QSII Quality Systems, Inc. (delisted)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report

(Date of earliest event reported)

January 21, 2015

 

 

QUALITY SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

CALIFORNIA		001-12537		95-2888568
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification Number)

18111 Von Karman, Suite 700

Irvine, California 92612

(Address of Principal Executive Offices)

(949) 255-2600

(Registrant’s Telephone Number, Including Area Code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02

Results of Operations and Financial Condition.

On January 22, 2015, Quality Systems, Inc. (the “Company”) issued a press release announcing its financial performance for the period ended December 31, 2014. A copy of the press release is attached to this Form 8-K as Exhibit 99.1, and is incorporated herein by reference.

The information in this Item 2.02 of this Form 8-K, as well as Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 8.01

Other Events.

Quarterly Dividend

On January 21, 2015, the Board of Directors (the “Board”) of the Company declared a quarterly cash dividend of $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 on or about April 3, 2015. The $0.175 dividend is declared pursuant to the Company’s current practice to pay a regular dividend on the Company’s outstanding shares of common stock each fiscal quarter subject to Board review and approval.

 

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Item 9.01

Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit No.		Description
99.1		Press Release dated January 22, 2015

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: January 22, 2015

 

 

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EXHIBITS ATTACHED TO THIS REPORT ON FORM 8-K

 

Exhibit No.		Description
99.1		Press Release dated January 22, 2015

 

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Exhibit 99.1

 

 

For Further Information, Contact:
Quality Systems, Inc.				Susan J. Lewis
18111 Von Karman Avenue, Suite 700				Phone: (954) 389-3700
Irvine, CA 92612				slewis@qsii.com
Phone: (949) 255-2600
Paul Holt, EVP/CFO, pholt@qsii.com

FOR IMMEDIATE RELEASE

        JANUARY 22, 2015

QUALITY SYSTEMS, INC. REPORTS FISCAL 2015 THIRD QUARTER RESULTS

Company Sees Improvement across Several Key Areas including Revenue, Earnings, and Pipeline

IRVINE, Calif. … January 22, 2015 … 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

 

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Quality Systems

Fiscal 2015 Third Quarter Results

Page 2

 

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

 

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Quality Systems

Fiscal 2015 Third Quarter Results

Page 3

 

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.

FINANCIAL TABLES ATTACHED

 

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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

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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

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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

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