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 Quality Systems, Inc. Reports Fiscal 2016 Fourth Quarter and Year-End Results
   Thursday, May 19, 2016 4:05:00 PM ET

Quality Systems, Inc. (QSII ) announced today results for its fiscal 2016 fourth quarter and fiscal year ended March 31, 2016.

Revenues for the fiscal 2016 fourth quarter reached $127.9 million, compared with $128.4 million reported for the fiscal 2015 fourth quarter. Non-GAAP net income for the 2016 fourth quarter was $11.5 million compared with non-GAAP net income of $12.5 million in the 2015 fourth quarter. On a GAAP basis, net loss for the 2016 fourth quarter was $(16.3) million, compared with net income of $10.7 million in the 2015 fourth quarter.

On a non-GAAP basis, fully diluted earnings per share for the fiscal 2016 fourth quarter was $0.19 versus $0.21 reported in the fourth quarter a year ago. On a GAAP basis, fully diluted loss per share was $(0.27) in the fiscal 2016 fourth quarter compared with $0.18 earnings per share for the same period a year ago.

For the fiscal year ended March 31, 2016, revenues reached $492.5 million, compared with $490.2 million for the 2015 fiscal year. The recurring revenue base, which includes software-related subscription services, support and maintenance, RCM, and EDI, reached $386.0 million and represented approximately 78 percent of total revenues for the fiscal year ended 2016.

Non-GAAP net income for fiscal year 2016 was $44.1 million as compared to non-GAAP net income for fiscal year 2015 of $37.7 million. GAAP net income for fiscal 2016 was $5.7 million, versus $27.3 million reported in fiscal 2015. On a non-GAAP basis, fully diluted earnings per share for fiscal year 2016 was $0.72 versus $0.62 reported in the prior year. On a GAAP basis, fully diluted earnings per share for the 2016 fiscal year was $0.09, compared with $0.45 reported in the 2015 fiscal year.

The Company also confirmed the guidance it provided in their April 28, 2016 release "Business Strategy Review" as it relates to revenues and non-GAAP fully diluted earnings per share. Currently, the Company expects fiscal year 2017 revenues of between $508 million and $522 million and Non-GAAP fully diluted earnings per share between $0.78 and $0.86.

"These results are in line with the preliminary results we announced on our Business Strategy Update conference call held April 28, 2016," noted Rusty Frantz, president and chief executive officer. "We continue to execute on the plan laid out at that time and believe we are well positioned to achieve long-term revenue and earnings growth and thus drive shareholder value."

Quality Systems will host a conference call to discuss its fiscal 2016 fourth quarter and year-end results on Thursday, May 19, 2016 at 5:00 PM ET (2:00 PM PT). All participants should dial 1-866-900-9499 at least ten minutes prior to the start of the call and reference conference ID #10622905. 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 #10622905. The replay will be available from approximately 8:00 PM ET on Thursday, May 19, 2016, through 11:59 PM ET on Wednesday, May 25, 2016. A transcript of the conference call will be made available on the Company’s website at www.qsii.com.

As previously announced, Quality Systems will host its Investment Community Analyst Day for those analysts that follow the Company on Tuesday, June 7, 2016 from 8:30 AM - 1:00 PM local time at the Le Parker Meridien Hotel in New York City, located at 119 West 56th Street (between 6th and 7th Avenues), 212-245-5000. The general public can access the live management presentation in real-time by visiting www.qsii.com, clicking on Investors, and selecting Events & Presentations. An archive of the analyst session will also be available for 90 days.

In addition, the Company will hold its 2016 Annual Shareholders’ Meeting on Tuesday, August 16, 2016 at 1:00 PM local time. The meeting will be held at the Marriott Hotel, 18000 Von Karman Avenue, Irvine, California 92612. Holders of record as of June 17, 2016 are eligible to vote and attend. Proxy materials and the 2016 Annual Report will be made available to shareholders of record and will also be posted on the Company’s website at www.qsii.com.

About Quality Systems, Inc.

Irvine, Calif.-based Quality Systems, Inc. (QSI) and its subsidiary, NextGen Healthcare Information Systems, develop and provide a range of software and services for medical and dental group practices, including practice management and electronic health record applications, patient portal, interoperability and connectivity products, and population health management and analytics offerings. Services include managed cloud services, revenue cycle management, claims clearinghouse, data interchange and value-add consulting. The Company’s solution portfolio is readily integrated and collectively positioned to drive low total cost of ownership for its client partners, as well as enable the transition to value-based healthcare. Visit www.qsii.com and www.nextgen.com for additional information.

(R) Marks owned by Quality Systems, Inc.

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 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; the development by 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 acquisition costs, losses related to the disposition of a business segment, 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 (loss) before provision for 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 applied to each quarter of fiscal year 2016 and expected to be applied for the fiscal 2017 period 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.

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 press release. The exact amount of these adjustments are not currently determinable, but may be significant. 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 March 31,                                                                                                                                  Fiscal Year Ended March 31,
                                                                                                       -----------------------------------------------------------------------------------------------------------------------                                          ---------------------------------------------------------------------------------------------------------------
                                                                                                                         2016                                      2015                                                                         2016                                  2015
                                                                                                       ----------------------------------------                                          -------------------------------------                                          --------------------------------                                          -------------------------------------
Revenues:
  Software license and hardware                                                                          $         18,497                                                                      $  21,144                                                                  $ 70,523                                                                      $  81,649
  Software related subscription services                                                                           19,015                                                      13,326                                                 55,403                                                      44,592  
                                                                                                       ---------------------------------------                                           ------------------------------------                                           -------------------------------                                           ------------------------------------
    Total software, hardware and related                                                                           37,512                                                                         34,470                                                                   125,926                                                                        126,241
  Support and maintenance                                                                                          39,792                                                                         43,234                                                                   165,200                                                                        169,219
  Revenue cycle management and related services                                                                    20,376                                                                         19,720                                                                    83,006                                                                         74,237
  Electronic data interchange and data services                                                                    20,930                                                                         20,082                                                                    82,343                                                                         76,358
  Professional services                                                                                             9,302                                                      10,882                                                 36,002                                                      44,170  
                                                                                                       ---------------------------------------                                           ------------------------------------                                           -------------------------------                                           ------------------------------------
    Total revenues                                                                                                127,912                                                     128,388                                                492,477                                                     490,225  
                                                                                                       ---------------------------------------                                           ------------------------------------                                           -------------------------------                                           ------------------------------------
Cost of revenue:
  Software license and hardware                                                                                     7,357                                                                          6,477                                                                    27,506                                                                         28,803
  Software related subscription services                                                                            9,168                                                       5,643                                                 26,622                                                      20,672  
                                                                                                       ---------------------------------------                                           ------------------------------------                                           -------------------------------                                           ------------------------------------
    Total software, hardware and related                                                                           16,525                                                                         12,120                                                                    54,128                                                                         49,475
  Support and maintenance                                                                                           7,455                                                                          7,802                                                                    31,329                                                                         28,866
  Revenue cycle management and related services                                                                    14,018                                                                         14,252                                                                    57,591                                                                         54,406
  Electronic data interchange and data services                                                                    12,851                                                                         12,274                                                                    50,153                                                                         48,244
  Professional services                                                                                             8,406                                                       9,393                              32,414                                                      42,173  
                                                                                                       ---------------------------------------                                           ------------------------------------                      -------------------- -------------------------------                                           ------------------------------------
    Total cost of revenue                                                                                          59,255                                                      55,841                                                225,615                                                     223,164  
                                                                                                       ---------------------------------------                                           ------------------------------------                                           -------------------------------                                           ------------------------------------
    Gross profit                                                                                                   68,657                                                                         72,547                                                                   266,862                                                                        267,061
Operating expenses:
  Selling, general and administrative                                                                              40,272                                                                         41,279                                                                   156,234                                                                        158,172
  Research and development costs, net                                                                              16,077                                                                         17,638                                                                    65,661                                                                         69,240
  Amortization of acquired intangible assets                                                                        2,675                                                                            898                                                                     5,367                                                                          3,693
  Impairment of assets                                                                                             32,238                                              --                                                 32,238                                              --  
                                                                                                       ---------------------------------------                                           ------------------------------------                                           -------------------------------                                           ------------------------------------
    Total operating expenses                                                                                       91,262                                                      59,815                                                259,500                                                     231,105  
                                                                                                       ---------------------------------------                                           ------------------------------------                                           -------------------------------                                           ------------------------------------
     Income from operations                                                                                       (22,605 )                                                                       12,732                                                                     7,362                                                                         35,956
Interest income                                                                                                        27                                                                             40                                                                       428                                                                            111
Interest expense                                                                                                   (1,295 )                                                                         (311 )                                                                  (1,304 )                                                                         (341 )
Other expense, net                                                                                                    (19 )                                                                          (45 )                                                                    (166 )                                                                          (62 )
                                                                                                       ---------------------------------------                                           ------------------------------------                                           -------------------------------                                           ------------------------------------
Income (loss) before provision for (benefit of) income taxes                                                      (23,892 )                                                                       12,416                                                                     6,320                                                                         35,664
Provision for (benefit of) income taxes                                                                            (7,570 )                                                                        1,673                                                    663                                                       8,332  
                                                                                                       ---------------------------------------                                           ------------------------------------                                           -------------------------------                                           ------------------------------------
     Net income (loss)                                                                                   $        (16,322 )                                                                    $  10,743                                               $  5,657                                                   $  27,332  
                                                                                                       === ============== ====================                                           ======= ======= ====================                                           === ====== ====================                                           ======= ======= ====================
Net income (loss) per share:
  Basic                                                                                                  $          (0.27 )                                                                    $    0.18                                                                  $   0.09                                                                      $    0.45
  Diluted                                                                                                $          (0.27 )                                                                    $    0.18                                                                  $   0.09                                                                      $    0.45
Weighted average shares outstanding:
  Basic                                                                                                            60,899                                                                         60,288                                                                    60,635                                                                         60,259
  Diluted                                                                                                          60,899                                                                         60,956                                                                    61,233                                                                         60,849
Dividends declared per common share                                                                      $ --                                                                      $   0.175                                                                  $  0.525                                                                      $    0.70
                                                                                                                                                                                                                                                                                                                                                                   
                                                                                                                 
                                                                                                       QUALITY SYSTEMS, INC.
                                                                                                    CONSOLIDATED BALANCE SHEETS
                                                                                                          (IN THOUSANDS)
                                                                                                            (UNAUDITED)
                                                                                                                                                                                               
                                                                                                                             March 31,                                                                      March 31,
                                                                                                                               2016                                                                           2015
                                                                                                               -------------------------------------                                          -------------------------------------
ASSETS
Current assets:
  Cash and cash equivalents                                                                                          $  27,176                                                                      $ 118,993
  Restricted cash and cash equivalents                                                                                   5,320                                                                          2,419
  Marketable securities                                                                                                  9,297                                                                         11,592
  Accounts receivable, net                                                                                              94,024                                                                        107,669
  Inventory                                                                                                                555                                                                            622
  Income taxes receivable                                                                                               32,709                                                                          3,147
  Deferred income taxes, net                                                                                    --                                                                 --
  Prepaid expenses and other current assets                                                                             14,910                                                      11,535  
                                                                                                               ------------------------------------                                           ------------------------------------
    Total current assets                                                                                               183,991                                                                        255,977
Equipment and improvements, net                                                                                         25,790                                                                         20,807
Capitalized software costs, net                                                                                         13,250                                                                         40,397
Deferred income taxes, net                                                                                               8,198                                                                         30,197
Intangibles, net                                                                                                        91,675                                                                         27,689
Goodwill                                                                                                               188,837                                                                         73,571
Other assets                                                                                                            19,049                                                      11,883  
                                                                                                               ------------------------------------                                           ------------------------------------
    Total assets                                                                                                     $ 530,790                                                   $ 460,521  
                                                                                                               ======= ======= ====================                                           ======= ======= ====================
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
  Accounts payable                                                                                                   $  11,126                                                                      $  10,018
  Deferred revenue                                                                                                      57,935                                                                         66,343
  Accrued compensation and related benefits                                                                             18,670                                                                         24,051
  Income taxes payable                                                                                                      91                                                                         10,048
  Dividends payable                                                                                             --                                                                         10,700
  Other current liabilities                                                                                             50,238                                                      33,924  
                                                                                                               ------------------------------------                                           ------------------------------------
    Total current liabilities                                                                                          138,060                                                                        155,084
Deferred revenue, net of current                                                                                         1,335                                                                          1,349
Deferred compensation                                                                                                    6,357                                                                          5,750
Line of credit                                                                                                         105,000                                                                 --
Other noncurrent liabilities                                                                                            10,661                                                      14,798  
                                                                                                               ------------------------------------                                           ------------------------------------
    Total liabilities                                                                                                  261,413                                                                        176,981
Commitments and contingencies
Shareholders’ equity:
  Common stock
                                                                                                                           610                                                                            603
  $0.01 par value; authorized 100,000 shares; issued and outstanding
  60,978 and 60,303
  shares at March 31, 2016 and 2015,
  respectively
  Additional paid-in capital                                                                                           211,262                                                                        198,650
  Accumulated other comprehensive loss                                                                                    (481 )                                                                         (192 )
  Retained earnings                                                                                                     57,986                                                      84,479  
                                                                                                               ------------------------------------                                           ------------------------------------
    Total shareholders’ equity                                                                                         269,377                                                     283,540  
                                                                                                               ------------------------------------                                           ------------------------------------
    Total liabilities and shareholders’ equity                                                                       $ 530,790                                                   $ 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 March 31,                                                                              Fiscal Year Ended March 31,
                                                                                         --------------------------------------------------------------------------------------------                     ----------------------------------------------------------------------------
                                                                                                        2016                                 2015                                                    2016                          2015
                                                                                         ----------------------------------                     -------------------------------------                     ---------------------------------                     ----------------------
Income (loss) before provision for income taxes - GAAP                                      $ (23,892 )                                               $  12,416                                              $  6,320                                                    $     35,664
Non-GAAP adjustments:
   Acquisition costs, net                                                                         (95 )                                                     441                                                 5,648                                                           2,923
   Amortization of acquired intangible assets                                                   5,612                                                     1,756                                                11,014                                                           7,126
   Amortization of deferred debt issuance costs                                                   258                                            --                                                   258                                                  --
                                                                                                  311                                            --                                                 2,064                                                  --
   Loss on disposition of Hospital Solutions Division and related
   costs
   Securities litigation defense costs, net of insurance                                       (1,866 )                                                   1,491                                                (2,147 )                                                         3,951
   Share-based compensation                                                                       967                                                       845                                                 3,295                                                           3,471
   Impairment of assets and related wind-down costs*                                           32,832                                            --                                                32,832                                                  --
   Other non-run-rate expenses**                                                                2,477                         --                              4,199                                          315
                                                                                         ---------------------------------                      ------------------------------------                      --------------------------------                      ----------------------
Total adjustments to GAAP income before provision for income taxes:                            40,496                                  4,533                             57,163                                       17,786
                                                                                         ---------------------------------                      ------------------------------------                      --------------------------------                      ----------------------
Income before provision for income taxes - Non-GAAP                                            16,604                                                    16,949                                                63,483                                                          53,450
Provision for income taxes                                                                      5,064                                  4,425                             19,362                                       15,718
                                                                                         ---------------------------------                      ------------------------------------                      --------------------------------                      ----------------------
   Net income - Non-GAAP                                                                    $  11,540                              $  12,524                           $ 44,121                                 $     37,732
                                                                                         ==== ======= ====================                      ======= ======= ====================                      ==== ====== ====================                      ========== ==========
Diluted net income per share - Non-GAAP                                                     $    0.19                                                 $    0.21                                              $   0.72                                                    $       0.62
Weighted-average shares outstanding (diluted):                                                 61,375                                                    60,956                                                61,233                                                          60,849
                                                                                                                                                                                                                                                                 

* For the three months and fiscal year ended March 31, 2016, impairment of assets and related wind-down costs consists of $32,238 impairment of previously capitalized investment in the NextGen Now development project and $594 of related wind-down costs.

** For the three months ended March 31, 2016, other non-run-rate expenses consist of $1,145 of professional services costs not related to ongoing core operations, $474 incremental costs related to the transition of Company executive officers, and $858 of other costs, including severance, retention, and other employee-related costs. For the fiscal year ended March 31, 2016, other non-run-rate expenses consist of $1,417 of professional services costs not related to ongoing core operations, $1,412 incremental costs related to the transition of Company executive officers, and $1,370 of severance, retention, and other employee-related costs.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20160519006502r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20160519006502/en/

SOURCE: Quality Systems, Inc.

Quality Systems, Inc. 
Mark Davis, 949-265-6928 
mdavis@nextgen.com


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