Quality Systems Tops on Record Revs - Analyst Blog

Quality Systems (QSII) reported third-quarter fiscal 2011 (ended December 31) earnings per share of 60 cents, beating the Zacks Consensus Estimate of 54 cents and surpassing the year-ago figure of 46 cents.

Revenues

Revenue registered a record $91.9 million, up 23% year over year, beating the Zacks Consensus Estimate of $89 million.

Segment-wise Results

System sales came in at $33.9 million, up 22.7% year over year. Revenues from the two subcomponents were $29.7 million (up 21.9% year over year) from Software, Hardware and Supplies and $4.3 million (up 28.6%) from Implementation and Training Services.

Maintenance, EDI, Revenue Cycle Management and other Services revenues were $57.9 million, reflecting a 22.5% year over year increase. Segment revenues were reported under four heads. Maintenance charges amounted to $27.9 million, up 26.1%. Electronic data interchange services sales stood at $10.4 million, an increase of 16.4%. Revenue Cycle Management delivered sales of $11.5 million, leaping 19.7%, and the “Other” sub-segment generated $8.2 million, up 22.6%.

Margin

Gross margin was 64.8% in the third quarter, above 62.2% achieved in the prior-year quarter.

Balance Sheet

Cash and cash equivalents were $118.2 million at the end of the third quarter, up 49.4% on a year over year basis.

Outlook

Quality Systems believes that with the enunciation of the requirements of the “meaningful use” criteria, health care providers are more confidently moving forward with their selection of an Electronic Health Record (“EHR”). Overall, the company is optimistic that it is well positioned to benefit from the incentives to be derived by medical providers under the American Recovery and Reinvestment Act (“ARRA”).

Quality Systems continues to face stiff competition across all of its operating platforms with established Health IT players such as Cerner Corporation (CERN), Allscripts Healthcare Solutions (MDRX) and Athenahealth (ATHN) posing a threat to the company. Nevertheless, Quality Systems remains sanguine about the growth prospects in each of its end markets boosted by the expanded adoption of its premium solutions.

 
ATHENAHEALTH IN (ATHN): Free Stock Analysis Report
 
CERNER CORP (CERN): Free Stock Analysis Report
 
ALLSCRIPTS HLTH (MDRX): Free Stock Analysis Report
 
QUALITY SYS (QSII): Free Stock Analysis Report
 
Zacks Investment Research