EX-99.1 2 d70671_ex99-1.htm PRESS RELEASE

Exhibit 99.1

 

For Further Information:

 

Quality Systems, Inc.

CCG Investor Relations

18191 Von Karman Avenue, Suite 450

10960 Wilshire Blvd., Suite 2050

Irvine, CA 92612

Los Angeles, CA 90024

Phone: (949) 255-2600

Phone: (310) 477-9800

www.qsii.com

www.ccgir.com

CONTACT:

Louis Silverman,

CONTACT:

Sean Collins,

 

President and CEO

Senior Partner

 

FOR IMMEDIATE RELEASE:

 

QUALITY SYSTEMS REPORTS PRELIMINARY THIRD QUARTER RESULTS

IRVINE, Calif.--(BUSINESS WIRE) — February 5, 2007--Quality Systems, Inc. (NASDAQ: QSII - news ) today announced preliminary results of operations for its fiscal 2007 third quarter ended December 31, 2006. The Company expects to report net revenues of $38.5 million for the third quarter, an increase of 44% from the $26.8 million generated during the same quarter last year. Net income for the quarter is expected to be $8.7 million, an increase of 81% over net income of $4.8 million earned in the comparable quarter of the prior year. Fully diluted earnings per share are expected to be $0.32 for the quarter, an increase of 78% over the fully diluted $0.18 per share earnings recorded in the same quarter last year. Expected third 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 expected third quarter 2007 net earnings and diluted earnings per share by $587,000 and $0.02, respectively.

The third quarter 2007 tax provision includes an expected benefit of approximately $369,000 or $0.01 per diluted share as a result of the re-enactment of the research and development tax credit statute which occurred during the third quarter of fiscal year 2007.

For the quarter, the Company’s NextGen Healthcare Information Systems division expects to report revenue of $34.2 million, up 50% over the same quarter prior year and operating income of $13.4 million, up 70% over the same quarter of the prior year.

The Company received written notification from the Securities and Exchange Commission (the “Commission”) stating that the Commission has initiated an investigation of trading activity in the Company’s securities.

While making clear that the investigation does not mean the Commission has concluded there has been a violation of law, the Commission seeks Company documents and records concerning the Company’s Chief Financial Officer. The Company intends to cooperate fully with the Commission’s investigation. The independent registered public accountants’ review of the unaudited interim financial statements for the period ended December 31, 2006 to be filed on Form 10-Q is not yet complete as the auditors’ received notification of this investigation on February 1, 2007.

Quality Systems, Inc. will hold a conference call to discuss preliminary third quarter financial results on Monday, February 5, 2007 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 Monday, February 5, 2007 at 5:30 p.m. EST, through Monday, February 12, 2007 at midnight EST. To access the replay dial (800) 642-1687 and enter conference ID number 7990986.

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. The forward-looking statements in this press release speak only as of the date they are made. The Company undertakes no obligation to revise or update publicly any forward-looking statement for any reason.

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 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 Quality Systems’ periodic reports and registration statements filed with the Securities and Exchange Commission including, without limitation, Reports on Form 10-K and 10-Q.

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 highlights follow]

 



QUALITY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

 

 

 

THREE MONTHS ENDED

 

NINE MONTHS ENDED

 

 


 


 

 

DECEMBER 31,
2006

 

DECEMBER 31,
2005

 

DECEMBER 31,
2006

 

DECEMBER 31,
2005

 

 


 


 


 


 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

  Software, hardware and supplies

 

$          16,088

 

$          10,835

 

$          47,854

 

$          37,469

  Implementation and training services

 

2,885

 

2,615

 

8,687

 

8,136

 

 


 


 


 


System sales

 

18,973

 

13,450

 

56,541

 

45,605

 

 


 


 


 


 

 

 

 

 

 

 

 

 

  Maintenance

 

11,069

 

7,733

 

30,107

 

22,403

  Electronic data interchange services (EDI)

 

 

4,290

 

 

3,310

 

 

12,333

 

 

9,586

  Other services

 

4,164

 

2,259

 

13,048

 

6,128

 

 


 


 


 


Maintenance, EDI and other services

 

19,523

 

13,302

 

55,488

 

38,117

 

 


 


 


 


 

 

 

 

 

 

 

 

 

    Total revenue

 

38,496

 

26,752

 

112,029

 

83,722

 

 


 


 


 


 

 

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

 

 

 

  Software, hardware and supplies

 

1,798

 

1,659

 

5,210

 

6,023

  Implementation and training services

 

2,169

 

1,975

 

6,285

 

5,741

 

 


 


 


 


Total cost of system sales

 

3,967

 

3,634

 

11,495

 

11,764

 

 


 


 


 


 

 

 

 

 

 

 

 

 

  Maintenance

 

3,058

 

2,024

 

8,987

 

6,517

  Electronic data interchange services

 

3,144

 

2,216

 

8,850

 

6,403

  Other services

 

2,528

 

1,529

 

6,655

 

4,081

 

 


 


 


 


Total cost of maintenance and other services

 

 

8,730

 

 

5,769

 

 

24,492

 

 

17,001

 

 


 


 


 


    Total cost of revenue

 

12,697

 

9,403

 

35,987

 

28,765

 

 


 


 


 


 

 

 

 

 

 

 

 

 

    Gross profit

 

25,799

 

17,349

 

76,042

 

54,957

 

 


 


 


 


 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

    Selling, general and administrative

 

10,593

 

8,016

 

30,787

 

24,968

    Research and development costs

 

2,601

 

2,208

 

7,510

 

5,926

 

 


 


 


 


      Total operating expenses

 

13,194

 

10,224

 

38,297

 

30,894

 

 


 


 


 


 

 

 

 

 

 

 

 

 

    Income from operations

 

12,605

 

7,125

 

37,745

 

24,063

 

 

 

 

 

 

 

 

 

Interest income

 

935

 

594

 

2,421

 

1,395

 

 


 


 


 


 

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

 

13,540

 

 

7,719

 

 

40,166

 

 

25,458

Provision for income taxes

 

4,819

 

2,904

 

15,439

 

9,774

 

 


 


 


 


 

 

 

 

 

 

 

 

 

   Net income

 

$            8,721

 

$            4,815

 

$          24,727

 

$          15,684

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

  Basic

 

$              0.32

 

$              0.18

 

$              0.92

 

$              0.60

 

 


 


 


 


  Diluted

 

$              0.32

 

$              0.18

 

$              0.90

 

$              0.58

 

 


 


 


 


 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

26,966

 

26,490

 

26,828

 

26,338

 

 


 


 


 


Diluted

 

27,507

 

27,372

 

27,441

 

27,248

 

 


 


 


 


 



QUALITY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

 

 

 

DECEMBER 31,
2006

 

MARCH 31,
2006

 

 

 


 


ASSETS

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$               80,410

 

$               57,225

 

Accounts receivable, net

59,015

 

44,665

 

Inventories, net

Income tax receivable

1,311

1,732

 

561

1,195

 

Net current deferred tax assets

1,341

 

1,824

 

Other current assets

3,559

 

2,912

 

 


 


 

          Total current assets

147,368

 

108,382

 

 

 

 

 

Equipment and improvements, net

4,827

 

3,739

Capitalized software development costs, net

6,323

 

5,171

Net deferred tax assets

542

 

1,157

Goodwill

1,840

 

1,840

Other

2,399

 

1,958

 


 


 

          Total assets

$            163,299

 

$            122,247

 



 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

$                3,274

 

$                2,934

 

Deferred revenue

39,870

 

34,422

 

Accrued compensation and related benefits

4,874

 

5,490

 

Other current liabilities

6,827

 

3,812

 

 


 


 

          Total current liabilities

54,845

 

46,658

 

 

 

 

 

 

 

 

 

Deferred revenue, net of current

676

 

1,494

Deferred compensation

2,131

 

1,686

 

 


 


 

          Total liabilities

57,652

 

49,838

 

 


 


 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

Common stock, $0.01 par value; authorized 50,000 shares; issued
and outstanding 26,974 and 26,711 shares at December 31, 2006 and
March 31, 2006, respectively

 

 

270

 

 

 

267

 

Additional paid-in capital

61,499

 

53,675

 

Retained earnings

43,878

 

19,151

 

Deferred compensation

 

(684)

 

 


 


 

          Total shareholders’ equity

105,647

 

72,409

 

 


 


 

          Total liabilities and shareholders’ equity

$            163,299

 

$            122,247