October 29, 2010

Quality Systems Reports Fiscal 2011 Second Quarter Results

IRVINE, Calif., Oct 29, 2010 (BUSINESS WIRE) -- Quality Systems, Inc. (NASDAQ:QSII) announced today the results of operations for its fiscal 2011 second quarter ended September 30, 2010.

The Company reported record net revenues of $81.5 million for the fiscal 2011 second quarter, an increase of 14 percent from $71.7 million in the comparable period last year. The Company reported net income of $13.4 million, a 14 percent increase when compared with $11.8 million in net income for the same period last year. Fully diluted earnings per share were $0.46 in the fiscal 2011 second quarter; up 12 percent versus the $0.41 fully diluted earnings per share for the second quarter of fiscal 2010.

"At the very end of the second quarter, in fact on September 30, 2010, the Certification Commission for Health Information Technology (CCHIT(R)) announced that our EHR solution was certified as a Complete EHR and 2011/2012 compliant. This came on the heels of the Stage 1 Meaningful Use definition criteria revealed in July 2010. With the lifting of the many uncertainties that had been looming for quite some time, we are well positioned to aid physicians and hospitals with their EHR decisions as they prepare to make incentive-based purchases," explained Steven T. Plochocki, Quality Systems' chief executive officer.

"Now that we have met both Meaningful Use and CCHIT(R) standards, we believe our robust product and service offering will bode well for those physicians and hospitals seeking to transition to EHR and help to optimize shareholder value as we enter year one of the five-year stimulus plan," Plochocki added.

Quality Systems, Inc. also announced that the Company's Board of Directors declared a cash dividend of Thirty Cents ($0.30) per share on the Company's outstanding shares of Common Stock, payable to shareholders of record as of December 17, 2010, with an anticipated distribution date of January 5, 2011, pursuant to the Company's current policy to pay a regular quarterly dividend of Thirty Cents ($0.30) per share on the Company's outstanding shares of Common Stock, subject to further 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, Inc. will host a conference call to discuss its fiscal 2011 second quarter results on Friday, October 29, 2010 at 10:00 AM ET (7:00 AM PT). All participants should dial 877-941-6013 at least ten minutes prior to the start of the call. International callers should dial 480-629-9738. 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 1-800-406-7325 or 303-590-3030 and enter reservation identification number 4375400. The replay will be available from approximately 12:00 PM ET on Friday, October 29, 2010, through 11:59 PM ET on Friday, November 5, 2010.

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. 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 and net income), are forward-looking statements within the meaning of these laws and involve a number of risks and uncertainties. Management believes that these forward looking statements are reasonable and are based on reasonable assumptions and forecasts, however, undue reliance should not be placed on such statements that speak only as of the date hereof. Moreover, these forward-looking statements are subject to a number of risks and uncertainties, some of which are outlined below. As a result, actual results may vary materially from those anticipated by the forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: 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; 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; uncertainties concerning threatened, pending and new litigation against the Company including related professional services fees; uncertainties concerning the amount and timing of professional fees incurred by the Company generally; changes of accounting estimates and assumptions used to prepare the prior periods' financial statements; general economic conditions; and the risk factors detailed from time to time in the Company's periodic reports and registration statements filed with the Securities and Exchange Commission.

A significant portion of the Company's quarterly sales of software product licenses and computer hardware is concluded in the last month of the 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)

(UNAUDITED)

Three Months Ended September 30, Six Months Ended September 30,
2010 2009 2010 2009
Revenues:
Software, hardware and supplies $ 20,375 $ 22,856 $ 45,131 $ 40,632
Implementation and training services 4,499 3,380 8,807 6,837
System sales 24,874 26,236 53,938 47,469
Maintenance 27,529 21,475 53,065 43,115
Electronic data interchange services 10,142 8,796 19,906 16,958
Revenue cycle management and related services 11,175 8,888 21,947 17,880
Other services 7,737 6,303 15,528 12,914
Maintenance, EDI, RCM and other services 56,583 45,462 110,446 90,867
Total revenues 81,457 71,698 164,384 138,336
Cost of revenue:
Software, hardware and supplies 4,696 3,737 10,908 6,441
Implementation and training services 3,475 3,296 6,465 6,177

Total cost of system sales

8,171 7,033 17,373 12,618
Maintenance 3,238 3,255 6,692 6,280
Electronic data interchange services 6,773 6,164 13,482 12,054
Revenue cycle management and related services 8,222 6,856 16,367 13,378
Other services 3,724 5,003 8,073 9,870
Total cost of maintenance, EDI, RCM and other services 21,957 21,278 44,614 41,582
Total cost of revenue 30,128 28,311 61,987 54,200
Gross profit 51,329 43,387 102,397 84,136
Operating expenses:
Selling, general and administrative 24,829 20,061 51,067 40,154
Research and development costs 5,232 4,346 10,688 8,323
Amortization of acquired intangible assets 445 367 792 724
Total operating expenses 30,506 24,774 62,547 49,201
Income from operations 20,823 18,613 39,850 34,935
Interest income 129 59 189 137
Other income 65 - 59 58
Income before provision for income taxes 21,017 18,672 40,098 35,130
Provision for income taxes 7,587 6,852 14,576 12,964
Net income $ 13,430 $ 11,820 $ 25,522 $ 22,166
Net income per share:
Basic $ 0.46 $ 0.41 $ 0.88 $ 0.78
Diluted $ 0.46 $ 0.41 $ 0.88 $ 0.77
Weighted-average shares outstanding:
Basic 28,935 28,597 28,915 28,545
Diluted 29,078 28,742 29,066 28,717
Dividends declared per common share $ 0.30 $ 0.30 $ 0.60 $ 0.60

QUALITY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

September 30, March 31,
2010 2010
ASSETS
Current assets:
Cash and cash equivalents $ 106,852 $ 84,611
Restricted cash 2,114 2,339
Marketable securities - 7,158
Accounts receivable, net 112,506 107,458
Inventories, net 1,483 1,340
Income taxes receivable 177 2,953
Deferred income taxes, net 5,470 5,678
Other current assets 8,086 8,684
Total current assets 236,688 220,221
Equipment and improvements, net 8,728 8,432
Capitalized software costs, net 13,799 11,546
Intangibles, net 18,550 20,145
Goodwill 46,189 46,189
Other assets 4,494 3,647
Total assets $ 328,448 $ 310,180
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,972 $ 3,342
Deferred revenue 65,737 64,109
Accrued compensation and related benefits 6,988 8,951
Dividends payable 8,686 8,664
Other current liabilities 19,026 16,220
Total current liabilities 106,409 101,286
Deferred revenue, net of current 797 474
Deferred income taxes, net 10,254 10,859
Deferred compensation 2,178 1,883
Other noncurrent liabilities 7,354 7,389
Total liabilities 126,992 121,891
Commitments and contingencies
Shareholders' equity:

Common stock
$0.01 par value; authorized 50,000 shares; issued
and outstanding 28,956 and 28,879 shares at
September 30, 2010 and March 31, 2010, respectively

290 289
Additional paid-in capital 127,274 122,271
Retained earnings 73,892 65,729
Total shareholders' equity 201,456 188,289
Total liabilities and shareholders' equity $ 328,448 $ 310,180

SOURCE: Quality Systems, Inc.

Quality Systems, Inc.
Paul Holt, CFO, 949-255-2600
pholt@qsii.com
or
Susan J. Lewis, 303-804-0494
slewis@qsii.com

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