Red Hat Revenues Increase by 35% to $33.1 Million

12/22/2003 - Red Hat, Inc. (Nasdaq:RHAT), the world's premier open source and Linux provider, reported financial results for its third quarter of fiscal year 2004.

In the third quarter of fiscal 2004, Red Hat reported revenue of $33.1 million, a sequential increase of 15% compared to $28.8 million in the second quarter of fiscal 2004, and a year-over-year increase of 36%.

The company also reported net income of $4.1 million, or $0.02 per share. This compares to a net income of $3.3 million, or $0.02 per share, in the prior quarter, and a net income of $214,000, or break-even per share, in the same quarter a year ago.

The company generated $12.0 million, or $0.07 per share, in positive cash flow from operations during the second quarter, bringing positive cash flows from operations to $27.9 million for the nine months ended November 30, 2003. The company ended the third quarter with a cash and investments balance of $329 million, a sequential increase of $22 million and a year-over-year increase of $42 million.

The company reported a net operating profit of $1.5 million, compared to a net operating profit of $240,000 in the prior quarter and a net operating loss of $2.9 million in the third quarter of the prior year. Excluding stock-based compensation and amortization of intangibles, operating margin was 6.2% in the quarter, up from 2.9% in the previous quarter.

Highlights for the third quarter include:

"Our revenue growth accelerated in the third quarter, which translated to increased operating income and cash flows from operations ," said Kevin Thompson, Red Hat Executive Vice President and Chief Financial Officer. "The subscription revenue model has developed sufficient maturity to enable us to drive consistent sequential increases in quarterly revenue."

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

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, 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

LINUX is a trademark of Linus Torvalds. RED HAT is a registered trademark of Red Hat, Inc.

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