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Quest Software Reports First Quarter 2011 Results

Quest Software, Inc. (Nasdaq: QSFT) today reported financial results for the quarter ended March 31, 2011. Total revenues were $188.2 million, a 9.9% increase compared to the prior year’s first quarter revenues of $171.2 million. Operating margins were 2.9% and 13.9% for the three months ended March 31, 2011 and 2010, respectively. On a non-GAAP basis, operating margin was 12.7% for the three months ended March 31, 2011.   

“We have strong aspirations for 2011 and the next few years, and are making key investments to attain our targets,” said Doug Garn, President and CEO of Quest Software. “The first quarter saw us make substantive progress with the opening of our Business Operations and Advanced Technology Center in Cork, Ireland, the completion of the BakBone acquisition, and the continuation of our internal infrastructure and systems transformation, which is focused on incorporating key sales-enablement applications to support sales and the back-office. With the recent introduction of our six solution areas and strong partnerships on a global basis, we remain committed to our on-going strategy of optimizing efficiency and productivity for our customers.”

GAAP Results

Quest Software’s net income for the first quarter of 2011 was $3.6 million, or $0.04 per fully diluted share. This compares to net income of $15.6 million, or $0.17 per share on a fully diluted basis, for the first quarter of 2010. Operating margin was 2.9% in the first quarter of 2011 compared to 13.9% in the comparable period of 2010, resulting in operating income of $5.4 million, which compares to $23.8 million for the corresponding period in 2010.

Non-GAAP Results

On a non-GAAP basis, net income for the first quarter of 2011 was $19.0 million, or $0.20 per fully diluted share. This compares to non-GAAP net income of $24.3 million, or $0.26 per share on a fully diluted basis, for the first quarter of 2010. The non-GAAP operating margin was 12.7% in the first quarter of 2011, resulting in non-GAAP operating income of $23.9 million, compared to non-GAAP operating margin and operating income of 21.2% and $36.3 million, respectively, for the corresponding period in 2010.

Non-GAAP results exclude the after-tax effects of amortization of intangible assets acquired with business combinations, stock-based compensation expenses, acquisition related costs, retention bonus and severance costs related to the establishment of our shared services center in Cork, Ireland, and patent infringement litigation costs. 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.

First Quarter 2011 Conference Call Information

Quest Software will host a conference call today, Tuesday, May 3, 2011, 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 May 3, 2012. An audio replay of the conference call will also be available through May 8, 2011, by dialing (888) 203-1112 (from the U.S. or Canada) or 719-457-0820 (outside the U.S. and Canada), using confirmation code: 2293168.

Published Wednesday, May 04, 2011 5:33 AM by David Marshall
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