Red Hat Reports Fiscal First Quarter Results

Red Hat Reports Fiscal First Quarter Results
Revenue Up 46% From Prior Year,  Record Cash Flow From Operations.

Raleigh, NC (Business Wire) —June 30, 2005—Red Hat,
Inc. (NASDAQ:RHAT), the world's leading provider of open source solutions
to the enterprise, today announced financial results for its fiscal first
quarter ended May 31, 2005.

Total revenue for the quarter was $60.8 million, a year-over-year increase
of 46% and a sequential increase of 6%. Enterprise subscription revenue was
$48.7 million, an increase of 63% year-over-year and 7% sequentially.

For the first quarter of fiscal 2006, the company reported net income of
$12.4 million or $0.07 per diluted share, up from $11.8 million or $0.06
per diluted share in the prior quarter.

The company reported $36.6 million in cash flow from operations during the
first quarter, a 20% increase from the prior quarter and the highest level
in the company's history.

After repurchasing $5.1 million of common stock and $10.0 million face
value of debt during the quarter, cash and investments totaled $951.5
million at the end of May 2005. These transactions were completed in
conjunction with the expanded repurchase program approved by the
company’s board of directors in March of this year. 

At quarter end, the company’s total deferred revenue balance was
$157.9 million, an increase of $20.6 million from the prior quarter and
$70.1 million from the year ago period.

“Our results for the first quarter represent a solid start to the
fiscal year,” stated Charlie Peters, Executive Vice President and
Chief Financial Officer of Red Hat. “We continue to experience
strong customer demand. This quarter's record-level billings speak to the
continued momentum we are experiencing globally for our open source
solutions.”

“From an operational standpoint,” Peters said, “the
process improvements we implemented last quarter began to pay off earlier
than we expected in terms of shorter cash collection cycles and improved
cash flow from operations.  Thus, despite some negative impact from recent
movements in foreign currency, we remain confident in the long-term cash
flow capabilities of the company. Our first quarter performance was a step
forward in our stated goal of significantly growing our cash flow run rate
over the course of the fiscal year.”

Other highlights from the quarter included:

DSO improved by 7 days, from 64 days in the prior quarter to 57 days in the
first quarter. Channel partner bookings increased to 60% of orders versus
56% last quarter and is approaching the company's previously stated
long-term goal of 70%.  The company released Red Hat Directory Server,
providing the identity management market its first enterprise class open
source solution.

Dion Cornett, Red Hat's Vice President of Investor Relations, stated,
“We are very pleased with the momentum we continue to see in our
business and the open source market place. We remain committed to our
customers, partners, employees and the open source community as a whole.
And as this quarter's string of new records indicates, our partners and
customers remain committed to Red Hat.”

About Red Hat, Inc.

Red Hat, the world's leading open source and Linux provider, is
headquartered in Raleigh, NC with satellite offices spanning the globe. Red
Hat is leading Linux and open source solutions into the mainstream by
making high quality, low cost technology accessible. Red Hat provides
operating system software along with middleware, applications and
management solutions. Red Hat also offers support, training and consulting
services to its customers worldwide and through top-tier partnerships. Red
Hat's open source strategy offers customers a long term plan for building
infrastructures that are based on and leverage open source technologies
with focus on security and ease of management. Learn more: 
http://www.redhat.com

Forward-Looking Statements  
Any statements in this press release about future expectations, plans and
prospects for the company, including statements containing the words
“believes,” “anticipates,”
“plans,” “expects,” “will,”
and similar expressions, constitute forward-looking statements within the
meaning of The Private Securities Litigation Reform Act of 1995. Actual
results may differ materially from those indicated by such forward-looking
statements as a result of various important factors, including: the factors
discussed in our most recent Annual Report on Form 10-K filed with the SEC
(a copy of which may be accessed through the SEC’s website at http://www.sec.gov), 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 and the viability of the Internet. In
addition, 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.

Tables to follow – 

Contact Info
Red Hat, Inc.
Leigh Day, 919-754-4369
lday@redhat.com
Linda Brewton, 919-754-4476
lbrewton@redhat.com