8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report
(Date of earliest event reported)
October 25, 2010

QUALITY SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

CALIFORNIA	001-12537	95-2888568
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

18111 Von Karman, Suite 600
Irvine, California 92612
(Address of Principal Executive Offices)

(949) 255-2600
(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EX-99.1

Item 2.02 Results of Operations and Financial Condition.

     The information in this Item 2.02 of this Form 8-K, as well as Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

     On October 29, 2010, Quality Systems, Inc. (the “Company”) issued a press release announcing its financial performance for the period ended September 30, 2010. A copy of the press release is attached to this Form 8-K as Exhibit 99.1, which is incorporated herein by this reference.

     On October 29, 2010, the Company held a conference call concerning its financial performance for the period ended September 30, 2010. The Company expects to file a copy of the transcript of the conference call as soon as available by amendment to this Form 8-K. The conference call contains forward-looking statements regarding the Company and includes cautionary statements identifying important factors that could cause actual results to differ materially from those anticipated.

Use of Non-GAAP Financial Measures

     The Company from time to time discloses its Days Sales Outstanding (“DSO”), which is a non-GAAP financial measure. During the quarter ended September 30, 2010, DSO was 126 days. 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 a DSO figure. For the quarter ended September 30, 2010, the calculation was as follows:

Quarterly Revenue	$	81,457,000
Times four(4)	x	4
Equals Annualized Revenue		325,828,000
Divided by 365 days	÷	365
Equals Daily Revenue	=	$892,679
Net Accounts Receivable	$	112,506,000
Divided by Average Daily Revenue	÷	892,679
Equals Days Sales Outstanding	=	126

Item 8.01 Other Events.

Quarterly Dividend

     On October 25, 2010, the Company’s Board of Directors declared a quarterly cash dividend of $0.30 per share on the Company’s outstanding shares of common stock, payable to shareholders of record as of December 17, 2010 with an anticipated distribution date on or about January 5, 2011 pursuant to the Company’s current policy to pay a regular quarterly dividend on the Company’s outstanding shares of common stock each fiscal quarter subject to further Board review, approval and establishment of record and distribution dates by the Board prior to the declaration and payment of each such quarterly dividend.

     A copy of the Company’s press release announcing the dividend and earnings results is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

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Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.		Description
	99.1	Press Release dated October 29, 2010

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 29, 2010

QUALITY SYSTEMS, INC.
By:	/s/ Paul Holt
	Paul Holt
	Chief Financial Officer

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EXHIBITS ATTACHED TO THIS REPORT ON FORM 8-K

Exhibit No.		Description
	99.1	Press Release dated October 29, 2010

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EX-99.1

Exhibit 99.1

For Further Information, Contact:
Quality Systems, Inc.	Susan J. Lewis
18111 Von Karman Avenue, Suite 600	Phone: (303) 804-0494
Irvine, CA 92612	slewis@qsii.com
Phone: (949) 255-2600
Paul Holt, CFO, pholt@qsii.com

FOR IMMEDIATE RELEASE
          October 29, 2010

QUALITY SYSTEMS REPORTS FISCAL 2011 SECOND QUARTER RESULTS

     IRVINE, Calif. ... October 29, 2010... Quality Systems, Inc. (NASDAQ:QSII) announced today the results of operations for its fiscal 2011 second quarter ended September 30, 2010.

     The Company reported record net revenues of $81.5 million for the fiscal 2011 second quarter, an increase of 14 percent from $71.7 million in the comparable period last year. The Company reported net income of $13.4 million, a 14 percent increase when compared with $11.8 million in net income for the same period last year. Fully diluted earnings per share were $0.46 in the fiscal 2011 second quarter; up 12 percent versus the $0.41 fully diluted earnings per share for the second quarter of fiscal 2010.

     “At the very end of the second quarter, in fact on September 30, 2010, the Certification Commission for Health Information Technology (CCHIT^®) announced that our EHR solution was certified as a Complete EHR and 2011/2012 compliant. This came on the heels of the Stage 1 Meaningful Use definition criteria revealed in July 2010. With the lifting of the many uncertainties that had been looming for quite some time, we are well positioned to aid physicians and hospitals with their EHR decisions as they prepare to make incentive-based purchases,” explained Steven T. Plochocki, Quality Systems’ chief executive officer.

     “Now that we have met both Meaningful Use and CCHIT^® standards, we believe our robust product and service offering will bode well for those physicians and hospitals seeking to transition to EHR and help to optimize shareholder value as we enter year one of the five-year stimulus plan,” Plochocki added.

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Quality Systems, Inc.
Fiscal 2011 Second Quarter Results
Page 2

     Quality Systems, Inc. also announced that the Company’s Board of Directors declared a cash dividend of Thirty Cents ($0.30) per share on the Company’s outstanding shares of Common Stock, payable to shareholders of record as of December 17, 2010, with an anticipated distribution date of January 5, 2011, pursuant to the Company’s current policy to pay a regular quarterly dividend of Thirty Cents ($0.30) per share 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, Inc. will host a conference call to discuss its fiscal 2011 second quarter results on Friday, October 29, 2010 at 10:00 AM ET (7:00 AM PT). All participants should dial 877-941-6013 at least ten minutes prior to the start of the call. International callers should dial 480-629-9738. 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 1-800-406-7325 or 303-590-3030 and enter reservation identification number 4375400. The replay will be available from approximately 12:00 PM ET on Friday, October 29, 2010, through 11:59 PM ET on Friday, November 5, 2010.

     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.

SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS

This news release may contain forward-looking statements within the meaning of the federal securities laws. 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 and net income), are forward-looking statements within the meaning of these laws and involve a number of risks and uncertainties. Management believes that these forward looking statements are reasonable and are based on reasonable assumptions and forecasts, however, undue reliance should not be placed on such statements that speak only as of the date hereof. Moreover, these forward-looking statements are subject to a number of risks and uncertainties, some of which are outlined below. As a result, actual results may vary materially from those anticipated by the forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: 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; 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; uncertainties concerning threatened, pending and new litigation against the Company including related professional services fees; uncertainties concerning the amount and timing of professional fees incurred by the Company generally; changes of accounting estimates and assumptions used to prepare the prior periods’ financial statements; general economic conditions; and the risk factors detailed from time to time in the Company’s periodic reports and registration statements filed with the Securities and Exchange Commission.

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Quality Systems, Inc.
Fiscal 2011 Second Quarter Results
Page 3

A significant portion of the Company’s quarterly sales of software product licenses and computer hardware is concluded in the last month of the 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.

FINANCIAL TABLES ATTACHED

QUALITY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)

	Three Months Ended September 30,				Six Months Ended September 30,
	2010		2009		2010		2009
Revenues:
Software, hardware and supplies	$	20,375	$	22,856	$	45,131	$	40,632
Implementation and training services		4,499		3,380		8,807		6,837
System sales		24,874		26,236		53,938		47,469
Maintenance		27,529		21,475		53,065		43,115
Electronic data interchange services		10,142		8,796		19,906		16,958
Revenue cycle management and related services		11,175		8,888		21,947		17,880
Other services		7,737		6,303		15,528		12,914
Maintenance, EDI, RCM and other services		56,583		45,462		110,446		90,867
Total revenues		81,457		71,698		164,384		138,336
Cost of revenue:
Software, hardware and supplies		4,696		3,737		10,908		6,441
Implementation and training services		3,475		3,296		6,465		6,177
Total cost of system sales		8,171		7,033		17,373		12,618
Maintenance		3,238		3,255		6,692		6,280
Electronic data interchange services		6,773		6,164		13,482		12,054
Revenue cycle management and related services		8,222		6,856		16,367		13,378
Other services		3,724		5,003		8,073		9,870
Total cost of maintenance, EDI, RCM and other service		21,957		21,278		44,614		41,582
Total cost of revenue		30,128		28,311		61,987		54,200
Gross profit		51,329		43,387		102,397		84,136
Operating expenses:
Selling, general and administrative		24,829		20,061		51,067		40,154
Research and development costs		5,232		4,346		10,688		8,323
Amortization of acquired intangible assets		445		367		792		724
Total operating expenses		30,506		24,774		62,547		49,201
Income from operations		20,823		18,613		39,850		34,935
Interest income		129		59		189		137
Other income		65		—		59		58
Income before provision for income taxes		21,017		18,672		40,098		35,130
Provision for income taxes		7,587		6,852		14,576		12,964
Net income	$	13,430	$	11,820	$	25,522	$	22,166
Net income per share:
Basic	$	0.46	$	0.41	$	0.88	$	0.78
Diluted	$	0.46	$	0.41	$	0.88	$	0.77
Weighted-average shares outstanding:
Basic		28,935		28,597		28,915		28,545
Diluted		29,078		28,742		29,066		28,717
Dividends declared per common share	$	0.30	$	0.30	$	0.60	$	0.60

QUALITY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

	September 30,		March 31,
	2010		2010
ASSETS
Current assets:
Cash and cash equivalents	$	106,852	$	84,611
Restricted cash		2,114		2,339
Marketable securities		—		7,158
Accounts receivable, net		112,506		107,458
Inventories, net		1,483		1,340
Income taxes receivable		177		2,953
Deferred income taxes, net		5,470		5,678
Other current assets		8,086		8,684
Total current assets		236,688		220,221
Equipment and improvements, net		8,728		8,432
Capitalized software costs, net		13,799		11,546
Intangibles, net		18,550		20,145
Goodwill		46,189		46,189
Other assets		4,494		3,647
Total assets	$	328,448	$	310,180
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,972	$	3,342
Deferred revenue		65,737		64,109
Accrued compensation and related benefits		6,988		8,951
Dividends payable		8,686		8,664
Other current liabilities		19,026		16,220
Total current liabilities		106,409		101,286
Deferred revenue, net of current		797		474
Deferred income taxes, net		10,254		10,859
Deferred compensation		2,178		1,883
Other noncurrent liabilities		7,354		7,389
Total liabilities		126,992		121,891
Commitments and contingencies
Shareholders’ equity:
Common stock $0.01 par value; authorized 50,000 shares; issued and outstanding 28,956 and 28,879 shares at September 30, 2010 and March 31, 2010, respectively		290		289
Additional paid-in capital		127,274		122,271
Retained earnings		73,892		65,729
Total shareholders’ equity		201,456		188,289
Total liabilities and shareholders’ equity	$	328,448	$	310,180

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