Event Brief of Q3 2006 Red Hat, Inc. Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

PARTICIPANTS

. Dion Cornett, Red Hat, VP-IR . Matthew Szulik, Red Hat, Chairman, President and CEO . Charlie Peters, Red Hat, EVP and CFO . Jason Maynard, Credit Suisse, Analyst . Brent Field, Prudential, Analyst

. Brendan Barnicle, Pacific Crest Securities, Analyst . Terry Tillman, Suntrust Robinson Humphrey, Analyst . Tim Klassel, Thomas Weisel Partners, Analyst . Chris Clark, SIG, Analyst . Mark Murphy, First Albany, Analyst . Rick Sherlin, Goldman Sachs, Analyst . Brent Williams, Keybanc Capital Market, Analyst . Todd May, Deutsche Bank, Analyst . Heather Bellini, UBS, Analyst . Trip Chowdry, FTN Midwest Securities, Analyst . Steve Ashley, Robert Baird, Analyst . Chris Russe, Wachovia Securities, Analyst

OVERVIEW

RHAT reported 3Q06 total revenue of $73.1m, operating income of $18.7m, net income of $23.2m, and fully diluted EPS of $0.12. The Co. expects 4Q06 revenue to be $77.5-78.5m and EPS to be $0.11-0.12. Given the strong performance YTD, the Co. is raising its previous cash flow guidance from operations for FY06 from greater than $160m to greater than $175m or about $0.82 per fully diluted share.

FINANCIAL DATA

A. Key Data From Call 1. 3Q06 total revenue = $73.1m. 2. 3Q06 operating income = $18.7m. 3. 3Q06 net income = $23.2m. 4. 3Q06 fully diluted EPS = $0.12. 5. Cash and investments at 3Q06 end = $1b. 6. 4Q06 expected revenue = $77.5-78.5m. 7. 4Q06 expected EPS = $0.11-0.12.

PRESENTATION SUMMARY

S1. 3Q06 Operational Review (M.S.) 1. Highlights: 1. RHAT is pleased to present 3Q06 results which continued to be strong across key metrics including revenue growth, margin expansion, net income, and cash flow. 2. The drivers of the performance remain sales growth and continued operational improvements across RHAT's worldwide business. 3. Focusing on sales growth, the Co.'s opportunity has four primary components: 1. Deeper penetration of the existing installed base customers. 2. Substantial broadening of that customer base. 3. Geographic expansion. 4. The addition of value-added solutions beyond the core operating system.

4. Strengthening the relationship with the installed base

customers: 1. At the end of 3Q06, RHAT continued to service 70% plus of the Fortune 500 companies. 2. Within this installed base, RHAT sees customers expanding their commitment to Open Source solutions as evidenced by the fact that 24 of its top 25 deals in the prior year were renewed and the majority of its top 25 transactions were …