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8-K - 8-K - NEXTGEN HEALTHCARE, INC.qsii-8k_20180524.htm

Exhibit 99.1

 

 

 

 

 

FOR IMMEDIATE RELEASE

May 24, 2018

 

Quality Systems, Inc. Reports Fiscal 2018 Fourth Quarter and Year-End Results

IRVINE, Calif. – (BUSINESS WIRE) – Quality Systems, Inc. (QSII), known to its clients as NextGen Healthcare, announced today its fiscal 2018 fourth quarter and year end March 31, 2018 operating results.

 

"We closed fiscal 2018 with a strong quarter delivering at or above the commitments we made to our investors. We’re seeing great growth in our RCM pipeline, as well as continuing success with our NextGen Population Health Analytics Suite and NextGen Mobile Platform, formerly Eagle Dream and Entrada. We executed on our commitment to drive bookings growth in the back half of the fiscal year, with 9% actual and 5.5% pro forma year over year growth in the fourth quarter," commented Rusty Frantz, president and chief executive officer of NextGen Healthcare.

 

Mr. Frantz continued, “The successes we’ve seen over the course of fiscal 2018, particularly the sales performance during the fourth quarter, maintains our confidence in our long-term targets.”

 

 

Fiscal 2018 Fourth Quarter and Year-End Highlights

 

Notable for the results in the fourth quarter, subsequent to the quarter-end, was an agreement-in-principle to settle the Federal Securities Class action litigation. As a result, we recorded a charge of $19 million, which is included in our quarterly GAAP results.

 

Revenues for the fiscal 2018 fourth quarter of $135.8 million compared to $132.4 million a year-ago. On a GAAP basis, net loss for the 2018 fourth quarter was $11.0 million, compared with net income of $4.4 million in the 2017 fourth quarter. Non-GAAP net income for the 2018 fourth quarter was $10.4 million compared with non-GAAP net income of $12.7 million in the 2017 fourth quarter.

 

On a GAAP basis, fully diluted loss per share was $0.17 in the fiscal 2018 fourth quarter compared with earnings per share of $0.07 for the same period a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2018 fourth quarter was $0.16 versus $0.21 reported in the fourth quarter a year ago.

 

For the fiscal year ended March 31, 2018, revenues reached $531.0 million, compared with $509.6 million for the 2017 fiscal year. GAAP net income for fiscal 2018 was $2.4 million, versus $18.2 million reported in fiscal 2017. Non-GAAP net income for fiscal year 2018 was $44.5 million compared to non-GAAP net income for fiscal year 2017 of $50.8 million.

 


On a GAAP basis, fully diluted earnings per share for the 2018 fiscal year was $0.04, compared with $0.29 reported in the 2017 fiscal year. On a non-GAAP basis, fully diluted earnings per share for fiscal year 2018 was $0.70 versus $0.82 reported in the prior year.

 

Fiscal 2019 Financial Outlook

The company is providing initial outlook for fiscal 2019 and expects:

 

Revenue of between $532 million and $548 million

 

Non-GAAP EPS of between $0.70 and $0.78

 

Conference Call Information

NextGen Healthcare will host a conference call to discuss its fiscal 2018 fourth quarter and year-end results on Thursday, May 24, 2018 at 5:00 PM ET (2:00 PM PT). Shareholders and interested participants may listen to a live broadcast of the conference call by dialing 866-750-8947 or 720-405-1352 for international callers, and referencing participant code 4669876 approximately 15 minutes prior to the call. A live webcast of the conference call will be available on the investor relations section of the company’s web site and an audio file of the call will also be archived for 90 days at investor.qsii.com. After the conference call, a replay will be available until February 8, 2018 and can be accessed by dialing 800-585-8367 or 404-537-3406 for international callers, and referencing participant code 4669876.

 

2018 Annual Shareholders' Meeting

In addition, the Company will hold its 2018 Annual Shareholders' Meeting on Tuesday, August 14, 2018 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 18, 2018 are eligible to vote and attend. Proxy materials and the 2018 Annual Report will be made available to shareholders of record and will also be posted on the Company's website.

 

About Quality Systems, Inc.

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

 

Media Contact:
Jennifer Cohen, 949-255-2600x74334
jecohen@nextgen.com

or

Investor Contact:

Westwicke Partners

Bob East or Asher Dewhurst

Westwicke Partners

443-213-0500

 

SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS


This news release may contain forward-looking statements within the meaning of the federal securities laws, including but not limited to, statements regarding future events, developments in the healthcare sector and regulatory framework, the Company's future performance, as well as management's expectations, beliefs, intentions, plans, estimates or projections relating to the future (including, without limitation, statements concerning revenue, net income, and earnings per share). Risks and uncertainties exist that may cause the results to differ materially from those set forth in these forward-looking statements. Factors that could cause the anticipated results to differ from those described in the forward-looking statements and additional risks and uncertainties are set forth in Part I, Item A of our most recent Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q, including but not limited to: the volume and timing of systems sales and installations; length of sales cycles and the installation process; the possibility that products will not achieve or sustain market acceptance; seasonal patterns of sales and customer buying behavior; impact of incentive payments under The American Recovery and Reinvestment Act on sales and the ability of the Company to meet continued certification requirements; uncertainties related to the future impact of U.S. tax reform; the impact of governmental and regulatory agency investigations; the development by competitors of new or superior technologies; the timing, cost and success or failure of new product and service introductions, development and product upgrade releases; undetected errors or bugs in software; product liability; changing economic, political or regulatory influences in the health-care industry; changes in product-pricing policies; availability of third-party products and components; competitive pressures including product offerings, pricing and promotional activities; the Company's ability or inability to attract and retain qualified personnel; possible regulation of the Company's software by the U.S. Food and Drug Administration; changes of accounting estimates and assumptions used to prepare the prior periods' financial statements; disruptions caused by acquisitions of companies, products, or technologies; and general economic conditions. A significant portion of the Company's quarterly sales of software product licenses and computer hardware is concluded in the last month of a fiscal quarter, generally with a concentration of such revenues earned in the final ten business days of that month. Due to these and other factors, the Company's revenues and operating results are very difficult to forecast. A major portion of the Company's costs and expenses, such as personnel and facilities, are of a fixed nature and, accordingly, a shortfall or decline in quarterly and/or annual revenues typically results in lower profitability or losses. As a result, comparison of the Company's period-to-period financial performance is not necessarily meaningful and should not be relied upon as an indicator of future performance. These forward-looking statements speak only as of the date hereof. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

USE OF NON-GAAP FINANCIAL MEASURES

This news release contains certain non-GAAP (Generally Accepted Accounting Principles) financial measures, which are provided only as supplemental information. Investors should consider these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures. These non-GAAP measures are not in accordance with or a substitute for U.S. GAAP. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of non-GAAP financial measures to the most directly comparable financial measure in the accompanying financial tables. Other companies may calculate non-GAAP measures differently than Quality Systems, which limits comparability between companies. The Company believes that its presentation of non-GAAP diluted earnings per share provides useful supplemental information to investors and management regarding the Company's financial condition and results. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. The Company calculates non-GAAP diluted earnings per share by excluding net acquisition costs, amortization of acquired intangible assets, amortization of deferred debt issuance costs, restructuring costs, net securities litigation defense costs and settlement, 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 fiscal years 2018 and 2017 is 30.5%. The determination of this rate is based on the consideration of both historic and projected financial results. The Company has not adjusted its non-GAAP tax rate for fiscal year 2018 following the enactment of the new tax reform legislation on December 22, 2017. The Company may adjust its non-GAAP tax rate in fiscal 2019 as additional information becomes available and further analysis is completed based on the expected long-term impact of the tax reform legislation in conjunction with any other significant events occur that may materially affect this rate, such as merger and acquisition activity, changes in business outlook, or other changes in expectations regarding tax regulations.

 

The Company’s future period guidance in this release includes adjustments for items not indicative of the Company’s core operations. Such adjustments are generally expected to be of a nature similar to those adjustments applied to the Company’s historic GAAP financial results in the determination of the Company’s non-GAAP diluted earnings per share. Such adjustments, however, may be affected by changes in ongoing assumptions and judgments as to the items that are excluded in the calculation of non-GAAP adjusted net income and adjusted diluted earnings per share, as described in this release. The exact amount and probable significance of these adjustments, including net acquisition costs, net securities litigation defense costs and settlement, 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,

 

 

Year Ended March 31,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software license and hardware

$

15,378

 

 

$

16,581

 

 

$

55,576

 

 

$

65,547

 

Software related subscription services

 

25,963

 

 

 

23,139

 

 

 

99,547

 

 

 

87,050

 

Total software, hardware and related

 

41,341

 

 

 

39,720

 

 

 

155,123

 

 

 

152,597

 

Support and maintenance

 

40,634

 

 

 

41,898

 

 

 

163,805

 

 

 

158,803

 

Revenue cycle management and related services

 

19,669

 

 

 

20,515

 

 

 

83,996

 

 

 

82,552

 

Electronic data interchange and data services

 

23,327

 

 

 

23,424

 

 

 

92,773

 

 

 

88,951

 

Professional services

 

10,804

 

 

 

6,828

 

 

 

35,322

 

 

 

26,721

 

Total revenues

 

135,775

 

 

 

132,385

 

 

 

531,019

 

 

 

509,624

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software license and hardware

 

5,720

 

 

 

5,427

 

 

 

21,667

 

 

 

24,654

 

Software related subscription services

 

11,673

 

 

 

9,637

 

 

 

44,495

 

 

 

36,744

 

Total software, hardware and related

 

17,393

 

 

 

15,064

 

 

 

66,162

 

 

 

61,398

 

Support and maintenance

 

7,349

 

 

 

7,414

 

 

 

29,932

 

 

 

28,317

 

Revenue cycle management and related services

 

15,290

 

 

 

14,318

 

 

 

60,905

 

 

 

56,370

 

Electronic data interchange and data services

 

13,702

 

 

 

12,870

 

 

 

54,015

 

 

 

51,102

 

Professional services

 

8,243

 

 

 

6,304

 

 

 

30,521

 

 

 

25,947

 

Total cost of revenue

 

61,977

 

 

 

55,970

 

 

 

241,535

 

 

 

223,134

 

Gross profit

 

73,798

 

 

 

76,415

 

 

 

289,484

 

 

 

286,490

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

65,709

 

 

 

42,710

 

 

 

193,226

 

 

 

163,623

 

Research and development costs, net

 

21,098

 

 

 

22,111

 

 

 

81,259

 

 

 

78,341

 

Amortization of acquired intangible assets

 

1,795

 

 

 

2,546

 

 

 

7,810

 

 

 

10,435

 

Impairment of other assets

 

3,757

 

 

 

 

 

 

3,757

 

 

 

 

Restructuring costs

 

481

 

 

 

2,393

 

 

 

611

 

 

 

7,078

 

Total operating expenses

 

92,840

 

 

 

69,760

 

 

 

286,663

 

 

 

259,477

 

Income (loss) from operations

 

(19,042

)

 

 

6,655

 

 

 

2,821

 

 

 

27,013

 

Interest income

 

19

 

 

 

5

 

 

 

55

 

 

 

14

 

Interest expense

 

(1,073

)

 

 

(711

)

 

 

(3,323

)

 

 

(3,156

)

Other income (expense), net

 

85

 

 

 

(116

)

 

 

37

 

 

 

(262

)

Income (loss) before provision for (benefit of) income taxes

 

(20,011

)

 

 

5,833

 

 

 

(410

)

 

 

23,609

 

Provision for (benefit of) income taxes

 

(8,964

)

 

 

1,418

 

 

 

(2,830

)

 

 

5,368

 

Net income (loss)

$

(11,047

)

 

$

4,415

 

 

$

2,420

 

 

$

18,241

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.17

)

 

$

0.07

 

 

$

0.04

 

 

$

0.30

 

Diluted

$

(0.17

)

 

$

0.07

 

 

$

0.04

 

 

$

0.29

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

63,888

 

 

 

62,345

 

 

 

63,435

 

 

 

61,818

 

Diluted

 

63,888

 

 

 

62,348

 

 

 

63,440

 

 

 

62,010

 


QUALITY SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

March 31, 2018

 

 

March 31, 2017

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

28,845

 

 

$

37,673

 

Restricted cash and cash equivalents

 

2,373

 

 

 

4,916

 

Accounts receivable, net

 

84,962

 

 

 

83,407

 

Inventory

 

180

 

 

 

158

 

Income taxes receivable

 

8,122

 

 

 

2,679

 

Prepaid expenses and other current assets

 

17,180

 

 

 

17,969

 

Total current assets

 

141,662

 

 

 

146,802

 

Equipment and improvements, net

 

26,795

 

 

 

27,426

 

Capitalized software costs, net

 

26,318

 

 

 

13,607

 

Deferred income taxes, net

 

9,219

 

 

 

11,265

 

Intangibles, net

 

74,091

 

 

 

69,213

 

Goodwill

 

218,875

 

 

 

185,898

 

Other assets

 

18,795

 

 

 

19,010

 

Total assets

$

515,755

 

 

$

473,221

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

4,213

 

 

$

4,618

 

Deferred revenue

 

54,079

 

 

 

52,383

 

Accrued compensation and related benefits

 

27,910

 

 

 

24,513

 

Income taxes payable

 

73

 

 

 

405

 

Other current liabilities

 

48,317

 

 

 

46,775

 

Total current liabilities

 

134,592

 

 

 

128,694

 

Deferred revenue, net of current

 

1,173

 

 

 

1,394

 

Deferred compensation

 

6,086

 

 

 

6,629

 

Line of credit

 

37,000

 

 

 

15,000

 

Other noncurrent liabilities

 

13,494

 

 

 

16,461

 

Total liabilities

 

192,345

 

 

 

168,178

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

Common stock

 

 

 

 

 

 

 

$0.01 par value; authorized 100,000 shares; issued and outstanding 63,995 and 62,455 shares at March 31, 2018 and 2017, respectively

 

640

 

 

 

625

 

Additional paid-in capital

 

244,462

 

 

 

228,549

 

Accumulated other comprehensive loss

 

(400

)

 

 

(358

)

Retained earnings

 

78,708

 

 

 

76,227

 

Total shareholders' equity

 

323,410

 

 

 

305,043

 

Total liabilities and shareholders' equity

$

515,755

 

 

$

473,221

 

 


QUALITY SYSTEMS, INC.

NON-GAAP FINANCIAL MEASURES

(In thousands, except per share data)

 

 

RECONCILIATION OF NON-GAAP DILUTED EARNINGS PER SHARE

 

 

Three Months Ended March 31,

 

 

Year Ended March 31,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Income (loss) before provision for income taxes - GAAP

$

(20,011

)

 

$

5,833

 

 

$

(410

)

 

$

23,609

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition and disposition costs, net

 

339

 

 

 

1,376

 

 

 

1,908

 

 

 

6,523

 

Amortization of acquired intangible assets

 

6,029

 

 

 

5,508

 

 

 

23,380

 

 

 

22,461

 

Amortization of deferred debt issuance costs

 

803

 

 

 

269

 

 

 

1,610

 

 

 

1,076

 

Restructuring costs

 

481

 

 

 

2,393

 

 

 

611

 

 

 

7,078

 

Securities litigation defense costs and settlement, net of insurance

 

19,984

 

 

 

315

 

 

 

20,700

 

 

 

1,798

 

Share-based compensation

 

3,611

 

 

 

2,430

 

 

 

12,196

 

 

 

7,497

 

Impairment of assets

 

3,757

 

 

 

 

 

 

3,757

 

 

 

 

Other non-run-rate expenses*

 

 

 

 

144

 

 

 

263

 

 

 

3,009

 

Total adjustments to GAAP income before provision for income taxes:

 

35,004

 

 

 

12,435

 

 

 

64,425

 

 

 

49,442

 

Income before provision for income taxes - Non-GAAP

 

14,993

 

 

 

18,268

 

 

 

64,015

 

 

 

73,051

 

Provision for income taxes

 

4,573

 

 

 

5,572

 

 

 

19,525

 

 

 

22,281

 

Net income - Non-GAAP

$

10,420

 

 

$

12,696

 

 

$

44,490

 

 

$

50,770

 

Diluted net income per share - Non-GAAP

$

0.16

 

 

$

0.21

 

 

$

0.70

 

 

$

0.82

 

Weighted-average shares outstanding (diluted):

 

63,888

 

 

 

62,348

 

 

 

63,440

 

 

 

62,010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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