July 26, 2012

Quality Systems, Inc. Reports Fiscal 2013 First Quarter Results

IRVINE, Calif.--(BUSINESS WIRE)-- Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal 2013 first quarter ended June 30, 2012.

The Company reported record revenues of $118.3 million for the fiscal 2013 first quarter, an increase of 18 percent, compared with $100.4 million for the fiscal 2012 first quarter. Net income for the fiscal 2013 first quarter was $15.5 million, down 18 percent versus net income of $19.0 million for the same period a year ago. Fully diluted earnings per share for the fiscal 2013 first quarter was $0.26, a 19 percent decrease from $0.32 for the fiscal 2012 first quarter.

"Although we delivered record revenue for our fiscal 2013 first quarter driven by strong performance in our recurring revenue streams, our overall results were impacted by lower-than-expected revenue from large, higher margin software system sales. There are times when a limited number of these types of sales can influence performance in any given quarter," explained Steven T. Plochocki, president and chief executive officer.

"We remain confident about our future performance and prospects. However, due to evolving conditions affecting our industry and uncertainty in predicting future results, we are not affirming our previous guidance nor providing revised guidance at this time," Plochocki said.

Quality Systems will host a conference call to discuss its fiscal 2013 first quarter results on Thursday, July 26, 2012 at 10:00 AM ET (7:00 AM PT). All participants should dial 877-941-2927 at least ten minutes prior to the start of the call. International callers should dial 480-629-9725. 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 4553724. The replay will be available from approximately 12:00 PM ET on Thursday, July 26, 2012, through 11:59 PM ET on Thursday, August 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, net income and earnings per share). 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, 2012, 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 June 30,
  2012         2011  
 
Revenues:
Software, hardware and supplies $ 25,844 $ 28,911
Implementation and training services   12,046     5,472  
 
System sales 37,890 34,383
 
Maintenance 38,568 31,502
Electronic data interchange services 13,823 12,092
Revenue cycle management and related services 14,401 11,881
Other services   13,614     10,584  
 
Maintenance, EDI, RCM and other services   80,406     66,059  
 
Total revenues   118,296     100,442  
 
Cost of revenue:
Software, hardware and supplies 5,771 4,614
Implementation and training services   9,145     4,075  
 
Total cost of system sales 14,916 8,689
 
Maintenance 4,811 3,854
Electronic data interchange services 9,248 7,962
Revenue cycle management and related services 10,870 8,826
Other services   8,550     5,597  
 
Total cost of maintenance, EDI, RCM and other services   33,479     26,239  
 
Total cost of revenue   48,395     34,928  
 
Gross profit 69,901 65,514
 
Operating expenses:
Selling, general and administrative 36,681 29,386
Research and development costs 8,576 6,827
Amortization of acquired intangible assets   1,137     482  
 
Total operating expenses   46,394     36,695  
 
Income from operations 23,507 28,819
 
Interest income 35 82
Other income (expense), net   (213 )   (38 )
 
Income before provision for income taxes 23,329 28,863
Provision for income taxes   7,832     9,880  
 
Net income $ 15,497   $ 18,983  
 
Net income per share:
Basic $ 0.26 $ 0.33
Diluted $ 0.26 $ 0.32
 
Weighted average shares outstanding:
Basic 59,281 58,362
Diluted 59,388 58,800
 
Dividends declared per common share $ 0.175 $ 0.175
 
QUALITY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
       
June 30, March 31,
  2012   2012
 
ASSETS
Current assets:
Cash and cash equivalents $ 129,906 $ 134,444
Restricted cash 4,768 1,962
Marketable securities 4,990 4,987
Accounts receivable, net 153,218 145,756
Inventories 4,228 3,715
Income taxes receivable - 2,628
Deferred income tax assets, net 10,143 10,127
Other current assets   7,563   9,090
 
Total current assets 314,816 312,709
 
Equipment and improvements, net 20,578 17,841
Capitalized software costs, net 21,865 19,994
Intangibles, net 33,292 23,259
Goodwill 63,161 60,776
Other assets   6,351   5,773
 
Total assets $ 460,063 $ 440,352
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 12,527 $ 4,532
Deferred revenue 70,653 83,108
Accrued compensation and related benefits 11,180 11,870
Income taxes payable 4,413 -
Dividends payable 10,382 10,354
Other current liabilities   27,325   19,568
 
Total current liabilities 136,480 129,432
 
Deferred revenue, net of current 1,089 1,293
Deferred income tax liabilities, net 5,357 5,351
Deferred compensation 2,926 3,497
Other noncurrent liabilities   7,654   5,602
 
Total liabilities 153,506 145,175
 
Commitments and contingencies
 
Shareholders' equity:
Common stock
$0.01 par value; authorized 100,000 shares; issued and outstanding 59,343 and 59,180 shares at June 30, 2012 and March 31, 2012, respectively 593 592
Additional paid-in capital 175,252 168,988
Retained earnings   130,712   125,597
 
Total shareholders' equity   306,557   295,177
 
Total liabilities and shareholders' equity $ 460,063 $ 440,352

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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