Quality Systems third quarter revenues decrease 5% to $108.9 million

Quality Systems, Inc. (NASDAQ:QSII) announced today results for its fiscal 2014 third quarter ended December 31, 2013.

The Company reported revenues of $108.9 million for the third quarter ended December 31, 2013, a decrease of five percent versus $114.5 million reported in the third quarter of fiscal 2013. Net loss for the fiscal 2014 third quarter, partially impacted by the previously announced impairment charge in the Hospital Solutions Division, was $12.6 million versus net income of $15.6 million for the fiscal 2013 third quarter. On a GAAP basis, fully diluted loss per share for the fiscal 2014 third quarter was $0.21 versus earnings per share of $0.26 reported in the comparable quarter a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2014 third quarter was $0.11, a decline of 62 percent from $0.29 for the comparable quarter a year ago (non-GAAP fully diluted earnings per share is reconciled to its corresponding GAAP measure at the end of this release).

The Company's results reflect the previously announced impairment of certain long-lived assets in its Hospital Solutions Division, which resulted in a non-cash charge of $26.0 million in the quarter. Of this amount, $20.1 million is classified as a component of cost of revenue and the remaining $5.9 million is reflected as a component of total operating expenses. This impairment stems from operating results of the Hospital Solutions Division, which has performed below internal expectations. The Company remains committed to the hospital market and continues to make investments across its Hospital Solutions Division, including in areas such as implementation and training, infrastructure and support, customer service and software development.

During the quarter, bookings continued to improve. The Company also noted it continues to realize growth from its RCM Services Division and its new Mirth Corporation acquisition.

"As we continue to position the Company for growth and improved performance, it is important to recognize that NextGen Healthcare became one of the first electronic health record vendors in the nation to achieve ONC-HIT 2014 Edition Certification as a complete EHR, for both ambulatory and inpatient settings. This certification included meeting criteria for both the transition to ICD-10 and achieving Meaningful Use Stage 2. This is a key milestone as we help prepare our clients for these critical changes and position the Company for future success in the EHR and replacement markets as well as the small hospital arena," said President and Chief Executive Officer Steven T. Plochocki.

"While we are disappointed in the performance of late in our Hospital Services Division, we believe in its long-term prospects and to this end, are investing accordingly. With the impairment now behind us, we are encouraged by cross-selling opportunities, particularly as the demand for revenue cycle services increases in light of the fast-approaching ICD-10 deadline. Additionally, we are gaining traction since our acquisition of Mirth, and its connectivity solutions are paving the way as our healthcare system shifts from fee-for-service to value-based, such as the evolving accountable care organization model. Our breadth and depth make it possible for our clients to succeed in this rapidly changing space," Plochocki concluded.

Quality Systems also announced that its Board of Directors declared a quarterly cash dividend of Seventeen and One-Half Cents ($0.175) per share on the Company's outstanding shares of Common Stock, payable to shareholders of record as of March 14, 2014 with an anticipated distribution date of April 4, 2014. The $0.175 per share cash dividend is pursuant to the Company's current policy to pay a regular quarterly dividend on the Company's outstanding shares of Common Stock, subject to Board review and approval, and establishment of record and distribution dates by the Board prior to the declaration and payment of each such quarterly dividend.