Quality Systems, Inc. (NASDAQ:QSII) announced today results for
its fiscal 2018 first quarter ended June 30, 2017.
“Fiscal 2018 is off to a very solid start, as we saw strong
financial results and continued to make progress on our strategic
plan. During the quarter, we leveraged our platform as a service
strategy to further enhance our solution offerings and enhance the
value we bring to our clients. Furthermore, the significant
modifications we’ve made to our business model will simplify the
process and increase the ease of partnering with NextGen going
forward. I feel very confident in our position within the market
and our ability to drive bookings growth in the back half of fiscal
2018,” commented Rusty Frantz, President and Chief Executive
Officer of Quality Systems, Inc.
Revenues for the fiscal 2018 first quarter of $130.9 million
compared to $122.2 million a year-ago. On a GAAP basis, net income
for the 2018 first quarter was $3.9 million, compared with net loss
of $647 thousand in the 2017 first quarter. Non-GAAP net income for
the 2018 first quarter was $10.5 million compared with non-GAAP net
income of $9.3 million in the 2017 first quarter.
On a GAAP basis, fully diluted earnings per share was $0.06 in
the fiscal 2018 first quarter compared with a loss per share of
$0.01 for the same period a year ago. On a non-GAAP basis, fully
diluted earnings per share for the fiscal 2018 first quarter was
$0.17 versus $0.15 reported in the first quarter a year ago.
Fiscal 2018 Financial Outlook
For the fiscal year 2018, the Company is reiterating its revenue
outlook of a range of $512 million and $530 million and adjusting
its non-GAAP EPS from a range of $0.66 to $0.74 to a range of $0.62
and $0.70 to account for incremental investments in the EagleDream
Health platform.
Corporate Event
In other news, Jocelyn A. Leavitt, the Company’s Executive Vice
President, General Counsel and Secretary, informed the Board of
Directors of the Company on July 31, 2017 that she will be
resigning from her position. Ms. Leavitt has been with the Company
since December 2011, serving first as the Company’s Vice President,
Associate General Counsel before being appointed General Counsel in
June 2013. Ms. Leavitt is resigning to pursue other interests and
will remain with the Company until her successor is appointed to
ensure a smooth transition. The Company wishes her well in her
future endeavors.
Conference Call Information
Quality Systems will host a conference call to discuss its
fiscal 2018 first quarter results on Tuesday, August 1, 2017 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
866-750-8947 or 720-405-1352 for international callers, and
referencing participant code 51776315 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 August 7, 2017 and can be accessed by dialing
800-585-8367 or 404-537-3406 for international callers, and
referencing participant code 51776315.
About Quality Systems, Inc.
Quality Systems, Inc., known to our clients as NextGen
Healthcare, provides software, services, and analytic solutions to
the ambulatory care market. We are a healthcare information
technology and services company that delivers foundational
capabilities to organizations that want to promote healthy
communities. Our technology provides a customizable platform that
empowers physician success, enriches the patient care experience
and lowers the cost of 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 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 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; 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 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 2017 and
expected to be applied for each quarter of fiscal year 2018 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 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.
FINANCIAL TABLES ATTACHED
QUALITY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF
INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30, 2017 2016
Revenues: Software license and hardware $ 12,800 $ 14,789 Software
related subscription services 23,906 19,875 Total
software, hardware and related 36,706 34,664 Support and
maintenance 41,116 38,007 Revenue cycle management and related
services 21,403 21,053 Electronic data interchange and data
services 23,312 22,124 Professional services 8,385 6,357
Total revenues 130,922 122,205 Cost of
revenue: Software license and hardware 5,373 7,120 Software related
subscription services 10,430 9,087 Total software,
hardware and related 15,803 16,207 Support and maintenance 7,623
6,568 Revenue cycle management and related services 15,361 14,231
Electronic data interchange and data services 13,158 12,763
Professional services 7,224 7,046 Total cost of
revenue 59,169 56,815 Gross profit 71,753 65,390
Operating expenses: Selling, general and administrative 42,977
40,581 Research and development costs, net 19,989 18,224
Amortization of acquired intangible assets 2,047 2,704
Restructuring costs — 3,753 Total operating expenses
65,013 65,262 Income from operations 6,740 128
Interest income 9 8 Interest expense (677 ) (1,013 ) Other expense,
net (22 ) (87 ) Income (loss) before provision for (benefit of)
income taxes 6,050 (964 ) Provision for (benefit of) income taxes
2,154 (317 ) Net income (loss) $ 3,896 $ (647 ) Net
income (loss) per share: Basic $ 0.06 $ (0.01 ) Diluted $ 0.06 $
(0.01 ) Weighted-average shares outstanding: Basic 62,636 61,179
Diluted 62,643 61,179
QUALITY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
June 30, 2017 March 31, 2017 ASSETS Current
assets: Cash and cash equivalents $ 23,337 $ 37,673 Restricted cash
and cash equivalents 5,915 4,916 Accounts receivable, net 81,605
83,407 Inventory 100 158 Income taxes receivable 2,303 2,679
Prepaid expenses and other current assets 18,283 17,969
Total current assets 131,543 146,802 Equipment and
improvements, net 27,832 27,426 Capitalized software costs, net
17,948 13,607 Deferred income taxes, net 12,266 11,265 Intangibles,
net 79,165 69,213 Goodwill 202,272 185,898 Other assets 18,883
19,010 Total assets $ 489,909 $ 473,221
LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 5,007 $ 4,618 Deferred revenue 51,471 52,383
Accrued compensation and related benefits 14,388 24,513 Income
taxes payable 2,265 405 Other current liabilities 32,618
46,775 Total current liabilities 105,749 128,694 Deferred
revenue, net of current 1,438 1,394 Deferred compensation 6,386
6,629 Line of credit 45,000 15,000 Other noncurrent liabilities
17,148 16,461 Total liabilities 175,721 168,178
Commitments and contingencies Shareholders' equity: Common stock
$0.01 par value; authorized 100,000 shares; issued and outstanding
63,370 and 62,455 shares at June 30, 2017 and March 31, 2017,
respectively 634 625 Additional paid-in capital 233,742 228,549
Accumulated other comprehensive loss (372 ) (358 ) Retained
earnings 80,184 76,227 Total shareholders' equity
314,188 305,043 Total liabilities and shareholders'
equity $ 489,909 $ 473,221
QUALITY SYSTEMS, INC.
NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
RECONCILIATION OF
NON-GAAP DILUTED EARNINGS PER SHARE
Three Months Ended June 30, 2017 2016 Income (loss)
before provision for income taxes - GAAP $ 6,050 $ (964 ) Non-GAAP
adjustments: Acquisition costs, net 549 2,736 Amortization of
acquired intangible assets 5,448 5,732 Amortization of deferred
debt issuance costs 269 269 Restructuring costs — 3,753 Securities
litigation defense costs, net of insurance 446 364 Share-based
compensation 2,041 1,156 Other non-run-rate expenses* 263
401 Total adjustments to GAAP income before provision for
income taxes: 9,016 14,411 Income before provision
for income taxes - Non-GAAP 15,066 13,447 Provision for income
taxes 4,595 4,101 Net income - Non-GAAP $ 10,471
$ 9,346 Diluted net income per share - Non-GAAP $
0.17 $ 0.15 Weighted-average shares outstanding (diluted): 62,643
61,676
* For the three months ended June 30, 2017 and 2016, other
non-run-rate expenses consist primarily of professional services
costs not related to core operations.
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version on businesswire.com: http://www.businesswire.com/news/home/20170801005812/en/
Quality Systems, Inc.Jamie Arnold, 949-255-2600Chief
Financial OfficerJArnold@nextgen.comorInvestors:Westwicke
PartnersBob East or Asher Dewhurst443-213-0500
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