RHT Red Hat

• Second quarter total revenue of $600 million, up 19% year-over-year
• Second quarter total subscription revenue of $531 million, up 20% year-over-year
• Second quarter GAAP EPS of $0.32 and non-GAAP EPS of $0.55, up 14% and 17% year-over-year, respectively
• Total deferred revenue balance of $1.68 billion, up 19% year-over-year

Red Hat, Inc. (NYSE: RHT), the world's leading provider of open source solutions, today announced financial results for the second quarter of fiscal year 2017 ended August 31, 2016.

“Red Hat's second quarter revenue results were highlighted by 18% in year-over-year growth for our Infrastructure offerings combined with 33% in year-over-year growth for our Application development and other emerging technologies," said Jim Whitehurst, President and Chief Executive Officer of Red Hat. "Digital transformation and hybrid cloud computing are changing how applications are built, deployed, and managed. As organizations adopt agile application development technologies such as Linux containers, they are able to rely on Red Hat as their strategic partner to modernize their infrastructure and application development platforms.”

“In the second quarter, we continued to benefit from solid demand and strong overall execution,” stated Frank Calderoni, Executive Vice President, Operations and Chief Financial Officer of Red Hat. “We continued to close a record number of deals over $1 million in our second quarter, which are up more than 60% year over year. This further demonstrates our customers’ commitment to Red Hat and the broad demand for our expanding technology portfolio as enterprises embrace digital transformation and the hybrid cloud."

Revenue: Total revenue for the quarter was $600 million, up 19% in U.S. dollars year-over-year, or 18% measured in constant currency. Constant currency references in this release are detailed in the tables below. Subscription revenue for the quarter was $531 million, up 20% in U.S. dollars year-over-year, or 19% measured in constant currency. Subscription revenue in the quarter was 89% of total revenue.

Subscription Revenue Breakout: Subscription revenue from Infrastructure-related offerings for the quarter was $427 million, an increase of 18% in U.S. dollars year-over-year and 17% measured in constant currency. Subscription revenue from Application development-related and other emerging technologies offerings for the quarter was $104 million, an increase of 33% in U.S. dollars year-over-year and 32% measured in constant currency.

Operating Income: GAAP operating income for the quarter was $82 million, up 7% year-over-year. After adjusting for non-cash share-based compensation expense, amortization of intangible assets, and transaction costs related to business combinations, non-GAAP operating income for the second quarter was $137 million, up 11% year-over-year. Non-GAAP references in this release are detailed in the tables below. For the second quarter, GAAP operating margin was 13.7% and non-GAAP operating margin was 22.8%.

Net Income: GAAP net income for the quarter was $59 million, or $0.32 per diluted share, compared with $51 million, or $0.28 per diluted share, in the year-ago quarter. After adjusting for non-cash share-based compensation expense, amortization of intangible assets, transaction costs related to business combinations, and non-cash interest expense related to the debt discount, non-GAAP net income for the quarter was $101 million, or $0.55 per diluted share, as compared to $88 million, or $0.47 per diluted share, in the year-ago quarter. Non-GAAP diluted weighted average shares outstanding excludes any dilution resulting from the convertible notes because any potential dilution is expected to be offset by our convertible note hedge transactions.

Cash: Operating cash flow was $97 million for the second quarter, a decrease of 21% on a year-over-year basis. Total cash, cash equivalents and investments as of August 31, 2016 was $2.0 billion after repurchasing approximately $127 million, or approximately 1.8 million shares, of common stock in the second quarter. The remaining balance in the current repurchase authorization as of August 31, 2016 was approximately $901 million.

Deferred revenue: At the end of the second quarter, the company’s total deferred revenue balance was $1.68 billion, an increase of 19% year-over-year. The full year positive impact to total deferred revenue from changes in foreign exchange rates was $22 million year-over-year. On a constant currency basis, total deferred revenue would have been up 17% year-over-year.

Outlook: Red Hat’s outlook assumes current business conditions and current foreign currency exchange rates.

For the full year:

• Revenue guidance is expected to be $2.415 billion to $2.435 billion in U.S. dollars.
• GAAP operating margin is expected to be approximately 13.8% and non-GAAP operating margin is expected to be approximately 23.0%.
• Fully-diluted GAAP earnings per share (EPS) is expected to be approximately $1.35 to $1.37 per share. Fully-diluted non-GAAP EPS is expected to be approximately $2.23 to $2.25 per share. Both GAAP and non-GAAP EPS assume a $1 million to $2 million per quarter forecast for other income. Both GAAP and non-GAAP EPS also assume an estimated annual effective tax rate of 27% before discrete tax items and 184 million fully-diluted shares outstanding.

• Operating cash flow guidance range is expected to be approximately $800 million to $820 million.

For the third quarter:

• Revenue guidance is $613 million to $623 million.
• GAAP operating margin is expected to be approximately 13.4% and non-GAAP operating margin is expected to be approximately 23.3%.
• Fully-diluted GAAP EPS is expected to be approximately $0.34 per share. Fully-diluted non-GAAP EPS is expected to be approximately $0.58 per share. Both GAAP and non-GAAP EPS assume a $1 million to $2 million forecast for other income. Both GAAP and non-GAAP EPS also assume an estimated annual effective tax rate of 27% before discrete tax items and 184 million fully-diluted shares outstanding.

GAAP to non-GAAP reconciliation:

Full year non-GAAP operating margin guidance is derived by subtracting the estimated full year impact of non-cash share-based compensation expense of approximately $190 million, amortization of intangible assets of approximately $32 million, and transaction costs related to business combinations of $2 million. Estimated full year impacts of share-based compensation expense, amortization of intangible assets, and transaction costs related to business combinations have increased from the prior quarter primarily due to business combinations. Full year fully-diluted non-GAAP EPS guidance is derived by subtracting the expenses listed in the previous sentence and the full year impact of non-cash interest expense related to the debt discount of approximately $19 million and an estimated annual effective tax rate of 27% before discrete tax items. Additionally, full year fully-diluted non-GAAP EPS excludes approximately $15 million of discrete tax benefits related to share-based compensation that are included in full year fully-diluted GAAP EPS.

Third quarter non-GAAP operating margin guidance is derived by subtracting the estimated impact of non-cash share-based compensation expense of approximately $53 million and amortization of intangible assets of approximately $8 million. Third quarter fully-diluted non-GAAP EPS guidance is derived by subtracting the expenses listed in the previous sentence and non-cash interest expense related to the debt discount of approximately $5 million and an estimated annual effective tax rate of 27% before discrete tax items. Additionally, third quarter fully-diluted non-GAAP EPS excludes approximately $5 million of discrete tax benefits related to share-based compensation that are included in third quarter fully-diluted GAAP EPS.

Webcast and Website Information

A live webcast of Red Hat's results will begin at 5:00 pm ET today. The webcast, in addition to a copy of our prepared remarks and slides containing financial highlights and supplemental metrics, 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. Additional information on Red Hat's reported results, including a reconciliation of the non-GAAP adjusted results, are included in the financial tables below.

About Red Hat, Inc.

Red Hat is the world's leading provider of open source software solutions, using a community-powered approach to provide reliable and high-performing cloud, Linux, middleware, storage and virtualization technologies. Red Hat also offers award-winning support, training, and consulting services. As a connective hub in a global network of enterprises, partners, and open source communities, Red Hat helps create relevant, innovative technologies that liberate resources for growth and prepare customers for the future of IT. Learn more at 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 the ability of the Company to compete effectively; the ability to deliver and stimulate demand for new products and technological innovations on a timely basis; delays or reductions in information technology spending; the integration of acquisitions and the ability to market successfully acquired technologies and products; fluctuations in exchange rates; the effects of industry consolidation; uncertainty and adverse results in litigation and related settlements; 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; risks related to data and information security vulnerabilities; the ability to meet financial and operations changes encountered in our international operations; ineffective management of, and control over, the Company's growth and international operations; 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 this press release.

Red Hat and the Shadowman logo are trademarks or registered trademarks of Red Hat, Inc. or its subsidiaries in the U.S. and other countries. Linux® is the registered trademark of Linus Torvalds in the U.S. and other countries.

  RED HAT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) (In thousands - except per share amounts)                           Three Months Ended Six Months Ended August 31, August 31, August 31, August 31,   2016   2015     2016     2015   Revenue:   Subscriptions $ 531,209 $ 441,526 $ 1,032,874 $ 866,319 Training and services   68,596   62,622     134,829     118,830       Total subscription, training and services revenue   599,805   504,148     1,167,703     985,149     Cost of revenue:   Subscriptions 39,678 30,996 76,222 60,843 Training and services   47,993   44,968     95,496     86,519       Total cost of subscription, training and services revenue   87,671   75,964     171,718     147,362       Total gross profit 512,134 428,184 995,985 837,787   Operating expense: Sales and marketing 253,255 205,101 496,503 403,973 Research and development 121,265 102,488 236,281 199,919 General and administrative   55,730   44,125     105,954     86,496       Total operating expense   430,250   351,714     838,738     690,388     Income from operations 81,884 76,470 157,247 147,399 Interest income 3,392 2,895 6,821 5,611 Interest expense 5,925 5,733 11,811 11,448 Other income (expense), net   84   (1,245 )   (468 )   (1,448 )     Income before provision for income taxes 79,435 72,387 151,789 140,114 Provision for income taxes (1)   20,663   20,992     31,832     40,633     Net income $ 58,772 $ 51,395   $ 119,957   $ 99,481     Net income per share: Basic $ 0.33 $ 0.28 $ 0.66 $ 0.54 Diluted $ 0.32 $ 0.28 $ 0.65 $ 0.53   Weighted average shares outstanding: Basic 180,322 183,179 180,745 183,155 Diluted 183,346 186,750 183,750 186,493    

(1) Provision for income taxes for the three and six months ended August 31, 2016 includes the impact of early adoption of ASU 2016-09. ASU 2016-09 requires that the amendment related to accounting for income taxes be adopted on a prospective basis. Accordingly, the provision for income taxes for the three and six months ended August 31, 2015 has not been adjusted. The provision for income taxes for the three and six months ended August 31, 2016 includes the effect of discrete tax benefits of $1.0 million and $8.9 million, respectively, related to excess tax benefits from share-based compensation.

  RED HAT, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands)         ASSETS August 31, February 29,   2016   2016 (1)   Current assets: Cash and cash equivalents $ 970,569 $ 927,778 Investments in debt and equity securities 365,128 281,142 Accounts receivable, net 359,893 509,715 Prepaid expenses 149,226 150,877 Other current assets   3,404     2,921     Total current assets 1,848,220 1,872,433   Property and equipment, net 172,312 166,886 Goodwill 1,053,872 1,027,277 Identifiable intangibles, net 142,794 146,071 Investments in debt securities 706,948 786,470 Deferred tax assets, net 122,131 111,456 Other assets, net   54,479     44,506     Total assets $ 4,100,756   $ 4,155,099     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 273,568 $ 284,802 Deferred revenue 1,233,762 1,272,908 Other current obligations   1,950     1,467     Total current liabilities 1,509,280 1,559,177   Convertible notes 734,700 723,942 Long term deferred revenue 446,890 449,636 Other long term obligations 91,490 87,912 Stockholders' equity: Common stock 24 23 Additional paid-in capital 2,215,856 2,162,264 Retained earnings 1,219,246 1,099,738 Treasury stock, at cost (2,047,008 ) (1,853,144 ) Accumulated other comprehensive loss   (69,722 )   (74,449 )   Total stockholders' equity   1,318,396     1,334,432     Total liabilities and stockholders' equity $ 4,100,756   $ 4,155,099       (1) Derived from audited financial statements   RED HAT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)                                 Three Months Ended Six Months Ended August 31, August 31, August 31, August 31,   2016     2015     2016     2015     Cash flows from operating activities: Net income $ 58,772 $ 51,395 $ 119,957 $ 99,481 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 21,160 18,538 41,862 37,085 Share-based compensation expense 45,357 40,537 86,632 77,059 Deferred income taxes (5,467 ) (3,843 ) (7,619 ) (1,929 ) Excess tax benefits from share-based payment arrangements 1,185 2,812 9,135 9,231 Net amortization of bond premium on available-for-sale debt securities 3,294 3,139 6,834 5,736 Accretion of debt discount and amortization of debt issuance costs 5,393 5,222 10,758 10,417 Other 328 1,078 (437 ) 1,908 Changes in operating assets and liabilities net of effects of acquisitions: Accounts receivable (30,684 ) (17,908 ) 159,645 161,479 Prepaid expenses 8,883 13,077 (490 ) 12,651 Accounts payable and accrued expenses 18,578 34,415 (19,558 ) (17,932 ) Deferred revenue (26,953 ) (25,017 ) (73,046 ) (56,579 ) Other   (3,044 )   (356 )   (4,574 )   (340 )   Net cash provided by operating activities   96,802     123,089     329,099     338,267     Cash flows from investing activities: Purchase of available-for-sale debt securities (163,043 ) (196,613 ) (297,644 ) (602,824 ) Proceeds from sales and maturities of available-for-sale debt securities 177,528 170,617 294,710 353,200 Acquisition of businesses, net of cash acquired (28,667 ) (1,700 ) (28,667 ) (1,700 ) Purchase of other intangible assets (3,521 ) (2,068 ) (6,389 ) (5,997 ) Purchase of property and equipment (15,539 ) (10,277 ) (33,192 ) (20,973 ) Other   -     (1,159 )   (111 )   (3,158 )   Net cash used in investing activities   (33,242 )   (41,200 )   (71,293 )   (281,452 )   Cash flows from financing activities: Proceeds from exercise of common stock options 689 480 2,068 2,589 Purchase of treasury stock (127,386 ) (70,079 ) (193,864 ) (70,079 ) Payments related to net settlement of employee share-based compensation awards (6,398 ) (7,726 ) (37,477 ) (32,937 ) Payments on other borrowings (463 ) (385 ) (906 ) (737 ) Other   415     -     914     -     Net cash used in financing activities   (133,143 )   (77,710 )   (229,265 )   (101,164 )   Effect of foreign currency exchange rates on cash and cash equivalents   8,587     (3,494 )   14,250     (11,517 ) Net increase (decrease) in cash and cash equivalents (60,996 ) 685 42,791 (55,866 ) Cash and cash equivalents at beginning of the period   1,031,565     990,922     927,778     1,047,473     Cash and cash equivalents at end of period $ 970,569   $ 991,607   $ 970,569   $ 991,607     RED HAT, INC. RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED RESULTS (Unaudited) (In thousands - except per share amounts)                                 Non cash share-based compensation expense included in Consolidated Statements of Operations:   Three Months Ended Six Months Ended August 31, August 31, August 31, August 31,   2016     2015     2016     2015     Cost of revenue $ 4,054 $ 4,151 $ 8,359 $ 7,877 Sales and marketing 20,361 16,782 38,802 32,194 Research and development 12,969 12,022 24,971 22,897 General and administration   7,973     7,582     14,500     14,091   Total share-based compensation expense $ 45,357   $ 40,537   $ 86,632   $ 77,059       Amortization of intangible assets expense included in Consolidated Statements of Operations:   Three Months Ended Six Months Ended August 31, August 31, August 31, August 31,   2016     2015     2016     2015     Cost of revenue $ 3,846 $ 2,618 $ 7,468 $ 5,192 Sales and marketing 1,905 2,010 3,821 4,014 Research and development 34 292 69 542 General and administration   1,848     1,160     3,601     2,212   Total amortization of intangible assets expense $ 7,633   $ 6,080   $ 14,959   $ 11,960       Non-cash interest expense related to the debt discount included in Consolidated Statements of Operations:   Three Months Ended Six Months Ended August 31, August 31, August 31, August 31,   2016     2015     2016     2015     Total non-cash interest expense related to the debt discount $ 4,753   $ 4,620   $ 9,484   $ 9,219     Transaction costs related to business combinations included in Consolidated Statements of Operations:   Three Months Ended Six Months Ended August 31, August 31, August 31, August 31,   2016     2015     2016     2015     Transaction costs related to business combinations $ 1,789   $ 51   $ 1,789   $ 51       Three Months Ended Six Months Ended August 31, August 31, August 31, August 31,   2016     2015     2016     2015     GAAP net income $ 58,772 $ 51,395 $ 119,957 $ 99,481   GAAP provision for income taxes   20,663     20,992     31,832     40,633     GAAP income before provision for income taxes $ 79,435 $ 72,387 $ 151,789 $ 140,114   Add: Non-cash share-based compensation expense 45,357 40,537 86,632 77,059 Add: Amortization of intangible assets 7,633 6,080 14,959 11,960 Add: Non-cash interest expense related to the debt discount 4,753 4,620 9,484 9,219 Add: Transaction costs related to business combinations   1,789     51     1,789     51     Non-GAAP adjusted income before provision for income taxes $ 138,967   $ 123,675   $ 264,653   $ 238,403     Non-GAAP provision for income taxes (1)   37,739     35,866     71,245     69,137     Non-GAAP adjusted net income (basic and diluted) $ 101,228   $ 87,809   $ 193,408   $ 169,266     Non-GAAP adjusted diluted weighted average shares outstanding: GAAP diluted weighted average shares outstanding 183,346 186,750 183,750 186,493 Dilution offset from convertible note hedge transactions   (195 )   (585 )   (82 )   (329 ) Non-GAAP diluted weighted average shares outstanding 183,151 186,165 183,668 186,164   Non-GAAP adjusted net income per share: Basic $ 0.56 $ 0.48 $ 1.07 $ 0.92 Diluted $ 0.55 $ 0.47 $ 1.05 $ 0.91     (1) Non-GAAP provision for income taxes: Non-GAAP adjusted income before provision for income taxes $ 138,967 $ 123,675 $ 264,653 $ 238,403 GAAP estimated annual effective tax rate   27.0 %   29.0 %   27.0 %   29.0 % Provision for income taxes on Non-GAAP adjusted net income before discrete tax benefits $ 37,521 $ 35,866 $ 71,456 $ 69,137 Discrete tax expense (benefit), excluding discrete benefits related to share-based compensation   218     -     (211 )   -   Provision for income taxes on Non-GAAP adjusted net income excluding discrete benefits related to share-based compensation $ 37,739   $ 35,866   $ 71,245   $ 69,137     RED HAT, INC. RECONCILIATION OF CERTAIN GAAP RESULTS TO NON-GAAP ADJUSTED RESULTS (Unaudited) (In thousands)                                         Reconciliation of GAAP results to non-GAAP adjusted results   Three Months Ended Six Months Ended August 31, August 31, August 31, August 31,   2016     2015     2016     2015     GAAP gross profit $ 512,134 $ 428,184 $ 995,985 $ 837,787   Add: Non-cash share-based compensation expense 4,054 4,151 8,359 7,877 Add: Amortization of intangible assets   3,846     2,618     7,468     5,192     Non-GAAP gross profit $ 520,034   $ 434,953   $ 1,011,812   $ 850,856     Non-GAAP gross margin 86.7 % 86.3 % 86.6 % 86.4 %     Three Months Ended Six Months Ended August 31, August 31, August 31, August 31,   2016     2015     2016     2015     GAAP operating expenses $ 430,250 $ 351,714 $ 838,738 $ 690,388   Deduct: Non-cash share-based compensation expense (41,303 ) (36,386 ) (78,273 ) (69,182 ) Deduct: Amortization of intangible assets (3,787 ) (3,462 ) (7,491 ) (6,768 ) Deduct: Transaction costs related to business combinations   (1,789 )   (51 )   (1,789 )   (51 )   Non-GAAP adjusted operating expenses $ 383,371   $ 311,815   $ 751,185   $ 614,387       Three Months Ended Six Months Ended August 31, August 31, August 31, August 31,   2016     2015     2016     2015     GAAP operating income $ 81,884 $ 76,470 $ 157,247 $ 147,399   Add: Non-cash share-based compensation expense 45,357 40,537 86,632 77,059 Add: Amortization of intangible assets 7,633 6,080 14,959 11,960 Add: Transaction costs related to business combinations   1,789     51     1,789     51     Non-GAAP adjusted operating income $ 136,663   $ 123,138   $ 260,627   $ 236,469     Non-GAAP adjusted operating margin 22.8 % 24.4 % 22.3 % 24.0 %     Three Months Ended   August 31, August 31, Year-Over-Year   2016     2015   Growth Rate   GAAP subscription revenue by offering type Infrastructure-related offerings $ 427,035 $ 362,926 17.7 % Adjustment for currency impact   (3,824 )   -   Non-GAAP Infrastructure-related subscription revenue on a constant currency basis $ 423,211 $ 362,926 16.6 %   Application development-related and other emerging technology offerings $ 104,174 $ 78,600 32.5 % Adjustment for currency impact   (629 )   -  

Non-GAAP Application development-related and other emerging technology subscription revenue on a constantcurrency basis

$ 103,545 $ 78,600 31.7 %   GAAP subscription revenue 531,209 441,526 20.3 % Adjustment for currency impact   (4,453 )   -   Non-GAAP subscription revenue on a constant currency basis $ 526,756 $ 441,526 19.3 %   GAAP training and services revenue $ 68,596 $ 62,622 9.5 % Adjustment for currency impact   974     -   Non-GAAP training and services revenue on a constant currency basis $ 69,570 $ 62,622 11.1 %   GAAP total subscription, training and services revenue $ 599,805 $ 504,148 19.0 % Adjustment for currency impact   (3,479 )   -   Non-GAAP total subscription, training and services revenue on a constant currency basis $ 596,326   $ 504,148   18.3 %     Six Months Ended   August 31, August 31, Year-Over-Year   2016     2015   Growth Rate   GAAP subscription revenue by offering type Infrastructure-related offerings $ 830,216 $ 716,667 15.8 % Adjustment for currency impact   (5,572 )   -   Non-GAAP Infrastructure-related subscription revenue on a constant currency basis $ 824,644 $ 716,667 15.1 %   Application development-related and other emerging technology offerings $ 202,658 $ 149,652 35.4 % Adjustment for currency impact   (894 )   -  

Non-GAAP Application development-related and other emerging technology subscription revenue on a constantcurrency basis

$ 201,764 $ 149,652 34.8 %   GAAP subscription revenue 1,032,874 866,319 19.2 % Adjustment for currency impact   (6,466 )   -   Non-GAAP subscription revenue on a constant currency basis $ 1,026,408 $ 866,319 18.5 %   GAAP training and services revenue $ 134,829 $ 118,830 13.5 % Adjustment for currency impact   1,577     -   Non-GAAP training and services revenue on a constant currency basis $ 136,406 $ 118,830 14.8 %   GAAP total subscription, training and services revenue $ 1,167,703 $ 985,149 18.5 % Adjustment for currency impact   (4,889 )   -   Non-GAAP total subscription, training and services revenue on a constant currency basis $ 1,162,814   $ 985,149   18.0 %   RED HAT, INC. SUPPLEMENTAL INFORMATION (Unaudited) (In thousands)                                   Change in deferred revenue balances

CurrentDeferredRevenue

Long TermDeferredRevenue

Total DeferredRevenue

  Balance at August 31, 2015 $ 1,047,732 $ 365,708 $ 1,413,440 Constant currency change in deferred revenue (1) 169,269 75,469 244,738 Impact from foreign currency translation   16,761     5,713     22,474   Balance at August 31, 2016 $ 1,233,762 $ 446,890 $ 1,680,652   Year-over-year growth rate 17.8 % 22.2 % 18.9 % Year-over-year growth rate on a constant currency basis 16.2 % 20.6 % 17.3 %   (1) Change in deferred revenue includes approximately $0.7 million acquired as part of business combinations.     Revenue growth by geographical segment Americas EMEA APAC Consolidated   Total revenue for the three months ended August 31, 2016 $ 385,529 $ 127,467 $ 86,809 $ 599,805 Adjustment for currency impact   2,997     (578 )   (5,898 )   (3,479 ) Total revenue on a constant currency basis for the three months ended August 31, 2016 $ 388,526 $ 126,889 $ 80,911 $ 596,326   Total revenue for the three months ended August 31, 2015 $ 332,204 $ 108,454 $ 63,490 $ 504,148   Year-over-year growth rate 16.1 % 17.5 % 36.7 % 19.0 % Year-over-year growth rate on a constant currency basis 17.0 % 17.0 % 27.4 % 18.3 %     Total revenue for the six months ended August 31, 2016 $ 751,252 $ 251,766 $ 164,685 $ 1,167,703 Adjustment for currency impact   6,248     (4,256 )   (6,881 )   (4,889 ) Total revenue on a constant currency basis for the six months ended August 31, 2016 $ 757,500 $ 247,510 $ 157,804 $ 1,162,814   Total revenue for the six months ended August 31, 2015 $ 654,037 $ 205,927 $ 125,185 $ 985,149   Year-over-year growth rate 14.9 % 22.3 % 31.6 % 18.5 % Year-over-year growth rate on a constant currency basis 15.8 % 20.2 % 26.1 % 18.0 %

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Media Contact:Stephanie WonderlickRed Hat, Inc.571-421-8169swonderl@redhat.comorInvestor Relations:Tom McCallumRed Hat, Inc.919-754-4630tmccallum@redhat.com