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)

May 20, 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 May 21, 2015, Quality Systems, Inc. (the “Company”) issued a press release announcing its financial performance for the period ended March 31, 2015. 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 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e) Compensatory Arrangements of Certain Officers

On May 20, 2015, the Board of Directors (the “Board”) of the Company modified the compensation of John Stumpf, Interim Chief Financial Officer of the Company, effective May 20, 2015. Mr. Stumpf’s compensation will consist of the following components:

 

•

A base salary at an annualized rate of $315,000.

 

•

An annual cash bonus opportunity of up to $157,500, subject to the terms and provisions of the Company’s current fiscal year 2016 executive compensation program.

 

•

An equity bonus opportunity of up to 30,000 restricted performance shares of the Company’s common stock over a three year period subject to the terms and provisions of the Company’s current fiscal year 2016 executive compensation program.

The disclosures set forth under Item 5.02 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 20, 2015 are incorporated herein by reference.

 

Item 8.01

Other Events.

Quarterly Dividend

On May 20, 2015, the Board 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 June 12, 2015 with an anticipated distribution date on or about July 6, 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.

Annual Meeting

On May 20, 2015, the Board set August 11, 2015 as the date of the Company’s 2015 Annual Shareholders’ Meeting (the “Annual Meeting”). The Annual Meeting will be held at the Center Club, 650 Town Center Drive, Costa Mesa, California 92626. Shareholders of record as of June 16, 2015 are eligible to vote and attend the Annual Meeting.

 

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Item 9.01

Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit No.		Description
99.1		Press Release dated May 21, 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: May 21, 2015

 

 

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EXHIBITS ATTACHED TO THIS REPORT ON FORM 8-K

 

Exhibit No.		Description
99.1		Press Release dated May 21, 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
John Stumpf, Interim Chief Financial Officer
jstumpf@qsii.com

FOR IMMEDIATE RELEASE

MAY 21, 2015

QUALITY SYSTEMS, INC. REPORTS FISCAL 2015 FOURTH QUARTER AND YEAR-END RESULTS

Company Ends Fiscal Year Posting Double-digit Revenue Growth

IRVINE, Calif. … May 21, 2015 … Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal 2015 fourth quarter and year ended March 31, 2015.

Revenues for the fiscal 2015 fourth quarter reached $128.4 million, an increase of 11 percent versus $115.2 million reported for the fiscal 2014 fourth quarter. Net income for the 2015 fourth quarter was $10.7 million, increasing 107 percent when compared with $5.2 million in the 2014 fourth quarter.

On a GAAP basis, fully diluted earnings per share was $0.18 in the fiscal 2015 fourth quarter compared with $0.09 for the same period a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2015 fourth quarter was $0.21 versus $0.12 reported in the fourth quarter a year ago.

At quarter-end, the Company’s liquidity position was strong, with $130.6 million of cash and investments.

For the fiscal year ended March 31, 2015, revenues reached $490.2 million, up 10 percent when compared with $444.7 million for the 2014 fiscal year. The recurring revenue base, which includes maintenance, EDI, RCM and other services, reached $405.2 million and represents 83 percent of total revenues for the fiscal year ended 2015.

Net income for fiscal 2015 was $27.3 million, versus $15.7 million reported in fiscal 2014, an increase of 74 percent. On a GAAP basis, fully diluted earnings per share for the 2015 fiscal year was $0.45, compared with $0.26 reported in the 2014 fiscal year. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2015 year was $0.62 versus $0.70 reported in the comparable period a year ago (non-GAAP fully diluted earnings per share is reconciled to its corresponding GAAP measure at the end of this release). The fiscal 2015 non-GAAP earnings reflects the Company’s significant and growing investment in research and development, the net cost of which rose by $27.7 million, or 67 percent, from fiscal 2014 to fiscal 2015.

 

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Quality Systems

Fiscal 2015 Fourth Quarter and Year-end Results

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“We are very pleased with the fourth quarter and fiscal 2015 results overall. This latest quarter represents the fifth consecutive period in which we delivered increases in consolidated revenue, and which culminated in a new quarterly revenue record. Our revenue growth in the 2015 fourth quarter and fiscal year demonstrates the impact of our broad-based market offerings, which now span nearly 30 products and services directly aimed at the evolving value-based Accountable Care Organization (ACO) model. As physicians strive to better manage their patients and payors seek the necessary intelligence to help control costs while emphasizing quality of care, we believe we are well positioned to help all stakeholders meet the challenges that continue to unfold,” explained Steven T. Plochocki, president and chief executive officer.

“Our portfolio of products and services addresses the ways in which healthcare constituents communicate and manage patient populations. We believe that as we enter into our fiscal 2016 year, there will be significant opportunities for our RCM business line, along with the Mirth interoperability and connectivity solutions we offer. With ICD-10 fast approaching, practices seek the exact type of support Quality Systems/NextGen Healthcare brings to the table. With our sales force boasting strong cross-selling capabilities across our large installed client base and beyond, as well as our enhanced marketing capabilities and seasoned implementation team, we stand ready to meet healthcare’s rapidly changing needs. Our ability to strengthen our offerings, expand our solutions and demonstrate solid growth is reflective of our agility and commitment to seamlessly serving the healthcare information technology industry,” Plochocki said.

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 June 12, 2015 with an anticipated distribution date of July 6, 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.

In addition, the Company announced that it will hold its 2015 Annual Shareholders’ Meeting on Tuesday, August 11, 2015 at 1:00 PM local time. The meeting will be held at the Center Club, 650 Town Center Drive, Costa Mesa, California 92626. Holders of record as of June 16, 2015 are eligible to vote and attend. Proxy materials and the 2015 Annual Report will be made available to shareholders of record and will also be posted on the Company’s website at www.qsii.com.

 

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Quality Systems

Fiscal 2015 Fourth Quarter and Year-end Results

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Quality Systems will host a conference call to discuss its fiscal 2015 fourth quarter and year-end results on Thursday, May 21, 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 #46698028. 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 #46698028. The replay will be available from approximately 1:00 PM ET on Thursday, May 21, 2015, through 11:59 PM ET on Thursday, May 28, 2015.

As previously announced, Quality Systems will host its Investment Community Analyst Day for those analysts that follow the Company on Monday, June 8, 2015 from 8:30 AM – 1:00 PM at the Le Parker Meridien Hotel in New York City, located at 119 West 56^th Street (between 6^th and 7^th Avenues), 212-245-5000. The general public can access the session in real-time by visiting www.qsii.com, clicking on Investors, and selecting Events & Presentations. An archive of the analyst session will also be available for 90 days.

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

 

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Quality Systems

Fiscal 2015 Fourth Quarter and Year-end Results

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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

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

		Three Months Ended March 31,								Fiscal Year Ended March 31,
		2015				2014				2015				2014
Revenues:
Software and hardware		$	16,061			$	15,186			$	61,373			$	60,834
Implementation and training services			6,684				6,518				23,648				25,948
System sales			22,745				21,704				85,021				86,782
Maintenance			43,234				41,376				169,219				160,060
Electronic data interchange services			20,082				17,421				76,358				67,295
Revenue cycle management and related services			19,720				15,316				74,237				62,976
Other services			22,607				19,386				85,390				67,554
Maintenance, EDI, RCM and other services			105,643				93,499				405,204				357,885
Total revenues			128,388				115,203				490,225				444,667
Cost of revenue:
Software and hardware			5,404				7,115				24,693				44,226
Implementation and training services			5,479				8,109				23,902				29,681
Total cost of system sales			10,883				15,224				48,595				73,907
Maintenance			7,802				6,384				28,866				22,590
Electronic data interchange services			12,274				10,845				48,244				42,567
Revenue cycle management and related services			14,252				12,059				54,406				46,203
Other services			10,630				8,842				43,053				34,896
Total cost of maintenance, EDI, RCM and other services			44,958				38,130				174,569				146,256
Total cost of revenue			55,841				53,354				223,164				220,163
Gross profit			72,547				61,849				267,061				224,504
Operating expenses:
Selling, general and administrative			41,279				38,676				158,172				149,214
Research and development costs			17,638				15,120				69,240				41,524
Amortization of acquired intangible assets			898				1,132				3,693				4,805
Impairment of goodwill and other assets			—				—				—				5,873
Total operating expenses			59,815				54,928				231,105				201,416
Income from operations			12,732				6,921				35,956				23,088
Interest income (expense), net			(271	)			322				(230	)			269
Other income (expense), net			(45	)			35				(62	)			(356	)
Income before provision for income taxes			12,416				7,278				35,664				23,001
Provision for income taxes			1,673				2,077				8,332				7,321
Net income		$	10,743			$	5,201			$	27,332			$	15,680
Net income per share:
Basic		$	0.18			$	0.09			$	0.45			$	0.26
Diluted		$	0.18			$	0.09			$	0.45			$	0.26
Weighted-average shares outstanding:
Basic			60,288				60,208				60,259				59,918
Diluted			60,956				60,592				60,849				60,134
Dividends declared per common share		$	0.175			$	0.175			$	0.70			$	0.70

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QUALITY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

(UNAUDITED)

 

		March 31, 2015				March 31, 2014
ASSETS
Current assets:
Cash and cash equivalents		$	118,993			$	103,145
Restricted cash and cash equivalents			2,419				4,351
Marketable securities			11,592				10,656
Accounts receivable, net			107,669				113,268
Inventories			622				834
Income taxes receivable			3,147				8,366
Deferred income taxes, net			24,080				21,531
Other current assets			11,535				11,135
Total current assets			280,057				273,286
Equipment and improvements, net			20,807				22,801
Capitalized software costs, net			40,397				39,152
Intangibles, net			27,689				33,016
Goodwill			73,571				72,804
Other assets			18,000				10,292
Total assets		$	460,521			$	451,351
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	10,018			$	7,888
Deferred revenue			66,343				71,077
Accrued compensation and related benefits			24,051				15,953
Income taxes payable			10,048				—
Dividends payable			10,700				10,686
Other current liabilities			33,924				21,369
Total current liabilities			155,084				126,973
Deferred revenue, net of current			1,349				2,187
Deferred compensation			5,750				4,809
Other noncurrent liabilities			14,798				22,292
Total liabilities			176,981				156,261
Commitments and contingencies
Shareholders’ equity:
Common stock
$0.01 par value; authorized 100,000 shares; issued and outstanding 60,303 and 60,206 shares at March 31, 2015 and 2014, respectively			603				602
Additional paid-in capital			198,650				194,739
Accumulated other comprehensive loss			(192	)			(182	)
Retained earnings			84,479				99,931
Total shareholders’ equity			283,540				295,090
Total liabilities and shareholders’ equity		$	460,521			$	451,351

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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 March 31,								Fiscal Year Ended March 31,
		2015				2014				2015				2014
Income before provision for income taxes - GAAP		$	12,416			$	7,278			$	35,664			$	23,001
Plus items included in cost of revenue:
Amortization of acquired software technology			858				858				3,433				3,526
Impairment of other assets*			—				—				—				20,098
Share-based compensation			91				95				373				348
Total adjustments to cost of revenue			949				953				3,806				23,972
Plus items included in operating expenses:
Acquisition costs			441				846				2,923				1,448
Amortization of acquired intangible assets			898				1,132				3,693				4,805
Impairment of goodwill and other assets			—				—				—				5,873
Securities litigation defense costs			1,491				—				3,951				1,721
Share-based compensation			754				563				3,098				2,142
Other non-run-rate expenses			—				—				315				—
Total adjustments to operating expenses			3,584				2,541				13,980				15,989
Total adjustments to GAAP income before provision for income taxes:			4,533				3,494				17,786				39,961
Income before provision for income taxes - Non-GAAP			16,949				10,772				53,450				62,962
Provision for income taxes			4,425				3,318				15,718				20,966
Net income - Non-GAAP		$	12,524			$	7,454			$	37,732			$	41,996
Diluted net income per share - Non-GAAP		$	0.21			$	0.12			$	0.62			$	0.70
Weighted-average shares outstanding (diluted):			60,956				60,592				60,849				60,134

 

*	Relates to the impairment of acquired software technology and capitalized software costs in the Hospital Solutions Division

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