Double-Digit Sequential Revenue Growth, Positive Cash Flows from Operations Highlight Red Hat's Third Quarter Results.Business Editors, High Tech Writers RALEIGH Raleigh (rôl`ē, räl`ē), city (1990 pop. 207,951), state capital, and seat of Wake co., central N.C.; the site was selected for the capital in 1788, and the city was laid out and inc. 1792. , N.C.--(BUSINESS WIRE)--Dec. 17, 2002 Enterprise subscription revenues grow 29% sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen , operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. reach $1 million Red Hat, Inc. (Nasdaq:RHAT RHAT Red Hat (stock symbol) RHAT Rainwater Harvesting Association of Tanzania RHAT Register Hba Attributes ), the world's premier open source and Linux Linux Nonproprietary operating system (OS) for digital computers. In 1991 Linus Torvalds of Finland began asking for volunteer programmers over the Internet to collaborate on the development of a UNIX-like OS for personal computers; the “1. provider, today reported financial results for its third quarter fiscal 2003 ended November November: see month. 30, 2002. These results will only be provided in GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). format. In the third quarter of fiscal 2003, Red Hat achieved revenue of $24.3 million, a sequential One after the other in some consecutive order such as by name or number. increase of 14% compared to $21.2 million in the second quarter of fiscal 2003, and a year-over-year increase of 21%. For the third quarter of fiscal 2003 the company reported a net income of $305,000, or break-even per share. This compares to a net loss of $2.0 million, or $0.01 per share, in the prior quarter, and a net loss of $15.1 million, or $0.09 per share in the same quarter a year ago. Other highlights for the quarter include: -- Enterprise revenues, which account for 93% of Red Hat's total revenues, grew 15% to $22.5 million. -- Enterprise subscription revenues jumped 29% and generated gross margins of 82%. -- Blended gross margins remained strong improving to 66%, while Enterprise gross margins grew to a record 68%. -- Cash flow from operations jumped 74% to $1.0 million. -- Sales of Advanced Server increased to 12,000 subscriptions, a 50% increase compared to the prior quarter. -- Days Sales Outstanding decreased to a record 46 days. "By continuing to deliver strong operating performance, Red Hat continues to show solid execution of its business strategy," stated Kevin Thompson Kevin Thompson may refer to:
About Red Hat, Inc. Red Hat is the world's premier open source and Linux provider. Red Hat is headquartered in Raleigh, N.C. and has offices worldwide. For investor inquiries, contact Gabriel Szulik at Red Hat, (919) 754-3700, x44439. More information about Red Hat is available at www.redhat.com. FORWARD-LOOKING STATEMENTS forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Forward-looking statements in this press release are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. 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 Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the , 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 See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. .
RED HAT INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended
-------------------------------
Nov. 30, Aug. 31, Nov. 30,
2002 2002 2001
-------------------------------
(Unaudited)
Subscription and services revenue:
Subscription:
Enterprise $12,448 $9,635 $9,450
Embedded 709 761 1,440
-------- -------- ---------
Total subscription revenue 13,157 10,396 10,890
-------- -------- ---------
Services:
Enterprise 10,071 9,993 6,274
Embedded development services 1,050 845 2,889
-------- -------- ---------
Total services revenue 11,121 10,838 9,163
-------- -------- ---------
Total subscription and services
revenue 24,278 21,234 20,053
-------- -------- ---------
Cost of subscription and services
revenue:
Subscription:
Enterprise 2,285 1,930 2,081
Embedded 124 129 145
-------- -------- ---------
Total cost of subscription revenue 2,409 2,059 2,226
-------- -------- ---------
Services:
Enterprise 4,911 4,629 3,261
Embedded development services 868 936 1,789
-------- -------- ---------
Total cost of services revenue 5,779 5,565 5,050
-------- -------- ---------
Total cost of subscription and
services revenue 8,188 7,624 7,276
-------- -------- ---------
Gross profit enterprise 15,323 13,069 10,382
Gross profit embedded 767 541 2,395
-------- -------- ---------
Total gross profit 16,090 13,610 12,777
Operating expense:
Sales and marketing 8,147 8,581 7,368
Research and development 5,422 4,817 3,717
General and administrative 3,995 3,680 3,347
General and administrative - mergers
and acquisitions - - 202(a)
Lease buyout costs/Idle facility costs - - -
Amortization of goodwill - - 9,877(c)
Amortization of intangibles 278(d) 213(d) 374(d)
Stock-based compensation 1,142(e) 913(e) 1,506(e)
Restructuring charges - 104(f) 1,947(f)
-------- -------- ---------
Total operating expense 18,984 18,308 28,338
-------- -------- ---------
Loss from operations (2,894) (4,698) (15,561)
Other income (expense), net 3,199 2,747 3,514
-------- -------- ---------
Income (loss) from continuing
operations before extraordinary item 305 (1,951) (12,047)
Discontinued operations:
Loss from discontinued operations - - (3,009)(g)
-------- -------- ---------
Income (loss) before extraordinary item 305 (1,951) (15,056)
Extraordinary item-loss on disposal of
discontinued operations - - -
-------- -------- ---------
Net income (loss) $305 ($1,951) ($15,056)
======== ======== =========
Basic income (loss) per common share
Net income (loss) from continuing
operations $0.00 ($0.01) ($0.07)
Discontinued operations:
Loss from discontinued operations - - ($0.02)
Extraordinary item-loss on disposal of
discontinued operations - - -
-------- -------- ---------
Net income (loss) $0.00 ($0.01) ($0.09)
======== ======== =========
Diluted income (loss) per common share
Net income (loss) from continuing
operations $0.00 ($0.01) ($0.07)
Discontinued operations:
Loss from discontinued operations - - ($0.02)
Extraordinary item-loss on disposal of
discontinued operations - - -
-------- -------- ---------
Net income (loss) $0.00 ($0.01) ($0.09)
======== ======== =========
Weighted average shares outstanding:
Basic 170,183 169,977 169,242
Diluted 178,268 169,977 169,242
Nine Months Ended
--------------------
Nov. 30, Nov. 30
2002 2001
--------------------
(Unaudited)
Subscription and services revenue:
Subscription:
Enterprise $31,648 $27,744
Embedded 2,511 4,495
-------- ---------
Total subscription revenue 34,159 32,239
-------- ---------
Services:
Enterprise 27,831 17,228
Embedded development services 3,044 10,874
-------- ---------
Total services revenue 30,875 28,102
-------- ---------
Total subscription and services revenue 65,034 60,341
-------- ---------
Cost of subscription and services revenue:
Subscription:
Enterprise 6,083 7,158
Embedded 374 665
-------- ---------
Total cost of subscription revenue 6,457 7,823
-------- ---------
Services:
Enterprise 13,659 8,814
Embedded development services 2,965 5,517
-------- ---------
Total cost of services revenue 16,624 14,331
-------- ---------
Total cost of subscription and services
revenue 23,081 22,154
-------- ---------
Gross profit enterprise 39,737 29,000
Gross profit embedded 2,216 9,187
-------- ---------
Total gross profit 41,953 38,187
Operating expense:
Sales and marketing 24,534 25,651
Research and development 15,026 12,227
General and administrative 11,050 10,037
General and administrative - mergers and
acquisitions 522(a) 4,089(a)
Lease buyout costs/Idle facility costs 285(b) -
Amortization of goodwill - 40,435(c)
Amortization of intangibles 890(d) 1,060(d)
Stock-based compensation 2,990(e) 8,353(e)
Restructuring charges 1,461(f) 38,561(f)
-------- ---------
Total operating expense 56,758 140,413
-------- ---------
Loss from operations (14,805) (102,226)
Other income (expense), net 8,832 11,978
-------- ---------
Income (loss) from continuing operations
before extraordinary item (5,973) (90,248)
Discontinued operations:
Loss from discontinued operations - (7,718)(g)
-------- ---------
Income (loss) before extraordinary item (5,973) (97,966)
Extraordinary item-loss on disposal of
discontinued operations (261)(h) -
-------- ---------
Net income (loss) ($6,234) ($97,966)
======== =========
Basic income (loss) per common share
Net income (loss) from continuing operations ($0.04) ($0.53)
Discontinued operations:
Loss from discontinued operations - ($0.05)
Extraordinary item-loss on disposal of
discontinued operations ($0.00) -
-------- ---------
Net income (loss) ($0.04) ($0.58)
======== =========
Diluted income (loss) per common share
Net income (loss) from continuing operations ($0.04) ($0.53)
Discontinued operations:
Loss from discontinued operations - ($0.05)
Extraordinary item-loss on disposal of
discontinued operations ($0.00) -
-------- ---------
Net income (loss) ($0.04) ($0.58)
======== =========
Weighted average shares outstanding:
Basic 169,995 168,502
Diluted 169,995 168,502
(a) This amount represents costs related to integration of
acquisitions, primarily severance and duplicate facilities, that are
not part of recurring operations.
(b) Idle facility costs represent the non-cash write-off of
leasehold improvement costs at facilities consolidated by the Company
during the first quarter of fiscal 2003.
(c) This amount represents amortization of goodwill related to
acquisitions made prior to June 30, 2001.
(d) This amount primarily represents amortization of intangible
assets related to acquisitions made by the Company.
(e) This amount represents amortization of deferred compensation
which was primarily related to acquisitions made in prior periods.
(f) The fiscal 2003 restructuring charge represents severance
costs associated with the completion of the restructuring of our
embedded business which began in Q4 of fiscal 2002. The fiscal 2002
restructuring charge represents write-off of goodwill and other costs
of $33.7 million in Q2 FY 2002 and severance costs related to the
transition of Red Hat from a retail software products Company to the
premier Open Source Solutions provider to the Global 2000.
(g) This amount includes amortization of goodwill and other
non-cash charges of $2.2 million and $7.7 million in the three and
nine months ended November 30, 2001, respectively.
(h) This amount represents severance and facility closure costs.
RED HAT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
November 30, February 28,
2002 2002
----------- -----------
Assets:
Cash and investments in
debt securities $286,609 $286,977
Accounts receivable, net 12,252 12,919
Costs and estimated earnings
in excess of billings 6,177 5,727
Inventory 1,117 885
Prepaid expenses and other assets 9,413 7,499
Property and equipment, net 21,693 20,399
Goodwill and intangibles, net 40,179 35,459
-------- --------
Total assets $377,440 $369,865
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $6,116 $6,267
Accrued expenses 7,909 11,035
Deferred revenue 10,136 8,624
Deferred lease credits 5,163 3,778
Other liabilities 17,506 12,612
------ ------
Total liabilities 46,830 42,316
Commitments and contingencies - -
Stockholders' equity:
Noncontrolling interest in
subsidiary 94 74
Preferred stock - -
Common stock 17 17
Additional paid-in capital 629,816 626,633
Deferred compensation (3,265) (5,984)
Accumulated deficit (290,039) (283,805)
Treasury stock, at cost (7,436) (6,672)
Accumulated other comprehensive
income (loss) 1,423 (2,714)
------- -------
Total stockholders' equity 330,610 327,549
------- -------
Total liabilities and
stockholders' equity $377,440 $369,865
======== ========
Note: Balance sheet as presented above is not classified with
regard to GAAP maturities of cash and investments in debt Securities.
RED HAT, INC.
CASH FLOW SUMMARY
(In thousands)
Three Months Ended
----------------------------
November 30, August 31,
2002 2002
----------------------------
Net income (loss) $305 $(1,701)
Non-cash expenses 2,094 5,222
Net change in working capital items (1,388) (2,939)
------ -----
Net cash provided by operating
activities 1,011 582
Cash flows from investing activities:
Purchases of property and equipment (1,398) (1,753)
Acquisition of business, net of cash
acquired (1,222) -
Net change in debt securities (122) 2,823
----- -----
Net cash provided by (used in)
investing activities (2,742) 1,070
Net cash provided by (used in)
financing activities (204) 335
--- ---
Net increase (decrease) in cash and
investments (1,935) 1,987
Cash and investments at beginning of
period 288,544 286,557
------- -------
Cash and investments at end of period $286,609 $288,544
======= =======
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