Red Hat Reports Second Quarter Results

Revenue of $184 million, up 12% year-over-year Deferred Revenue of $581 million, up 17% year-over-year Repurchased $47 million, or 2.3 million shares, of common stock

RALEIGH, CAROLINE DU NORD -

Red Hat (NYSE: RHT), the world's leading provider of open source solutions, today announced financial results for its fiscal year 2010 second quarter ended August 31, 2009.

Total revenue for the quarter was $183.6 million, an increase of 12% from the year ago quarter. Subscription revenue for the quarter was $156.3 million, up 15% year-over-year.

"IT organizations continue to move ahead with purchases of high value solutions, and Red Hat is capitalizing on this demand as a result of our strong customer relationships and proven value proposition. These factors contributed to our better than expected total revenue in the second quarter, and drove annual subscription revenue growth of 15% for both the quarter and first half of fiscal year 2010. We continue to be optimistic about Red Hat's future and believe the company is well positioned when the economic and IT spending environment improves," stated Jim Whitehurst, President and Chief Executive Officer of Red Hat. "In addition to solid second quarter results, we also marked a new milestone in Red Hat's ten year history as a public company by our inclusion in July as a component of the S&P 500."

GAAP operating income for the quarter was $27.5 million, up 29% from $21.4 million in the year ago quarter. After adjusting for stock compensation and amortization expenses as detailed in the tables below, non-GAAP operating income for the quarter was $43.6 million, up 21% year-over-year. GAAP operating margin was 15.0%. Non-GAAP operating margin was 23.7%, up 170 basis points from the year ago quarter.

GAAP net income for the quarter was $28.9 million, or $0.15 per diluted share, compared with $21.1 million, or $0.10 per diluted share, in the year ago quarter. Non-GAAP adjusted net income for the quarter was $39.4 million, or $0.20 per diluted share, after adjusting for stock compensation and amortization expenses as detailed in the tables below, as compared to $30.1 million, or $0.14 per diluted share, in the year ago quarter. Both GAAP and non-GAAP net income for the quarter include a discrete tax benefit of $7.3 million, adding approximately $0.04 per diluted share. Excluding this tax benefit, GAAP earnings per share would have been $0.11 and non-GAAP earnings per share would have been $0.16.

Operating cash flow totaled $62.0 million compared to $54.3 million from the year ago quarter, up 14% year-over-year. At quarter end, the company's total deferred revenue balance was $580.9 million, an increase of 17% on a year-over-year basis. Total cash, cash equivalents and investments as of August 31, 2009 were $911.8 million.

"During the second quarter, Red Hat's financial performance was strong across all of our key metrics. We delivered double digit growth in revenue and deferred revenue, expanded our non-GAAP operating margins and generated strong cash flow from operations," stated Charlie Peters, Executive Vice President and Chief Financial Officer of Red Hat. "We are particularly pleased with the growth of the current portion of deferred revenue combined with the lengthening of our average subscription duration."

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 today and can be accessed by the general public at Red Hat's investor relations website at http://investors.redhat.com. A replay of the webcast will be available shortly after the live event has ended.

About Red Hat, Inc.

Red Hat, the world's leading open source solutions provider, is headquartered in Raleigh, NC with over 65 offices spanning the globe. CIOs ranked Red Hat as one of the top vendors delivering value in Enterprise Software for five consecutive years in the CIO Insight Magazine Vendor Value survey. Red Hat provides high-quality, affordable technology with its operating system platform, Red Hat Enterprise Linux, together with applications, management and Services Oriented Architecture (SOA) solutions, including JBoss Enterprise Middleware. Red Hat also offers support, training and consulting services to its customers worldwide. 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: risks related to delays or reductions in information technology spending, the integration of acquisitions and the ability to market successfully acquired technologies and products; 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; 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; adverse results in litigation; 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 conditions, and governmental and public policy changes. 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.

© 2009 Red Hat, Inc. Red Hat, the Shadowman logo and JBoss are registered trademarks of Red Hat, Inc. in the U.S. and other countries. Linux is a registered trademark of Linus Torvalds.

RED HAT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands - except per share amounts)
               
        Three Months Ended Six Months Ended
        August 31, August 31, August 31, August 31,
         2009   2008   2009   2008 
Revenue:        
               
  Subscriptions $156,273  $135,709  $305,063  $266,403 
  Training and services  27,360   28,674   52,958   54,615 
               
              
    Total subscription, training and services revenue  183,633   164,383   358,021   321,018 
               
Cost of revenue:        
               
  Subscriptions  10,972   9,720   21,023   18,677 
  Training and services  17,468   17,788   33,886   35,260 
               
               
    Total cost of subscription, training and services revenue  28,440   27,508   54,909   53,937 
               
               
 Total gross profit  155,193   136,875   303,112   267,081 
               
Operating expense:        
 Sales and marketing  66,768   59,566   130,745   118,837 
 Research and development  36,360   31,728   71,462   60,639 
 General and administrative  24,523   24,177   
  • 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.