Quest Software: Fiscal 3Q11 Financial Results

(in US$ millions)	3Q10	3Q11	9 mo. 10	9 mo. 11
Revenues	193.0	220.4	550.3	611.5
*Growth*		14%		*11%*
Net income (loss)	28.5	21.5	61.5	31.4

Quest Software, Inc. reported financial results for the quarter ended September 30, 2011.

Total revenues were $220.4 million, a 14.2% increase compared to the prior year’s third quarter revenues of $193.0 million.

Total revenues for the nine months ended September 30, 2011, were $611.5 million, an 11.1% increase compared to $550.3 million for the same period in 2010.

Operating margins were 13.6% and 7.4% for the three months and nine months ended September 30, 2011, respectively as compared to 16.9% and 16.2% for the three and nine months ended September 30, 2010, respectively.

On a non-GAAP basis, operating margins were 22.4% and 16.5% for the three and nine months ended September 30, 2011, respectively.

Cash and investments at September 30, 2011, totaled $256.7 million, a decrease of $24.4 million over the comparable balance at June 30, 2011. The decrease was primarily due to stock repurchases of $46.8 million during the quarter. Cash flow from operations was $23.7 million for the three months ended September 30, 2011.

"Overall, this was a solid quarter for us on balance," said Doug Garn, president and CEO of Quest Software. "Our primary focus as we close out this year is to ensure that we execute well going into 2012 and continue to deliver tangible value to our customers."

GAAP Results
Quest Software’s net income for the third quarter of 2011 was $21.5 million, or $0.25 per fully diluted share. This compares to net income of $28.5 million, or $0.31 per share on a fully diluted basis, for the third quarter of 2010. Operating margin was 13.6% in the third quarter of 2011 compared to 16.9% in the comparable period of 2010, resulting in operating income of $29.9 million, which compares to $32.6 million for the corresponding period in 2010. Net income for the nine months ended September 30, 2011, was $31.4 million, or $0.35 per fully diluted share compared to net income of $61.5 million, or $0.66 per fully diluted share for the same period in 2010.

Non-GAAP Results
On a non-GAAP basis, net income for the third quarter of 2011 was $35.3 million, or $0.41 per fully diluted share. This compares to non-GAAP net income of $36.7 million, or $0.39 per share on a fully diluted basis, for the third quarter of 2010. The non-GAAP operating margin was 22.4% in the third quarter of 2011, resulting in non-GAAP operating income of $49.4 million, compared to non-GAAP operating margin and operating income of 24.5% and $47.4 million, respectively, for the corresponding period in 2010. For the nine months ended September 30, 2011, non-GAAP net income was $74.9 million, or $0.83 per fully diluted share. This compares to non-GAAP net income of $90.2 million, or $0.98 per fully diluted share, for the nine months ended September 30, 2010. The non-GAAP operating margin was 16.5% for the nine months ended September 30, 2011, resulting in non-GAAP operating income of $101.2 million, compared to non-GAAP operating margin and operating income of 23.3% and $128.5 million, respectively, in the comparable period of 2010.