Quality Systems, Inc. Reports Fiscal 2013 Second Quarter Results

IRVINE, Calif.--(BUSINESS WIRE)--

Quality Systems, Inc. QSII announced today results for its fiscal 2013 second quarter ended September 30, 2012.

The Company reported revenues of $116.1 million for the fiscal 2013 second quarter, an increase of 8 percent, versus $107.6 million for the fiscal 2012 second quarter. Net income for the fiscal 2013 second quarter was $15.7 million, down 23 percent when compared with net income of $20.5 million for the comparable period last year. Fully diluted earnings per share for the fiscal 2013 second quarter was $0.26, a 26 percent decrease from $0.35 for the fiscal 2012 second quarter. While revenues increased in the quarter, profitability was impacted by lower software license sales.

“Quality Systems continues to make investments and position the company to capture the significant opportunities that lie ahead in our healthcare information technology sector. Recently, we named Dan Morefield, a seasoned technology executive, as our new chief operating officer; restructured our sales and marketing functions under Gary Voydanoff, one of our veteran sales executives; and promoted Steve Puckett to a newly created chief technology officer role to manage our development-related resources. For more than 20 years, Steve has served a critical role in bringing industry-leading technology to the company,” stated Steven T. Plochocki, president and chief executive officer.

Quality Systems will host a conference call to discuss its fiscal 2013 second quarter results on Friday, October 26, 2012 at 10:00 AM ET (7:00 AM PT). All participants should dial 1-800-762-8779 at least ten minutes prior to the start of the call. International callers should dial 480-629-9818. To hear a live Web simulcast or to listen to the archived webcast following completion of the call, please visit the Company's 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 800-406-7325 or 303-590-3030 and enter reservation identification number 4571447. The replay will be available from approximately 12:00 PM ET on Friday, October 26, 2012, through 11:59 PM ET on Friday, November 2, 2012.

A transcript of the conference call will be made available on the Company's website at www.qsii.com.

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 14, 2012 with an anticipated distribution date of January 4, 2013. The $0.175 per share cash dividend is consistent with 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.

In other news, Quality Systems reported that Mark H. Davis was appointed to its Board of Directors, effective October 25, 2012. Davis fills the seat vacated by Maureen Spivack, who resigned due to conflicting employment obligations. Davis will also be appointed to serve on the Board's Audit Committee and Transaction Committee.

Davis is a managing director at B. Riley & Co, LLC, an investment firm specializing in research, sales and trading and corporate finance. He brings more than 20 years of experience advising and financing technology companies, including software, cloud infrastructure and information technology firms, to the Quality Systems Board. In addition, Davis was a practicing certified public accountant for nearly a decade and his financial expertise and knowledge will prove beneficial to the Board.

Previously, Davis served as head of technology investment banking at Cantor Fitzgerald, managing director at Macquarie Capital, an Australian merchant and investment banking firm, and managing director (as well as in other senior leadership roles) at Citigroup. Earlier in his career, Davis was an Audit Senior with Price Waterhouse. Davis holds a Master's of Business Administration from the Wharton School of the University Of Pennsylvania, and a Bachelor of Science degree in Accounting from the University of Maryland.

“We welcome Mark to the Board. His two decades of experience advising and financing technology-related businesses, coupled with his public accounting background, will provide the Board with insights and expertise in both technology and finance. We look forward to the guidance he will bring to the Board and the contributions he will make to the Company,” Plochocki added.

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 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 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, 2012, 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' 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.

QUALITY SYSTEMS, INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS. EXCEPT PER SHARE DATA) (UNAUDITED)
		Three Months Ended September 30,								Six Months Ended September 30,
		2012				2011				2012				2011
Revenues:
Software, hardware and supplies		$	23,720			$	31,860			$	49,564			$	60,771
Implementation and training services			8,535				6,094				20,581				11,566
System sales			32,255				37,954				70,145				72,337
Maintenance			38,715				35,214				77,283				66,716
Electronic data interchange services			15,024				11,985				28,847				24,077
Revenue cycle management and related services			14,486				11,142				28,887				23,023
Other services			15,648				11,339				29,262				21,923
Maintenance, EDI, RCM and other services			83,873				69,680				164,279				135,739
Total revenues			116,128				107,634				234,424				208,076
Cost of revenue:
Software, hardware and supplies			5,624				4,187				11,395				8,801
Implementation and training services			7,507				5,050				16,652				9,125
Total cost of system sales			13,131				9,237				28,047				17,926
Maintenance			4,741				3,994				9,552				7,848
Electronic data interchange services			9,151				7,964				18,399				15,926
Revenue cycle management and related services			10,556				8,456				21,426				17,282
Other services			8,785				6,369				17,335				11,966
Total cost of maintenance, EDI, RCM and other services			33,233				26,783				66,712				53,022
Total cost of revenue			46,364				36,020				94,759				70,948
Gross profit			69,764				71,614				139,665				137,128
Operating expenses:
Selling, general and administrative			37,832				32,169				74,513				61,555
Research and development costs			6,272				7,358				14,848				14,185
Amortization of acquired intangible assets			1,316				520				2,453				1,002
Total operating expenses			45,420				40,047				91,814				76,742
Income from operations			24,344				31,567				47,851				60,386
Interest income (expense), net			(62	)			75				(27	)			157
Other income (expense), net			220				(144	)			7				(182	)
Income before provision for income taxes			24,502				31,498				47,831				60,361
Provision for income taxes			8,811				11,002				16,643				20,882
Net income		$	15,691			$	20,496			$	31,188			$	39,479
Net income per share:
Basic		$	0.26			$	0.35			$	0.53			$	0.67
Diluted		$	0.26			$	0.35			$	0.53			$	0.67
Weighted average shares outstanding:
Basic			59,347				58,664				59,314				58,511
Diluted			59,386				59,005				59,386				58,902
Dividends declared per common share		$	0.175			$	0.175			$	0.350			$	0.350

QUALITY SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED)
		September 30,				March 31,
		2012				2012
ASSETS
Current assets:
Cash and cash equivalents		$	117,043			$	134,444
Restricted cash			5,223				1,962
Marketable securities			4,989				4,987
Accounts receivable, net			151,787				145,756
Inventories			3,858				3,715
Income taxes receivable			6,063				2,628
Deferred income tax assets, net			10,127				10,127
Other current assets			6,712				9,090
Total current assets			305,802				312,709
Equipment and improvements, net			20,296				17,841
Capitalized software costs, net			29,232				19,994
Intangibles, net			31,299				23,259
Goodwill			63,161				60,776
Other assets			6,860				5,773
Total assets		$	456,650			$	440,352
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	8,955			$	4,532
Deferred revenue			67,968				83,108
Accrued compensation and related benefits			9,894				11,870
Dividends payable			10,382				10,354
Other current liabilities			31,108				19,568
Total current liabilities			128,307				129,432
Deferred revenue, net of current			1,225				1,293
Deferred income tax liabilities, net			4,500				5,351
Deferred compensation			3,208				3,497
Other noncurrent liabilities			7,103				5,602
Total liabilities			144,343				145,175
Commitments and contingencies
Shareholders' equity:
Common stock
$0.01 par value; authorized 100,000 shares; issued and outstanding 59,370 and 59,180 shares at September 30, 2012 and March 31, 2012, respectively			594				592
Additional paid-in capital			175,747				169,033
Accumulated other comprehensive loss			(55	)			(45	)
Retained earnings			136,021				125,597
Total shareholders' equity			312,307				295,177
Total liabilities and shareholders' equity		$	456,650			$	440,352