Irvine-based medical software maker Quality Systems Inc. recently missed earnings expectations—but the market didn’t seem to mind.
Quality makes software that doctors and dentists use to manage their practices.
The company’s shares overcame a low opening to close up about 10% on Jan. 24, the day it announced earnings that fell short of analysts’ expectations. Shares dipped again the following day, but have regained ground since, with a market value of about $1.13 billion last week.
Quality posted a profit of $15.6 million for the three months ended on Dec. 31, down 26% from a year earlier. Wall Street was looking for a profit of $17.2 million.
Quarterly revenue came in at $114.5 million, up 2% from a year earlier.
Wall Street expected the company to have $119.3 million in revenue for the recent quarter.
Quality’s earnings decline “primarily reflects a mix change in revenue away from system sales to recurring services revenue including [revenue cycle management] and [electronic data interchange], which have lower gross margin compared to software,” Paul Holt, the company’s chief financial officer, said in a conference call with investors and analysts.
Opportunities to sell software to customers on various services apparently eased concerns over lower margins.
“Promises of cross selling and some low expectations … offset a significant deterioration in [third-quarter] fundamentals,” analyst David Windley of Jefferies & Co., a Stamford, Conn.-based investment bank, wrote in a client note. “Opportunities in [Quality’s] addressable markets remain robust, but they will require a significant change in selling strategy … to capitalize.”
A report from Chicago-based Zacks Investor Service outlined some of Quality’s challenges, including a consolidation trend amid a competitive landscape that makes for tough going on increasing sales.
The recurring revenue expected from services helped offset those concerns.
“On the positive side, we observe the high proportion of recurring revenues,” the report said. “Of late, however, growth of its pipeline metric has seen a falling trend.”
Quality faces “intense” competition from Watertown, Mass.-based Athenahealth Inc., Allscripts Healthcare Solutions in Chicago, Kansas City, Mo.-based Cerner Corp. and others, according to Zacks.
Separately, Quality said that it has rescheduled its investor day to May 6. It was previously scheduled for November but was postponed due to Hurricane Sandy.
Endologix Gets European OK
Endologix Inc., a fast-rising medical device maker based in Irvine, said that it achieved European regulatory approval for a new version of its Nellix EndoVascular aneurysm sealing system. Endologix makes various types of stents that are used to treat abdominal aortic aneurysms, or a ballooning of the body’s main artery.
The company’s shares rose 4% on Jan. 24 to a market value of about $951 million on that news.
European regulators had cleared a previous version of the Nellix device back in October. Endologix said in a release that the new version includes “a few enhancements.”
Endologix said it expects to begin a limited market introduction of the new Nellix in this year’s second quarter. A post-market clinical study will be done in the third quarter at selected European sites.
Chief Executive John McDermott said the study will gather initial data and patient follow-up information to support gradual introductions in other markets. Endologix is scheduling a broader launch for the Nellix device in 2014.
Endologix got the Nellix device when it bought Palo Alto-based Nellix Endovascular Inc. in 2010.
Silverado in Phoenix
Irvine-based Silverado Senior Living Inc. will build a $12 million assisted living facility in the Phoenix suburb of Peoria, Ariz.
The building will have 43,500 square feet of space and employ about 100 people when it opens late this year or in early 2014, according to the Phoenix Business Journal.
Silverado specializes in building and operating assisted-living communities for people with Alzheimer’s disease and other forms of dementia. The company now has 23 facilities in California, Arizona and four other states, and is planning to build a community in Denver, marking its entry into the Colorado market.
Chief Executive Loren Shook told the Phoenix publication that it decided to build in Peoria because of the city’s medical office cluster as well as its proximity to Sun City, a large retirement community.
Bits and Pieces:
Lake Forest-based Insight Imaging said that GE Healthcare, a U.K.-based business unit of General Electric Co. in Stamford, Conn., picked it as its sole preferred mobile diagnostic imaging provider. Insight said its fleet now includes those previously operated by GE Mobile Interim Solutions. … Rob Pickell is chief marketing officer at Irvine-based healthcare software maker Kareo Inc., a new position. Pickell previously was chief marketing officer and senior vice president for HireRight, an Irvine employment software and service provider. … Feinerman Vision Center in Newport Beach said it now offers refractive surgery using lasers made by LensX Lasers, an Aliso Viejo startup that was acquired in 2010 by Alcon Inc., which has more than 800 workers in Irvine.
