) reported fourth-quarter fiscal 2012 (ended March 31) adjusted
(excluding one-time items other than stock-based compensation
expense) earnings per share of 26 cents missing the Zacks Consensus
Estimate of 27 cents. The company stated earnings per share of
$1.30 for fiscal 2012 missing the Zacks Consensus Estimate of
Net income dropped 18.8% year over year to $150.7 million (25
cents per share) in the reported quarter partly due to higher
Sales stood at $109 million in the fourth quarter, up 12.2% year
over year, missing the Zacks Consensus Estimate of $111 million.
Revenues were $429.8 million in fiscal 2012, up 21.6%, also missing
the Zacks Consensus Estimate of $431 million.
System sales amounted to $34.8 million, down 5% year over year.
Revenues from the two subcomponents were $26.6 million (down 16.2%
year over year) from Software, Hardware and Supplies and $8.3
million (higher 67.2%) from Implementation and Training
Maintenance, EDI, Revenue Cycle Management and other Services
revenues amounted to $74.2 million, up 22.7% year over year.
Segment sales were reported under four separate headings.
Maintenance charges were $35.9 million, up 23.5%. Electronic data
interchange services sales were $13.1 million, up 21.6%. Revenue
Cycle Management sales of $11.4 million were down 1.9% and the
"Other" sub-segment amounted to $13.8 million, up 52.9%.
Gross margin stood at 61.5% in the fourth quarter, lower than
65.8% achieved in the prior-year quarter. Operating margin came to
21.4%, also lower than 29.3% in the year-ago quarter.
Cash, cash equivalents and marketable securities were $134.3
million at the end of the fourth quarter, up 15.3% year over
Quality Systems runs a pure-play business model, in an
attractive industry, with a large number of catalysts, which
provoke frequent speculation about mergers and acquisition. In
recent times, the company has not only well managed its ambulatory
clinical deals but, in addition, has nicely executed several
enterprise contracts. Also, on the positive side, we derive comfort
from the high proportion of recurring revenues and steady growth in
its NextGen pipeline.
However, competition is intense from well regarded players such
Allscripts Healthcare Solutions
) and others. Price discounting is frequent, particularly on the
lower end, and Software as a Service (SaaS) based model appears to
have exacerbated pricing pressure.
Quality Systems has traditionally focused on providing solutions
for physician practices. However, core ambulatory EHR providers,
such as Quality Systems, will see opportunities shrinking for
selling their products as physician groups are increasingly getting
absorbed into hospitals.
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