Quality Systems, Inc. Reports Fiscal 2014 First Quarter Results

Quality Systems, Inc. Reports Fiscal 2014 First Quarter Results

Lead Generation Increases 172 Percent Year-over-Year;
Pipeline Jumps Six Percent to $150.1 Million Quarter-over-Quarter

IRVINE, Calif.--(BUSINESS WIRE)-- Quality Systems, Inc. (NAS: QSII) announced today results for its fiscal 2014 first quarter ended June 30, 2013.

The Company reported revenues of $109.5 million for the first quarter ended June 30, 2013, a decrease of seven percent when compared with $118.3 million for the 2013 first quarter. Net income for the fiscal 2014 first quarter was $12.9 million, a decrease of 16 percent versus net income of $15.5 million for the first quarter of fiscal 2013. Fully diluted earnings per share for the fiscal 2014 first quarter was $0.22, a decline of 15 percent from $0.26 reported in the first quarter of the last fiscal year.

During the quarter, the Company saw considerable advancement in lead generation, which grew 172 percent year-over-year. Additionally, Quality Systems is seeing significant growth in its sales pipeline for the first time in several quarters, which jumped to $150.1 million, a six percent improvement versus the prior quarter. These two key metrics, along with a reduction in total operating expenses, are signs that the restructuring efforts the Company implemented in late fiscal 2013 -- which included consolidation of its sales and marketing efforts, cross selling of services and solutions as well as the centralization of shared services -- are beginning to show positive momentum. Revenue from the Company's Revenue Cycle Management (RCM) and Electronic Data Interface (EDI) services grew 11 percent and 21 percent, respectively, in the fiscal 2014 first quarter compared with the same period last year, as clients continue to recognize the benefits of such services amid changing healthcare models and healthcare reform.

"Our management team is greatly encouraged that our restructuring plan is beginning to bear fruit. The bottom line is that our leads are up, our pipeline is up and our operating expenses are down," explained Steven T. Plochocki, Quality Systems' President and Chief Executive Officer.

"As the healthcare information technology sector continues to rapidly evolve and new models arise, we play a key role in helping our clients adapt. Quality Systems is now the only company to have achieved Stage 2 Meaningful Use (MU) certification for physicians, dentists and hospitals. In fact, the Company ranks among the top four for MU attestations for physicians, and is one of only four organizations in the top 12 for attestations for both the inpatient and ambulatory markets. Moreover, according to CMS, in the first quarter of this calendar year, NextGen Healthcare ranked number one in terms of improvement for new physicians reaching attestation, and also ranked number one in client retention rate, at 87 percent. We are leading the way in the marketplace by assisting our clients in reaching important industry milestones necessary to their success. Our efforts in this area continue to be a priority for our entire organization," Plochocki concluded.

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 September 13, 2013 with an anticipated distribution date of October 4, 2013. The $0.175 per share cash dividend is pursuant to the Company's current policy to pay a regular quarterly dividend on the Company's outstanding shares of Common Stock, subject to further Board review and approval, and establishment of record and distribution dates by the Board prior to the declaration and payment of each such quarterly dividend.

Quality Systems will host a conference call to discuss its fiscal 2014 first quarter results on Thursday, July 25, 2013 at 10:00 AM ET (7:00 AM PT). All participants should dial 1-866-900-9499 at least ten minutes prior to the start of the call and reference conference ID # 21310368. 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 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 # 21310368. The replay will be available from approximately 1:00 PM ET on Thursday, July 25, 2013, through 11:59 PM ET on Thursday, August 1, 2013.

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. 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.


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, 2013, 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.


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 measures, such as Days Sales Outstanding ("DSO"), provide useful supplemental information to investors and management regarding the Company's financial condition and results.The Company calculates DSO as follows: net revenue for the quarter is annualized (multiplied by four) and then divided by 365 days to yield an average daily sales amount. The balance of accounts receivable, net of any reserves for bad debts, is then divided by that average daily sales amount resulting in the DSO.



Three Months Ended June 30,
2013 2012
Software and hardware$15,972$25,844
Implementation and training services 6,575  12,046 
System sales22,54737,890
Electronic data interchange services16,69213,823
Revenue cycle management and related services16,01514,401
Other services 15,667  13,614 
Maintenance, EDI, RCM and other services 86,982  80,406 
Total revenues 109,529  118,296 
Cost of revenue:
Software and hardware4,9345,771
Implementation and training services 7,134  9,145 
Total cost of system sales12,06814,916
Electronic data interchange services10,7969,248
Revenue cycle management and related services11,40110,870
Other services 8,505  8,550 
Total cost of maintenance, EDI, RCM and other services 36,004  33,479 
Total cost of revenue 48,072  48,395 
Gross profit61,45769,901
Operating expenses:
Selling, general and administrative35,09636,681
Research and development costs5,6148,576
Amortization of acquired intangible assets 1,194  1,137 
Total operating expenses 41,904  46,394 
Income from operations19,55323,507
Interest income, net3135
Other expense, net (254) (213)
Income before provision for income taxes19,33023,329
Provision for income taxes 6,385  7,832 
Net income$12,945 $15,497 
Net income per share:
Weighted average shares outstanding:
Dividends declared per common share$0.175$0.175


June 30March 31,
Current assets:
Cash and cash equivalents$118,212$105,999
Restricted cash3,6475,488
Marketable securities11,81412,012
Accounts receivable, net138,949148,257
Deferred income tax assets, net12,14012,140
Other current assets 10,561  12,720 
Total current assets296,306297,326
Equipment and improvements, net21,82521,887
Capitalized software costs, net44,40239,781
Intangibles, net25,68427,550
Other assets 10,843  10,750 
Total assets$444,821 $443,055 
Current liabilities:
Accounts payable$7,440$11,501
Deferred revenue62,72565,207
Accrued compensation and related benefits12,07311,915
Income taxes payable5,5501,480
Dividends payable10,42610,418
Other current liabilities 26,477  26,508 
Total current liabilities124,691127,029
Deferred revenue, net of current1,2851,219
Deferred compensation3,9503,809
Other noncurrent liabilities 4,791  3,949 
Total liabilities134,717136,006
Commitments and contingencies
Shareholders' equity:
Common stock

$0.01 par value; authorized 100,000 shares; issued and
outstanding 59,588 and 59,543 shares at June 30, 2013
and March 31, 2013, respectively

Additional paid-in capital180,450179,743
Accumulated other comprehensive loss(184)(11)
Retained earnings 129,242  126,722 
Total shareholders' equity 310,104  307,049 
Total liabilities and shareholders' equity$444,821 $443,055 


June 30, 2013
Quarterly Revenue$109,529
Times four (4)


Equals Annualized Revenue438,116
Divided by 365 days


Equals Average Daily Revenue


Net Accounts Receivable$138,949
Divided by Average Daily Revenue


Equals Days Sales Outstanding



Quality Systems, Inc.
Susan J. Lewis,303-804-0494
Paul Holt, CFO, 949-255-2600

KEYWORDS:   United States  North America  California


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