Press release

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Red Hat Reports Fiscal Fourth Quarter and Fiscal Year 2006 Results

Red Hat Reports Fiscal Fourth Quarter and Fiscal Year 2006 Results

(pressebox) Stuttgart, 29.03.2006 - Red Hat, Inc. (NASDAQ:RHAT - News), the world's leading provider of open source solutions to the enterprise, today announced financial results for its fiscal fourth quarter and fiscal year ended February 28, 2006. Total revenue for the quarter was $78.7 million, an increase of 37% from the year ago quarter and 8% from the prior quarter. Subscription revenue was $66.7 million, up 44% year-over-year and 11% sequentially. For the full year, total revenue was $278.3 million, an increase of 42% over fiscal 2005 revenue, and subscription revenue was $230.4 million, up 53% from the prior year.

The company reported operating income of $19.8 million for the quarter and $58.1 million for the year, representing increases of 165% over the fourth quarter of fiscal 2005 and 116% over the full fiscal year 2005. Net income for the quarter was $27.3 million, up 131% year-over-year and 18% sequentially. For the full year, net income rose 75% to $79.7 million over the prior fiscal year. Earnings per diluted share more than doubled to $.13 for the fourth quarter, versus $.06 in the year ago quarter.

At year end, the company's total deferred revenue balance was $223.5 million, an increase of 63% on a year-over-year basis and 12% sequentially.
Other highlights from the quarter included:

- Red Hat was rated the number one technology vendor for value and reliability in a Ziff Davis survey of over 1,000 CIO's and IT executives, for the second year in a row.

- Quarterly gross margin improved to 84% from 81% in the year ago period.

- Quarterly operating margin improved to 25% versus 13% in the year ago period.

- Total cash, cash equivalents, and investments as of February 28, 2006 were $1.1 billion.

"This past year's results affirmed our ability to scale for growth," stated Charlie Peters, Executive Vice President and Chief Financial Officer of Red Hat. "Margins continued to expand even as we built out our infrastructure through investments in headcount and systems. Moreover, our cash flow from operations improved significantly in FY 2006."

"We are pleased to report continued market momentum," stated Dion Cornett, Vice President Investor Relations. "Fiscal year 2006 was a great year in that we outgrew leading industry analysts' estimates for Linux market growth and substantially out paced rivals, thus implying continued market share gains. The positive interaction between our community, ecosystem, and customers continues to extend our leadership position as the world's largest provider of open source solutions."
View the earnings tables.

Contact person:

Herr Marcus Birke
Phone: 089-800 908-26
Fax: 089-800 908-10
field of activity: Pressekontakt
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