Quest Software, Inc. (Nasdaq: QSFT) today reported preliminary operating results for the fourth quarter and fiscal year ended December 31, 2007. Total revenues increased approximately 12% year-over-year to $186.7 million in the fourth quarter of 2007 compared to fourth quarter 2006 revenue of $167.3 million. For the year, total revenues increased approximately 12% to $631.0 million in fiscal 2007 compared to total revenues of $561.6 million in fiscal 2006.

GAAP Results

Quest Software’s GAAP net income for the fourth quarter of 2007 was $24.1 million, or $0.23 per diluted share. The GAAP operating margin was 12% in the fourth quarter, resulting in GAAP operating income of $22.8 million. Net income for the full year ended December 31, 2007 was $61.9 million or $0.59 per diluted share versus net income of $59.0 million or $0.57 per diluted share for the comparable period in 2006. Operating income for fiscal 2007 was $68.3 million, a 9% increase over the same period in 2006. Quest generated cash flow from operations of $41.9 million in the December 2007 quarter.

Non-GAAP Results

On a non-GAAP basis, net income for the fourth quarter 2007 was $27.8 million or $0.26 per diluted share. The non-GAAP operating margin was 20% for the fourth quarter, resulting in pro-forma operating income of $38.0 million. Non-GAAP net income for fiscal 2007 was $94.8 million resulting in $0.90 per diluted share. Non-GAAP operating income for fiscal 2007 was $118.7 million, a 2% increase over fiscal 2006.

Non-GAAP results exclude the after-tax effects of amortization of intangible assets acquired with business combinations, share-based compensation expenses, the write-off of in-process research and development, professional services fees related to our restatement efforts and gain from the sale of our corporate aircraft. A reconciliation of GAAP to non-GAAP financial results is included with this press release.

“Our positive financial and operating results for the fourth quarter and the full year demonstrate the on-going success in helping customers manage their IT environments that is allowing us to continue growing the business,” said Vinny Smith, chairman and chief executive officer, Quest Software. “We made a number of strategic acquisitions during 2007 in key areas like SharePoint, desktop management and virtualization that all position us to meet an even broader set of customer needs moving forward in 2008 and beyond.”

Financial Outlook

Quest Software management offers the following guidance for the twelve months ending December 31, 2008:

• Annual revenue is expected to be in the range of $705 million to $720 million;
• GAAP operating margin is expected to be in the range of 11.0% to 12.0%. Our GAAP guidance is based on information available as of the date of this release;
• Non-GAAP operating margin is expected to be in the range of 16.5% to 17.5%. The non-GAAP guidance excludes approximately $24.7 million in amortization of acquisition-related intangible assets, $12.9 million related to share-based compensation expense attributable to outstanding unvested shares as of December 31, 2007 and $1.5 million in professional services fees for restatement related matters.