10,945
Capital lease obligations 97 538
Convertible notes 600,000 600,000
Commitments and contingencies - -
Stockholders' equity:
Noncontrolling interest in subsidiary 557 359
Preferred stock - -
Common stock 19 18
Additional paid-in capital 714,604 695,722
Deferred compensation (4,792) (9,293)
Accumulated deficit (231,798) (277,224)
Treasury stock, at cost (107,409) (7,436)
Accumulated other comprehensive
income (loss) (9,510) 6,243
-------------- -----------------
Total stockholders' equity 361,671 408,389
-------------- -----------------
Total liabilities and stockholders'
equity $1,134,036 $1,111,653
============== =================
RED HAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended Year Ended
----------------------- ---------------------
Feb. 28, Feb. 29, Feb. 28, Feb. 29,
2005 2004 2005 2004
----------- ----------- ----------- ---------
(Unaudited) (Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $11,840 $4,786 $45,426 $13,732
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 3,639 2,297 10,911 6,871
Deferred income taxes (1,673) - (3,602) -
Stock-based compensation
expense 1,212 1,305 4,719 3,144
Earnings in noncontrolling
interest in subsidiary 20 68 198 244
Provision for doubtful
accounts 411 681 1,969 1,678
Amortization of debt
issue costs 785 393 3,003 393
Other - (18) 121 49
Changes in operating assets
and liabilities:
Accounts receivable and
estimated earnings in
excess of billings (4,766) (6,242) (9,284) (18,487)
Inventory 211 (559) 801 (1,240)
Prepaid expenses (153) (935) (1,039) (1,158)
Intangibles and other
assets (98) (115) (1,392) (458)
Accounts payable 1,671 3,347 962 1,496
Accrued expenses 2,180 982 8,389 1,999
Deferred revenue 15,330 27,691 61,214 53,335
Deferred lease credits (48) (40) (179) (23)
----------- ----------- ----------- ---------
Net cash provided by
operating activities 30,561 33,641 122,217 61,575
----------- ----------- ----------- ---------
Cash flows from investing
activities:
Purchase of investment
securities (37,554) (502,515) (788,481) (707,565)
Proceeds from sales and
maturities of investment
securities 54,835 304,449 463,819 479,012
Cash used to acquire
businesses (20,750) 3,380 (21,053) 3,380
Purchase of property
and equipment (4,374) (7,949) (14,921) (13,209)
----------- ----------- ----------- ---------
Net cash used in
investing activities (7,843) (202,635) (360,636) (238,382)
----------- ----------- ----------- ---------
Cash flows from financing
activities:
Proceeds from short term
notes payable - 10,000 - 67,957
Repayments of short term
notes payable - (24,982) - (82,971)
Proceeds from issuance
of convertible debt - 600,000 - 600,000
Offering costs - issuance
of convertible debt (32) (15,278) (169) (15,278)
Proceeds from issuance
of common stock under
Employee Stock Purchase
Plan 724 - 2,118 1,014
Proceeds from exercise
of common stock options 2,675 12,273 15,679 27,764
Purchase of treasury
stock (54,781) - (99,973) -
Payments on capital
lease obligations (211) (197) (1,026) (1,230)
----------- ----------- ----------- ---------
Net cash provided by
(used in) financing
activities (51,625) 581,816 (83,371) 597,256
----------- ----------- ----------- ---------
Effect of foreign
currency exchange rates
on cash and cash
equivalents (643) 117 655 1,305
Net increase (decrease)
in cash and cash
equivalents (29,550) 412,939 (321,135) 421,754
Cash and cash equivalents
at beginning of the
period 169,719 48,365 461,304 39,550
----------- ----------- ----------- ---------
Cash and cash equivalents
at end of period $140,169 $461,304 $140,169 $461,304
=========== =========== =========== =========
CONTACT: Red Hat, Inc.
Leigh Day, 919-754-4369
lday@redhat.com
Gabriel Szulik, 919-754-4439
gszulik@redhat.com