Quality Systems Inc.’s (QSII) fourth-quarter fiscal 2010 (ended March 31, 2010) earnings of 45 cents per share fell short of the Zacks Consensus Estimate by 4 cents.
 
Results in the quarter were hurt by the amortization of acquired intangibles and transaction costs pertaining to its acquisition of Opus Healthcare Solutions. Furthermore, a drop in collections from the company’s revenue cycle management (RCM) division partly because of the East Coast snowfalls also hurt results in the reported quarter. However, the earnings did surpass the year-ago earnings by 5 cents per share.
 
Total revenue for the reported quarter increased 19% year over year to $78.5 million. Category-wise, revenue from System sales, which include software license fees, third party hardware and software, and supplies, implementation and training services related to purchase of the company’s software systems, jumped approximately 20.8% year over year to $29.01 million. Revenue from maintenance, electronic data interchange (EDI), revenue cycle management and other services grew 18.4% year over year to $49.5 million.
 
The total cost of system sales was flat year over year at $5.8 million. Total cost of maintenance, EDI, RCM and other services for the quarter was $22.5 million as against $19.6 million in the year-ago quarter, up 14.8%. The company’s gross profit in the reported quarter climbed approximately 24% year over year to $50.2 million.
 
Research & development spend for the quarter increased 16.2% year over year to $4.3 million for the quarter. Selling, general and administrative expenses for the reported quarter climbed 40% year over year to $25.2 million.
 
Quality Systems also declared a quarterly cash dividend of 30 cents per share, payable to shareholders of record as of June 17. Furthermore, the company also announced the resignation of Chief Operating Officer Philip N. Kaplan.
 
Annual Results
 
Quality Systems earned $1.68 per share in fiscal 2010 as against $1.62 per share earned last year. Total revenues in fiscal 2010 rose 19% year over year to $291.8 million. The company’s gross profit in fiscal 2010 climbed approximately 15.6% year over year to $181 million.
 
Quality Systems ended the year with cash and cash equivalents of $84.6 million as opposed to $70.2 million at the end of fiscal 2009.
 
Currently we are Neutral on Quality Systems. Our Neutral stance on the stock indicates that it is expected to perform in line with the broader US equity market over the next six to twelve months. We advise investors to retain the stock over this time period.
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