Quest Software, Inc. today reported financial results for the quarter ended June 30, 2010. Total revenues were $186.1 million, a 13.3% increase compared to the prior year’s second quarter revenue of $164.3 million, while license revenues grew 25.1% to $77.1 million. Total revenues for the six months ended June 30, 2010, were $357.3 million, an 8.3% increase compared to $329.9 million for the same period in 2009. Operating margins increased to 17.7% and 15.9% for the three and six months ended June 30, 2010, respectively, as compared to 13.0% and 12.1% for the three and six months ended June 30, 2009, respectively. On a non-GAAP basis, operating margin was 24.1% and 22.7% for the three and six months ended June 30, 2010.
Cash and investments at June 30, 2010, totaled $439.2 million, an increase of $13.3 million over the comparable balance at March 31, 2010. Cash flow from operations was $30.5 million for the three months ended June 30, 2010.
"Overall, this was a strong quarter," said Doug Garn, president and CEO of Quest Software. "We realized a marked improvement in license growth which generated the best pro forma operating margin performance for a second quarter in our company’s history. Furthermore, as announced previously, our acquisition of Völcker Informatik strengthens our Identity and Access Management solutions. In addition, our pending acquisition of Surgient, announced today, will expand our footprint within the virtualization management market by enabling our customers to rapidly and affordably deploy a private cloud-based infrastructure.‖
Quest Software’s net income for the second quarter of 2010 was $17.4 million, or $0.19 per fully diluted share. This compares to net income of $20.5 million, or $0.21 per share on a fully diluted basis, for the second quarter of 2009. Operating margins increased year-over-year from 13.0% to 17.7% in the second quarter, resulting in operating income of $33.0 million, which compares to $21.3 million for the corresponding period in 2009. Net income for the six months ended June 30, 2010, was $33.0 million, or $0.36 per fully diluted share compared to net income of $30.4 million, or $0.32 per fully diluted share for the same period in 2009.
On a non-GAAP basis, net income for the second quarter of 2010 was $29.3 million, or $0.32 per fully diluted share. This compares to non-GAAP net income of $28.1 million, or $0.29 per share on a fully diluted basis, for the second quarter of 2009. The non-GAAP operating margin was 24.1% in the second quarter of 2010, resulting in non-GAAP operating income of $44.8 million, compared to non-GAAP operating margin and operating income of 20.6% and $33.8 million, respectively, for the corresponding period in 2009. For the six months ended June 30, 2010, non-GAAP net income was $53.5 million, or $0.58 per fully diluted share. This compares to non-GAAP net income of $49.6 million, or $0.52 per fully diluted share, for the six months ended June 30, 2009. The non-GAAP operating margin was 22.7% for the six months ended June 30, 2010, resulting in non-GAAP operating income of $81.1 million, compared to non-GAAP operating margin and operating income of 19.9% and $65.8 million, respectively, in the comparable period of 2009.
Non-GAAP results exclude the after-tax effects of amortization of intangible assets acquired with business combinations, stock-based compensation expenses, acquisition related costs and expenses associated with our completed stock option investigation. A reconciliation of GAAP to non-GAAP financial results is included with this press release.
Quest Software’s management prepares and uses 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 non-GAAP reporting provides a meaningful representation of the Company’s on-going economic performance and therefore uses non-GAAP reporting internally to evaluate and manage the Company’s operations. Management believes excluding charges such as those described above from its GAAP results facilitates investors' understanding of the Company’s ongoing business operating results. These non-GAAP financial measures also facilitate comparisons to the operating results of the Company’s competitors and provide investors with transparency with respect to the supplemental information used by management in its operational and financial decision making. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for measures of financial performance prepared in conformity with GAAP.
Second Quarter 2010 Conference Call Information
Quest Software will host a conference call today, Thursday, July 29, 2010, at 2:00 p.m. Pacific Time, to discuss its results. A simultaneous webcast of the conference call will be available on Quest Software’s website in the Investor Relations section at www.quest.com/company/investor-relations.aspx . A webcast replay will be available on the same website through July 29, 2011. An audio replay of the conference call will also be available through August 5, 2010, by dialing (888) 203-1112 (from the U.S. or Canada) or 719-457-0820 (outside the U.S. and Canada), using confirmation code: 2147283.