January 28, 2011

Quality Systems, Inc. Reports Record Fiscal 2011 Third Quarter Results; Increases Quarterly Dividend

Company Well Positioned as First Year of Stimulus Incentives Kick in

IRVINE, Calif.--(BUSINESS WIRE)-- Quality Systems, Inc. (NASDAQ:QSII) announced today the results of operations for its fiscal 2011 third quarter ended December 31, 2010.

The Company reported record net revenues of $91.9 million for the fiscal 2011 third quarter, an increase of 23 percent from the $75.0 million reported in the same period a year ago. The Company reported net income of $17.5 million, up 33 percent versus net income of $13.2 million for the comparable period last year. Fully diluted earnings per share were $0.60 in the fiscal 2011 third quarter; rising 33 percent when compared with $0.46 fully diluted earnings per share for the third quarter of fiscal 2010.

Quality Systems, Inc. also announced that the Company's Board of Directors increased the cash dividend by five cents ($0.05), or 17 percent, to Thirty-Five Cents ($0.35) per share on the Company's outstanding shares of Common Stock, payable to shareholders of record as of March 17, 2011, with an anticipated distribution date of April 5, 2011. The $0.35 per share cash dividend is pursuant to the Company's current policy to pay a regular quarterly dividend 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.

"We are very pleased with the Company's third quarter performance. Our entire organization has worked very hard preparing for the first year of incentives provided under The American Recovery and Reinvestment Act (ARRA). The team is ready to witness the fruits of their labor," noted Steven T. Plochocki, Quality Systems' chief executive officer.

"As we said for the past 22 months since the bill was first introduced, there were levels of uncertainty and speculation, but once certification was announced in October 2010 and the regulations for Stage 1 Meaningful Use were finalized, the path became very clear. We are in a very positive position to take advantage of the benefits stemming from the first year of the stimulus incentives. Additionally, the Board's declaration to increase our quarterly dividend is indicative of the Company's strength in the marketplace and optimism about the future. We remain very encouraged by the industry opportunity before us, and confident in the certified electronic health solutions we bring to the physician, dental and hospital marketplaces," Plochocki concluded.

Quality Systems, Inc. will host a conference call to discuss its fiscal 2011 third quarter results on Friday, January 28, 2011 at 10:00 AM ET (7:00 AM PT). All participants should dial 866-225-8754 at least ten minutes prior to the start of the call. International callers should dial 480-629-9692. 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 4403880. The replay will be available from approximately 12:00 PM ET on Friday, January 28, 2011, through 11:59 PM ET on Friday, February 4, 2011.

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 December 31,           Nine Months Ended December 31,
  2010     2009   2010     2009
 
Revenues:
Software, hardware and supplies $ 29,675 $ 24,346 $ 74,806 $ 64,978
Implementation and training services   4,262   3,313   13,069   10,150
 
System sales 33,937 27,659 87,875 75,128
 
Maintenance 27,908 22,139 80,973 65,254
Electronic data interchange services 10,360 8,897 30,266 25,855
Revenue cycle management and related services 11,496 9,602 33,443 27,482
Other services   8,170   6,665   23,698   19,579
 
Maintenance, EDI, RCM and other services   57,934   47,303   168,380   138,170
 
Total revenues   91,871   74,962   256,255   213,298
 
Cost of revenue:
Software, hardware and supplies 5,667 2,810 16,575 9,251
Implementation and training services   3,677   2,898   10,142   9,075
 
Total cost of system sales 9,344 5,708 26,717 18,326
 
Maintenance 3,381 3,392 10,073 9,672
Electronic data interchange services 6,908 6,525 20,390 18,579
Revenue cycle management and related services 8,715 7,124 25,082 20,502
Other services   3,981   5,560   12,054   15,430
 
Total cost of maintenance, EDI, RCM and other services   22,985   22,601   67,599   64,183
 
Total cost of revenue   32,329   28,309   94,316   82,509
 
Gross profit 59,542 46,653 161,939 130,789
 
Operating expenses:
Selling, general and administrative 27,958 21,574 79,025 61,728
Research and development costs 5,358 3,954 16,046 12,277
Amortization of acquired intangible assets   445   377   1,237   1,101
 
Total operating expenses   33,761   25,905   96,308   75,106
 
Income from operations 25,781 20,748 65,631 55,683
 
Interest income 55 43 244 180
Other income, net   -   136   59   194
 
Income before provision for income taxes 25,836 20,927 65,934 56,057
Provision for income taxes   8,305   7,775   22,881   20,739
 
Net income $ 17,531 $ 13,152 $ 43,053 $ 35,318
 
Net income per share:
Basic $ 0.60 $ 0.46 $ 1.49 $ 1.24
Diluted $ 0.60 $ 0.46 $ 1.48 $ 1.23
 
Weighted-average shares outstanding:
Basic 28,978 28,667 28,936 28,586
Diluted 29,140 28,833 29,091 28,755
 
Dividends declared per common share $ 0.30 $ 0.30 $ 0.90 $ 0.90
 
QUALITY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 
 
        December 31,           March 31,
2010 2010
 
ASSETS
Current assets:
Cash and cash equivalents $ 118,221 $ 84,611
Restricted cash 2,956 2,339
Marketable securities - 7,158
Accounts receivable, net 123,196 107,458
Inventories 1,942 1,340
Income taxes receivable - 2,953
Deferred income taxes, net 5,470 5,678
Other current assets   7,356   8,684
 
Total current assets 259,141 220,221
 
Equipment and improvements, net 10,940 8,432
Capitalized software costs, net 14,931 11,546
Intangibles, net 17,720 20,145
Goodwill 46,189 46,189
Other assets   4,576   3,647
 
Total assets $ 353,497 $ 310,180
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,525 $ 3,342
Deferred revenue 71,897 64,109
Accrued compensation and related benefits 9,322 8,951
Income taxes payable 1,157 -
Dividends payable 8,693 8,664
Other current liabilities   20,955   16,220
 
Total current liabilities 117,549 101,286
 
Deferred revenue, net of current 870 474
Deferred income taxes, net 10,108 10,859
Deferred compensation 2,240 1,883
Other noncurrent liabilities   10,747   7,389
 
Total liabilities 141,514 121,891
 
Commitments and contingencies
 
Shareholders' equity:
Common stock

$0.01 par value; authorized 50,000 shares; issued
and outstanding 28,976 and 28,879 shares at
December 31, 2010 and March 31, 2010, respectively

290 289
Additional paid-in capital 128,964 122,271
Retained earnings   82,729   65,729
 
Total shareholders' equity   211,983   188,289
 
Total liabilities and shareholders' equity $ 353,497 $ 310,180

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

Source: Quality Systems, Inc.

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