Exhibit 99.1
![]() | NEWS For Immediate Release |
Editorial Contact: Erin Jones
949-754-8032
erin.jones@quest.com
Investor Contact: Scott Davidson
949-754-8659
scott.davidson@quest.com
QUEST SOFTWARE REPORTS EARNINGS FOR FIRST QUARTER 2005
Revenue Grows 25% Year-over-Year to $103.3 Million for the Quarter
IRVINE, Calif., May 4, 2005– Quest Software, Inc. (Nasdaq: QSFT), a leading provider of application, database and Windows management solutions, today reported financial results for the first quarter ended March 31, 2005. Total revenues increased 25% year-over-year to $103.3 million compared to last year’s first quarter revenue of $82.5 million.
GAAP Results
Quest Software’s GAAP net income for the first quarter was $9.2 million, or $0.09 per diluted share. GAAP operating margins increased year-over-year from 4.4% to 14.6% in the first quarter, resulting in GAAP operating income of $15.1 million in the first quarter of 2005. Quest Software generated cash flow from operations of $27.6 million in the March 2005 quarter.
Non-GAAP Results
On a pro forma basis, operating margins increased to 19.6% for the quarter, resulting in pro forma net income of $12.4 million, or $0.12 per share on a diluted basis. This compares to pro forma net income of $8.6 million, or $0.09 per share on a diluted basis for the first quarter ended March 31, 2004.
A reconciliation of pro forma and as reported financial results is included with this press release.
“This quarter’s results indicate continued product leadership in our core markets,” said Vinny Smith, chairman and chief executive officer, Quest Software. “We continue to satisfy customers’ demands for management solutions that improve the performance and productivity of their critical applications, databases and infrastructure. Throughout 2005, our plan will be to continue to focus on helping customers meet their higher expectations for enterprise IT.”
Quest Reports Fourth Quarter and Fiscal Year 2004 Results – page 2 of 9
Quest Software management utilizes non-GAAP financial measures in the presentation of the Company’s results to provide a consistent understanding of its historical operating performance and comparisons with peer companies. Management believes that pro forma reporting provides a more accurate representation of the Company’s on-going economic performance and therefore uses pro forma reporting internally to evaluate and manage the Company’s operations. Management believes that these measures provide useful information because they exclude certain items including amortization of acquisition-related intangible assets, other compensation expenses associated with stock options, litigation-related loss contingency reserves and impacts of other events, which might otherwise obscure the results of operations of our core business when compared to our historical performance or competitors or are not necessarily relevant to understanding the operating activities within the Company’s business.
Financial Outlook
Quest Software management offers the following guidance for the second quarter ending June 30, 2005, including the impact from the proposed Imceda Software, Inc. (Imceda) acquisition. For assumptions please read the accompanying footnote1:
• | Revenue is expected to be in the range of $104.0 million to $108.0 million, which assumes a revenue contribution of $1.5 million from Imceda; |
• | GAAP diluted earnings per share is expected to be in the range of $0.06 to $0.10 per share; |
• | Pro forma diluted earnings per share is expected to be in the range of $0.09 to $0.13 per share. The pro forma guidance excludes approximately $3.5 million of amortization of acquisition related intangible assets and $501,000 of other compensation charges related to stock options. |
For the full year ending December 31, 2005, Quest Software management offers the following guidance, including the impact from the proposed Imceda acquisition. For assumptions please read the accompanying footnote1:
• | Annual revenue is expected to be in the range of $445.0 million to $460.0 million, which assumes a revenue contribution of $10.0 million from Imceda; |
• | GAAP diluted earnings per share is expected to be in the range of $0.46 to $0.51 per share; |
• | Pro forma diluted earnings per share is expected to be in the range of $0.57 to $0.62. The pro-forma guidance excludes approximately $13.9 million of amortization of acquisition related intangible assets, $1.1 million of in-process research and development charges related to our acquisition of Wingra and $1.9 million of other compensation charges related to stock options. |
Quest Reports Fourth Quarter and Fiscal Year 2004 Results – page 3 of 9
First Quarter 2005 Conference Call Information
Quest Software will host a conference call today, Wednesday, May 4, 2005 at 2:00 p.m. Pacific Time, to discuss its results. A simultaneous Web cast of the conference call will be available on Quest Software’s Web site in the Investors – IR Events section atwww.quest.com. A Web cast replay will be available on the same Web site through May 4, 2006. An audio replay of the call will also be available through May 18, 2005 by dialing (888) 203-1112 (from the U.S. or Canada) or (719) 457-0820 (outside the U.S. and Canada), using confirmation code: 3241047.
About Quest Software, Inc.Quest Software, Inc. delivers innovative products that help organizations get more performance and productivity from their applications, databases and infrastructure. Through a deep expertise in IT operations and a continued focus on what works best, Quest helps more than 18,000 customers worldwide meet higher expectations for enterprise IT. Quest Software, headquartered in Irvine, Calif., can be found in offices around the globe and atwww.quest.com.
Quest and Quest Software are registered trademarks of Quest Software, Inc. The Quest Software logo and all other Quest Software product or service names and slogans are registered trademarks or trademarks of Quest Software, Inc. All other trademarks and registered trademarks are property of their respective owners.
1 | Our second quarter ending June 30, 2005 and full year ending December 31, 2005 guidance assumes the following: |
• | Acquisition of Imceda closes by May 30, 2005; |
• | Excludes in-process research and development (IPR&D) charges and related tax effects from the Imceda transaction; |
• | Weighted average shares outstanding includes approximately 1.2 million shares of Quest stock issued as part of both the equity consideration for the Imceda transaction and a portion for options converted into Quest options; |
• | Assumes other income of $450,000 per quarter, which adjusts for forgone interest income related to the proposed Imceda transaction and a potential negative impact from currency movements; |
• | The GAAP tax rate is projected at 33%. This is exclusive of any impact from IPR&D, which is to be determined as we complete our acquisition accounting after the Imceda deal closes but will have an affect upon the rate. The pro-forma tax rate is expected to be 34% for the quarter and full year. |
Forward Looking Statements
This release and the matters to be discussed on the conference call may include predictions, estimates and other information that might be considered forward-looking statements, including statements relating to expectations of revenues and earnings per share in future periods and anticipated benefits of our proposed acquisition of Imceda Software. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ from those anticipated as a result of various factors, including: the impact of adverse changes in general economic conditions on our customers; reductions or delays in information technology spending; variations in the size and timing of customer orders; competitive products and pricing; rapid technological change; risks associated with the development and market acceptance of new or enhanced products; disruptions caused by acquisitions of companies and/or technologies and uncertainties relating to the timing of completing proposed acquisitions, satisfaction of closing conditions, including regulatory approval requirements, and to the integration of products, services, employees and operations of acquired companies; fluctuating currency exchange rates and other risks associated with
Quest Reports Fourth Quarter and Fiscal Year 2004 Results – page 4 of 9
international operations; and the need to attract and retain qualified employees. For a discussion of these and other related risks, please refer to our recent SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2004, which are available on the SEC’s website at www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date thereof.
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Quest Reports Fourth Quarter and Fiscal Year 2004 Results – page 5 of 9
QUEST SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended March 31, | |||||||
2005 | 2004 | ||||||
Revenues: | |||||||
Licenses | $ | 54,718 | $ | 47,028 | |||
Services | 48,630 | 35,499 | |||||
Total revenues | 103,348 | 82,527 | |||||
Cost of revenues: | |||||||
Licenses | 968 | 1,097 | |||||
Services | 8,675 | 6,403 | |||||
Amortization of purchased technology | 2,255 | 1,431 | |||||
Total cost of revenues | 11,898 | 8,931 | |||||
Gross profit | 91,450 | 73,596 | |||||
Operating expenses: | |||||||
Sales and marketing | 43,393 | 36,124 | |||||
Research and development | 20,891 | 18,158 | |||||
General and administrative | 9,702 | 8,260 | |||||
Amortization of other purchased intangible assets | 1,276 | 730 | |||||
In-process research and development | 1,050 | 6,700 | |||||
Total operating expenses | 76,312 | 69,972 | |||||
Income from operations | 15,138 | 3,624 | |||||
Other (expense) income, net | (1,510 | ) | 667 | ||||
Income before income tax provision | 13,628 | 4,291 | |||||
Income tax provision | 4,435 | 3,905 | |||||
Net income | $ | 9,193 | $ | 386 | |||
Net income per share: | |||||||
Basic | $ | 0.10 | $ | 0.00 | |||
Diluted | $ | 0.09 | $ | 0.00 | |||
Weighted average shares: | |||||||
Basic | 96,195 | 93,802 | |||||
Diluted | 99,585 | 97,970 |
Quest Reports Fourth Quarter and Fiscal Year 2004 Results – page 6 of 9
QUEST SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended March 31, 2005 | |||||||||||
GAAP | Adjustments | Adjusted | |||||||||
Revenues: | |||||||||||
Licenses | $ | 54,718 | $ | 54,718 | |||||||
Services | 48,630 | 48,630 | |||||||||
Total revenues | 103,348 | 103,348 | |||||||||
Cost of revenues: | |||||||||||
Licenses | 968 | 968 | |||||||||
Services | 8,675 | (38 | )(1) | 8,637 | |||||||
Amortization of purchased technology | 2,255 | (2,255 | ) | — | |||||||
Total cost of revenues | 11,898 | 9,605 | |||||||||
Gross profit | 91,450 | 93,743 | |||||||||
Operating expenses: | |||||||||||
Sales and marketing | 43,393 | (285 | )(1) | 43,108 | |||||||
Research and development | 20,891 | (169 | )(1) | 20,722 | |||||||
General and administrative | 9,702 | (11 | )(1) | 9,691 | |||||||
Amortization of other purchased intangible assets | 1,276 | (1,276 | ) | — | |||||||
In-process research and development | 1,050 | (1,050 | )(3) | — | |||||||
Total operating expenses | 76,312 | 73,521 | |||||||||
Income from operations | 15,138 | 20,222 | |||||||||
Other expense, net | (1,510 | ) | (1,510 | ) | |||||||
Income before income tax provision | 13,628 | 18,712 | |||||||||
Income tax provision | 4,435 | 1,873 | (2) | 6,308 | |||||||
Net income | $ | 9,193 | $ | 12,404 | |||||||
Net income per share: | |||||||||||
Basic | $ | 0.10 | $ | 0.13 | |||||||
Diluted | $ | 0.09 | $ | 0.12 | |||||||
Weighted average shares: | |||||||||||
Basic | 96,195 | 96,195 | |||||||||
Diluted | 99,585 | 99,585 |
(1) | Represents stock based compensation and payroll taxes attributed to stock option exercises. |
(2) | Represents the tax effect of adjustments. |
(3) | Represents a one-time charge to write off in-process research and development assumed with our acquisition of Wingra Technologies, Inc. in January 2005. |
Quest Reports Fourth Quarter and Fiscal Year 2004 Results – page 7 of 9
QUEST SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended March 31, 2004 | |||||||||
GAAP | Adjustments | Adjusted | |||||||
Revenues: | |||||||||
Licenses | $ | 47,028 | $ | 47,028 | |||||
Services | 35,499 | 35,499 | |||||||
Total revenues | 82,527 | 82,527 | |||||||
Cost of revenues: | |||||||||
Licenses | 1,097 | 1,097 | |||||||
Services | 6,403 | (30 | )(1) | 6,373 | |||||
Amortization of purchased technology | 1,431 | (1,431 | ) | — | |||||
Total cost of revenues | 8,931 | 7,470 | |||||||
Gross profit | 73,596 | 75,057 | |||||||
Operating expenses: | |||||||||
Sales and marketing | 36,124 | (213 | )(1) | 35,911 | |||||
Research and development | 18,158 | (102 | )(1) | 18,056 | |||||
General and administrative | 8,260 | (6 | )(1) | 8,254 | |||||
Amortization of other purchased intangible assets | 730 | (730 | ) | — | |||||
In-process research and development | 6,700 | (6,700 | )(3) | — | |||||
Total operating expenses | 69,972 | 62,221 | |||||||
Income from operations | 3,624 | 12,836 | |||||||
Other income, net | 667 | 667 | |||||||
Income before income tax provision | 4,291 | 13,503 | |||||||
Income tax provision | 3,905 | 956 | (2) | 4,861 | |||||
Net income | $ | 386 | $ | 8,642 | |||||
Net income per share: | |||||||||
Basic | $ | 0.00 | $ | 0.09 | |||||
Diluted | $ | 0.00 | $ | 0.09 | |||||
Weighted average shares: | |||||||||
Basic | 93,802 | 93,802 | |||||||
Diluted | 97,970 | 97,970 |
(1) | Represents stock based compensation and payroll taxes attributed to stock option exercises. |
(2) | Represents the tax effect of adjustments. |
(3) | Represents a one-time charge to write off in-process research and development assumed with our acquisition of Aelita Software Corporation in March 2004. |
Quest Reports Fourth Quarter and Fiscal Year 2004 Results – page 8 of 9
QUEST SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31, 2005 | December 31, 2004 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 121,544 | $ | 118,157 | ||
Short-term marketable securities available for sale | 30,645 | 15,892 | ||||
Accounts receivable, net | 54,456 | 98,800 | ||||
Prepaid expenses and other current assets | 11,978 | 12,528 | ||||
Deferred income taxes | 13,107 | 13,075 | ||||
Total current assets | 231,730 | 258,452 | ||||
Property and equipment, net | 53,321 | 52,761 | ||||
Long-term marketable securities | 145,511 | 163,527 | ||||
Amortizing intangible assets, net | 41,964 | 41,404 | ||||
Goodwill | 332,339 | 323,903 | ||||
Other assets | 3,192 | 3,304 | ||||
Total assets | $ | 808,057 | $ | 843,351 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 4,819 | $ | 4,135 | ||
Obligation under repurchase agreement | — | 12,632 | ||||
Accrued compensation | 21,037 | 27,802 | ||||
Other accrued expenses | 22,667 | 46,292 | ||||
Income taxes payable | 9,716 | 12,030 | ||||
Current portion of deferred revenue | 106,618 | 106,356 | ||||
Total current liabilities | 164,857 | 209,247 | ||||
Long-term liabilities: | ||||||
Long-term portion of deferred revenue | 19,975 | 20,897 | ||||
Deferred income taxes | 4,520 | 4,526 | ||||
Other long-term liabilities | 1,609 | 1,769 | ||||
Total long-term liabilities | 26,104 | 27,192 | ||||
Shareholders’ equity | 617,096 | 606,912 | ||||
Total liabilities and shareholders’ equity | $ | 808,057 | $ | 843,351 | ||
Quest Reports Fourth Quarter and Fiscal Year 2004 Results – page 9 of 9
QUEST SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
2005 | 2004 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 9,193 | $ | 386 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 6,148 | 5,402 | ||||||
Compensation expense associated with stock option grants | 454 | 170 | ||||||
Deferred income taxes | (41 | ) | 3 | |||||
Tax benefit related to stock option exercises | 259 | 1,540 | ||||||
Provision for bad debts | (80 | ) | (23 | ) | ||||
In-process research and development | 1,050 | 6,700 | ||||||
Changes in operating assets and liabilities, net of effects of acquisitions: | ||||||||
Accounts receivable | 43,513 | 9,807 | ||||||
Prepaid expenses and other current assets | 461 | (2,331 | ) | |||||
Other assets | 141 | (3 | ) | |||||
Accounts payable | 548 | 493 | ||||||
Accrued compensation | (6,614 | ) | (1,116 | ) | ||||
Other accrued expenses | (8,035 | ) | (4,796 | ) | ||||
Litigation settlement payment | (16,000 | ) | — | |||||
Income taxes payable | (2,276 | ) | 1,262 | |||||
Deferred revenue | (1,010 | ) | 4,843 | |||||
Other liabilities | (108 | ) | 415 | |||||
Net cash provided by operating activities | 27,603 | 22,752 | ||||||
Cash flows used in investing activities: | ||||||||
Purchases of property and equipment, net | (3,039 | ) | (16,586 | ) | ||||
Cash paid for acquisitions, net of cash acquired | (12,754 | ) | (94,283 | ) | ||||
Sales and maturities of marketable securities | 2,064 | 13,005 | ||||||
Net cash used in investing activities | (13,729 | ) | (97,864 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from repurchase agreement | — | 67,500 | ||||||
Repayment of repurchase agreement | (12,725 | ) | — | |||||
Repayment of capital lease obligations | (85 | ) | (92 | ) | ||||
Proceeds from the exercise of stock options | 1,472 | 4,288 | ||||||
Proceeds from employee stock purchase plan | — | 2,723 | ||||||
Net cash (used in) provided by financing activities | (11,338 | ) | 74,419 | |||||
Effect of exchange rate changes on cash and cash equivalents | 851 | (821 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 3,387 | (1,514 | ) | |||||
Cash and cash equivalents, beginning of period | 118,157 | 67,470 | ||||||
Cash and cash equivalents, end of period | $ | 121,544 | $ | 65,956 | ||||