Company Sees Improvement across Several Key
Areas including Revenue, Earnings and Pipeline
Quality Systems, Inc. (NASDAQ:QSII) announced today results for
its fiscal 2015 third quarter ended December 31, 2014.
Revenues for the fiscal 2015 third quarter reached $123.4
million, an increase of 13 percent when compared with $108.9
million reported for the fiscal 2014 third quarter. Net income for
the 2015 third quarter was $6.7 million versus a net loss of $12.6
million in the 2014 third quarter, when the Company recorded an
impairment charge in its Hospital Solutions division.
On a GAAP basis, fully diluted earnings per share was $0.11 in
the fiscal 2015 third quarter compared with fully diluted loss per
share of $0.21 for the comparable period a year ago. On a non-GAAP
basis, fully diluted earnings per share for the fiscal 2015 third
quarter was $0.16, an increase of 45 percent from $0.11 reported in
the fiscal 2014 third quarter.
During the quarter, the Company’s pipeline grew to $162.3
million, demonstrating yet another quarter of improvement. At
quarter-end, the Company’s liquidity position was strong, with
$124.8 million of cash and investments.
“We are pleased that this quarter’s financial performance
clearly demonstrates the progress the Company is making across all
fronts of our business. The momentum we have been building over the
past several quarters resulted in increases in both revenue and
earnings, primarily driven by tailwinds from our Revenue Cycle
Management Services division and broader adoption of our
Mirth-based interoperability products. This, coupled with wider
acceptance of our population health and EDI solutions, all
contributed to the improvements we saw this quarter,” noted Steven
T. Plochocki, president and chief executive officer.
“We believe our recent growth is the cumulative effect of our
comprehensive product portfolio, which now spans 32 products. This
full spectrum offering is generating a more diversified revenue
stream, reaping stronger, steady growth. We expect this pattern to
continue as we help our clients navigate the ever-changing
healthcare landscape, and prepare them to adapt to what lies beyond
the horizon. We are continuously helping guide them through the
movement towards value-based healthcare by creating, strengthening
and introducing an extensive product and services offering that
arms providers with all the tools they need to deliver exceptional,
patient-centric, cost-effective care,” Plochocki concluded.
Quality Systems also announced that its Board of Directors
declared a quarterly cash dividend of seventeen and one-half cents
($0.175) per share on the Company’s outstanding shares of common
stock, payable to shareholders of record as of March 13, 2015 with
an anticipated distribution date of April 3, 2015. The $0.175 per
share cash dividend is pursuant to the Company’s current practice
to pay a regular quarterly dividend on the Company’s outstanding
shares of common stock, subject to Board review and approval, and
establishment of record and distribution dates by the Board prior
to the declaration and payment of each such quarterly dividend.
Quality Systems will host a conference call to discuss its
fiscal 2015 third quarter results on Thursday, January 22, 2015 at
10:00 AM ET (7:00 AM PT). All participants should dial
1-866-900-9499 at least ten minutes prior to the start of the call
and reference conference ID #66989201. International callers should
dial 1-937-502-2136. To hear a live Web simulcast or to listen to
the archived webcast following completion of the call, please visit
the Company’s website at www.qsii.com, click on the "Investors”
tab, then select "Conference Calls," to access the link to the
call. To listen to a telephone replay of the conference call,
please dial 800-585-8367 or 404-537-3406 and enter conference ID
#66989201. The replay will be available from approximately 1:00 PM
ET on Thursday, January 22, 2015, through 11:59 PM ET on Thursday,
January 29, 2015.
A transcript of the conference call will be made available on
the Company’s website at www.qsii.com.
About Quality Systems, Inc.
Irvine, Calif.-based Quality Systems, Inc. and its NextGen
Healthcare subsidiary develop and market computer-based practice
management, electronic health records and revenue cycle management
applications as well as connectivity products and services for
medical and dental group practices and small hospitals. Visit
www.qsii.com and www.nextgen.com for additional information.
SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS
This news release may contain forward-looking statements within
the meaning of the federal securities laws, including but not
limited to, statements regarding future events, developments in the
healthcare sector and regulatory framework, the Company's future
performance, as well as management's expectations, beliefs,
intentions, plans, estimates or projections relating to the future
(including, without limitation, statements concerning revenue, net
income, and earnings per share). Risks and uncertainties exist that
may cause the results to differ materially from those set forth in
these forward-looking statements. Factors that could cause the
anticipated results to differ from those described in the
forward-looking statements and additional risks and uncertainties
are set forth in Part I, Item A of our most recent Annual Report on
Form 10-K for the fiscal year ended March 31, 2014, including but
not limited to: the volume and timing of systems sales and
installations; length of sales cycles and the installation process;
the possibility that products will not achieve or sustain market
acceptance; seasonal patterns of sales and customer buying
behavior; impact of incentive payments under The American Recovery
and Reinvestment Act on sales and the ability of the Company to
meet continued certification requirements; the development by
competitors of new or superior technologies; the timing, cost and
success or failure of new product and service introductions,
development and product upgrade releases; undetected errors or bugs
in software; product liability; changing economic, political or
regulatory influences in the health-care industry; changes in
product-pricing policies; availability of third-party products and
components; competitive pressures including product offerings,
pricing and promotional activities; the Company's ability or
inability to attract and retain qualified personnel; possible
regulation of the Company's software by the U.S. Food and Drug
Administration; changes of accounting estimates and assumptions
used to prepare the prior periods' financial statements; and
general economic conditions. A significant portion of the Company's
quarterly sales of software product licenses and computer hardware
is concluded in the last month of a fiscal quarter, generally with
a concentration of such revenues earned in the final ten business
days of that month. Due to these and other factors, the Company's
revenues and operating results are very difficult to forecast. A
major portion of the Company's costs and expenses, such as
personnel and facilities, are of a fixed nature and, accordingly, a
shortfall or decline in quarterly and/or annual revenues typically
results in lower profitability or losses. As a result, comparison
of the Company's period-to-period financial performance is not
necessarily meaningful and should not be relied upon as an
indicator of future performance. The Company undertakes no
obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or
otherwise.
USE OF NON-GAAP FINANCIAL MEASURES
This news release contains certain non-GAAP (Generally Accepted
Accounting Principles) financial measures, which are provided only
as supplemental information. Investors should consider these
non-GAAP financial measures only in conjunction with the comparable
GAAP financial measures. These non-GAAP measures are not in
accordance with or a substitute for U.S. GAAP. Pursuant to the
requirements of Regulation G, the Company has provided a
reconciliation of non-GAAP financial measures to the most directly
comparable financial measure in the accompanying financial tables.
Other companies may calculate non-GAAP measures differently than
Quality Systems, which limits comparability between companies.
The Company believes that its presentation of non-GAAP diluted
earnings per share provides useful supplemental information to
investors and management regarding the Company's financial
condition and results. The Company calculates non-GAAP diluted
earnings per share by excluding acquisition costs, amortization of
acquired intangible assets, impairment of goodwill and other
assets, securities litigation defense costs, share-based
compensation, and other non-run-rate expenses from GAAP income
before provision for income taxes. The non-GAAP provision for
income taxes is calculated by excluding the income tax effect of
the non-GAAP adjustments.
QUALITY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(LOSS)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended December 31, Nine Months Ended December
31, 2014 2013 2014 2013
Revenues: Software and hardware $ 16,339 $ 14,114 $ 45,312 $ 45,648
Implementation and training services 3,658
5,046 16,964 19,430
System sales
19,997 19,160 62,276 65,078 Maintenance 43,045 39,763
125,985 118,684 Electronic data interchange services 19,051 16,637
56,276 49,874 Revenue cycle management and related services 20,392
16,178 54,517 47,660 Other services 20,939
17,116 62,783 48,168
Maintenance, EDI, RCM and other services 103,427
89,694 299,561 264,386
Total revenues 123,424 108,854
361,837 329,464 Cost of revenue:
Software and hardware 6,127 27,398 19,289 37,111 Implementation and
training services 4,584 7,466
18,423 21,572 Total cost of system
sales 10,711 34,864 37,712 58,683 Maintenance 7,365 5,642
21,064 16,206 Electronic data interchange services 11,956 10,276
35,970 31,722 Revenue cycle management and related services 14,246
11,736 40,154 34,144 Other services 10,082
8,537 32,423 26,054 Total
cost of maintenance, EDI, RCM and other services 43,649
36,191 129,611 108,126
Total cost of revenue 54,360
71,055 167,323 166,809
Gross profit 69,064 37,799 194,514 162,655 Operating
expenses: Selling, general and administrative 41,482 36,864 116,893
110,538 Research and development costs 18,468 13,175 51,602 26,404
Amortization of acquired intangible assets 904 1,219 2,795 3,673
Impairment of goodwill and other assets -
5,873 - 5,873 Total
operating expenses 60,854 57,131
171,290 146,488 Income (loss) from
operations 8,210 (19,332 ) 23,224 16,167 Interest income
(expense), net (82 ) 121 41 (53 ) Other income (expense), net
- 18 (17 ) (391 )
Income (loss) before income taxes 8,128 (19,193 ) 23,248 15,723
Provision for (benefit of) income taxes 1,452
(6,606 ) 6,659 5,244 Net income
(loss) $ 6,676 $ (12,587 ) $ 16,589 $ 10,479 Net income
(loss) per share: Basic $ 0.11 $ (0.21 ) $ 0.28 $ 0.18 Diluted $
0.11 $ (0.21 ) $ 0.27 $ 0.17 Weighted-average shares
outstanding: Basic 60,272 60,173 60,250 59,823 Diluted 60,855
60,173 60,813 59,984 Dividends declared per common share $
0.175 $ 0.175 $ 0.525 $ 0.525
QUALITY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
December 31, March 31, 2014 2014 ASSETS Current assets: Cash
and cash equivalents $ 113,640 $ 103,145 Restricted cash and cash
equivalents 2,330 4,351 Marketable securities 11,182 10,656
Accounts receivable, net 105,879 110,181 Inventories 665 834 Income
taxes receivable 3,391 8,366 Deferred income taxes, net 11,751
11,690 Other current assets 12,160 11,135
Total current assets 260,998 260,358 Equipment
and improvements, net 21,636 22,801 Capitalized software costs, net
38,497 39,152 Intangibles, net 27,645 33,016 Goodwill 72,804 72,804
Other assets 17,671 16,927 Total
assets $ 439,251 $ 445,058 LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,962
$ 7,888 Deferred revenue 67,756 71,077 Accrued compensation and
related benefits 19,588 15,953 Dividends payable 10,697 10,686
Other current liabilities 33,906 18,282
Total current liabilities 138,909 123,886 Deferred
revenue, net of current 1,611 2,187 Deferred compensation 5,477
4,809 Other noncurrent liabilities 10,753
19,086 Total liabilities 156,750 149,968
Commitments and contingencies Shareholders' equity: Common
stock
$0.01 par value; authorized 100,000
shares; issued and outstanding 60,285 and 60,206 shares at December
31, 2014 and March 31, 2014, respectively
603 602 Additional paid-in capital 197,727 194,739 Accumulated
other comprehensive loss (265 ) (182 ) Retained earnings
84,436 99,931 Total shareholders'
equity 282,501 295,090 Total
liabilities and shareholders' equity $ 439,251 $ 445,058
QUALITY SYSTEMS, INC.
NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS, EXCEPT PER SHARE DATA)
RECONCILIATION OF
NON-GAAP DILUTED EARNINGS PER SHARE
Three Months Ended December 31, Nine Months Ended December
31, 2014 2013 2014 2013
Income before provision for income taxes -
GAAP
$ 8,128 $ (19,193 ) $ 23,248 $ 15,723 Plus items included in
cost of revenue:
Amortization of acquired software technology 858 1,060 2,575 2,668
Impairment of other assets* - 20,098 - 20,098 Share-based
compensation 104 90 282 253
Total adjustments to cost of revenue 962 21,248 2,857 23,019
Plus items included in operating expenses: Acquisition costs 738
108 2,482 602 Amortization of acquired intangible assets 904 1,219
2,795 3,673 Impairment of goodwill and other assets - 5,873 - 5,873
Securities litigation defense costs 1,173 - 2,460 1,721 Share-based
compensation 865 617 2,344 1,579 Other non-run-rate expenses
- 315 - Total adjustments to operating
expenses 3,680 7,817 10,396 13,448
Total adjustments to GAAP income before provision for income taxes:
4,642 29,065 13,253 36,467
Income before provision for income taxes - Non-GAAP 12,770
9,872 36,501 52,190 Provision for income taxes 3,074
3,141 11,294 17,518 Net income -
Non-GAAP $ 9,696 $ 6,731 $ 25,207 $ 34,672 Diluted
net income per share - Non-GAAP $ 0.16 $ 0.11 $ 0.41 $ 0.58
Weighted-average shares outstanding (diluted): 60,855 60,546 60,813
59,984
* Relates to the impairment of acquired software technology and
capitalized software costs in the Hospital Solutions Division
Quality Systems, Inc.Susan J. Lewis(954)
389-3700slewis@qsii.comorPaul Holt, EVP/CFO(949)
255-2600pholt@qsii.com
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