RESEARCH TRIANGLE PARK, N.C.–Sept. 18, 2001–
Red Hat, Inc. (NASDAQ:RHAT)
, the leader in developing, deploying and managing open source
solutions, today reported revenue of $21.1 million for the second
quarter ended August 31, 2001, a decrease of 15% versus the $25.0
million reported for the second quarter of fiscal 2001 and a
decrease of 17% over the first quarter of fiscal 2002.
The company reported an adjusted net loss of $100,000, or break
even per share, for the second quarter of fiscal 2002, compared to
an adjusted net loss of $4.0 million, or $0.02 per share, for the
second quarter of fiscal 2001. On a reported basis, the net loss
was $55.3 million, or $0.33 per share, compared with a net loss of
$20.0 million, or $0.12 per share in fiscal 2001.
During the quarter, the company restructured its operations to
focus on two primary areas, UNIX to Linux migration opportunities
in enterprises and delivering complete solutions for the embedded
system market. This restructuring resulted in the company incurring
a charge of $37.2 million, which was comprised of the impairment of
$33.8 million in the carrying value of goodwill and intangibles
related to acquisitions made in prior periods and $3.4 million in
severance related expenses.
“Our continued emphasis on improving the quarter to quarter
operating performance of Red Hat is evident even as we faced a
shortfall in sales,” stated Kevin Thompson, Executive Vice
President and Chief Financial Officer.
Highlights for the second quarter include:
CUSTOMER WINS / MAJOR DEALS
–Red Hat is assisting a major financial institution with
migration of its network infrastructure from Sun Solaris to Red Hat
Linux
— Amazon is expanding the use of Red Hat Linux and Stronghold
for secure eCommerce transaction capabilities for online
customers
— Intel signed a comprehensive multi-year agreement where Red
Hat will update and enhance GNU/Linux technologies for the Intel
Xscale microprocessor family
— Red Hat signed an Embedded Technology agreement for NEC’s
MIPS embedded processor devices
— Juniper Networks has engaged Red Hat for the development and
deployment of Juniper Equipment using Red Hat GNU/Linux
technology
— Nintendo is using Red Hat technologies in the development of
Nintendo gaming technology
— Red Hat is working with Motorola to enhance the GNU/Linux
technology for Motorola’s PowerPC architecture
— Red Hat is providing advanced GNUPro technology for
Sandcraft’s 64-bit MIPS processor family
— Red Hat has provided GE Transportation with Internetworking,
Enterprise Systems Management, and Telco Design review in GE’s
moving of a server farm from Florida to Cincinnati
— Red Hat has provided Verisign with Checkpoint Firewall
Administration for Verisign’s Solaris machines
— Compagnie Generale de Geophysique, the worldwide supplier of
products and services to oil/gas industry, has upgraded Houston
processing center with hundreds of Dell servers running Red Hat
Linux
— Wincor Nixdorf has entered in a partnership with Red Hat to
use Red Hat Linux as the platform for Wincor Nixdorf’s POSition and
Calypso store solutions, as well as customer owned solutions.
Customers already engaged include:
— Carrefour, with over 9,000 store locations, will launch new
solution in Switzerland and Slovakia
— Schleswig Holstein eG, co-op, will have all 1,000 POS systems
installed with Calypso on Red Hat Linux by end of year
— DIA, the largest Spanish discount chain, migrating its own
solution to run on Red Hat Linux
OTHER ANNOUNCEMENTS
— Red Hat announced the Red Hat Database, an open source
database solution based on PostgreSQL 7.1 and optimized with RH
Linux 7.1
— Red Hat launched its Open Source Consulting Practice, which
is a suite of consulting services to help companies plan and
migrate key elements of their computing infrastructure to Linux and
other open source solutions
About Red Hat, Inc.
Red Hat is the leader in developing, deploying and managing
solutions built on the benefits of an open source platform. The
open source platform includes the Red Hat Linux operating system
for mainframes, servers, workstations and embedded devices, GNUPro
tools for developers, database, e-Commerce, secure Web server, high
availability server and run-time solutions like eCos and RedBoot.
For this platform, Red Hat provides end-to-end professional
services including Professional Consulting, Engineering services,
Enterprise Support services, and Global Learning services. Red Hat
Network is the premier Internet based service that simplifies and
integrates the deployment and management of these offers. More
information about Red Hat is available at www.redhat.com. Red Hat
is headquartered in Research Triangle Park, N.C. and has offices
worldwide.
FORWARD-LOOKING STATEMENTS
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, 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, Red Hat’s ability to effectively integrate the
operations of Planning Technologies; Red Hat’s ability to retain
Planning Technologies’ traditional customers; Planning
Technologies’ inexperience in offering professional consulting
services to Linux customers; Red Hat’s lack of experience in
managing a large, geographically dispersed, professional services
organization; 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, 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.
RED HAT, INC.CONSOLIDATED STATEMENTS OF OPERATIONS
(Excludes amortization of goodwill and intangibles, stock based
compensation, merger, acquisitions and other costs,
and restructuring charges)
(In thousands - except per share amounts)
Three Months Ended Six Months Ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
2001 2000 2001 2000
(Unaudited) (Unaudited)
Subscription and
services revenue:
Subscription $9,995 $10,690 $21,349 $20,459
Services:
Network consulting 3,682 6,461 8,878 12,142
Embedded development
services 3,538 4,436 8,236 8,678
Open source services 3,910 3,367 8,265 5,385
Total subscription
and services revenue 21,125 24,954 46,728 46,664
Cost of subscription and
services revenue:
Subscription 2,472 3,611 5,597 7,361
Services 5,526 8,803 13,531 15,896
Total cost of subscription
and services revenue 7,998 12,414 19,128 23,257
Gross profit on subscription
and services revenue 13,127 12,540 27,600 23,407
Hardware resale, net -- 8 -- 96
Operating expense:
Sales and marketing 9,329 11,656 20,013 23,818
Research and development 4,213 3,672 8,510 6,943
General and administrative 3,662 6,785 7,033 11,451
Total operating expense 17,204 22,113 35,556 42,212
Loss from operations (4,077) (9,565) (7,956) (18,709)
Other interest income
(expense), net 4,045 5,624 8,525 11,105
Loss before income taxes (32) (3,941) 569 (7,604)
Provision for income taxes 61 35 61 99
Net loss $(93) $(3,976) $508 $(7,703)
Net loss per common share:
Basic ($0.00) ($0.02) $0.00 ($0.05)
Diluted ($0.00) ($0.02) $0.00 ($0.05)
Weighted average shares
outstanding:
Basic 169,968 163,976 169,486 161,720
Diluted 169,968 163,976 169,486 161,720
RED HAT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands - except per share amounts)
Three Months Ended Six Months Ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
2001 2000 2001 2000
(Unaudited) (Unaudited)
Subscription and
services revenue:
Subscription $9,995 $10,690 $21,349 $20,459
Services:
Network consulting 3,682 6,461 8,878 12,142
Embedded development
services 3,538 4,436 8,236 8,678
Open source services 3,910 3,367 8,265 5,385
Total subscription and
services revenue 21,125 24,954 46,728 46,664
Cost of subscription and
services revenue:
Subscription 2,472 3,611 5,597 7,361
Services 5,526 8,803 13,531 15,896
Total cost of subscription
and services revenue 7,998 12,414 19,128 23,257
Gross profit on subscription
and services revenue 13,127 12,540 27,600 23,407
Hardware resale, net -- 8 -- 96
Operating expense:
Sales and marketing 9,329 11,656 20,013 23,818
Research and development 4,213 3,672 8,510 6,943
General and administrative 3,662 6,785 7,033 11,451
Amortization of
goodwill and intangibles 14,911 11,245 69,414 17,955
Stock-based compensation 3,171 3,501 6,847 7,127
Merger, acquisitions and other -- 1,284 7,156 4,643
Restructuring charges 37,175 -- -- --
Total operating expense 72,461 38,143 118,973 71,937
Loss from operations (59,334) (25,595) (91,373) (48,434)
Other interest income
(expense), net 4,045 5,624 8,525 11,105
Loss before income taxes (55,289) (19,971) (82,848) (37,329)
Provision for income taxes 61 35 61 99
Net loss $(55,350) $(20,006) $(82,909) $(37,428)
Net loss per common share:
Basic ($0.33) ($0.12) ($0.49) ($0.23)
Diluted ($0.33) ($0.12) ($0.49) ($0.23)
Weighted average
shares outstanding:
Basic 169,968 163,976 169,486 161,720
Diluted 169,968 163,976 169,486 161,720
RED HAT, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
August, 31 February 28,
2001 2001
Assets:
Cash and investments in debt and
equity securities $ 299,913 $ 302,681
Accounts receivable, net 19,207 25,204
Subcontractor receivable 557 3,441
Inventory 774 740
Prepaid expenses and other assets 8,686 11,197
Property and equipment, net 16,741 14,591
Goodwill and intangibles, net 82,369 147,397
Total assets $ 428,247 $ 505,251
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 8,316 $ 9,681
Accrued expenses 9,892 15,916
Deferred revenue 9,425 12,151
Financing obligations 11,153 3,221
Total liabilities 38,786 40,969
Commitments and contingencies -- --
Stockholders' equity:
Noncontrolling interest in subsidiary 63 --
Preferred stock -- --
Common stock 17 17
Additional paid-in capital 627,220 643,712
Deferred compensation (11,610) (36,051)
Accumulated deficit (226,498) (143,589)
Accumulated other comprehensive
income (loss) 269 193
Total stockholders' equity 389,461 464,282
Total liabilities and
stockholders' equity $ 428,247 $ 505,251