NextGen Healthcare (Horsham) parent Quality Systems settles with activist investor; Could sale be in the future?

Tom Paine

Follow @phillytechnews

 Subscribe in a reader
Subscribe to Philadelphia Tech News by Email


Quality Systems, Inc., the Irvine, California-based corporation whose primary business unit is Horsham-based NextGen Healthcare, may be looking for a buyer, according to some reports.

Speculation was heightened by an agreement announced on Wednesday between Quality and activist investor Clinton Group, in which Quality is expected to add three of the investor's nominees to its board, two of whom will also serve on a transaction committee which will evaluate Quality Systems' strategy and direction.

Quality Systems, which provides electronic health record (EHR) systems and related services, was riding the wave of "meaningful use" funding authorized by the Federal stimulus program to incentivize medical practices to adopt electronic record keeping. The stock hit $48.50 in September 2011, but closed at $22.01 (NASDAQ: QSII ) on Friday as growth has lagged behind several other EHR providers, giving it a current market value of $1.3 billion.

Qaulity reported revenue of $460.2 million for its fiscal year ending March 31, 2013, an increase of 7% over the prior year. Net income was $42.7 million, a decrease of 44% from the prior year. Revenue generated by NextGen's operating units account for well over 90% of Quality's total revenue.

An analyst quoted in an Med City News article names Siemens, whose Malvern-based Healthcare IT unit already partners with NextGen in certain areas, as one possible buyer should it be sold.

Patrick B.Cline co-founded Clinitec, based in Horsham, in 1994; it was acquired by Quality Systems two years later and became the foundation of NextGen Healthcare. Cline retired from NextGen and Quality at the end of 2011, and is currently CEO of Irving, Texas-based Lightbeam Health Solutions.

Daily Links 8/24/2012: NextGen Healthcare founder, former Quality Systems President Cline elected to Qaulity Systems board

An entrepreneurial spirit grows in Phila. (Philadelphia Inquirer)

Quality Systems, Inc. Announces Results of Annual Shareholders Meeting (Business Wire)
Patrick B. Cline, co-founder of Clinitec (now NextGen Healthcare) and former President of Quality Systems, joins Quality's board as member of dissident shareholder Ahmed Hussein's slate, after last week's proxy vote. This follows the just announced departure of NextGen President Scott Decker. NextGen Healthcare, based in Horsham, is a unit of Quality Systems and a provider of Electronic Health Records (EHRs) and systems.

Salesforce.com: 5 nagging questions ahead (ZDNet Blogs)

The Dreamforce party dampener (Dennis Howlett/ZDNet)

Salesforce.com Future Includes a Marketing Cloud, Deeper Workday Links and More HTML5 (PC World)



SAP Co-CEO: European Crisis, Germany & Acquisitions/Interview with Bill McDermott (Video: CNBC)


No Wi-Fi or backhaul restrictions in FCC's approval of Verizon's cable deals (FierceCable)

Comcast scores stay of FCC order in Tennis Channel fight (LA Times: Company Town)
This seemingly unending volley just keeps on going back and forth.

Penn amps up role in Coursera online-education effort (Philadelphia Inquirer)



permalink

NextGen Healthcare parent Quality Systems falls 33% on earnings shortfall

Tom Paine

Quality Systems, Inc., the Orange County, California-based corporation which derives over 90% of its revenue from Horsham-based EHR (electronic healthcare record) provider NextGen Healthcare, had been a high-flying stock, with its shares lifted higher by the potential of the federal subsidy program designed to push healthcare practices to adopt EHRs and achieve the magical "meaningful use" designation. That picture had been deteriorating for a while, though, and today fell to earth as Quality pulled its full-year outlook after a below expectations beginning to its fiscal year. Quality (NASDAQ:QSII) closed the day down 33%. It shares are down 64% over the past year, and its market cap is now under $1 billion down from around $3 billion at its peak.

Quality Systems said today that its profit in its April-June quarter fell 18 percent to $15.5 million, or 26 cents per share, while sales rose 18 percent to $118.3 million. Software sales fell 11 percent to $25.8 million, but Reuters cites analysts who believe some software revenue may have been pulled in from the next quarter, understating the extent of the decline. Analysts differed on whether some of its problems were specific to Quality or due to more generic industry issues, but some believe Quality could be losing market share to competitors such as Cerner Corp and Athenahealth Inc.

Quality's CEO, Steven Plochocki, told the Wall Street Journal that most of the company's shortfall could be attributed to three big deals that failed to close in the quarter.

Board member and dissident shareholder Ahmed D. Hussein, who has been battling Chairman of the Board Sheldon Razin for years, is mounting a proxy contest to support the election of his seven board nominees at Quality's annual shareholder meeting to be held in mid-August, and issued a letter on that subject yesterday. Among his nominees is the well-respected Partrick B. Cline, who co-founded Clinitec, which grew to become NextGen Healthcare. Cline retired as President of Quality Systems at the end of 2011.



Related:
FRIDAY, JULY 29, 2011: Quality Systems, QlikTech earnings reports


permalink

Quality Systems, QlikTech earnings reports

What are probably the two hottest publicly traded tech companies with a major presence in the Philadelphia area announced quarterly results yesterday.

Quality Systems, Inc. is not actually based here, but in Irvine, CA, though virtually all of its revenue generating business comes out of its Horsham-based NextGen Healthcare unit. NextGen provides electronic health record (EHR) systems to health practices and hospitals, though it has historically gotten most of its business from smaller practices. It has benefitted from the up to $19 billion in subsidies offered through the HITECH Act (part of the stimulus package) that go to physicians who convert to electronic records and achieve what the government defines as "Meaningful Use".

In its Q1 2012 results reported yesterday, Quality Systems announced its first $100 million quarter, as revenue grew 21% and net income increased 57%, beating estimates. The company also announced that its Board had approved a two-for-one stock split. Quality Systems is now trading at $89.30, giving it a market value of $2.6 billion.

The other significant announcement yesterday is that Quality Systems' President (and former NextGen President), Patrick B. Cline, is retiring at the end of the year. Cline, who is a fairly young guy, said during NextGen's conference call that his only plans for now were to spend more time with his family, although he might consider taking on something else in the future. Cline co-founded Clinitec, based in Horsham, in 1994; it was acquired by Quality Systems two years later and became the foundation of NextGen Healthcare. Cline is widely respected in the industry. No successor has been named.

QlikTech, the Radnor-based in-memory Business Intelligence vendor that did its IPO a year ago, announced that revenue grew 45% in its second quarter to $74 million. The company posted a small GAAP loss (and a tiny non-GAAP profit) as it continued to push the accelerator down to achieve growth. Headcount is now at 967, up 49% from a year ago, of which over 100 are based in Radnor, a company spokeperson says. (QlikTech was started in Sweeden before moving its headquarters here).

QlikTech now has 21,000 customers, up from 15,000 a year ago, and is seeing more deals in excess of $100,000, from both new and existing customers. As it moves more into the core of the enterprise, QlikTech has needed to enhance its higher level sales resources. It announced yesterday that it had named Joe DiBartolomeo as President of the Americas. DiBartolomeo was a long-time Oracle exec who most recently was heading a unit at Dun & Bradstreet.

QlikTech raised its revenue guidance for 2011; it now expects revenue in excess of $300 million. However, QlikTech also raised its full year operating expense outlook. While it is aggressively spending and expanding to go after the large market opportunity it sees, there are certainly some analysts who have concerns about the expense growth rate and think that maybe a $300 million software company ought to be showing a little more profit.

QlikTech is now trading at over $30, up about 5% on the day, and its market value is $2.45 billion.



permalink

Daily Links 7/28/2011: Quality Systems posts strong results; President Patrick Cline to retire

Quality Systems, Inc. Reports Record Fiscal 2012 First Quarter Results; Board Approves 2:1 Stock Split; and President Patrick B. Cline Plans to Retire (Business Wire)
Net income up 57% on revenue growth of 21%. Quality Systems' primary business is NextGen Healthcare of Horsham.

QlikTech Announces Second Quarter 2011 Financial Results (Business Wire)
Revenue up 45%, small GAAP loss; new President of the Americas named.

SunGard Announces Second Quarter 2011 Results (Business Wire)

Pac-12 to Kick Off Home-Grown TV Unit National network and six RSNs will launch in 2012 (Ad Week)
Comcast one of the cable systems it will launch on.

Comcast To FCC: We’re Complying With Merger Rules—Bloomberg’s Playing Games (paidContent)

Sharpton’s Push for Comcast Raises Issues About Possible MSNBC Job (New York Times)

Amazon Inks Deal With NBCUniversal To Stream 1,000 Movies & TV Shows (Mashable)

Kagan: Cable Subs Dip as Multichannel Subs Rise
Report says overall growth came despite increasing online video competition and weak housing market (Broadcasting & Cable)

CEO Geoff Cook: Why We Sold myYearbook (paidContent)

Heartland Payment Systems Reports 35% Increase in Second Quarter Adjusted Earnings Per Share (Business Wire)

SAP, Rent-a-Center in Battle Over Millions in Fees (PC World)

Clearwire's Future Unclear at Sprint (Light Reading Mobile)

DCED: New Round of Investments Spurs Creation and Application of New Technology Industries in Pennsylvania (PA DCED Press Release)



permalink