Quest Software Reports Financial Results for Q4 and Fiscal Year 2007

Business Wire, Feb 5, 2008

Company Posts $631 Million in Revenue for 2007; Double Digit Revenue Growth for Both the Fourth Quarter and the Year

ALISO VIEJO, Calif. -- 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.

Fourth Quarter and Fiscal 2007 Conference Call Information

Quest Software will host a conference call today, Tuesday, February 5, 2008 at 2:00 p.m. Pacific Time, to discuss its results. A simultaneous Web cast of the conference call will be available on Quest Software's Web site in the Investors - IR Events section at www.quest.com. A Web cast replay will be available on the same Web site through February 5, 2009. An audio replay of the call will also be available through February 12, 2008 by dialing (888) 203-1112 (from the U.S. or Canada) or (719) 457-0820 (outside the U.S. and Canada), using confirmation code: 1815438.

About Quest Software, Inc.

Quest Software, Inc. delivers innovative products that help organizations get more performance and productivity from their applications, databases and Windows infrastructure. Through a deep expertise in IT operations and a continued focus on what works best, Quest helps more than 50,000 customers worldwide meet higher expectations for enterprise IT. Quest Software can be found in offices around the globe and at www.quest.com.

Quest and Quest Software are registered trademarks of Quest Software, Inc. The Quest Software logo and all other Quest Software product or service names and slogans are registered trademarks or trademarks of Quest Software, Inc. All other trademarks and registered trademarks are property of their respective owners.

Web Links Referenced in this Release:

Quest Software, Inc. - www.quest.com

Forward-Looking Statements

This release and the matters to be discussed on the conference call may include predictions, estimates and other information that might be considered forward-looking statements, including statements relating to expectations of future revenue and operating margin performance. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ from those anticipated as a result of various factors, including: the impact of adverse changes in general economic conditions on our relationships with customers, strategic partners and vendors; reductions or delays in information technology spending; variations in demand or the size and timing of customer orders; competitive conditions in our various product areas; rapid technological change; risks associated with the development and market acceptance of new products and product strategies; disruptions caused by acquisitions of companies and/or technologies; fluctuating currency exchange rates and risks associated with international operations; the need to attract and retain qualified employees; and other risks inherent in software businesses. For a discussion of these and other related risks, please refer to our recent SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2006 and our Quarterly Reports on Form 10-Q for subsequent periods, which are available on the SEC's website at www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date thereof.