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 REVENUE AND EARNINGS FOR
FOURTH QUARTER AND FISCAL YEAR 2005
Company Posts $476 Million In Revenue for Fiscal 2005;
Fourth Quarter Revenue Grows 23%
ALISO VIEJO, Calif., February 8, 2006– Quest Software, Inc. (Nasdaq: QSFT), a leading provider of application, database and infrastructure management solutions, today reported financial results for the fourth quarter and fiscal year ended December 31, 2005. Total revenues increased 23% year-over-year to $144.6 million in the fourth quarter of 2005 compared to last year’s fourth quarter revenue of $118.1 million. Total revenues increased 22% to $476.4 million in fiscal 2005 compared to total revenues of $389.5 million in fiscal 2004.
GAAP Results
Quest Software’s GAAP net income for the fourth quarter was $16.1 million, or $0.16 per diluted share. The GAAP operating margin was 20% in the fourth quarter, resulting in GAAP operating income of $28.9 million. Net income for the full year ended December 31, 2005 was $41.8 million or $0.41 per diluted share versus net income of $47.2 million or $0.48 per diluted share for the comparable period in 2004. Operating income for fiscal 2005 was $74.1 million, a 16% increase over the same period in 2004. Quest Software generated cash flow from operations of $43.6 million in the December 2005 quarter. During the fourth quarter of 2005, Quest Software incurred a charge of $2.3 million for income taxes arising from the repatriation of approximately $43.5 million of accumulated income earned abroad, pursuant to the American Jobs Creation Act.
Non-GAAP Results
On a pro forma basis, net income for the fourth quarter 2005 was $21.2 million or $0.21 per diluted share. The pro forma operating margin was 24% for the fourth quarter, resulting in pro-forma operating income of $35.2 million. Pro forma net income for fiscal 2005 was $64.5 million, a 22% increase over the prior year and resulting in $0.64 per diluted share. Pro forma operating income for fiscal 2005 was $103.4 million, a 43% increase over fiscal 2004.
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Quest Reports Fourth Quarter and Fiscal 2005 Results – page 2 of 9
A reconciliation of pro forma and as reported financial results is included with this press release.
“We ended 2005 with strong financial and operating results for the fourth quarter and the full year,” said Vinny Smith, chairman and chief executive officer, Quest Software. “Our innovative products are helping customers get more performance, productivity, availability and value from their applications, databases and infrastructure. We are continuing to invest in our business to gain market share and grow, and I am excited about our prospects for 2006.”
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 meaningful 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 quarter ending March 31, 2006:
• | Revenue is expected to be in the range of $117 million to $120 million. |
• | GAAP diluted earnings per share is expected to be in the range of $0.03 to $0.05 per share. Our GAAP guidance excludes amortization of intangible assets, potential in-process research and |
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Quest Reports Fourth Quarter and Fiscal 2005 Results – page 3 of 9
development charges, and the related impacts on our tax rate, arising from our January 2006 acquisition of AfterMail Limited, which are not available at the present time; |
• | 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 $0.03 per share of amortization of acquisition-related intangible assets and $0.05 per share related to the effects of stock-based compensation expense. |
For the full year ending December 31, 2006, Quest Software management offers the following guidance:
• | Annual revenue is expected to be in the range of $525 million to $540 million; |
• | GAAP diluted earnings per share is expected to be in the range of $0.33 to $0.39 per share. Our GAAP guidance excludes amortization of intangible assets, potential in-process research and development charges, and the related impacts on our tax rate, arising from our January 2006 acquisition of AfterMail Limited, which are not available at the present time; |
• | Pro forma diluted earnings per share is expected to be in the range of $0.67 to $0.72. The pro-forma guidance excludes approximately $0.13 per share of amortization of acquisition-related intangible assets and $0.20 to $0.21 per share related to the effects of stock-based compensation expense. |
Fourth Quarter and Fiscal 2005 Conference Call Information
Quest Software will host a conference call today, Wednesday, February 8, 2006 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 at www.quest.com. A Web cast replay will be available on the same Web site through February 8, 2007. An audio replay of the call will also be available through February 22, 2006 by dialing (888) 203-1112 (from the U.S. or Canada) or (719) 457-0820 (outside the U.S. and Canada), using confirmation code: 7303184.
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 can be found in offices around the globe and at www.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.
Quest Reports Fourth Quarter and Fiscal 2005 Results – page 4 of 9
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 growth, revenues, operating efficiencies and earnings per share in future periods. 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; the effects of FAS 123(R) on our GAAP operating expenses due to the variability of the factors used to estimate the value of stock-based compensation; disruptions caused by acquisitions of companies and/or technologies and the integration of acquired products, services, employees and operations; 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 September 30, 2005, 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 2005 Results – page 5 of 9
QUEST SOFTWARE, INC.
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
(Unaudited)
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||
Revenues: | ||||||||||||||
Licenses | $ | 85,504 | $ | 73,269 | $ | 260,349 | $ | 225,032 | ||||||
Services | 59,128 | 44,781 | 216,033 | 164,431 | ||||||||||
Total revenues | 144,632 | 118,050 | 476,382 | 389,463 | ||||||||||
Cost of revenues: | ||||||||||||||
Licenses | 1,693 | 1,123 | 5,004 | 3,958 | ||||||||||
Services | 11,285 | 7,907 | 38,128 | 29,646 | ||||||||||
Amortization of purchased technology | 3,151 | 2,126 | 10,910 | 8,107 | ||||||||||
Total cost of revenues | 16,129 | 11,156 | 54,042 | 41,711 | ||||||||||
Gross profit | 128,503 | 106,894 | 422,340 | 347,752 | ||||||||||
Operating expenses: | ||||||||||||||
Sales and marketing | 60,306 | 50,510 | 200,335 | 170,702 | ||||||||||
Research and development | 23,896 | 19,924 | 87,876 | 78,305 | ||||||||||
General and administrative | 13,282 | 10,833 | 45,034 | 36,493 | ||||||||||
Amortization of other purchased intangible assets | 2,222 | 1,351 | 7,179 | 5,212 | ||||||||||
In-process research and development | (110 | ) | — | 7,840 | 6,980 | |||||||||
Litigation loss contingency | — | 11,000 | — | 16,000 | ||||||||||
Total operating expenses | 99,596 | 93,618 | 348,264 | 313,692 | ||||||||||
Gain on sale of Vista Plus product suite | — | — | — | 29,574 | ||||||||||
Income from operations | 28,907 | 13,276 | 74,076 | 63,634 | ||||||||||
Other income (expense), net | 84 | 6,093 | (1,634 | ) | 8,976 | |||||||||
Income before income tax provision | 28,991 | 19,369 | 72,442 | 72,610 | ||||||||||
Income tax provision | 12,864 | 6,106 | 30,644 | 25,390 | ||||||||||
Net income | $ | 16,127 | $ | 13,263 | $ | 41,798 | $ | 47,220 | ||||||
Net income per share: | ||||||||||||||
Basic | $ | 0.16 | $ | 0.14 | $ | 0.43 | $ | 0.50 | ||||||
Diluted | $ | 0.16 | $ | 0.13 | $ | 0.41 | $ | 0.48 | ||||||
Weighted average shares: | ||||||||||||||
Basic | 99,211 | 95,557 | 97,621 | 94,622 | ||||||||||
Diluted | 102,680 | 99,635 | 100,770 | 98,158 |
Quest Reports Fourth Quarter and Fiscal 2005 Results – page 6 of 9
QUEST SOFTWARE, INC.
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
(Unaudited)
Three Months Ended December 31, 2005 | Twelve Months Ended December 31, 2005 | ||||||||||||||||||||
GAAP | Adjustments | Adjusted | GAAP | Adjustments | Adjusted | ||||||||||||||||
Revenues: | |||||||||||||||||||||
Licenses | $ | 85,504 | $ | 85,504 | $ | 260,349 | $ | 260,349 | |||||||||||||
Services | 59,128 | 59,128 | 216,033 | 216,033 | |||||||||||||||||
Total revenues | 144,632 | 144,632 | 476,382 | 476,382 | |||||||||||||||||
Cost of revenues: | |||||||||||||||||||||
Licenses | 1,693 | (1 | )(1) | 1,692 | 5,004 | (1 | )(1) | 5,003 | |||||||||||||
Services | 11,285 | (51 | )(1) | 11,234 | 38,128 | (197 | )(1) | 37,931 | |||||||||||||
Amortization of purchased technology | 3,151 | (3,151 | ) | — | 10,910 | (10,910 | ) | — | |||||||||||||
Total cost of revenues | 16,129 | 12,926 | 54,042 | 42,934 | |||||||||||||||||
Gross profit | 128,503 | 131,706 | 422,340 | 433,448 | |||||||||||||||||
Operating expenses: | |||||||||||||||||||||
Sales and marketing | 60,306 | (320 | )(1) | 59,986 | 200,335 | (1,374 | )(1) | 198,961 | |||||||||||||
Research and development | 23,896 | (573 | )(1) | 23,323 | 87,876 | (1,655 | )(1) | 86,221 | |||||||||||||
General and administrative | 13,282 | (78 | )(1) | 13,204 | 45,034 | (187 | )(1) | 44,847 | |||||||||||||
Amortization of other purchased intangible assets | 2,222 | (2,222 | ) | — | 7,179 | (7,179 | ) | — | |||||||||||||
In-process research and development | (110 | ) | 110 | (2) | — | 7,840 | (7,840 | )(3) | — | ||||||||||||
Total operating expenses | 99,596 | 96,513 | 348,264 | 330,029 | |||||||||||||||||
Income from operations | 28,907 | 35,193 | 74,076 | 103,419 | |||||||||||||||||
Other income (expense), net | 84 | 84 | (1,634 | ) | (1,634 | ) | |||||||||||||||
Income before income tax provision | 28,991 | 35,277 | 72,442 | 101,785 | |||||||||||||||||
Income tax provision | 12,864 | 1,166 | (4) | 14,030 | 30,644 | 6,630 | (4) | 37,274 | |||||||||||||
Net income | $ | 16,127 | $ | 21,247 | $ | 41,798 | $ | 64,511 | |||||||||||||
Net income per share: | |||||||||||||||||||||
Basic | $ | 0.16 | $ | 0.21 | $ | 0.43 | $ | 0.66 | |||||||||||||
Diluted | $ | 0.16 | $ | 0.21 | $ | 0.41 | $ | 0.64 | |||||||||||||
Weighted average shares: | |||||||||||||||||||||
Basic | 99,211 | 99,211 | 97,621 | 97,621 | |||||||||||||||||
Diluted | 102,680 | 102,680 | 100,770 | 100,770 |
(1) | Represents stock-based compensation and payroll taxes attributed to stock option exercises. |
(2) | Represents a purchase price allocation adjustment to Vintela, Inc.’s in-process research and development charge. |
(3) | Represents a one-time charge to write off in-process research and development assumed with our acquisitions of Wingra Technologies, Inc. in January 2005 and Vintela, Inc. in July 2005. |
(4) | Represents the related tax effects of all adjustments and the tax provision related to the repatriation of foreign earnings under the American Jobs Creation Act. |
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Quest Reports Fourth Quarter and Fiscal 2005 Results – page 7 of 9
QUEST SOFTWARE, INC.
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
(Unaudited)
Three Months Ended December 31, 2004 | Twelve Months Ended December 31, 2004 | |||||||||||||||||
GAAP | Adjustments | Adjusted | GAAP | Adjustments | Adjusted | |||||||||||||
Revenues: | ||||||||||||||||||
Licenses | $ | 73,269 | $ | 73,269 | $ | 225,032 | $ | 225,032 | ||||||||||
Services | 44,781 | 44,781 | 164,431 | 164,431 | ||||||||||||||
Total revenues | 118,050 | 118,050 | 389,463 | 389,463 | ||||||||||||||
Cost of revenues: | ||||||||||||||||||
Licenses | 1,123 | 1,123 | 3,958 | 3,958 | ||||||||||||||
Services | 7,907 | (45 | )(1) | 7,862 | 29,646 | (190 | )(1) | 29,456 | ||||||||||
Amortization of purchased technology | 2,126 | (2,126 | ) | — | 8,107 | (8,107 | ) | — | ||||||||||
Total cost of revenues | 11,156 | 8,985 | 41,711 | 33,414 | ||||||||||||||
Gross profit | 106,894 | 109,065 | 347,752 | 356,049 | ||||||||||||||
Operating expenses: | ||||||||||||||||||
Sales and marketing | 50,510 | (379 | )(1) | 50,131 | 170,702 | (1,409 | )(1) | 169,293 | ||||||||||
Research and development | 19,924 | (219 | )(1) | 19,705 | 78,305 | (569 | )(1) | 77,736 | ||||||||||
General and administrative | 10,833 | (19 | )(1) | 10,814 | 36,493 | (40 | )(1) | 36,453 | ||||||||||
Amortization of other purchased intangible assets | 1,351 | (1,351 | ) | — | 5,212 | (5,212 | ) | — | ||||||||||
In-process research and development | — | — | — | 6,980 | (6,980 | )(2) | — | |||||||||||
Litigation loss contingency | 11,000 | (11,000 | )(3) | — | 16,000 | (16,000 | )(3) | — | ||||||||||
Total operating expenses | 93,618 | 80,650 | 313,692 | 283,482 | ||||||||||||||
Gain on sale of Vista Plus product suite | — | — | 29,574 | (29,574 | ) | — | ||||||||||||
Income from operations | 13,276 | 28,415 | 63,634 | 72,567 | ||||||||||||||
Other income, net | 6,093 | 6,093 | 8,976 | 8,976 | ||||||||||||||
Income before income tax provision | 19,369 | 34,508 | 72,610 | 81,543 | ||||||||||||||
Income tax provision | 6,106 | 5,600 | (4) | 11,706 | 25,390 | 3,248 | (4) | 28,638 | ||||||||||
Net income | $ | 13,263 | $ | 22,802 | $ | 47,220 | $ | 52,905 | ||||||||||
Net income per share: | ||||||||||||||||||
Basic | $ | 0.14 | $ | 0.24 | $ | 0.50 | $ | 0.56 | ||||||||||
Diluted | $ | 0.13 | $ | 0.23 | $ | 0.48 | $ | 0.54 | ||||||||||
Weighted average shares: | ||||||||||||||||||
Basic | 95,557 | 95,557 | 94,622 | 94,622 | ||||||||||||||
Diluted | 99,635 | 99,635 | 98,158 | 98,158 |
(1) | Represents stock-based compensation and payroll taxes attributed to stock option exercises. |
(2) | 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. |
(3) | Represents a special charge for a loss contingency reserve related to our Computer Associates intellectual property litigation. |
(4) | Represents the tax effect of all adjustments. |
Quest Reports Fourth Quarter and Fiscal 2005 Results – page 8 of 9
QUEST SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, 2005 | December 31, 2004 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 121,025 | $ | 118,157 | ||
Short-term marketable securities available for sale | 74,398 | 15,892 | ||||
Accounts receivable, net | 116,052 | 98,800 | ||||
Prepaid expenses and other current assets | 15,202 | 12,528 | ||||
Deferred income taxes | 10,623 | 13,075 | ||||
Total current assets | 337,300 | 258,452 | ||||
Property and equipment, net | 82,845 | 52,761 | ||||
Long-term marketable securities | 47,538 | 163,527 | ||||
Amortizing intangible assets, net | 68,975 | 41,404 | ||||
Goodwill | 428,418 | 323,903 | ||||
Other assets | 4,828 | 3,304 | ||||
Total assets | $ | 969,904 | $ | 843,351 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 3,756 | $ | 4,135 | ||
Obligation under repurchase agreement | — | 12,632 | ||||
Accrued compensation | 32,696 | 27,802 | ||||
Other accrued expenses | 34,351 | 46,292 | ||||
Income taxes payable | 18,300 | 12,030 | ||||
Current portion of deferred revenue | 140,267 | 106,356 | ||||
Total current liabilities | 229,370 | 209,247 | ||||
Long-term liabilities: | ||||||
Long-term portion of deferred revenue | 34,980 | 20,897 | ||||
Deferred income taxes | 9,294 | 4,526 | ||||
Other long-term liabilities | 1,460 | 1,769 | ||||
Total long-term liabilities | 45,734 | 27,192 | ||||
Shareholders’ equity | 694,800 | 606,912 | ||||
Total liabilities and shareholders’ equity | $ | 969,904 | $ | 843,351 | ||
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Quest Reports Fourth Quarter and Fiscal 2005 Results – page 9 of 9
QUEST SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 16,127 | $ | 13,263 | $ | 41,798 | $ | 47,220 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 9,728 | 5,860 | 30,734 | 26,420 | ||||||||||||
Compensation expense associated with stock option grants | 898 | 512 | 2,930 | 1,778 | ||||||||||||
Deferred income taxes | (777 | ) | 6,702 | (834 | ) | 7,314 | ||||||||||
Gain on sale of Vista Plus product suite | — | — | (39 | ) | (29,574 | ) | ||||||||||
Tax benefit related to stock option exercises | 1,125 | 1,112 | 6,060 | 3,909 | ||||||||||||
Provision for bad debts | 187 | 124 | 264 | 236 | ||||||||||||
In-process research and development | (110 | ) | — | 7,840 | 6,980 | |||||||||||
Litigation loss provision | — | 11,000 | — | 16,000 | ||||||||||||
Changes in operating assets and liabilities, net of effects of acquisitions: | ||||||||||||||||
Accounts receivable | (31,001 | ) | (28,220 | ) | (20,519 | ) | (34,290 | ) | ||||||||
Prepaid expenses and other current assets | (4,615 | ) | (1,196 | ) | (5,616 | ) | (1,472 | ) | ||||||||
Other assets | (518 | ) | 4,246 | (1,468 | ) | 3,870 | ||||||||||
Accounts payable | 1,035 | (1,531 | ) | (1,045 | ) | (829 | ) | |||||||||
Accrued compensation | 6,772 | 5,706 | 4,879 | 7,747 | ||||||||||||
Other accrued expenses | 6,697 | 2,349 | 2,590 | (3,285 | ) | |||||||||||
Litigation settlement payment | — | — | (16,000 | ) | — | |||||||||||
Income taxes payable | 8,317 | (7,344 | ) | 7,706 | 2,619 | |||||||||||
Deferred revenue | 29,828 | 25,617 | 43,976 | 41,371 | ||||||||||||
Other liabilities | (110 | ) | (216 | ) | (1,343 | ) | 92 | |||||||||
Net cash provided by operating activities | 43,583 | 37,984 | 101,913 | 96,106 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchases of property and equipment | (6,875 | ) | (3,863 | ) | (41,109 | ) | (31,873 | ) | ||||||||
Cash paid for acquisitions, net of cash acquired | (5,316 | ) | (369 | ) | (120,621 | ) | (96,733 | ) | ||||||||
Proceeds from sale of Vista Plus product suite | — | — | 2,039 | 22,515 | ||||||||||||
Purchases of marketable securities | — | (9,994 | ) | — | (10,001 | ) | ||||||||||
Sales and maturities of marketable securities | 1,290 | 12,948 | 56,272 | 40,446 | ||||||||||||
Net cash used in investing activities | (10,901 | ) | (1,278 | ) | (103,419 | ) | (75,646 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||||||
Proceeds from repurchase agreement | — | — | 10,008 | 67,581 | ||||||||||||
Repayment of repurchase agreement | (10,171 | ) | (14,980 | ) | (22,896 | ) | (55,492 | ) | ||||||||
Repayment of notes payable | — | — | (51 | ) | (769 | ) | ||||||||||
Repayment of capital lease obligations | (54 | ) | (125 | ) | (324 | ) | (400 | ) | ||||||||
Proceeds from the exercise of stock options | 6,148 | 9,676 | 13,295 | 16,704 | ||||||||||||
Proceeds from employee stock purchase plan | — | — | — | 4,797 | ||||||||||||
Net cash provided by (used in) financing activities | (4,077 | ) | (5,429 | ) | 32 | 32,421 | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | 1,664 | (2,504 | ) | 4,342 | (2,194 | ) | ||||||||||
Net increase in cash and cash equivalents | 30,269 | 28,773 | 2,868 | 50,687 | ||||||||||||
Cash and cash equivalents, beginning of period | 90,756 | 89,384 | 118,157 | 67,470 | ||||||||||||
Cash and cash equivalents, end of period | $ | 121,025 | $ | 118,157 | $ | 121,025 | $ | 118,157 | ||||||||