Exhibit 99.1
Red Hat Reports Third Quarter Fiscal Year 2007 Results
-- Revenue up 45% year-over-year
-- Operating profit up 44% from prior quarter
-- Operating cash flow up more than 35% from prior quarter
RALEIGH, N.C.--(BUSINESS WIRE)--Dec. 21, 2006--Red Hat, Inc. (NYSE: RHT),
the world's leading provider of open source solutions, today announced financial
results for its fiscal year 2007 third quarter.
Total revenue for the quarter was $105.8 million, an increase of 45% from
the year-ago quarter and 6% from the prior quarter. Subscription revenue was
$88.9 million, up 48% year-over-year and 5% sequentially.
Net income for the quarter was $14.6 million or $0.07 per diluted share
compared with $11.0 million or $0.05 per diluted share for the prior quarter.
Non-GAAP adjusted net income for the quarter was $29.6 million, or $0.14 per
diluted share, after adjusting for stock compensation and tax expense as
detailed in the tables below. This compares to non-GAAP adjusted net income of
$22.7 million, or $0.11 per diluted share in the third quarter of last fiscal
year.
At quarter end, the company's total deferred revenue balance was $311.7
million, an increase of $27.6 million, or 10%, when compared to the end of the
last fiscal quarter.
Other highlights from the quarter included:
-- Operating income of $13.6 million was up 44% from $9.5 million in the
prior quarter.
-- Total cash and investments as of November 30, 2006 were $1.1 billion.
-- We added over 12,000 net new customers during the quarter.
-- Red Hat held its European developer and middleware event, JBossWorld
Europe in Berlin.
"This quarter's performance was characterized by strong market demand and
solid execution," stated Charlie Peters, Executive Vice President and Chief
Financial Officer. "We are particularly pleased to be named by CIO Insight, for
the third consecutive year, as the number one enterprise software vendor in
delivering value to customers."
Additional information on Red Hat's reported results, including a
reconciliation of the non-GAAP adjusted results, are included in the financial
tables below. A live webcast of Red Hat's results will begin at 5:00 pm ET and
can be accessed by the general public at the Company's investor relations
website at http://investors.redhat.com. A replay of the webcast will be
available shortly after the live event will have ended.
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 applications, management, and middleware solutions,
including JBoss Enterprise Middleware Suite (JEMS). Red Hat is accelerating the
shift to service-oriented architectures (SOA) and enabling the next generation
of web-enabled applications running on a low-cost, secure open source platform.
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
Certain statements contained in this press release may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements provide current
expectations of future events based on certain assumptions and include any
statement that does not directly relate to any historical or current fact.
Actual results may differ materially from those indicated by such
forward-looking statements as a result of various important factors, including:
the ability of the Company to effectively compete; the inability to adequately
protect Company intellectual property and the potential for infringement or
breach of license claims of or relating to third party intellectual property;
risks related to data and information security vulnerabilities; ineffective
management of, and control over, the Company's growth and international
operations; risks related to the integration of acquisitions; adverse results in
litigation; the dependence on key personnel as well as other factors contained
in our most recent Quarterly Report on Form 10-Q (copies of which may be
accessed through the Securities and Exchange Commission's website at
http://www.sec.gov), including those found therein under the captions "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations". 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 and JBOSS are registered
trademarks of Red Hat, Inc. in the US and other countries. All other names and
trademarks are the property of their respective owners.
RED HAT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands - except per share amounts)
Three Months Ended Nine Months Ended
------------------- -------------------
Nov 30, Nov 30, Nov 30, Nov 30,
2006 2005 2006 2005
------------------- -------------------
Revenue:
Subscriptions $ 88,860 $ 60,211 $245,300 $163,779
Training and services 16,966 12,901 44,202 35,831
--------- --------- --------- ---------
Total subscription,
training and services
revenue 105,826 73,112 289,502 199,610
--------- --------- --------- ---------
Cost of revenue:
Subscriptions 6,741 4,952 20,123 15,788
Training and services 10,699 6,905 27,183 20,291
--------- --------- --------- ---------
Total cost of subscription,
training and services
revenue 17,440 11,857 47,306 36,079
--------- --------- --------- ---------
Total gross profit 88,386 61,255 242,196 163,531
Operating expense:
Sales and marketing 37,575 20,505 105,883 61,296
Research and development 19,200 9,644 51,084 29,846
General and administrative 18,024 12,357 49,579 34,067
--------- --------- --------- ---------
Total operating expense 74,799 42,506 206,546 125,209
--------- --------- --------- ---------
Income from operations 13,587 18,749 35,650 38,322
Other income (expense), net 11,113 6,645 31,388 22,601
Interest expense (1,494) (1,490) (4,467) (4,612)
--------- --------- --------- ---------
Income before provision for
income taxes 23,206 23,904 62,571 56,311
Provision for income taxes 8,586 701 23,151 3,942
--------- --------- --------- ---------
Net income $ 14,620 $ 23,203 $ 39,420 $ 52,369
========= ========= ========= =========
Net income-diluted $ 15,543 $ 24,565 $ 42,189 $ 56,529
========= ========= ========= =========
Net income per share:
Basic $ 0.08 $ 0.13 $ 0.21 $ 0.30
Diluted $ 0.07 $ 0.12 $ 0.19 $ 0.27
Weighted average shares
outstanding:
Basic 191,298 177,615 188,379 177,200
Diluted 219,458 211,783 218,591 208,964
Diluted net income per share
computation:
GAAP Net income, basic $ 14,620 $ 23,203 $ 39,420 $ 52,369
Interest expense on convertible
debentures, net of related
GAAP tax effects 449 662 1,347 2,017
Amortization of debt issuance
costs, net of related GAAP tax
effects 474 700 1,422 2,143
GAAP Net income, diluted $ 15,543 $ 24,565 $ 42,189 $ 56,529
========= ========= ========= =========
Note: certain prior year amounts have been reclassified to conform
with current year presentation.
RED HAT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
Nov. February
30, 28,
2006 2006
----------- -----------
(unaudited)
Current assets:
Cash and cash equivalents $ 795,992 $ 267,547
Investments in debt securities 180,873 537,324
Accounts receivable, net 81,251 59,792
Prepaid expenses and other current assets 34,123 16,576
----------- -----------
Total current assets 1,092,239 881,239
Property and equipment, net 42,278 35,822
Goodwill 327,264 75,942
Identifiable intangibles, net 97,574 13,467
Investments in debt securities 120,313 272,669
Other assets, net 33,238 35,102
----------- -----------
Total assets $1,712,906 $1,314,241
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,742 $ 5,627
Accrued expenses 40,370 31,960
Deferred revenue 227,786 162,934
Other current obligations 359 401
----------- -----------
Total current liabilities 279,257 200,922
Deferred lease credits 5,329 4,994
Long term deferred revenue 83,909 60,554
Other long term obligations - 213
Convertible debentures 570,000 570,000
Stockholders' equity:
Minority interest - 771
Common stock 20 19
Additional paid-in capital 1,015,376 763,906
Deferred compensation - (2,418)
Accumulated deficit (112,579) (152,113)
Treasury stock, at cost (125,723) (124,125)
Accumulated other comprehensive loss (2,683) (8,482)
----------- -----------
Total stockholders' equity 774,411 477,558
----------- -----------
Total liabilities and stockholders' equity $1,712,906 $1,314,241
=========== ===========
Note: certain prior year amounts have been reclassified to
conform with current year presentation.
RED HAT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
-------------------- ---------------------
Nov 30, Nov 30, Nov 30, Nov 30,
2006 2005 2006 2005
-------------------- ---------------------
Cash flows from operating
activities:
Net income $ 14,620 $ 23,203 $ 39,420 $ 52,369
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 6,594 4,145 17,691 11,443
Deferred income taxes 3,501 293 13,003 (507)
Share-based compensation
expense 8,495 1,299 24,421 3,794
Excess tax benefits from
share-based payment
arrangements (2,368) - (5,243)
Gain from repurchase of
convertible debentures - (3,140)
Provision for doubtful
accounts 281 228 983 369
Amortization of debt
issuance costs 752 752 2,256 2,304
(Gain) loss on disposal of
property and equipment (16) 128 (22) 1,125
Other - 546 (283) 568
Changes in operating assets
and liabilities net of
effects of acquisitions:
Accounts receivable (10,446) 2,968 (10,628) (6,274)
Prepaid expenses and other
current assets 243 (1,731) (2,002) (2,521)
Accounts payable 3,030 337 3,539 (3,030)
Accrued expenses 9,595 3,966 9,438 11,521
Deferred revenue 25,486 17,983 63,565 68,229
Other assets (91) (4) (206) 223
------------------------------------------
Net cash provided by
operating activities 59,676 54,113 155,932 136,473
--------- ---------- ---------- ----------
Cash flows from investing
activities:
Purchase of investment
securities (223,900) (7,444) (363,077)
Proceeds from sales and
maturities of investment
securities 166,810 221,956 522,862 332,972
Acquisitions of businesses,
net of cash acquired (302) (303) (149,864) (2,803)
Purchase of other
investments (20,000) (20,767)
Purchase of property and
equipment (5,766) (4,401) (14,751) (12,389)
--------- ---------- ---------- ----------
Net cash provided by (used
in) investing activities 160,742 (26,648) 350,803 (66,064)
--------- ---------- ---------- ----------
Cash flows from financing
activities:
Excess tax benefits from
share-based payment
arrangements 2,368 - 5,243 -
Repurchase of convertible
debentures - (26,301)
Structured stock
repurchases 1,514 - 1,514 1,031
Net proceeds from issuance
of common stock under
Employee Stock Purchase
Plan 833 306 2,330
Proceeds from exercise of
common stock options 2,966 6,978 14,650 14,102
Purchase of treasury stock (66) - (1,598) (16,688)
Other financing (223) 470 (255) 553
--------- ---------- ---------- ----------
Net cash provided by (used
in) financing activities 6,559 8,281 19,860 (24,973)
--------- ---------- ---------- ----------
Effect of foreign currency
exchange rates on cash and
cash equivalents 834 (1,856) 1,850 (3,659)
Net increase in cash and
cash equivalents 227,811 33,890 528,445 41,777
Cash and cash equivalents at
beginning of the period 568,181 148,056 267,547 140,169
--------- ---------- ---------- ----------
Cash and cash equivalents at
end of period $795,992 $ 181,946 $ 795,992 $ 181,946
========= ========== ========== ==========
Note: certain prior year amounts have been reclassified to
conform with current year presentation.
RED HAT, INC.
NON CASH SHARE-BASED COMPENSATION AND RECONCILIATION OF GAAP RESULTS
TO NON-GAAP ADJUSTED RESULTS
(Unaudited)
(In thousands - except per share amounts)
Non cash share-based compensation expense included in Consolidated
Statements of Operations:
Three Months Nine Months
Ended Ended
----------------- -------------------
Nov 30, Nov 30, Nov 30, Nov 30,
2006 2005 2006 2005
----------------- -------------------
Cost of revenue $ 558 $ - $ 1,607 $ -
Sales and marketing 2,181 87 6,753 117
Research and development 1,882 99 5,150 205
General and administration 3,874 1,113 10,911 3,472
-------- -------- --------- ---------
Total stock based compensation
expense $ 8,495 $ 1,299 $ 24,421 $ 3,794
======== ======== ========= =========
Reconciliation of GAAP Results to non-GAAP adjusted Results
(for prior year comparison purposes only)
Three Months Nine Months
Ended Ended
----------------- -------------------
Nov 30, Nov 30, Nov 30, Nov 30,
2006 2005 2006 2005
----------------- -------------------
GAAP Net income $14,620 $23,203 $ 39,420 $ 52,369
GAAP Provision for income taxes 8,586 701 23,151 3,942
GAAP Income before provision for
income taxes $23,206 $23,904 $ 62,571 $ 56,311
Add: Share-based compensation per
FAS 123R (Nov 06 only) 8,495 1,299 24,421 3,794
Deduct: Intrinsic value of stock
options per APB No. 25 (566) (1,299) (1,910) (3,794)
-------- ----------------------------
Incremental non-cash share-based
compensation expense 7,929 0 22,511 0
Non-GAAP adjusted income before
provision for income taxes $31,135 $23,904 $ 85,082 $ 56,311
Non-GAAP cash provision for
income taxes $ 1,557 $ 1,195 $ 4,254 $ 2,816
-------- -------- --------- ---------
Non-GAAP adjusted net income $29,578 $22,709 $ 80,828 $ 53,495
======== ======== ========= =========
Non-GAAP adjusted net income-
diluted $30,970 $24,101 $ 85,003 $ 57,744
======== ======== ========= =========
Non-GAAP adjusted net income per
share:
Basic $ 0.15 $ 0.13 $ 0.43 $ 0.30
Diluted $ 0.14 $ 0.11 $ 0.39 $ 0.28
Non-GAAP diluted net income per
share computation:
Non-GAAP adjusted net income $29,578 $22,709 $ 80,828 $ 53,495
Interest expense on convertible
debentures, net of related 5%
cash tax effects 677 677 2,031 2,060
Amortization of debt issuance
costs, net of related 5% cash
tax effects 715 715 2,144 2,189
Non-GAAP adjusted net income-
diluted $30,970 $24,101 $ 85,003 $ 57,744
======== ======== ========= =========
Reconciliation of GAAP cash flow from operating activities to non-GAAP
adjusted cash flow from operating activities
(for prior year comparison purposes only)
Three Months Nine Months
Ended Ended
----------------- -------------------
Nov 30, Nov 30, Nov 30, Nov 30,
2006 2005 2006 2005
----------------- -------------------
GAAP Net cash provided by
operating activities $59,676 $54,113 $155,932 $136,473
Add: Excess tax benefits from
share-based payment arrangements 2,368 0 5,243 0
Non-GAAP Net cash provided by
operating activities $62,044 $54,113 $161,175 $136,473
======== ======== ========= =========
CONTACT: Red Hat
Kerrin Catallozzi, Corporate Communications
919-754-4268
kcatallo@redhat.com
or
Linda Brewton, Investor Relations
919-754-4476
lbrewton@redhat.com