Quality Systems, Inc. Reports Fiscal 2013 Third Quarter Results

  Quality Systems, Inc. Reports Fiscal 2013 Third Quarter Results

Business Wire

IRVINE, Calif. -- January 24, 2013

Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal
2013 third quarter ended December 31, 2012.

The Company reported revenues of $114.5 million for the fiscal 2013 third
quarter, an increase of two percent, when compared with $112.8 million for the
fiscal 2012 third quarter. Net income for the fiscal 2013 third quarter was
$15.6 million, versus net income of $21.1 million for the same period last
year, a decrease of 26 percent. Fully diluted earnings per share for the
fiscal 2013 third quarter were $0.26, a 28 percent decrease from $0.36 for the
fiscal 2012 third quarter. Although revenues were slightly up in the quarter,
profitability continued to be affected by lower software license sales.

“We continue to execute on the restructuring plan we laid out in October 2012,
which included the centralization of our sales and marketing efforts as well
as the business development and technology functions of the organization. In
addition, we have been strengthening our operational structure under the
direction of our recently appointed chief operating officer, Dan Morefield,”
explained Steven T. Plochocki, president and chief executive officer.

“All these initiatives are starting to gain traction, and we are confident in
the anticipated benefits of these organizational changes. Albeit early, we are
beginning to see some impact from our reorganization as we continue to
maximize and leverage our multi-product offering within the healthcare
information technology marketplace,” Plochocki concluded.

In other news, Quality Systems has set a new date for its Investment Community
Analyst Day, originally scheduled to be held in November 2012 but postponed
due to Hurricane Sandy. The meeting has been rescheduled for Monday, May 6,
2013 at the Le Parker Meridien Hotel in New York City. More details to follow.

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 March 15, 2013 with an anticipated distribution date of April 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.

Quality Systems will host a conference call to discuss its fiscal 2013 third
quarter results on Thursday, January 24, 2013 at 10:00 AM ET (7:00 AM PT). All
participants should dial 1-866-225-8754 at least ten minutes prior to the
start of the call. International callers should dial 1-480-629-9818. 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
4591712. The replay will be available from approximately 12:00 PM ET on
Thursday, January 24, 2013, through 11:59 PM ET on Thursday, January 31, 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 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.

QUALITY SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)
                                                               
                                                                             
                     Three Months Ended December           Nine Months Ended December
                     31,                                   31,
                      2012            2011              2012            2011    
                                                                             
Revenues:
Software,
hardware and         $ 21,899          $ 35,074            $ 71,463          $ 95,845
supplies
Implementation
and training          7,266           6,555             27,847          18,121  
services
                                                                             
System sales           29,165            41,629              99,310            113,966
                                                                             
Maintenance            39,463            36,245              116,746           102,961
Electronic
data                   15,209            12,101              44,056            36,178
interchange
services
Revenue cycle
management and         15,015            11,147              43,902            34,170
related
services
Other services        15,658          11,643            44,920          33,566  
                                                                             
Maintenance,
EDI, RCM and          85,345          71,136            249,624         206,875 
other services
                                                                             
Total revenues        114,510         112,765           348,934         320,841 
                                                                             
Cost of
revenue:
Software,
hardware and           4,660             4,622               16,055            13,423
supplies
Implementation
and training          7,221           5,994             23,873          15,119  
services
                                                                             
Total cost of          11,881            10,616              39,928            28,542
system sales
                                                                             
Maintenance            5,259             4,412               14,811            12,260
Electronic
data                   9,852             7,890               28,251            23,816
interchange
services
Revenue cycle
management and         10,918            8,405               32,344            25,687
related
services
Other services        8,686           7,011             26,021          18,977  
                                                                             
Total cost of
maintenance,          34,715          27,718            101,427         80,740  
EDI, RCM and
other services
                                                                             
Total cost of         46,596          38,334            141,355         109,282 
revenue
                                                                             
Gross profit           67,914            74,431              207,579           211,559
                                                                             
Operating
expenses:
Selling,
general and            35,532            33,096              110,045           94,651
administrative
Research and
development            7,786             8,277               22,634            22,462
costs
Amortization
of acquired           1,212           543               3,665           1,545   
intangible
assets
                                                                             
Total
operating             44,530          41,916            136,344         118,658 
expenses
                                                                             
Income from            23,384            32,515              71,235            92,901
operations
                                                                             
Interest
income                 13                55                  (14     )         212
(expense), net
Other expense,        (122    )        (218    )          (115    )        (400    )
net
                                                                             
Income before
provision for          23,275            32,352              71,106            92,713
income taxes
Provision for         7,649           11,247            24,292          32,129  
income taxes
                                                                             
Net income           $ 15,626         $ 21,105           $ 46,814         $ 60,584  
                                                                             
Net income per
share:
Basic                $ 0.26            $ 0.36              $ 0.79            $ 1.03
Diluted              $ 0.26            $ 0.36              $ 0.79            $ 1.03
                                                                             
Weighted
average shares
outstanding:
Basic                  59,400            58,847              59,343            58,623
Diluted                59,405            59,128              59,411            58,943
                                                                             
Dividends
declared per         $ 0.175           $ 0.175             $ 0.525           $ 0.525
common share
                                                                             

QUALITY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

(UNAUDITED)
                                                          
                                              December 31,         March 31,
                                                2012              2012    
                                                                   
ASSETS
Current assets:
Cash and cash equivalents                     $  101,702           $ 134,444
Restricted cash                                  5,155               1,962
Marketable securities                            4,987               4,987
Accounts receivable, net                         151,495             145,756
Inventories                                      3,912               3,715
Income taxes receivable                          1,864               2,628
Deferred income tax assets, net                  10,127              10,127
Other current assets                            7,276             9,090   
                                                                   
Total current assets                             286,518             312,709
                                                                   
Equipment and improvements, net                  20,930              17,841
Capitalized software costs, net                  32,881              19,994
Intangibles, net                                 29,415              23,259
Goodwill                                         63,161              60,776
Other assets                                    7,315             5,773   
                                                                   
Total assets                                  $  440,220          $ 440,352 
                                                                   
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable                              $  6,563             $ 4,532
Deferred revenue                                 63,001              83,108
Accrued compensation and related                 8,595               11,870
benefits
Dividends payable                                -                   10,354
Other current liabilities                       27,750            19,568  
                                                                   
Total current liabilities                        105,909             129,432
                                                                   
Deferred revenue, net of current                 1,307               1,293
Deferred income tax liabilities, net             4,096               5,351
Deferred compensation                            3,454               3,497
Other noncurrent liabilities                    4,368             5,602   
                                                                   
Total liabilities                                119,134             145,175
                                                                   
Commitments and contingencies
                                                                   
Shareholders' equity:
Common stock
$0.01 par value; authorized 100,000
shares; issued and
outstanding 59,535 and 59,180 shares             595                 592
at December 31,
2012 and March 31, 2012, respectively
Additional paid-in capital                       179,306             169,033
Accumulated other comprehensive loss             (45     )           (45     )
Retained earnings                               141,230           125,597 
                                                                   
Total shareholders' equity                      321,086           295,177 
                                                                   
Total liabilities and shareholders'           $  440,220          $ 440,352 
equity
                                                                    

Contact:

Quality Systems, Inc.
Paul Holt, CFO, 949-255-2600
pholt@qsii.com
or
Susan J. Lewis, 303-804-0494
slewis@qsii.com