Similar to the last reported fiscal second quarter,
Quality Systems Inc.
) reported a fall in earnings and missed the Zacks Consensus
Estimate for the third quarter of the fiscal 2014 as well.
Consequently, QSII shares dipped 8.5% after the market closed
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QUALITY SYS (QSII): Free Stock Analysis
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QSII's earnings plunged more than 64.0% to $6,024 million or 10
cents per share in the reported quarter from $16,903 million or
28 cents in the third quarter of fiscal 2013, mainly due to lower
revenues and considerably higher cost of sales (reflecting a
95.1% rise). With this, earnings per share significantly lagged
the Zacks Consensus Estimate by 11 cents.
Revenues in the quarter ebbed roughly 5.0% to $108,854 million
driven by a fall in Systems sales, partially mitigated by a 5%
increase in services, maintenance, RCM, ADI, and other services
revenues. Revenues were also lower than the Zacks Consensus
Estimate of $114 million.
Recurring revenues accounted for about 82% of total revenues
compared to 75% a year ago. Total bookings (including Revenue
Cycle Management or RCM) rose 5.1% to $41.6 million from $39.6
million in the last year's quarter.
Adjusted gross profits plummeted 75.2% to $16,641 million from
$67,242 million a year ago. Adjusted gross margin decreased to
15.3% from 58.7% in the year-ago quarter. The decline was
attributable to fall in higher margin software from the prior
year as well as a decline in implementation training
profitability tied to a combination of the build out of resources
in anticipation of expected demand for upgrade assistance along
with the near-term slowdown in revenues.
Adjusted operating loss was $47,690 million in the third quarter
of fiscal 2014 in sharp contrast with an operating profit of
$21,143 million in the same quarter of fiscal 2013.
Effective tax rate for the quarter increased 150 basis points to
34.4% from 32.9% in the prior year quarter. The increase was
attributable to increase of state blended rates and the
non-deductibility of certain aspects of the company's impairment
dipped 34.3% to $19,160 million, driven by a sharp decline in
Software and hardware business revenues. Revenues from Software
and hardware nosedived 35.5% to $14,114 million while revenues
from Implementation and training Services fell 30.6% to $5,046
Maintenance, Electronic Data Interchange Services (EDI),
RCM, and Other Services
rose 5.1% to $89,694 million. Maintenance revenues remained
almost flat at $39,763 million. Electronic data interchange
services revenues rose 9.4% to $16.6 million. Revenue Cycle
Management and related services revenues increased 7.7% to
$16,178 million and revenues from other services went up 9.3% to
Quality Systems ended the quarter with cash and cash equivalents
of $82,101 million as of Dec 31, 2013, down from $105,999 million
as of Mar 31, 2013. Inventories stood at $928 thousand, up
from $710 thousand as of Mar 31, 2013. Cash flow from operations
increased to $27.7 million in the reported quarter from $16.2
million in the year-ago quarter.
Quality Systems currently retains a Zacks Rank #3 (Hold). We are
disappointed about earnings and revenues misses and concerned
about headwinds in the QSII's core Systems business.
Currently, we prefer
Medidata Solutions, Inc.
) with a Zacks Rank #2 (Buy) from the medical information systems
) with a Zacks Rank #1 (Strong Buy) and
) with a Zacks Rank #2 (Buy) in the medical products