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Quality Systems, Inc. Reports Fiscal 2015 Third Quarter Results
January 22, 2015 at 5:00 AM EST

Company Sees Improvement across Several Key Areas including Revenue, Earnings and Pipeline

IRVINE, Calif.--(BUSINESS WIRE)-- Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal 2015 third quarter ended December 31, 2014.

Revenues for the fiscal 2015 third quarter reached $123.4 million, an increase of 13 percent when compared with $108.9 million reported for the fiscal 2014 third quarter. Net income for the 2015 third quarter was $6.7 million versus a net loss of $12.6 million in the 2014 third quarter, when the Company recorded an impairment charge in its Hospital Solutions division.

On a GAAP basis, fully diluted earnings per share was $0.11 in the fiscal 2015 third quarter compared with fully diluted loss per share of $0.21 for the comparable period a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2015 third quarter was $0.16, an increase of 45 percent from $0.11 reported in the fiscal 2014 third quarter.

During the quarter, the Company's pipeline grew to $162.3 million, demonstrating yet another quarter of improvement. At quarter-end, the Company's liquidity position was strong, with $124.8 million of cash and investments.

"We are pleased that this quarter's financial performance clearly demonstrates the progress the Company is making across all fronts of our business. The momentum we have been building over the past several quarters resulted in increases in both revenue and earnings, primarily driven by tailwinds from our Revenue Cycle Management Services division and broader adoption of our Mirth-based interoperability products. This, coupled with wider acceptance of our population health and EDI solutions, all contributed to the improvements we saw this quarter," noted Steven T. Plochocki, president and chief executive officer.

"We believe our recent growth is the cumulative effect of our comprehensive product portfolio, which now spans 32 products. This full spectrum offering is generating a more diversified revenue stream, reaping stronger, steady growth. We expect this pattern to continue as we help our clients navigate the ever-changing healthcare landscape, and prepare them to adapt to what lies beyond the horizon. We are continuously helping guide them through the movement towards value-based healthcare by creating, strengthening and introducing an extensive product and services offering that arms providers with all the tools they need to deliver exceptional, patient-centric, cost-effective care," Plochocki concluded.

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 March 13, 2015 with an anticipated distribution date of April 3, 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.

Quality Systems will host a conference call to discuss its fiscal 2015 third quarter results on Thursday, January 22, 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 #66989201. 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 #66989201. The replay will be available from approximately 1:00 PM ET on Thursday, January 22, 2015, through 11:59 PM ET on Thursday, January 29, 2015.

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 December 31, Nine Months Ended December 31,
2014       2013 2014       2013
Software and hardware $ 16,339 $ 14,114 $ 45,312 $ 45,648
Implementation and training services   3,658     5,046     16,964     19,430  

System sales

19,997 19,160 62,276 65,078
Maintenance 43,045 39,763 125,985 118,684
Electronic data interchange services 19,051 16,637 56,276 49,874
Revenue cycle management and related services 20,392 16,178 54,517 47,660
Other services   20,939     17,116     62,783     48,168  
Maintenance, EDI, RCM and other services   103,427     89,694     299,561     264,386  
Total revenues   123,424     108,854     361,837     329,464  
Cost of revenue:
Software and hardware 6,127 27,398 19,289 37,111
Implementation and training services   4,584     7,466     18,423     21,572  
Total cost of system sales 10,711 34,864 37,712 58,683
Maintenance 7,365 5,642 21,064 16,206
Electronic data interchange services 11,956 10,276 35,970 31,722
Revenue cycle management and related services 14,246 11,736 40,154 34,144
Other services   10,082     8,537     32,423     26,054  
Total cost of maintenance, EDI, RCM and other services   43,649     36,191     129,611     108,126  
Total cost of revenue   54,360     71,055     167,323     166,809  
Gross profit 69,064 37,799 194,514 162,655
Operating expenses:
Selling, general and administrative 41,482 36,864 116,893 110,538
Research and development costs 18,468 13,175 51,602 26,404
Amortization of acquired intangible assets 904 1,219 2,795 3,673
Impairment of goodwill and other assets   -     5,873     -     5,873  
Total operating expenses   60,854     57,131     171,290     146,488  
Income (loss) from operations 8,210 (19,332 ) 23,224 16,167
Interest income (expense), net (82 ) 121 41 (53 )
Other income (expense), net   -     18     (17 )   (391 )
Income (loss) before income taxes 8,128 (19,193 ) 23,248 15,723
Provision for (benefit of) income taxes   1,452     (6,606 )   6,659     5,244  
Net income (loss) $ 6,676 $ (12,587 ) $ 16,589 $ 10,479
Net income (loss) per share:
Basic $ 0.11 $ (0.21 ) $ 0.28 $ 0.18
Diluted $ 0.11 $ (0.21 ) $ 0.27 $ 0.17
Weighted-average shares outstanding:
Basic 60,272 60,173 60,250 59,823
Diluted 60,855 60,173 60,813 59,984
Dividends declared per common share $ 0.175 $ 0.175 $ 0.525 $ 0.525





December 31, March 31,
2014 2014
Current assets:
Cash and cash equivalents $ 113,640 $ 103,145
Restricted cash and cash equivalents 2,330 4,351
Marketable securities 11,182 10,656
Accounts receivable, net 105,879 110,181
Inventories 665 834
Income taxes receivable 3,391 8,366
Deferred income taxes, net 11,751 11,690
Other current assets   12,160     11,135  
Total current assets 260,998 260,358
Equipment and improvements, net 21,636 22,801
Capitalized software costs, net 38,497 39,152
Intangibles, net 27,645 33,016
Goodwill 72,804 72,804
Other assets   17,671     16,927  
Total assets $ 439,251   $ 445,058  
Current liabilities:
Accounts payable $ 6,962 $ 7,888
Deferred revenue 67,756 71,077
Accrued compensation and related benefits 19,588 15,953
Dividends payable 10,697 10,686
Other current liabilities   33,906     18,282  
Total current liabilities 138,909 123,886
Deferred revenue, net of current 1,611 2,187
Deferred compensation 5,477 4,809
Other noncurrent liabilities   10,753     19,086  
Total liabilities 156,750 149,968
Commitments and contingencies
Shareholders' equity:
Common stock

$0.01 par value; authorized 100,000 shares; issued and outstanding 60,285 and 60,206 shares at December 31, 2014 and March 31, 2014, respectively

603 602
Additional paid-in capital 197,727 194,739
Accumulated other comprehensive loss (265 ) (182 )
Retained earnings   84,436     99,931  
Total shareholders' equity   282,501     295,090  
Total liabilities and shareholders' equity $ 439,251   $ 445,058  






Three Months Ended December 31, Nine Months Ended December 31,
2014 2013 2014 2013

Income before provision for income taxes - GAAP

$ 8,128 $ (19,193 ) $ 23,248 $ 15,723
Plus items included in cost of revenue:


Amortization of acquired software technology 858 1,060 2,575 2,668
Impairment of other assets* - 20,098 - 20,098
Share-based compensation   104   90     282   253
Total adjustments to cost of revenue 962 21,248 2,857 23,019
Plus items included in operating expenses:
Acquisition costs 738 108 2,482 602
Amortization of acquired intangible assets 904 1,219 2,795 3,673
Impairment of goodwill and other assets - 5,873 - 5,873
Securities litigation defense costs 1,173 - 2,460 1,721
Share-based compensation 865 617 2,344 1,579
Other non-run-rate expenses   -     315   -
Total adjustments to operating expenses 3,680 7,817 10,396 13,448
Total adjustments to GAAP income before provision for income taxes:   4,642   29,065     13,253   36,467
Income before provision for income taxes - Non-GAAP 12,770 9,872 36,501 52,190
Provision for income taxes   3,074   3,141     11,294   17,518
Net income - Non-GAAP $ 9,696 $ 6,731   $ 25,207 $ 34,672
Diluted net income per share - Non-GAAP $ 0.16 $ 0.11 $ 0.41 $ 0.58
Weighted-average shares outstanding (diluted): 60,855 60,546 60,813 59,984

* Relates to the impairment of acquired software technology and capitalized software costs in the Hospital Solutions Division

Quality Systems, Inc.
Susan J. Lewis
(954) 389-3700
Paul Holt, EVP/CFO
(949) 255-2600

Source: Quality Systems, Inc.

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