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 27, 2016
______________
QUALITY SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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CALIFORNIA (State or other jurisdiction of incorporation) | 001-12537 (Commission File Number) | 95-2888568 (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:
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⃞ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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⃞ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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⃞ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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⃞ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On January 28, 2016, Quality Systems, Inc. (the “Company”) issued a press release announcing its financial performance for the period ended December 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.
Appointment of David A. Metcalfe as Chief Technology Officer
On January 27, 2016, the Board of Directors of the Company (the “Board”) appointed David A. Metcalfe to serve as the Company’s Chief Technology Officer, effective February 1, 2016.
Prior to joining the Company, Mr. Metcalfe, age 52, served as Vice President of R&D at Becton, Dickinson & Company, 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 Becton, Dickinson & Company. From 2008 to 2012, Metcalfe was Vice President of Development for Allscripts Healthcare Solutions, a provider of healthcare information technology solutions. Earlier in his career, Mr. Metcalfe held numerous other senior-level development positions at technology companies. Mr. Metcalfe holds a Bachelor of Science in Instrumentation and Control Engineering from Teesside University in Middlesbrough, England.
In connection with his appointment, Mr. Metcalfe accepted an offer of terms for at-will employment with the Company, effective February 1, 2016 (the “Employment Terms”). Pursuant to the Employment Terms, Mr. Metcalfe will report to the President and Chief Executive Officer of the Company and his compensation will consist of the following components:
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• | Mr. Metcalfe shall be paid an annual base salary of $400,000. |
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• | Mr. Metcalfe shall receive a signing bonus of $190,000 (the “Signing Bonus”) to be paid within 30 days of his first date of employment. The Signing Bonus is subject to forfeiture and repayment to the Company if Mr. Metcalfe is terminated for Cause or resigns for any reason: (i) prior to or on the one-year anniversary of his first day of employment, in the full amount of $190,000, and (ii) prior to or on the two-year anniversary of his first day of employment, in the amount of $95,000 (i.e. 50% of the Signing Bonus). Cause will have the meaning given in the terms and provisions of the Company's 2015 Equity Incentive Plan (the "2015 Plan") filed with the Securities and Exchange Commission (the “Commission”) as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 14, 2015, and incorporated herein by reference. |
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• | On the first day of his employment with the Company, Mr. Metcalfe shall receive a non-qualified stock option grant to purchase 200,000 shares of the Company’s common stock, pursuant to the terms and provisions of the 2015 Plan. The options will have an exercise price equal to the closing price of a share of the Company’s common stock on the date of the grant, a term of eight years from the date of grant, and will vest in equal, annual, 25% installments over a four-year period, beginning on the one-year anniversary of the date of grant. The options will be subject to accelerated vesting in full in accordance with the “double trigger” change of control provisions of the 2015 Plan and the Company’s standard form of stock option agreement for the 2015 Plan filed with the Commission as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on August 14, 2015 and incorporated herein by reference. |
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• | Mr. Metcalfe is eligible to receive a fiscal year 2016 cash bonus of up to 60% of his base salary, subject to the Company’s attainment of the financial objectives and achievement of certain performance targets established under the 2016 Executive Compensation Program previously approved by the Compensation Committee of the Board and described in the Company’s 2015 Proxy Statement, provided that Mr. Metcalfe continues to be employed by the Company on the date such bonus is payable. Any bonus payable for the Company’s 2016 fiscal year will be pro-rated for the number of full months of Mr. Metcalfe’s employment during such fiscal year. |
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• | Mr. Metcalfe and his family will be eligible for participation in the Company’s health and welfare benefit plans to the same extent generally applicable to all executive officers of the Company. |
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• | Mr. Metcalfe will be entitled to three weeks of paid vacation leave per year, prorated for calendar year 2016, and will be entitled to accrue a maximum of four weeks of paid vacation leave. |
Mr. Metcalfe will also be required to acquire and hold shares of the Company’s common stock in accordance with the Company’s Executive Stock Ownership Program in order to better align his interests with the interests of the shareholders of the Company.
All compensatory arrangements in the Employment Terms were approved by the Compensation Committee of the Board.
The foregoing summary of the Employment Terms is qualified in its entirety by the text of the offer letter accepted by Mr. Metcalfe, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
In accordance with the Company’s standard practices for executive officers, effective February 1, 2016, the Company will enter into an indemnification agreement with Mr. Metcalfe, which will be substantially consistent with the Company’s form of Indemnification Agreement, filed with the Commission as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 28, 2013, and incorporated herein by reference.
Other than the Employment Terms, there are no arrangements or understandings between Mr. Metcalfe and any other person pursuant to which Mr. Metcalfe was appointed to serve as the Chief Technology Officer of the Company. There are no family relationships between Mr. Metcalfe and any director or executive officer of the Company, and Mr. Metcalfe has no direct or indirect material interest in any “related party” transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Item 7.01 Regulation FD Disclosure.
The Company issued a press release on January 28, 2016, announcing, amongst other matters, the appointment of Mr. Metcalfe as the Chief Technology Officer of the Company. The press release making these announcements is attached hereto as Exhibit 99.1.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 7.01, including such portions of Exhibit 99.1 relating to Mr. Metcalfe’s appointment shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Exhibit No. | | Description |
10.1 | | Employment Offer Letter, dated January 27, 2016, between David Metcalfe and Quality Systems, Inc. |
99.1 | | Press Release dated January 28, 2016 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Date: January 28, 2016 | QUALITY SYSTEMS, INC. |
| By: | /s/ John K. Stumpf |
| | John K. Stumpf |
| | Interim Chief Financial Officer |
EXHIBITS ATTACHED TO THIS REPORT ON FORM 8-K
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Exhibit No. | | Description |
10.1 | | Employment Offer Letter, dated January 27, 2016, between David Metcalfe and Quality Systems, Inc. |
99.1 | | Press Release dated January 28, 2016 |
January 27, 2016
David Metcalfe
7080 Sitio Caliente
Carlsbad, CA 92009
Re: Employment Offer Letter
Dear Mr. Metcalfe:
On behalf of Quality Systems, Inc. (“QSI”), I am pleased to extend to you an offer of employment to join QSI in the full-time position of Chief Technology Officer. This letter will convey the proposed terms and conditions of your employment with QSI. In addition to the other items specified in paragraph 10 below, this offer is conditioned upon final approval by QSI’s Board of Directors (the “Board”).
Following your acceptance of these terms and subject to satisfaction of the other conditions specified herein, your employment start date will be February 1, 2016. Your title will be Chief Technology Officer, and subject to necessary business travel requirements, you will perform your employment duties at Irvine, California. You will report directly to John (“Rusty”) Frantz, the Chief Executive Officer of QSI, and your duties and responsibilities will be commensurate with your title.
The terms and conditions of your employment with QSI are summarized below:
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1. | You will receive an initial base salary of $400,000 per year ($16,666.66 semi-monthly), payable in accordance with QSI’s normal payroll practices and subject to all legally required deductions. |
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2. | You will be paid a signing bonus of $190,000 to be paid within 30 days of your first date of employment. Your signing bonus is subject to forfeiture and repayment to QSI if you are terminated for Cause or resign for any reason: (i) prior to or on the one-year anniversary of your first day of employment, in the full amount of $190,000, and (ii) prior to or on the two-year anniversary of your first day of employment, in the amount of $95,000 (i.e., 50% of the signing bonus). Cause will have the meaning given in the terms and provisions of QSI’s 2015 Equity Incentive Plan (the “2015 Incentive Plan”). |
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3. | You will be eligible to receive a 2016 fiscal year cash bonus opportunity of up to 60% of your base salary, subject to QSI’s attainment of the financial objectives and achievement of certain performance targets established under the 2016 Executive Compensation Program previously approved by QSI’s Compensation Committee, provided that you continue to be |
David Metcalfe
January 27, 2016
2
employed by QSI on the date such bonus is payable. Any bonus payable for QSI’s 2016 fiscal year will be pro-rated for the number of full months of your employment during such fiscal year.
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4. | On your first day of employment, you will receive a non-qualified stock option grant to purchase 200,000 shares of QSI’s common stock, pursuant to the terms and provisions of the 2015 Incentive Plan. The option will have an exercise price equal to the closing price of a share of QSI common stock on the date of grant, a term of eight years from the date of grant, and will vest in equal, annual, 25% installments over a four-year period beginning on the one-year anniversary of the date of grant. The option will be subject to accelerated vesting in full in accordance with the “double trigger” change of control provisions of the 2015 Incentive Plan and QSI’s standard form of option grant award. |
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5. | To align your interests with those of QSI’s shareholders, you will be required to comply with the terms and conditions of QSI’s Executive Stock Ownership Program and to acquire and hold the minimum number of shares of QSI common stock set forth in such policy. |
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6. | You will be entitled to accrue three weeks of vacation time per year, which may be used in accordance with QSI’s current policy as described in the Employee Handbook. Pursuant to QSI’s current policy, you will be entitled to accrue a maximum of four weeks of paid vacation leave. |
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7. | You will be eligible for group insurance coverage (with a participant eligibility date to be determined by the plan documents currently in effect), together with such other employment benefits generally made available to other similarly situated QSI employees. |
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8. | By undertaking employment with QSI, you agree to abide by all current and future employment policies, rules and regulations of QSI. You also acknowledge that your position with QSI is a full-time position, and accordingly, you agree that you will not accept, during your employment with QSI, employment with any other person or entity without the prior written consent of QSI’s Chief Executive Officer. As with all QSI employees, on your first day of employment, you will be required to execute (i) an Acknowledgement and Certification of your receipt of, and agreement with, QSI’s Employee Handbook and (ii) the Agreement for Protection of Company Information, which, among other things, requires you to protect QSI’s confidential information and includes certain non-solicitation provisions. As required by the Immigration Reform and Control Act of 1986 (“IRCA”), you also must establish your identity and authorization to work in the United States. You will be required to complete the Employment Verification Form (I-9) on your first day of employment. |
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9. | You and QSI expressly understand and agree that your employment with QSI is in all respects “at will,” meaning that either you or QSI can terminate the employment relationship at any time without advance notice to the other, with or without Cause, for any reason or no reason. QSI also can discipline, demote or alter the terms of employment of its employees at any time, with or without Cause or advance notice. This letter and the employment documents referenced in preceding paragraph 8 will be our entire understanding concerning the subjects |
David Metcalfe
January 27, 2016
3
contained herein (including the at-will nature of your employment and the possible termination of the employment relationship), and QSI’s policy of at-will employment cannot be changed or modified in any way except that it may be superseded by one or more written agreements between you and QSI, authorized in advance by specific resolution of QSI’s Board of Directors and signed by both you and QSI’s Chief Executive Officer.
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10. | This offer is conditioned upon: (i) final approval of your offer for employment and the terms of this offer letter by the Board, (ii) the Board’s satisfaction with the results of a background check to be performed on behalf of QSI, (iii) your written acceptance of this offer letter, and (iv) your execution of the Agreement for Protection of Company Information and other documents described in paragraph 8. If you provide materially false or misleading information in your employment application or other documents submitted in connection with your seeking employment with QSI, you will be subject to immediate termination. |
I am delighted with the prospect of you joining QSI, and we all look forward to you making a tremendous contribution to the company.
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Very truly yours, |
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/s/ John R. Frantz |
John R. Frantz |
Chief Executive Officer |
AGREED TO AND ACCEPTED BY:
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/s/ David Metcalfe |
David Metcalfe |
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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 | |
Mark Davis, Executive Vice President, Corporate Development and Strategy |
mdavis@qsii.com | |
FOR IMMEDIATE RELEASE
JANUARY 28, 2016
QUALITY SYSTEMS, INC. REPORTS FISCAL 2016 THIRD QUARTER RESULTS
Company Fills Chief Technology Officer Role with Seasoned Healthcare Technology Executive
IRVINE, Calif. … January 28, 2016 … Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal 2016 third quarter 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 ten 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.
FINANCIAL TABLES ATTACHED
QUALITY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
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| 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 |
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QUALITY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
|
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| 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 60,303 shares 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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