Red Hat Reports Fourth Quarter and Fiscal Year 2012 Results

29 March 2012 - Red Hat, Inc. (NYSE: RHT), the world's leading provider of open source solutions, today announced financial results for its fiscal fourth quarter and fiscal year ended February 29, 2012.

Total revenue for the quarter was US$297.0 million, an increase of 21% from the year ago quarter. Subscription revenue for the quarter was US$255.2 million, up 22% year-over-year. For the full fiscal year 2012, total revenue was US$1.13 billion, an increase of 25% over the prior year, and subscription revenue was US$965.6 million, up 25% year-over-year.

“The strength of our fourth quarter was a fitting conclusion to a remarkably strong year for our business. Our investments to expand our geographic sales footprint and add sales people with targeted industry and product knowledge has accelerated our growth,” stated Jim Whitehurst, President and Chief Executive Officer of Red Hat.

“Red Hat is the first pure-play, open source company, and one of only a select few software companies, to have achieved the billion dollar revenue milestone. The open source technologies which we provide are being selected by more customers every day as they re-architect the infrastructure of their data centers for greater efficiency, agility and cloud enablement.”

GAAP operating income for the fourth quarter and the full fiscal year 2012 was US$48.5 million and US$199.9 million, respectively. GAAP operating margin was 16.3% in the fourth quarter and 17.6% for the full year. After adjusting for stock compensation and amortization expenses, as detailed in the tables below, non-GAAP operating income for the quarter was US$77.2 million, or a 26.0% operating margin, and full year non-GAAP operating income was US$298.9 million. Full year non-GAAP operating margin was 26.4%, representing an increase of 160 basis points from the prior year.

GAAP net income for the fourth quarter was US$36.0 million, or US$0.18 per diluted share, compared with US$38.2 million, or US$0.19 per diluted share, for the prior quarter and US$33.5 million, or US$0.17 per diluted share, in the year ago quarter. Non-GAAP adjusted net income for the fourth quarter was US$57.2 million, or US$0.29 per diluted share, after adjusting for stock compensation and amortization expenses as detailed in the tables below. This compares to non-GAAP adjusted net income of US$55.7 million, or US$0.28 per diluted share in the prior quarter and US$51.4 million, or US$0.26 per diluted share in the year ago quarter. Both the GAAP and non-GAAP results for the year ago fourth quarter benefited by approximately US$0.02 per share as a result of the retroactive reenactment in December 2010 of the US research tax credit.

For the full year, GAAP net income was US$146.6 million or US$0.75 per diluted share, compared with US$107.3 million or US$0.55 per diluted share in the prior year. After adjusting for stock compensation and amortization expenses, as detailed in the tables below, non-GAAP adjusted net income for the year was US$216.4 million or US$1.10 per diluted share, compared to US$162.8 million and US$0.83 per diluted share for the previous fiscal year.

Operating cash flow totaled US$128.0 million for the fourth quarter and US$391.9 million for the full year. At the end of the fiscal year, the company’s total deferred revenue balance was US$946.7 million, an increase of 23% on a year-over-year basis and 16% sequentially. Cash and investments at February 29, 2012 totaled US$1.3 billion after repurchasing approximately US$76.3 million, or approximately 1.8 million shares, of common stock in the fourth quarter. For the full fiscal year 2012, Red Hat repurchased approximately US$133.0 million, or approximately 3.2 million shares, of common stock.

“We experienced impressive breadth and depth of demand for our technologies this quarter whether by geography or by industry vertical. This resulted in record financial metrics for both the fourth quarter and the full fiscal year 2012,” stated Charlie Peters, Executive Vice President and Chief Financial Officer of Red Hat. “Our strategy for growth, coupled with relentless day-to-day execution of the business, has been successful. We experienced a significant increase in large deals, both in Q4 and for the full year which contributed to annual organic growth of 25% in revenue, 33% in non-GAAP operating income and 35% growth in operating cash flow.”

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 provider of open source solutions and an S&P 500 company, is headquartered in Raleigh, NC with more than 70 offices spanning the globe. Red Hat provides high-quality, affordable technology with its operating system platform, Red Hat Enterprise Linux, together with cloud, virtualization, management, storage and service-oriented architecture (SOA) solutions, including Red Hat Enterprise Virtualization and 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 effects of industry consolidation; the ability of the Company to compete effectively; uncertainty and adverse results in litigation and related settlements; the integration of acquisitions and the ability to market successfully acquired technologies and products; 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 the press release. ### 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. “We are pleased to welcome Red Hat’s Marco Bill-Peter to our esteemed group of Support Services Advisory Board members,” said J.B. Wood, president and CEO of TSIA. “The board works to strengthen the support services discipline within the technology services industry, and we anticipate Marco’s contribution to be significant as we work toward achieving our objectives. These are both exciting and challenging times in the technology services industry, and we look forward to the thought leadership that Marco will bring to the Board.” For more information about Red Hat's Global Support Services, visit http://www.redhat.com/support/. For additional information on TSIA’s Support Services Industry Board, visit http://www.tsia.com/about_us/advisory_boards/support_services_advisory_board.html.

For more information about Red Hat, visit www.redhat.com. For more news, more often, visit www.press.redhat.com. ### About Red Hat, Inc. Red Hat, the world's leading provider of open source solutions and an S&P 500 company, is headquartered in Raleigh, North Carolina, USA, with more than 70 offices spanning the globe. Red Hat provides high-quality, affordable technology with its operating system platform, Red Hat Enterprise Linux, together with cloud, virtualization, management, storage and service-oriented architecture (SOA) solutions, including Red Hat Enterprise Virtualization and JBoss Enterprise Middleware. Red Hat also offers support, training and consulting services to its customers worldwide. Learn more: 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; uncertainty and adverse results in litigation and related settlements; the integration of acquisitions and the ability to market successfully acquired technologies and products; 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 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, including events in Japan. 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. Red Hat and JBoss are trademarks of Red Hat, Inc., registered in the U.S. and other countries. Linux® is the registered trademark of Linus Torvalds in the U.S. and other countries.