QSII Quality Systems, Inc. (delisted)

Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal 2016 first quarter ended June 30, 2015.

Revenues for the fiscal 2016 first quarter reached $122.2 million, an increase of four percent, versus $117.9 million reported in the fiscal 2015 first quarter.

Net income for the 2016 first quarter was $6.4 million, increasing 23 percent when compared with $5.2 million for the same period a year ago.

On a GAAP basis, fully diluted earnings per share was $0.10 in the fiscal 2016 first quarter versus $0.08 in the comparable period last year. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2016 first quarter was $0.16 compared with $0.13 reported in the fiscal 2015 first quarter.

At quarter-end, the Company’s liquidity position remained strong with $116.8 million of cash and investments.

“As we kick off fiscal 2016 and I begin to settle into my new role, my immediate priority is centered on Quality Systems’ clients and our employees, as previously stated. To this end, during my first few weeks on the job, I have spent the majority of my time meeting with clients to ensure we are delivering a positive, productive and effective experience for them. I have also visited with many of our employees at QSI offices throughout the country. These initiatives have allowed me to quickly gain a keener understanding of the culture and communication – both internal and external – here at Quality Systems. I believe this is critical to the process involved in moving this Company forward in the dynamic healthcare environment in which we operate,” explained Rusty Frantz, president and chief executive officer, who officially began his employment with the Company in this capacity on July 1, 2015.

“Having one of the largest installed user bases in the healthcare information technology space affords us the chance to make a significant impact on our clients’ abilities to navigate changing healthcare models. I am gratified to learn that we are continuing to make progress in the Company’s efforts to enhance the client experience and bring new capabilities and solutions that enable them to stay relevant and flourish, both today and into the future,” Frantz said.

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 September 11, 2015 with an anticipated distribution date of October 5, 2015. 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.

Quality Systems will host a conference call to discuss its fiscal 2016 first quarter results on Thursday, July 23, 2015 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 #80827836. 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 #80827836. The replay will be available from approximately 1:00 PM ET on Thursday, July 23, 2015, through 11:59 PM ET on Thursday, July 30, 2015.

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, 2015, 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 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 diluted earnings per share provides 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, securities litigation defense costs, share-based compensation, and other non-run-rate expenses from GAAP income before provision for income taxes. Historically, the Company calculated a non-GAAP effective tax rate each quarter, based on non-GAAP pre-tax income (or loss) for the period, to determine the corresponding non-GAAP provision for (benefit of) 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 expected to be applied to each quarter of fiscal year 2016 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.

    QUALITY SYSTEMS, INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)   Three Months Ended June 30, 2015     2014   Revenues: Software license and hardware $ 16,189 $ 19,761 Software related subscription services   12,246     9,715   Total software, hardware and related 28,435 29,476   Support and maintenance 43,713 40,805 Revenue cycle management and related services 20,243 16,693 Electronic data interchange and data services 20,189 18,319 Professional services   9,584     12,601   Total revenues   122,164     117,894   Cost of revenue: Software license and hardware 7,041 7,556 Software related subscription services   5,958     4,451   Total software, hardware and related 12,999 12,007   Support and maintenance 7,943 6,914 Revenue cycle management and related services 14,512 12,706 Electronic data interchange and data services 12,326 11,999 Professional services   8,197     12,564   Total cost of revenue   55,977     56,190   Gross profit 66,187 61,704   Operating expenses: Selling, general and administrative 39,171 36,730 Research and development costs 17,085 16,236 Amortization of acquired intangible assets   897     983   Total operating expenses   57,153     53,949   Income from operations 9,034 7,755   Interest income, net 302 54 Other income (expense), net   (50 )   9   Income before provision for income taxes 9,286 7,818 Provision for income taxes   2,924     2,655   Net income $ 6,362 $ 5,163   Net income per share: Basic $ 0.11 $ 0.09 Diluted $ 0.10 $ 0.08   Weighted-average shares outstanding: Basic 60,312 60,230 Diluted 61,064 60,770   Dividends declared per common share $ 0.175 $ 0.175           QUALITY SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED)   June 30, March 31, 2015 2015   ASSETS Current assets: Cash and cash equivalents $ 104,859 $ 118,993 Restricted cash and cash equivalents 3,765 2,419 Marketable securities 11,938 11,592 Accounts receivable, net 99,974 107,669 Inventories 647 622 Income taxes receivable 2,662 3,147 Deferred income taxes, net 24,078 24,080 Other current assets   11,357     11,535     Total current assets 259,280 280,057   Equipment and improvements, net 22,055 20,807 Capitalized software costs, net 41,593 40,397 Intangibles, net 25,889 27,689 Goodwill 73,571 73,571 Other assets   18,501     18,000     Total assets $ 440,889   $ 460,521     LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 11,095 $ 10,018 Deferred revenue 61,863 66,343 Accrued compensation and related benefits 15,645 24,051 Income taxes payable 2,686 10,048 Dividends payable 10,703 10,700 Other current liabilities   37,026     33,924     Total current liabilities 139,018 155,084   Deferred revenue, net of current 1,272 1,349 Deferred compensation 6,385 5,750 Other noncurrent liabilities   14,260     14,798     Total liabilities 160,935 176,981   Commitments and contingencies   Shareholders’ equity: Common stock

$0.01 par value; authorized 100,000 shares; issued and outstanding 60,317 and 60,303 shares at June 30, 2015 and March 31, 2015, respectively

603 603 Additional paid-in capital 199,481 198,650 Accumulated other comprehensive loss (268 ) (192 ) Retained earnings   80,138     84,479     Total shareholders’ equity   279,954     283,540     Total liabilities and shareholders’ equity $ 440,889   $ 460,521         QUALITY SYSTEMS, INC. NON-GAAP FINANCIAL MEASURES (IN THOUSANDS, EXCEPT PER SHARE DATA)  

RECONCILIATION OF NON-GAAP DILUTED EARNINGS PER SHARE

    Three Months Ended June 30, 2015 2014   Income before provision for income taxes - GAAP $ 9,286 $ 7,818   Plus items included in cost of revenue: Amortization of acquired software technology 903 858 Share-based compensation   97   86 Total adjustments to cost of revenue 1,000 944   Plus items included in operating expenses: Acquisition costs 517 1,123 Amortization of acquired intangible assets 897 983 Securities litigation defense costs 538 278 Share-based compensation 587 704 Other non-run-rate expenses*   938   - Total adjustments to operating expenses 3,477 3,088     Total adjustments to GAAP income before provision for income taxes:   4,477   4,032   Income before provision for income taxes - Non-GAAP 13,763 11,850 Provision for income taxes   4,198   4,061   Net income - Non-GAAP $ 9,565 $ 7,789   Diluted net income per share - Non-GAAP $ 0.16 $ 0.13   Weighted-average shares outstanding (diluted): 61,064 60,770  

* For the three months ended June 30, 2015, the $938 of other non-run-rate expenses consists of non-recurring incremental costs related to the change in the Company's Chief Executive Officer, including recruitment fees and severance payments.

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Quality Systems, Inc.John Stumpf, Interim Chief Financial OfficerPhone: (949) 255-2600jstumpf@qsii.comorSusan J. LewisPhone: (954) 389-3700slewis@qsii.com