Washington, D.C. 20549



Pursuant to Section 13 OR 15(d) of the

Securities Exchange Act of 1934

Date of Report

(Date of earliest event reported)

August 3, 2006


(Exact name of registrant as specified in its charter)




(State or other

(Commission File Number)

(IRS Employer

jurisdiction of incorporation)


Identification Number)





18191 Von Karman, Suite 450

Irvine, California 92612

(Address of Principal Executive Offices)

(949) 255-2600

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02

Results of Operations and Financial Condition.

The information in this Form 8-K and the Exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.       

On August 3, 2006, Quality Systems, Inc. issued a press release announcing its financial performance for the period ended June 30, 2006. On that same date, Quality Systems, Inc. conducted a conference call concerning its performance for the period ended June 30, 2006. A copy of the news release is attached to this Form 8-K as Exhibit 99.1.


Item 9.01

Financial Statements and Exhibits





Exhibit 99.1  

Press release dated August 3, 2006 of Quality Systems, Inc.








Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date:  August 3, 2006 




/s/ Paul Holt


Paul Holt


Chief Financial Officer








Number        Description                                                                                                                    








For more information contact:

Louis Silverman
President and CEO
Quality Systems, Inc.
(949) 255-2600
  Sean Collins
CCG Investor Relations
(310) 231-8600


IRVINE, Calif. — (BUSINESS WIRE)— August 3, 2006 — Quality Systems, Inc. (NASDAQ:QSIInews) today announced the results of operations for its fiscal 2007 first quarter ended June 30, 2006. The Company posted net revenues of $36.1 million in the first quarter, an increase of 32% from the $27.4 million generated during the same quarter last year. The Company reported net income of $7.7 million an increase of 51% over net income of $5.1 million earned in the comparable quarter of the prior year. Fully diluted earnings per share was $0.28 in the quarter, an increase of 47% over the fully diluted $0.19 per share earnings recorded in the same quarter last year. First quarter 2007 net earnings and diluted earnings per share reflect the impact of adopting Statement of Financial Accounting Standards No. 123R (SFAS 123R), Share-Based Payment, which requires the expensing of stock options. Adoption of SFAS 123R reduced first quarter 2007 net earnings and diluted earnings per share by $550,000 and $0.02, respectively.

For the quarter, the Company’s NextGen Healthcare Information Systems division posted revenue of $32.2 million, up 36% over the same quarter prior year and operating income of $13.4 million, up 54% over the same quarter of the prior year.

Quality Systems, Inc. will hold a conference call to discuss first quarter financial results August 3, 2006 at 4:30 p.m. EST (1:30 p.m. PST). To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (877) 586-7724. There is no pass code required for this call. If you are unable to participate in the call at this time, a replay will be available on Thursday, August 3, 2006 at 6:30 p.m. EST, through Wednesday, August 9, 2006 at midnight EST. To access the replay dial (800) 642-1687 and enter conference ID number 4013433.

A transcript of the conference call will be made available on the QSII Web site (www.qsii.com).

About Quality Systems, Inc.
Quality Systems, Inc. and its NextGen Healthcare Information Systems subsidiary develop and market computer-based practice management, patient records, and connectivity applications for medical and dental group practices. Visit www.qsii.com and www.nextgen.com for additional information.

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. 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; the timing, cost and success or failure of new product and service introductions, development and product upgrade releases; undetected errors or bugs in software; 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 Quality Systems’ 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.

[financial highlights follow]



JUNE 30,

  JUNE 30
, 2005

  Software, hardware and supplies     $ 15,029   $ 12,973  
  Implementation and training services       2,954     2,490  

System sales       17,983     15,463  
  Maintenance and other services       14,114     8,863  
  Electronic data interchange services       3,977     3,102  

Maintenance, EDI and other services       18,091     11,965  

   Total revenue       36,074     27,428  

Cost of revenue:                
  Software, hardware and supplies       1,689     2,456  
  Implementation and training services       1,963     1,824  

Total cost of system sales       3,652     4,280  
  Maintenance and other services       5,025     3,409  
  Electronic data interchange services       2,780     2,062  

Total cost of maintenance, EDI and other services       7,805     5,471  

   Total cost of revenue       11,457     9,751  

   Gross profit       24,617     17,677  

Operating expenses:                
   Selling, general and administrative       10,200     8,032  
   Research and development costs       2,318     1,741  

     Total operating expenses       12,518     9,773  

   Income from operations       12,099     7,904  
Interest income       667     341  

Income before provision for income taxes       12,766     8,245  
Provision for income taxes       5,097     3,170  

   Net income     $ 7,669   $ 5,075  

Net income per share:                
Basic     $ 0.29   $ 0.19  
Diluted     $ 0.28   $ 0.19  
Weighted average shares outstanding, basic       26,714     26,224  
Weighted average shares outstanding, diluted       27,232     26,950  



JUNE 30,

  MARCH 31,

Current assets:    
             Cash and cash equivalents     $ 66,954   $ 57,225  
             Accounts receivable, net       48,229     44,665  
             Inventories, net       852     561  
             Income tax receivable           1,195  
             Net current deferred tax assets       1,680     1,824  
             Other current assets       2,700     2,912  

                       Total current assets       120,415     108,382  
Equipment and improvements, net       3,953     3,739  
Capitalized software costs, net       5,494     5,171  
Net deferred tax assets       1,273     1,157  
Goodwill       1,840     1,840  
Other       2,086     1,958  

                       Total assets     $ 135,061   $ 122,247  

Current liabilities:                
             Accounts payable     $ 2,328   $ 2,934  
             Deferred revenue       35,090     34,422  
             Accrued compensation and related benefits       4,410     5,490  
             Income tax payable       3,707      
             Other current liabilities       4,643     3,812  

                       Total current liabilities       50,178     46,658  
Deferred revenue, net of current       1,744     1,494  
Deferred compensation       1,789     1,686  

                       Total liabilities       53,711     49,838  

Commitments and contingencies                
Shareholders’ equity:                
             Common stock, $0.01 par value; authorized 50,000 shares; issued
                 and outstanding 26,737 and 26,711 shares at June 30, 2006 and
                 March 31, 2006, respectively
      267     267  
             Additional paid-in capital       54,263     53,675  
             Retained earnings       26,820     19,151  
             Deferred compensation           (684 )

                       Total shareholders’ equity       81,350     72,409  

                       Total liabilities and shareholders’ equity     $ 135,061   $ 122,247