Company Confirms Fiscal 2017 Guidance
Quality Systems, Inc. (NASDAQ:QSII) announced today results for
its fiscal 2016 fourth quarter and fiscal year ended March 31,
2016.
Revenues for the fiscal 2016 fourth quarter reached $127.9
million, compared with $128.4 million reported for the fiscal 2015
fourth quarter. Non-GAAP net income for the 2016 fourth quarter was
$11.5 million compared with non-GAAP net income of $12.5 million in
the 2015 fourth quarter. On a GAAP basis, net loss for the 2016
fourth quarter was $(16.3) million, compared with net income of
$10.7 million in the 2015 fourth quarter.
On a non-GAAP basis, fully diluted earnings per share for the
fiscal 2016 fourth quarter was $0.19 versus $0.21 reported in the
fourth quarter a year ago. On a GAAP basis, fully diluted loss per
share was $(0.27) in the fiscal 2016 fourth quarter compared with
$0.18 earnings per share for the same period a year ago.
For the fiscal year ended March 31, 2016, revenues reached
$492.5 million, compared with $490.2 million for the 2015 fiscal
year. The recurring revenue base, which includes software-related
subscription services, support and maintenance, RCM, and EDI,
reached $386.0 million and represented approximately 78 percent of
total revenues for the fiscal year ended 2016.
Non-GAAP net income for fiscal year 2016 was $44.1 million as
compared to non-GAAP net income for fiscal year 2015 of $37.7
million. GAAP net income for fiscal 2016 was $5.7 million, versus
$27.3 million reported in fiscal 2015. On a non-GAAP basis, fully
diluted earnings per share for fiscal year 2016 was $0.72 versus
$0.62 reported in the prior year. On a GAAP basis, fully diluted
earnings per share for the 2016 fiscal year was $0.09, compared
with $0.45 reported in the 2015 fiscal year.
The Company also confirmed the guidance it provided in their
April 28, 2016 release “Business Strategy Review” as it relates to
revenues and non-GAAP fully diluted earnings per share. Currently,
the Company expects fiscal year 2017 revenues of between $508
million and $522 million and Non-GAAP fully diluted earnings per
share between $0.78 and $0.86.
“These results are in line with the preliminary results we
announced on our Business Strategy Update conference call held
April 28, 2016,” noted Rusty Frantz, president and chief executive
officer. “We continue to execute on the plan laid out at that time
and believe we are well positioned to achieve long-term revenue and
earnings growth and thus drive shareholder value.”
Quality Systems will host a conference call to discuss its
fiscal 2016 fourth quarter and year-end results on Thursday, May
19, 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 #10622905. 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
#10622905. The replay will be available from approximately 8:00 PM
ET on Thursday, May 19, 2016, through 11:59 PM ET on Wednesday, May
25, 2016. A transcript of the conference call will be made
available on the Company’s website at www.qsii.com.
As previously announced, Quality Systems will host its
Investment Community Analyst Day for those analysts that follow the
Company on Tuesday, June 7, 2016 from 8:30 AM - 1:00 PM local
time at the Le Parker Meridien Hotel in New York City, located at
119 West 56th Street (between 6th and 7th Avenues),
212-245-5000. The general public can access the live management
presentation 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.
In addition, the Company will hold its 2016 Annual Shareholders’
Meeting on Tuesday, August 16, 2016 at 1:00 PM local time. The
meeting will be held at the Marriott Hotel, 18000 Von Karman
Avenue, Irvine, California 92612. Holders of record as of June 17,
2016 are eligible to vote and attend. Proxy materials and the 2016
Annual Report will be made available to shareholders of record and
will also be posted 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.
® Marks owned by Quality Systems, Inc.
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 and subsequently
filed Quarterly Reports on Form 10-Q, 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. These forward-looking
statements speak only as of the date hereof. 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 presentation of non-GAAP financial information is not intended
to be considered in isolation or as a substitute for, or superior
to, financial information prepared and presented in accordance with
GAAP. 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 (loss) before provision for 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 applied to each
quarter of fiscal year 2016 and expected to be applied for the
fiscal 2017 period 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.
The Company’s future period guidance in this release includes
adjustments for items not indicative of the Company’s core
operations. Such adjustments are generally expected to be of a
nature similar to those adjustments applied to the Company’s
historic GAAP financial results in the determination of the
Company’s non-GAAP diluted earnings per share. Such adjustments,
however, may be affected by changes in ongoing assumptions and
judgments as to the items that are excluded in the calculation of
non-GAAP adjusted net income and adjusted diluted earnings per
share, as described in this press release. The exact amount of
these adjustments are not currently determinable, but may be
significant. It is therefore not practicable to reconcile this
non-GAAP guidance to the most comparable GAAP measures.
QUALITY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended March 31, Fiscal Year Ended March 31,
2016 2015 2016 2015 Revenues: Software
license and hardware $ 18,497 $ 21,144 $ 70,523 $ 81,649 Software
related subscription services 19,015 13,326 55,403
44,592 Total software, hardware and related 37,512
34,470 125,926 126,241 Support and maintenance 39,792 43,234
165,200 169,219 Revenue cycle management and related services
20,376 19,720 83,006 74,237 Electronic data interchange and data
services 20,930 20,082 82,343 76,358 Professional services 9,302
10,882 36,002 44,170 Total revenues
127,912 128,388 492,477 490,225 Cost of
revenue: Software license and hardware 7,357 6,477 27,506 28,803
Software related subscription services 9,168 5,643
26,622 20,672 Total software, hardware and related
16,525 12,120 54,128 49,475 Support and maintenance 7,455 7,802
31,329 28,866 Revenue cycle management and related services 14,018
14,252 57,591 54,406 Electronic data interchange and data services
12,851 12,274 50,153 48,244 Professional services 8,406
9,393 32,414 42,173 Total cost of
revenue 59,255 55,841 225,615 223,164
Gross profit 68,657 72,547 266,862 267,061 Operating expenses:
Selling, general and administrative 40,272 41,279 156,234 158,172
Research and development costs, net 16,077 17,638 65,661 69,240
Amortization of acquired intangible assets 2,675 898 5,367 3,693
Impairment of assets 32,238 — 32,238 —
Total operating expenses 91,262 59,815 259,500
231,105 Income from operations (22,605 ) 12,732 7,362 35,956
Interest income 27 40 428 111 Interest expense (1,295 ) (311 )
(1,304 ) (341 ) Other expense, net (19 ) (45 ) (166 ) (62 ) Income
(loss) before provision for (benefit of) income taxes (23,892 )
12,416 6,320 35,664 Provision for (benefit of) income taxes (7,570
) 1,673 663 8,332 Net income (loss) $ (16,322
) $ 10,743 $ 5,657 $ 27,332 Net income (loss)
per share: Basic $ (0.27 ) $ 0.18 $ 0.09 $ 0.45 Diluted $ (0.27 ) $
0.18 $ 0.09 $ 0.45 Weighted average shares outstanding: Basic
60,899 60,288 60,635 60,259 Diluted 60,899 60,956 61,233 60,849
Dividends declared per common share $ — $ 0.175 $ 0.525 $ 0.70
QUALITY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
March 31, March 31, 2016 2015 ASSETS Current assets: Cash
and cash equivalents $ 27,176 $ 118,993 Restricted cash and cash
equivalents 5,320 2,419 Marketable securities 9,297 11,592 Accounts
receivable, net 94,024 107,669 Inventory 555 622 Income taxes
receivable 32,709 3,147 Deferred income taxes, net — — Prepaid
expenses and other current assets 14,910 11,535 Total
current assets 183,991 255,977 Equipment and improvements, net
25,790 20,807 Capitalized software costs, net 13,250 40,397
Deferred income taxes, net 8,198 30,197 Intangibles, net 91,675
27,689 Goodwill 188,837 73,571 Other assets 19,049 11,883
Total assets $ 530,790 $ 460,521 LIABILITIES
AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $
11,126 $ 10,018 Deferred revenue 57,935 66,343 Accrued compensation
and related benefits 18,670 24,051 Income taxes payable 91 10,048
Dividends payable — 10,700 Other current liabilities 50,238
33,924 Total current liabilities 138,060 155,084 Deferred
revenue, net of current 1,335 1,349 Deferred compensation 6,357
5,750 Line of credit 105,000 — Other noncurrent liabilities 10,661
14,798 Total liabilities 261,413 176,981 Commitments
and contingencies Shareholders’ equity: Common stock
$0.01 par value; authorized 100,000
shares; issued and outstanding 60,978 and 60,303shares at March 31,
2016 and 2015, respectively
610 603 Additional paid-in capital 211,262 198,650 Accumulated
other comprehensive loss (481 ) (192 ) Retained earnings 57,986
84,479 Total shareholders' equity 269,377
283,540 Total liabilities and shareholders' equity $ 530,790
$ 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 March 31, Fiscal Year Ended March 31,
2016 2015 2016 2015 Income (loss) before provision
for income taxes - GAAP $ (23,892 ) $ 12,416 $ 6,320 $ 35,664
Non-GAAP adjustments: Acquisition costs, net (95 ) 441 5,648 2,923
Amortization of acquired intangible assets 5,612 1,756 11,014 7,126
Amortization of deferred debt issuance costs 258 — 258 —
Loss on disposition of Hospital Solutions
Division and related costs
311 — 2,064 — Securities litigation defense costs, net of insurance
(1,866 ) 1,491 (2,147 ) 3,951 Share-based compensation 967 845
3,295 3,471 Impairment of assets and related wind-down costs*
32,832 — 32,832 — Other non-run-rate expenses** 2,477 —
4,199 315 Total adjustments to GAAP income before
provision for income taxes: 40,496 4,533 57,163
17,786 Income before provision for income taxes - Non-GAAP
16,604 16,949 63,483 53,450 Provision for income taxes 5,064
4,425 19,362 15,718 Net income - Non-GAAP $ 11,540
$ 12,524 $ 44,121 $ 37,732 Diluted net income
per share - Non-GAAP $ 0.19 $ 0.21 $ 0.72 $ 0.62 Weighted-average
shares outstanding (diluted): 61,375 60,956 61,233 60,849
* For the three months and fiscal year ended March 31, 2016,
impairment of assets and related wind-down costs consists of
$32,238 impairment of previously capitalized investment in the
NextGen Now development project and $594 of related wind-down
costs.
** For the three months ended March 31, 2016, other non-run-rate
expenses consist of $1,145 of professional services costs not
related to ongoing core operations, $474 incremental costs related
to the transition of Company executive officers, and $858 of other
costs, including severance, retention, and other employee-related
costs. For the fiscal year ended March 31, 2016, other non-run-rate
expenses consist of $1,417 of professional services costs not
related to ongoing core operations, $1,412 incremental costs
related to the transition of Company executive officers, and $1,370
of severance, retention, and other employee-related costs.
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version on businesswire.com: http://www.businesswire.com/news/home/20160519006502/en/
Quality Systems, Inc.Mark Davis,
949-265-6928mdavis@nextgen.com
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