Steve Plochocki – President & Chief Executive Officer Paul Holt – Executive Vice President & Chief Financial Officer Dan Morefield – Executive Vice President & Chief Operating Officer Monte Sandler – Executive Vice President, RCM Services Gary Voydanoff – Executive Vice President, Sales and Marketing

Charles Rhyee – Cowen & Co. David Larsen – Leerink Swann Michael Cherny – ISI Group Ricky Goldwasser – Morgan Stanley Jamie Stockton – Wells Fargo George Hill – Deutsche Bank Gavin Weiss – JP Morgan Richard Close – Avondale Partners Donald Hooker – KeyBanc Capital Markets Bret Jones – Oppenheimer Jeff Fidacaro – William Blair & Company Mohan Naidu – Stephens, Inc.

Welcome to Quality Systems, Inc. F3Q 2014 Results Conference Call. Hosting the call today from Quality Systems is Steve Plochocki, President and Chief Executive Officer. Today’s call is being recorded. (Operator instructions.) It is now my pleasure to turn the floor over to Steve Plochocki, President and Chief Executive Officer. You may begin.

Thank you, Jackie, and welcome everyone to Quality Systems’ F3Q 2014 results call. With me this morning are Paul Holt, our CFO; Dan Morefield, our Chief Operating Officer; Monte Sandler, the Executive Vice President of RCM Services; and Gary Voydanoff, the Executive Vice President of Sales and Marketing. Please note that the comments made on this call may include statements that are forward looking within the meaning of securities laws including without limitation statements related to anticipated industry trends; the company’s plans, products, prospective and strategies preliminary and projected; and capital equity initiatives to the implementation of potential impacts of legal, regulatory, or accounting principles. I’ll provide some opening comments and then turn it over to the other members of the team. While we are disappointed in the performance of late in our Hospital Services Division we believe in its long-term prospects and to this end are investing accordingly. With the impairment now behind us we are encouraged by cross-selling opportunities particularly as the demand for revenue cycle services increases in light of the fast approaching ICD-10 deadlines. Additionally we are gaining traction since our acquisition of Mirth and its connectivity solutions are paving the way as our healthcare system shifts from fee for service to value based, such as the evolving accountable care organization models. Our breadth and depth make it possible for our clients to succeed in this rapidly changing space. NextGen Healthcare became one of the first electronic health vendors in the nation to achieve ONC-HIT 2014 Edition Certification as a complete EHR for both ambulatory and inpatient settings. This certification included meeting criteria for both ICD-10 and Meaningful Use Stage 2. As the healthcare information technology sector continues to evolve and new models arise we play a key role in helping our clients adapt and keep pace with these aggressive requirements of end use certification and coding changes. This is a promise we have made to our customers and we will continue to keep it. October 1st, the date for ICD-10 compliance, is rapidly approaching. As a result we have developed ICD-10 compliant Meaningful Use Stage 2 solutions and resources to help our clients succeed. Sharing some key educational testing portions of our ICD-10 transition solutions and knowledge with the industry will help providers move towards successful transition into this modern era of healthcare. 2014 will create tailwinds as healthcare continues to automate and reform. We have RCM fueled by ICD-10 coding requirements. Our Mirth products are fueled by the movement from free for service to value based modeling such as ACOs, implementation and training services to upgrade clients to Stage 2 and a replacement market fueled by Stage 2 certification requirements. Smaller vendors simply don’t have the infrastructure to make the investments to progress to Stage 2 or Stage 3. The government has already extended Stage 2 to 2016 and delayed Stage 3 to 2017. The reason for this is clear – out of more than 2200 products and more than 1400 complete EHRs that were certified for Stage 1 Meaningful Use Criteria, today only 75 products and 21 complete EHRs are certified for Stage 2. We fit in that category. So we are busily upgrading our clients to Stage 2 and ICD-10 compliance, keeping them well ahead of the game. I will now turn it over to Paul.

Thanks, Steve, and hello everyone. Let me first make note of a couple of the most significant contributors to this quarter’s results just to give you some context to the numbers that we’ve just reported. The first was our weaker than expected revenue and operating performance coming from our Hospital Solutions unit, which pursuant to accounting rules required us to perform a review of our long-lived assets for potential impairment. The conclusion of that process resulted in a $26 million noncash charge related to the impairment of all remaining [hospital-held] intangible assets including capitalized software development costs. $20.1 million of the charge was allocated to costs of revenue while approximately $5.9 million was included in our SG&A and operating expense lines. While we’re disappointed in our near-term results we remain committed to delivering for our hospital customers as well as improving our operating performance moving forward. The second significant contributor to this quarter’s results was the release of our new Ambulatory v. 5.8/8.3 which supports new ICD-10 billing codes as well as MU 2 requirements. The release of this version resulted in both increased amortization expense as well as significantly reduced capitalization of development costs after the release. Amortization of capitalized software expense which includes any cost of revenue grew by approximately $1.4 million on a sequential basis, while capitalization of development costs declined by approximately $4.4 million sequentially. While both these items have no impact on our cash flows they do impact our GAAP earnings. The combination of both these changes reduced earnings per share by approximately $0.06 compared to the prior quarter. Now moving on to my normal discussion around revenue and operating results, consolidated revenue this quarter was $108.9 million versus $111.1 million last quarter with the decline driven primarily by a $2.2 million decline in hospital segment revenue and a $2.8 million decline in implementation and training revenue. The decline in our Hospital Segment revenue was driven by both lower sales as well as reserves for returns and credits. The downturn in implementation service revenue was driven partly by the timing of our User Group Meeting, holidays, and some segment of customers requiring delays in services pending their own internal preparation for our release of 5.8/8/.3; as well as some reduced demand coming from the downturn in system sales. Partially offsetting these declines was the growth in RCM revenue as well as incremental Mirth-related revenue which Mirth-related revenue grew to approximately $2.6 million versus $0.6 million just last quarter. Our total bookings of software and services including RCM grew to $41.6 million – that’s up from approximately $38.2 million last year and $39.6 million a year ago. The RCM increased bookings related to Mirth products and services as well as upgrade services for our new version 5.8/8.3 release. Moving to year-over-year performance, our consolidated December quarter revenue of $108.9 million was down 5% over the prior year’s $114.5 million primarily due to a decline in systems sales of $10.0 million or 34% which is partially mitigated by an increase in services, maintenance, RCM, ADI, and other services revenue of $4.3 million or 5%. Our recurring revenue represented approximately 82% of total revenue compared to 75% a year ago. Our consolidated gross profit margin this quarter came in at 34.7% including the impact of the impairment. That’s down from the year-ago quarter at 59.3%. Excluding the impact of the impairment, our F3Q 2014 gross margin was 53.2%. Our gross margin was down primarily due to the decline in higher margin software versus the prior year as well as a decline in implementation training profitability tied to a combination of the build out of resources we performed in anticipation of expected demand for upgrade assistance combined with the near-term slowdown in revenue I referenced earlier. Our SG&A increased by approximately $1.4 million to $36.9 million in F3Q compared to $35.5 million a year ago. This increase was driven primarily by salaries, benefits, commissions and other administrative expenses as well as a full quarter of Mirth results which is partially offset by a reduction of bad debt expense. The reduction in bad debt expense reflects the impact of our heightened focus on working capital management as further evidenced by a decline in accounts receivable days outstanding to 106 for the current quarter versus 121 a year ago. Our R&D expense increased $13.3 million versus $7.8 million a year ago. The increase in net expense reflects a number of factors including a $2.9 million increase in gross investment in R&D combined with a reduction in capitalized software costs of $2.5 million. The decline in capitalization costs was driven by increased use of the development (inaudible) which are not capitalized under accounting rules as well as a cessation of capitalization and software development costs in the hospital business via the impairment. Our commitment to continued investment in product development is going to continue and even expand with our Mirth acquisition which is opening up new opportunities to accelerate our product development efforts. Our effective tax rate for the December quarter was 34.4% compared to 32.9% in the prior year quarter. The current rate increased mostly due to an increase of state blended rates and the non-deductibility of certain aspects of our impairment charge. On a GAAP basis our fully diluted earnings per share for F3Q 2014 was a loss of $0.21. This compares to earnings of $0.26 which we reported a year ago. Our year-over-year decline in earnings per share was driven primarily by an impairment charge in our hospital unit, lower systems sales as well as increased R&D expenses. On a non-GAAP basis our fully diluted earnings per share was $0.11, and that’s a decline of 52% from the $0.29 we reported a year ago. This was principally driven again by a decline in system sales, an increase in R&D expenses, and reduced capitalized software charges. Our cash and cash equivalents plus marketable securities was at $94.0 million at the end of our December quarter. That’s up $9.7 million from $84.3 million at the start of the quarter primarily due to our outstanding collections performance this quarter which reduced our total accounts due by approximately $13.2 million during the quarter. I’ll also note that our cash flow from operations grew $27.7 million this quarter compared to $16.2 million a year ago; and deferred revenue grew to $72.7 million – that’s up from $66.8 million just last quarter, reflecting in part the impact of the Mirth acquisition. And again, for those of you who are tracking this I’m going to provide some selective noncash expenses for the quarter as follows: total amortization of capitalized software $4.1 million; amortization of intangible assets $2.4 million; total depreciation expense $2.1 million; stock comp expense $0.7 million. Our investing activities for the quarter: internally standard and capitalized software, $3.6 million; fixed assets, $2.8 million. And finally I’d also like to mention that Quality Systems has announced that its Board of Directors has declared a quarterly cash dividend of $0.175 per share on the company’s outstanding shares of common stock payable to shareholders of record as of March 14, 2014, with an anticipated distribution date of April 4, 2014. And thank you for your interest in our company. I’ll now turn things over to Dan Morefield.

Thanks, Paul, and hello everybody. In November we had a very successful User Group Meeting in Las Vegas, Nevada, with record attendance of over 4800 people. To kick off the conference we announced that general release of the NextGen KDM v.8.3 which is the content module that completes the preparation for ICD-10 and Meaningful Use Stage 2 of our Ambulatory product. More than just a regulatory release the new KDM has new content for many specialties such as cardiology, orthopedics, ophthalmology and obstetrics just to name a few. In addition we also announced our new interoperability platform NextGen Share is a platform for delivering cloud services to existing NextGen Ambulatory customers. Features of this service include such things as secure, electronic referrals among the participating NextGen clients. NextGen shares the first joint solution utilizing Mirth tools since we acquired Mirth Corporation in September of last year. During the last quarter we announced the release of Mirth Connect 3.0 Health Integration Engine. Mirth Connect 3.0 adds hundreds of new features to Mirth Connect 2.2 such as the new internal messaging engine that focuses on guaranteed delivery performance and configurability. The F3Q revenue from implementation was below expectations. A number of factors contributed to the quarter-over-quarter decline. These include the remix of work in progress pools from larger long-term implementations to smaller practice implementations and the decline in new business sales during the prior quarters. Additionally we usually see some fluctuations in demand for services this last quarter due to the holidays. On a more positive note we had some of our enterprise clients make significant license purchases during the quarter. This further supports our belief that our client base will be the leaders in the practice consolidation movement in the physician-led ACO models. As we anticipated coming out of our UGM we started building a strong service revenue pipeline as clients again are preparing and engaging in the need for [MU2] and ICD-10 transition plans. In just a few weeks between our User Group and the end of the quarter there were bookings of over $3 million in that segment. The sales activity in our service lines continued to build in the early part of January and we are confident that trend will carry forward throughout this year. Moving on to Hospital Solutions and some comments on the impairment: the impairment review stems from the operating results of the Hospital Solutions which has performed below internal expectations and has experienced a slowing of systems sales while the company continues to significantly invest in customer satisfaction, development, and infrastructure. Under accounting rules when indicators of potential impairment are identified companies are required to conduct a review of their carrying amounts of goodwill and other long-lived assets to determine if an impairment exists. Notwithstanding the impairment the company has made good progress in working through its backlog of implementations as it helps our clients prepare to test for Meaningful Use Stage 2 and the effective adoption of ICD-10. Accordingly we have begun to reduce the resources in the division as our early investments continue to improve customer satisfaction in a more sustainable, scalable manner. As a reminder, in the fall of 2013 NextGen Inpatient Clinicals v 2.6 became compliant with the ONC 2014 Edition criteria and was certified as a Complete Electronic Health Record, a complete EHR, by the Certification Commission of Health Information Technology, an ONC authorized certification body. The certification was in accordance with the applicable hospital certification criteria adopted by the Secretary of Health and Human Resources. The ONC 2014 Edition criteria supports both Stage 1 and Stage 2 Meaningful Use Measures required to qualify eligible providers and hospitals for funding under the American Recovery and Reinvestment Act. The certification enhances Quality Systems’ competitive position within the healthcare information technology sector. With that I’m going to turn the call over to Monte Sandler.

Thanks, Dan. Good morning everyone. RCM Services revenue for F3Q was $17.4 million, representing a 7% growth over the prior year quarter. Operating income was $2.5 million, 19% above prior year. We remain on record pace for bookings and continue to see strong interest in the market for multiple product sales bundled as part of our recurring revenue RCM service offering. Our backlog of signed deals not implemented is up significantly over last year as our team implements recent bookings. And our RCM pipeline continues to grow as our customers in the overall market learn more about our comprehensive service offerings. Our efforts to expand our RCM services into our small hospital and dental customer markets continue to advance as part of our overall corporate strategy. We continue to work with providers that remain concerned about their financial future as a result of pressures from ACA reforms, the looming implementation of ICD-10, declining reimbursement, and risk contracting. Our tailored RCM services driven by people, process and technology make us a great solution to help providers position themselves successfully for future healthcare reimbursement models. Thank you for your time and interest in our company. I’ll now turn it over to Gary.

Thanks, Monte. Hi everyone, glad to be with you once again. The strategy to adapt our sales and marketing efforts to the ever-changing market continues. The rapidly changing conditions mean that we have to make some course corrections but it’s evident that repositioning ourselves for the RCM market, cross-selling our products into our client base, focusing on the growing population health interest, and beginning to move the Mirth technology into and outside of our base is the right course. The march toward the ICD-10 and Meaningful Use deadlines continues which in turn drives our growing RCM and professional services pipeline. While we had a higher percentage of net new sales this quarter we are confident, as are many of the industry analysts, that the replacement market will build as vendors fail to meet regulatory requirements. We are excited as we begin the process of spinning up the Mirth sales and marketing efforts. Mirth has grown organically, basically by word of mouth, and now we have the opportunity to really tell their success story. Our sales teams are beginning the training process and the marketing message and the campaigns are ramping up. We are very encouraged by our first full quarter with the Mirth team. The products are rock solid and we are already seeing interest from our NextGen client base and new prospects with respect to the Mirth technology set. Cross-selling Mirth into our client base is in its infancy and we expect it to grow in F2015 as the sales team is trained and begins their outreach into the base. Several new opportunities have already been brought to the Mirth sales team by the NextGen sales team and they are working on joint opportunities now. We’ve also begun initial hiring for members of the Mirth outside sales team to actively call on the enterprise healthcare segment. We’ve also started giving key clients and potential prospects and partners a look at our new architecture platform and the feedback is great. Combined with Mirth’s technology the product [Roadmap] is energizing the enterprise clients and client advisory board who are partnering to shape our future. Marketing continues to focus on generating new business opportunities for NextGen healthcare. Year-over-year marketing leads have grown significantly for our core products, RCM services and ACO solutions. We’ve seen 158% growth in leads in F3Q versus the same quarter one year ago. Our investment in this area continues to deliver a healthy return on investment as leads are converted to opportunities in the sales pipeline. Our strategic messaging demonstrates the value and business results NextGen solutions deliver to the healthcare market. The lead generation and cross-selling effort is having a very positive impact on the RCM pipeline. The overall pipeline sits at $153 million and as we stated last quarter this now represents the combined Ambulatory, RCM, Mirth, and dental pipeline. The drop in our quarter-over-quarter pipeline can be attributed to the drop in the inpatient short-term funnel as the division has been almost exclusively focused on the implementation, account management and support of our inpatient sales backlog. As always I’d like to mention some of the notable success stories from last quarter. Two contracts in particular stand out as they reflect the growth of our Ambulatory enterprise clients, their satisfaction with our software and the positive impact of our cross-selling efforts. Virtua, a four-hospital health system based in Marlton, New Jersey, continued to expand their NextGen relationship, signing a significant RCM services agreement. In addition we signed a long-term agreement with Abilente Healthcare and Family Health Center of Boone County. Adventis Health System continues to expand their ambulatory market footprint and signed another large ambulatory license order. And kudos to the Mirth team for signing notable orders with Quality Health Network, a Colorado-based HIE. This deal by the way is a competitive replacement which the Mirth team is seeing as an emerging trend for them. Accountable Care Associates signed an order for much of the Mirth technology set – Mirth Results, Mirth Match, Analytics and Connect. Lastly, the Defense Health Clinical Systems Office of the Department of Defense signed a significant license renewal with Mirth. Finally, the company executed 100 new arrangements on a consolidated basis versus 104 last quarter. 87% of the new arrangements were greenfield and 13% were replacements. Discounting did not materially change in the quarter and as of 12/30/13 there were 151 quota carrying sales and management positions. There was no material increase in the Ambulatory staff over F2Q. We will continue to add headcount to support our expanding Mirth and RCM sales efforts. Thank you all for your time and continued interest in our company. Jackie, I’d like to turn it over to you now for questions.

The floor is now open for questions. (Operator instructions.) Thank you. Our first question is coming from the line of Charles Rhyee with Cowen & Co. Charles Rhyee – Cowen & Co.: Yeah, thanks guys. You know, I wanted to talk about the hospital business here, and obviously one real question is how much of the pipeline last quarter would you have attributed to the hospital business? And then secondly you know, obviously this division has struggled here for some time now and has led you to write off a lot of the value here. Can you kind of sort of give us a sense of what’s really gone wrong here for you guys and why has this not come together better than it has? Thanks.

Hi Charles, this is Dan. First of all let me respond to your pipeline question. As a general rule we’re not going to break out that level of specificity. As was earlier stated it was the bulk of the… The reduction in our pipeline was principally attributed to the decline in pipeline in the Hospital Solutions group. As far as the Hospital Solutions as a whole, as we’ve mentioned before we got out of that gate fast and sold significantly more than we could implement. And so we have been focusing a lot of our efforts on implementation and client satisfaction, and investing into our software for those purposes as well as bringing to market software for Meaningful Use 2 and ICD-10 compliance. So this was a market that continues to be important to us. The one thing that we see at this point is that our investments in that over the last couple of quarters are taking hold and we believe that we can reduce some of those investments as we see the results of our efforts in the past. Charles Rhyee – Cowen & Co.: Is it right to understand that when you take this charge here, this impairment on goodwill, is it right to think that you’re assuming that this division though is not going to be really contributing much over the near to medium term? Is that the right way to think about it?

Well I think the acknowledgement that the unit has been running with operating losses in that unit is a reflection of the investments that we’ve been making. And so when you’re looking at that you have to assess the value of long-term assets, the accounting rules require that when you do look out you do forecasting and you have to assess the value and whether or not that you need to impair. So I think the fact that we had to take that charge is just a simple fact that the unit has been very unprofitable here in the near term and we have to acknowledge that. Charles Rhyee – Cowen & Co.: Okay, and one last question, Dan. You know, obviously you don’t want to break out the specificity on the pipeline but can you give us a sense sequentially on how the pipeline looked for the Ambulatory side of NextGen? Thanks.

Charles, this is Gary. So once again we’re not going to break out individual parts of the pipeline but as I mentioned in my statement we’ve had very positive RCM growth. And the sales team has certainly been repositioning and refocusing their efforts on that services market which I think we know industry-wide is growing very rapidly. So we’re very encouraged there. Charles Rhyee – Cowen & Co.: Great, thank you.

Our next question comes from the line of David Larsen with Leerink Swann. David Larsen – Leerink Swann: Hey guys. Can you talk about the 5.8 and 8.3 product and what sort of incremental value that delivers to your physician customers? Our checks indicate that your product, your legacy product is excellent but it can be a little bit complicated, like a lot of bells and whistles – can you just sort of talk about that please? Thanks.

Sure David, this is Gary Voydanoff. I’ll talk to that one. Well so what we’ve been really focused on with 5.8 and 8.3, 8.3 being the clinical side and the components there, is really the user experience and making the system more user friendly and easier; more based on individual preference setting by the end user so that you can modify it and enhance it to your own tastes very quickly and easily. So the physicians that are working on the product that we work with in concert with our advisory group really like that type of workflow that we’re providing so we’re really looking to add simplicity to the system and that’s been the goal. And I think we’re hitting that mark and our clients are happy with where we’re going, and it’s just kind of a logical transition to where we’re going in the future with making systems much more easy to use, fundamentally simpler. And as you know, industry-wide the satisfaction by physicians in terms of how they engage with us to further deepen and build the clinical content. So it meets today’s standards. There are certainly things in the release that we mentioned around regulatory requirements, ICD-10 in particular. That was very important for us. Continuing to enhance it with respect to tracking and trending measures, clinical performance and all those things go towards what’s going on with meaningful use and the entire ACO industry. So I think we’re excited with those things. Another really important component that Dan mentioned was the NextGen Share component and I think it’s really important that we made a statement really early on with Mirth that we were going to use the Mirth tools to really benefit our client base and provide connectivity at really no cost in this case. So now we have a huge network of NextGen customers, 80,000 providers that can be connected, that can share information, that can share referrals, have mail capabilities – secure mail and other capabilities – that we really haven’t seen in the market today. And we’re going to continue to leverage and build off that network, and I can tell you our clients are excited. Another piece that we released at our UGM was our First Patient mobile application. So now we continue to extend our applications out into the patient side now. We think again in the long term that’s an area we’re going to continue to build on and explore. There are certainly opportunities for revenue in that area in the future. And I think the last thing I would point out with 5.8 and 8.3 was really the drive for quality. Again, we wanted to make sure we had a rock solid release that was of the highest quality we’ve delivered and I think we’re pretty confident in what we’re seeing in the results from the clients that are upgrading right now that it may be one of our best releases that we’ve ever done. So I think that’s how I would characterize 5.8 and 8.3. David Larsen – Leerink Swann: Great, and then just one more: the bookings number I think, $41.6 million, does that include RCM? And had that number previously included RCM?

No David, previously we did not include RCM. So you are correct, the bookings number that we provided this quarter and going forward will be inclusive of our RCM booking. David Larsen – Leerink Swann: Okay, great. And then for the 5.8 and 8.3, Gary, of the 4400 group practices that you have as clients how many actually have that new solution roughly?

Well David, it’s hard to tell right now. Since we just released it in mid-November and then we had holidays where we had not a lot of folks wanting to go through those enhancements and upgrades so it’s really just starting to ramp up now. I think we’re at the low end. David Larsen – Leerink Swann: Okay, under 5%.

Sure. David Larsen – Leerink Swann: Thank you.

Our next question comes from the line of Michael Cherny with ISI Group. Michael Cherny – ISI Group: Good morning, guys. So just a couple housekeeping questions first, I apologize if I missed this: do you guys give the full segment breakdown of your results in terms of revenue and EBIT?

I can provide that, this is Paul. You ready? So Ambulatory revenue $83.9 million; RCM $17.4 million; Hospital revenue $2.5 million; and dental, $5.1 million – those are all the revenue statistics. Next up would be the operating income: Ambulatory $22.6 million; RCM $2.5 million; Hospital, a loss of $5.0 million; and dental, $0.4 million. Michael Cherny – ISI Group: Okay, thanks Paul, that’s helpful. And then just another modeling question: in terms of the R&D line and the significant new product rollouts you guys have had you obviously had a step-up in expense. How should we think about, without asking you guys to give specific guidance but the trending of that line? Is this the new normal in terms of what we should expect from an expense perspective or will it go back to a more normalized rate like we’ve seen for the last number of quarters?

Yeah, this is Paul. So the amortization piece, that is going to become more of a normalized rate – that’s not something that’s going to be moving around a lot. However on the capitalized software piece, that’s a component of exactly what projects are being worked on. And so that one I’m not going to suggest any particular guidance there. I think directionally it was certainly you saw a pretty big change this quarter but it’d be hard for me to really guide you or direct you there in any particular direction. But clearly whatever change would have to be off of the run rate where we’re at today if that makes any sense. Michael Cherny – ISI Group: Thanks. And then just tying into that more of a thought process question related to the cost base, and you’ve talked in the past about right sizing the business, pursuing some restructuring programs given the growth environment. Can you talk to me about some of the specific areas you’re targeting, any results you had and kind of how you’re measuring the success of those restructuring programs?

This is Dan, and those were pieces that we’ve talked on before and that question has come up in the past on these earnings calls. And what we’ve said is that we’re not giving out those specific kinds of details, but the other thing we’ve said is that our purpose for right sizing the organization as you know is the ability to invest in the higher growth sections of it. And so we’re seeing some of that in research and development; we’ve seen a little bit of that in the past in Hospital Solutions to catch up there. Certainly we’re investing in RCM and we continue to invest into Mirth. So we’re not going to provide specifics on that, and again, it’s just a reminder to the group that our purpose for doing that is giving us the ability to invest in other parts of the organization. Michael Cherny – ISI Group: Thanks.

Our next question comes from the line of Ricky Goldwasser with Morgan Stanley. Ricky Goldwasser – Morgan Stanley: Hi, this is actually (Inaudible) in for Ricky Goldwasser. Thanks for taking our questions. I guess you know, the November 30 deadline for the transaction on some of these from the report on strategic alternatives is coming online. Is the Committee still pursuing a consideration of strategic alternatives and I mean can you speak to the timing of that?

Well first off, Ricky, the transaction committee is charged with undertaking an objective evaluation of the company’s strategy, direction, and alternatives. We do not believe it is appropriate to comment on internal Board or committee initiatives or strategic deliberations. We do not intend to provide market updates on the status of any such ongoing internal deliberations. So we will of course publicly disclose any material events or developments when appropriate and as required by the securities laws. So that’s a long way of saying that the Board and management are always assessing strategic direction and quite honestly we’re in the process right now of developing our plans for our upcoming fiscal year. As you know our fiscal year begins April 1st so this is our normal planning process and our normal planning time. Ricky Goldwasser – Morgan Stanley: Thanks, and just a couple of quick questions on just the operating business. We saw the sequential decline in maintenance revenues and we’re wondering if this reflects any loss of clients on the Ambulatory side from hospital consolidation? And then secondly is the increasing demand for SaaS based solutions particularly on the Ambulatory side, are you seeing that impact system sales and demand for your products?

This is Paul. I’ll take the maintenance one and then I think Gary will take your second one. So the issue with the sequential decline in maintenance was strictly around the hospital fees. We had (inaudible) some reserves there and we had some write offs that we had impact the maintenance line inside the hospital unit to the tune of about $0.7 million. So if you factor that in, take that into consideration here and I’ll turn over to Gary for the other.

Gary here to speak to the SaaS question. I think the total number of arrangements we’ve done has been very consistent and I would say the number of, the percentage of SaaS arrangements within all of that have also been fairly consistent. What we’ve certainly had an uptick in as we look at our arrangements is our RCM agreements. It’s no question that our sales team as I mentioned earlier, we’ve really refocused them and repositioned everything we do around that service side. So the fact that we’ve begun offering now clinical and financial services together in a model that just provides dynamite outcomes and results that’s where we’re really seeing the market trending and where the uptick or the change has been, not so much in the SaaS area. Ricky Goldwasser – Morgan Stanley: Thank you. Thank you, I’ll step back in the line.

Our next question comes from the line of Jamie Stockton with Wells Fargo. Jamie Stockton – Wells Fargo: Yeah, good morning. Thanks for taking my questions. Gary, maybe just to stick with you for a minute. You guys have talked about leads being up significantly year-over-year I think probably for five or six quarters. When you look at the data that you’re seeing internally and then you look at system sales not really inflecting yet, how do you reconcile those? Or how do you get a good feel for whether or not that significant growth in leads year-over-year is ultimately going to translate into a pickup in system sales?

Jamie, what I think is really happening is NextGen fortunately is still top of mind with a lot of people and so all of the things we’ve been doing in marketing, geared around digital marketing has really brought more and more people to our website and to ask us about “What’s going on with NextGen? Tell us about all your different products.” So leads and all those various contacts that are coming to us are on really a wide, wide variety of topics – everything from population health to what’s going on in Patient Mobile, to you know, to actually somebody looking for a new system. So the breadth of the products is pretty wide so we get contacts and leads around all of those. And then obviously from there you’re going to have some sort of conversion of those into actual opportunities but the lead process and the things that we’re doing out there to generate and keep NextGen top of mind are really what we’ve been talking about in terms of leads and it continues to be positive. So that’s a good trend. If it was going the other way it would just mean that people are sort of relegating us to the backseat somewhere but that’s not happening. We’re still engaged in new opportunities and people are wanting to know what we’re doing. They want to know about 5.8/8.3, population health, what we’re doing in the ACO market and all those things. So I think there’s going to be… You know, it’s part of what this market is right now. We still think there’s going to be a lot of pent up demand and opportunities in the replacement area. I think people are doing their homework and they continue to look at vendors like ourselves. Jamie Stockton – Wells Fargo: Okay. Do you think that we should pay more attention to the pipeline number just as a better gauge for potential of inflection of system sales in the next couple of quarters?

That’s a good question but I don’t know that the pipeline in terms of where we’ve been at for RCM and Ambulatory is overall remaining steady. I think that just tells us we’re staying the course and the market has been what it’s been for probably the last three, four quarters. Jamie Stockton – Wells Fargo: Okay. Just one more question for you, Gary: the comment that you made about showing key clients the new architecture – is there any update that you guys can give us on what the timeline looks like for rolling out the integrated inpatient ambulatory single database, web-based solution that you’ve talked about in the past?

Hi Jamie, this is Dan and I’ll take a shot at that. We have publicly said on a number of occasions that our intent on the NextGen, the NG7 platform is that we will have the first product rollout on that in the upcoming fiscal year; that we will announce that relatively early in that year; and that that product will be single database, SaaS, cloud-enabled – all the component pieces that you referred to. And we are not at this point ready to announce the specific product and the specific submarket it will address but again that is something that we have said in the past and continue to say, that our intent is to begin to bring that out in our next fiscal year. Jamie Stockton – Wells Fargo: Okay, and Dan, this will be my last question. The implementation and training component of your business, I think you said that you’re building up some capacity there maybe to deal with ICD-10 and at the same time you got slammed with a little lower utilization during the quarter. How should we think about it, or how do you think about the target for margins in that business for the long term because the gross margin was obviously very negative this quarter? And that’s the last question from me.

Sure. So last quarter had two important components in our services line. The first one is we did keep our overall resources relatively high in anticipation of the need of utilizing those resources in the next three or four quarters as our clients upgrade to our next version and begin preparation for ICD-10. And so we had a combination of one, it was important to make sure we had the right level of resources trained, ready to go; and we’re beginning to see a significant amount of bookings surrounding that as clients are now paying a lot more attention on the upgrade process for both those reasons. The other piece from a margin perspective is of course there’s more fluctuation in the fourth calendar quarter and we saw a little bit of that. So those two pieces combined and lower margins, those two pieces we would expect to see reversed in the future based upon macro market trends and the upgrading of our client base. Jamie Stockton – Wells Fargo: Thank you.

Our next question comes from the line of George Hill with Deutsche Bank. George, your line is open. George Hill – Deutsche Bank: I guess Paul or Steve, just a question – I wanted to make sure I heard you guys right on the pipeline. It sounds like the pipeline mix is changing from less higher-margin software business to more lower-margin services business. I guess did I hear that right on the change in the pipeline mix and I guess how should we think about that and how it impacts the long-term outlook for margins?

I’ll let Gary take this but this is Steve. Obviously over the years as we have been adding additional product and service lines to the company, we’ve been adding them and incorporating them into our pipeline. So we do have a broader mix in our pipeline today. But as we indicated earlier we really don’t segment all those pieces out as a policy – we just simply don’t do that. Gary, do you want to add any color to the pipeline?

Yeah, I would just say that again with all that RCM business certainly growing and we want to continue to grow it rapidly; I will also say that our current clients and many prospects still have a big appetite for license sales. And so even in areas such as for example population health, you know, we came out with our first release of Population Health – we had both a SaaS and a license purchase model. And it’s been very evident that folks want to lean towards the purchase model, the license model. So and even as we get into newer architectures we’re going to consider both types of models at all times because I think you have to have a hybrid approach to all of these products. All organizations aren’t the same, you can’t fit them all into the same box. So I think we’ll continue to see a nice mix of service growth and license growth. George Hill – Deutsche Bank: Okay, that’s a fair answer to that question, I appreciate that. And then maybe just a follow-up on Mirth – it seems like Mirth is posting pretty good growth. How should we think about who Mirth is taking share from? And I guess can you give us any stats on what is the current customer penetration of your RCM services as we think about the EMR and EPM footprint?

This is Gary; I’ll take a stab at both of those. Mirth has been, I think we’re still trying to get a handle on it a little bit because they’re in so many different areas. It’s an exciting story that I think we’ll be able to tell. But what you can see right now and I think what’s kind of evident is that a lot of the interest they’re getting are from existing HIEs, health information exchanges that are out there that have not had a good experience with their initial technology partner. And so Mirth is starting to see replacement opportunity, or for those organizations that want to buy the Mirth tools to improve how they’re currently servicing their clients. So that’s exciting. You know, as I mentioned we’re starting to cross sell into NextGen opportunities, and we’ve already seen new prospects from group practices to ACOs that are interested in seeing how Mirth can really help them connect in their community across all systems. And that’s the advantage that it really brings us. There are a lot of nice things that we see within the Mirth business. They’ve been well known for their Mirth Connect product that had an open source and a commercial business, and those downloads of those products continue to increase. Their website visits since they’ve become part of NextGen are way up; renewal rates are at a high level and their new leads as well are coming way up. So from the Mirth side of the house they’ve got a wide variety of products and some very interesting things that are exciting. And what was the second part of the question – RCMs?

This is Monte. I guess I would disclose similar to previous comments the penetration in the existing Ambulatory base remains at less than 10% but growing. And keep in mind, not only are we growing inside that base but we’re also competing and growing our net new customers as well. So our growth comes from both areas and we remain focused on sort of both segments in the market. George Hill – Deutsche Bank: Okay. You talked about taking share – is there anybody in particular that you guys are seeing as a vulnerable kind of software to take share from? Or is it kind of more of the legacy, like the outsourced mom & pop types that are losing share?

I’m sorry, is that referring to Mirth or just RCM? George Hill – Deutsche Bank: Yeah, to Mirth.

Oh, referring to Mirth. I’d say without naming names that they’re traditional vendors that we’re seeing those kinds of activities from. George Hill – Deutsche Bank: Okay, alright. I appreciate the color, thank you.

Our next question comes from the line of Gavin Weiss with JP Morgan. Gavin Weiss – JP Morgan: Hi, thanks for taking my question. I think if I heard you correctly you responded to Dave earlier that only about 5% of customers have upgraded so far or have signed up for upgrades – is that correct?

This is Dan. We don’t actually have the specific numbers but the one indication that I do remember off the top of my head is we have over 800 of our clients who have already certified formally that they are ready for the upgraded and who have started the process. So while I don’t have the actual numbers that have completed that we are seeing the upgrade process basically very much as we anticipated it and maybe even above the anticipation or happening faster than we had originally anticipated it. So it got off to a little bit of a slow start in late November but again, I think what we’re seeing is our clients have done the preparation and the early part of that funnel is very, very strong. Gavin Weiss – JP Morgan: Okay, that’s very helpful. And where are you in terms of the expenses related to the build out of the infrastructure for the upgrade cycle?

The expenses have been incurred. You’re talking about the internal expenses associated with those, Gavin? Gavin Weiss – JP Morgan: Yes, exactly.

Yeah, so I refer back to my comments earlier about services, that we have those expenses taken in. We have trained our staff; we have upgraded and had the personnel and staff necessary to effectively help our clients upgrade and to do so both in a great manner for them and a profitable manner for us. Gavin Weiss – JP Morgan: Okay, great. And Steve, you mentioned last week that you’re interested in growing the RCM segment through M&A. First, do you see any viable opportunities out there right now? And second, is that really the preference still for Quality to build through acquired technology? Or do you think you can develop some of these technologies in-house?

Well Gavin, our game plan has always been a byproduct of both. We have a large development core that’s working on a series of different projects; and then of course as we’ve stated repeatedly our acquisition targets sit in the area of revenue cycle management – we want to expand our capabilities in that area; analytics and tools that can help the accountable care organizations progress into more value based modeling which we think is going to be a pattern over the next several years. These are two areas that we’re looking to expand in. But we also have projects internally. I think Monte cited on the last call or the previous to last call that we’ve already developed a bit of an infrastructure to start doing some work in revenue cycle management in the hospital area as well as the dental area. So we’re not waiting for the right acquisition; we’re progressing. But the right acquisition, if it’s there, we’re interested. Gavin Weiss – JP Morgan: Okay, great. Thanks for the color.

Our next question comes from the line of Richard Close with Avondale Partners. Richard Close – Avondale Partners: Yes, thank you for taking the question. Just really quick, I mean obviously Hospital Solutions has been a disappointment since the multiple of acquisitions that you guys have had – I think on this quarter we’re at a run rate for $10 million, that’s down from I think two fiscal years ago being roughly $30 million if I’m not mistaken. So you know, as we think about other acquisitions either in your pipeline or something like Mirth, how do you convey to the market that you guys I guess are capable of taking these acquisitions and integrating them or growing them after you’ve completed the transaction?

Richard, this is Dan. Let me respond to you on that. Certainly we’re disappointed with the results of our Hospital Solutions performance and we’ve been pretty straightforward about that. On the other side of the coin we have a history of exceptional performance on acquisitions in this organization going back a number of years. And so as anyone who has been or has done a lot of acquisitions, and I think in my career I’ve been involved in I think 29 of them now, you don’t get 100% success rate on all of them. You look at those places where you didn’t get what you thought that you were going to get and you learn from that, and you continue to go forward. But we look at some of the acquisitions we’ve done in the RCM space and those have been very successful. We look at the early results from Mirth and we think that those are very successful. We certainly look at some of the acquisitions that we’ve done in the Ambulatory space going back a number of years to form NextGen and the component pieces and bringing them together and integrating them, and those have been extremely successful. So I think that it’s a combination of performance over time. I think we have the skills to be able to do that and therefore it remains an important part of our go-forward strategy as Steve outlined earlier. Richard Close – Avondale Partners: Okay, thank you.

Our next question comes from the line of Donald Hooker with KeyBanc. Donald Hooker – KeyBanc Capital Markets: Great, hello. Thank you. So I think I picked up $153 million of pipeline. Like last quarter did you give any detail around Mirth or dental or other stuff or is that the entire pipeline?

This is Gary, Donald. So that’s the entire pipeline. Last quarter when we talked about pipeline we did mention that we were adding in the dental and Mirth. We mentioned last quarter what those components were and then that we’d be going forward reporting the entire pipeline only. Donald Hooker – KeyBanc Capital Markets: Gotcha, okay. Thank you. And then following the RCM services segment doing very well obviously ahead of ICD-10, is it really ICD-10 that’s driving that? So I guess as we think beyond ICD-10 I mean how might you guys towards the end of this calendar year, does that change your marketing strategy in RCM?

Hi, this is Monte. I think there are a lot of contributing factors as would contribute to the growth of RCM. Certainly ICD-10 anticipation and preparation is one. Actually I think you’ll see we’re working on some marketing strategies in the near term that will continue to drive that. But it’s certainly not the only one. You know, medicine continues to become more complicated. Providers are forced to adopt new technologies to meet Meaningful Use guidelines, other regulatory guidelines and quite honestly it’s becoming more and more difficult for providers to manage all of these components of their business. And so with our solution we allow them to simplify their lives, focus on the clinical side of their practice, treating patients; and it allows us to focus on our core competency which is optimizing revenue. So you know, a lot of contributing factors and ICD-10 really is just one of those. Donald Hooker – KeyBanc Capital Markets: Gotcha. Just one last quick one – I guess nobody mentioned about some of the changing timelines in Meaningful Use. I was curious if you think that might have any sort of extension to your sales cycle in calendar ’14 and ’15?

This is Gary. So as of yet you know, I really haven’t seen anything in the market per se and in the opportunities that we’re pursuing on the ground where folks are saying “Hey, you know, we’re not sure what the timelines are really going to be or how it impacts us. So I would say right now there really hasn’t been any kind of meaningful impact. We think maybe there’s some in the hospital sector a little bit that has caused some of the delays or maybe some more tire kicking for a while as they try and determine their strategies and where their existing vendor is going to end up in many cases in terms of regulatory and certification. So maybe that’s the only place that we’ve really seen it affect us. Donald Hooker – KeyBanc Capital Markets: Okay, thank you.

Our next question comes from the line of Bret Jones with Oppenheimer. Bret Jones – Oppenheimer: Good morning, thank you for taking the questions. I wanted to circle back on the cost structure. I know you guys touched on it a little bit and you don’t want to go into explicit detail, and I can understand that. I just want to understand what’s your view of the total cost structure? Revenues have been down; costs are continuing to tick up. You’re talking about decreasing investments in some areas of the business to redirect that into higher growth areas. On a net basis do you think you’re at the right cost structure now or should we expect to see some kind of cost savings in the future?

This is Dan. The overall cost structure of the organization, we continue to take a close look at that especially in our current planning cycle. It’s one of the things that we’re spending a lot of attention on is understanding how we fund the overall investments in our higher growth areas going forward. So as we have not provided guidance on this issue, going forward one of the things that we continue to look at is how do we fund the entire gross margins. We know and we’ve talked about our next generation platform and the ability to fund that. So the message is that we will do what is necessary to continue the growth of the organization and we’ll also go spend a great deal of time making sure that we’re optimizing the expense structure to give us the best opportunity to invest in high growth areas going forward. Bret Jones – Oppenheimer: And to that end, if we think about R&D you’ve had significant product launches this year and you’ve got another one coming up pretty shortly. Do you think that the R&D spending level should actually abate a little bit as we go forward?

This is Paul. No, I would not make that assumption. I think we have a lot of opportunities ahead of us to further build out the next generation platforms and no pun intended, as well as some of the other areas inside Mirth. And we’ve just got a lot of opportunities, a lot of things to do so I would not make that assumption. I think as Dan mentioned, I think what we are doing is making sure we want to spend wisely and appropriately, and reviewing the things that are most important as any good businessperson should do – or as any business folks should do is make sure we’re not leaving things on the table, not wasting things that aren’t critical to us, and making sure that we’re putting our resources where we’re getting the bang out of the buck for the resources that we’re consuming. Bret Jones – Oppenheimer: Fair enough. I wanted to switch gears into the RCM business a little bit. We saw a step up in the cost of services there, and pretty equivalent to the revenue increase quarter-over-quarter, and I was just wondering is that just a reflection of investments ahead of bringing on some of this backlog or was there a true margin step back this quarter?

This is Monte. So I think that the shift was marginal at best. You know, we certainly are implementing a large backlog of business so I think that contributes. I think there was also one more payroll day and one less revenue day in the quarter so that contributes, but nothing materially changed. Bret Jones – Oppenheimer: Okay great, thank you.

Our next question comes from the line of Jeff Fidacaro with William Blair & Company. Jeff Fidacaro – William Blair & Company: Good morning, guys, thanks for taking the question. I just had a couple quick ones on Mirth – first just as a reminder, which revenue line and which division does Mirth fit in?

This is Paul. So we have Mirth revenue inside the Ambulatory line at this point from a segment point of view, and from a revenue category the large majority of Mirth’s revenues are in subscriptions and other recurring service revenues at this point. But Mirth has a broad suite of products and services so going forward there will be some in some other revenue category lines including system sales. But for now a majority of it is in the other recurring service revenue line. Jeff Fidacaro – William Blair & Company: Got it. And then looking at the Ambulatory Division revenue, it seems that it was down sequentially, and then if we were to back out Mirth it’s down even further. So I was hoping for a little more discussion on the different strengths and weaknesses you’re seeing in that division if we take out the recent acquisition.

Yeah, if you take out the recent acquisition as we talked about probably the biggest item hitting that system sales line as we talked about is the implementation and training revenue that we had there as well as a very modest small decline in the software side. However that was very modest – the majority I would attribute to the implementation and training revenue line. Jeff Fidacaro – William Blair & Company: Fair enough. And then one final question: are the trends that you’re seeing in the Ambulatory Division any different in the pipeline than what you just described for the revenue line?

This is Gary. That pretty much follows – I don’t think there’s anything different. Jeff Fidacaro – William Blair & Company: Great, thanks again, guys.

Jackie, we will take one more question, please.

Our next question comes from Mohan Naidu with Stephens. Mohan Naidu – Stephens, Inc.: Alright, thank you guys for squeezing me in – this is Mohan from Stephens. So one quick question on the small hospital segment – can you tell us a little bit about what’s going on in the market itself? Are there any changes or are there still left a lot of small hospitals who want to buy the EHR products there?

Mohan, this is Dan. What we’re seeing in that market is that there is still a good deal of greenfield in that market – a number of small hospitals that have not yet adopted. The biggest thing that we see is that these small hospitals find it difficult to adopt both from a financial perspective and having the internal IT to be able to support the upgrade and (inaudible) the upgrade. So the overall market I think we see that there’s still some demand in there. We see that a number of the competitors in the environment are taking a look at the timing associated with their meaningful use upgrades, but overall we see the market as being very much the same which is there is still demand out there – however, the overall financial strength of the market remains pretty weak. That’s one of the reasons that we are continuing to focus on the RCM side and invest a little bit in the RCM side for the small hospital market because we believe that combining the RCM component will help these small hospitals in their fiscal side of the house in collecting receivables and being more profitable. So that’s again why we’re looking at bringing RCM into a greater alliance with our overall hospital strategy. Mohan Naidu – Stephens, Inc.: Thanks a lot, Dan, that’s great color.

Okay. Well thank you all for joining us and just in summary, you know, as we plan for our upcoming fiscal year we find interesting components heading into this new fiscal year. As you know, when the government first outlined Stage 1, 2, and 3 and then ICD-9, -10, and -11 and the movement towards those areas. As you can see we’re sitting right in the middle of that as a sector right now. I mean ICD-10 enacts on October 1st. The penalty phase for the Stage program begins in 2015. The government has extended Stage 2 to 2016; they’ve delayed Stage 3 to 2017. So when you take a look from the beginning of these announcements to where we think we’re going to finish up whit these staged accelerations and the ICD-9 coding acceleration we’re sitting as a sector right in the middle. And what we see as we head into our new fiscal year is that we here at Quality Systems have some tailwinds that are going to help us out. One, RCM is clearly going to be fueled as outlined by Monte by ICD-10. If that date stays true to October 1st we believe we’ll see acceleration in that area over the next two to three quarters. Mirth products will be fueled by the value based modeling that’s emerging in accountable care organizations, and I believe we have nearly 600 certified ACOs today. And as you know, we have a large installed base group of physicians and physicians are leading the charge on ACOs. We also see that one of the benefits to a company like us is we’re early to the party. Our Stage 2 certification and ICD-10 compliance, which we have already achieved, is putting our customers and our client base in an optimal competitive position as they move through this upcoming year. As I cited earlier, I was talking to you about the statistics which are overwhelming and I’ll say it again, is that of the 2200 products and 1400 complete EHRs certified for Stage 1 Meaningful Use Criteria, only 75 products and 21 complete EHRs are certified for Stage 2 as we sit here in January. That’s a fraction of the Stage 1. So that again we believe is going to create a replacement market that will be fueled by perhaps a very large percentage of the Stage 1 certified software products not being capable of meeting Stage 2 or ICD-10. So we see tailwinds heading into our upcoming year. We’re encouraged. We’re progressing in the inpatient area. We’ve got a lot of the bad news and pain behind us in inpatient and we’re very confident in our upcoming year. So again thank you and we look forward to seeing you in our travels. Take care.

Thank you. This does conclude today’s teleconference. If you’d like to listen to a replay of today’s conference please dial 800-585-8367 and refer to conference ID #34711885. A webcast archive of this call can also be found at www.qsii.com. Please disconnect your lines at this time and have a wonderful day.