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Quest Software Reports Second Quarter 2011 Results

Quest Software, Inc. today reported financial results for the quarter ended June 30, 2011. Total revenues were $203.0 million, a 9.1% increase compared to the prior year’s second quarter revenues of $186.1 million. Total revenues for the six months ended June 30, 2011, were $391.1 million, a 9.5% increase compared to $357.3 million for the same period in 2010. Operating margins were 5.0% and 4.0% for the three months and six months ended June 30, 2011, respectively as compared to 17.7% and 15.9% for the three and six months ended June 30, 2010, respectively. On a non-GAAP basis, operating margins were 13.7% and 13.2% for the three and six months ended June 30, 2011, respectively.   

Cash and investments at June 30, 2011, totaled $281.2 million, a decrease of $114.8 million over the comparable balance at March 31, 2011. The decrease was primarily due to stock repurchases of $121.4 million during the quarter. Cash flow from operations was $42.6 million for the three months ended June 30, 2011.

“We were not pleased with Q2 results but feel confident about the strategic direction in which Quest is headed,” said Doug Garn, President and CEO of Quest Software. “Quest’s balance sheet remains healthy, and we are optimistic that we will see the returns from the increased investments that we have made in our business around the world. We will continue to carefully evaluate our investments to manage our profitability, but will not lose sight of our long-term strategy to deliver value to our customers and a better return for our stockholders.”

GAAP Results

Quest Software’s net income for the second quarter of 2011 was $6.3 million, or $0.07 per fully diluted share. This compares to net income of $17.4 million, or $0.19 per share on a fully diluted basis, for the second quarter of 2010. Operating margin was 5.0% in the second quarter of 2011 compared to 17.7% in the comparable period of 2010, resulting in operating income of $10.2 million, which compares to $33.0 million for the corresponding period in 2010. Net income for the six months ended June 30, 2011, was $10.0 million, or $0.11 per fully diluted share compared to net income of $33.0 million, or $0.36 per fully diluted share for the same period in 2010.

Non-GAAP Results

On a non-GAAP basis, net income for the second quarter of 2011 was $20.6 million, or $0.23 per fully diluted share. This compares to non-GAAP net income of $29.3 million, or $0.32 per share on a fully diluted basis, for the second quarter of 2010. The non-GAAP operating margin was 13.7% in the second quarter of 2011, resulting in non-GAAP operating income of $27.8 million, compared to non-GAAP operating margin and operating income of 24.1% and $44.8 million, respectively, for the corresponding period in 2010. For the six months ended June 30, 2011, non-GAAP net income was $39.5 million, or $0.43 per fully diluted share. This compares to non-GAAP net income of $53.5 million, or $0.58 per fully diluted share, for the six months ended June 30, 2010. The non-GAAP operating margin was 13.2% for the six months ended June 30, 2011, resulting in non-GAAP operating income of $51.8 million, compared to non-GAAP operating margin and operating income of 22.7% and $81.1 million, respectively, in the comparable period of 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 Business Operations and Advance Technology 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.

Second Quarter 2011 Conference Call Information

Quest Software will host a conference call today, Tuesday, August 2, 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 August 2, 2012. An audio replay of the conference call will also be available through August 7, 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: 5516543.

Published Wednesday, August 03, 2011 5:28 AM by David Marshall
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