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8-K - FORM 8-K - NEXTGEN HEALTHCARE, INC.d542412d8k.htm

Exhibit 99.1

 

LOGO

For Further Information, Contact:

Quality Systems, Inc.

18111 Von Karman Avenue, Suite 700

Irvine, CA 92612

Phone: (949) 255-2600

Paul Holt, CFO, pholt@qsii.com

  

Susan J. Lewis

Phone: (303) 804-0494

slewis@qsii.com

FOR IMMEDIATE RELEASE

MAY 23, 2013

QUALITY SYSTEMS, INC. REPORTS FISCAL 2013 FOURTH QUARTER AND

YEAR-END RESULTS

Company Also Appoints Michael Aghajanian to Board of Directors

IRVINE, Calif. … May 23, 2013 …Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal 2013 fourth quarter and year ended March 31, 2013.

The Company reported revenues of $460.2 million for the fiscal year ended March 31, 2013, an increase of 7 percent versus $429.8 million for the 2012 fiscal year ended March 31, 2012. Net income for fiscal 2013 was $42.7 million, a decrease of 44 percent when compared with net income of $75.7 million for fiscal 2012. Fully diluted earnings per share for the 2013 fiscal year was $0.72, down 44 percent from $1.28 for the 2012 fiscal year.

Revenues for the fiscal 2013 fourth quarter reached $111.3 million, up 2 percent when compared with $109.0 million for the fourth quarter of the previous fiscal year.

In light of recent operating results of the Company’s Hospital Division, management performed a comprehensive operational review of that business unit in the latter part of the fourth quarter and, accordingly, revised its operating plans to incorporate additional investment in development, implementation and support. This investment will initially impact near-term profitability of the unit. Management is committed to realizing the substantial opportunity it perceives exists in the small hospital market and is confident in the strength its product and service offerings bring to the sector. As a result of this operational review and an updated assessment of the fair value of the business unit’s goodwill, the Company recorded a goodwill impairment charge to income of $17.4 million for the fiscal 2013 fourth quarter.

Net loss for the fiscal 2013 fourth quarter was $4.1 million versus net income of $15.1 million for the comparable period a year ago. Fully diluted loss per share was ($0.07) in the fourth quarter of fiscal 2013 versus earnings per share of $0.25 for the fourth quarter of fiscal 2012. Excluding the impairment charge, pro forma net income for fiscal 2013 was $59.1 million with fully diluted earnings per share of $0.99. Pro forma net income for the fourth quarter of fiscal 2013 was $12.3 million with fully diluted earnings per share of $0.21.

 

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Quality Systems, Inc.

Fiscal 2013 Fourth Quarter and Year-end Results

Page 2

 

“We are moving forward with the reorganizational plan we put in place during fiscal 2013, and are increasing our opportunities to leverage cross selling, especially on the RCM Services side. We also saw positive momentum in our bookings of products and services during the fourth quarter, including record RCM bookings, which is affording us a great start in the new fiscal year,” said Steven T. Plochocki, president and chief executive officer.

“While this takes time, we are confident in our growth strategy and our ancillary products and services that cater to today’s changing healthcare models.” Plochocki concluded.

In other news, Quality Systems reported that Michael Aghajanian was appointed to its Board of Directors, effective May 22, 2013. Aghajanian fills one of the two vacancies on the Board after recent resignations of two board members. Aghajanian was also appointed to serve on the Board’s Transaction Committee.

Aghajanian, age 55, brings more than 30 years of engineering and operational experience to the company. He is an adjunct professor in the engineering department at Worcester Polytechnic Institute (“WPI”) and a frequent lecturer and supporter of the Office of Executive Education at the Paul Merage School of Business at the University of California, Irvine (“UCI”). Previously, Aghajanian held a variety of roles of increasing responsibility at Pittiglio Rabin Todd & McGrath (“PRTM”), a management consultant company providing services in the areas of operational strategy, supply chain management, product innovation and customer experience excellence, culminating in his role as President and Chief Executive Officer. In addition to his educational work with WPI and UCI, since his retirement from PRTM, Aghajanian has served on the board of directors of several for-profit and charitable organizations, including serving as the Chairman of Cimtek, Inc., a provider of functional testing of electronics, and on the boards of directors of Nexiant, Inc., a provider of MRO inventory solutions, and the Orange County Technology Action Network, an organization devoted to fueling technology growth in Orange County, Calif.

Aghajanian earned a Master’s degree in Business Administration with a concentration in technology management from the University of California, Irvine and a Bachelor of Science in engineering from Worcester Polytechnic Institute in Massachusetts.

“We welcome Michael to our Board. His operational and leadership experience as well as his expertise in strategic direction will prove beneficial, particularly during a time of refocus as we reorganize the Company to take better advantage of opportunities within the changing healthcare landscape. We look forward to Michael’s contributions,” Plochocki noted.

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 June 14, 2013 with


Quality Systems, Inc.

Fiscal 2013 Fourth Quarter and Year-end Results

Page 3

 

an anticipated distribution date of July 5, 2013. The $0.175 per share cash dividend is pursuant to the Company’s current policy to pay a regular quarterly dividend on the Company’s outstanding shares of common stock, subject to further 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.

The Company will hold its 2013 Annual Shareholders’ Meeting on Thursday, August 15, 2013 at 1:00 PM local time. The meeting will be held at The Irvine Marriott, 18000 Von Karman Avenue, Irvine, Calif., 92612. Holders of record as of June 17, 2013 are eligible to vote and attend. Proxy materials and the 2013 Annual Report will be made available to shareholders of record and will also be posted on the Company’s website at www.qsii.com.

Quality Systems will host a conference call to discuss its fiscal 2013 fourth quarter and year-end results on Thursday, May 23, 2013 at 10:00 AM ET (7:00 AM PT). All participants should dial 1-877-941-6010 at least ten minutes prior to the start of the call. International callers should dial 1-480-629-9643. 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 800-406-7325 or 303-590-3030 and enter reservation identification number 4620344. The replay will be available from approximately 12:00 PM ET on Thursday, May 23, 2013, through 11:59 PM ET on Thursday, May 30, 2013.

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, 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 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, 2012, including but not limited to: the volume and timing of systems sales and installations; length of sales cycles and the installation


Quality Systems, Inc.

Fiscal 2013 Fourth Quarter and Year-end Results

Page 4

 

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 measures, such as pro forma net income and Days Sales Outstanding (“DSO”), provides useful supplemental information to investors and management regarding the Company’s financial condition and results. Pro forma net income is calculated by excluding the goodwill impairment charge from net income (loss) before provision for income taxes and the product is adjusted pre-tax income. From the adjusted pre-tax income amount, the tax provision (excluding the tax effect of the impairment) is deducted and the result is pro forma net income. The Company calculates DSO as follows: net revenue for the quarter is annualized (multiplied by four) and then divided by 365 days to yield an average daily sales amount. The balance of accounts receivable, net of any reserves for bad debts, is then divided by that average daily sales amount resulting in the DSO.

FINANCIAL TABLES ATTACHED


QUALITY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

     Three Months Ended March 31,      Year Ended March 31,  
     2013     2012      2013     2012  

Revenues:

         

Software, hardware and supplies

   $ 17,109      $ 26,562       $ 88,572      $ 122,407   

Implementation and training services

     7,161        8,270         35,008        26,391   
  

 

 

   

 

 

    

 

 

   

 

 

 

System sales

     24,270        34,832         123,580        148,798   

Maintenance

     40,025        35,871         156,771        138,832   

Electronic data interchange services

     15,653        13,081         59,709        49,259   

Revenue cycle management and related services

     15,317        11,402         59,219        45,572   

Other services

     16,030        13,808         60,950        47,374   
  

 

 

   

 

 

    

 

 

   

 

 

 

Maintenance, EDI, RCM and other services

     87,025        74,162         336,649        281,037   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total revenues

     111,295        108,994         460,229        429,835   
  

 

 

   

 

 

    

 

 

   

 

 

 

Cost of revenue:

         

Software, hardware and supplies

     5,695        4,976         21,750        18,399   

Implementation and training services

     7,023        6,179         30,896        21,298   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total cost of system sales

     12,718        11,155         52,646        39,697   

Maintenance

     5,505        4,844         20,316        17,104   

Electronic data interchange services

     10,099        8,606         38,350        32,422   

Revenue cycle management and related services

     10,980        8,608         43,324        34,295   

Other services

     8,995        8,728         35,016        27,705   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total cost of maintenance, EDI, RCM and other services

     35,579        30,786         137,006        111,526   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total cost of revenue

     48,297        41,941         189,652        151,223   
  

 

 

   

 

 

    

 

 

   

 

 

 

Gross profit

     62,998        67,053         270,577        278,612   

Operating expenses:

         

Selling, general and administrative

     38,308        34,195         148,353        128,846   

Research and development costs

     8,231        8,907         30,865        31,369   

Amortization of acquired intangible assets

     1,194        653         4,859        2,198   

Impairment of goodwill

     17,400        —           17,400        —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Total operating expenses

     65,133        43,755         201,477        162,413   
  

 

 

   

 

 

    

 

 

   

 

 

 

Income (loss) from operations

     (2,135     23,298         69,100        116,199   

Interest income (expense)

     (93     35         (107     247   

Other income (expense), net

     36        261         (79     (139
  

 

 

   

 

 

    

 

 

   

 

 

 

Income (loss) before provision for income taxes

     (2,192     23,594         68,914        116,307   

Provision for income taxes

     1,898        8,521         26,190        40,650   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

   $ (4,090   $ 15,073       $ 42,724      $ 75,657   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) per share:

         

Basic

   $ (0.07   $ 0.26       $ 0.72      $ 1.29   

Diluted

   $ (0.07   $ 0.25       $ 0.72      $ 1.28   

Weighted average shares outstanding:

         

Basic

     59,541        59,048         59,392        58,729   

Diluted

     59,541        59,232         59,462        59,049   

Dividends declared per common share

   $ 0.175      $ 0.175       $ 0.700      $ 0.700   

Proforma net income *

   $ 12,292         $ 59,106     
  

 

 

      

 

 

   

Proforma net income per diluted share

   $ 0.21         $ 0.99     

 

* Net income excluding the Q4 2013 impairment charge and the estimated tax impact of such charge.


QUALITY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

(UNAUDITED)

 

     March 31,     March 31,  
     2013     2012  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 105,999      $ 134,444   

Restricted cash

     5,488        1,962   

Marketable securities

     12,012        4,987   

Accounts receivable, net

     148,257        145,756   

Inventories

     710        1,242   

Income taxes receivable

     —          2,628   

Deferred income tax assets, net

     12,140        10,127   

Other current assets

     12,720        11,563   
  

 

 

   

 

 

 

Total current assets

     297,326        312,709   

Equipment and improvements, net

     21,887        17,841   

Capitalized software costs, net

     39,781        19,994   

Intangibles, net

     27,550        23,259   

Goodwill

     45,761        60,776   

Other assets

     10,750        5,773   
  

 

 

   

 

 

 

Total assets

   $ 443,055      $ 440,352   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 11,501      $ 4,532   

Deferred revenue

     65,207        83,108   

Accrued compensation and related benefits

     11,915        11,870   

Income taxes payable

     1,480        —     

Dividends payable

     10,418        10,354   

Other current liabilities

     26,508        19,568   
  

 

 

   

 

 

 

Total current liabilities

     127,029        129,432   

Deferred revenue, net of current

     1,219        1,293   

Deferred income tax liabilities, net

     —          5,351   

Deferred compensation

     3,809        3,497   

Other noncurrent liabilities

     3,949        5,602   
  

 

 

   

 

 

 

Total liabilities

     136,006        145,175   

Commitments and contingencies

    

Shareholders’ equity:

    

Common stock

    

$0.01 par value; authorized 100,000 shares; issued and outstanding 59,543 and 59,180 shares at March 31, 2013 and March 31, 2012, respectively

     595        592   

Additional paid-in capital

     179,743        169,033   

Accumulated other comprehensive loss

     (11     (45

Retained earnings

     126,722        125,597   
  

 

 

   

 

 

 

Total shareholders’ equity

     307,049        295,177   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 443,055      $ 440,352   
  

 

 

   

 

 

 


QUALITY SYSTEMS, INC.

NON-GAAP FINANCIAL MEASURES

RECONCILIATION OF PRO FORMA NET INCOME

(IN THOUSANDS)

 

     Three Months
Ended
March 31, 2013
    Year Ended
March 31, 2013
 

Income (loss) before provision for income taxes

   $ (2,192   $ 68,914   

Addback: Impairment of goodwill

     17,400        17,400   
  

 

 

   

 

 

 
     15,208        86,314   

Provision for income taxes (excluding tax effect of impairment)

     2,916        27,208   
  

 

 

   

 

 

 

Pro forma net income

   $ 12,292      $ 59,106   
  

 

 

   

 

 

 

Pro forma net income per diluted share

   $ 0.21      $ 0.99   
  

 

 

   

 

 

 

DAYS SALES OUTSTANDING CALCULATION

(IN THOUSANDS, EXCEPT NUMBER OF DAYS)

 

Quarterly Revenue

      $ 111,295   

Times four (4)

     x         4   
     

 

 

 

Equals Annualized Revenue

        445,180   

Divided by 365 days

        365   
     

 

 

 

Equals Average Daily Revenue

     =       $ 1,220   
     

 

 

 

Net Accounts Receivable

      $ 148,257   

Divided by Average Daily Revenue

        1,220   
     

 

 

 

Equals Days Sales Outstanding

     =         122