Quality Systems, Inc. Reports Fiscal 2016 Third Quarter Results
Company Fills Chief Technology Officer Role with Seasoned Healthcare
Technology Executive
IRVINE, Calif.--(BUSINESS WIRE)--
Quality
Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal
2016 third quarter and nine months ended December 31, 2015.
Revenues for the three months ended December 31, 2015, on a pro forma
basis to exclude the Hospital Solutions Division which the Company sold
on October 22, 2015, were $116.4 million, versus $118.4 million for the
three months ended December 31, 2014, on the same basis, reflecting a
reduction in system sales and related maintenance, offset by increases
in revenue cycle management services and electronic data interchange
services. Reported revenues, including the Hospital Solutions Division,
for the three months ended December 31, 2015 were $117.0 million,
compared with $123.4 million reported for the three months ended
December 31, 2014, largely reflecting a decline of $4.4 million in
revenues associated with the disposition of the Hospital Solutions
Division.
Recurring revenues in the third quarter of fiscal 2016 increased to
approximately 80 percent of total revenues.
On a non-GAAP basis, fully diluted earnings per share was $0.16 for both
the three months ended December 31, 2015 and 2014. On a GAAP basis,
fully diluted earnings per share was $0.12 for the three months ended
December 31, 2015 versus $0.11 for the comparable period a year ago.
Revenues for the nine months ended December 31, 2015, on a pro forma
basis to exclude the Hospital Solutions Division, were $357.1 million,
up two percent when compared with revenues of $348.5 million for the
nine months ended December 31, 2014, on the same basis. Reported
revenues, including the Hospital Solutions Division, for the nine months
ended December 31, 2015 were $364.6 million, compared with $361.8
million reported for the nine months ended December 31, 2014.
On a non-GAAP basis, fully diluted earnings per share for the nine
months ended December 31, 2015 was $0.53 versus $0.41 in the comparable
period a year ago. On a GAAP basis, fully diluted earnings per share was
$0.36 for the nine months ended December 31, 2015 versus $0.27 for the
comparable period a year ago.
Gross margin for the three months ended December 31, 2015 was 54
percent, compared with 56 percent for the three months ended December
31, 2014.
Operating expenses, consisting of selling, general and administrative
and research and development costs, declined 10 percent for the three
months ended December 31, 2015, compared with the same period a year
ago. This decline reflects a year-over-year decrease in both corporate
selling, general and administrative and research and development costs.
Rusty Frantz, president and chief executive officer, commenting on the
results, stated: "I am pleased with our progress as we continue to
transform our business while being a good steward of the cost line to
enhance EPS levels."
At quarter-end, the Company's liquidity position remained strong with
$104.8 million of cash and investments.
Subsequent to the closing of the fiscal 2016 third quarter, the Company
completed its previously announced acquisition of HealthFusion Holdings,
Inc. on January 4th, 2016 and entered into a $250 million
revolving credit facility.
In addition, as previously announced, the Company had been seeking to
fill the role of chief technology officer. To this end, David A.
Metcalfe was named to the post, effective February 1, 2016. Prior to
joining QSI, Metcalfe, 52, served as vice president of R&D; at Becton,
Dickinson & Company (BD), a leading worldwide medical technology
company, from March 2015 to January 2016. Previously, Metcalfe was vice
president of product development at CareFusion Corp., a global medical
technology company servicing the critical care market from September
2012 to March 2015, at which time CareFusion was acquired by BD. From
2008 to 2012, Metcalfe was vice president of development for Allscripts
Healthcare Solutions, a provider of healthcare information technology
(HCIT) solutions.
"We are pleased to fill the CTO role with David Metcalfe, a seasoned
technology and software expert. David brings significant, relevant
experience to our Company, having worked at several healthcare
technology companies and also within the HCIT space," Frantz noted.
"As Quality Systems works to improve the quality of our client
experience, our current growth strategy is centered on our transition to
the cloud and the role our recent acquisition of HealthFusion plays,
along with a strong focus on our core ambulatory business and pursuit of
opportunities within the population health arena as the market shifts to
the delivery of value-based care. Furthermore, we are restructuring the
sales organization and re-engineering sales processes to enable
cross-selling amongst our large installed ambulatory base. We also are
more effectively using capital to strengthen and grow our business to
meet the changing needs of the HCIT marketplace. The foundation we have
laid during the past few months well positions the Company for the
direction in which the future of healthcare is headed," Frantz concluded.
Quality Systems will host a conference call to discuss its fiscal 2016
third quarter results on Thursday, January 28, 2016 at 5:00 PM ET (2:00
PM PT). All participants should dial 1-866-900-9499 at least 10 minutes
prior to the start of the call and reference conference ID #29627511.
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
#29627511. The replay will be available from approximately 8:00 PM ET on
Thursday, January 28, 2016, through 11:59 PM ET on Thursday, February 4,
2016.
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. (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, 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 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. 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,
losses related to the disposition of a business segment, 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 December 31,
|
|
Nine Months Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Software license and hardware
|
|
$
|
16,150
|
|
|
$
|
21,428
|
|
|
$
|
52,026
|
|
|
$
|
60,505
|
|
|
Software related subscription services
|
|
11,705
|
|
|
11,864
|
|
|
36,388
|
|
|
31,266
|
|
|
Total software, hardware and related
|
|
27,855
|
|
|
33,292
|
|
|
88,414
|
|
|
91,771
|
|
|
Support and maintenance
|
|
39,519
|
|
|
43,045
|
|
|
125,408
|
|
|
125,985
|
|
|
Revenue cycle management and related services
|
|
21,594
|
|
|
20,392
|
|
|
62,630
|
|
|
54,517
|
|
|
Electronic data interchange and data services
|
|
20,643
|
|
|
19,051
|
|
|
61,413
|
|
|
56,276
|
|
|
Professional services
|
|
7,421
|
|
|
7,644
|
|
|
26,700
|
|
|
33,288
|
|
|
Total revenues
|
|
117,032
|
|
|
123,424
|
|
|
364,565
|
|
|
361,837
|
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
Software license and hardware
|
|
6,530
|
|
|
7,295
|
|
|
20,149
|
|
|
22,326
|
|
|
Software related subscription services
|
|
5,533
|
|
|
5,194
|
|
|
17,454
|
|
|
15,029
|
|
|
Total software, hardware and related
|
|
12,063
|
|
|
12,489
|
|
|
37,603
|
|
|
37,355
|
|
|
Support and maintenance
|
|
7,537
|
|
|
7,365
|
|
|
23,874
|
|
|
21,064
|
|
|
Revenue cycle management and related services
|
|
14,381
|
|
|
14,246
|
|
|
43,573
|
|
|
40,154
|
|
|
Electronic data interchange and data services
|
|
12,437
|
|
|
11,956
|
|
|
37,302
|
|
|
35,970
|
|
|
Professional services
|
|
7,367
|
|
|
8,304
|
|
|
24,008
|
|
|
32,780
|
|
|
Total cost of revenue
|
|
53,785
|
|
|
54,360
|
|
|
166,360
|
|
|
167,323
|
|
|
Gross profit
|
|
63,247
|
|
|
69,064
|
|
|
198,205
|
|
|
194,514
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
39,395
|
|
|
41,482
|
|
|
115,962
|
|
|
116,893
|
|
|
Research and development costs
|
|
14,518
|
|
|
18,468
|
|
|
49,584
|
|
|
51,602
|
|
|
Amortization of acquired intangible assets
|
|
897
|
|
|
904
|
|
|
2,692
|
|
|
2,795
|
|
|
Total operating expenses
|
|
54,810
|
|
|
60,854
|
|
|
168,238
|
|
|
171,290
|
|
|
Income from operations
|
|
8,437
|
|
|
8,210
|
|
|
29,967
|
|
|
23,224
|
|
|
Interest income (expense), net
|
|
49
|
|
|
(82
|
)
|
|
392
|
|
|
41
|
|
|
Other expense, net
|
|
(43
|
)
|
|
—
|
|
|
(147
|
)
|
|
(17
|
)
|
|
Income before provision for income taxes
|
|
8,443
|
|
|
8,128
|
|
|
30,212
|
|
|
23,248
|
|
|
Provision for income taxes
|
|
1,141
|
|
|
1,452
|
|
|
8,233
|
|
|
6,659
|
|
|
Net income
|
|
$
|
7,302
|
|
|
$
|
6,676
|
|
|
$
|
21,979
|
|
|
$
|
16,589
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.12
|
|
|
$
|
0.11
|
|
|
$
|
0.36
|
|
|
$
|
0.28
|
|
|
Diluted
|
|
$
|
0.12
|
|
|
$
|
0.11
|
|
|
$
|
0.36
|
|
|
$
|
0.27
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
60,867
|
|
|
60,272
|
|
|
60,548
|
|
|
60,250
|
|
|
Diluted
|
|
61,279
|
|
|
60,855
|
|
|
61,190
|
|
|
60,813
|
|
|
Dividends declared per common share
|
|
$
|
0.175
|
|
|
$
|
0.175
|
|
|
$
|
0.525
|
|
|
$
|
0.525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUALITY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN
THOUSANDS)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
March 31,
|
|
|
|
2015
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
92,648
|
|
|
$
|
118,993
|
|
|
Restricted cash and cash equivalents
|
|
4,452
|
|
|
2,419
|
|
|
Marketable securities
|
|
12,165
|
|
|
11,592
|
|
|
Accounts receivable, net
|
|
92,592
|
|
|
107,669
|
|
|
Inventories
|
|
662
|
|
|
622
|
|
|
Income taxes receivable
|
|
10,565
|
|
|
3,147
|
|
|
Deferred income taxes, net
|
|
24,074
|
|
|
24,080
|
|
|
Prepaid expenses and other current assets
|
|
14,111
|
|
|
11,535
|
|
|
Total current assets
|
|
251,269
|
|
|
280,057
|
|
|
Equipment and improvements, net
|
|
23,171
|
|
|
20,807
|
|
|
Capitalized software costs, net
|
|
44,573
|
|
|
40,397
|
|
|
Intangibles, net
|
|
22,287
|
|
|
27,689
|
|
|
Goodwill
|
|
73,513
|
|
|
73,571
|
|
|
Other assets
|
|
18,577
|
|
|
18,000
|
|
|
Total assets
|
|
$
|
433,390
|
|
|
$
|
460,521
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
|
$
|
10,250
|
|
|
$
|
10,018
|
|
|
Deferred revenue
|
|
55,146
|
|
|
66,343
|
|
|
Accrued compensation and related benefits
|
|
16,345
|
|
|
24,051
|
|
|
Income taxes payable
|
|
53
|
|
|
10,048
|
|
|
Dividends payable
|
|
10,726
|
|
|
10,700
|
|
|
Other current liabilities
|
|
38,575
|
|
|
33,924
|
|
|
Total current liabilities
|
|
131,095
|
|
|
155,084
|
|
|
Deferred revenue, net of current
|
|
1,127
|
|
|
1,349
|
|
|
Deferred compensation
|
|
6,667
|
|
|
5,750
|
|
|
Other noncurrent liabilities
|
|
9,918
|
|
|
14,798
|
|
|
Total liabilities
|
|
148,807
|
|
|
176,981
|
|
|
Commitments and contingencies
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
|
Common stock
|
|
|
|
|
|
$0.01 par value; authorized 100,000 shares; issued and outstanding
60,886 and 60,303
shares at December 31, 2015 and March 31,
2015, respectively
|
|
609
|
|
|
603
|
|
|
Additional paid-in capital
|
|
210,184
|
|
|
198,650
|
|
|
Accumulated other comprehensive loss
|
|
(517
|
)
|
|
(192
|
)
|
|
Retained earnings
|
|
74,307
|
|
|
84,479
|
|
|
Total shareholders' equity
|
|
284,583
|
|
|
283,540
|
|
|
Total liabilities and shareholders' equity
|
|
$
|
433,390
|
|
|
$
|
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 December 31,
|
|
Nine Months Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Income before provision for income taxes - GAAP
|
|
$
|
8,443
|
|
|
$
|
8,128
|
|
$
|
30,212
|
|
|
$
|
23,248
|
|
Plus items included in cost of revenue:
|
|
|
|
|
|
|
|
|
|
Amortization of acquired software technology
|
|
903
|
|
|
858
|
|
2,710
|
|
|
2,575
|
|
Share-based compensation
|
|
101
|
|
|
104
|
|
300
|
|
|
282
|
|
Total adjustments to cost of revenue
|
|
1,004
|
|
|
962
|
|
3,010
|
|
|
2,857
|
|
Plus items included in operating expenses:
|
|
|
|
|
|
|
|
|
|
Acquisition costs
|
|
4,451
|
|
|
738
|
|
5,743
|
|
|
2,482
|
|
Loss on disposition of Hospital Solutions Division*
|
|
1,753
|
|
|
—
|
|
1,753
|
|
|
—
|
|
Amortization of acquired intangible assets
|
|
897
|
|
|
904
|
|
2,692
|
|
|
2,795
|
|
Securities litigation defense costs, net of insurance
|
|
(3,075
|
)
|
|
1,173
|
|
(281
|
)
|
|
2,460
|
|
Share-based compensation
|
|
642
|
|
|
865
|
|
2,028
|
|
|
2,344
|
|
Other non-run-rate expenses**
|
|
335
|
|
|
—
|
|
1,722
|
|
|
315
|
|
Total adjustments to operating expenses
|
|
5,003
|
|
|
3,680
|
|
13,657
|
|
|
10,396
|
|
Total adjustments to GAAP income before provision for income taxes:
|
|
6,007
|
|
|
4,642
|
|
16,667
|
|
|
13,253
|
|
Income before provision for income taxes - Non-GAAP
|
|
14,450
|
|
|
12,770
|
|
46,879
|
|
|
36,501
|
|
Provision for income taxes
|
|
4,407
|
|
|
3,074
|
|
14,298
|
|
|
11,294
|
|
Net income - Non-GAAP
|
|
$
|
10,043
|
|
|
$
|
9,696
|
|
$
|
32,581
|
|
|
$
|
25,207
|
|
Diluted net income per share - Non-GAAP
|
|
$
|
0.16
|
|
|
$
|
0.16
|
|
$
|
0.53
|
|
|
$
|
0.41
|
|
Weighted-average shares outstanding (diluted):
|
|
61,279
|
|
|
60,855
|
|
61,190
|
|
|
60,813
|
|
|
|
|
|
|
|
|
|
|
|
* The loss on disposition of Hospital Solutions Division includes $387
in direct incremental costs related to the disposition.
** For the three months ended December 31, 2015, the $335 of other
non-run-rate expenses consists of non-recurring severance and other
employee-related costs incurred in connection with the Hospital
disposition. Other non-run-rate expenses for the nine months ended
December 31, 2015 also includes $449 in certain non-recurring
professional services costs not related to ongoing core operations and
non-recurring severance costs plus $938 of non-recurring incremental
costs related to the change in the Company's Chief Executive Officer,
including recruitment fees and severance payments.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160128006407/en/
Quality Systems, Inc.
Mark Davis, 949-255-2600
Executive
Vice President, Corporate Development and Strategy
[email protected]
or
Susan
J. Lewis, 303-766-4343
[email protected]
Source: Quality Systems, Inc.
News Provided by Acquire Media
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