Quality Systems, Inc. Announces Results of Business Strategy Review
Cloud Strategy to be based on Acquired MediTouch Platform;
Corporate
Structure Streamlined for Client Responsiveness and Efficiency; and,
Annual Financial Guidance Initiated.
Conference Call Scheduled for April 28, 2016 9:00 am EDT (6:00 am PDT)
IRVINE, Calif.--(BUSINESS WIRE)--
Quality
Systems, Inc. (NASDAQ:QSII) announced today its Board of Directors
approved management's recommendations for several strategic initiatives,
the Company's updated cloud strategy, a corporate restructuring and the
initiation of financial guidance.
MediTouch®
Based Cloud Strategy
Following several months of assessment of both the recently acquired
MediTouch platform and the Company's NextGen Now platform in
development, management concluded that the MediTouch platform offers the
most efficient path to providing a high-quality, robust, cloud-based
solution for ambulatory care. As a result, the Company will cease
further investment in NextGen Now and immediately discontinue all
efforts to use or repurpose the NextGen Now platform. This assessment
was conducted under the technology leadership of David Metcalfe, who
joined the Company on February 1, 2016 as chief technology officer.
"The acquisition of the MediTouch platform accelerates our
time-to-market with a cloud-based platform that already meets the needs
of smaller practices. Our focus now will be to scale this solution to
address the needs of enterprise-level organizations and larger
practices," stated Metcalfe.
As a result of this decision, Quality Systems' fiscal fourth quarter and
full-year results will reflect a pre-tax charge of approximately $32
million, relating to the impairment of the Company's previously
capitalized investment in NextGen Now. This charge did not result in,
nor is it expected to result in, any additional cash expenditures.
Streamlined Corporate Structure
The Company also announced a restructuring plan, which will eliminate
its business units in favor of a streamlined, functional-based
organizational structure. This new structure will enable a more
efficient, integrated and client-centered delivery of the holistic
solutions ambulatory care organizations need.
"We are realigning the organization to remove silos and be better
positioned to serve our clients, as they pursue population health and
value-based reimbursement initiatives. It will also reduce our cost
structure and make the organization more nimble," explained Rusty
Frantz, president and chief executive officer.
This organizational realignment is expected to result in approximately
$4 million of restructuring-related charges, consisting principally of
severance and other one-time termination benefits. The restructuring
costs are expected to be primarily incurred and funded in the first and
second quarters of fiscal year 2017. In connection with such charges,
the Company estimates that it will reduce its headcount by approximately
150 employees, approximately six percent of its U.S.-based workforce.
The Company expects $14 million to $16 million of personnel-related
savings in fiscal year 2017, excluding the restructuring charge.
Fiscal Year 2017 Guidance and Preliminary &
Unaudited Fiscal Year 2016 Results
Effective in fiscal year 2017, the Company will begin providing annual
guidance for certain financial metrics. For fiscal year 2017, the
Company anticipates revenues of $508 million to $522 million and
non-GAAP diluted earnings per share of $0.78 to $0.86. This fiscal year
2017 guidance reflects the anticipated full year contribution from the
acquisition of HealthFusion as well as the impact of the corporate
restructuring. The Company expects to update this guidance, as
appropriate, in its fourth quarter 2016 earnings announcement, scheduled
for May 19, 2016.
To provide context for the fiscal year 2017 guidance, the Company also
reported that, based upon preliminary financial data, it expects total
revenue of $491 million to $493 million for fiscal year 2016 and $126
million to $128 million for its fourth quarter ended March 31, 2016,
which are modestly below analysts' consensus. The Company also expects
to report non-GAAP diluted earnings per share of $0.70 to $0.72 for
fiscal year 2016 and $0.17 to $0.19 for the fourth quarter, in line or
slightly above analysts' consensus. The Company expects GAAP earnings
per share of $0.08 to $0.10 for fiscal year 2016 and a GAAP loss per
share of ($0.28) to ($0.26) for the fourth quarter, largely due to the
aforementioned impairment charge.
These preliminary, unaudited results are subject to the completion of
the Company's customary accounting and auditing procedures. Final
adjustments and other developments may arise between the date of this
press release and the dates on which the Company announces its 2016
fourth quarter and audited year-end results and files its Annual Report
on Form 10-K with the Securities and Exchange Commission, that may cause
actual results to materially differ.
Conference Call
Quality Systems will host a conference call to discuss its business
strategy review on Thursday, April 28, 2016 at 9:00 AM ET (6:00 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 #1292427.
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 #1292427. The replay will be available from
approximately 8:00 PM ET on Thursday, April 28, 2016, through 11:59 PM
ET on Saturday, April 30, 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.
® Marks owned by Quality Systems, Inc.
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). The
Company's preliminary, unaudited results reported in this news release
are based on management's initial review of operations for the quarter
and year ended March 31, 2016 and remain subject to the completion of
the Company's customary annual closing and review procedures. Final
adjustments and other material developments may arise between the date
of this news release and the dates the Company announces final results
for the period. The preliminary results in this news release represent
the Company's initial estimates and are subject to the risk of being
inaccurate because of the preliminary nature of the forecasts, the
possibility of further adjustment, or other unanticipated issues. 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 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. Other
risks and uncertainties may arise in connection with the Company's
impairment charge announced in this news release, including, without
limitation, finalization of the accounting impacts of the impairment.
Additional risks and uncertainties may arise relating to the
Company's restructuring announced in this news release, including,
without limitation, whether the Company will be able to implement the
restructuring program as planned, whether the expected costs associated
with the restructuring will differ in amount or timing from the
Company's estimates, whether the Company will be able to realize the
full amount of estimated savings and benefits from the restructuring
program, and finalization of severance and personnel transition
arrangements and finalization of the accounting impacts of these actions.
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, in context of the Company's preliminary financial
results provided for its fiscal 2016 periods. 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
acquisition costs, losses related to the disposition of a business
segment, amortization of acquired intangible assets, certain
acquisition-related fair value adjustments, 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. 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 applied to each quarter of fiscal
year 2016 and expected to be applied for the fiscal 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 press release. The exact
amount of these adjustments are not currently determinable, but may be
significant. It is therefore not practicable to reconcile this
non-GAAP guidance to the most comparable GAAP measures.
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FINANCIAL TABLES ATTACHED
QUALITY SYSTEMS, INC.
NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
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RECONCILIATION OF PRELIMINARY NON-GAAP
DILUTED EARNINGS PER SHARE
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Three Months
Ended 3/31/2016
Preliminary Estimate
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Fiscal Year
Ended 3/31/2016
Preliminary Estimate
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Diluted net income (loss) per share - GAAP
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($0.28) to ($0.26)
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$0.08 to $0.10
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Adjustments:
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Acquisition costs
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$0.00
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$0.06
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Amortization of acquired intangible assets
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$0.06
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$0.13
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Loss on disposition of Hospital Solutions Division and related costs
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$0.00
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$0.02
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Securities litigation defense costs, net of insurance
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($0.02)
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($0.02)
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Share-based compensation
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$0.01
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$0.04
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Write-off of capitalized software costs and related wind-down costs
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$0.37
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$0.37
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Other non-run-rate expenses *
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$0.03
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$0.05
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Effect of difference between GAAP and Non-GAAP effective tax rates
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($0.01)
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($0.03)
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Total adjustments to GAAP diluted net loss per share **
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$0.45
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$0.62
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Diluted net income per share - Non-GAAP
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$0.17 to $0.19
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$0.70 to $0.72
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* For the three months ended 3/31/2016, other non-run-rate expenses
consist of $0.01 per share of professional services costs not related to
ongoing core operations, $0.01 per share of incremental costs related to
the transition of Company executive officers, and $0.01 per share of
severance, retention, and other employee-related costs.
For the fiscal year ended 3/31/2016, other non-run-rate expenses consist
of $0.02 per share of professional services costs not related to ongoing
core operations, $0.02 per share of incremental costs related to the
transition of Company executive officers, and $0.02 per share of
severance, retention, and other employee-related costs.
** Total adjustments may not foot due to rounding of per share amounts.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160427006634/en/
Quality Systems, Inc.
Mark Davis, 949-265-6928
EVP,
Corp Development and IR
[email protected]
or
Susan
J. Lewis, 303-766-4343
[email protected]
Source: Quality Systems, Inc.
News Provided by Acquire Media
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