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Continued Execution Towards Profitability
with Significant Gross Margin Improvement
RESEARCH TRIANGLE PARK, N.C.--(BUSINESS WIRE)--June 15, 2000--Red Hat, Inc. (Nasdaq: RHAT), the leader in open source Internet infrastructure solutions, today reported revenue of $16.0 million for the first quarter ended May 31, 2000, a 95% increase over revenue of $8.2 million for the first quarter last year, and 22% higher than fourth quarter 1999 revenue of $13.1 million. Gross margins increased to 54.0% for the quarter, a 6.6 percentage point improvement over the prior quarter.
Adjusting for non-cash, merger, acquisition and other expenses, the Company reported a net loss for the first quarter of fiscal 2001 of $2.5 million, or $0.02 per share, compared to an adjusted net loss for the first quarter of fiscal 2000 of $3.8 million, or $0.08 per share. On a reported basis, the net loss was $14.9 million, or $0.10 per share, compared with a net loss of $4.1 million, or $0.08 per share, for the first quarter of fiscal 2000.
Commenting on the results, Matthew Szulik, president and CEO of Red Hat, Inc., said, "Q1 performance represents continued execution against our plan to double revenue and become profitable in calendar 2001 while leveraging our acquisitions to enter new markets and create new revenue streams."
Highlights for the first quarter include:
About Red Hat
Founded in 1994, Red Hat (Nasdaq:RHAT), is the leading provider of open source Internet infrastructure solutions, ranging from small embedded devices to high availability clusters and Web serving. Red Hat applies its technological leadership to create open source solutions for Internet infrastructure and post-PC environments, offers services backed by the best understanding of open source and the most comprehensive resources, delivers the brand of a widely trusted open source leader and corporate partner, and persists in an indelible commitment to the virtues of open source to lead a revolution in the computing industry.
Red Hat is based in Research Triangle Park, N.C. and has offices worldwide. Visit Red Hat on the Web at www.redhat.com. For investor inquiries, please call 1-888-REDHAT2.
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, statements regarding current or future financial performance, management's plans and objectives for future operations, product plans and performance, management's assessment of market factors, and statements regarding the strategy and plans of the Company and its strategic partners, constitute forward-looking statements. These forward-looking statements are not guarantees of the Company's future performance and are subject to a number of risks and uncertainties that could cause the Company's actual results in the future materially to differ from the forward-looking statements. These risks and uncertainties include, without limitation, challenges associated with the Company's domestic and international expansion, shifting to a subscription-based model of product offerings, the difficulty of integrating newly-acquired companies, the possible failure to realize the beneficial synergies expected from such acquisitions, the Company's ability to attract new enterprise customers and to meet their needs by expanding and enhancing its service offerings, the need to continually enhance the Company's Web site and the ability to generate significant revenue from it, the Company's ability to enter into new and retain existing strategic alliances with technology leaders, the continuing need for an increasing number of Linux-based enterprise applications, the Company's dependence upon an open source business model, reliance upon independent enforceability of the GNU General Public License and other licenses under which the Company's products are developed and licensed, the risks of economic downturns generally, and in the Company's industry specifically, the risks associated with competition and competitive pricing pressures, the viability of the Internet, and other risks detailed in the Company'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. -0-
RED HAT, INC.
Consolidated Statements of Operations
Three months ended
May 31,
-------------------------------------
2000 1999
(Unaudited) (Unaudited)
Revenue
Subscription 8,537,501 4,321,540
Services 6,260,334 3,832,458
Web 1,230,863 80,050
----------------- --------------
Total revenue 16,028,698 8,234,048
----------------- --------------
Cost of revenue
Subscription 3,688,543 2,235,901
Services 3,629,234 1,615,890
Web 61,250 123,000
----------------- --------------
Total cost of revenue 7,379,027 3,974,791
----------------- --------------
----------------- --------------
Gross profit 8,649,671 4,259,257
----------------- --------------
Operating expense
Sales and marketing 9,493,407 3,740,859
Research and development 3,271,184 2,381,782
General and
administrative 3,771,148 2,019,577
Amortization of goodwill
and intangibles 5,231,387 1,298
Stock-based compensation 3,717,753 371,625
Merger, acquisition
and other 3,359,026 -
----------------- --------------
Total operating
expense 28,843,905 8,515,141
----------------- --------------
Income (loss) from
operations (20,194,234) (4,255,884)
Other income (expense),
net 5,407,190 227,927
----------------- --------------
Income (loss) before
income taxes (14,787,044) (4,027,957)
Provision for income
taxes 64,414 61,576
----------------- --------------
Net income (loss) (14,851,458) (4,089,533)
----------------- --------------
Accretion on mandatorily
redeemable preferred stock - 43,080
----------------- --------------
Net income (loss) available
to common stockholders (14,851,458) (4,132,613)
================= ==============
Net income (loss) per
common share
Basic (0.10) (0.08)
Diluted (0.10) (0.08)
Weighted average common
shares outstanding
Basic 154,664,865 49,925,913
Diluted 154,664,865 49,925,913
RED HAT, INC.
Consolidated Balance Sheets
May 31, February 29,
2000 2000
Assets
Current assets:
Cash and cash
equivalents $ 106,050,164 $242,426,032
Short-term
investments 48,314,139 27,460,222
Accounts receivable,
net 10,250,190 7,893,936
Inventory 1,343,816 488,977
Prepaid expenses 2,175,166 1,874,973
----------------- --------------
Total current assets 168,133,475 280,144,140
Property and equipment,
net 8,894,542 7,909,103
Goodwill and intangibles,
net 87,870,770 58,267,419
Long-term investments 176,260,633 72,354,212
Other assets, net 7,713,678 4,859,958
----------------- --------------
Total assets $ 448,873,098 $423,534,832
Liabilities and stockholders'
equity Current liabilities:
Accounts payable 5,909,724 10,774,546
Royalties payable 40,822 115,117
Accrued expenses 13,078,768 7,571,058
Deferred revenue 12,030,907 11,030,337
Current portion of capital
lease obligation 366,315 366,062
----------------- --------------
Total current
liabilities 31,426,536 29,857,120
Capital lease obligations 190,483 230,516
Commitments and
contingencies - -
Stockholders' equity
(deficit):
Preferred stock - -
Common stock 15,639 15,334
Additional paid-in capital 514,104,170 477,781,234
Shareholder receivables 602 (66,899)
Deferred compensation (32,066,408) (35,159,127)
Accumulated other
comprehensive income
(loss) (1,338,988) (515,868)
Accumulated deficit (63,458,936) (48,607,478)
----------------- --------------
Total stockholders'
equity 417,256,079 393,447,196
----------------- --------------
Total liabilities
and stockholders'
equity 448,873,098 423,534,832
----------------- -------------
CONTACT: Red Hat, Inc.
Hal Covert, Chief Financial Officer, 919/547-0012 x215
hcovert@redhat.com
or
INVESTOR CONTACT: Lippert/Heilshorn & Associates
John Heilshorn/Jody Burfening, 212/838-3777
john@lhai.com/jody@lhai.com
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