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)
July 22, 2015
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 July 23, 2015, Quality Systems, Inc. (the Company) issued a press release announcing its financial performance for the period ended June 30, 2015. 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 July 22, 2015, the Board of Directors (the Board) 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 September 11, 2015 with an anticipated distribution date on or about October 5, 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.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
Exhibit |
Description | |
99.1 | Press Release dated July 23, 2015 |
-2-
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: July 23, 2015
QUALITY SYSTEMS, INC. | ||
By: | /s/ John Stumpf | |
John Stumpf | ||
Interim Chief Financial Officer |
-3-
EXHIBITS ATTACHED TO THIS REPORT ON FORM 8-K
Exhibit |
Description | |
99.1 | Press Release dated July 23, 2015 |
-4-
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 | ||
John Stumpf, Interim Chief Financial Officer jstumpf@qsii.com |
FOR IMMEDIATE RELEASE
JULY 23, 2015
QUALITY SYSTEMS, INC. REPORTS FISCAL 2016 FIRST QUARTER RESULTS
IRVINE, Calif. July 23, 2015 Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal 2016 first quarter ended June 30, 2015.
Revenues for the fiscal 2016 first quarter reached $122.2 million, an increase of four percent, versus $117.9 million reported in the fiscal 2015 first quarter.
Net income for the 2016 first quarter was $6.4 million, increasing 23 percent when compared with $5.2 million for the same period a year ago.
On a GAAP basis, fully diluted earnings per share was $0.10 in the fiscal 2016 first quarter versus $0.08 in the comparable period last year. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2016 first quarter was $0.16 compared with $0.13 reported in the fiscal 2015 first quarter.
At quarter-end, the Companys liquidity position remained strong with $116.8 million of cash and investments.
As we kick off fiscal 2016 and I begin to settle into my new role, my immediate priority is centered on Quality Systems clients and our employees, as previously stated. To this end, during my first few weeks on the job, I have spent the majority of my time meeting with clients to ensure we are delivering a positive, productive and effective experience for them. I have also visited with many of our employees at QSI offices throughout the country. These initiatives have allowed me to quickly gain a keener understanding of the culture and communication both internal and external here at Quality Systems. I believe this is critical to the process involved in moving this Company forward in the dynamic healthcare environment in which we operate, explained Rusty Frantz, president and chief executive officer, who officially began his employment with the Company in this capacity on July 1, 2015.
Having one of the largest installed user bases in the healthcare information technology space affords us the chance to make a significant impact on our clients abilities to navigate changing healthcare models. I am gratified to learn that we are continuing to make progress in the Companys efforts to enhance the client experience and bring new capabilities and solutions that enable them to stay relevant and flourish, both today and into the future, Frantz said.
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Quality Systems
Fiscal 2016 First 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 September 11, 2015 with an anticipated distribution date of October 5, 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 2016 first quarter results on Thursday, July 23, 2015 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 #80827836. 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 #80827836. The replay will be available from approximately 1:00 PM ET on Thursday, July 23, 2015, through 11:59 PM ET on Thursday, July 30, 2015.
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, 2015, 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
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Quality Systems
Fiscal 2016 First Quarter Results
Page 3
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. Historically, the Company calculated a non-GAAP effective tax rate each quarter, based on non-GAAP pre-tax income (or loss) for the period, to determine the corresponding non-GAAP provision for (benefit of) income taxes. Beginning in the first quarter of fiscal year 2016, the Company began utilizing a normalized non-GAAP tax rate to provide better consistency across the interim reporting periods within a given fiscal year, by eliminating the effects of non-recurring and period-specific items which can vary in size and frequency, and which are not necessarily reflective of the Companys longer-term operations. The normalized non-GAAP tax rate expected to be applied to each quarter of fiscal year 2016 is 30.5%. The determination of this rate is based on the consideration of both historic and projected financial results. The Company intends to re-evaluate this normalized non-GAAP tax rate on an annual basis or more frequently if any significant events occur that may materially affect this rate, such as merger and acquisition activity, changes in business outlook, or changes in expectations regarding tax regulations.
FINANCIAL TABLES ATTACHED
QUALITY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended June 30, | ||||||||
2015 | 2014 | |||||||
Revenues: |
||||||||
Software license and hardware |
$ | 16,189 | $ | 19,761 | ||||
Software related subscription services |
12,246 | 9,715 | ||||||
|
|
|
|
|||||
Total software, hardware and related |
28,435 | 29,476 | ||||||
Support and maintenance |
43,713 | 40,805 | ||||||
Revenue cycle management and related services |
20,243 | 16,693 | ||||||
Electronic data interchange and data services |
20,189 | 18,319 | ||||||
Professional services |
9,584 | 12,601 | ||||||
|
|
|
|
|||||
Total revenues |
122,164 | 117,894 | ||||||
|
|
|
|
|||||
Cost of revenue: |
||||||||
Software license and hardware |
7,041 | 7,556 | ||||||
Software related subscription services |
5,958 | 4,451 | ||||||
|
|
|
|
|||||
Total software, hardware and related |
12,999 | 12,007 | ||||||
Support and maintenance |
7,943 | 6,914 | ||||||
Revenue cycle management and related services |
14,512 | 12,706 | ||||||
Electronic data interchange and data services |
12,326 | 11,999 | ||||||
Professional services |
8,197 | 12,564 | ||||||
|
|
|
|
|||||
Total cost of revenue |
55,977 | 56,190 | ||||||
|
|
|
|
|||||
Gross profit |
66,187 | 61,704 | ||||||
Operating expenses: |
||||||||
Selling, general and administrative |
39,171 | 36,730 | ||||||
Research and development costs |
17,085 | 16,236 | ||||||
Amortization of acquired intangible assets |
897 | 983 | ||||||
|
|
|
|
|||||
Total operating expenses |
57,153 | 53,949 | ||||||
|
|
|
|
|||||
Income from operations |
9,034 | 7,755 | ||||||
Interest income, net |
302 | 54 | ||||||
Other income (expense), net |
(50 | ) | 9 | |||||
|
|
|
|
|||||
Income before provision for income taxes |
9,286 | 7,818 | ||||||
Provision for income taxes |
2,924 | 2,655 | ||||||
|
|
|
|
|||||
Net income |
$ | 6,362 | $ | 5,163 | ||||
Net income per share: |
||||||||
Basic |
$ | 0.11 | $ | 0.09 | ||||
Diluted |
$ | 0.10 | $ | 0.08 | ||||
Weighted-average shares outstanding: |
||||||||
Basic |
60,312 | 60,230 | ||||||
Diluted |
61,064 | 60,770 | ||||||
Dividends declared per common share |
$ | 0.175 | $ | 0.175 |
QUALITY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
June 30, | March 31, | |||||||
2015 | 2015 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 104,859 | $ | 118,993 | ||||
Restricted cash and cash equivalents |
3,765 | 2,419 | ||||||
Marketable securities |
11,938 | 11,592 | ||||||
Accounts receivable, net |
99,974 | 107,669 | ||||||
Inventories |
647 | 622 | ||||||
Income taxes receivable |
2,662 | 3,147 | ||||||
Deferred income taxes, net |
24,078 | 24,080 | ||||||
Other current assets |
11,357 | 11,535 | ||||||
|
|
|
|
|||||
Total current assets |
259,280 | 280,057 | ||||||
Equipment and improvements, net |
22,055 | 20,807 | ||||||
Capitalized software costs, net |
41,593 | 40,397 | ||||||
Intangibles, net |
25,889 | 27,689 | ||||||
Goodwill |
73,571 | 73,571 | ||||||
Other assets |
18,501 | 18,000 | ||||||
|
|
|
|
|||||
Total assets |
$ | 440,889 | $ | 460,521 | ||||
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 11,095 | $ | 10,018 | ||||
Deferred revenue |
61,863 | 66,343 | ||||||
Accrued compensation and related benefits |
15,645 | 24,051 | ||||||
Income taxes payable |
2,686 | 10,048 | ||||||
Dividends payable |
10,703 | 10,700 | ||||||
Other current liabilities |
37,026 | 33,924 | ||||||
|
|
|
|
|||||
Total current liabilities |
139,018 | 155,084 | ||||||
Deferred revenue, net of current |
1,272 | 1,349 | ||||||
Deferred compensation |
6,385 | 5,750 | ||||||
Other noncurrent liabilities |
14,260 | 14,798 | ||||||
|
|
|
|
|||||
Total liabilities |
160,935 | 176,981 | ||||||
Commitments and contingencies |
||||||||
Shareholders equity: |
||||||||
Common stock $0.01 par value; authorized 100,000 shares; issued and outstanding 60,317 and 60,303 shares at June 30, 2015 and March 31, 2015, respectively |
603 | 603 | ||||||
Additional paid-in capital |
199,481 | 198,650 | ||||||
Accumulated other comprehensive loss |
(268 | ) | (192 | ) | ||||
Retained earnings |
80,138 | 84,479 | ||||||
|
|
|
|
|||||
Total shareholders equity |
279,954 | 283,540 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders equity |
$ | 440,889 | $ | 460,521 | ||||
|
|
|
|
QUALITY SYSTEMS, INC.
NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS, EXCEPT PER SHARE DATA)
RECONCILIATION OF NON-GAAP DILUTED EARNINGS PER SHARE
Three Months Ended June 30, | ||||||||
2015 | 2014 | |||||||
Income before provision for income taxes - GAAP |
$ | 9,286 | $ | 7,818 | ||||
Plus items included in cost of revenue: |
||||||||
Amortization of acquired software technology |
903 | 858 | ||||||
Share-based compensation |
97 | 86 | ||||||
|
|
|
|
|||||
Total adjustments to cost of revenue |
1,000 | 944 | ||||||
Plus items included in operating expenses: |
||||||||
Acquisition costs |
517 | 1,123 | ||||||
Amortization of acquired intangible assets |
897 | 983 | ||||||
Securities litigation defense costs |
538 | 278 | ||||||
Share-based compensation |
587 | 704 | ||||||
Other non-run-rate expenses* |
938 | | ||||||
|
|
|
|
|||||
Total adjustments to operating expenses |
3,477 | 3,088 | ||||||
|
|
|
|
|||||
Total adjustments to GAAP income before provision for income taxes: |
4,477 | 4,032 | ||||||
|
|
|
|
|||||
Income before provision for income taxes - Non-GAAP |
13,763 | 11,850 | ||||||
Provision for income taxes |
4,198 | 4,061 | ||||||
|
|
|
|
|||||
Net income - Non-GAAP |
$ | 9,565 | $ | 7,789 | ||||
|
|
|
|
|||||
Diluted net income per share - Non-GAAP |
$ | 0.16 | $ | 0.13 | ||||
Weighted-average shares outstanding (diluted): |
61,064 | 60,770 |
* | For the three months ended June 30, 2015, the $938 of other non-run-rate expenses consists of non-recurring incremental costs related to the change in the Companys Chief Executive Officer, including recruitment fees and severance payments. |
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