Quality Systems, Inc. (NASDAQ: QSII) announced today results for
its fiscal 2017 second quarter ended September 30, 2016.
“I’m very pleased with our performance during the second
quarter. The strategic investments we’ve made and the measures
we’ve taken to integrate and streamline the business are starting
to pay off,” commented Rusty Frantz, president and chief executive
officer of Quality Systems, Inc. “Furthermore, our reinvigorated
sales efforts coupled with our focus on customer relations have
resulted in increased rates of customer satisfaction and favorably
impacted our customer retention.”
Mr. Frantz continued, “Our financial results in the first half
of fiscal 2017, as well as the progress we made in the second
quarter, lead us to feel confident about the remainder of the year
and reaffirm the guidance we provided on our last call.”
Revenues for the fiscal 2017 second quarter of $127.2 million
compared to $125.4 million a year-ago. On a GAAP basis, net income
for the 2017 second quarter was $4.0 million, compared with net
income of $8.3 million in the 2016 second quarter. Non-GAAP net
income for the 2017 second quarter was $14.4 million compared with
non-GAAP net income of $13.0 million in the 2016 second
quarter.
On a GAAP basis, fully diluted earnings per share was $0.06 in
the fiscal 2017 second quarter compared with $0.14 earnings per
share for the same period a year ago. On a non-GAAP basis, fully
diluted earnings per share for the fiscal 2017 second quarter was
$0.23 versus $0.21 reported in the second quarter a year ago.
Fiscal 2017 Financial Outlook
The company is reaffirming outlook for the remainder of 2017 and
expects:
- Revenue of between $494 million and
$510 million
- Non-GAAP EPS of between $0.75 and
$0.81
Conference Call Information
Quality Systems will host a conference call to discuss its
fiscal 2017 second quarter results on Thursday, October 27, 2016 at
8:30 AM ET (5:30 AM PT). Shareholders and interested participants
may listen to a live broadcast of the conference call by dialing
866-900-9499 or 937-502-2136 for international callers, and
referencing participant code 95129126 approximately 15 minutes
prior to the call. A live webcast of the conference call will be
available on the investor relations section of the company’s web
site and an audio file of the call will also be archived for 90
days at investor.qsii.com. After the conference call, a replay will
be available until November 3, 2016 and can be accessed by dialing
800-585-8367 or 404-537-3406 for international callers, and
referencing participant code 95129126.
About Quality Systems, Inc.
Irvine, Calif.-based Quality Systems, Inc. (QSI) and its
subsidiary, NextGen Healthcare Information Systems, develop and
provide a range of software and services for medical and dental
group practices, including practice management and electronic
health record applications, patient portal, interoperability and
connectivity products, and population health management and
analytics offerings. Services include managed cloud services,
revenue cycle management, claims clearinghouse, data interchange
and value-add consulting. The Company's solution portfolio is
readily integrated and collectively positioned to drive low total
cost of ownership for its client partners, as well as enable the
transition to value-based healthcare. 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 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, 2016 and subsequently
filed Quarterly Reports on Form 10-Q, 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 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;
disruptions caused by acquisitions of companies, products, or
technologies; 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. These forward-looking
statements speak only as of the date hereof. The Company undertakes
no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or
otherwise.
USE OF NON-GAAP FINANCIAL MEASURES
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 presentation of non-GAAP financial information is not intended
to be considered in isolation or as a substitute for, or superior
to, financial information prepared and presented in accordance with
GAAP. The Company calculates non-GAAP diluted earnings per share by
excluding net acquisition and disposition costs, amortization of
acquired intangible assets, amortization of deferred debt issuance
costs, restructuring costs, net securities litigation defense
costs, share-based compensation, and other non-run-rate expenses
from GAAP income before provision for income taxes. The Company
utilizes a normalized non-GAAP tax rate to provide better
consistency across the interim reporting periods within a given
fiscal year by eliminating the effects of non-recurring and
period-specific items, which can vary in size and frequency, and
which are not necessarily reflective of the Company’s longer-term
operations. The normalized non-GAAP tax rate applied to each
quarter of fiscal year 2016 and expected to be applied for each
quarter of fiscal year 2017 period is 30.5%. The determination of
this rate is based on the consideration of both historic and
projected financial results. The Company intends to re-evaluate
this normalized non-GAAP tax rate on an annual basis or more
frequently if any significant events occur that may materially
affect this rate, such as merger and acquisition activity, changes
in business outlook, or changes in expectations regarding tax
regulations.
The Company’s future period guidance in this release includes
adjustments for items not indicative of the Company’s core
operations. Such adjustments are generally expected to be of a
nature similar to those adjustments applied to the Company’s
historic GAAP financial results in the determination of the
Company’s non-GAAP diluted earnings per share. Such adjustments,
however, may be affected by changes in ongoing assumptions and
judgments as to the items that are excluded in the calculation of
non-GAAP adjusted net income and adjusted diluted earnings per
share, as described in this release. The exact amount and probable
significance of these adjustments, including net acquisition and
disposition costs, net securities litigation defense costs, and
other non-run-rate expenses, are not currently determinable without
unreasonable efforts, but may be significant. These items cannot be
reliably quantified or forecasted due to the combination of their
historic and expected variability. It is therefore not practicable
to reconcile this non-GAAP guidance to the most comparable GAAP
measures.
QUALITY SYSTEMS, INC. CONSOLIDATED
STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended September 30, Six Months Ended September
30, 2016 2015 2016 2015 Revenues: Software license
and hardware $ 17,182 $ 19,687 $ 31,971 $ 35,876 Software related
subscription services 21,490 12,437 41,365
24,683 Total software, hardware and related 38,672 32,124
73,336 60,559 Support and maintenance 38,974 42,176 76,981 85,889
Revenue cycle management and related services 20,936 20,793 41,989
41,036 Electronic data interchange and data services 21,613 20,581
43,737 40,770 Professional services 6,971 9,695
13,328 19,279
Total revenues
127,166 125,369 249,371 247,533 Cost of
revenue: Software license and hardware 6,427 6,578 13,547 13,619
Software related subscription services 8,675 5,963
17,762 11,921 Total software, hardware and related
15,102 12,541 31,309 25,540 Support and maintenance 7,036 8,394
13,604 16,337 Revenue cycle management and related services 14,359
14,680 28,590 29,192 Electronic data interchange and data services
12,807 12,539 25,570 24,865 Professional services 6,693
8,444 13,739 16,641 Total cost of revenue
55,997 56,598 112,812 112,575 Gross
profit 71,169 68,771 136,559 134,958 Operating expenses: Selling,
general and administrative 42,790 37,396 83,371 76,567 Research and
development costs, net 18,292 17,981 36,516 35,066 Amortization of
acquired intangible assets 2,617 898 5,321 1,795 Restructuring
costs 701 — 4,454 — Total operating
expenses 64,400 56,275 129,662 113,428
Income from operations 6,769 12,496 6,897 21,530 Interest income 1
44 9 346 Interest expense (803 ) (3 ) (1,816 ) (3 ) Other expense,
net (55 ) (54 ) (142 ) (104 ) Income before provision for income
taxes 5,912 12,483 4,948 21,769 Provision for income taxes 1,925
4,168 1,608 7,092 Net income $ 3,987
$ 8,315 $ 3,340 $ 14,677 Net income per
share: Basic $ 0.06 $ 0.14 $ 0.05 $ 0.24 Diluted $ 0.06 $ 0.14 $
0.05 $ 0.24 Weighted-average shares outstanding: Basic 61,658
60,461 61,420 60,387 Diluted 62,052 61,194 61,704 61,129 Dividends
declared per common share $ — $ 0.175 $ — $ 0.35
QUALITY SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
September 30, 2016 March 31, 2016 ASSETS Current assets:
Cash and cash equivalents $ 26,246 $ 27,176 Restricted cash and
cash equivalents 4,458 5,320 Marketable securities — 9,297 Accounts
receivable, net 78,406 94,024 Inventory 353 555 Income taxes
receivable 15,276 32,709 Prepaid expenses and other current assets
18,519 14,910 Total current assets 143,258 183,991
Equipment and improvements, net 25,985 25,790 Capitalized software
costs, net 13,750 13,250 Deferred income taxes, net 8,018 8,198
Intangibles, net 80,297 91,675 Goodwill 188,555 188,837 Other
assets 19,025 19,049 Total assets $ 478,888 $
530,790 LIABILITIES AND SHAREHOLDERS’ EQUITY Current
liabilities: Accounts payable $ 5,438 $ 11,126 Deferred revenue
52,295 57,935 Accrued compensation and related benefits 15,192
18,670 Income taxes payable 185 91 Other current liabilities 50,734
50,238 Total current liabilities 123,844 138,060
Deferred revenue, net of current 1,403 1,335 Deferred compensation
6,794 6,357 Line of credit 48,000 105,000 Other noncurrent
liabilities 13,376 10,661 Total liabilities 193,417
261,413 Commitments and contingencies Shareholders' equity: Common
stock $0.01 par value; authorized 100,000 shares; issued and
outstanding 62,094 and 60,978 shares at September 30, 2016 and
March 31, 2016, respectively 621 610 Additional paid-in capital
224,089 211,262 Accumulated other comprehensive loss (565 ) (481 )
Retained earnings 61,326 57,986 Total shareholders'
equity 285,471 269,377 Total liabilities and
shareholders' equity $ 478,888 $ 530,790
QUALITY SYSTEMS, INC. NON-GAAP FINANCIAL
MEASURES
(In thousands, except per share data)
RECONCILIATION OF
NON-GAAP DILUTED EARNINGS PER SHARE
Three Months Ended September 30, Six Months Ended September 30,
2016 2015 2016 2015 Income before provision for
income taxes - GAAP $ 5,912 $ 12,483 $ 4,948 $ 21,769 Non-GAAP
adjustments: Acquisition and disposition costs, net 3,748 775 6,484
1,292 Amortization of acquired intangible assets 5,646 1,802 11,378
3,602 Amortization of deferred debt issuance costs 269 — 538 —
Restructuring costs 701 — 4,454 — Securities litigation defense
costs, net of insurance 763 2,256 1,127 2,794 Share-based
compensation 1,910 901 3,066 1,585 Other non-run-rate expenses*
1,725 449 2,126 1,387 Total adjustments to
GAAP income before provision for income taxes: 14,762 6,183
29,173 10,660 Income before provision for income
taxes - Non-GAAP 20,674 18,666 34,121 32,429 Provision for income
taxes 6,306 5,693 10,407 9,891 Net income -
Non-GAAP $ 14,368 $ 12,973 $ 23,714 $ 22,538
Diluted net income per share - Non-GAAP $ 0.23 $ 0.21 $ 0.38 $ 0.37
Weighted-average shares outstanding (diluted): 62,052 61,194 61,704
61,129
* For the three months ended September 30, 2016, other
non-run-rate expenses consist of $1,419 of professional services
costs not related to ongoing core operations and $191 of executive
hiring costs. For the six months ended September 30, 2016, other
non-run-rate expenses consist of $1,820 of professional services
costs not related to ongoing core operations and $191 of executive
hiring costs.
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version on businesswire.com: http://www.businesswire.com/news/home/20161027005390/en/
Quality Systems, Inc.Jamie Arnold, Chief Financial
Officer949-255-2600JArnold@nextgen.comorInvestor
Contact:Westwicke PartnersBob East or Asher
Dewhurst443-213-0500
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