QSI - Press Releases

IRVINE, Calif.--(BUSINESS WIRE) February 7, 2005--Quality Systems, Inc. (NASDAQ:QSII - news) today announced the results of operations for its fiscal 2005 third quarter ended December 31, 2004.

The Company posted net revenues of $22.1 million in the third quarter, an increase of 21% from $18.2 million generated during the same quarter last year. The Company reported net income of $4.2 million an increase of 62% over net income of $2.6 million earned in the comparable quarter of the prior year. Fully diluted earnings per share was $0.64 in the quarter, an increase of 60% over the fully diluted $0.40 per share earnings recorded in the same quarter last year.

The revenue and net income results achieved in the quarter were records for the Company.� Results in the third quarter were driven by record revenue and profit in the Company�s NextGen Healthcare Information Systems division.� For the quarter, the Company�s NextGen Healthcare Information Systems division posted record revenue of $18.3 million, up 31% over the same quarter prior year and record operating income of $6.7 million, up 78% over the same quarter of the prior year.

Quality Systems, Inc. will hold a conference call to discuss third quarter financial results February 7, 2005 at 4:30 p.m. EST (1:30 p.m. PST).� �To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time:� (877) 586-7724.� �There is no pass code required for this call. If you are unable to participate in the call at this time, a replay will be available on Monday, February 7 at 5:30 p.m. EST through Monday, February 14 at midnight EST.� To access the replay dial (800) 642-1687 and enter the conference ID number 3400595.

Quality Systems, Inc. and its NextGen Healthcare Information Systems subsidiary develop and market computer-based practice management, patient records, and connectivity applications for medical and dental group practices. Visit www.qsii.com and www.nextgen.com for additional information.

This news release may contain forward-looking statements within the meaning of the federal securities laws. Statements regarding future events, developments, 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 and net income), are forward-looking statements within the meaning of these laws and involve a number of risks and uncertainties. Moreover, these forward-looking statements are subject to a number of risks and uncertainties, some of which are outlined below. As a result, actual results may vary materially from those anticipated by the forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: 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; the timing, cost and success or failure of new product and service introductions, development and product upgrade releases; undetected errors or bugs in software; 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; uncertainties concerning threatened, pending and new litigation against the Company including related professional services fees; uncertainties concerning the amount and timing of professional fees incurred by the Company generally; changes of accounting estimates and assumptions used to prepare the prior periods' financial statements; general economic conditions; and the risk factors detailed from time to time in Quality Systems' periodic reports and registration statements filed with the Securities and Exchange Commission. A significant portion of the Company's quarterly sales of software product licenses and computer hardware is concluded in the last month of the 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.

QUALITY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

	THREE MONTHS ENDED		NINE MONTHS ENDED
	DECEMBER 31, 2004	DECEMBER 31, 2003	DECEMBER 31, 2004	DECEMBER 31, 2003

Revenues:
Software, hardware and supplies......	$ 9,781	$ 8,068	$ 27,891	$ 24,130
Implementation and training services.	��1,889	1,791	6,455	5,229
System sales...........................	11,670	9,859	34,346	29,359

Maintenance and other services.........	10,418	8,340	29,089	22,788

Total revenue.......................	22,088	18,199	63,435	52,147

Cost of revenue:
Software, hardware and supplies......	1,384	1,966	5,428	6,541
Implementation and training services.	1,575	1,427	4,546	3,964
Total cost of system sales.............	2,959	3,393	9,974	10,505

Total cost of maintenance and other services...............................	4,556	4,130	13,580	11,120
Total cost of revenue...............	7,515	7,523	� ��23,554	21,625

Gross profit........................	14,573	10,676	39,881	30,522

Operating expenses:
Selling, general and administrative.	6,420	4,902	16,786	14,410
Research and development............	1,707	1,628	5,137	4,496
Total operating expenses..........	8,127	6,530	21,923	18,906

Income from operations..............	6,446	4,146	17,958	�11,616

Interest income........................	263	95	553	284

Income before provision for income taxes..................................	6,709	4,241	18,511	� 11,900
Provision for income taxes.............	2,488	1,630	7,193	4,604

Net income..........................	$ 4,221	$ 2,611	$ 11,318	$ 7,296
�

Net income per share:
Basic...............................	$ 0.65	$ 0.42	$ 1.77	$ 1.18
Diluted.............................	$ 0.64	$ 0.40	$ 1.72	$ 1.13

Weighted�average shares used in per share calculation:
Basic...............................	6,476	6,237	6,400	��6,162
Diluted.............................	6,641	6,549	6,567	6,476

QUALITY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

		December 31, 2004			March 31, 2004
ASSETS			(UNAUDITED)

Current assets:
	Cash and cash equivalents.............................................	$ 66,432			$ 51,395
	Accounts receivable, net..............................................	27,929			� 20,336
	Inventories, net...................................................... Deferred tax assets...................................................	1,405 2,979			�� 725 �� 2,979
	Other current assets..................................................	� ��1,353			�� 1,437
	Total current assets........................................	100,098			� 76,872

Equipment and improvements, net..........................................		2,406			�� 2,012
Capitalized software costs, net..........................................		3,961			�� 3,608
Deferred tax assets......................................................		1,104			�� 1,104
Goodwill.................................................................		1,840			�� 1,840
Other....................................................................		1,616			�� 1,242
	Total assets................................................	$ 111,025			$ 86,678

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
	Accounts payable......................................................	$ 2,269		$ 1,655
	Deferred revenue..........................	22,599		� 16,016
	Accrued compensation and related benefits.............................	2,304		2,985
	Income taxes payable..................................................	1,806		273
	Other current liabilities.............................................	4,478		3,497
	Total current liabilities...................................	33,456		24,426

Deferred revenue.........................................................		1,103		� �1,247
	Total liabilities...........................................	34,559		25,673

Commitments and contingencies.............................................		--		--

Shareholders� equity:
	Common stock, $0.01 par value; authorized 20,000 shares; issued�� and outstanding 6,525 and 6,325 shares at December 31, 2004 and March 31, 2004, respectively.......................................	65		�� 63
	Additional paid-in capital............................................	43,553		39,735
	Retained earnings.....................................................	34,068		��22,750
	Deferred compensation.................................................	(1,220)		(1,543)
	Total shareholders' equity..................................	76,466		61,005
	Total liabilities and shareholders� equity..................	$ 111,025		$ 86,678

QUALITY SYSTEMS REPORTS THIRD QUARTER RESULTS����������

ASSETS

(UNAUDITED)

LIABILITIES AND SHAREHOLDERS' EQUITY

QUALITY SYSTEMS REPORTS THIRD QUARTER RESULTS��