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 RESULTS FOR SECOND QUARTER 2005
Revenue Grows 16% Year-over-Year to $107.1 Million for the Quarter
IRVINE, Calif., August 4, 2005— Quest Software, Inc. (Nasdaq: QSFT), a leading provider of application, database and infrastructure management solutions, today reported financial results for the second quarter ended June 30, 2005. Total revenues increased 16% year-over-year to $107.1 million compared to last year’s second quarter revenue of $92.1 million. Total revenues for the first six months of 2005 were $210.5 million compared to $174.7 million for the same period in 2004.
GAAP Results
Quest Software’s GAAP net income for the second quarter was $10.7 million, or $0.11 per diluted share. GAAP operating margins were 15.4% in the second quarter, resulting in GAAP operating income of $16.5 million. Net income for the first six months of 2005 was $19.7 million or $0.20 per diluted share versus net income of $3.0 million or $0.03 per diluted share for the comparable period in 2004. Quest Software generated cash flow from operations of $16.2 million in the June 2005 quarter.
Non-GAAP Results
On a pro forma basis, operating margins increased to 19.4% for the quarter, resulting in pro forma net income of $13.4 million, or $0.13 per share on a diluted basis. This compares to pro forma net income of $8.9 million, or $0.09 per share on a diluted basis for the second quarter ended June 30, 2004. For the six months ended June 30, 2005 pro forma net income was $25.8 million of $0.26 per diluted share. This compares to pro forma net income of $17.5 million or $0.18 per diluted share for the six months ended June 2004.
A reconciliation of pro forma and as reported financial results is included with this press release.
“Our second quarter results were strong and we continue to see increasing awareness of our solutions within the enterprise,” said Vinny Smith, chairman and chief executive officer, Quest Software. “With the recent addition of the people and products from Imceda Software, Inc. and Vintela, Inc., and a number of key product releases, we have underscored our commitment to building out a robust application, database and infrastructure management product portfolio for our customers.”
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 third quarter ending September 30, 2005, including the impact from the acquisitions of Imceda Software Inc. (Imceda) and Vintela, Inc. (Vintela). For assumptions please read the accompanying footnote(1):
• | Revenue is expected to be in the range of $111.0 million to $114.0 million. |
• | GAAP diluted earnings per share is expected to be in the range of $0.07 to $0.09 per share; |
• | Pro forma diluted earnings per share is expected to be in the range of $0.11 to $0.13 per share. The pro forma guidance excludes approximately $4.5 million of amortization of acquisition-related intangible assets and $1.0 million of other compensation charges related to stock options. |
For the full year ending Dec. 31, 2005, Quest Software management offers the following guidance, including the impact from the Imceda and Vintela acquisitions. For assumptions please read the accompanying footnote(1):
• | Annual revenue is expected to be in the range of $452 million to $467 million; |
• | GAAP diluted earnings per share is expected to be in the range of $0.43 to $0.47 per share; |
• | Pro forma diluted earnings per share is expected to be in the range of $0.56 to $0.60. The pro-forma guidance excludes approximately $16.3 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 $3.2 million of other compensation charges related to stock options. |
Second Quarter 2005 Conference Call Information
Quest Software will host a conference call today, Thursday, August 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 August 4, 2006. An audio replay of the call will also be available through August 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: 9465971.
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.
1Our third quarter ending September 30, 2005 and full year ending December 31, 2005 guidance assumes the following:
• | Our GAAP guidance excludes amortization of intangible assets, fair value accounting for deferred revenue and potential charges related to in-process research and development (IPR&D) arising from our acquisition of Vintela, which are not available at the present time. |
• | Assumes other income (expense), net of $200,000 per quarter; |
• | The GAAP tax rate is projected at 33%, which excludes any tax rate changes relating to our cash repatriation efforts, which will be addressed in the third quarter of 2005 and is exclusive of any potential impact from IPR&D, which is to be determined as we complete our acquisition accounting for the Vintela deal 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 acquisitions of
Imceda and Vintela. 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; the integration of products, services, employees and operations of acquired companies; fluctuating currency exchange rates and other risks associated with 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 and our Quarterly Report on Form 10-Q for the period ended March 31, 2005, which are available on the SEC’s website atwww.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.
QUEST SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||
Revenues: | |||||||||||||||
Licenses | $ | 54,612 | $ | 51,195 | $ | 109,330 | $ | 98,223 | |||||||
Services | 52,514 | 40,952 | 101,144 | 76,451 | |||||||||||
Total revenues | 107,126 | 92,147 | 210,474 | 174,674 | |||||||||||
Cost of revenues: | |||||||||||||||
Licenses | 1,192 | 974 | 2,160 | 2,071 | |||||||||||
Services | 8,685 | 7,363 | 17,360 | 13,766 | |||||||||||
Amortization of purchased technology | 2,421 | 2,280 | 4,676 | 3,711 | |||||||||||
Total cost of revenues | 12,298 | 10,617 | 24,196 | 19,548 | |||||||||||
Gross profit | 94,828 | 81,530 | 186,278 | 155,126 | |||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing | 45,634 | 41,193 | 89,027 | 77,317 | |||||||||||
Research and development | 20,640 | 20,356 | 41,760 | 38,513 | |||||||||||
General and administrative | 10,565 | 8,524 | 20,267 | 16,785 | |||||||||||
Amortization of other purchased intangible assets | 1,498 | 1,563 | 2,774 | 2,293 | |||||||||||
In-process research and development | — | 280 | 1,050 | 6,980 | |||||||||||
Litigation loss provision | — | 5,000 | — | 5,000 | |||||||||||
Total operating expenses | 78,337 | 76,916 | 154,878 | 146,888 | |||||||||||
Income from operations | 16,491 | 4,614 | 31,400 | 8,238 | |||||||||||
Other (expense) income, net | (522 | ) | (506 | ) | (2,032 | ) | 161 | ||||||||
Income before income tax provision | 15,969 | 4,108 | 29,368 | 8,399 | |||||||||||
Income tax provision | 5,302 | 1,479 | 9,662 | 5,384 | |||||||||||
Net income | $ | 10,667 | $ | 2,629 | $ | 19,706 | $ | 3,015 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.11 | $ | 0.03 | $ | 0.20 | $ | 0.03 | |||||||
Diluted | $ | 0.11 | $ | 0.03 | $ | 0.20 | $ | 0.03 | |||||||
Weighted average shares: | |||||||||||||||
Basic | 96,838 | 94,374 | 96,517 | 94,087 | |||||||||||
Diluted | 99,253 | 97,761 | 99,422 | 97,774 |
QUEST SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30, 2005 | Six Months Ended June 30, 2005 | |||||||||||||||||||||
GAAP | Adjustments | Adjusted | GAAP | Adjustments | Adjusted | |||||||||||||||||
Revenues: | ||||||||||||||||||||||
Licenses | $ | 54,612 | $ | 54,612 | $ | 109,330 | $ | 109,330 | ||||||||||||||
Services | 52,514 | 52,514 | 101,144 | 101,144 | ||||||||||||||||||
Total revenues | 107,126 | 107,126 | 210,474 | 210,474 | ||||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||
Licenses | 1,192 | 1,192 | 2,160 | 2,160 | ||||||||||||||||||
Services | 8,685 | (37 | )(1) | 8,648 | 17,360 | (75 | )(1) | 17,285 | ||||||||||||||
Amortization of purchased technology | 2,421 | (2,421 | ) | — | 4,676 | (4,676 | ) | — | ||||||||||||||
Total cost of revenues | 12,298 | 9,840 | 24,196 | 19,445 | ||||||||||||||||||
Gross profit | 94,828 | 97,286 | 186,278 | 191,029 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||
Sales and marketing | 45,634 | (279 | )(1) | 45,355 | 89,027 | (564 | )(1) | 88,463 | ||||||||||||||
Research and development | 20,640 | (22 | )(1) | 20,618 | 41,760 | (420 | )(1) | 41,340 | ||||||||||||||
General and administrative | 10,565 | (10 | )(1) | 10,555 | 20,267 | (21 | )(1) | 20,246 | ||||||||||||||
Amortization of other purchased intangible assets | 1,498 | (1,498 | ) | — | 2,774 | (2,774 | ) | — | ||||||||||||||
In-process research and development | — | — | — | 1,050 | (1,050 | )(2) | — | |||||||||||||||
Total operating expenses | 78,337 | 76,528 | 154,878 | 150,049 | ||||||||||||||||||
Income from operations | 16,491 | 20,758 | 31,400 | 40,980 | ||||||||||||||||||
Other expense, net | (522 | ) | (522 | ) | (2,032 | ) | (2,032 | ) | ||||||||||||||
Income before income tax provision | 15,969 | 20,236 | 29,368 | 38,948 | ||||||||||||||||||
Income tax provision | 5,302 | 1,558 | (3) | 6,860 | 9,662 | 3,506 | (3) | 13,168 | ||||||||||||||
Net income | $ | 10,667 | $ | 13,376 | $ | 19,706 | $ | 25,780 | ||||||||||||||
Net income per share: | ||||||||||||||||||||||
Basic | $ | 0.11 | $ | 0.14 | $ | 0.20 | $ | 0.27 | ||||||||||||||
Diluted | $ | 0.11 | $ | 0.13 | $ | 0.20 | $ | 0.26 | ||||||||||||||
Weighted average shares: | ||||||||||||||||||||||
Basic | 96,838 | 96,838 | 96,517 | 96,517 | ||||||||||||||||||
Diluted | 99,253 | 99,253 | 99,422 | 99,422 |
(1) | Represents stock based compensation and payroll taxes attributed to stock option exercises. |
(2) | Represents a one-time charge to write off in-process research and development assumed with our acquisition of Wingra Technologies, Inc. in January 2005. |
(3) | Represents the tax effect of adjustments. |
QUEST SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30, 2004 | Six Months Ended June 30, 2004 | |||||||||||||||||||
GAAP | Adjustments | Adjusted | GAAP | Adjustments | Adjusted | |||||||||||||||
Revenues: | ||||||||||||||||||||
Licenses | $ | 51,195 | $ | 51,195 | $ | 98,223 | $ | 98,223 | ||||||||||||
Services | 40,952 | 40,952 | 76,451 | 76,451 | ||||||||||||||||
Total revenues | 92,147 | 92,147 | 174,674 | 174,674 | ||||||||||||||||
Cost of revenues: | ||||||||||||||||||||
Licenses | 974 | 974 | 2,071 | 2,071 | ||||||||||||||||
Services | 7,363 | (59 | )(1) | 7,304 | 13,766 | (89 | )(1) | 13,677 | ||||||||||||
Amortization of purchased technology | 2,280 | (2,280 | ) | — | 3,711 | (3,711 | ) | — | ||||||||||||
Total cost of revenues | 10,617 | 8,278 | 19,548 | 15,748 | ||||||||||||||||
Gross profit | 81,530 | 83,869 | 155,126 | 158,926 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Sales and marketing | 41,193 | (461 | )(1) | 40,732 | 77,317 | (674 | )(1) | 76,643 | ||||||||||||
Research and development | 20,356 | (107 | )(1) | 20,249 | 38,513 | (209 | )(1) | 38,304 | ||||||||||||
General and administrative | 8,524 | (8 | )(1) | 8,516 | 16,785 | (14 | )(1) | 16,771 | ||||||||||||
Amortization of other purchased intangible assets | 1,563 | (1,563 | ) | — | 2,293 | (2,293 | ) | — | ||||||||||||
In-process research and development | 280 | (280 | )(2) | — | 6,980 | (6,980 | )(5) | — | ||||||||||||
Litigation loss provision | 5,000 | (5,000 | )(3) | — | 5,000 | (5,000 | )(3) | — | ||||||||||||
Total operating expenses | 76,916 | 69,497 | 146,888 | 131,718 | ||||||||||||||||
Income from operations | 4,614 | 14,372 | 8,238 | 27,208 | ||||||||||||||||
Other (expense) income, net | (506 | ) | (506 | ) | 161 | 161 | ||||||||||||||
Income before income tax provision | 4,108 | 13,866 | 8,399 | 27,369 | ||||||||||||||||
Income tax provision | 1,479 | 3,513 | (4) | 4,992 | 5,384 | 4,469 | (4) | 9,853 | ||||||||||||
Net income | $ | 2,629 | $ | 8,874 | $ | 3,015 | $ | 17,516 | ||||||||||||
Net income per share: | ||||||||||||||||||||
Basic | $ | 0.03 | $ | 0.09 | $ | 0.03 | $ | 0.19 | ||||||||||||
Diluted | $ | 0.03 | $ | 0.09 | $ | 0.03 | $ | 0.18 | ||||||||||||
Weighted average shares: | ||||||||||||||||||||
Basic | 94,374 | 94,374 | 94,087 | 94,087 | ||||||||||||||||
Diluted | 97,761 | 97,761 | 97,774 | 97,774 |
(1) | Represents stock based compensation and payroll taxes attributed to stock option exercises. |
(2) | Represents a one-time charge to write off in-process research and development assumed with our acquisition of Lecco Technology in April 2004. |
(3) | Represents a special charge for a loss contingency reserve related to our Computer Associates intellectual property litigation. |
(4) | Represents the tax effect of adjustments. |
(5) | Represents one-time charges to write off in-process research and development assumed with our acquisition of Aelita Software in March 2004 and Lecco Technology in April 2004. |
QUEST SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
ASSETS
June 30, 2005 | December 31, 2004 | |||||
Current assets: | ||||||
Cash and cash equivalents | $ | 121,642 | $ | 118,157 | ||
Short-term marketable securities available for sale | 123 | 15,892 | ||||
Accounts receivable, net | 73,327 | 98,800 | ||||
Prepaid expenses and other current assets | 11,106 | 12,528 | ||||
Deferred income taxes | 13,092 | 13,075 | ||||
Total current assets | 219,290 | 258,452 | ||||
Property and equipment, net | 76,396 | 52,761 | ||||
Long-term marketable securities | 125,399 | 163,527 | ||||
Amortizing intangible assets, net | 58,044 | 41,404 | ||||
Goodwill | 379,548 | 323,903 | ||||
Other assets | 4,038 | 3,304 | ||||
Total assets | $ | 862,715 | $ | 843,351 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 5,779 | $ | 4,135 | ||
Obligation under repurchase agreement | — | 12,632 | ||||
Accrued compensation | 24,336 | 27,802 | ||||
Other accrued expenses | 28,302 | 46,292 | ||||
Income taxes payable | 12,267 | 12,030 | ||||
Current portion of deferred revenue | 114,615 | 106,356 | ||||
Total current liabilities | 185,299 | 209,247 | ||||
Long-term liabilities: | ||||||
Long-term portion of deferred revenue | 20,553 | 20,897 | ||||
Deferred income taxes | 9,470 | 4,526 | ||||
Other long-term liabilities | 1,434 | 1,769 | ||||
Total long-term liabilities | 31,457 | 27,192 | ||||
Shareholders’ equity | 645,959 | 606,912 | ||||
Total liabilities and shareholders’ equity | $ | 862,715 | $ | 843,351 | ||
QUEST SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 10,667 | $ | 2,629 | $ | 19,706 | $ | 3,015 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 6,810 | 7,237 | 12,958 | 12,639 | ||||||||||||
Compensation expense associated with stock option grants | 311 | 539 | 994 | 709 | ||||||||||||
Deferred income taxes | 5 | 8 | (36 | ) | 11 | |||||||||||
Tax benefit related to stock option exercises | 772 | 872 | 1,031 | 2,412 | ||||||||||||
Provision for bad debts | 120 | 91 | 40 | 68 | ||||||||||||
In-process research and development | — | 280 | 1,050 | 6,980 | ||||||||||||
Litigation loss provision | — | 5,000 | — | 5,000 | ||||||||||||
Changes in operating assets and liabilities, net of effects of acquisitions: | ||||||||||||||||
Accounts receivable | (19,548 | ) | (8,723 | ) | 23,965 | 1,084 | ||||||||||
Prepaid expenses and other current assets | 307 | 1,959 | 768 | (372 | ) | |||||||||||
Other assets | (789 | ) | (419 | ) | (648 | ) | (422 | ) | ||||||||
Accounts payable | 953 | 2,114 | 1,501 | 2,607 | ||||||||||||
Accrued compensation | 3,159 | 1,505 | (3,455 | ) | 389 | |||||||||||
Other accrued expenses | 4,405 | 182 | (3,630 | ) | (4,614 | ) | ||||||||||
Litigation settlement payment | — | — | (16,000 | ) | — | |||||||||||
Income taxes payable | 2,286 | (3,576 | ) | (65 | ) | (2,314 | ) | |||||||||
Deferred revenue | 6,763 | 2,713 | 5,753 | 7,556 | ||||||||||||
Other liabilities | (38 | ) | (84 | ) | (146 | ) | 331 | |||||||||
Net cash provided by operating activities | 16,183 | 12,327 | 43,786 | 35,079 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchases of property and equipment | (25,362 | ) | (7,548 | ) | (28,401 | ) | (24,134 | ) | ||||||||
Cash paid for acquisitions, net of cash acquired | (44,871 | ) | (1,655 | ) | (57,625 | ) | (95,938 | ) | ||||||||
Sales and maturities of marketable securities | 51,209 | 4,326 | 53,273 | 17,331 | ||||||||||||
Net cash used in investing activities | (19,024 | ) | (4,877 | ) | (32,753 | ) | (102,741 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||||||
Proceeds from repurchase agreement | — | 81 | — | 67,581 | ||||||||||||
Repayment of repurchase agreement | — | — | (12,725 | ) | — | |||||||||||
Repayment of notes payable | (40 | ) | — | (40 | ) | — | ||||||||||
Repayment of capital lease obligations | (13 | ) | (136 | ) | (98 | ) | (228 | ) | ||||||||
Proceeds from the exercise of stock options | 1,834 | 1,627 | 3,306 | 5,915 | ||||||||||||
Proceeds from employee stock purchase plan | — | — | — | 2,723 | ||||||||||||
Net cash provided by (used in) financing activities | 1,781 | 1,572 | (9,557 | ) | 75,991 | |||||||||||
Effect of exchange rate changes on cash and cash equivalents | 1,158 | 751 | 2,009 | (70 | ) | |||||||||||
Net increase in cash and cash equivalents | 98 | 9,773 | 3,485 | 8,259 | ||||||||||||
Cash and cash equivalents, beginning of period | 121,544 | 65,956 | 118,157 | 67,470 | ||||||||||||
Cash and cash equivalents, end of period | $ | 121,642 | $ | 75,729 | $ | 121,642 | $ | 75,729 | ||||||||