Company Fills Chief Technology Officer Role
with Seasoned Healthcare Technology Executive
Quality Systems, Inc. (NASDAQ:QSII) announced today results for
its fiscal 2016 third quarter and nine months ended December 31,
2015.
Revenues for the three months ended December 31, 2015, on a pro
forma basis to exclude the Hospital Solutions Division which the
Company sold on October 22, 2015, were $116.4 million, versus
$118.4 million for the three months ended December 31, 2014, on the
same basis, reflecting a reduction in system sales and related
maintenance, offset by increases in revenue cycle management
services and electronic data interchange services. Reported
revenues, including the Hospital Solutions Division, for the three
months ended December 31, 2015 were $117.0 million, compared with
$123.4 million reported for the three months ended December 31,
2014, largely reflecting a decline of $4.4 million in revenues
associated with the disposition of the Hospital Solutions
Division.
Recurring revenues in the third quarter of fiscal 2016 increased
to approximately 80 percent of total revenues.
On a non-GAAP basis, fully diluted earnings per share was $0.16
for both the three months ended December 31, 2015 and 2014. On a
GAAP basis, fully diluted earnings per share was $0.12 for the
three months ended December 31, 2015 versus $0.11 for the
comparable period a year ago.
Revenues for the nine months ended December 31, 2015, on a pro
forma basis to exclude the Hospital Solutions Division, were $357.1
million, up two percent when compared with revenues of $348.5
million for the nine months ended December 31, 2014, on the same
basis. Reported revenues, including the Hospital Solutions
Division, for the nine months ended December 31, 2015 were $364.6
million, compared with $361.8 million reported for the nine months
ended December 31, 2014.
On a non-GAAP basis, fully diluted earnings per share for the
nine months ended December 31, 2015 was $0.53 versus $0.41 in the
comparable period a year ago. On a GAAP basis, fully diluted
earnings per share was $0.36 for the nine months ended December 31,
2015 versus $0.27 for the comparable period a year ago.
Gross margin for the three months ended December 31, 2015 was 54
percent, compared with 56 percent for the three months ended
December 31, 2014.
Operating expenses, consisting of selling, general and
administrative and research and development costs, declined 10
percent for the three months ended December 31, 2015, compared with
the same period a year ago. This decline reflects a year-over-year
decrease in both corporate selling, general and administrative and
research and development costs.
Rusty Frantz, president and chief executive officer, commenting
on the results, stated: “I am pleased with our progress as we
continue to transform our business while being a good steward of
the cost line to enhance EPS levels.”
At quarter-end, the Company’s liquidity position remained strong
with $104.8 million of cash and investments.
Subsequent to the closing of the fiscal 2016 third quarter, the
Company completed its previously announced acquisition of
HealthFusion Holdings, Inc. on January 4th, 2016 and entered into a
$250 million revolving credit facility.
In addition, as previously announced, the Company had been
seeking to fill the role of chief technology officer. To this end,
David A. Metcalfe was named to the post, effective February 1,
2016. Prior to joining QSI, Metcalfe, 52, served as vice president
of R&D at Becton, Dickinson & Company (BD), a leading
worldwide medical technology company, from March 2015 to January
2016. Previously, Metcalfe was vice president of product
development at CareFusion Corp., a global medical technology
company servicing the critical care market from September 2012 to
March 2015, at which time CareFusion was acquired by BD. From 2008
to 2012, Metcalfe was vice president of development for Allscripts
Healthcare Solutions, a provider of healthcare information
technology (HCIT) solutions.
“We are pleased to fill the CTO role with David Metcalfe, a
seasoned technology and software expert. David brings significant,
relevant experience to our Company, having worked at several
healthcare technology companies and also within the HCIT space,”
Frantz noted.
“As Quality Systems works to improve the quality of our client
experience, our current growth strategy is centered on our
transition to the cloud and the role our recent acquisition of
HealthFusion plays, along with a strong focus on our core
ambulatory business and pursuit of opportunities within the
population health arena as the market shifts to the delivery of
value-based care. Furthermore, we are restructuring the sales
organization and re-engineering sales processes to enable
cross-selling amongst our large installed ambulatory base. We also
are more effectively using capital to strengthen and grow our
business to meet the changing needs of the HCIT marketplace. The
foundation we have laid during the past few months well positions
the Company for the direction in which the future of healthcare is
headed,” Frantz concluded.
Quality Systems will host a conference call to discuss its
fiscal 2016 third quarter results on Thursday, January 28, 2016 at
5:00 PM ET (2:00 PM PT). All participants should dial
1-866-900-9499 at least 10 minutes prior to the start of the call
and reference conference ID #29627511. 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
#29627511. The replay will be available from approximately 8:00 PM
ET on Thursday, January 28, 2016, through 11:59 PM ET on Thursday,
February 4, 2016.
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. (QSI) and its
subsidiary, NextGen Healthcare Information Systems, develop and
provide a range of software and services for medical and dental
group practices, including practice management and electronic
health record applications, patient portal, interoperability and
connectivity products, and population health management and
analytics offerings. Services include managed cloud services,
revenue cycle management, claims clearinghouse, data interchange
and value-add consulting. The Company’s solution portfolio is
readily integrated and collectively positioned to drive low total
cost of ownership for its client partners, as well as enable the
transition to value-based healthcare. 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, 2015, 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
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; disruptions caused by acquisitions of companies,
products, or technologies; 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, losses related to the disposition of a
business segment, 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.
Historically, the Company calculated a non-GAAP effective tax rate
each quarter, based on non-GAAP pre-tax income (or loss) for the
period, to determine the corresponding non-GAAP provision for
(benefit of) income taxes. Beginning in the first quarter of fiscal
year 2016, the Company began utilizing a normalized non-GAAP tax
rate to provide better consistency across the interim reporting
periods within a given fiscal year, by eliminating the effects of
non-recurring and period-specific items which can vary in size and
frequency, and which are not necessarily reflective of the
Company’s longer-term operations. The normalized non-GAAP tax rate
expected to be applied to each quarter of fiscal year 2016 is
30.5%. The determination of this rate is based on the consideration
of both historic and projected financial results. The Company
intends to re-evaluate this normalized non-GAAP tax rate on an
annual basis or more frequently if any significant events occur
that may materially affect this rate, such as merger and
acquisition activity, changes in business outlook, or changes in
expectations regarding tax regulations.
QUALITY SYSTEMS, INC.CONSOLIDATED
STATEMENTS OF INCOME(IN THOUSANDS, EXCEPT PER SHARE
DATA)(UNAUDITED)
Three Months Ended December 31, Nine Months Ended
December 31, 2015 2014 2015 2014 Revenues: Software
license and hardware $ 16,150 $ 21,428 $ 52,026 $ 60,505 Software
related subscription services 11,705 11,864 36,388
31,266 Total software, hardware and related 27,855
33,292 88,414 91,771 Support and maintenance 39,519 43,045 125,408
125,985 Revenue cycle management and related services 21,594 20,392
62,630 54,517 Electronic data interchange and data services 20,643
19,051 61,413 56,276 Professional services 7,421 7,644
26,700 33,288 Total revenues 117,032
123,424 364,565 361,837 Cost of revenue:
Software license and hardware 6,530 7,295 20,149 22,326 Software
related subscription services 5,533 5,194 17,454
15,029 Total software, hardware and related 12,063
12,489 37,603 37,355 Support and maintenance 7,537 7,365 23,874
21,064 Revenue cycle management and related services 14,381 14,246
43,573 40,154 Electronic data interchange and data services 12,437
11,956 37,302 35,970 Professional services 7,367 8,304
24,008 32,780 Total cost of revenue
53,785 54,360 166,360 167,323 Gross
profit 63,247 69,064 198,205 194,514 Operating expenses: Selling,
general and administrative 39,395 41,482 115,962 116,893 Research
and development costs 14,518 18,468 49,584 51,602 Amortization of
acquired intangible assets 897 904 2,692 2,795
Total operating expenses 54,810 60,854 168,238
171,290
Income from operations
8,437 8,210 29,967 23,224 Interest income (expense), net 49 (82 )
392 41 Other expense, net (43 ) — (147 ) (17 ) Income before
provision for income taxes 8,443 8,128 30,212 23,248 Provision for
income taxes 1,141 1,452 8,233 6,659
Net income $ 7,302 $ 6,676 $ 21,979 $ 16,589
Net income per share: Basic $ 0.12 $ 0.11 $ 0.36 $ 0.28
Diluted $ 0.12 $ 0.11 $ 0.36 $ 0.27 Weighted average shares
outstanding: Basic 60,867 60,272 60,548 60,250 Diluted 61,279
60,855 61,190 60,813 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, 2015 2015 ASSETS Current
assets: Cash and cash equivalents $ 92,648 $ 118,993 Restricted
cash and cash equivalents 4,452 2,419 Marketable securities 12,165
11,592 Accounts receivable, net 92,592 107,669 Inventories 662 622
Income taxes receivable 10,565 3,147 Deferred income taxes, net
24,074 24,080 Prepaid expenses and other current assets 14,111
11,535 Total current assets 251,269 280,057 Equipment
and improvements, net 23,171 20,807 Capitalized software costs, net
44,573 40,397 Intangibles, net 22,287 27,689 Goodwill 73,513 73,571
Other assets 18,577 18,000 Total assets $ 433,390
$ 460,521 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Accounts payable $ 10,250 $ 10,018 Deferred
revenue 55,146 66,343 Accrued compensation and related benefits
16,345 24,051 Income taxes payable 53 10,048 Dividends payable
10,726 10,700 Other current liabilities 38,575 33,924
Total current liabilities 131,095 155,084 Deferred revenue, net of
current 1,127 1,349 Deferred compensation 6,667 5,750 Other
noncurrent liabilities 9,918 14,798 Total liabilities
148,807 176,981 Commitments and contingencies Shareholders' equity:
Common stock
$0.01 par value; authorized 100,000
shares; issued and outstanding 60,886 and 60,303shares at December
31, 2015 and March 31, 2015, respectively
609 603 Additional paid-in capital 210,184 198,650 Accumulated
other comprehensive loss (517 ) (192 ) Retained earnings 74,307
84,479 Total shareholders' equity 284,583
283,540 Total liabilities and shareholders' equity $ 433,390
$ 460,521
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, 2015 2014 2015 2014 Income before provision for
income taxes - GAAP $ 8,443 $ 8,128 $ 30,212 $ 23,248 Plus items
included in cost of revenue: Amortization of acquired software
technology 903 858 2,710 2,575 Share-based compensation 101
104 300 282 Total adjustments to cost of revenue 1,004 962
3,010 2,857 Plus items included in operating expenses: Acquisition
costs 4,451 738 5,743 2,482 Loss on disposition of Hospital
Solutions Division* 1,753 — 1,753 — Amortization of acquired
intangible assets 897 904 2,692 2,795 Securities litigation defense
costs, net of insurance (3,075 ) 1,173 (281 ) 2,460 Share-based
compensation 642 865 2,028 2,344 Other non-run-rate expenses** 335
— 1,722 315 Total adjustments to operating expenses
5,003 3,680 13,657 10,396 Total adjustments to GAAP
income before provision for income taxes: 6,007 4,642 16,667
13,253 Income before provision for income taxes - Non-GAAP
14,450 12,770 46,879 36,501 Provision for income taxes 4,407
3,074 14,298 11,294 Net income - Non-GAAP $ 10,043 $
9,696 $ 32,581 $ 25,207 Diluted net income per share -
Non-GAAP $ 0.16 $ 0.16 $ 0.53 $ 0.41 Weighted-average shares
outstanding (diluted): 61,279 60,855 61,190 60,813
* The loss on disposition of Hospital Solutions Division
includes $387 in direct incremental costs related to the
disposition.
** For the three months ended December 31, 2015, the $335 of
other non-run-rate expenses consists of non-recurring severance and
other employee-related costs incurred in connection with the
Hospital disposition. Other non-run-rate expenses for the nine
months ended December 31, 2015 also includes $449 in certain
non-recurring professional services costs not related to ongoing
core operations and non-recurring severance costs plus $938 of
non-recurring incremental costs related to the change in the
Company's Chief Executive Officer, including recruitment fees and
severance payments.
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version on businesswire.com: http://www.businesswire.com/news/home/20160128006407/en/
Quality Systems, Inc.Mark Davis, 949-255-2600Executive
Vice President, Corporate Development and
Strategymdavis@qsii.comorSusan J. Lewis,
303-766-4343slewis@qsii.com
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