Red Hat Reports First Quarter Results

MALAYSIA, 3 July 2008 – Red Hat, the world's leading provider of open source solutions, has announced financial results for its fiscal year 2009 first quarter ended May 31, 2008.

“The first quarter was a solid start to the fiscal year,” stated Jim Whitehurst, President and Chief Executive Officer of Red Hat. “With our recognised value advantage and award winning technology solutions, we continued to see top enterprise customers expand Red Hat deployments and new customers migrate to our solutions.”

Total revenue for the quarter was US$156.6 million, an increase of 32 percent from the year ago quarter and 11 percent from the prior quarter. Subscription revenue for the quarter was US$130.7 million, up 27 percent year-over-year and 7 percent sequentially.

Net income for the quarter was US$17.3 million, or US$0.8 per diluted share, compared with US$16.2 million, or US$0.8 per diluted share, in the year ago quarter. Non-GAAP adjusted net income for the quarter was US$37.0 million, or US$0.18 per diluted share, after adjusting for stock compensation and tax expense. This compares to non-GAAP adjusted net income of US$33.7 million, or US$0.16 per diluted share in the year ago quarter.

Operating cash flow totaled US$63.4 million, compared to US$39.7 million from the year ago quarter and US$54.5 million from the prior quarter. At quarter end, the company’s total deferred revenue balance was US$491.8 million, an increase of 36 percent on a year-over-year basis and 4 percent sequentially. Total cash, cash equivalents and investments as of May 31, 2008 were US$1.35 billion.

Other highlights include the following:
Red Hat launched major releases of its flagship products; Red Hat Network Satellite 5.1, Red Hat Enterprise Linux 5.2, and JBoss Operation Network 2.0. Also Red Hat released Fedora 9 to the open source community.

Red Hat’s middleware business continued to gain momentum in the quarter. JBoss middleware solutions were positioned in the Leadership quadrant of Gartner Inc.’s “Magic Quadrant for Enterprise Application Servers” for a third consecutive year. JBoss also received high marks in a survey of application development professionals published by Forrester Research on April 25, 2008 “Application server Quality: Review Your Assumptions”.

Red Hat was named the #1 IT vendor in Japan by IT workers surveyed in the Nikkei Access’ April 2008 study for the second consecutive year.

“Our execution this quarter enabled us to deliver a combination of strong revenue, operating income and cash flow growth,” stated Charlie Peters, Executive Vice President and Chief Financial Officer of Red Hat. “We achieved these results while continuing to invest in our infrastructure and technologies to enable future growth.”