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) November 2, 2006
QUALITY SYSTEMS, INC. (Exact name of registrant as specified in its charter)
CALIFORNIA	0-13801	95-2888568
(State or other	(Commission File Number)	(IRS Employer
jurisdiction of incorporation)		Identification Number)

18191 Von Karman, Suite 450 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))

Item 2.02                     Results of Operations and Financial Condition.

The information in this Form 8-K and the Exhibits 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 November 2, 2006, Quality Systems, Inc. issued a press release announcing its financial performance for the period ended September 30, 2006. On that same date, Quality Systems, Inc. conducted a conference call concerning its performance for the period ended September 30, 2006. A copy of the news release is attached to this Form 8-K as Exhibit 99.1.

Item 9.01                     Financial Statements and Exhibits

(c)       Exhibits.

        Exhibit 99.1      Press release dated November 2, 2006 of Quality Systems, Inc.

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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:  November 3, 2006	QUALITY SYSTEMS, INC.
	By:	/s/ Paul Holt
		Paul Holt Chief Financial Officer
INDEX TO EXHIBITS

Exhibit Number	Description
99.1	Press Release dated November 2, 2006.

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EX-99.1

Exhibit 99.1
	For more information contact:
	Louis Silverman President and CEO Quality Systems, Inc. (949) 255-2600 www.qsii.com
FOR IMMEDIATE RELEASE
	Sean Collins Partner CCG Investor Relations (310) 231-8600 www.ccgir.com
QUALITY SYSTEMS REPORTS SECOND QUARTER RESULTS
IRVINE, Calif.—(BUSINESS WIRE)— November 2, 2006—Quality Systems, Inc. (NASDAQ:QSII - news) today announced the results of operations for its fiscal 2007 second quarter ended September 30, 2006. The Company posted net revenues of $37.5 million in the second quarter, an increase of 27% from the $29.5 million generated during the same quarter last year. The Company reported net income of $8.3 million, an increase of 44% over net income of $5.8 million earned in the comparable quarter of the prior year. Fully diluted earnings per share was $0.30 in the quarter, an increase of 43% over the fully diluted $0.21 per share earnings recorded in the same quarter last year. Second quarter 2007 net earnings and diluted earnings per share reflect the impact of adopting Statement of Financial Accounting Standards No. 123R (SFAS 123R), Share-Based Payment, which requires the expensing of stock options. Adoption of SFAS 123R reduced second quarter 2007 net earnings and diluted earnings per share by $612,000 and $0.02, respectively.
For the quarter, the Company’s NextGen Healthcare Information Systems division posted revenue of $33.5 million, up 31% over the same quarter prior year and operating income of $14.1 million, up 43% over the same quarter of the prior year.
Quality Systems, Inc. will hold a conference call to discuss second quarter financial results on Thursday, November 2, 2006 at 4:30 p.m. EST (1:30 p.m. PST). To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (877) 586-7724. There is no pass code required for this call. If you are unable to participate in the call at this time, a replay will be available on Thursday, November 2, 2006 at 5:30 p.m. EST, through Thursday, November 9, 2006 at midnight EST. To access the replay dial (800) 642-1687 and enter conference ID number 1157616.
A transcript of the conference call will be made available on the QSII Web site (www.qsii.com).
About Quality Systems, Inc.
Quality Systems, Inc. and its NextGen Healthcare Information Systems subsidiary develop and market computer-based practice management, patient records, and connectivity applications for medical and dental group practices. 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. 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. 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 timing, cost and success or failure of new product and service introductions, development and product upgrade releases; undetected errors or bugs in software; 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 accountin g estimates and assumptions used to prepare the prior periods’ financial statements; general economic conditions; and the risk factors detailed from time to time in Quality Systems’ periodic reports and registration statements filed with the Securities and Exchange Commission. 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 meaningf ul 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 highlights follow]

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

	THREE MONTHS ENDED				SIX MONTHS ENDED
	SEPTEMBER 30, 2006		SEPTEMBER 30, 2005		SEPTEMBER 30, 2006		SEPTEMBER 30, 2005
Revenues:
Software, hardware and supplies	$	16,737	$	13,661	$	31,766	$	26,634
Implementation and training services		2,848		3,031		5,802		5,521
System sales		19,585		16,692		37,568		32,155
Maintenance		9,639		7,360		19,038		14,671
Electronic data interchange services		4,066		3,174		8,043		6,276
Other services		4,169		2,316		8,884		3,868
Maintenance, EDI and other services		17,874		12,850		35,965		24,815
Total revenue		37,459		29,542		73,533		56,970
Cost of revenue:
Software, hardware and supplies		1,723		1,907		3,412		4,364
Implementation and training services		2,154		1,942		4,117		3,766
Total cost of system sales		3,877		3,849		7,529		8,130
Maintenance		2,792		2,236		5,929		4,493
Electronic data interchange services		2,926		2,125		5,706		4,187
Other services		2,238		1,401		4,126		2,552
Total cost of maintenance and other services		7,956		5,762		15,761		11,232
Total cost of revenue		11,833		9,611		23,290		19,362
Gross profit		25,626		19,931		50,243		37,608
Operating expenses:
Selling, general and administrative		9,994		8,920		20,194		16,952
Research and development costs		2,591		1,977		4,909		3,718
Total operating expenses		12,585		10,897		25,103		20,670
Income from operations		13,041		9,034		25,140		16,938
Interest income		819		460		1,486		801
Income before provision for income taxes		13,860		9,494		26,626		17,739
Provision for income taxes		5,523		3,700		10,620		6,870
Net income	$	8,337	$	5,794	$	16,006	$	10,869
Net income per share:
Basic	$	0.31	$	0.22	$	0.60	$	0.41
Diluted	$	0.30	$	0.21	$	0.59	$	0.40
Weighted average shares outstanding:
Basic		26,802		26,298		26,758		26,262
Diluted		27,380		27,128		27,332		27,058

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

	SEPTEMBER 30, 2006		MARCH 31, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	74,700	$	57,225
Accounts receivable, net		55,292		44,665
Inventories, net		856		561
Income tax receivable		54		1,195
Net current deferred tax assets		1,807		1,824
Other current assets		2,814		2,912
Total current assets		135,523		108,382
Equipment and improvements, net		4,192		3,739
Capitalized software costs, net		5,852		5,171
Net deferred tax assets		1,257		1,157
Goodwill		1,840		1,840
Other		2,386		1,958
Total assets	$	151,050	$	122,247
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,389	$	2,934
Deferred revenue		37,853		34,422
Accrued compensation and related benefits		4,497		5,490
Other current liabilities		6,561		3,812
Total current liabilities		52,300		46,658
Deferred revenue, net of current		1,497		1,494
Deferred compensation		1,932		1,686
Total liabilities		55,729		49,838
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.01 par value; authorized 50,000 shares; issued                    and outstanding 26,934 and 26,711 shares at September 30, 2006                    and March 31, 2006, respectively		269		267
Additional paid-in capital		59,895		53,675
Retained earnings		35,157		19,151
Deferred compensation		—		(684	)
Total shareholders’ equity		95,321		72,409
Total liabilities and shareholders’ equity	$	151,050	$	122,247