May 26, 2011

Quality Systems, Inc. Reports Record Fiscal 2011 Fourth Quarter and Year-End Results

Strong Quarterly and Year-end Results Reflect Onset of Stimulus Incentives

IRVINE, Calif.--(BUSINESS WIRE)-- Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal 2011 fourth quarter and year ended March 31, 2011.

The Company reported record net revenues of $97.1 million for the fiscal 2011 fourth quarter, up 24 percent from the $78.5 million reported in the comparable period a year ago. For the 2011 fourth quarter, net income reached $18.6 million, an increase of 42 percent when compared with net income of $13.1 million for the same period last year. Fully diluted earnings per share were $0.64 in the fiscal 2011 fourth quarter, a 42 percent increase, versus $0.45 fully diluted earnings per share for the fiscal 2010 fourth quarter.

Revenue for the fiscal year ended March 31, 2011 reached $353.4 million, rising 21 percent when compared with fiscal 2010 revenue of $291.8 million. Net income for fiscal year 2011 was $61.6 million, an increase of 27 percent versus net income of $48.4 million for the 2010 fiscal year. Fully diluted earnings per share increased to $2.12 for fiscal year 2011, up from $1.68 earned during fiscal year 2010, an increase of 26 percent.

The record fourth quarter and year end results were positively impacted by the onset of the stimulus plan.

"The last quarter of our fiscal year marked the first full quarter under the stimulus plan of The American Recovery and Reinvestment Act (ARRA). As we have stated, we spent much time preparing all facets of our organization for this important point in time. As we enter the front-end of the stimulus -- where regulations are finalized, meaningful use standards have been established and our products certified -- the rubber is hitting the road as it relates to benefitting from the stimulus," explained Steven T. Plochocki, Quality Systems' chief executive officer.

"Decisions are being made with more clarity and certainty in a timely manner, which is obviously reflected in our results and will bode well for us over the next few years of the stimulus. All of our planning and preparation during the past several quarters has paid off as we look ahead to further solidifying our leadership role in an industry well positioned for change, growth and expansion," Plochocki said.

Quality Systems, Inc. also announced that the Company's Board of Directors declared a quarterly cash dividend of Thirty-Five Cents ($0.35) per share on the Company's outstanding shares of Common Stock, payable to shareholders of record as of June 17, 2011, with an anticipated distribution date of July 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.

The Company also announced that its 2011 Annual Shareholders' Meeting will be held on Thursday, August 11, 2011 at 1:00 PM. The meeting will be held at The Center Club, 650 Town Center Drive, Costa Mesa, Calif. Holders of record as of June 13, 2011 are eligible to vote and attend. Proxy materials and the 2011 Annual Report will be made available to shareholders of record and will also be posted on the Company's website at www.qsii.com.

Quality Systems, Inc. will host a conference call to discuss its fiscal 2011 fourth quarter and year-end results on Thursday, May 26, 2011 at 11:00 AM ET (8:00 AM PT). All participants should dial 877-941-2332 at least ten minutes prior to the start of the call. International callers should dial 480-629-9722. 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 800-406-7325 or 303-590-3030 and enter reservation identification number 4442392. The replay will be available from approximately 1:00 PM ET on Thursday, May 26, 2011, through 11:59 PM ET on Thursday, June 2, 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; 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; 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 March 31, Fiscal Year Ended March 31,
2011           2010 2011           2010
 
Revenues:
Software, hardware and supplies $ 31,708 $ 24,783 $ 106,514 $ 89,761
Implementation and training services   4,946   4,226   18,015   14,376
 
System sales 36,654 29,009 124,529 104,137
 
Maintenance 29,046 23,938 110,019 89,192
Electronic data interchange services 10,756 9,181 41,022 35,035
Revenue cycle management and related services 11,622 9,183 45,065 36,665
Other services   9,030   7,202   32,728   26,782
 
Maintenance, EDI, RCM and other services   60,454   49,504   228,834   187,674
 
Total revenues   97,108   78,513   353,363   291,811
 
Cost of revenue:
Software, hardware and supplies 3,204 2,864 19,779 12,115
Implementation and training services   4,868   2,908   15,010   11,983
 
Total cost of system sales 8,072 5,772 34,789 24,098
 
Maintenance 2,875 3,667 12,948 13,339
Electronic data interchange services 7,321 6,683 27,711 25,262
Revenue cycle management and related services 8,733 7,213 33,815 27,715
Other services   6,165   4,963   18,219   20,393
 
Total cost of maintenance, EDI, RCM and other services   25,094   22,526   92,693   86,709
 
Total cost of revenue   33,166   28,298   127,482   110,807
 
Gross profit 63,942 50,215 225,881 181,004
 
Operating expenses:
Selling, general and administrative 29,285 25,223 108,310 86,951
Research and development costs 5,751 4,269 21,797 16,546
Amortization of acquired intangible assets   445   682   1,682   1,783
 
Total operating expenses   35,481   30,174   131,789   105,280
 
Income from operations 28,461 20,041 94,092 75,724
 
Interest income 19 46 263 226
Other income, net   2   74   61   268
 
Income before provision for income taxes 28,482 20,161 94,416 76,218
Provision for income taxes   9,929   7,100   32,810   27,839
 
Net income $ 18,553 $ 13,061 $ 61,606 $ 48,379
 
Net income per share:
Basic $ 0.64 $ 0.45 $ 2.13 $ 1.69
Diluted $ 0.64 $ 0.45 $ 2.12 $ 1.68
 
Weighted average shares outstanding:
Basic 29,005 28,784 28,947 28,635
Diluted 29,202 28,929 29,118 28,796
 
Dividends declared per common share $ 0.35 $ 0.30 $ 1.25 $ 1.20
                 

QUALITY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 
March 31, March 31,
2011 2010
 
ASSETS
Current assets:
Cash and cash equivalents $ 116,617 $ 84,611
Restricted cash 3,787 2,339
Marketable securities 1,120 7,158
Accounts receivable, net 139,772 107,458
Inventories 1,933 1,340
Income taxes receivable - 2,953
Deferred income tax assets, net 10,397 5,678
Other current assets   8,768   8,684
 
Total current assets 282,394 220,221
 
Equipment and improvements, net 12,599 8,432
Capitalized software costs, net 15,150 11,546
Intangibles, net 16,890 20,145
Goodwill 46,721 46,189
Other assets   4,932   3,647
 
Total assets $ 378,686 $ 310,180
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,686 $ 3,342
Deferred revenue 76,695 64,109
Accrued compensation and related benefits 10,247 8,951
Income taxes payable 3,530 -
Dividends payable 10,162 8,664
Other current liabilities   29,316   16,220
 
Total current liabilities 136,636 101,286
 
Deferred revenue, net of current 1,099 474
Deferred income tax liabilities, net 11,384 10,859
Deferred compensation 2,488 1,883
Other noncurrent liabilities   2,409   7,389
 
Total liabilities 154,016 121,891
 
Commitments and contingencies
 
Shareholders' equity:
Common stock

$0.01 par value; authorized 50,000 shares; issued
and outstanding 29,034 and 28,879 shares at
March 31, 2011 and March 31, 2010, respectively

290 289
Additional paid-in capital 133,259 122,271
Retained earnings   91,121   65,729
 
Total shareholders' equity   224,670   188,289
 
Total liabilities and shareholders' equity $ 378,686 $ 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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