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8-K - 8-K - NEXTGEN HEALTHCARE, INC.qsii-8k_20171231.htm

Exhibit 99.1

 

 

For Further Information, Contact:

Quality Systems, Inc.

18111 Von Karman Avenue, Suite 800

Irvine, CA  92612

Phone: (949) 255-2600

Jamie Arnold, Chief Financial Officer

JArnold@nextgen.com

 

FOR IMMEDIATE RELEASE

January 25, 2018

 

Quality Systems, Inc. Reports Fiscal 2018 Third Quarter Results

IRVINE, Calif. – (January 25, 2018) – Quality Systems, Inc. (NASDAQ: QSII), known to its clients as NextGen Healthcare, announced today results for its fiscal 2018 third quarter ended December 31, 2017.

“Our fiscal third quarter marked one of solid financial results and continued demonstration of execution on our strategic plan. I believe the structural changes we’ve put in place, including the new additions to our sales team, allow for greater predictability in our business and I’m pleased to report a sequential increase in bookings and great receptivity to Eagle Dream during the quarter. The positive indications we’re seeing in cross-selling are still early, but I believe the new solutions we’ve added have greatly helped to develop our well-rounded platform. This continued progress makes us confident in our outlook for the longer-term as we continue to deliver value for our clients and position ourselves to deliver future growth,” commented Rusty Frantz, President and Chief Executive Officer of Quality Systems, Inc.

Revenues for the fiscal 2018 third quarter of $131.7 million compared to $127.9 million a year-ago. On a GAAP basis, net income for the 2018 third quarter was $1.5 million, compared with $10.5 million in the 2017 third quarter. Non-GAAP net income for the 2018 third quarter was $9.4 million compared with non-GAAP net income of $14.4 million in the 2017 third quarter.

On a GAAP basis, fully diluted earnings per share was $0.02 in the fiscal 2018 third quarter compared with $0.17 per share for the same period a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2018 third quarter was $0.15 versus $0.23 reported in the third quarter a year ago.

Fiscal 2018 Financial Outlook

For the fiscal year 2018, the Company is reiterating its revenue outlook of a range of $522 million to $530 million. The Company is also reiterating its non-GAAP EPS from a range of $0.64 and $0.68.

Conference Call Information

Quality Systems will host a conference call to discuss its fiscal 2018 third quarter results on Thursday, January 25, 2018 at 5:00 PM ET (2:00 PM PT).  Shareholders and interested participants may listen to a live broadcast of the conference call by dialing 866-750-8947 or 720-405-1352 for international callers, and referencing participant code 9176097 approximately 15 minutes prior to the call. A live webcast of the conference call will be available on


the investor relations section of the company's web site and an audio file of the call will also be archived for 90 days at investor.qsii.com. After the conference call, a replay will be available until February 8, 2018 and can be accessed by dialing 800-585-8367 or 404-537-3406 for international callers, and referencing participant code 9176097.

About Quality Systems, Inc.


Quality Systems, Inc., known to its clients as NextGen Healthcare, provides a range of software, services, and analytics solutions to medical and dental group practices. The company's portfolio delivers foundational capabilities to empower physician success, enrich the patient care experience, and enable the transition to value-based healthcare. Visit www.qsii.com and www.nextgen.com for additional information.

 

Investor Contact:

Bob East or Asher Dewhurst

Westwicke Partners

443-213-0500

 

 

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 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; uncertainties related to the future impact of U.S. tax reform; the impact of governmental and regulatory agency investigations; 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; 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. 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. 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 net acquisition costs, amortization of acquired intangible assets, amortization of deferred debt issuance costs, restructuring costs, net securities litigation defense costs, share-based compensation, and other non-run-rate expenses from GAAP income before provision for income taxes. The Company utilizes 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 2017 and each quarter of fiscal 2018 through December 31, 2017 is 30.5%. The determination of this rate is based on the consideration of both historic and projected financial results. The Company has not adjusted its non-GAAP tax rate for the three and nine months ended December 31, 2017 following the enactment of the new tax reform legislation on December 22, 2017. We have not yet fully assessed the impact of the tax reform legislation on the fiscal 2018 non-GAAP tax rate and may adjust it in the fiscal 2018 fourth quarter as additional information becomes available and further analysis is completed based on the expected long-term impact of the tax reform legislation in conjunction with any other significant events occur that may materially affect this rate, such as merger and acquisition activity, changes in business outlook, or other 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 release. The exact amount and probable significance of these adjustments, including net acquisition costs, net securities litigation defense costs, and other non-run-rate expenses, are not currently determinable without unreasonable efforts, but may be significant. These items cannot be reliably quantified or forecasted due to the combination of their historic and expected variability. It is therefore not practicable to reconcile this non-GAAP guidance to the most comparable GAAP measures.

 


QUALITY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 

Three Months Ended December 31,

 

 

Nine Months Ended December 31,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software license and hardware

$

13,131

 

 

$

16,995

 

 

$

40,198

 

 

$

48,966

 

Software related subscription services

 

24,690

 

 

 

22,546

 

 

 

73,584

 

 

 

63,911

 

Total software, hardware and related

 

37,821

 

 

 

39,541

 

 

 

113,782

 

 

 

112,877

 

Support and maintenance

 

40,362

 

 

 

39,924

 

 

 

123,171

 

 

 

116,905

 

Revenue cycle management and related services

 

21,922

 

 

 

20,048

 

 

 

64,327

 

 

 

62,037

 

Electronic data interchange and data services

 

23,136

 

 

 

21,790

 

 

 

69,446

 

 

 

65,527

 

Professional services

 

8,474

 

 

 

6,565

 

 

 

24,518

 

 

 

19,893

 

Total revenues

 

131,715

 

 

 

127,868

 

 

 

395,244

 

 

 

377,239

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software license and hardware

 

5,726

 

 

 

5,680

 

 

 

15,947

 

 

 

19,227

 

Software related subscription services

 

11,693

 

 

 

9,345

 

 

 

32,822

 

 

 

27,107

 

Total software, hardware and related

 

17,419

 

 

 

15,025

 

 

 

48,769

 

 

 

46,334

 

Support and maintenance

 

7,525

 

 

 

7,299

 

 

 

22,583

 

 

 

20,903

 

Revenue cycle management and related services

 

15,401

 

 

 

13,462

 

 

 

45,615

 

 

 

42,052

 

Electronic data interchange and data services

 

13,581

 

 

 

12,662

 

 

 

40,313

 

 

 

38,232

 

Professional services

 

7,708

 

 

 

5,904

 

 

 

22,278

 

 

 

19,643

 

Total cost of revenue

 

61,634

 

 

 

54,352

 

 

 

179,558

 

 

 

167,164

 

Gross profit

 

70,081

 

 

 

73,516

 

 

 

215,686

 

 

 

210,075

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

43,563

 

 

 

37,542

 

 

 

127,517

 

 

 

120,913

 

Research and development costs, net

 

20,645

 

 

 

19,714

 

 

 

60,161

 

 

 

56,230

 

Amortization of acquired intangible assets

 

1,956

 

 

 

2,568

 

 

 

6,015

 

 

 

7,889

 

Restructuring costs

 

130

 

 

 

231

 

 

 

130

 

 

 

4,685

 

Total operating expenses

 

66,294

 

 

 

60,055

 

 

 

193,823

 

 

 

189,717

 

Income from operations

 

3,787

 

 

 

13,461

 

 

 

21,863

 

 

 

20,358

 

Interest income

 

15

 

 

 

-

 

 

 

36

 

 

 

9

 

Interest expense

 

(733

)

 

 

(629

)

 

 

(2,250

)

 

 

(2,445

)

Other expense, net

 

(41

)

 

 

(4

)

 

 

(48

)

 

 

(146

)

Income before provision for income taxes

 

3,028

 

 

 

12,828

 

 

 

19,601

 

 

 

17,776

 

Provision for income taxes

 

1,487

 

 

 

2,342

 

 

 

6,134

 

 

 

3,950

 

Net income

$

1,541

 

 

$

10,486

 

 

$

13,467

 

 

$

13,826

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.02

 

 

$

0.17

 

 

$

0.21

 

 

$

0.22

 

Diluted

$

0.02

 

 

$

0.17

 

 

$

0.21

 

 

$

0.22

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

63,706

 

 

 

62,093

 

 

 

63,287

 

 

 

61,645

 

Diluted

 

63,708

 

 

 

62,093

 

 

 

63,296

 

 

 

61,900

 


QUALITY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

December 31, 2017

 

 

March 31, 2017

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

23,359

 

 

$

37,673

 

Restricted cash and cash equivalents

 

3,393

 

 

 

4,916

 

Accounts receivable, net

 

79,416

 

 

 

83,407

 

Inventory

 

154

 

 

 

158

 

Income taxes receivable

 

4,082

 

 

 

2,679

 

Prepaid expenses and other current assets

 

17,944

 

 

 

17,969

 

Total current assets

 

128,348

 

 

 

146,802

 

Equipment and improvements, net

 

27,137

 

 

 

27,426

 

Capitalized software costs, net

 

23,209

 

 

 

13,607

 

Deferred income taxes, net

 

7,197

 

 

 

11,265

 

Intangibles, net

 

80,663

 

 

 

69,213

 

Goodwill

 

216,530

 

 

 

185,898

 

Other assets

 

18,299

 

 

 

19,010

 

Total assets

$

501,383

 

 

$

473,221

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

3,069

 

 

$

4,618

 

Deferred revenue

 

52,843

 

 

 

52,383

 

Accrued compensation and related benefits

 

21,898

 

 

 

24,513

 

Income taxes payable

 

 

 

 

405

 

Other current liabilities

 

30,153

 

 

 

46,775

 

Total current liabilities

 

107,963

 

 

 

128,694

 

Deferred revenue, net of current

 

853

 

 

 

1,394

 

Deferred compensation

 

6,473

 

 

 

6,629

 

Line of credit

 

39,000

 

 

 

15,000

 

Other noncurrent liabilities

 

16,354

 

 

 

16,461

 

Total liabilities

 

170,643

 

 

 

168,178

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

Common stock

 

 

 

 

 

 

 

$0.01 par value; authorized 100,000 shares; issued and outstanding 63,712 and 62,455 shares at December 31, 2017 and March 31, 2017, respectively

 

637

 

 

 

625

 

Additional paid-in capital

 

240,584

 

 

 

228,549

 

Accumulated other comprehensive loss

 

(235

)

 

 

(358

)

Retained earnings

 

89,754

 

 

 

76,227

 

Total shareholders' equity

 

330,740

 

 

 

305,043

 

Total liabilities and shareholders' equity

$

501,383

 

 

$

473,221

 

 


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,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Income before provision for income taxes - GAAP

$

3,028

 

 

$

12,828

 

 

$

19,601

 

 

$

17,776

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition and disposition costs, net

 

387

 

 

 

(1,337

)

 

 

1,569

 

 

 

5,147

 

Amortization of acquired intangible assets

 

6,083

 

 

 

5,575

 

 

 

17,351

 

 

 

16,953

 

Amortization of deferred debt issuance costs

 

269

 

 

 

269

 

 

 

807

 

 

 

807

 

Restructuring costs

 

130

 

 

 

231

 

 

 

130

 

 

 

4,685

 

Securities litigation defense costs, net of insurance

 

152

 

 

 

356

 

 

 

716

 

 

 

1,483

 

Share-based compensation

 

3,453

 

 

 

2,001

 

 

 

8,585

 

 

 

5,067

 

Other non-run-rate expenses*

 

-

 

 

 

739

 

 

 

263

 

 

 

2,865

 

Total adjustments to GAAP income before provision for income taxes:

 

10,474

 

 

 

7,834

 

 

 

29,421

 

 

 

37,007

 

Income before provision for income taxes - Non-GAAP

 

13,502

 

 

 

20,662

 

 

 

49,022

 

 

 

54,783

 

Provision for income taxes

 

4,118

 

 

 

6,302

 

 

 

14,952

 

 

 

16,709

 

Net income - Non-GAAP

$

9,384

 

 

$

14,360

 

 

 

34,070

 

 

$

38,074

 

Diluted net income per share - Non-GAAP

$

0.15

 

 

$

0.23

 

 

$

0.54

 

 

$

0.62

 

Weighted-average shares outstanding (diluted):

 

63,708

 

 

 

62,093

 

 

 

63,296

 

 

 

61,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Other non-run-rate expenses consist primarily of professional services costs not related to core operations.