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Press release

Red Hat Reports Fiscal Fourth Quarter and Year End Results

87,000 new subscriptions, $32 million in cash flow from operations, and 68% sequential growth in deferred revenue highlight the quarter

RALEIGH, N.C.

Revenue for the fourth quarter of fiscal 2004 was $37.0 million, a sequential increase of 11% compared to $33.1 million in the third quarter of fiscal 2004, and a year-over-year increase of 43%.

For the fourth quarter of fiscal 2004, the company reported net income of $5.0 million, or $0.03 per share. This compares to a net income of $4.1 million, or $0.02 per share, in the prior quarter, and break-even results in the same quarter a year ago.

The company generated $32.2 million, or $0.17 per share, in positive cash flow from operations during the fourth quarter, and a total of $61 million, or $0.33 per share, in positive cash flow from operations for the fiscal year ended February 29, 2004. The company ended the year with a cash balance of $941 million, an increase of $649 million as compared to the balance at the end of the prior fiscal year.

In the fourth quarter of fiscal 2004, the company increased its deferred revenue balance to $70.8 million, a sequential increase of $28.6 million, or 68%, as compared to the third quarter of fiscal 2004.

Highlights for the fourth quarter include:

  • Fourth quarter sales of subscriptions for Red Hat Enterprise Linux technologies increased by 87,000 new subscriptions, comprised of 61,000 subscriptions sold into the enterprise IT market and 26,000 subscriptions sold into the HPC and hosting markets.
  • Renewal rates for sales of Red Hat Enterprise Linux remained strong at approximately 90%.
  • Gross margins increased to record levels, with blended gross margins at 76% and gross margins of Enterprise subscription technologies at 91%.
  • Operating profit, before stock-based compensation, increased to $4.6 million, or 12% of total revenue.

For the fiscal year ended February 29, 2004, the company reported revenues of $126.1 million, an increase of 39% as compared to fiscal 2003 revenues of $90.9 million. The company reported net income of $14 million for fiscal 2004, or $0.08 per share, compared to a net loss of $6.6 million, or a loss of $0.04 per share, for fiscal 2003. For the fiscal year ended on February 29, 2004, the company reported over 160,000 cumulative sales of Red Hat Enterprise Linux technologies.

"For Red Hat, fiscal 2004 was a year marked by great execution, as we delivered strong growth in revenues, cash flows, and profitability", stated Kevin Thompson, Executive Vice President and Chief Financial Officer. "The growth rate in the adoption of Red Hat Enterprise Linux has exceeded our expectations to date and we are positive on the outlook for fiscal 2005".

See the earnings tables.

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

Forward-looking statements in this press release are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that statements in this press release that are not strictly historical statements, including, without limitation, management's plans and objectives for future operations, and management's assessment of market factors, constitute forward-looking statements which involve risks and uncertainties. These risks and uncertainties include, without limitation, 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, the viability of the Internet, and other risks detailed in Red Hat's filings with the Securities and Exchange Commission, copies of which may be accessed through the SEC's Web site at http://www.sec.gov.

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About Red Hat

Red Hat is the world’s leading provider of open source software solutions, using a community-powered approach to reliable and high-performing cloud, Linux, middleware, storage and virtualization technologies. Red Hat also offers award-winning support, training, and consulting services. As the connective hub in a global network of enterprises, partners, and open source communities, Red Hat helps create relevant, innovative technologies that liberate resources for growth and prepare customers for the future of IT. Learn more at 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: risks related to delays or reductions in information technology spending; the effects of industry consolidation; the ability of the Company to compete effectively; the integration of acquisitions and the ability to market successfully acquired technologies and products; uncertainty and adverse results in litigation and related settlements; 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; the ability to deliver and stimulate demand for new products and technological innovations on a timely basis; risks related to data and information security vulnerabilities; ineffective management of, and control over, the Company’s growth and international operations; fluctuations in exchange rates; and changes in and a 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 to these factors, actual future performance, outcomes, and results may differ materially because of more general factors including (without limitation) general industry and market conditions and growth rates, economic and political conditions, governmental and public policy changes and the impact of natural disasters such as earthquakes and floods. 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 this press release.