UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
Proxy
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Soliciting Material Pursuant to
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Quality Systems,
Inc.
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Registrant as Specified In Its Charter)
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Quality Systems Inc.
Investor Presentation
August 19, 2008
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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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Quality Systems: Company Snapshot
o Through our NextGen and QSI divisions, we develop and provide
computer-based practice management, medical records, and e- business
applications for U.S. medical and dental group practices
o The company derives most of its revenue and growth from physician group
business and its high functionality practice management suites
o Quality Systems is managed with an eye toward pursuing organic growth,
while concurrently maintaining a strategy of aggressive reinvestment in
new product and service development initiatives
o Quality Systems has an industry-leading track record of strong financial
and shareholder returns, and a dedication to the highest corporate
governance standards
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A Track Record of Success
o The growth strategy developed by the continuing Quality Systems Board
nominees and management team has delivered results:
o We believe the company has been growing at a faster rate than the industry
average and taking market share from our competitors
o Our revenue stream is diversified, with two-thirds of sales to mid- sized
and large customers and the rest to smaller customers
o The company has successfully leveraged its strength in the practice
management business into the emerging medical records market
o Currently 75% of our customers buy products in both categories
o By investing in new products and services, we can anticipate customers'
unique needs and provide the solutions they demand
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A Track Record of Success
o Evident in our ongoing financial performance and track record of
delivering shareholder value:
o Nearly 400% stock price increase the past five years
o Financial results rank Quality Systems among the most profitable
companies and strongest cash flow generators in its sector during the
same period
o Solid first-quarter FY'09 earnings included a 31% jump in net
revenues and 40% increase in net income
o Corporate governance record predicated on pro-shareholder policies
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Our Strategy Is Working
Revenue
Earnings Per Share
4
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Our Strategy is Working
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Ongoing Strong Financial Performance
Maintenance Revenues
System Sales
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We Are Generating Meaningful Results for Shareholders
Cumulative Returns
QSI William Blair Healthcare Information Technology Index
NASDAQ Composite Index NASDAQ Computer and Data Processing Index
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Well-Positioned for Continued Success
o The company has a proven strategy to expand the business and build on its
recent momentum:
o Our Board nominees and current management team - including Chairman
Sheldon Razin and Steven Plochocki, our new CEO - share common goals
for our company's future and have the skills and knowledge to enable
us to prosper in this growing industry
o Under the leadership of this group, Quality Systems will continue to
capitalize on the industry's expected growth by:
o Developing and enhancing our leading software solutions
o Expanding into new markets where we can capture meaningful market
share
o Making prudent, disciplined investments to improve our products
o Growing our existing customer relationships while pursuing new ones
o Prioritizing organic growth, but also continuing to pursue
opportunistic acquisitions such as HSI that complement our existing
products or expand our customer base
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Our CEO: Significant Experience
o Steven Plochocki is a seasoned industry executive with significant
experience and a strong track record of building value
o As Chairman and CEO of Omniflight Helicopters, the country's
second-largest air medical services provider, achieved 20% EBITDA
margins, among the sector's best
o As CEO of Trinity Hospice, helped restore the company to
profitability and achieved 20% compound annual growth rate in
revenues
o As CEO of InSight Health Services Corp., the nation's largest
integrated provider of diagnostic imaging services, company doubled
in sized and share price increased by more than 250%
o Significant knowledge of Quality Systems
o Strong leadership and continuity of the company's successful strategy
o Has provided an independent perspective since joining the Board in 2004
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Experienced Management Team
Years of Industry
Title Experience
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Steven Plochocki 36
Chief Executive Officer, Quality Systems, Inc.
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Patrick Cline 27
President, NextGen Healthcare and EVP, Quality Systems, Inc.
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Paul Holt 13
Chief Financial Officer, Quality Systems, Inc.
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Donn Neufeld 28
Executive Vice President, Quality Systems, Inc.
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Fred Neufeld 30
Executive Vice President and General Manager, NextGen Healthcare
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Scott Decker 12
Senior Vice President, NextGen Healthcare
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Tim Eggena 15
Executive Vice President, NextGen Practice Solutions, NextGen Healthcare
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Knowledgeable, Experienced Nominees
Years of
Director & Relevant
Current Occupation Expertise Experience
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George Bristol Financial Services 26
Managing Director - Corporate Finance,
Crowell Weedon &Co.
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Patrick Cline Healthcare IT 27
President, NextGen
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Philip Kaplan Technology 13
CEO, Deer Valley Ventures, LLC
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Vincent Love Financial Services 41
Managing Partner, Kramer, Love & Cutter, LLP
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Russell Pflueger Medical Devices 7
Founder, Chairman & CEO, Quiescence Medical, Inc.
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Steven Plochocki Healthcare 36
CEO, Quality Systems, Inc.
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Sheldon Razin Healthcare IT 34
Founder and Chairman, Quality Systems, Inc.
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Robert Smith Financial Services / 33
Senior Advisor to Aquiline Capital Partners, LLC Marketing
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The Right Board to Build Value Going Forward
o Nominees drawn from financial services, healthcare, medical devices and
information technology fields -- providing the relevant knowledge and
diversity of experience the Board needs
o Director nominees collectively have nearly 50 years of Quality Systems
Board experience
o The Board and its Chairman continue to provide leadership and critical
understanding of the company, its history and how the industry's
competitive landscape has evolved
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Continually Recognized by Leading Business Publications
o #5: Forbes 200 Best Small Companies in America (7 consecutive years)
"Quality Systems should have no end of new business, given how much time
practices have to devote to nonmedical activities--and the approach of an
election year in which every presidential candidate has to have a plan to
broaden health care coverage."
o #19: BusinessWeek 100 Hot Growth Companies (4 consecutive years)
"If you've filled out forms at the doctor's office lately, you'll
understand why Quality Systems Inc.'s stock has been on a tear. Doctors
and nurses are drowning in a sea of paperwork, and Quality Systems
software can digitize it, from patient data to appointment records to
treatment outcomes."
o #52: Fortune America's 100 Fastest Growing Small Public Companies (4
consecutive years)
"Physicians and dentists rely on Quality Systems' software to transition
patient records from paper to electronic systems. Last year the company
introduced applications and services that help practices collect funds
from insurance companies and Medicare."
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Highly Regarded by Wall Street
o Nine of our 15 sell-side analysts currently rate the stock a BUY or
equivalent
o Median analyst 12-month target price was $41 on 8/6/08, the day before Q1
'09 earnings were announced, a 23.5% increase over the closing price of
$33.20 at the time
o Donald H. Hooker, UBS: "We like that Plochocki has served as a
Director on QSII's Board since 2004, and has been a member of the
audit, compensation, and independent directors' compensation
committees -- all of which, we believe, will give him a deep
knowledge of QSII and allow him to hit the ground running. We think
Plochocki's broader healthcare services background (mainly outside of
tech) may prove to be complementary to industry veterans Pat Cline
(President of NextGen) and Donn Neufeld (President of QSI)."
(8/12/08)
o Sean W. Wieland, Piper Jaffray: "Strong performance is attributed to
favorable market conditions, strong pipeline and quality sales force.
Building on noticeable attrition in sales force prior quarter, QSII
seemed to have built a strong sales team that is delivering." (August
8, 2008)
o Todd Weller, Stifel Nicolaus: "Overall, we continue to view the
physician HIT market as an attractive growth opportunity over the
next few years. We also believe that Quality remains well positioned
to capture its fair share of the market [�] Quality remains well
positioned as one of the top players in the physician HIT market."
(June 11, 2008)
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Strong Corporate Governance Record
o Governance practices are strongly pro-shareholder
o Our governance structure includes:
x An annually elected Board
x Cumulative voting rights
x Shareholders may call meetings and act by written consent
x No "poison pill"
o Our corporate governance provisions, including the definition of
"independent director," meet or exceed NASDAQ requirements
- Six of our eight Board nominees are independent under these
criteria
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We Believe Giving Control to the Hussein Nominees Presents a Real Threat
o Mr. Hussein has never articulated a strategic plan
o Has not participated meaningfully or supported the Board's successful
plan the past several years
o Criticized management's decision to acquire Clinitec and Micromed,
which now account for more than 90% of Quality Systems' revenues
o Mr. Hussein seeks control, not just representation
o Cumulative voting will permit him to keep Board seat
o Owns less than 17% of shares, yet wants Board control
o A backdoor raid on Quality Systems
o Mr. Hussein's actions to date have been counterproductive
o Unwilling to set aside personal grievances
o Has boycotted several critical Board meetings
o Disruptive demeanor and unfounded accusations distract our Board from
critical business matters
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Hussein has a History of Destroying Shareholder Value
o SIMO, a profitable Egyptian paper company, foundered under his leadership
o Company was profitable prior to Mr. Hussein's ascension as Chairman
o During Mr. Hussein's term as Chairman, the company's financial
position greatly deteriorated and losses mounted, to the extent that
employees were not being paid wages during certain periods in 1998
o Ultimately, the entire Board was suspended by the Companies Authority
o Following Mr. Hussein's removal by Egyptian government, company's
financial position improved
o Censured and fined by American Stock Exchange for mismanagement of an
investment account under his control
o ASE found that Mr. Hussein engaged in a course of fraudulent conduct
by "excessively trading and churning" a customer account, and
providing the customer with "materially false and misleading
information about the status of his account"
o Suspended for three months from servicing any new discretionary
accounts
o Hussein's employer settled the related lawsuit for $2.5 million
o These are just two examples. For others please go to our Web site at:
www.qsi2008proxy.com
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We believe Mr. Hussein's history shows that he is ill-equipped to
control and lead Quality Systems
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Mr. Hussein's Independent Director Proposal Should be Defeated
o Our definition was adopted in 2004 as part of a general review of the
bylaws undertaken at the urging of the Board's independent directors to
ensure compliance with California law and NASDAQ regulatory standards
o We believe the proposal is primarily motivated by Mr. Hussein's desire to
increase his influence on the Board and certain committees
o This proposal is simply a power grab intended to minimize the influence of
Chairman and independent Board member Sheldon Razin
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The Company's Management Team
Supports Our Board Nominees
o The company's top 10 executives recently sent a letter to shareholders
expressing their strong support for the Quality Systems nominees, noting:
o Mr. Hussein "does not appear to understand or to care about our
business and strategy"
o His attacks "have threatened the ability of our management and
employees to carry out our growth strategy in the face of
increasingly intense competition"
o "The prospect of Mr. Hussein increasing his influence is deeply
disturbing to us, as we believe it should be to all shareholders"
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