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Quality Systems, Inc. Reports Fiscal 2015 Fourth Quarter and Year-End Results
May 21, 2015 at 5:00 AM EDT


Company Ends Fiscal Year Posting Double-digit Revenue Growth

IRVINE, Calif.--(BUSINESS WIRE)-- Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal 2015 fourth quarter and year ended March 31, 2015.

Revenues for the fiscal 2015 fourth quarter reached $128.4 million, an increase of 11 percent versus $115.2 million reported for the fiscal 2014 fourth quarter. Net income for the 2015 fourth quarter was $10.7 million, increasing 107 percent when compared with $5.2 million in the 2014 fourth quarter.

On a GAAP basis, fully diluted earnings per share was $0.18 in the fiscal 2015 fourth quarter compared with $0.09 for the same period a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2015 fourth quarter was $0.21 versus $0.12 reported in the fourth quarter a year ago.

At quarter-end, the Company's liquidity position was strong, with $130.6 million of cash and investments.

For the fiscal year ended March 31, 2015, revenues reached $490.2 million, up 10 percent when compared with $444.7 million for the 2014 fiscal year. The recurring revenue base, which includes maintenance, EDI, RCM and other services, reached $405.2 million and represents 83 percent of total revenues for the fiscal year ended 2015.

Net income for fiscal 2015 was $27.3 million, versus $15.7 million reported in fiscal 2014, an increase of 74 percent. On a GAAP basis, fully diluted earnings per share for the 2015 fiscal year was $0.45, compared with $0.26 reported in the 2014 fiscal year. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2015 year was $0.62 versus $0.70 reported in the comparable period a year ago (non-GAAP fully diluted earnings per share is reconciled to its corresponding GAAP measure at the end of this release). The fiscal 2015 non-GAAP earnings reflects the Company's significant and growing investment in research and development, the net cost of which rose by $27.7 million, or 67 percent, from fiscal 2014 to fiscal 2015.

"We are very pleased with the fourth quarter and fiscal 2015 results overall. This latest quarter represents the fifth consecutive period in which we delivered increases in consolidated revenue, and which culminated in a new quarterly revenue record. Our revenue growth in the 2015 fourth quarter and fiscal year demonstrates the impact of our broad-based market offerings, which now span nearly 30 products and services directly aimed at the evolving value-based Accountable Care Organization (ACO) model. As physicians strive to better manage their patients and payors seek the necessary intelligence to help control costs while emphasizing quality of care, we believe we are well positioned to help all stakeholders meet the challenges that continue to unfold," explained Steven T. Plochocki, president and chief executive officer.

"Our portfolio of products and services addresses the ways in which healthcare constituents communicate and manage patient populations. We believe that as we enter into our fiscal 2016 year, there will be significant opportunities for our RCM business line, along with the Mirth interoperability and connectivity solutions we offer. With ICD-10 fast approaching, practices seek the exact type of support Quality Systems/NextGen Healthcare brings to the table. With our sales force boasting strong cross-selling capabilities across our large installed client base and beyond, as well as our enhanced marketing capabilities and seasoned implementation team, we stand ready to meet healthcare's rapidly changing needs. Our ability to strengthen our offerings, expand our solutions and demonstrate solid growth is reflective of our agility and commitment to seamlessly serving the healthcare information technology industry," Plochocki said.

Quality Systems also announced that its 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 June 12, 2015 with an anticipated distribution date of July 6, 2015. The $0.175 per share cash dividend is pursuant to the Company's current practice to pay a regular quarterly dividend on the Company's outstanding shares of common stock, subject to 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.

In addition, the Company announced that it will hold its 2015 Annual Shareholders' Meeting on Tuesday, August 11, 2015 at 1:00 PM local time. The meeting will be held at the Center Club, 650 Town Center Drive, Costa Mesa, California 92626. Holders of record as of June 16, 2015 are eligible to vote and attend. Proxy materials and the 2015 Annual Report will be made available to shareholders of record and will also be posted on the Company's website at

Quality Systems will host a conference call to discuss its fiscal 2015 fourth quarter and year-end results on Thursday, May 21, 2015 at 10:00 AM ET (7:00 AM PT). All participants should dial 1-866-900-9499 at least ten minutes prior to the start of the call and reference conference ID #46698028. International callers should dial 1-937-502-2136. 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, 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 800-585-8367 or 404-537-3406 and enter conference ID #46698028. The replay will be available from approximately 1:00 PM ET on Thursday, May 21, 2015, through 11:59 PM ET on Thursday, May 28, 2015.

As previously announced, Quality Systems will host its Investment Community Analyst Day for those analysts that follow the Company on Monday, June 8, 2015 from 8:30 AM - 1:00 PM at the Le Parker Meridien Hotel in New York City, located at 119 West 56th Street (between 6th and 7th Avenues), 212-245-5000. The general public can access the session in real-time by visiting, clicking on Investors, and selecting Events & Presentations. An archive of the analyst session will also be available for 90 days.

A transcript of the conference call will be made available on the Company's website at

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 and for additional information.


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 in the healthcare sector and regulatory framework, 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 and additional risks and uncertainties 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, 2014, 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.


This news release contains certain non-GAAP (Generally Accepted Accounting Principles) financial measures, which are provided only as supplemental information. Investors should consider these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures. These non-GAAP measures are not in accordance with or a substitute for U.S. GAAP. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of non-GAAP financial measures to the most directly comparable financial measure in the accompanying financial tables. Other companies may calculate non-GAAP measures differently than Quality Systems, which limits comparability between companies. The Company believes that its presentation of non-GAAP diluted earnings per share provides useful supplemental information to investors and management regarding the Company's financial condition and results. The Company calculates non-GAAP diluted earnings per share by excluding acquisition costs, amortization of acquired intangible assets, impairment of goodwill and other assets, securities litigation defense costs, share-based compensation, and other non-run-rate expenses from GAAP income before provision for income taxes. The non-GAAP provision for income taxes is calculated by excluding the income tax effect of the non-GAAP adjustments.






        Three Months Ended March 31,       Fiscal Year Ended March 31,
        2015       2014       2015       2014
Software and hardware       $ 16,061         $ 15,186       $ 61,373         $ 60,834  
Implementation and training services         6,684           6,518         23,648           25,948  
System sales         22,745           21,704         85,021           86,782  
Maintenance         43,234           41,376         169,219           160,060  
Electronic data interchange services         20,082           17,421         76,358           67,295  
Revenue cycle management and related services         19,720           15,316         74,237           62,976  
Other services         22,607           19,386         85,390           67,554  
Maintenance, EDI, RCM and other services         105,643           93,499         405,204           357,885  
Total revenues         128,388           115,203         490,225           444,667  
Cost of revenue:                                
Software and hardware         5,404           7,115         24,693           44,226  
Implementation and training services         5,479           8,109         23,902           29,681  
Total cost of system sales         10,883           15,224         48,595           73,907  
Maintenance         7,802           6,384         28,866           22,590  
Electronic data interchange services         12,274           10,845         48,244           42,567  
Revenue cycle management and related services         14,252           12,059         54,406           46,203  
Other services         10,630           8,842         43,053           34,896  
Total cost of maintenance, EDI, RCM and other services         44,958           38,130         174,569           146,256  
Total cost of revenue         55,841           53,354         223,164           220,163  
Gross profit         72,547           61,849         267,061           224,504  
Operating expenses:                                
Selling, general and administrative         41,279           38,676         158,172           149,214  
Research and development costs         17,638           15,120         69,240           41,524  
Amortization of acquired intangible assets         898           1,132         3,693           4,805  
Impairment of goodwill and other assets         -           -         -           5,873  
Total operating expenses         59,815           54,928         231,105           201,416  
Income from operations         12,732           6,921         35,956           23,088  
Interest income (expense), net         (271 )         322         (230 )         269  
Other income (expense), net         (45 )         35         (62 )         (356 )
Income before provision for income taxes         12,416           7,278         35,664           23,001  
Provision for income taxes         1,673           2,077         8,332           7,321  
Net income       $ 10,743         $ 5,201       $ 27,332         $ 15,680  
Net income per share:                                
Basic       $ 0.18         $ 0.09       $ 0.45         $ 0.26  
Diluted       $ 0.18         $ 0.09       $ 0.45         $ 0.26  
Weighted-average shares outstanding:                                
Basic         60,288           60,208         60,259           59,918  
Diluted         60,956           60,592         60,849           60,134  
Dividends declared per common share       $ 0.175         $ 0.175       $ 0.70         $ 0.70  





        March 31,                     March 31,
        2015                     2014
Current assets:                              
Cash and cash equivalents       $ 118,993                       $ 103,145  
Restricted cash and cash equivalents         2,419                         4,351  
Marketable securities         11,592                         10,656  
Accounts receivable, net         107,669                         113,268  
Inventories         622                         834  
Income taxes receivable         3,147                         8,366  
Deferred income taxes, net         24,080                         21,531  
Other current assets         11,535                         11,135  
Total current assets         280,057                         273,286  
Equipment and improvements, net         20,807                         22,801  
Capitalized software costs, net         40,397                         39,152  
Intangibles, net         27,689                         33,016  
Goodwill         73,571                         72,804  
Other assets         18,000                         10,292  
Total assets       $ 460,521                       $ 451,351  
LIABILITIES AND SHAREHOLDERS' EQUITY                              
Current liabilities:                              
Accounts payable       $ 10,018                       $ 7,888  
Deferred revenue         66,343                         71,077  
Accrued compensation and related benefits         24,051                         15,953  
Income taxes payable         10,048                         -  
Dividends payable         10,700                         10,686  
Other current liabilities         33,924                         21,369  
Total current liabilities         155,084                         126,973  
Deferred revenue, net of current         1,349                         2,187  
Deferred compensation         5,750                         4,809  
Other noncurrent liabilities         14,798                         22,292  
Total liabilities         176,981                         156,261  
Commitments and contingencies                              
Shareholders' equity:                              
Common stock                              

$0.01 par value; authorized 100,000 shares; issued and outstanding 60,303 and 60,206 shares at March 31, 2015 and 2014, respectively

        603                         602  
Additional paid-in capital         198,650                         194,739  
Accumulated other comprehensive loss         (192 )                       (182 )
Retained earnings         84,479                         99,931  
Total shareholders' equity         283,540                         295,090  
Total liabilities and shareholders' equity       $ 460,521                       $ 451,351  






        Three Months Ended March 31,       Fiscal Year Ended March 31,
        2015       2014       2015       2014
Income before provision for income taxes - GAAP       $ 12,416       $ 7,278       $ 35,664       $ 23,001
Plus items included in cost of revenue:                                
Amortization of acquired software technology         858         858         3,433         3,526
Impairment of other assets*         -         -         -         20,098
Share-based compensation         91         95         373         348
Total adjustments to cost of revenue         949         953         3,806         23,972
Plus items included in operating expenses:                                
Acquisition costs         441         846         2,923         1,448
Amortization of acquired intangible assets         898         1,132         3,693         4,805
Impairment of goodwill and other assets         -         -         -         5,873
Securities litigation defense costs         1,491         -         3,951         1,721
Share-based compensation         754         563         3,098         2,142
Other non-run-rate expenses         -         -         315         -
Total adjustments to operating expenses         3,584         2,541         13,980         15,989
Total adjustments to GAAP income before provision for income taxes:         4,533         3,494         17,786         39,961
Income before provision for income taxes - Non-GAAP         16,949         10,772         53,450         62,962
Provision for income taxes         4,425         3,318         15,718         20,966
Net income - Non-GAAP       $ 12,524       $ 7,454       $ 37,732       $ 41,996
Diluted net income per share - Non-GAAP       $ 0.21       $ 0.12       $ 0.62       $ 0.70
Weighted-average shares outstanding (diluted):         60,956         60,592         60,849         60,134
*     Relates to the impairment of acquired software technology and capitalized software costs in the Hospital Solutions Division


Quality Systems, Inc.
John Stumpf, Interim Chief Financial Officer
Phone: 949-255-2600
Susan J. Lewis
Phone: 954-389-3700

Source: Quality Systems, Inc.



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