EX-99.1 2 d616860dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

 

For Further Information, Contact:   
Quality Systems, Inc.    Susan J. Lewis
18111 Von Karman Avenue, Suite 700    Phone: (303) 804-0494
Irvine, CA 92612    slewis@qsii.com
Phone: (949) 255-2600   
Paul Holt, CFO, pholt@qsii.com   

FOR IMMEDIATE RELEASE

      OCTOBER 24, 2013

QUALITY SYSTEMS, INC. REPORTS FISCAL 2014 SECOND QUARTER RESULTS

IRVINE, Calif. … October 24, 2013 …Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal 2014 second quarter ended September 30, 2013.

The Company reported revenues of $111.1 million for the second quarter ended September 30, 2013, a decrease of four percent versus $116.1 million reported in the second quarter of fiscal 2013. Net income for the fiscal 2014 second quarter was $10.1 million, a decrease of 36 percent compared with net income of $15.7 million for the fiscal 2013 second quarter. On a GAAP basis, fully diluted earnings per share for the fiscal 2014 second quarter was $0.17, a decline of 35 percent from $0.26 reported in the comparable quarter a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2014 second quarter was $0.22, a decline of 29 percent from $0.31 for the comparable quarter a year ago (non-GAAP fully diluted earnings per share is reconciled to its corresponding GAAP measure at the end of this release).

The Company commenced reporting non-GAAP earnings per share this quarter, as a supplement to the reported GAAP earnings per share, as management of the Company believes that the non-GAAP measurement provides readers of the financial statements enhanced disclosure of the Company’s operating performance exclusive of select non-cash items and other exceptional costs.

During the quarter, the Company completed the acquisition of Mirth Corporation, a global leader in health information technology that aids in achieving interoperability and fosters connectivity. The acquisition enhances the Company’s current enterprise interoperability initiatives while broadening its accountable and collaborative care, population health, disease management and clinical data exchange offerings.

“The second quarter results are indicative that the reorganization plan we put in place during fiscal 2013 is beginning to gain traction. During this time, we employed a range of new techniques to foster leads, and over the past two quarters, these initiatives started to reap results. In the first half of this fiscal year, we saw our leads grow and pipeline increase. This quarter, revenue, bookings and systems sales all increased versus the 2014 first quarter. For the first time in five quarters, we are pleased to see sequential improvement across all these categories,” noted Steven T. Plochocki, Quality Systems’ President and Chief Executive Officer.

“Additionally, the acquisition of Mirth was well received by our clients and the marketplace. Mirth is bringing state-of-the-art interoperability technology to our clients and the marketplace, which not only strengthens our competitive position, but also brings new potential products and opens the doors for expansion across other market segments in the future. We are quickly integrating Mirth’s expertise and believe it will be a strong contributor in fiscal year 2015,” Plochocki added.

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Quality Systems, Inc.

Fiscal 2014 Second Quarter Results

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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 13, 2013 with an anticipated distribution date of January 3, 2014. 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 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 second quarter results on Thursday, October 24, 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 #76516044. 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 #76516044. The replay will be available from approximately 1:00 PM ET on Thursday, October 24, 2013, through 11:59 PM ET on Thursday, October 31, 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.

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, earnings per share and the anticipated benefits of the acquisition of Mirth Corporation). 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 include failure to successfully integrate the operations, technology, infrastructure or employees of Mirth Corporation into the Company; and additional risks and uncertainties 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’


Quality Systems, Inc.

Fiscal 2014 Second Quarter Results

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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.

USE OF NON-GAAP FINANCIAL MEASURES

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 non-GAAP diluted earnings per share and Days Sales Outstanding (“DSO”), provide useful supplemental information to investors and management regarding the Company’s financial condition and results. The Company calculates non-GAAP diluted earnings per share by excluding acquisition costs, amortization of acquired intangible assets, proxy contest expense, and share-based compensation from GAAP income before provision for income taxes. The Company calculates DSO by annualizing (multiplying by four) net revenue for the quarter and then dividing 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.

FINANCIAL TABLES ATTACHED


QUALITY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

     Three Months Ended September 30,  
     2013     2012  

Revenues:

    

Software and hardware

   $ 15,562      $ 23,720   

Implementation and training services

     7,809        8,535   
  

 

 

   

 

 

 

System sales

     23,371        32,255   

Maintenance

     40,313        38,715   

Electronic data interchange services

     16,545        15,024   

Revenue cycle management and related services

     15,467        14,486   

Other services

     15,385        15,648   
  

 

 

   

 

 

 

Maintenance, EDI, RCM and other services

     87,710        83,873   
  

 

 

   

 

 

 

Total revenues

     111,081        116,128   
  

 

 

   

 

 

 

Cost of revenue:

    

Software and hardware

     4,779        5,624   

Implementation and training services

     6,972        7,507   
  

 

 

   

 

 

 

Total cost of system sales

     11,751        13,131   

Maintenance

     5,262        4,741   

Electronic data interchange services

     10,650        9,151   

Revenue cycle management and related services

     11,007        10,556   

Other services

     9,012        8,785   
  

 

 

   

 

 

 

Total cost of maintenance, EDI, RCM and other services

     35,931        33,233   
  

 

 

   

 

 

 

Total cost of revenue

     47,682        46,364   
  

 

 

   

 

 

 

Gross profit

     63,399        69,764   

Operating expenses:

    

Selling, general and administrative

     38,578        37,832   

Research and development costs

     7,615        6,272   

Amortization of acquired intangible assets

     1,260        1,316   

Impairment of goodwill

     —          —     
  

 

 

   

 

 

 

Total operating expenses

     47,453        45,420   
  

 

 

   

 

 

 

Income from operations

     15,946        24,344   

Interest expense, net

     (205     (62

Other income (expense), net

     (155     220   
  

 

 

   

 

 

 

Income before provision for income taxes

     15,586        24,502   

Provision for income taxes

     5,465        8,811   
  

 

 

   

 

 

 

Net income

   $ 10,121      $ 15,691   
  

 

 

   

 

 

 

Net income per share:

    

Basic

   $ 0.17      $ 0.26   

Diluted

   $ 0.17      $ 0.26   

Weighted-average shares outstanding:

    

Basic

     59,734        59,347   

Diluted

     59,751        59,386   

Dividends declared per common share

   $ 0.175      $ 0.175   


QUALITY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

(UNAUDITED)

 

     September 30,     March 31,  
     2013     2013  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 72,816      $ 105,999   

Restricted cash

     3,498        5,488   

Marketable securities

     11,489        12,012   

Accounts receivable, net

     139,526        148,257   

Inventories

     996        710   

Income taxes receivable

     4,466        —     

Deferred income taxes, net

     12,180        12,140   

Other current assets

     12,212        12,720   
  

 

 

   

 

 

 

Total current assets

     257,183        297,326   

Equipment and improvements, net

     23,508        21,887   

Capitalized software costs, net

     49,773        39,781   

Intangibles, net

     49,838        27,550   

Goodwill

     76,219        45,761   

Other assets

     10,810        10,750   
  

 

 

   

 

 

 

Total assets

   $ 467,331      $ 443,055   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 8,823      $ 11,501   

Deferred revenue

     66,643        65,207   

Accrued compensation and related benefits

     11,976        11,915   

Income taxes payable

     —          1,480   

Dividends payable

     10,672        10,418   

Other current liabilities

     32,343        26,508   
  

 

 

   

 

 

 

Total current liabilities

     130,457        127,029   

Deferred revenue, net of current

     1,362        1,219   

Deferred income taxes, net

     —          —     

Deferred compensation

     4,298        3,809   

Other noncurrent liabilities

     10,710        3,949   
  

 

 

   

 

 

 

Total liabilities

     146,827        136,006   

Commitments and contingencies

    

Shareholders’ equity:

    

Common stock $0.01 par value; authorized 100,000 shares; issued and outstanding 60,125 and 59,543 shares at September 30, 2013 and March 31, 2013, respectively

     601        595   

Additional paid-in capital

     191,416        179,743   

Accumulated other comprehensive loss

     (204     (11

Retained earnings

     128,691        126,722   
  

 

 

   

 

 

 

Total shareholders’ equity

     320,504        307,049   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 467,331      $ 443,055   
  

 

 

   

 

 

 


QUALITY SYSTEMS, INC.

NON-GAAP FINANCIAL MEASURES

RECONCILIATION OF NON-GAAP DILUTED NET INCOME PER SHARE

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

            Three Months Ended September 30,  
            2013      2012  

Income before provision for income taxes—GAAP

      $ 15,586       $ 24,502   

Items excluded from Non-GAAP income before provision for income taxes:

        

Acquisition costs

        429         871   

Amortization of acquired intangible assets

        2,196         1,993   

Proxy contest expense

        1,721         1,000   

Share-based compensation

        584         419   
     

 

 

    

 

 

 

Income before provision for income taxes—Non-GAAP

        20,516         28,785   

Provision for income taxes

        7,160         10,334   

Net income—Non-GAAP

      $ 13,356       $ 18,451   
     

 

 

    

 

 

 

Diluted net income per share—Non-GAAP

      $ 0.22       $ 0.31   

RECONCILIATION OF DAYS SALES OUTSTANDING CALCULATION

        

(IN THOUSANDS, EXCEPT NUMBER OF DAYS)

        
            September 30,         
            2013         

Quarterly Revenue

      $ 111,081      

Times four (4)

     x         4      
     

 

 

    

Equals Annualized Revenue

        444,324      

Divided by 365 days

     ÷         365      
     

 

 

    

Equals Average Daily Revenue

     =       $ 1,217      
     

 

 

    

Net Accounts Receivable

      $ 139,526      

Divided by Average Daily Revenue

     ÷         1,217      
     

 

 

    

Equals Days Sales Outstanding

     =         115      
     

 

 

    

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