Jefferies 2015 Global Healthcare Conference June 2015

Transcription

1 Jefferies 2015 Global Healthcare Conference June

2 Safe Harbor Provisions SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS: This news release may contain forward-looking statements within the meaning of the federal securities laws. Statements regarding future events, developments, the Company's future performance, as well as management's expectations, beliefs, intentions, plans, estimates or projections relating to the future (including, without limitation, statements concerning revenue and net income), are forward-looking statements within the meaning of these laws and involve a number of risks and uncertainties. Management believes that these forward looking statements are reasonable and are based on reasonable assumptions and forecasts, however, undue reliance should not be placed on such statements that speak only as of the date hereof. Moreover, these forward-looking statements are subject to a number of risks and uncertainties, some of which are outlined below. As a result, actual results may vary materially from those anticipated by the forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: the volume and timing of systems sales and installations; length of sales cycles and the installation process; the possibility that products will not achieve or sustain market acceptance; seasonal patterns of sales and customer buying behavior; impact of incentive payments under The American Recovery and Reinvestment Act on sales and the ability of the Company to meet continued certification requirements; the development by competitors of new or superior technologies; the timing, cost and success or failure of new product and service introductions, development and product upgrade releases; undetected errors or bugs in software; product liability; changing economic, political or regulatory influences in the health-care industry; changes in product-pricing policies; availability of third-party products and components; competitive pressures including product offerings, pricing and promotional activities; the Company's ability or inability to attract and retain qualified personnel; possible regulation of the Company's software by the U.S. Food and Drug Administration; uncertainties concerning threatened, pending and new litigation against the Company including related professional services fees; uncertainties concerning the amount and timing of professional fees incurred by the Company generally; changes of accounting estimates and assumptions used to prepare the prior periods' financial statements; general economic conditions; and the risk factors detailed from time to time in the Company s periodic reports and registration statements filed with the Securities and Exchange Commission. 2

3 Company Overview Quality Systems, Inc. and its NextGen Healthcare subsidiary develop and market computer-based practice management, electronic health records (EHR) and revenue cycle management applications, as well as connectivity products and services, for medical and dental group practices and small hospitals. Revenue primarily derived from physician group businesses that utilize the Company s high functionality practice management suites Focus is on growing organically with a strong emphasis on reinvestment in new product and service development initiatives Acquisitions of complementary business lines are also key drivers of growth 3

4 Organizational Timeline A willingness to reinvest and reinvent to better compete 4

5 Quality Systems Today March 31 st, 2015 TTM Revenue: $490.2mm Non-GAAP EPS: $0.62 TTM Revenue: $373.8mm (76% of total) TTM Revenue: $18.5mm (4% of total) TTM Revenue: $80.0mm (16% of total) TTM Revenue: $18.0mm (4% of total) ~ 85,000 Providers ~10,000 Dentists ~ 6,500 Providers ~ 300 Hospitals Markets Served: Ambulatory Practices Practice Management EHR Population Health Management Patient Portal Markets Served: Dental Practices Practice Management Electronic Dental Records Markets Served: Ambulatory Practices Revenue Cycle Management Other Services Markets Served: Small Hospitals Financials Clinical Surgery Scheduling 5

6 Market Drivers American Recovery and Re-investment Act (ARRA) 2/09 Over $60 billion in incentive and grant money to stimulate healthcare information technology (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 become major purchasers of HIT 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 6

7 Medicare Complete EHR EP Attestations Top Ten Vendors Epic Systems Corporation 152,888 Allscripts 66,498 eclinicalworks LLC 51,876 NextGen Healthcare 47,185 GE Healthcare 38,541 Greenway Health 29,527 athenahealth, Inc 21,070 Practice Fusion 17,104 McKesson 16,727 Community Computer Service Inc 9,204-20,000 40,000 60,000 80, , , , , ,000 Based on ONC March 2015 attestation data 7

8 Medicare Complete EHR EP Attestations: Top Five vs. Top Ten Vendors by % Total 22.9% 32.6% Based on ONC attestation data March % 2.6% 2.5% 3.2% 4.4% 9.9% 5.8% 7.8% 7.1% Epic Systems Corporation Allscripts eclinicalworks LLC NextGen Healthcare GE Healthcare Greenway Health, LLC athenahealth, Inc Practice Fusion McKesson Community Computer Service, Inc All Other The top five vendors continue to dominate more than half (53%) of all attestations, where All Other represents a collection of almost 500 additional vendors 8

9 Hospital Top 10 Vendors Vendor Attestations % Total 1 Epic Systems Corporation 1, % 2 MEDITECH 1, % 3 CPSI 1, % 4 Cerner Corporation % 5 McKesson % 6 MEDHOST % 7 Healthland, Inc % 8 Allscripts % 9 NextGen Healthcare % 10 Health Care Systems Inc % All Other 7.4% Based on ONC March 2015 attestation data 9

10 Hospital Attestations: Top Ten Vendors by % Total 7.4% 1.5% 1.9% 4.2% 7.1% 17.7% 7.6% 8.2% 17.0% 11.8% 15.5% Epic Systems Corporation MEDITECH CPSI Cerner Corporation McKesson MEDHOST Healthland, Inc. Allscripts NextGen Healthcare Health Care Systems, Inc. All Other Based on ONC March 2015 attestation data 10

11 EHR Incentive Program Total Program to Date Stage 1 Payments Active Registrations Providers Paid Dollars Paid Medicare Eligible Professionals 353, ,304 $7.67 Billion Medicaid Eligible Professionals 177, ,110 $3.63 Billion Eligible Hospitals & CAHs 4,811 4,793 $18.31 Billion Total 535, ,207 $29.61 Billion Stage 2 Payments Providers Paid Dollars Paid Medicare Eligible Professionals 38,472 $ Million Eligible Hospitals 1,440 $1.08 Billion Total 39,912 $1.33 Billion Total Dollars Paid $30.93 Billion Based on ONC March 2015 attestation data 11

12 Market Opportunity & Positioning Growth High Growth Low Growth <100 Bed Hospital Software $3 Billion 60-70% Penetrated Dental Software $1 Billion Ambulatory Software $13 Billion 60-70% Penetrated Revenue Cycle Management Services $26 Billion 20-25% Penetrated Population Health Management $45 Billion 19% Penetrated 80% Penetrated Low Opportunity (High Penetration) Penetration Opportunity High Opportunity (Low Penetration) 1. Citi Research, Oliver Wyman Analysis, 2. TriZetto, Industry Perspectives on Future Trends in Population Health; 3: KPMG Population Health Investment Survey 12

13 Representative Customers 13

14 Strategic Dial Movers Continued Growth of Our Core Businesses This is the fourth year of government incentive payments to physicians and hospitals with half of the market to go Stage Resale Market ICD Resale Market Healthcare Reform Five Years of Incentives Five Years of Penalties 10 Year Adoption Period 14

15 Strategic Dial Movers Focusing on Opportunities to Sell Complementary Products There is significant opportunity in cross-selling new solutions to the existing customer base and bundling multiple solutions for new customers Large Installed Base ~ 85,000 providers ~ 10,000 dentists ~ 300 hospitals Four Divisions 28 Product & Service Offerings 15

16 Product Penetration in Current Client Base Creating demand for ancillary products Focused on client education, product bundling, and marketing Client base demand for products is significant 100% 90% 5% 9% 80% 33% 70% 60% 50% 40% 95% 91% 88% 98% 94% 82% 30% 67% 20% 10% 0% 18% 12% 2% 6% PM EHR RCM Mirth Patient Portal Population Health Dashboard Product Penetration 16

17 Reorganized Functional Areas Reorganized functional areas to maximize efficiencies company-wide: Research & Development Sales & Marketing Finance & Back Office Operations Implementation & Professional Services Information Technology Services 17

18 Accountable Care Organizations 18

19 Strategic Dial Movers Expand Revenue Cycle Management Capabilities NextGen RCM has been set-up to grow the company s RCM business and is already seeing strong results. Reform Provides the Fuel Core vs. Non-Core Competency Reimbursement Pressure Revenue Down Regulatory Pressure Costs Up 19

20 20 Quick Fact

21 Majority of Practices See Results (with RCM) Source: MGMA. Medical Billing Services Information Exchange: #4840. Based on MGMA Survey: Medical Billing Companies Produce Strong Results, ( s/medical-billing-services/) 21

22 Revenue Cycle Management is a $50 Billion Market in the United States Revenue cycle management (RCM) is currently a $50 billion market in the US 7.5 Times Larger than the EHR Market Source: Frost & Sullivan

23 Strategic Dial Movers Continued Growth through Acquisitions QSI is focused on bolt-on acquisitions to fill a strategic gap or kick-start entry into newer business lines Eleven Acquisitions in Last Seven Years RCM Analytics Patient Management Regulatory and Clinical Reporting Tools 23

24 Strategic Dial Movers Expand Offshore Capabilities to Capture Cost Efficiencies A growing technology innovation center in Bangalore, India currently employs more than 375 technologists and engineers Opened in July 2011 Now full service R&D shop 24

25 The Mirth Plan Headquartered in Costa Mesa, CA 100+ employees Experts in Healthcare Data Integration and Health Information Exchange Global leader in commercial and open source software for Health IT Focused exclusively on healthcare software for 14 years Revolutionizing how organizations adapt to evolving HIT requirements and push towards interconnected healthcare Family of Mirth products connect seamlessly and naturally within the HIT ecosystem Solution to satisfy demands from HIEs and the emergence of ACOs Software Development Healthcare Focus Mirth Products 25

26 The Mirth Solution Mirth Results Central Data Repository Document Factory (C-CDA) Provider Portal IHE: PIX/PDQ, XDS.b, etc Consent & Confidential Info Mirth Mail Secure Direct Messaging, Chat, & Provider Directory Mirth Care Chronic Disease Management & Care Management Mirth Match EMPI & Record Locator Service Mirth Connect Data Integration Engine Mirth Analytics Business Intelligence, Reporting, & Analytics Direct Messaging, Secure Chat, HPD+ Provider Directory HL7, DiCOM, X12, CCD, C-CDA, EHR Integration 26

27 Financial Highlights Fiscal year ended March Revenue $490,225 $444,667 $460,229 $429,835 $353,363 Net income* $27,332 $33,022 $59,124 $75,657 $61,606 Non-GAAP diluted earnings per share ** $0.62 $0.70 $1.14 $1.37 $1.15 Cash dividends declared per share $0.70 $0.70 $0.70 $0.70 $0.63 Total Shareholders Equity $283,540 $295,090 $307,050 $295,177 $224,670 (in thousands, except per share amounts) *2014 Net Income excludes $26 million impairment charge and estimated tax impact, 2013 Net Income excludes $17.4 million impairment charge and estimated tax impact of such charge **2012 and 2011 Non-GAAP Diluted Earnings per Share are estimated as they were not formally announced in those years A proven record of delivering value back to Shareholders 27

28 Recurring Service Revenue as Percentage of Total Revenue 85% 80% 75% 70% 65% 60% * Recurring service revenue consists of maintenance, EDI, RCM and other services. 28

29 Why Quality Systems? Proven Growth and Profitability Proven track record of organic growth Five-year revenue CAGR of 9% Self-funded, highly profitable growth strategy Recurring revenue represented 83% of total revenue in FY 2015 Cash and marketable securities of $130.6 million and no debt Robust Sales Pipeline $161.3 million NextGen Healthcare sales 5/21/15 Lead Generation up year over year Substantial Customer Base Over 4,400 clients representing ~ 95,000 providers ~ 300 hospital relationships Leading Suite of HCIT Products Certified technology platform in hospital, physician and dental markets Positive HCIT Industry Trends Increasing focus on technology benefits in healthcare Healthcare Reform Economic Stimulus Package/Obama Plan from U.S. Government Experienced Management Team Extensive years of experience and working collaboratively as a management team 29

30 18111 Von Karman Avenue Suite 700 Irvine, California (949) Phone Susan Lewis Investor Relations Steven T. Plochocki Chief Executive Officer Daniel J. Morefield Chief Operating Officer John Stumpf Interim Chief Financial Officer 30