January 26, 2012

Quality Systems, Inc. Reports Record Fiscal 2012 Third Quarter Results

IRVINE, Calif.--(BUSINESS WIRE)-- Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal 2012 third quarter ended December 31, 2011.

The Company reported record net revenues of $112.8 million for the fiscal 2012 third quarter, an increase of 23 percent when compared with $91.9 million for the fiscal 2011 third quarter. Net income for the fiscal 2012 third quarter reached a record $21.1 million, up 20 percent versus $17.5 million for the same period a year ago. Fully diluted earnings per share were $0.36 in the third quarter of fiscal 2012, versus $0.30 for the fiscal 2011 third quarter, up 20 percent.

"The record fiscal 2012 third quarter results can be attributed to the continued adoption of electronic health records by physicians, medical groups and hospitals. As the momentum continues and more practices transition to electronic-based solutions, Quality Systems is capturing additional market share. We now have entered the second year of the five-year stimulus period, which appears to be the most aggressive in terms of healthcare information technology adoption. Our quarterly results are indicative of the continued acceptance of our innovative solutions throughout the marketplace and across physician practices, small hospitals and dental groups," noted Steven T. Plochocki, Quality Systems' chief executive officer.

Quality Systems also announced that the Company's 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 Tuesday, March 20, 2012 with an anticipated distribution date of April 5, 2012. 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.

Quality Systems will host a conference call to discuss its fiscal 2012 third quarter results on Thursday, January 26, 2012 at 10:00 AM ET (7:00 AM PT). All participants should dial 877-941-6010 at least ten minutes prior to the start of the call. International callers should dial 480-629-9772. 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 4507957. The replay will be available from approximately 12:00 PM ET on Thursday, January 26, 2012, through 11:59 PM ET on Thursday, February 2, 2012.

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, 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 and net income). 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, 2011, 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)

(UNAUDITED)

                             
 
Three Months Ended December 31, Nine Months Ended December 31,
2011 2010 2011 2010
 
Revenues:
Software, hardware and supplies $ 35,074 $ 29,675 $ 95,845 $ 74,806
Implementation and training services   6,555     4,262   18,121     13,069
 
System sales 41,629 33,937 113,966 87,875
 
Maintenance 36,245 27,908 102,961 80,973
Electronic data interchange services 12,101 10,360 36,178 30,266
Revenue cycle management and related services 11,147 11,496 34,170 33,443
Other services   11,643     8,170   33,566     23,698
 
Maintenance, EDI, RCM and other services   71,136     57,934   206,875     168,380
 
Total revenues   112,765     91,871   320,841     256,255
 
Cost of revenue:
Software, hardware and supplies 4,622 5,667 13,423 16,575
Implementation and training services   5,994     3,677   15,119     10,142
 

Total cost of system sales

10,616 9,344 28,542 26,717
 
Maintenance 4,412 3,381 12,260 10,073
Electronic data interchange services 7,890 6,908 23,816 20,390
Revenue cycle management and related services 8,405 8,715 25,687 25,082
Other services   7,011     3,981   18,977     12,054
 
Total cost of maintenance, EDI, RCM and other services   27,718     22,985   80,740     67,599
 
Total cost of revenue   38,334     32,329   109,282     94,316
 
Gross profit 74,431 59,542 211,559 161,939
 
Operating expenses:
Selling, general and administrative 33,096 27,958 94,651 79,025
Research and development costs 8,277 5,358 22,462 16,046
Amortization of acquired intangible assets   543     445   1,545     1,237
 
Total operating expenses   41,916     33,761   118,658     96,308
 
Income from operations 32,515 25,781 92,901 65,631
 
Interest income 55 55 212 244
Other income (expense), net   (218 )   -   (400 )   59
 
Income before provision for income taxes 32,352 25,836 92,713 65,934
Provision for income taxes   11,247     8,305   32,129     22,881
 
Net income $ 21,105   $ 17,531 $ 60,584   $ 43,053
 
Net income per share:
Basic $ 0.36 $ 0.30 $ 1.03 $ 0.74
Diluted $ 0.36 $ 0.30 $ 1.03 $ 0.74
 
Weighted average shares outstanding:
Basic 58,847 57,956 58,623 57,872
Diluted 59,128 58,280 58,943 58,182
 
Dividends declared per common share $ 0.175 $ 0.15 $ 0.525 $ 0.45
 

QUALITY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

             
December 31, March 31,
2011 2011
 
ASSETS
Current assets:
Cash and cash equivalents $ 129,046 $ 116,617
Restricted cash 2,166 3,787
Marketable securities 1,086 1,120
Accounts receivable, net 159,555 139,772
Inventories 3,194 1,933
Income taxes receivable 5,053 -
Deferred income tax assets, net 10,466 10,397
Other current assets   8,664   8,768
 
Total current assets 319,230 282,394
 
Equipment and improvements, net 16,234 12,599
Capitalized software costs, net 18,733 15,150
Intangibles, net 24,585 16,890
Goodwill 58,445 46,721
Other assets   4,629   4,932
 
Total assets $ 441,856 $ 378,686
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,083 $ 6,686
Deferred revenue 90,617 76,695
Accrued compensation and related benefits 10,996 10,247
Income taxes payable - 3,530
Dividends payable 10,305 10,162
Other current liabilities   18,209   29,316
 

Total current liabilities

138,210 136,636
 
Deferred revenue, net of current 1,127 1,099
Deferred income tax liabilities, net 11,384 11,384
Deferred compensation 3,125 2,488
Other noncurrent liabilities   5,536   2,409
 
Total liabilities 159,382 154,016
 
Commitments and contingencies
 
Shareholders' equity:
Common stock
$0.01 par value; authorized 100,000 shares; issued and outstanding 58,901 and 58,068 shares at December 31, 2011 and March 31, 2011, respectively 589 580
Additional paid-in capital 161,007 132,969
Retained earnings   120,878   91,121
 
Total shareholders' equity   282,474   224,670
 
Total liabilities and shareholders' equity $ 441,856 $ 378,686

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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