Quality Systems, Inc. (NASDAQ: QSII) announced today results for
its fiscal 2017 third quarter ended December 31, 2016.
“We’ve seen a number of promising trends throughout the business
this year, and I’m pleased with our fiscal third quarter results,
as well as with the continued progress we’re making on our
strategic initiatives. In addition to improving our customer
attrition rates, we’ve also made great strides in customer
satisfaction over the last several quarters. During the first 75
days since our new software release, we’ve seen significant
interest and already have nearly 500 customers signed up to
upgrade,” commented Rusty Frantz, president and chief executive
officer of Quality Systems, Inc.
Mr. Frantz continued, “Through our restructuring, we’ve also
identified meaningful RCM and EDI cross-selling opportunities
within our existing customer base and hope to capitalize on them
through the efforts of our newly reinvigorated salesforce. That
said, given the uncertainty surrounding the ACA and the lengthy RCM
sales cycle, we believe it will take some time before new bookings
translate into top line growth. At this point in the year, I remain
confident in delivering on the commitments we made in July.”
Revenues for the fiscal 2017 third quarter of $127.9 million
compared to $117.0 million a year ago. On a GAAP basis, net income
for the 2017 third quarter was $10.5 million, compared with net
income of $7.3 million in the 2016 third quarter. Non-GAAP net
income for the 2017 third quarter was $14.4 million compared with
non-GAAP net income of $10.0 million in the 2016 third quarter.
On a GAAP basis, fully diluted earnings per share was $0.17 in
the fiscal 2017 third quarter compared with $0.12 earnings per
share for the same period a year ago. On a non-GAAP basis, fully
diluted earnings per share for the fiscal 2017 third quarter was
$0.23 versus $0.16 reported in the third quarter a year ago.
Conference Call Information
Quality Systems will host a conference call to discuss its
fiscal 2017 third quarter results on Wednesday, January 25, 2017 at
5:00 PM ET (2:00 PM PT). Shareholders and interested participants
may listen to a live broadcast of the conference call by dialing
866-900-9499 or 937-502-2136 for international callers, and
referencing participant code 56791651 approximately 15 minutes
prior to the call. A live webcast of the conference call will be
available on the investor relations section of the company’s web
site and an audio file of the call will also be archived for 90
days at investor.qsii.com. After the conference call, a replay will
be available until February 1, 2017 and can be accessed by dialing
800-585-8367 or 404-537-3406 for international callers, and
referencing participant code 56791651.
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, 2016 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 competitors of new or superior
technologies; the timing, cost and success or failure of new
product and service introductions, development and product upgrade
releases; undetected errors or bugs in software; product liability;
changing economic, political or regulatory influences in the
health-care industry; changes in product-pricing policies;
availability of third-party products and components; competitive
pressures including product offerings, pricing and promotional
activities; the Company's ability or inability to attract and
retain qualified personnel; possible regulation of the Company's
software by the U.S. Food and Drug Administration; changes of
accounting estimates and assumptions used to prepare the prior
periods' financial statements; 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 net acquisition and disposition costs, amortization of
acquired intangible assets, amortization of deferred debt issuance
costs, loss on disposition, restructuring costs, net securities
litigation defense costs, share-based compensation, and other
non-run-rate expenses from GAAP income before provision for income
taxes. The Company utilizes 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 each quarter of fiscal year 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 release. The exact amount and probable
significance of these adjustments, including net acquisition and
disposition costs, net securities litigation defense costs, and
other non-run-rate expenses, are not currently determinable without
unreasonable efforts, but may be significant. These items cannot be
reliably quantified or forecasted due to the combination of their
historic and expected variability. 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 December 31, Nine
Months Ended December 31, 2016 2015 2016 2015 Revenues: Software
license and hardware $ 16,995 $ 16,150 $ 48,966 $ 52,026 Software
related subscription services 22,546 11,705
63,911 36,388 Total software,
hardware and related 39,541 27,855 112,877 88,414 Support and
maintenance 39,924 39,519 116,905 125,408 Revenue cycle management
and related services 20,048 21,594 62,037 62,630 Electronic data
interchange and data services 21,790 20,643 65,527 61,413
Professional services 6,565 7,421
19,893 26,700 Total revenues
127,868 117,032 377,239
364,565 Cost of revenue: Software license and hardware 5,680
6,530 19,227 20,149 Software related subscription services
9,345 5,533 27,107 17,454
Total software, hardware and related 15,025 12,063 46,334
37,603 Support and maintenance 7,299 7,537 20,903 23,874 Revenue
cycle management and related services 13,462 14,381 42,052 43,573
Electronic data interchange and data services 12,662 12,437 38,232
37,302 Professional services 5,904 7,367
19,643 24,008 Total cost of
revenue 54,352 53,785 167,164
166,360 Gross profit 73,516 63,247 210,075
198,205 Operating expenses: Selling, general and administrative
37,542 39,395 120,913 115,962 Research and development costs, net
19,714 14,518 56,230 49,584 Amortization of acquired intangible
assets 2,568 897 7,889 2,692 Restructuring costs 231
- 4,685 - Total operating
expenses 60,055 54,810 189,717
168,238 Income from operations 13,461 8,437
20,358 29,967 Interest income - 60 9 406 Interest expense
(629 ) (11 ) (2,445 ) (14 ) Other expense, net
(4 ) (43 ) (146 ) (147 ) Income before
provision for income taxes 12,828 8,443 17,776 30,212 Provision for
income taxes 2,342 1,141 3,950
8,233 Net income $ 10,486 $ 7,302
$ 13,826 $ 21,979 Net income per share: Basic
$ 0.17 $ 0.12 $ 0.22 $ 0.36 Diluted $ 0.17 $ 0.12 $ 0.22 $ 0.36
Weighted-average shares outstanding: Basic 62,093 60,867 61,645
60,548 Diluted 62,093 61,279 61,900 61,190 Dividends declared per
common share $ - $ 0.175 $ - $ 0.525
QUALITY
SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (In thousands,
except per share data) (Unaudited) December
31, 2016 March 31, 2016 ASSETS Current assets: Cash and cash
equivalents $ 23,994 $ 27,176 Restricted cash and cash equivalents
4,647 5,320 Marketable securities - 9,297 Accounts receivable, net
75,516 94,024 Inventory 252 555 Income taxes receivable 14,481
32,709 Prepaid expenses and other current assets 15,944
14,910 Total current assets 134,834 183,991
Equipment and improvements, net 26,097 25,790 Capitalized software
costs, net 12,995 13,250 Deferred income taxes, net 9,780 8,198
Intangibles, net 74,722 91,675 Goodwill 185,888 188,837 Other
assets 18,703 19,049 Total assets $
463,019 $ 530,790 LIABILITIES AND
SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable 5,223
11,126 Deferred revenue 49,763 57,935 Accrued compensation and
related benefits 18,620 18,670 Income taxes payable 8 91 Other
current liabilities 44,338 50,238
Total current liabilities
117,952 138,060 Deferred revenue, net of current 1,312 1,335
Deferred compensation 6,738 6,357 Line of credit 25,000 105,000
Other noncurrent liabilities 14,267 10,661
Total liabilities 165,269 261,413 Commitments and
contingencies Shareholders' equity: Common stock $0.01 par value;
authorized 100,000 shares; issued and outstanding 62,437 and 60,978
shares at December 31, 2016 and March 31, 2016, respectively 624
610 Additional paid-in capital 225,967 211,262 Accumulated other
comprehensive loss (653 ) (481 ) Retained earnings 71,812
57,986 Total shareholders' equity
297,750 269,377 Total liabilities and
shareholders' equity $ 463,019 $ 530,790
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, 2016 2015 2016 2015 Income before provision for income taxes -
GAAP $ 12,828 $ 8,443 $ 17,776 $ 30,212 Non-GAAP adjustments:
Acquisition and disposition costs, net (1,337 ) 4,451 5,147 5,743
Amortization of acquired intangible assets 5,575 1,800 16,953 5,402
Amortization of deferred debt issuance costs 269 - 807 - Loss on
disposition of Hospital Solutions Division and related costs -
1,753 - 1,753 Restructuring costs 231 - 4,685 - Securities
litigation defense costs, net of insurance 356 (3,075 ) 1,483 (281
) Share-based compensation 2,001 743 5,067 2,328 Other non-run-rate
expenses* 739 335 2,865
1,722 Total adjustments to GAAP income before provision for
income taxes: 7,834 6,007 37,007
16,667 Income before provision for income taxes -
Non-GAAP 20,662 14,450 54,783 46,879 Provision for income taxes
6,302 4,407 16,709 14,298
Net income - Non-GAAP $ 14,360 $ 10,043 $
38,074 $ 32,581 Diluted net income per share - Non-GAAP $
0.23 $ 0.16 $ 0.62 $ 0.53 Weighted-average shares outstanding
(diluted): 62,093 61,279 61,900 61,190 * For the
three months ended December 31, 2016, other non-run-rate expenses
consist primarily of professional services costs not related to
core operations. Other non-run-rate expenses for the nine months
ended December 31, 2016 consists primarily of professional services
costs not related to core operations and $191 of executive hiring
costs. For the three months ended December 31, 2015, 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 includes $449 in certain professional services
costs not related to core operations, non-recurring severance and
other employee-related costs incurred in connection with the
Hospital disposition, and $938 of incremental costs related to the
change in the Company's Chief Executive Officer, including
recruitment fees and severance payments.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170125006155/en/
Quality Systems, Inc.Jamie Arnold, Chief Financial
Officer949-255-2600JArnold@nextgen.comorInvestor
Contact:Westwicke PartnersBob East or Asher
Dewhurst443-213-0500
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