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8-K - FORM 8-K - NEXTGEN HEALTHCARE, INC.d735673d8k.htm
EX-10.1 - EX-10.1 - NEXTGEN HEALTHCARE, INC.d735673dex101.htm

Exhibit 99.1

 

LOGO

 

 

For Further Information, Contact:   
Quality Systems, Inc.    Susan J. Lewis
18111 Von Karman Avenue, Suite 700    Phone: (303) 804-0494
Irvine, CA 92612    slewis@qsii.com
Phone: (949) 255-2600   
Paul Holt, EVP/CFO, pholt@qsii.com   

FOR IMMEDIATE RELEASE

    MAY 29, 2014

QUALITY SYSTEMS, INC. REPORTS FISCAL 2014 FOURTH QUARTER AND YEAR-END RESULTS; SYSTEM SALES, REVENUE, BOOKINGS AND PIPELINE ALL INCREASE IN QUARTER

Company Also Names New Member to its Board of Directors

IRVINE, Calif. … May 29, 2014 …Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal 2014 fourth quarter and fiscal year ended March 31, 2014.

Revenues for the fiscal 2014 fourth quarter reached $115.2 million, up 4 percent when compared with $111.3 million for the fiscal 2013 fourth quarter. Net income for the 2014 fourth quarter was $5.2 million, up from a net loss of $4.1 million reported in the same period last year.

On a GAAP basis, fully diluted earnings per share was $0.09 in the fourth quarter of fiscal 2014 versus fully diluted loss per share of $0.07 for the 2013 fourth quarter. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2014 fourth quarter was $0.12, a decline of 50 percent from $0.24 for the comparable quarter a year ago.

During the 2014 fourth quarter, the Company saw increases in systems sales, revenue, bookings and pipeline when compared with the fiscal 2014 third quarter.

Revenues reached $444.7 million for the fiscal year ended March 31, 2014, a decrease of 3 percent when compared with $460.2 million for the 2013 fiscal year ended March 31, 2013. The recurring revenue base reached $357.9 million for the fiscal year ended 2014. Net income for fiscal 2014 was $15.7 million, a decrease of 63 percent when compared with net income of $42.7 million for fiscal 2013.

On a GAAP basis, fully diluted earnings per share for the 2014 fiscal year was $0.26, down 64 percent from $0.72 reported in the 2013 fiscal year. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2014 year was $0.70, a decline of 39 percent from $1.14 for the comparable period a year ago (non-GAAP fully diluted earnings per share is reconciled to its corresponding GAAP measure at the end of this release).

 

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The Company ended the year with a strong liquidity position, including $113.8 million of cash and investments.

“We are encouraged by the progress we are seeing this quarter, resulting from our dedicated marketing and sales efforts, which are now positively impacting our system sales, revenue, bookings and pipeline growth. The improvement was also fueled by our new Mirth product line and our growth in revenue cycle management business. Both of these areas are expected to be two strong growth drivers for the Company in fiscal 2015,” explained president and chief executive officer Steven T. Plochocki.

“We ended the year in a very strong cash position, which affords us opportunity as we look ahead. We are confident that the programs and initiatives we have put in place over the past several quarters will further enhance the Company’s position as the next fiscal year unwinds,” Plochocki said.

In other news, Quality Systems reported that Jeffrey H. Margolis was named to its Board of Directors, effective May 28, 2014. He also was appointed to serve on the Board’s Transaction Committee.

Margolis is a seasoned healthcare executive, having dedicated more than 25 years to the industry. Currently he is chairman and chief executive officer of Welltok, Inc., an early-stage healthcare consumer engagement and platform-as-a-service enterprise. He founded and served as chairman and chief executive officer at TriZetto Corporation for 13 years and 12 years, respectively, beginning in 1997. TriZetto, a recognized leader in the provision of healthcare IT solutions to payers and providers, became a publicly traded company in 1999 and significantly grew revenues and profitability for approximately nine years before becoming a private entity in 2008 a transaction led by Apax Partners. Margolis concluded his role with TriZetto in 2011 and is Chairman Emeritus. During 2012 and 2013, he served as a senior executive advisor to the Oliver Wyman Health Innovation Center, an organization that identifies and disseminates ideas and best practices that aim to transform healthcare. He is a published author, including his most recent book, The Healthcare Cure.

Margolis also serves on a number of for-profit and non-profit boards. For-profit boards include healthcare analytics company, Predilytics, Inc., and an Irvine-based population health management entity. Non-profit boards include the Crohn’s and Colitis Foundation of America and Hoag Hospital in Newport Beach, Calif. He also serves as an advisory board member of the University of California at Irvine’s Center for Healthcare Management & Policy as well as at UCI’s Center for Digital Transformation. Additionally, he is a member of the board of governors at Cedars-Sinai in Los Angeles.

Margolis earned a bachelor’s degree in business administration/management information systems with high honors from the University of Illinois in 1984 and holds CPA certificates (currently inactive) in Colorado and Illinois.

“As a healthcare industry veteran, Jeff brings extensive expertise to our board. His previous accomplishments and experience will bode well for the Company as we continue to play a key role in the evolving healthcare information technology marketplace. We welcome Jeff to our board and look forward to the contributions he will make in this capacity,” Plochocki concluded.

 

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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 13, 2014 with an anticipated distribution date of July 3, 2014. 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.

The Company will hold its 2014 Annual Shareholders’ Meeting on Monday, August 11, 2014 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 16, 2014 are eligible to vote and attend. Proxy materials and the 2014 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 2014 fourth quarter and year-end results on Thursday, May 29, 2014 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 #42101881. 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 #42101881. The replay will be available from approximately 1:00 PM ET on Thursday, May 29, 2014, through 11:59 PM ET on Thursday, June 5, 2014.

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, 2013, including but not limited to: the volume and timing of systems sales and installations; length of sales cycles and the

 

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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 measures, such as non-GAAP diluted earnings per share, provide 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, proxy contest expense, and share-based compensation from GAAP income before provision for income taxes.

FINANCIAL TABLES ATTACHED


QUALITY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

 

     Three Months Ended March 31,     Fiscal Year Ended March 31,  
     2014      2013     2014     2013  

Revenues:

         

Software and hardware

   $ 15,186       $ 17,109      $ 60,834      $ 88,572   

Implementation and training services

     6,518         7,161        25,948        35,008   
  

 

 

    

 

 

   

 

 

   

 

 

 

System sales

     21,704         24,270        86,782        123,580   

Maintenance

     41,376         40,025        160,060        156,771   

Electronic data interchange services

     17,421         15,653        67,295        59,709   

Revenue cycle management and related services

     15,316         15,317        62,976        59,219   

Other services

     19,387         16,030        67,554        60,950   
  

 

 

    

 

 

   

 

 

   

 

 

 

Maintenance, EDI, RCM and other services

     93,500         87,025        357,885        336,649   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total revenues

     115,204         111,295        444,667        460,229   
  

 

 

    

 

 

   

 

 

   

 

 

 

Cost of revenue:

         

Software and hardware

     7,115         5,695        44,226        21,750   

Implementation and training services

     8,109         7,023        29,681        30,896   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total cost of system sales

     15,224         12,718        73,907        52,646   

Maintenance

     6,384         5,505        22,590        20,316   

Electronic data interchange services

     10,845         10,099        42,567        38,350   

Revenue cycle management and related services

     12,059         10,980        46,203        43,324   

Other services

     8,842         8,995        34,896        35,016   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total cost of maintenance, EDI, RCM and other services

     38,130         35,579        146,256        137,006   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total cost of revenue

     53,354         48,297        220,163        189,652   
  

 

 

    

 

 

   

 

 

   

 

 

 

Gross profit

     61,850         62,998        224,504        270,577   

Operating expenses:

         

Selling, general and administrative

     38,677         38,308        149,214        148,353   

Research and development costs

     15,120         8,231        41,524        30,865   

Amortization of acquired intangible assets

     1,132         1,194        4,805        4,859   

Impairment of goodwill and other assets

     —           17,400        5,873        17,400   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total operating expenses

     54,929         65,133        201,416        201,477   
  

 

 

    

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     6,921         (2,135     23,088        69,100   

Interest income (expense), net

     322         (93     269        (107

Other income (expense), net

     35         36        (356     (79
  

 

 

    

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     7,278         (2,192     23,001        68,914   

Provision for (benefit of) income taxes

     2,077         1,898        7,321        26,190   
  

 

 

    

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 5,201       $ (4,090   $ 15,680      $ 42,724   

Net income (loss) per share:

         

Basic

   $ 0.09       $ (0.07   $ 0.26      $ 0.72   

Diluted

   $ 0.09       $ (0.07   $ 0.26      $ 0.72   

Weighted-average shares outstanding:

         

Basic

     60,208         59,541        59,918        59,392   

Diluted

     60,592         59,541        60,134        59,462   

Dividends declared per common share

   $ 0.175       $ 0.175      $ 0.700      $ 0.700   


QUALITY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

(UNAUDITED)

 

     March 31,     March 31,  
     2014     2013  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 103,145      $ 105,999   

Restricted cash

     4,351        5,488   

Marketable securities

     10,656        12,012   

Accounts receivable, net

     110,181        148,257   

Inventories

     834        710   

Income taxes receivable

     8,366        —     

Deferred income taxes, net

     11,690        12,140   

Other current assets

     11,135        12,720   
  

 

 

   

 

 

 

Total current assets

     260,358        297,326   

Equipment and improvements, net

     22,801        21,887   

Capitalized software costs, net

     39,152        39,781   

Intangibles, net

     33,016        27,550   

Goodwill

     72,804        45,761   

Other assets

     16,927        10,750   
  

 

 

   

 

 

 

Total assets

   $ 445,058      $ 443,055   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 7,888      $ 11,501   

Deferred revenue

     71,077        65,207   

Accrued compensation and related benefits

     15,953        11,915   

Income taxes payable

     —          1,480   

Dividends payable

     10,686        10,418   

Other current liabilities

     18,282        26,508   
  

 

 

   

 

 

 

Total current liabilities

     123,886        127,029   

Deferred revenue, net of current

     2,187        1,219   

Deferred compensation

     4,809        3,809   

Other noncurrent liabilities

     19,086        3,949   
  

 

 

   

 

 

 

Total liabilities

     149,968        136,006   

Commitments and contingencies

    

Shareholders’ equity:

    

Common stock
$0.01 par value; authorized 100,000 shares; issued and outstanding 60,206 and 59,543 shares at March 31, 2014 and March 31, 2013, respectively

     602        595   

Additional paid-in capital

     194,739        179,743   

Accumulated other comprehensive loss

     (182     (11

Retained earnings

     99,931        126,722   
  

 

 

   

 

 

 

Total shareholders’ equity

     295,090        307,049   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 445,058      $ 443,055   
  

 

 

   

 

 

 


QUALITY SYSTEMS, INC.

NON-GAAP FINANCIAL MEASURES

RECONCILIATION OF NON-GAAP DILUTED NET INCOME PER SHARE

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

     Three Months Ended March 31,     Fiscal Year Ended March 31,  
     2014      2013     2014      2013  

Income (loss) before provision for income taxes - GAAP

   $ 7,278       $ (2,192   $ 23,001       $ 68,914   

Plus items included in cost of revenue:

          

Amortization of acquired software technology

     858         671        3,526         2,700   

Impairment of other assets*

     —           —          20,098         —     

Share-based compensation

     95         1        348         201   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total adjustments to cost of revenue

     953         672        23,972         2,901   

Plus items included in operating expenses:

          

Acquisition costs

     846         448        1,448         2,030   

Amortization of acquired intangible assets

     1,132         1,194        4,805         4,859   

Impairment of goodwill and other assets

     —           17,400        5,873         17,400   

Proxy contest expense

     —           —          1,721         1,250   

Share-based compensation

     563         360        2,142         2,126   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total adjustments to operating expenses

     2,541         19,402        15,989         27,665   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total adjustments to GAAP income before provision for income taxes:

     3,494         20,074        39,961         30,566   
  

 

 

    

 

 

   

 

 

    

 

 

 

Income before provision for income taxes - Non-GAAP

     10,772         17,882        62,962         99,480   

Provision for income taxes

     3,318         3,827        20,966         31,834   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income - Non-GAAP

   $ 7,454       $ 14,055      $ 41,996       $ 67,646   
  

 

 

    

 

 

   

 

 

    

 

 

 

Diluted net income per share - Non-GAAP

   $ 0.12       $ 0.24      $ 0.70       $ 1.14   

Weighted-average shares outstanding (diluted):

     60,592         59,550        60,134         59,462   

 

* Relates to the impairment of acquired software technology and capitalized software costs in the Hospital Solutions Division

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