Exhibit 99.1
Red Hat Reports Fiscal First Quarter Results
RALEIGH, N.C.--(BUSINESS WIRE)--June 30, 2005--Red Hat, Inc.
(NASDAQ:RHAT):
-- Revenue Up 46% From Prior Year
-- Record Cash Flow From Operations
Red Hat, Inc. (NASDAQ:RHAT), the world's leading provider of open
source solutions to the enterprise, today announced financial results
for its fiscal first quarter ended May 31, 2005.
Total revenue for the quarter was $60.8 million, a year-over-year
increase of 46% and a sequential increase of 6%. Enterprise
subscription revenue was $48.7 million, an increase of 63%
year-over-year and 7% sequentially.
For the first quarter of fiscal 2006, the company reported net
income of $12.4 million or $0.07 per diluted share, up from $11.8
million or $0.06 per diluted share in the prior quarter.
The company reported $36.6 million in cash flow from operations
during the first quarter, a 20% increase from the prior quarter and
the highest level in the company's history.
After repurchasing $5.1 million of common stock and $10.0 million
face value of debt during the quarter, cash and investments totaled
$951.5 million at the end of May 2005. These transactions were
completed in conjunction with the expanded repurchase program approved
by the company's board of directors in March of this year.
At quarter end, the company's total deferred revenue balance was
$157.9 million, an increase of $20.6 million from the prior quarter
and $70.1 million from the year ago period.
"Our results for the first quarter represent a solid start to the
fiscal year," stated Charlie Peters, Executive Vice President and
Chief Financial Officer of Red Hat. "We continue to experience strong
customer demand. This quarter's record-level billings speak to the
continued momentum we are experiencing globally for our open source
solutions."
"From an operational standpoint," Peters said, "the process
improvements we implemented last quarter began to pay off earlier than
we expected in terms of shorter cash collection cycles and improved
cash flow from operations. Thus, despite some negative impact from
recent movements in foreign currency, we remain confident in the
long-term cash flow capabilities of the company. Our first quarter
performance was a step forward in our stated goal of significantly
growing our cash flow run rate over the course of the fiscal year."
Other highlights from the quarter included:
-- DSO improved by 7 days, from 64 days in the prior quarter to
57 days in the first quarter.
-- Channel partner bookings increased to 60% of orders versus 56%
last quarter and is approaching the company's previously
stated long-term goal of 70%.
-- The company released Red Hat Directory Server, providing the
identity management market its first enterprise class open
source solution.
Dion Cornett, Red Hat's Vice President of Investor Relations,
stated, "We are very pleased with the momentum we continue to see in
our business and the open source market place. We remain committed to
our customers, partners, employees and the open source community as a
whole. And as this quarter's string of new records indicates, our
partners and customers remain committed to Red Hat."
About Red Hat, Inc.
Red Hat, the world's leading open source and Linux provider, is
headquartered in Raleigh, NC 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
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 Annual Report on
Form 10-K 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
------------------------------------
May 31, May 31,
2005 2004
------------------------------------
(Unaudited) (Unaudited)
Subscription and services revenue:
Subscription:
Enterprise technologies $48,743 $29,968
Retail - 375
Embedded 497 225
----------------- -----------
Total subscription revenue 49,240 30,568
----------------- -----------
Services:
Enterprise technologies 11,383 10,486
Embedded development services 157 710
----------------- -----------
Total services revenue 11,540 11,196
----------------- -----------
Total subscription and
services revenue 60,780 41,764
----------------- -----------
Cost of subscription and services
revenue:
Subscription:
Enterprise technologies and
retail 5,119 1,913
Embedded 55 69
----------------- -----------
Total cost of subscription
revenue 5,174 1,982
----------------- -----------
Services:
Enterprise technologies 6,149 5,486
Embedded development services 645 877
----------------- -----------
Total cost of services revenue 6,794 6,363
----------------- -----------
Total cost of subscription
and services revenue 11,968 8,345
----------------- -----------
Gross profit enterprise
technologies and retail 48,858 33,430
Gross profit embedded (46) (11)
----------------- -----------
Gross profit on enterprise
technologies, retail and
embedded revenue 48,812 33,419
Operating expense:
Sales and marketing 20,005 13,114
Research and development 9,795 7,083
General and administrative 9,222 6,465
Stock-based compensation and
amortization of intangibles 2,143 1,613
----------------- -----------
Total operating expense 41,165 28,275
----------------- -----------
Income (loss) from operations 7,647 5,144
Other income (expense), net 7,735 7,336
Interest expense (1,566) (1,563)
----------------- -----------
Income before provision for income
taxes 13,816 10,917
Provision (benefit) for income
taxes 1,381 -
----------------- -----------
Net income $12,435 $10,917
================= ===========
Net income per share:
Basic $0.07 $0.06
Diluted $0.07 $0.06
Weighted average shares
outstanding:
Basic 176,781 182,482
Diluted 206,907 219,078
RED HAT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
May 31, Feb. 28
2005 2005
---------- ----------
(unaudited)
Current assets:
Cash and cash equivalents $ 244,368 $ 140,169
Investments in debt securities $ 190,134 181,028
Accounts receivable, net 47,672 48,402
Estimated earnings in excess of billings 2,761 3,557
Prepaid expenses and other current assets 13,412 12,097
---------- ----------
Total current assets 498,347 385,253
Property and equipment, net 33,137 32,726
Goodwill and identifiable intangibles, net 91,542 90,331
Investments in debt securities 517,036 607,566
Debt issue costs-convertible notes 11,293 12,269
Other assets, net 6,420 5,891
---------- ----------
Total assets $1,157,775 $1,134,036
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,219 $ 8,426
Accrued expenses 25,109 21,065
Deferred revenue 125,439 109,426
Current portion of capital lease obligations 47 282
---------- ----------
Total current liabilities 154,814 139,199
Deferred lease credits 5,122 5,179
Long term deferred revenue 32,469 27,890
Capital lease obligations - 97
Convertible notes 590,000 600,000
Commitments and contingencies - -
Stockholders' equity:
Noncontrolling interest in subsidiary 428 557
Preferred stock - -
Common stock 19 19
Additional paid-in capital 719,330 714,604
Deferred compensation (4,265) (4,792)
Accumulated deficit (219,364) (231,798)
Treasury stock, at cost (112,537) (107,409)
Accumulated other comprehensive income (loss) (8,241) (9,510)
---------- ----------
Total stockholders' equity 375,370 361,671
---------- ----------
Total liabilities and stockholders' equity $1,157,775 $1,134,036
========== ==========
RED HAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
------------------------
May 31, May 31,
2005 2004/a
------------------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $ 12,435 $ 10,917
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,547 2,306
Deferred income taxes (193) -
Stock-based compensation expense 1,185 1,288
Net realized gain from long-term debt
repurchase (1,596) -
Provision for doubtful accounts 84 748
Amortization of debt issue costs 782 764
Other 22 (131)
Changes in operating assets and liabilities:
Accounts receivable and estimated earnings in
excess of billings 596 2,149
Prepaid expenses and other current assets (1,404) (463)
Intangibles and other assets 354 (651)
Accounts payable (4,101) (737)
Accrued expenses 2,464 (568)
Deferred revenue 22,486 15,535
Deferred lease credits (57) (40)
-------- ---------
Net cash provided by operating activities 36,604 31,117
-------- ---------
Cash flows from investing activities:
Purchase of investment securities (8,600) (585,280)
Proceeds from sales and maturities of
investment securities 91,286 224,188
Net change in other investments (767) -
Purchase of property and equipment (3,272) (5,368)
-------- ---------
Net cash provided by (used in) investing
activities 78,647 (366,460)
-------- ---------
Cash flows from financing activities:
Repurchase of convertible debt (8,210) -
Structured stock repurchases 1,031 -
Proceeds from issuance of common stock under
Employee Stock Purchase Plan 727 872
Proceeds from exercise of common stock options 1,706 10,410
Purchase of treasury stock (5,128) -
Payments on capital lease obligations (332) (248)
-------- ---------
Net cash (used in) provided by financing
activities (10,206) 11,034
-------- ---------
Effect of foreign currency exchange rates on
cash and cash equivalents (846) (1,304)
Net increase (decrease) in cash and cash
equivalents 104,199 (325,613)
Cash and cash equivalents at beginning of the
period 140,169 461,304
-------- ---------
Cash and cash equivalents at end of period $244,368 $ 135,691
======== =========
/a: Reclassed to conform with current period.
CONTACT: Red Hat, Inc.
Leigh Day, 919-754-4369; lday@redhat.com
or
Linda Brewton, 919-754-4476; lbrewton@redhat.com