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 Quality Systems, Inc. Reports Fiscal 2017 Fourth Quarter and Year-End Results
   Friday, May 19, 2017 6:08:00 AM ET

Quality Systems, Inc. (QSII ) announced today results for its fiscal 2017 fourth quarter and fiscal year ended March 31, 2017.

"We delivered another solid performance this quarter resulting in full year achievements that confirms our confidence in our organizational capabilities to deliver financial results. In addition, we continued to execute on our strategic agenda, which is driving satisfaction in our clients and confidence in our employees. As we look ahead, we plan to accelerate investments in our R&D and commercial capacities this fiscal year to enhance our market position and capitalize on opportunities to drive near term bookings and longer term revenue growth," commented Rusty Frantz, president and chief executive officer of Quality Systems, Inc.

Revenues for the fiscal 2017 fourth quarter of $132.4 million compared to $127.9 million a year-ago. On a GAAP basis, net income for the 2017 fourth quarter was $4.4 million, compared with net loss of $16.3 million in the 2016 fourth quarter. Non-GAAP net income for the 2017 fourth quarter was $12.7 million compared with non-GAAP net income of $11.5 million in the 2016 fourth quarter.

On a GAAP basis, fully diluted earnings per share was $0.07 in the fiscal 2017 fourth quarter compared with a loss per share of $0.27 for the same period a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2017 fourth quarter was $0.21 versus $0.19 reported in the fourth quarter a year ago.

For the fiscal year ended March 31, 2017, revenues reached $509.6 million, compared with $492.5 million for the 2016 fiscal year. The recurring revenue base, which includes software-related subscription services, support and maintenance, RCM, and EDI, reached $417.4 million and represented approximately 82 percent of total revenues for the fiscal year ended 2017. GAAP net income for fiscal 2017 was $18.2 million, versus $5.7 million reported in fiscal 2016. Non-GAAP net income for fiscal year 2017 was $50.8 million compared to non-GAAP net income for fiscal year 2016 of $44.1 million.

On a GAAP basis, fully diluted earnings per share for the 2017 fiscal year was $0.29, compared with $0.09 reported in the 2016 fiscal year. On a non-GAAP basis, fully diluted earnings per share for fiscal year 2017 was $0.82 versus $0.72 reported in the prior year.

Fiscal 2018 Financial Outlook

The company is providing initial outlook for fiscal 2018 and expects:

-- Revenue of between $512 million and $530 million

-- Non-GAAP EPS of between $0.66 and $0.74

Conference Call Information

Quality Systems will host a conference call to discuss its fiscal 2017 fourth quarter and year-end results on Friday, May 19, 2017 at 8:30 AM ET (5:30 AM PT). Shareholders and interested participants may listen to a live broadcast of the conference call by dialing 866-900-9499 or 937-502-2136 for international callers, and referencing participant code 10080033 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 May 26, 2017 and can be accessed by dialing 800-585-8367 or 404-537-3406 for international callers, and referencing participant code 10080033.

2017 Annual Shareholders’ Meeting

In addition, the Company will hold its 2017 Annual Shareholders’ Meeting on Tuesday, August 22, 2017 at 9:00 AM local time. The meeting will be held at the Marriott Hotel, 18000 Von Karman Avenue, Irvine, California 92612. Holders of record as of June 23, 2017 are eligible to vote and attend. Proxy materials and the 2017 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.

Quality Systems, Inc., known to our clients as NextGen Healthcare, provides software, services and analytics solutions to the ambulatory care market. We are a healthcare information technology and services company that delivers the foundational capabilities to organizations that want to promote healthy communities. Our technology provides a customizable platform that empowers physician practice success, enriches the patient care experience and lowers the cost of healthcare. 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 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 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 and disposition costs, amortization of acquired intangible assets, amortization of deferred debt issuance costs, loss on disposition, 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 2016 and expected to be applied for each quarter of fiscal year 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 release. The exact amount and probable significance of these adjustments, including net acquisition and disposition 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 March 31,                                                                                                    Fiscal Year Ended March 31,
                                                                                           -------------------------------------------------------------------------------------------------------------                     ------------------------------------------------------------------------------------------------------
                                                                                                               2017                                          2016                                                             2017                                      2016
                                                                                           --------------------------------------------                     --------------------------------------------                     --------------------------------------------                     -------------------------------------
Revenues:
   Software license and hardware                                                                 $         16,581                                                 $         18,497                                                 $         65,547                                                 $  70,523
   Software related subscription services                                                                  23,139                                        19,015                                        87,050                                 55,403  
                                                                                           -------------------------------------------                      -------------------------------------------                      -------------------------------------------                      ------------------------------------
   Total software, hardware and related                                                                    39,720                                                           37,512                                                          152,597                                                   125,926
   Support and maintenance                                                                                 41,898                                                           39,792                                                          158,803                                                   165,200
   Revenue cycle management and related services                                                           20,515                                                           20,376                                                           82,552                                                    83,006
   Electronic data interchange and data services                                                           23,424                                                           20,930                                                           88,951                                                    82,343
   Professional services                                                                                    6,828                                         9,302                                        26,721                                 36,002  
                                                                                           -------------------------------------------                      -------------------------------------------                      -------------------------------------------                      ------------------------------------
      Total revenues                                                                                      132,385                                       127,912                                       509,624                                492,477  
                                                                                           -------------------------------------------                      -------------------------------------------                      -------------------------------------------                      ------------------------------------
Cost of revenue:
   Software license and hardware                                                                            5,427                                                            7,357                                                           24,654                                                    27,506
   Software related subscription services                                                                   9,637                                         9,168                                        36,744                                 26,622  
                                                                                           -------------------------------------------                      -------------------------------------------                      -------------------------------------------                      ------------------------------------
   Total software, hardware and related                                                                    15,064                                                           16,525                                                           61,398                                                    54,128
   Support and maintenance                                                                                  7,414                                                            7,455                                                           28,317                                                    31,329
   Revenue cycle management and related services                                                           14,318                                                           14,018                                                           56,370                                                    57,591
   Electronic data interchange and data services                                                           12,870                                                           12,851                                                           51,102                                                    50,153
   Professional services                                                                                    6,304                                         8,406                                        25,947                                 32,414  
                                                                                           -------------------------------------------                      -------------------------------------------                      -------------------------------------------                      ------------------------------------
      Total cost of revenue                                                                                55,970                                        59,255                                       223,134                                225,615  
                                                                                           -------------------------------------------                      -------------------------------------------                      -------------------------------------------                      ------------------------------------
                                                                                                           76,415                                                           68,657                                                          286,490                                                   266,862
      Gross profit
Operating expenses:
   Selling, general and administrative                                                                     42,710                                                           40,272                                                          163,623                                                   156,234
   Research and development costs, net                                                                     22,111                                                           16,077                                                           78,341                                                    65,661
   Amortization of acquired intangible assets                                                               2,546                                                            2,675                                                           10,435                                                     5,367
   Impairment of other assets                                                                      --                                                           32,238                                                   --                                                    32,238
   Restructuring costs                                                                                      2,393                                --                                         7,078                         --  
                                                                                           -------------------------------------------                      -------------------------------------------                      -------------------------------------------                      ------------------------------------
      Total operating expenses                                                                             69,760                                        91,262                                       259,477                                259,500  
                                                                                           -------------------------------------------                      -------------------------------------------                      -------------------------------------------                      ------------------------------------
      Income from operations                                                                                6,655                                                          (22,605 )                                                         27,013                                                     7,362
Interest income                                                                                                 5                                                               27                                                               14                                                       428
Interest expense                                                                                             (711 )                                                         (1,295 )                                                         (3,156 )                                                  (1,304 )
Other expense, net                                                                                           (116 )                                                            (19 )                                                           (262 )                                                    (166 )
                                                                                           -------------------------------------------                      -------------------------------------------                      -------------------------------------------                      ------------------------------------
Income before provision for income taxes                                                                    5,833                                                          (23,892 )                                                         23,609                                                     6,320
Provision for income taxes                                                                                  1,418                                        (7,570 )                                                          5,368                                    663  
                                                                                           -------------------------------------------                      -------------------------------------------                      -------------------------------------------                      ------------------------------------
      Net income (loss)                                                                          $          4,415                              $        (16,322 )                                               $         18,241                              $   5,657  
                                                                                           ======= ============== ====================                      ======= ============== ====================                      ======= ============== ====================                      ======= ======= ====================
Net income (loss) per share:
   Basic                                                                                         $           0.07                                                 $          (0.27 )                                               $           0.30                                                 $    0.09
   Diluted                                                                                       $           0.07                                                 $          (0.27 )                                               $           0.29                                                 $    0.09
Weighted average shares outstanding:
   Basic                                                                                                   62,345                                                           60,899                                                           61,818                                                    60,635
   Diluted                                                                                                 62,348                                                           60,899                                                           62,010                                                    61,233
Dividends declared per common share                                                              $ --                                                 $ --                                                 $ --                                                 $   0.525
                                                                                                                                                                                                                                                                                                               
                                                                                                                                  
                                                                                                                QUALITY SYSTEMS, INC.
                                                                                                             CONSOLIDATED BALANCE SHEETS
                                                                                                                         (IN
                                                                                                                     THOUSANDS)
                                                                                                                     (UNAUDITED)
                                                                                                                                                                                             
                                                                                                                                       March 31,                                                                    March 31,
                                                                                                                                         2017                                                                         2016
                                                                                                                -------------------------------------------------------                     --------------------------------------------------------
ASSETS
Current assets:
   Cash and cash equivalents                                                                                       $    37,673                                               $    27,176
   Restricted cash and cash equivalents                                                                                                     4,916                                                                        5,320
   Marketable securities                                                                                                           --                                                                        9,297
   Accounts receivable, net                                                                                                                83,407                                                                       94,024
   Inventory                                                                                                                                  158                                                                          555
   Income taxes receivable                                                                                                                  2,679                                                                       32,709
   Prepaid expenses and other current assets                                                                                               17,969                                                    14,910  
                                                                                                                ------------------------------------------------------                      -------------------------------------------------------
     Total current assets                                                                                                                 146,802                                                                      183,991
Equipment and improvements, net                                                                                                            27,426                                                                       25,790
Capitalized software costs, net                                                                                                            13,607                                                                       13,250
Deferred income taxes, net                                                                                                                 11,265                                                                        8,198
Intangibles, net                                                                                                                           69,213                                                                       91,675
Goodwill                                                                                                                                  185,898                                                                      188,837
Other assets                                                                                                                               19,010                                                    19,049  
                                                                                                                ------------------------------------------------------                      -------------------------------------------------------
     Total assets                                                                                                  $   473,221                            $   530,790  
                                                                                                                ==== ==================== ======= ====================                      ===== ==================== ======= ====================
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
   Accounts payable                                                                                                $                        4,618                                               $                       11,126
   Deferred revenue                                                                                                                        52,383                                                                       57,935
   Accrued compensation and related benefits                                                                                               24,513                                                                       18,670
   Income taxes payable                                                                                                                       405                                                                           91
   Other current liabilities                                                                                                               46,775                                                    50,238  
                                                                                                                ------------------------------------------------------                      -------------------------------------------------------
     Total current liabilities                                                                                                            128,694                                                                      138,060
Deferred revenue, net of current                                                                                                            1,394                                                                        1,335
Deferred compensation                                                                                                                       6,629                                                                        6,357
Line of credit                                                                                                                             15,000                                                                      105,000
Other noncurrent liabilities                                                                                                               16,461                                                    10,661  
                                                                                                                ------------------------------------------------------                      -------------------------------------------------------
     Total liabilities                                                                                                                    168,178                                                                      261,413
Commitments and contingencies
Shareholders’ equity:
   Common stock
   $0.01 par value; authorized 100,000 shares; issued and outstanding                                                                         625                                                                          610
   62,455 and 60,978 shares at March 31, 2017 and March 31, 2016,
   respectively
   Additional paid-in capital                                                                                                             228,549                                                                      211,262
   Accumulated other comprehensive loss                                                                                                      (358 )                                                                       (481 )
   Retained earnings                                                                                                                       76,227                                                    57,986  
                                                                                                                ------------------------------------------------------                      -------------------------------------------------------
     Total shareholders’ equity                                                                                                           305,043                                                   269,377  
                                                                                                                ------------------------------------------------------                      -------------------------------------------------------
     Total liabilities and shareholders’ equity                                                                    $   473,221                            $   530,790  
                                                                                                                ==== ==================== ======= ====================                      ===== ==================== ======= ====================
                                                                                                                                                                                                                                
                                                                                                                                                                                                               
                                                                                                                                                                                           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,
                                                                                                                  ----------------------------------------------------------------------------------------------------------------------------------                     ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                           2017                                                    2016                                                                        2017                                                    2016
                                                                                                                  ------------------------------------------------------                     -------------------------------------------------------                     ------------------------------------------------------                     ------------------------------------------------------
                                                                                                                                                                                                                                                                                                 
Income before provision for income taxes - GAAP                                                                      $                       5,833                                              $                      (23,892 )                                            $                      23,609                                              $                       6,320
Non-GAAP adjustments:
   Acquisition and disposition costs, net                                                                                                    1,376                                                                         (95 )                                                                    6,523                                                                      5,648
   Amortization of acquired intangible assets                                                                                                5,508                                                                       5,612                                                                     22,461                                                                     11,014
   Amortization of deferred debt issuance costs                                                                                                269                                                                         258                                                                      1,076                                                                        258
   Loss on disposition of Hospital Solutions division and related costs                                                             --                                                                         311                                                             --                                                                      2,064
   Restructuring costs                                                                                                                       2,393                                                              --                                                                      7,078                                                             --
   Securities litigation defense costs, net of insurance                                                                                       315                                                                      (1,866 )                                                                    1,798                                                                     (2,147 )
   Share-based compensation                                                                                                                  2,430                                                                         967                                                                      7,497                                                                      3,295
   Impairment of assets                                                                                                             --                                                                      32,832                                                             --                                                                     32,832
   Other non-run-rate expenses*                                                                                                                144                                                    2,477                                                   3,009                                                   4,199  
                                                                                                                  -----------------------------------------------------                      ------------------------------------------------------                      -----------------------------------------------------                      -----------------------------------------------------
Total adjustments to GAAP income before provision for income taxes:                                                                         12,435                                                   40,496                                                  49,442                                                  57,163  
                                                                                                                  -----------------------------------------------------                      ------------------------------------------------------                      -----------------------------------------------------                      -----------------------------------------------------
Income before provision for income taxes - Non-GAAP                                                                                         18,268                                                                      16,604                                                                     73,051                                                                     63,483
Provision for income taxes                                                                                                                   5,572                                                    5,064                                                  22,281                                                  19,362  
                                                                                                                  -----------------------------------------------------                      ------------------------------------------------------                      -----------------------------------------------------                      -----------------------------------------------------
   Net income - Non-GAAP                                                                                             $   12,696                           $    11,540                           $   50,770                           $   44,121  
                                                                                                                  ==== ==================== ====== ====================                      ==== ==================== ======= ====================                      ==== ==================== ====== ====================                      ==== ==================== ====== ====================
Diluted net income per share - Non-GAAP                                                                              $                        0.21                                              $                         0.19                                              $                        0.82                                              $                        0.72
Weighted-average shares outstanding (diluted):                                                                                              62,348                                                                      61,375                                                                     62,010                                                                     61,233
                                                                                                                                                                                                                                                                                                                                                                                      

* For the three months ended March 31, 2017, other non-run-rate expenses consist primarily of professional services costs not related to core operations. For the three months ended March 31, 2016, other non-run-rate expenses consist of $1,145 professional services costs not related to core operations, $474 costs related to the transition of Company executive officers, and $858 employee-related costs, such as severance and retention.

For the fiscal year ended March 31, 2017, other non-run-rate expenses consist primarily of professional services costs not related to core operations and $191 of executive hiring costs. For the fiscal year ended March 31, 2016, other non-run-rate expenses consist of $1,417 professional services costs not related to core operations, $1,412 costs related to the transition of Company executive officers, and $1,370 employee-related costs, such as severance and retention.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170519005233r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170519005233/en/

SOURCE: Quality Systems, Inc.

Quality Systems, Inc. 
Jamie Arnold, 949-255-2600 
Chief Financial Officer 
JArnold@nextgen.com 
or 
Investors: 
Westwicke Partners 
Bob East or Asher Dewhurst 
443-213-0500


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