Exhibit 99.1
Red Hat Reports Fiscal Second Quarter Results
RALEIGH, N.C.--(BUSINESS WIRE)--Sept. 28, 2005--
-- Revenue of $65.7 million up 42% year-over-year
-- Cash Flow From Operations Grows 48% year-over-year to $45.8
million
Red Hat, Inc. (NASDAQ:RHAT), the world's leading provider of open
source solutions to the enterprise, today announced financial results
for its fiscal second quarter ended August 31, 2005.
Total revenue for the quarter was $65.7 million, a year-over-year
increase of 42% and a sequential increase of 8%. Subscription revenue
was $54.3 million, an increase of 56% year-over-year and 10%
sequentially.
The company reported operating income of $12.8 million,
representing a 68% increase from the prior quarter and 90% from the
year ago period. Net income for the quarter was $16.7 million, a
sequential increase of 35% and year-over-year increase of 42%.
Earnings per diluted share were $0.09 for the quarter, an increase
from $0.07 in the prior quarter and $0.06 in the year ago period.
The company reported $45.8 million in cash flow from operations
during the second quarter, a 48% year-over-year increase. After
repurchasing $11.6 million of common stock and $20.0 million face
value of the Company's convertible bonds during the quarter, cash and
investments totaled $966 million at the end of August 2005.
At quarter end, the company's total deferred revenue balance was
$184.0 million, an increase of 85% on a year-over-year basis and 17%
on a sequential basis.
Other highlights from the quarter included:
-- Billings, as approximated by the sum of revenue and quarterly
change in deferred revenue, was $91.8 million, up 58%
year-over year.
-- Gross margin improved to 83% from 80% in the prior quarter.
-- Operating margin grew to 20% from 13% last quarter.
"Our second quarter results show strong growth in revenue and cash
flow," stated Charlie Peters, Executive Vice President and Chief
Financial Officer of Red Hat. "We continue to focus on operational
improvements and solid execution in all areas of our business. Our
investments in people and systems have improved our productivity,
positively impacting our results."
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 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.
LINUX is a trademark of Linus Torvalds. RED HAT is a registered
trademark of Red Hat, Inc. All other names and trademarks are the
property of their respective owners.
RED HAT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands - except per share amounts)
Three Months Six Months
Ended Ended
----------------------- -----------------------
August 31, August 31, August 31, August 31,
2005 2004 2005 2004
----------------------- -----------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Subscription and
services revenue:
Subscription:
Enterprise
technologies $53,758 $33,941 $102,501 $63,909
Retail - 561 - 936
Embedded 569 423 1,067 648
----------- ----------- ----------- -----------
Total
subscription
revenue 54,327 34,925 103,568 65,493
----------- ----------- ----------- -----------
Services:
Enterprise
technologies 10,684 10,492 22,067 20,978
Embedded
development
services 707 907 863 1,617
----------- ----------- ----------- -----------
Total services
revenue 11,391 11,399 22,930 22,595
----------- ----------- ----------- -----------
Total
subscription
and services
revenue 65,718 46,324 126,498 88,088
----------- ----------- ----------- -----------
Cost of subscription
and services revenue:
Subscription:
Enterprise
technologies and
retail 4,295 2,807 9,414 4,720
Embedded 48 62 102 131
----------- ----------- ----------- -----------
Total cost of
subscription
revenue 4,343 2,869 9,516 4,851
----------- ----------- ----------- -----------
Services:
Enterprise
technologies 6,015 5,241 12,164 10,727
Embedded
development
services 574 736 1,220 1,613
----------- ----------- ----------- -----------
Total cost of
services
revenue 6,589 5,977 13,384 12,340
----------- ----------- ----------- -----------
Total cost of
subscription
and services
revenue 10,932 8,846 22,900 17,191
----------- ----------- ----------- -----------
Gross profit enterprise
technologies and
retail 54,132 36,946 102,990 70,376
Gross profit embedded 654 532 608 521
----------- ----------- ----------- -----------
Gross profit on
enterprise
technologies,
retail and embedded
revenue 54,786 37,478 103,598 70,897
Operating expense:
Sales and marketing 20,181 14,856 40,198 28,078
Research and
development 10,450 8,435 20,298 15,710
General and
administrative 10,388 7,265 20,731 14,884
Amortization of
intangibles 957 178 1,915 337
----------- ----------- ----------- -----------
Total operating
expense 41,976 30,734 83,142 59,009
----------- ----------- ----------- -----------
Income from operations 12,810 6,744 20,456 11,888
Other income (expense),
net 7,337 5,995 15,073 13,331
Interest expense (1,556) (1,555) (3,122) (3,118)
----------- ----------- ----------- -----------
Income before provision
for income taxes 18,591 11,184 32,407 22,101
Provision (benefit) for
income taxes 1,859 (641) 3,241 (641)
----------- ----------- ----------- -----------
Net income $16,732 $11,825 $29,166 $22,742
=========== =========== =========== ===========
Net income-diluted $18,079 $13,351 $31,889 $25,783
=========== =========== =========== ===========
Net income per share:
Basic $0.09 $0.06 $0.16 $0.12
Diluted $0.09 $0.06 $0.15 $0.12
Weighted average shares
outstanding:
Basic 177,208 183,422 176,995 182,952
Diluted 208,583 218,836 207,894 218,874
RED HAT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
Aug. 31, Feb. 28,
2005 2005
----------- ----------
(unaudited)
Current assets:
Cash and cash equivalents $148,056 $140,169
Investments in debt securities 369,364 181,028
Accounts receivable, net 57,797 48,402
Estimated earnings in excess of billings 1,788 3,557
Prepaid expenses and other current assets 13,154 12,097
-------------- -----------
Total current assets 590,159 385,253
Property and equipment, net 34,037 32,726
Goodwill 75,996 73,591
Identifiable intangibles, net 14,825 16,740
Investments in debt securities 448,198 607,566
Other assets, net 16,561 18,160
-------------- -----------
Total assets $1,179,776 $1,134,036
============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $4,892 $8,426
Accrued expenses 28,544 21,065
Deferred revenue 144,973 109,426
Current portion of capital lease
obligations 239 282
-------------- -----------
Total current liabilities 178,648 139,199
Deferred lease credits 5,080 5,179
Long term deferred revenue 39,061 27,890
Other long term obligations 223 97
Convertible notes 570,000 600,000
Commitments and contingencies - -
Stockholders' equity:
Noncontrolling interest in subsidiary 537 557
Preferred stock - -
Common stock 19 19
Additional paid-in capital 724,867 714,604
Deferred compensation (3,109) (4,792)
Accumulated deficit (202,632) (231,798)
Treasury stock, at cost (124,097) (107,409)
Accumulated other comprehensive income
(loss) (8,821) (9,510)
-------------- -----------
Total stockholders' equity 386,764 361,671
-------------- -----------
Total liabilities and stockholders'
equity $1,179,776 $1,134,036
============== ===========
RED HAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended Six Months Ended
---------------------------- -----------------------
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
2005 2004/a 2005 2004/a
---------------- ----------- ----------- -----------
(Unaudited)(Unaudited) (Unaudited) (Unaudited)
Cash flows from operating
activities:
Net income $16,732 $11,825 $29,166 $22,742
Adjustments to reconcile
net income to net
cash provided by
operating activities:
Depreciation and
amortization 3,751 2,409 7,298 4,715
Deferred income taxes (606) (1,236) (799) (1,236)
Stock-based compensation
expense 1,310 1,110 2,495 2,398
Gain from repurchase
of convertible debt (1,544) - (3,140) -
Provision for doubtful
accounts 57 266 141 1,014
Amortization of debt issue
costs 770 776 1,552 1,433
Loss on disposal
of property and
equipment 891 - 996 -
Other 102 102 22 78
Changes in operating assets
and liabilities:
Accounts receivable and
estimated earnings in
excess of billings (9,837) 849 (9,241) 2,998
Prepaid expenses
and other current
assets 615 321 (790) (142)
Intangibles and
other assets (29) (564) 325 (1,215)
Accounts payable 735 922 (3,367) 185
Accrued expenses 5,091 2,901 7,555 2,333
Deferred revenue 27,760 11,186 50,246 26,721
Deferred lease
credits (42) (44) (99) (84)
---------------- ----------- ----------- -----------
Net cash
provided by
operating
activities 45,756 30,823 82,360 61,940
---------------- ----------- ----------- -----------
Cash flows from
investing
activities:
Purchase of
investment
securities (130,577) (57,232) (139,177) (642,512)
Proceeds from
sales and
maturities of
investment
securities 19,731 61,154 111,017 285,342
Acquisitions of
businesses, net
of cash acquired (2,500) - (2,500) -
Purchase of other
investments - - (767) -
Purchase of
property and
equipment (4,716) (2,570) (7,988) (7,938)
---------------- ----------- ----------- -----------
Net cash (used
in) provided by
investing
activities (118,062) 1,352 (39,415) (365,108)
---------------- ----------- ----------- -----------
Cash flows from
financing
activities:
Repurchase of
convertible debt (18,091) - (26,301) -
Structured stock
repurchases - - 1,031 -
Net proceeds from
issuance of
common stock
under Employee
Stock Purchase
Plan 770 - 1,497 872
Proceeds from
exercise of
common stock
options 5,418 1,701 7,124 12,111
Purchase of
treasury stock (11,560) - (16,688) -
Other financing 415 (359) 83 (607)
---------------- ----------- ----------- -----------
Net cash (used
in) provided by
financing
activities (23,048) 1,342 (33,254) 12,376
---------------- ----------- ----------- -----------
Effect of foreign
currency exchange
rates on cash and
cash equivalents (958) (522) (1,804) (1,826)
Net increase
(decrease) in
cash and cash
equivalents (96,312) 32,995 7,887 (292,618)
Cash and cash
equivalents at
beginning of the
period 244,368 135,691 140,169 461,304
---------------- ----------- ----------- -----------
Cash and cash
equivalents at
end of period $148,056 $168,686 $148,056 $168,686
================ =========== =========== ===========
/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