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 22, 2014
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 700
Irvine, California 92612
(Address of Principal Executive Offices)
(949) 255-2600
(Registrants 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):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | 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. |
On October 23, 2014, Quality Systems, Inc. (the Company) issued a press release announcing its financial performance for the period ended September 30, 2014. A copy of the press release is attached to this Form 8-K as Exhibit 99.1, and is incorporated herein by reference.
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.
Item 8.01 | Other Events. |
Quarterly Dividend
On October 22, 2014, the Board of Directors (the Board) of the Company declared a quarterly cash dividend of $0.175 per share on the Companys outstanding shares of common stock, payable to shareholders of record as of December 12, 2014 with an anticipated distribution date on or about January 2, 2015. The $0.175 dividend is declared pursuant to the Companys current practice to pay a regular dividend on the Companys outstanding shares of common stock each fiscal quarter subject to Board review and approval.
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Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
Exhibit |
Description | |
99.1 | Press Release dated October 23, 2014 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: October 23, 2014
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 |
Description | |
99.1 | Press Release dated October 23, 2014 |
-5-
Exhibit 99.1
For Further Information, Contact: | ||
Quality Systems, Inc. | Susan J. Lewis | |
18111 Von Karman Avenue, Suite 700 |
Phone: (954) 389-3700 | |
Irvine, CA 92612 |
slewis@qsii.com | |
Phone: (949) 255-2600 |
||
Paul Holt, EVP/CFO, pholt@qsii.com |
||
FOR IMMEDIATE RELEASE | ||
OCTOBER 23, 2014 |
QUALITY SYSTEMS, INC. REPORTS FISCAL 2015 SECOND QUARTER RESULTS
Revenue Grows Nine Percent, Reaching Record Levels while
Pipeline Expands for Eighth Consecutive Quarter
IRVINE, Calif. October 23, 2014 Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal 2015 second quarter ended September 30, 2014.
Revenues for the fiscal 2015 second quarter reached a record $120.5 million, an increase of nine percent when compared with $111.1 million reported in the same period last year. Net income for the 2015 second quarter was $4.8 million versus $10.1 million, a decrease of $5.3 million from the 2014 second quarter.
On a GAAP basis, fully diluted earnings per share was $0.08 in the fiscal 2015 second quarter versus fully diluted earnings per share of $0.17 for the comparable period a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2015 second quarter was $0.13, a decline from $0.22 reported in the fiscal 2014 second quarter.
During the quarter, the Companys pipeline grew to $161.8 million, improving for the eighth consecutive quarter. At quarter-end, the Companys liquidity position was strong, with $123.5 million of cash and investments.
During the fiscal 2015 second quarter, we saw marked improvement across all fronts within the organization. The significant progress we are making is having a cumulative effect, which is creating positive momentum in our business and our results, noted Steven T. Plochocki, president and chief executive officer.
We continue to realize benefits from the initiatives we have put into place over the past year, including the restructuring of our functional organizations, the cross selling of our products and services and the release of new solutions that cater to the evolving healthcare marketplace. Revenue Cycle Management, population health and interoperability are all among the key areas that are impacting the Companys sales and marketing efforts, in terms of both net new deals as well as cross selling into our growing client base. All of this strengthens our position as we head into the second half of this fiscal year, added Plochocki.
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Quality Systems
Fiscal 2015 Second Quarter Results
Page 2
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 Companys outstanding shares of common stock, payable to shareholders of record as of December 12, 2014 with an anticipated distribution date of January 2, 2015. The $0.175 per share cash dividend is pursuant to the Companys current practice to pay a regular quarterly dividend on the Companys 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 2015 second quarter results on Thursday, October 23, 2014 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 #22384931. 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 Companys 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 #22384931. The replay will be available from approximately 1:00 PM ET on Thursday, October 23, 2014, through 11:59 PM ET on Thursday, October 30, 2014.
A transcript of the conference call will be made available on the Companys 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 in the healthcare sector and regulatory framework, the Companys future performance, as well as managements 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 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, 2014, 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
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Quality Systems
Fiscal 2015 Second Quarter Results
Page 3
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 Companys ability or inability to attract and retain qualified personnel; possible regulation of the Companys 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 Companys 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 Companys revenues and operating results are very difficult to forecast. A major portion of the Companys 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 Companys 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 diluted earnings per share provides useful supplemental information to investors and management regarding the Companys financial condition and results. The Company calculates non-GAAP diluted earnings per share by excluding acquisition costs, amortization of acquired intangible assets, impairment of goodwill and other assets, securities litigation defense costs, share-based compensation, and other non-run-rate expenses from GAAP income before provision for income taxes. The non-GAAP provision for income taxes is calculated by excluding the income tax effect of the non-GAAP adjustments.
FINANCIAL TABLES ATTACHED
QUALITY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenues: |
||||||||||||||||
Software and hardware |
$ | 14,230 | $ | 15,562 | $ | 28,973 | $ | 31,534 | ||||||||
Implementation and training services |
7,040 | 7,809 | 13,306 | 14,384 | ||||||||||||
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System sales |
21,270 | 23,371 | 42,279 | 45,918 | ||||||||||||
Maintenance |
42,135 | 40,313 | 82,940 | 78,921 | ||||||||||||
Electronic data interchange services |
18,906 | 16,545 | 37,225 | 33,237 | ||||||||||||
Revenue cycle management and related services |
17,432 | 15,467 | 34,125 | 31,482 | ||||||||||||
Other services |
20,776 | 15,385 | 41,844 | 31,052 | ||||||||||||
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Maintenance, EDI, RCM and other services |
99,249 | 87,710 | 196,134 | 174,692 | ||||||||||||
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Total revenues |
120,519 | 111,081 | 238,413 | 220,610 | ||||||||||||
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Cost of revenue: |
||||||||||||||||
Software and hardware |
6,521 | 4,779 | 13,162 | 9,713 | ||||||||||||
Implementation and training services |
6,688 | 6,972 | 13,839 | 14,106 | ||||||||||||
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|
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Total cost of system sales |
13,209 | 11,751 | 27,001 | 23,819 | ||||||||||||
Maintenance |
6,785 | 5,262 | 13,699 | 10,564 | ||||||||||||
Electronic data interchange services |
12,015 | 10,650 | 24,014 | 21,446 | ||||||||||||
Revenue cycle management and related services |
13,202 | 11,007 | 25,908 | 22,408 | ||||||||||||
Other services |
11,562 | 9,012 | 22,341 | 17,517 | ||||||||||||
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Total cost of maintenance, EDI, RCM and other services |
43,564 | 35,931 | 85,962 | 71,935 | ||||||||||||
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Total cost of revenue |
56,773 | 47,682 | 112,963 | 95,754 | ||||||||||||
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Gross profit |
63,746 | 63,399 | 125,450 | 124,856 | ||||||||||||
Operating expenses: |
||||||||||||||||
Selling, general and administrative |
38,681 | 38,578 | 75,411 | 73,674 | ||||||||||||
Research and development costs |
16,898 | 7,615 | 33,134 | 13,229 | ||||||||||||
Amortization of acquired intangible assets |
908 | 1,260 | 1,891 | 2,454 | ||||||||||||
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Total operating expenses |
56,487 | 47,453 | 110,436 | 89,357 | ||||||||||||
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Income from operations |
7,259 | 15,946 | 15,014 | 35,499 | ||||||||||||
Interest income (expense), net |
69 | (205 | ) | 123 | (174 | ) | ||||||||||
Other expense, net |
(26 | ) | (155 | ) | (17 | ) | (409 | ) | ||||||||
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Income before income taxes |
7,302 | 15,586 | 15,120 | 34,916 | ||||||||||||
Provision for income taxes |
2,552 | 5,465 | 5,207 | 11,850 | ||||||||||||
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Net income |
$ | 4,750 | $ | 10,121 | $ | 9,913 | $ | 23,066 | ||||||||
Net income per share: |
||||||||||||||||
Basic |
$ | 0.08 | $ | 0.17 | $ | 0.16 | $ | 0.39 | ||||||||
Diluted |
$ | 0.08 | $ | 0.17 | $ | 0.16 | $ | 0.39 | ||||||||
Weighted-average shares outstanding: |
||||||||||||||||
Basic |
60,247 | 59,734 | 60,238 | 59,647 | ||||||||||||
Diluted |
60,788 | 59,751 | 60,782 | 59,663 | ||||||||||||
Dividends declared per common share |
$ | 0.175 | $ | 0.175 | $ | 0.35 | $ | 0.35 |
QUALITY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
September 30, 2014 |
March 31, 2014 |
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ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 114,980 | $ | 103,145 | ||||
Restricted cash |
2,445 | 4,351 | ||||||
Marketable securities |
8,536 | 10,656 | ||||||
Accounts receivable, net |
106,652 | 110,181 | ||||||
Inventories |
745 | 834 | ||||||
Income taxes receivable |
3,698 | 8,366 | ||||||
Deferred income taxes, net |
11,754 | 11,690 | ||||||
Other current assets |
9,780 | 11,135 | ||||||
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Total current assets |
258,590 | 260,358 | ||||||
Equipment and improvements, net |
23,193 | 22,801 | ||||||
Capitalized software costs, net |
38,404 | 39,152 | ||||||
Intangibles, net |
29,408 | 33,016 | ||||||
Goodwill |
72,804 | 72,804 | ||||||
Other assets |
17,708 | 16,927 | ||||||
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Total assets |
$ | 440,107 | $ | 445,058 | ||||
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LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 8,965 | $ | 7,888 | ||||
Deferred revenue |
69,627 | 71,077 | ||||||
Accrued compensation and related benefits |
15,949 | 15,953 | ||||||
Dividends payable |
10,697 | 10,686 | ||||||
Other current liabilities |
31,413 | 18,282 | ||||||
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Total current liabilities |
136,651 | 123,886 | ||||||
Deferred revenue, net of current |
1,813 | 2,187 | ||||||
Deferred compensation |
5,312 | 4,809 | ||||||
Other noncurrent liabilities |
10,950 | 19,086 | ||||||
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Total liabilities |
154,726 | 149,968 | ||||||
Commitments and contingencies |
||||||||
Shareholders equity: |
||||||||
Common stock $0.01 par value; authorized 100,000 shares; issued and outstanding 60,269 and 60,206 shares at September 30, 2014 and March 31, 2014, respectively |
603 | 602 | ||||||
Additional paid-in capital |
196,552 | 194,739 | ||||||
Accumulated other comprehensive loss |
(232 | ) | (182 | ) | ||||
Retained earnings |
88,458 | 99,931 | ||||||
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Total shareholders equity |
285,381 | 295,090 | ||||||
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Total liabilities and shareholders equity |
$ | 440,107 | $ | 445,058 | ||||
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QUALITY SYSTEMS, INC.
NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS, EXCEPT PER SHARE DATA)
RECONCILIATION OF NON-GAAP DILUTED EARNINGS PER SHARE
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Income before provision for income taxes - GAAP |
$ | 7,302 | $ | 15,586 | $ | 15,120 | $ | 34,916 | ||||||||
Plus items included in cost of revenue: |
||||||||||||||||
Amortization of acquired software technology |
859 | 936 | 1,717 | 1,608 | ||||||||||||
Share-based compensation |
92 | 89 | 178 | 163 | ||||||||||||
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Total adjustments to cost of revenue |
951 | 1,025 | 1,895 | 1,771 | ||||||||||||
Plus items included in operating expenses: |
||||||||||||||||
Acquisition costs |
621 | 429 | 1,744 | 494 | ||||||||||||
Amortization of acquired intangible assets |
908 | 1,260 | 1,891 | 2,454 | ||||||||||||
Securities litigation defense costs |
1,009 | 1,721 | 1,287 | 1,721 | ||||||||||||
Share-based compensation |
775 | 495 | 1,479 | 962 | ||||||||||||
Other non-run-rate expenses |
315 | | 315 | | ||||||||||||
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Total adjustments to operating expenses |
3,628 | 3,905 | 6,716 | 5,631 | ||||||||||||
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Total adjustments to GAAP income before provision for income taxes: |
4,579 | 4,930 | 8,611 | 7,402 | ||||||||||||
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Income before provision for income taxes - Non-GAAP |
11,881 | 20,516 | 23,731 | 42,318 | ||||||||||||
Provision for income taxes |
4,159 | 7,160 | 8,220 | 14,377 | ||||||||||||
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Net income - Non-GAAP |
$ | 7,722 | $ | 13,356 | $ | 15,511 | $ | 27,941 | ||||||||
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Diluted net income per share - Non-GAAP |
$ | 0.13 | $ | 0.22 | $ | 0.26 | $ | 0.47 | ||||||||
Weighted-average shares outstanding (diluted): |
60,788 | 59,751 | 60,782 | 59,663 |
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