Quality Systems, Inc. Reports Fiscal 2013 Second Quarter Results

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Quality Systems, Inc. Reports Fiscal 2013 Second Quarter Results

Company Also Appoints Mark H. Davis to Board of Directors

IRVINE, Calif.--(BUSINESS WIRE)-- Quality Systems, Inc. (NAS: QSII) announced today results for its fiscal 2013 second quarter ended September 30, 2012.


The Company reported revenues of $116.1 million for the fiscal 2013 second quarter, an increase of 8 percent, versus $107.6 million for the fiscal 2012 second quarter. Net income for the fiscal 2013 second quarter was $15.7 million, down 23 percent when compared with net income of $20.5 million for the comparable period last year. Fully diluted earnings per share for the fiscal 2013 second quarter was $0.26, a 26 percent decrease from $0.35 for the fiscal 2012 second quarter. While revenues increased in the quarter, profitability was impacted by lower software license sales.

"Quality Systems continues to make investments and position the company to capture the significant opportunities that lie ahead in our healthcare information technology sector. Recently, we named Dan Morefield, a seasoned technology executive, as our new chief operating officer; restructured our sales and marketing functions under Gary Voydanoff, one of our veteran sales executives; and promoted Steve Puckett to a newly created chief technology officer role to manage our development-related resources. For more than 20 years, Steve has served a critical role in bringing industry-leading technology to the company," stated Steven T. Plochocki, president and chief executive officer.

Quality Systems will host a conference call to discuss its fiscal 2013 second quarter results on Friday, October 26, 2012 at 10:00 AM ET (7:00 AM PT). All participants should dial 1-800-762-8779 at least ten minutes prior to the start of the call. International callers should dial 480-629-9818. 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 800-406-7325 or 303-590-3030 and enter reservation identification number 4571447. The replay will be available from approximately 12:00 PM ET on Friday, October 26, 2012, through 11:59 PM ET on Friday, November 2, 2012.

A transcript of the conference call will be made available on the Company's website at www.qsii.com.

Quality Systems also announced that its Board of Directors declared a quarterly cash dividend of Seventeen and One-Half Cents ($0.175) per share on the Company's outstanding shares of Common Stock, payable to shareholders of record as of December 14, 2012 with an anticipated distribution date of January 4, 2013. The $0.175 per share cash dividend is consistent with the Company's current policy to pay a regular quarterly dividend on the Company's outstanding shares of Common Stock, subject to Board review and approval.

In other news, Quality Systems reported that Mark H. Davis was appointed to its Board of Directors, effective October 25, 2012. Davis fills the seat vacated by Maureen Spivack, who resigned due to conflicting employment obligations. Davis will also be appointed to serve on the Board's Audit Committee and Transaction Committee.

Davis is a managing director at B. Riley & Co, LLC, an investment firm specializing in research, sales and trading and corporate finance. He brings more than 20 years of experience advising and financing technology companies, including software, cloud infrastructure and information technology firms, to the Quality Systems Board. In addition, Davis was a practicing certified public accountant for nearly a decade and his financial expertise and knowledge will prove beneficial to the Board.

Previously, Davis served as head of technology investment banking at Cantor Fitzgerald, managing director at Macquarie Capital, an Australian merchant and investment banking firm, and managing director (as well as in other senior leadership roles) at Citigroup. Earlier in his career, Davis was an Audit Senior with Price Waterhouse. Davis holds a Master's of Business Administration from the Wharton School of the University Of Pennsylvania, and a Bachelor of Science degree in Accounting from the University of Maryland.

"We welcome Mark to the Board. His two decades of experience advising and financing technology-related businesses, coupled with his public accounting background, will provide the Board with insights and expertise in both technology and finance. We look forward to the guidance he will bring to the Board and the contributions he will make to the Company," Plochocki added.

About Quality Systems, Inc.

Irvine, Calif.-based Quality Systems, Inc. and its NextGen Healthcare subsidiary develop and market computer-based practice management, electronic health records and revenue cycle management applications as well as connectivity products and services for medical and dental group practices and small hospitals. Visit www.qsii.com and www.nextgen.com for additional information.

SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS

This news release may contain forward-looking statements within the meaning of the federal securities laws, including but not limited to, statements regarding future events, developments, 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 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, 2012, 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; 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.

 

QUALITY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS. EXCEPT PER SHARE DATA)
(UNAUDITED)

  
Three Months Ended September 30,Six Months Ended September 30,
2012 20112012 2011
 
Revenues:
Software, hardware and supplies$23,720$31,860$49,564$60,771
Implementation and training services 8,535  6,094  20,581  11,566 
 
System sales32,25537,95470,14572,337
 
Maintenance38,71535,21477,28366,716
Electronic data interchange services15,02411,98528,84724,077
Revenue cycle management and related services14,48611,14228,88723,023
Other services 15,648  11,339  29,262  21,923 
 
Maintenance, EDI, RCM and other services 83,873  69,680  164,279  135,739 
 
Total revenues 116,128  107,634  234,424  208,076 
 
Cost of revenue:
Software, hardware and supplies5,6244,18711,3958,801
Implementation and training services 7,507  5,050  16,652  9,125 
 
Total cost of system sales13,1319,23728,04717,926
 
Maintenance4,7413,9949,5527,848
Electronic data interchange services9,1517,96418,39915,926
Revenue cycle management and related services10,5568,45621,42617,282
Other services 8,785  6,369  17,335  11,966 
 
Total cost of maintenance, EDI, RCM and other services 33,233  26,783  66,712  53,022 
 
Total cost of revenue 46,364  36,020  94,759  70,948 
 
Gross profit69,76471,614139,665137,128
 
Operating expenses:
Selling, general and administrative37,83232,16974,51361,555
Research and development costs6,2727,35814,84814,185
Amortization of acquired intangible assets 1,316  520  2,453  1,002 
 
Total operating expenses 45,420  40,047  91,814  76,742 
 
Income from operations24,34431,56747,85160,386
 
Interest income (expense), net(62)75(27)157
Other income (expense), net 220  (144) 7  (182)
 
Income before provision for income taxes24,50231,49847,83160,361
Provision for income taxes 8,811  11,002  16,643  20,882 
 
Net income$15,691 $20,496 $31,188 $39,479 
 
Net income per share:
Basic$0.26$0.35$0.53$0.67
Diluted$0.26$0.35$0.53$0.67
 
Weighted average shares outstanding:
Basic59,34758,66459,31458,511
Diluted59,38659,00559,38658,902
 
Dividends declared per common share$0.175$0.175$0.350$0.350
 

QUALITY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)

  
September 30,March 31,
20122012
 
ASSETS
Current assets:
Cash and cash equivalents$117,043$134,444
Restricted cash5,2231,962
Marketable securities4,9894,987
Accounts receivable, net151,787145,756
Inventories3,8583,715
Income taxes receivable6,0632,628
Deferred income tax assets, net10,12710,127
Other current assets 6,712  9,090 
 
Total current assets305,802312,709
 
Equipment and improvements, net20,29617,841
Capitalized software costs, net29,23219,994
Intangibles, net31,29923,259
Goodwill63,16160,776
Other assets 6,860  5,773 
 
Total assets$456,650 $440,352 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable$8,955$4,532
Deferred revenue67,96883,108
Accrued compensation and related benefits9,89411,870
Dividends payable10,38210,354
Other current liabilities 31,108  19,568 
 
Total current liabilities128,307129,432
 
Deferred revenue, net of current1,2251,293
Deferred income tax liabilities, net4,5005,351
Deferred compensation3,2083,497
Other noncurrent liabilities 7,103  5,602 
 
Total liabilities144,343145,175
 
Commitments and contingencies
 
Shareholders' equity:
Common stock

$0.01 par value; authorized 100,000 shares; issued and
outstanding 59,370 and 59,180 shares at September 30,
2012 and March 31, 2012, respectively

594592
Additional paid-in capital175,747169,033
Accumulated other comprehensive loss(55)(45)
Retained earnings 136,
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