Quality Systems, Inc. (NASDAQ:QSII) announced today results for
its fiscal 2016 first quarter ended June 30, 2015.
Revenues for the fiscal 2016 first quarter reached $122.2
million, an increase of four percent, versus $117.9 million
reported in the fiscal 2015 first quarter.
Net income for the 2016 first quarter was $6.4 million,
increasing 23 percent when compared with $5.2 million for the same
period a year ago.
On a GAAP basis, fully diluted earnings per share was $0.10 in
the fiscal 2016 first quarter versus $0.08 in the comparable period
last year. On a non-GAAP basis, fully diluted earnings per share
for the fiscal 2016 first quarter was $0.16 compared with $0.13
reported in the fiscal 2015 first quarter.
At quarter-end, the Company’s liquidity position remained strong
with $116.8 million of cash and investments.
“As we kick off fiscal 2016 and I begin to settle into my new
role, my immediate priority is centered on Quality Systems’ clients
and our employees, as previously stated. To this end, during my
first few weeks on the job, I have spent the majority of my time
meeting with clients to ensure we are delivering a positive,
productive and effective experience for them. I have also visited
with many of our employees at QSI offices throughout the country.
These initiatives have allowed me to quickly gain a keener
understanding of the culture and communication – both internal and
external – here at Quality Systems. I believe this is critical to
the process involved in moving this Company forward in the dynamic
healthcare environment in which we operate,” explained Rusty
Frantz, president and chief executive officer, who officially began
his employment with the Company in this capacity on July 1,
2015.
“Having one of the largest installed user bases in the
healthcare information technology space affords us the chance to
make a significant impact on our clients’ abilities to navigate
changing healthcare models. I am gratified to learn that we are
continuing to make progress in the Company’s efforts to enhance the
client experience and bring new capabilities and solutions that
enable them to stay relevant and flourish, both today and into the
future,” Frantz 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 September 11, 2015
with an anticipated distribution date of October 5, 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 2016 first quarter results on Thursday, July 23, 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 #80827836. 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 www.qsii.com, 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
#80827836. The replay will be available from approximately 1:00 PM
ET on Thursday, July 23, 2015, through 11:59 PM ET on Thursday,
July 30, 2015.
A transcript of the conference call will be made available on
the Company’s website at www.qsii.com.
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
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, 2015, 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.
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 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. Historically, the Company calculated a non-GAAP effective
tax rate each quarter, based on non-GAAP pre-tax income (or loss)
for the period, to determine the corresponding non-GAAP provision
for (benefit of) income taxes. Beginning in the first quarter of
fiscal year 2016, the Company began utilizing 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
expected to be applied to each quarter of fiscal year 2016 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.
QUALITY SYSTEMS, INC. CONSOLIDATED STATEMENTS OF
INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended June 30, 2015 2014
Revenues: Software license and hardware $ 16,189 $ 19,761 Software
related subscription services 12,246 9,715
Total software, hardware and related 28,435 29,476
Support and maintenance 43,713 40,805 Revenue cycle management and
related services 20,243 16,693 Electronic data interchange and data
services 20,189 18,319 Professional services 9,584
12,601 Total revenues 122,164
117,894 Cost of revenue: Software license and hardware 7,041
7,556 Software related subscription services 5,958
4,451 Total software, hardware and related 12,999
12,007 Support and maintenance 7,943 6,914 Revenue cycle
management and related services 14,512 12,706 Electronic data
interchange and data services 12,326 11,999 Professional services
8,197 12,564 Total cost of revenue
55,977 56,190 Gross profit 66,187
61,704 Operating expenses: Selling, general and
administrative 39,171 36,730 Research and development costs 17,085
16,236 Amortization of acquired intangible assets 897
983 Total operating expenses 57,153
53,949 Income from operations 9,034 7,755
Interest income, net 302 54 Other income (expense), net (50
) 9 Income before provision for income taxes 9,286
7,818 Provision for income taxes 2,924 2,655
Net income $ 6,362 $ 5,163 Net income per share:
Basic $ 0.11 $ 0.09 Diluted $ 0.10 $ 0.08 Weighted-average
shares outstanding: Basic 60,312 60,230 Diluted 61,064 60,770
Dividends declared per common share $ 0.175 $ 0.175
QUALITY SYSTEMS, INC. CONSOLIDATED
BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) June 30, March 31,
2015 2015 ASSETS Current assets: Cash and cash equivalents $
104,859 $ 118,993 Restricted cash and cash equivalents 3,765 2,419
Marketable securities 11,938 11,592 Accounts receivable, net 99,974
107,669 Inventories 647 622 Income taxes receivable 2,662 3,147
Deferred income taxes, net 24,078 24,080 Other current assets
11,357 11,535 Total current
assets 259,280 280,057 Equipment and improvements, net
22,055 20,807 Capitalized software costs, net 41,593 40,397
Intangibles, net 25,889 27,689 Goodwill 73,571 73,571 Other assets
18,501 18,000 Total assets $
440,889 $ 460,521 LIABILITIES AND
SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 11,095
$ 10,018 Deferred revenue 61,863 66,343 Accrued compensation and
related benefits 15,645 24,051 Income taxes payable 2,686 10,048
Dividends payable 10,703 10,700 Other current liabilities
37,026 33,924 Total current liabilities
139,018 155,084 Deferred revenue, net of current 1,272 1,349
Deferred compensation 6,385 5,750 Other noncurrent liabilities
14,260 14,798 Total liabilities
160,935 176,981 Commitments and contingencies
Shareholders’ equity: Common stock
$0.01 par value; authorized 100,000
shares; issued and outstanding 60,317 and 60,303 shares at June 30,
2015 and March 31, 2015, respectively
603 603 Additional paid-in capital 199,481 198,650 Accumulated
other comprehensive loss (268 ) (192 ) Retained earnings
80,138 84,479 Total shareholders’
equity 279,954 283,540 Total
liabilities and shareholders’ equity $ 440,889 $ 460,521
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, 2015 2014 Income
before provision for income taxes - GAAP $ 9,286 $ 7,818
Plus items included in cost of revenue: Amortization of acquired
software technology 903 858 Share-based compensation 97
86 Total adjustments to cost of revenue 1,000 944
Plus items included in operating expenses: Acquisition costs 517
1,123 Amortization of acquired intangible assets 897 983 Securities
litigation defense costs 538 278 Share-based compensation 587 704
Other non-run-rate expenses* 938 - Total adjustments
to operating expenses 3,477 3,088 Total adjustments
to GAAP income before provision for income taxes: 4,477
4,032 Income before provision for income taxes -
Non-GAAP 13,763 11,850 Provision for income taxes 4,198
4,061 Net income - Non-GAAP $ 9,565 $ 7,789
Diluted net income per share - Non-GAAP $ 0.16 $ 0.13
Weighted-average shares outstanding (diluted): 61,064 60,770
* For the three months ended June 30, 2015, the $938 of other
non-run-rate expenses consists of non-recurring incremental costs
related to the change in the Company's Chief Executive Officer,
including recruitment fees and severance payments.
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Quality Systems, Inc.John Stumpf, Interim Chief Financial
OfficerPhone: (949) 255-2600jstumpf@qsii.comorSusan J.
LewisPhone: (954) 389-3700slewis@qsii.com
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