Quality Systems Presentation 04/01/10
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Transcript of Quality Systems Presentation 04/01/10
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April 2010
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SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS:Statements made during this presentation, the proxy statements filed with the Securities and Exchange Commission (“Commission”), communications to shareholders, press releases and oral statements made by our representatives that are not historical in nature, or that state our or management’s intentions, hopes, beliefs, expectations or predictions of the future, may constitute “forward-looking statements” within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended. Forward-looking statements can often be identified by the use of forward-looking terminology, such as “could,” “should,” “will,” “will be,” “will lead,” “will assist,” “intended,” “continue,” “believe,” “may,” “expect,” “hope,” “anticipate,” “goal,” “forecast,” “plan,” or “estimate” or variations thereof or similar expressions. Forward-looking statements are not guarantees of future performance.Forward-looking statements involve risks, uncertainties and assumptions. It is important to note that any such performance and actual results, financial condition or business, could differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the risk factors discussed under “Risk Factors” in our Annual Report on Form 10-K for fiscal year ended March 31, 2008, as well as factors discussed elsewhere in other reports and documents we file with the Commission. Other unforeseen factors not identified herein could also have such an effect. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial condition or business over time unless required by law. Interested persons are urged to review the risks described under “Risk Factors” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for fiscal year ended March 31, 2008, as well as in our other public disclosures and filings with the Commission.
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Safe Harbor Provisions
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Company Overview
• Quality Systems and its NextGen Healthcare Information Systems subsidiary develop and provide a broad range of computer-based business applications for U.S. medical and dental groups practices. These include practice management, electronic health records, revenue cycle management and e-business applications.
– Revenue primarily derived from physician group businesses that utilize the company’s high functionality practice management suites
– Focused is on growing organically with a strong emphasis on reinvestment in new product and service development initiatives
– Acquisitions of complimentary business lines also contribute to growth
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December 31, 2009 TTM
Revenue: $279.1mmEPS: $1.63
TTM Revenue: $262.9mm (94% of total)
Markets Served:Physicians•Practice Management•EHR•EDI•Revenue Cycle Management
Locations:Horsham, PA; Atlanta, GA; St. Louis, MO; Dallas, TX; Hunt Valley, MD; Austin, TX
Employees (2/11/10):
1,307
TTM Revenue: $16.2mm (6% of total)
Markets Served: Dentists•Practice Management•EPR•EDI
Locations: Irvine, CA; Santa Ana, CA
Employees (12/31/09):
74
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Quality Systems Today
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Organization
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Opus Healthcare Solutions
• Acquired February 11, 2010• Based in Austin, TX;
– $14 million in Revenue– $3.5 million EBITDA– 20 Hospital Customers
• Accretive in FY 2011• Small Hospital Market
– 100 Beds or Less– 1300 in U.S.
• CCHIT Certified
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Experienced Management Team
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Title Years of Experience
Steven T. Plochocki 36Chief Executive Officer, Quality Systems, Inc.
Patrick B. Cline 29President, Quality Systems, Inc.
Philip N. Kaplan 21Chief Operating Officer, Quality Systems, Inc.
Paul A. Holt 14Chief Financial Officer, Quality Systems, Inc.
Scott Decker 13President, NextGen Software
Donn Neufeld 29Executive Vice President, EDI & Dental
Fred Neufeld 31Executive Vice President and General Manager, NextGen Healthcare
Monte L. Sandler 16Executive Vice President, NextGen Practice Solutions, NextGen Healthcare
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Solution Evolution
Community Health
Solutions
Acute
Solutions
Revenue Cycle
Management
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Product / Market Dynamics
Penetration Opportunity
Growth
Clinical
Dental
Dental PM
MPM
EHR
EDI
High Penetration
Low Penetration
Low
Growth
High
Growth
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RCM
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New vs. Recurring Revenue
QSI - Dental
New25%
Recurring75%
NextGen
New44%
Recurring56%
Company
New37%
Recurring63%
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Current State of Adoption
Acute Care Ambulatory Care
Small Practices
Large Practices
Hospital Outpatient
Depts
Inpatient Critical Care
90% Paper
5% Partial5% Complete
10% Partial
10% Complete
80% Paper 50% Paper
49% Partial
1% Complete
Source: The Coker Group – 8/1/08
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• American Recovery and Re-investment Act (ARRA) – 2/09
– Over $60 billion in incentive and grant money to stimulate HIT adoption.
– Stringent rules for providers to qualify for funds known as “meaningful use”
– First time that state based Medicaid programs and Departments of Health have become major purchasers of health care information technology
– Regional Extension Center initiative promoting large scale HIT adoption• “Stark” law exception stimulating health system ambulatory strategies
• Pay-for-performance (P4P) programs, patient centered medical home, and other quality initiatives
• Consumerism and Personal Health Records (PHR)
• Interoperability and community-based data exchange
• Market mindset has moved to “when” not “if”
• IT Certification Process- CCHIT (Government-supported Certification Commission for Healthcare Information Technology, and other certifying bodies)
Market Drivers
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To improve patient care and reduce healthcare costs by providing industry leading systems and services while achieving the Gold Standard of customer satisfaction.
NextGen Healthcare: Our Mission
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• Integrated Solutions• Flexibility overcomes physician acceptance issues • 26+ specialty-specific clinical knowledge bases• Market leader in Pay-for-performance (P4P) and Patient
Centered Medical Home (PCMH)• Proven Industry Leadership (CCHIT certification)• Proven Customer Results• Experienced Management Team• Financial strength vs. competition
Competitive Advantages
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Competitive Advantages
Ranking
10-24Physicians Ranking
25-99 Physicians
Ranking
100+ Physicians
1 NextGen Healthcare 1 NextGen Healthcare 1 NextGen Healthcare
2Medical
Communications 2
Medical Communications
2 Epic
3 eClinicalWorks 3 eClinicalWorks 3 eClinicalWorks
4 Practice Partner 4 Practice Partner 4 Sage Software
5 GEMMS 5 GE Centricity 5Allscripts Enterprise
6 Pulse Systems 6 Pulse Systems 6GE Healthcare
Flowcast
7 E-MDs 7 Allscripts Enterprise 7 N/A
8 Greenway Medical 8 Greenway Medical 8 N/A
Functionality Assessment of EHR Solutions
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Source: The AC Group – 12/09
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Representative Customers
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Historical Performance
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
2005 2006 2007 2008 2009
$0
$10
$20
$30
$40
$50
$60
$70
$80
2005 2006 2007 2008 2009
Revenue(US $ mm)
Operating Income(US $ mm)
CAGR = 29%
CAGR = 32
%
$157.2
$89.0
$245.5$186.5
$119.3 $35.8
$24.6
$59.7
$50.9
$72.4
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FYE 03/31/09
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Financial Highlights
Fiscal year ended March 31, 2009 2008 2007 2006 2005
Revenue $ 245,515 $ 186,500 $ 157,165 $ 119,287 $ 88,961
Net income
46,119 40,078
33,232 23,322 16,109 Diluted earningsper share $1.62 $1.44 $1.21 $0.85 $0.61 Cash dividends declared per share $1.15 $1.00 $1.00 $0.875 $0.75 Total shareholders’ equity $ 155,567 $ 113,705 $ 91,246 $ 72,409 $ 62,731
(in thousands, except per share amounts)
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Equity Profile as of 12/31/09
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• Recent Price $62.80/share
• Book Value $6.02/share
• Cash & Marketable Securities $3.00/share
• P/E – LTM 38.53– Incl. Cash & Marketable Securities
• P/E – LTM 36.69– Excl. Cash & Marketable Securities
• Market Cap $1.8B
• Shares Outstanding (FD) 28.7M
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Third-Party Recognition
• Forbes ranked QSI one of the 200 Best Small Companies for the ninth consecutive year – #3 in 2009
• Forbes named QSI #23 in 2009 of 25 Fastest Growing Technology Companies
• Fortune ranked QSI #52 in 2008 list of 100 Fastest Growing Small Public Companies
• Business Week named QSI to 100 Hot Growth Companies list #19 in 2007
• 2009 Awards
• Innovation Award Winners - MS-HUGClinical Care – NextGen EHR
• Award Partner: Elmhurst Clinic, Elmhurst Memorial Healthcare
• 2008 Awards
• Innovation Award Winners - MS-HUGDisease Surveillance – NextGen EMR
• Award Partner: St. Joseph Family Medicine Residency, Medical College of Wisconsin
• Finalist - MS-HUG Innovation AwardOutcomes Reporting – NextGen EMR/EPM
• Award Partner: Medical Clinic of North Texas
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Why Quality Systems?
Proven Growthand Profitability
• Proven track record of organic growth and profitability– Five-year revenue CAGR of 29% and Net Income CAGR of 37%– Most profitable company in market segment with 30%+
EBITDA margins
• Self-funded, highly profitable growth strategy– Recurring revenue base provides stable cash flow
Substantial Customer Base
• Over 2,200 group practices representing 58,000 physicians and dentists
• Substantial cross-selling opportunities
• Relationships with key health care institutions
Leading Suite of HCIT Products
• Scalable technology platform with significant adoption in mid/large physician practice
Positive HCIT Industry Trends
• Increasing focus on technology benefits in healthcare
• Stark law relaxation
• Pay for Performance initiatives
• Economic Stimulus Package/Obama Plan from U.S. Government
Experienced Management Team
• Extensive years of experience and working collaboratively as a management team
Robust Sales Pipeline • $113 million NextGen Healthcare sales pipeline @ 12/31/09
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