Altiris 8-K Altiris Reports Strong Financial Results for Q2 of Fiscal Year 2006

Altiris Reports Strong Financial Results for Q2 of Fiscal Year 2006

Company Announces $50 million Stock Repurchase Program

SALT LAKE CITY — July 31, 2006 — Altiris, Inc. (Nasdaq: ATRS), a pioneer of service-oriented management solutions, today announced financial results for the second quarter of fiscal year 2006, ended June 30, 2006.

For the second quarter, total revenue increased 20 percent over the prior year to $55.6 million. Net income for the second quarter was $2.8 million, or $0.10 per diluted share, including charges of $1.7 million for the amortization of acquired intellectual property, $995,000 for amortization of intangible assets, and $3.3 million in share-based compensation as required by FAS 123(R).

Non-GAAP net income increased strongly to $7.3 million, or $0.25 per diluted share, from $1.9 million, or $0.07 per diluted share, reported in the second quarter of 2005. Non-GAAP net income excludes the above-mentioned charges and applies a tax rate of 35 percent.

The Company closed the second quarter with $168.3 million in cash and investments.

Altiris also announced that the Board of Directors of the Company authorized the repurchase of up to $50 million of the Company’s outstanding common stock. The Company intends to accomplish such repurchases by implementing a share repurchase program.

“We had strong performance across the business in the second quarter and are particularly pleased to report license revenue growth of 10 percent, as well as strong operating improvements,” commented Greg Butterfield, president and CEO of Altiris. “Altiris^(R) Software Virtualization Solution^(TM) and our security offerings were influential in revenue growth from existing suites. We experienced continued demand for Altiris^(R) Total Management Suite software, as well as strength in revenue from Altiris^(R) Asset and Server Management Suites^(TM) software in the quarter.

“Strength in our go-to-market model and in particular our value added reseller (VAR) and systems integrator (SI) relationships also contributed to growth in the quarter. We had good business activity with OEM partners Dell and HP, where revenue contributions were in line with our expectations.

“Based on the current price of our common stock, we believe that a stock repurchase program is a prudent use of capital. The approval to repurchase shares emphasizes our focus on shareholder value and our confidence in Altiris’ future.

“With the first half of 2006 successfully behind us, we are looking ahead with optimism. Our position as a leading service-oriented management company uniquely positions Altiris to be more responsive to customers’ needs and provides a platform for the quick integration of new technologies. Over the coming months, we will focus on further establishing Altiris as a software development platform, investing in our channel to support growing trends, and continuing to work with key industry partners to drive technology development and new business opportunities,” concluded Butterfield.

Earnings Call Information
Altiris, Inc. will broadcast a conference call discussing the company’s second quarter fiscal year 2006, Monday, July 31, 2006 beginning at 5:00 p.m. Eastern Time. A live Webcast of the call will be available from the investor relations section of the company’s corporate website athttp://phx.corporate-ir.net/phoenix.zhtml?c=131071&p=irol-irhome and via replay beginning two hours after the completion of the call. An audio replay of the call will also be available to investors beginning at 7:00 p.m. ET on July 31, 2006 through August 2, 2006, by dialing (800) 405-2236 and entering the passcode 11065216. Callers outside the US and Canada may access the replay by dialing (303) 590-3000 and entering the passcode 11065216.

Non-GAAP Financial Measures
In this earnings release and during our earnings conference call as described above, we use or plan to discuss certain non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States of America, or GAAP. A reconciliation between non-GAAP and GAAP measures can be found in the accompanying tables and on the investor relations section of our website at www.altiris.com. We believe that, while these non-GAAP measures are not a substitute for GAAP results, they provide a basis for evaluating the Company’s cash requirements for ongoing operating activities. These non-GAAP measures have been reconciled to the nearest GAAP measure as required under the rules promulgated by the United States Securities and Exchange Commission. We compute non-GAAP net income by adjusting GAAP net income before taxes for amortization of acquisition-related intellectual property, amortization of other acquired intangible assets such as customer lists and work force, restructuring charges and stock-based compensation. In addition, we used a non-GAAP tax rate of 35 percent for the second quarters of 2006 and 2005.

About Altiris
Altiris Inc. is a leading provider of service-oriented management software that enables IT organizations to easily manage, secure and service heterogeneous IT assets. Flexible solutions from Altiris(R) help IT align services to drive business objectives, deliver audit-ready security, automate tasks, and reduce the cost and complexity of management. For more information, visitwww.altiris.com.

Altiris is a registered trademark of Altiris Inc. in the United States and in other countries. The other company names or products mentioned are or may be trademarks of their respective owners.

Note on Forward-Looking Statements
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including but not limited to, statements regarding our optimism for the future, our leadership in service-oriented management and our unique position in the market, our continuing efforts to further establish Altiris as a software development platform, our continuing investment in our channel and ongoing work with key industry partners to drive technology development and new business opportunities, and the potential stock repurchases and implementation of a stock repurchase program, the amount of shares of common stock to be purchased pursuant to such stock repurchase program, and the belief that such program is a prudent use of capital. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ, including, but not limited to, the following: changes in the demand for our products; our inaccurate assessment of market demand or IT technology trends; difficulties in establishing Altiris as a software development platform; errors or bugs in our software products; our inability to compete effectively in an increasingly competitive market; changes in economic conditions generally or technology spending in particular; market conditions and specific financial market conditions affecting our common stock; changes in the competitive dynamics of our markets, including strategic alliances and consolidation among our competitors or strategic partners; deterioration of our relationships with Dell, HP, Fujitsu Siemens Computers, Microsoft and other OEMs and strategic partners; our inability to develop and expand our VAR, systems integrator and other distribution channels; our inability to implement and maintain adequate internal systems and effective internal control over financial reporting, which may result in unexpected fluctuations in our quarterly financial results; our inability to align our expenses with anticipated revenues and Company strategy; our inability to manage expenses; our inability to achieve the anticipated benefits of acquired businesses; slower than expected closure rates on larger transactions, including transactions involving our more complex product suites; disruptions in our business and operations as a result of acquisitions; difficulties and delays in product development and bringing products to market; the length and complexity of our product sales cycle; our failure to continue to meet the sophisticated and changing needs of our customers; risks inherent in doing business internationally; changes in relevant accounting standards and securities laws and regulations, and such other risks as identified in our Quarterly Report on Form 10-Q for the period ended March 31, 2006 as filed with the Securities and Exchange Commission and all subsequent filings, which contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. Altiris assumes no obligation, and does not intend, to update these forward-looking statements.

(TABLES TO FOLLOW)

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Altiris contact:	Investor contacts:
Susan Richards	Erica Abrams
Altiris Inc.	The Blueshirt Group for Altiris
801-805-2783	415-217-7722
srichards@altiris.com	erica@blueshirtgroup.com

Altiris, Inc.
Consolidated Balance Sheets
(Unaudited)
(in 000’s)

	June 30, 2006			December 31, 2005
ASSETS
Current assets:
Cash and cash equivalents	$	124,214		$	110,838
Available-for-sale securities		44,119			36,110
Accounts receivable, net		40,794			45,547
Prepaid expenses and other current assets		7,277			3,383
Deferred tax asset		5,929			5,861
Total current assets		222,333			201,739
Property and equipment, net		6,905			6,564
Intangible assets, net		28,385			33,936
Goodwill		68,068			68,068
Available-for-sale securities, non-current		—			6,320
Other assets		287			330
Total Assets	$	325,978		$	316,957
						��
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of capital lease obligations	$	1,345		$	1,518
Accounts payable		2,577			2,406
Accrued salaries and benefits		10,089			12,508
Other accrued expenses		3,836			7,011
Deferred revenue		54,166			57,270
Total current liabilities		72,013			80,713
Capital lease obligations, net of current portion		1,039			1,634
Other accrued expenses, non-current		30			57
Deferred tax liability, non-current		3,971			5,556
Deferred revenue, non-current		5,970			4,857
Total liabilities		83,023			92,817
Stockholders’ equity:
Common Stock		3			3
Additional paid-in capital		224,747			217,087
Deferred compensation		—			(3,031	)
Accumulated other comprehensive income		(506	)		(397	)
Retained earnings		18,711			10,478
Total stockholders’ equity		242,955			224,140
Total liabilities and stockholders’ equity	$	325,978		$	316,957

Altiris, Inc.
Consolidated Statements of Operations
(Unaudited)
(in 000’s, except per share data)

	Three Months Ended						Six Months Ended
	June 30						June 30
	2006			2005			2006			2005
Revenue:
Software	$	28,605		$	26,054		$	60,060		$	54,781
Services		27,015			20,277			52,964			38,483
Total revenue		55,620			46,331			113,024			93,264
Cost of revenue:
Software		284			111			431			263
Amortization of acquired core technology		1,668			2,603			3,493			4,419
Services (inclusive of share-based compensation of $138, $86, $275 and $86, respectively)		9,412			6,808			18,539			12,772
Total cost of revenue		11,364			9,522			22,463			17,454
Gross profit		44,256			36,809			90,561			75,810
Operating expenses:
Sales and marketing (inclusive of share-based compensation of $1,238, $918, $2,303 and $944, respectively)		22,290			21,741			43,482			39,333
Research and development (inclusive of share-based compensation of $1,112, $551, $2,111 and $558, respectively)		11,315			11,194			22,598			20,699
General and administrative (inclusive of share-based compensation of $781, $486, $1,504 and $507, respectively)		6,793			5,830			12,574			11,889
Amortization of intangible assets		995			952			2,058			2,017
Restructuring charges		—			—			42			—
Write-off of in-process research and development		—			—			—			1,600
Total operating expenses		41,393			39,717			80,754			75,538
Income (loss) from operations		2,863			(2,908	)		9,807			272
Other income, net		2,412			10,208			3,888			10,255
Income before income taxes and cumulative effect of a change in accounting principle		5,275			7,300			13,695			10,527
Provision for income taxes		(2,436	)		(2,726	)		(5,813	)		(3,895	)
Income before cumulative effect of a change in accounting principle		2,839			4,574			7,882			6,632
Cumulative effect of a change in accounting principle (net of tax provision of $0, $0, $221 and $0, respectively)		—			—			351			—
Net income	$	2,839		$	4,574		$	8,233		$	6,632
Basic net income per common share
Before cumulative effect of a change in accounting principle	$	0.10		$	0.17		$	0.28		$	0.24
Cumulative effect of a change in accounting principle		—			—			0.01			—
Net income	$	0.10		$	0.17		$	0.29		$	0.24
Diluted net income per common share
Before cumulative effect of a change in accounting principle	$	0.10		$	0.16		$	0.27		$	0.23
Cumulative effect of a change in accounting principle		—			—			0.01			—
Net income	$	0.10		$	0.16		$	0.29		$	0.23
Basic shares		28,445			27,441			28,163			27,368
Diluted shares		29,124			28,327			28,700			28,416

Altiris, Inc.
Consolidated Statements of Operations
(Unaudited)
(in 000’s, except per share data)

	Three Months Ended						Six Months Ended
	June 30						June 30
	2006			2005			2006			2005
Non-GAAP Adjustments
GAAP income before income taxes and cumulative effect of a change in accounting principle	$	5,275		$	7,300		$	13,695		$	10,527
Add back:
Amortization of acquired core technology		1,668			2,603			3,493			4,419
Amortization of intangible assets		995			952			2,058			2,017
Write-off of in-process research and development		—			—			—			1,600
Restructuring charges		—			—			42			—
Litigation settlement		—			(10,000	)		—			(10,000	)
Stock-based compensation		3,269			2,041			6,193			2,095
Non-GAAP income before income taxes and cumulative effect of a change in accounting principle		11,207			2,896			25,481			10,658
Non-GAAP provision for income taxes (35%)		(3,922	)		(1,014	)		(8,918	)		(3,730	)
Non-GAAP net income before cumulative effect of a change in accounting principle	$	7,285		$	1,882		$	16,563		$	6,928
Non-GAAP net income per share:
Basic	$	0.26		$	0.07		$	0.59		$	0.25
Diluted	$	0.25		$	0.07		$	0.58		$	0.24
Shares used to compute Non-GAAP net income per share:
Basic		28,445			27,441			28,163			27,368
Diluted		29,124			28,327			28,700			28,416