Quality Systems, Inc. Reports Fiscal 2013 Second Quarter Results

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

2011

2012

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 sales

32,255

37,954

70,145

72,337

Maintenance

38,715

35,214

77,283

66,716

Electronic data interchange services

15,024

11,985

28,847

24,077

Revenue cycle management and related services

14,486

11,142

28,887

23,023

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 supplies

5,624

4,187

11,395

8,801

Implementation and training services

7,507

5,050

16,652

9,125

Total cost of system sales

13,131

9,237

28,047

17,926

Maintenance

4,741

3,994

9,552

7,848

Electronic data interchange services

9,151

7,964

18,399

15,926

Revenue cycle management and related services

10,556

8,456

21,426

17,282

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 profit

69,764

71,614

139,665

137,128

Operating expenses:

Selling, general and administrative

37,832

32,169

74,513

61,555

Research and development costs

6,272

7,358

14,848

14,185

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 operations

24,344

31,567

47,851

60,386

Interest income (expense), net

(62

)

75

(27

)

157

Other income (expense), net

220

(144

)

7

(182

)

Income before provision for income taxes

24,502

31,498

47,831

60,361

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:

Basic

59,347

58,664

59,314

58,511

Diluted

59,386

59,005

59,386

58,902

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,

2012

2012

ASSETS

Current assets:

Cash and cash equivalents

$

117,043

$

134,444

Restricted cash

5,223

1,962

Marketable securities

4,989

4,987

Accounts receivable, net

151,787

145,756

Inventories

3,858

3,715

Income taxes receivable

6,063

2,628

Deferred income tax assets, net

10,127

10,127

Other current assets

6,712

9,090

Total current assets

305,802

312,709

Equipment and improvements, net

20,296

17,841

Capitalized software costs, net

29,232

19,994

Intangibles, net

31,299

23,259

Goodwill

63,161

60,776

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 revenue

67,968

83,108

Accrued compensation and related benefits

9,894

11,870

Dividends payable

10,382

10,354

Other current liabilities

31,108

19,568

Total current liabilities

128,307

129,432

Deferred revenue, net of current

1,225

1,293

Deferred income tax liabilities, net

4,500

5,351

Deferred compensation

3,208

3,497

Other noncurrent liabilities

7,103

5,602

Total liabilities

144,343

145,175

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

594

592

Additional paid-in capital

175,747

169,033

Accumulated other comprehensive loss

(55

)

(45

)

Retained earnings

136,