Quality Systems Misses on Q2 Fiscal Earnings by a Penny - Analyst Blog

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Quality Systems Inc. ( QSII ) posted a sharp 42.9% fall in adjusted earnings per share to 12 cents for the second quarter of fiscal 2015 from 21 cents in the same quarter of prior fiscal year. With this, Quality Systems' adjusted earnings missed the Zacks Consensus Estimate by a penny.

On a reported basis, net earnings per share significantly declined by 52.9% to 8 cents from 17 cents in the second quarter of fiscal 2014. Net earnings fell 53.1% to $4.75 million from $10.1 million in the year-ago quarter.

Quality Systems' revenues at the end of the quarter stood at $120.5 million, representing an increase of 8.5% from the year-ago revenues of $111.1 million and also inched past the Zacks Consensus Estimate of $119 million. The increase was attributable to higher revenues from Maintenance, EDI, RCM and other services. During the quarter, Quality Systems' pipeline grew to $161.8 million, improving for the eighth consecutive quarter.

Segment-wise Results

System sales amounted to $21.3 million in the quarter, representing a decline of about 9.0% year over year. Within System sales, revenues from Software and hardware decreased 8.6% to $14.2 million. Meanwhile, revenues from Implementation and training services declined 9.8% to $7.0 million from the year-ago period.

Revenues from Maintenance, Electronic Data Interchange Services ("EDI"), Revenue Cycle Management (RCM) and other Services totaled $99.2 million, up 13.2% year over year.

Maintenance revenues came in at $42.1 million, reflecting an increase of 4.5%. Electronic data interchange services revenues climbed 14.3% to $18.9 million. Revenue Cycle Management revenues edged up 12.7% to $17.4 million whereas revenues from other services spiked 35.0% to $20.8 million.


Adjusted gross profit improved marginally by 0.1% to $62.9 million in the quarter, but adjusted gross margin fell 400 basis points (bps) to 52.2% from 56.2% in the year-ago period.

Adjusted operating earnings dipped 69.4% to $3.5 million while adjusted operating margin contracted 750 bps to 2.9% from 10.4% in the prior-year quarter.

Financial Position

Quality Systems had cash and cash equivalents of $115.0 million as of Sep 30, 2014, up 11.5% from $103.1 million as of Mar 31, 2014. Deferred revenues decreased 2.0% to $69.6 million at the end of the quarter from $71.1 million as of Mar 31, 2014.

Zacks Rank

Currently, Quality Systems carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical information systems industry include Omnicell, Inc. ( OMCL ), and in the medical instruments sector include AngioDynamics Inc. ( ANGO ) and Pacific Biosciences of California, Inc. ( PACB ). All these stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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