Red Hat Reports Fiscal Second Quarter Results

Revenue of $65.7 million up 42% year-over-year, Cash Flow From Operations Grows 48% year-over-year to $45.8 million
(PresseBox) (Raleigh, NC, ) 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.”

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, 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.


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