Jae Jun

Author mail questions or comments to: jjun0366@gmail.com

www.oldschoolvalue.com

Disclaimer
Nothing on Old School Value, related pages, emails, or other communications by the author, either written or oral, are intended to be a
recommendation to either buy, hold, or sell any specific security or group of securities. Likewise, nothing herein should be construed as an
endorsement of any financial adviser, investment manager, commercial information provider, transaction service, or brokerage firm.

The findings from this spreadsheet is merely a start to a means of further research and uncovering a great business and investment. Old
School Value holds no responsibility for any investment whatsoever.
Company Name ticker

QUALITY SYSTEMS INC QSII

3/18/2009 all figures in $Mil
Financial Data
QSII 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 TTM

Income Statement
Revenue $ 33.8 $ 36.4 $ 39.9 $ 44.4 $ 54.8 $ 70.9 $ 89.0 $ 119.3 $ 157.2 $ 186.5 $ 230.9
COGS $ 15.8 $ 16.4 $ 17.3 $ 19.3 $ 23.8 $ 28.7 $ 32.7 $ 39.8 $ 50.8 $ 62.5 $ 80.6
COGS (%) 46.7% 45.1% 43.4% 43.5% 43.4% 40.5% 36.7% 33.4% 32.3% 33.5% 34.9%

Gross Profit $ 18.0 $ 20.0 $ 22.7 $ 25.2 $ 31.0 $ 42.3 $ 56.3 $ 79.5 $ 106.4 $ 124.0 $ 150.3

Gross Profit (%) 53.3% 54.9% 56.9% 56.8% 56.6% 59.7% 63.3% 66.6% 67.7% 66.5% 65.1%

Operating Expenses
SG&A $ 13.5 $ 12.7 $ 13.6 $ 13.1 $ 15.3 $ 19.5 $ 24.8 $ 35.6 $ 45.3 $ 53.3 $ 66.3
SG&A (%) 39.9% 34.9% 34.1% 29.5% 27.9% 27.5% 27.9% 29.8% 28.8% 28.6% 28.7%
R&D $ 3.6 $ 3.7 $ 4.1 $ 4.2 $ 5.1 $ 6.1 $ 6.9 $ 8.1 $ 10.2 $ 11.4 $ 13.1
R&D (%) 10.7% 10.2% 10.3% 9.5% 9.3% 8.6% 7.8% 6.8% 6.5% 6.1% 5.7%
Other $ - $ - -NaN NaN NaN NaN -NaN NaN -NaN NaN -NaN
Other (%) 0.0% 0.0% #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!

Operating Income $ 0.9 $ 3.6 $ 5.0 $ 7.9 $ 10.7 $ 16.6 $ 24.6 $ 35.8 $ 50.9 $ 59.4 $ 71.0

Operating Income (%) 2.7% 9.9% 12.5% 17.8% 19.5% 23.4% 27.6% 30.0% 32.4% 31.8% 30.7%

Other Income and Expense

Net Int Inc & Other $ 0.4 $ 0.8 $ 1.0 $ 0.6 $ 0.4 $ 0.4 $ 0.9 $ 2.1 $ 3.3 $ 3.6 $ 1.6
Earnings Before Taxes $ 1.3 $ 4.4 $ 6.0 $ 8.5 $ 11.1 $ 17.0 $ 25.5 $ 37.9 $ 54.2 $ 63.0 $ 72.6
Income Taxes $ 0.7 $ 1.9 $ 2.5 $ 3.2 $ 4.1 $ 6.6 $ 9.4 $ 14.6 $ 21.0 $ 22.9 $ 26.6
Earnings After Taxes $ 0.6 $ 2.5 $ 3.5 $ 5.3 $ 7.0 $ 10.4 $ 16.1 $ 23.3 $ 33.2 $ 40.1 $ 46.0
Acctg Changes $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Disc Operations $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Ext Items $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

Net Income $ 0.6 $ 2.5 $ 3.5 $ 5.3 $ 7.0 $ 10.4 $ 16.1 $ 23.3 $ 33.2 $ 40.1 $ 46.0

Net Income (%) 1.8% 6.9% 8.8% 11.9% 12.8% 14.7% 18.1% 19.5% 21.1% 21.5% 19.9%
Diluted EPS, Cont Ops$ $ 0.0 $ 0.1 $ 0.1 $ 0.2 $ 0.3 $ 0.4 $ 0.6 $ 0.9 $ 1.2 $ 1.4 $ 1.6
Diluted EPS$ $ 0.0 $ 0.1 $ 0.1 $ 0.2 $ 0.3 $ 0.4 $ 0.6 $ 0.9 $ 1.2 $ 1.4 $ 1.6
Shares 25 25 24 24 25 25 26 27 27 27 28.37

Balance Sheet

Assets
Cash and Equiv $ 14.2 $ 15.9 $ 18.5 $ 25.4 $ 36.4 $ 51.4 $ 51.2 $ 57.2 $ 60.0 $ 59.1 $ 55.4
Short-Term Investments $ 0.3 $ 0.2 $ 0.3 $ 0.3 $ - $ - $ - $ - $ - $ 2.5 $ 2.5
Accts Rec $ 12.5 $ 13.7 $ 13.3 $ 13.7 $ 17.6 $ 20.3 $ 33.4 $ 45.9 $ 64.0 $ 76.6 $ 100.8
Inventory $ 0.8 $ 1.0 $ 1.0 $ 1.1 $ 0.7 $ 0.7 $ 1.0 $ 0.6 $ 1.2 $ 1.0 $ 1.3
Other Current Assets $ 1.0 $ 2.5 $ 2.1 $ 2.4 $ 4.1 $ 4.4 $ 3.5 $ 4.7 $ 7.9 $ 11.0 $ 11.6

Total Current Assets $ 28.7 $ 33.4 $ 35.2 $ 42.9 $ 58.8 $ 76.9 $ 89.0 $ 108.4 $ 133.1 $ 150.2 $ 171.5
Net PP&E $ 1.8 $ 1.8 $ 1.8 $ 1.6 $ 1.8 $ 2.0 $ 2.7 $ 3.7 $ 5.0 $ 4.8 $ 6.4
Intangibles $ 2.1 $ 4.1 $ 3.5 $ 3.9 $ 4.4 $ 5.5 $ 6.2 $ 7.0 $ 8.8 $ 10.7 $ 47.0
Other Long-Term Assets $ 7.6 $ 4.9 $ 4.3 $ 3.7 $ 2.7 $ 2.4 $ 1.6 $ 3.1 $ 3.7 $ 22.3 $ 10.3

Total Assets $ 40.2 $ 44.1 $ 44.9 $ 52.1 $ 67.6 $ 86.7 $ 99.4 $ 122.3 $ 150.7 $ 187.9 $ 235.2

Liabilities & Stockholders' Equity

Accts Payable $ 1.8 $ 1.3 $ 1.8 $ 2.7 $ 2.5 $ 1.7 $ 2.3 $ 2.9 $ 5.3 $ 4.7 $ 4.5
Short-Term Debt $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Taxes Payable $ - $ - $ - $ - $ - $ - $ - $ - $ 0.3 $ 1.5 $ -
Accrued Liabilities $ - $ - $ - $ - $ - $ 3.0 $ 3.4 $ 5.5 $ 6.5 $ 8.4 $ 9.3
Other Short-Term
Liabilities $ 8.7 $ 10.8 $ 9.2 $ 9.4 $ 17.6 $ 21.0 $ 28.1 $ 38.2 $ 44.4 $ 55.6 $ 65.6

Total Current Liabilities $ 10.6 $ 12.1 $ 11.0 $ 12.1 $ 20.1 $ 25.7 $ 33.9 $ 46.7 $ 56.5 $ 70.2 $ 79.4
Long-Term Debt $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Other Long-Term
Liabilities $ - $ - $ - $ - $ - $ - $ 2.9 $ 3.2 $ 3.0 $ 4.0 $ 5.1

Total Liabilities $ 10.6 $ 12.1 $ 11.0 $ 12.1 $ 20.1 $ 25.7 $ 36.7 $ 49.8 $ 59.4 $ 74.2 $ 84.5
Total Equity $ 29.7 $ 32.1 $ 33.9 $ 40.1 $ 47.5 $ 61.0 $ 62.7 $ 72.4 $ 91.3 $ 113.7 $ 150.7

Total Liabilities & Equity $ 40.2 $ 44.1 $ 44.9 $ 52.1 $ 67.6 $ 86.7 $ 99.4 $ 122.3 $ 150.7 $ 187.9 $ 235.2
Cash Flows Statement

Cash Flows From Operating Activities

Net Income $ 0.6 $ 2.5 $ 3.5 $ 5.3 $ 7.0 $ 10.4 $ 16.1 $ 23.3 $ 33.2 $ 40.1 $ 46.0
Depr & Amort $ 2.5 $ 2.2 $ 2.7 $ 2.1 $ 2.2 $ 2.3 $ 3.0 $ 3.8 $ 5.2 $ 6.5 $ 8.3
Deferred Taxes $ (0.6) $ (1.1) $ 0.6 $ 0.4 $ 0.3 $ (0.2) $ 2.6 $ (1.5) $ (1.6) $ (0.2) $ 1.0
Other $ 0.9 $ - $ (0.7) $ 0.5 $ 3.7 $ 4.8 $ - $ 5.0 $ (7.2) $ (2.8) $ (16.7)

Cash from Operations $ 3.4 $ 3.6 $ 6.1 $ 8.2 $ 13.2 $ 17.3 $ 21.6 $ 30.7 $ 29.6 $ 43.6 $ 38.7

Cash Flows From Investing Activities

Cap Ex $ (0.5) $ (0.6) $ (0.8) $ (0.6) $ (1.1) $ (1.1) $ (1.7) $ (2.4) $ (3.2) $ (2.1) $ (2.5)
Purchase of Business $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Other $ (4.5) $ (1.2) $ (1.1) $ (1.5) $ (1.4) $ (2.6) $ (2.7) $ (3.3) $ (5.0) $ (28.1) $ 6.7

Cash from Investing $ (5.1) $ (1.8) $ (1.9) $ (2.0) $ (2.5) $ (3.7) $ (4.4) $ (5.7) $ (8.3) $ (30.2) $ 4.1

Cash Flows From Financing Activities

Net Issuance of Stock $ (0.2) $ (0.1) $ (1.7) $ 0.8 $ 0.4 $ 1.3 $ 2.2 $ 4.5 $ 6.1 $ - $ -
Net Issuance of Debt $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Dividends $ - $ - $ - $ - $ - $ - $ (19.6) $ (23.4) $ (27.1) $ (20.5) $ (29.1)
Other $ - $ - $ - $ - $ - $ - $ - $ - $ 2.5 $ 6.1 $ 11.7

Cash from Financing $ (0.2) $ (0.1) $ (1.7) $ 0.8 $ 0.4 $ 1.3 $ (17.5) $ (18.9) $ (18.5) $ (14.4) $ (17.4)
Currency Adj $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Change in Cash $ (1.9) $ 1.7 $ 2.6 $ 7.0 $ 11.0 $ 15.0 $ (0.2) $ 6.1 $ 2.8 $ (1.0) $ 25.4

Free Cash Flow

Cash from Operations $ 3.4 $ 3.6 $ 6.1 $ 8.2 $ 13.2 $ 17.3 $ 21.6 $ 30.7 $ 29.6 $ 43.6 $ 38.7
Cap Ex $ (0.5) $ (0.6) $ (0.8) $ (0.6) $ (1.1) $ (1.1) $ (1.7) $ (2.4) $ (3.2) $ (2.1) $ (2.5)

Free Cash Flow $ 2.6 $ 1.9 $ 5.2 $ 6.7 $ 8.1 $ 11.6 $ 17.3 $ 24.8 $ 17.6 $ 38.5 $ 20.5
Book Value Per Share $ 1.19 $ 1.28 $ 1.41 $ 1.67 $ 1.90 $ 2.44 $ 2.41 $ 2.68 $ 3.38 $ 4.21 $ 5.31
Company Name ticker

QUALITY SYSTEMS INC QSII

3/18/2009 User Growth www.oldschoolvalue.com all figures in $Mil
26.00%
Desired MOS Growth Discount % Price Share Value Buy under Actual D/C % 52Wk High 52Wk Low
User Input Params
50% 26.0% 15.0% $ 43.00 $ 36.02 $ 18.01 0% $47.94 $25.70
Financial Data
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Income Sheet Data
Revenue $ 33.8 $ 36.4 $ 39.9 $ 44.4 $ 54.8 $ 70.9 $ 89.0 $ 119.3 $ 157.2 $ 186.5
Gross Profit $ 18.0 $ 20.0 $ 22.7 $ 25.2 $ 31.0 $ 42.3 $ 56.3 $ 79.5 $ 106.4 $ 124.0
Operating Income $ 0.9 $ 3.6 $ 5.0 $ 7.9 $ 10.7 $ 16.6 $ 24.6 $ 35.8 $ 50.9 $ 59.4
Net Income $ 0.6 $ 2.5 $ 3.5 $ 5.3 $ 7.0 $ 10.4 $ 16.1 $ 23.3 $ 33.2 $ 40.1
Diluted EPS $ 0.0 $ 0.1 $ 0.1 $ 0.2 $ 0.3 $ 0.4 $ 0.6 $ 0.9 $ 1.2 $ 1.4

Cash Flow Data

Cash from Operations $ 3.4 $ 3.6 $ 6.1 $ 8.2 $ 13.2 $ 17.3 $ 21.6 $ 30.7 $ 29.6 $ 43.6
Free Cash Flow $ 2.6 $ 1.9 $ 5.2 $ 6.7 $ 8.1 $ 11.6 $ 17.3 $ 24.8 $ 17.6 $ 38.5

Balance Sheet Data

Current Assets $ 28.7 $ 33.4 $ 35.2 $ 42.9 $ 58.8 $ 76.9 $ 89.0 $ 108.4 $ 133.1 $ 150.2
Current Liabilities $ 10.6 $ 12.1 $ 11.0 $ 12.1 $ 20.1 $ 25.7 $ 33.9 $ 46.7 $ 56.5 $ 70.2
Total Liabilities $ 10.6 $ 12.1 $ 11.0 $ 12.1 $ 20.1 $ 25.7 $ 36.7 $ 49.8 $ 59.4 $ 74.2
Tangible Shareholder Equity $ 27.6 $ 28.0 $ 30.4 $ 36.2 $ 43.1 $ 55.5 $ 56.5 $ 65.4 $ 82.5 $ 103.0

Margins
Gross Margin 53.3% 54.9% 56.9% 56.8% 56.6% 59.7% 63.3% 66.6% 67.7% 66.5%
Operating Margin 2.7% 9.9% 12.5% 17.8% 19.5% 23.4% 27.6% 30.0% 32.4% 31.8%
Net Margin 1.8% 6.9% 8.8% 11.9% 12.8% 14.7% 18.1% 19.5% 21.1% 21.5%
Current Assets>1.5 times 270.8% 276.0% 320.0% 354.5% 292.5% 299.2% 262.5% 232.1% 235.6% 214.0%

Efficiency & Profitability

CROIC 9.4% 6.8% 17.1% 18.5% 18.8% 20.9% 29.2% 36.2% 20.6% 36.0%
FCF/Sales 7.7% 5.2% 13.0% 15.1% 14.8% 16.4% 19.4% 20.8% 11.2% 20.6%
Inventory Turnover 1975.0% 1640.0% 1730.0% 1754.5% 3400.0% 4100.0% 3270.0% 6633.3% 4233.3% 6250.0%
Return On Assets (ROA) 1.4% 5.9% 7.9% 10.9% 11.8% 13.5% 17.3% 21.0% 24.4% 23.7%
Retun On Equity (ROE) 2.1% 8.1% 10.6% 14.3% 16.1% 19.2% 26.0% 34.5% 40.6% 39.1%

Debt Related
Debt to Equity 35.7% 37.7% 32.4% 30.2% 42.3% 42.1% 58.5% 68.8% 65.1% 65.3%
Capitalization Ratio 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
FCF to Debt 24.5% 15.7% 47.3% 55.4% 40.3% 45.1% 47.1% 49.8% 29.6% 51.9%

Multi-Year Performance
1999-2006 2000-2007 2001-2008 1999-2004 2000-2005 2001-2006 2002-2007 2003-2008 Median
Shareholder Equity 13.1% 16.7% 19.0% 15.0% 15.1% 16.6% 17.9% 19.0% 16.6%
Free Cash Flow 38.0% 37.4% 33.1% 34.9% 55.5% 36.7% 21.3% 36.6% 36.6%
CROIC 18.7% 19.7% 20.8% 17.8% 18.7% 19.8% 20.8% 25.0% 19.8%
FCF/Sales 14.9% 14.9% 15.7% 13.9% 14.9% 15.7% 15.7% 17.9% 15.3%
ROA 11.3% 12.6% 15.4% 9.4% 11.3% 12.6% 15.4% 19.2% 12.6%
ROE 15.2% 17.6% 22.6% 12.4% 15.2% 17.6% 22.6% 30.3% 17.6%
Revenue Growth 19.7% 23.2% 24.6% 16.0% 19.6% 24.5% 28.8% 27.8% 23.9%
Gross Margin 56.8% 58.3% 61.5% 56.7% 56.8% 58.3% 61.5% 64.9% 58.3%
Operating Margin 18.7% 21.5% 25.5% 15.2% 18.7% 21.5% 25.5% 28.8% 21.5%
Net Margin 12.4% 13.7% 16.4% 10.4% 12.4% 13.7% 16.4% 18.8% 13.7%
Earnings Growth 70.9% 42.8% 39.5% 82.1% 43.6% 43.4% 41.9% 38.8% 43.1%
Cash from Ops Growth 36.9% 35.1% 32.4% 38.5% 43.1% 38.2% 29.3% 27.0% 36.0%

Projection of future Free Cash Flow

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Growing at 26.0% $ 49 $ 61 $ 77 $89.27 $110.16 $135.94 $167.75 $177.61 $215.01 $260.30
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Growing at 3% $ 268 $ 276 $ 284 $ 293 $ 302 $ 311 $ 320 $ 330 $ 340 $ 350

Company Valuation Free Cash Flow and Tangible Shareholder Equity Trend
Total Value $ 1,022 $120.0
$103.0
Shares Outstanding 28.37 FCF Shareholder Equity
$100.0
Per Share Value $ 36.02 $82.5
Margin of Safety 50% $80.0 $65.4
Purchase Price $ 18.01 $55.5 $56.5
$60.0
Current Price $ 43.00 $43.1
$36.2 $38.5
Actual Discount 0% $40.0 $27.6 $28.0 $30.4
$24.8
$17.3 $17.6
Enterprise Value $ 1,160.00 $11.6
$20.0 $5.2 $6.7 $8.1
14.658 $2.6 $1.9
$-
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
 Multi-Year Performance Graph
250.0%
Gross Margin Operating Margin Net Margin Earnings Growth ROA ROE

200.0%
30.3%
15.2% 12.4%
22.6% 9.4% 22.6%
11.3% 19.2%
17.6% 17.6%
150.0% 15.4% 15.2% 15.4%
12.6% 12.6%
11.3%
38.8%
70.9% 39.5% 82.1% 41.9%
42.8% 43.4%
43.6%
100.0% 18.8%
16.4% 16.4%
13.7% 13.7%
12.4% 12.4% 28.8%
25.5% 10.4% 25.5%
18.7% 21.5% 18.7% 21.5%
15.2%
50.0%

58.3% 61.5% 58.3% 61.5% 64.9%

56.8% 56.7% 56.8%

0.0%
1999-2006 2000-2007 2001-2008 1999-2004 2000-2005 2001-2006 2002-2007 2003-2008

Margin Percentages
80.0%
66.6% 67.7% 66.5%
70.0% 63.3%
59.7%
54.9% 56.9% 56.8% 56.6%
60.0% 53.3%
Gross Margin

50.0% Operating Margin

Net Margin
40.0% 32.4%
30.0% 31.8%
27.6%
30.0% 23.4%
19.5% 19.5% 21.1% 21.5%
17.8% 18.1%
20.0% 12.5% 12.8% 14.7%
9.9% 11.9%
6.9% 8.8%
10.0% 2.7%
1.8%
0.0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Efficiency & Profitability Debt

45.0%
CROIC FCF/Sales ROA ROE 80.0% Debt to Equity Capitalization Ratio FCF to Debt
40.0%
70.0%
35.0%
60.0%
30.0%
50.0%
25.0%
40.0%
20.0%
30.0%
15.0%

10.0% 20.0%

5.0% 10.0%

0.0% 0.0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Sales, Receivables, Inventory

$250.0
Sales Accts Receivable Inventory

$200.0

$150.0

$100.0

$50.0

$-
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 TTM
Company Name ticker
QUALITY SYSTEMS INC QSII
3/18/2009 www.oldschoolvalue.com all figures in $Mil
Desired MOS Growth Discount % Price Share Value Buy under Actual D/C % 52Wk High 52Wk Low
50% 26.0% 15% $ 43.00 $ 36.02 $ 18.01 0% $ 47.94 $ 25.70

Historical Stock Price Vs Intrinsic Value Per Share

50

Historical Price Intrinsic Value Buy Price Linear (Historical Price)

40

30

20

10

0
3/30/1998 3/30/1999 3/30/2000 3/30/2001 3/30/2002 3/30/2003 3/30/2004 3/30/2005 3/30/2006 3/30/2007 3/30/2008

-10

-20
Company Name ticker
QUALITY SYSTEMS INC QSII
3/18/2009 all figures in $Mil
www.oldschoolvalue.com
Desired MOS Growth Price Actual DC% Share Value Buy under P/B Ratio Net Net Working Capital
User Input Params
66% 26.0% $ 43.00 39% $ 70.56 $ 23.99 10.21 $ 1.75

Earnings
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
$ 0.02 $ 0.10 $ 0.14 $ 0.21 $ 0.28 $ 0.40 $ 0.61 $ 0.85 $ 1.21 $ 1.44
Diluted EPS
2009 2010 2011 2012
$ 1.66 $ 1.97 $ 2.28 $ 2.64

Multi-Year Performance
1999-2004 2000-2005 2001-2006 2002-2007 2003-2008 1999-2002 2000-2003 2001-2004
Earnings Growth 82.1% 43.6% 43.4% 41.9% 38.8% 119.0% 40.9% 41.9%
EPS Weighted Average $ 0.19 $ 0.29 $ 0.42 $ 0.59 $ 0.80 $ 0.12 $ 0.18 $ 0.26
2002-2005 2003-2006 2004-2007 2005-2008 Median (1998-2007)
Earnings Growth 42.68% 44.80% 44.62% 33.15% 43.1%
EPS Weighted Average $ 0.38 $ 0.54 $ 0.77 $ 1.03 $0.40

Company Stats $2.50

Normal Earnings $ 1.55 EPS
$1.97
Linear (EPS)
Expected 5 Year Growth 26.00% $2.00
$1.66
20 yr AA Corp Bond Rate 6.19 $1.44
$1.50 $1.21
Book Value Per Share 4.21
Price to Book Ratio 10.21 $1.00 $0.85
$0.61
Enterprise Value Per Share 43.47 $0.40
$0.50 $0.21 $0.28
$0.10 $0.14
$0.02
Company Valuation $-
Per Share Value $ 70.56 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Desired MOS 66.00% $(0.50)
Purchase Price $ 23.99
Current Price $ 43.00
Actual Discount 39%
Company Name ticker
QUALITY SYSTEMS INC QSII
3/18/2009 Enter Competitor Tickers Into Boxes Below all figures in $Mil
QSII CERN MDRX ECLP ATHN Industry Ranking
Stock Price 43 43.46 8.94 9.23 27.45 Error NA NA
Market Cap (millions) 1,220 3,490 1,310 518 917 #VALUE! NA NA

Valuation Ratios
P/E Ratio (TTM) 25.13 18.81 514.57 4.98 32.25 Error 1.49 3
Price to Sales (TTM) 5.06 2.06 3.55 0.98 6.47 Error 0.19 2
Price to Book (MRQ) 7.76 2.66 1.79 1.27 7.78 Error 3.25 2
Price to Tangible Book (MRQ) 11.28 3.87 48.16 2.38 8.53 Error 3.54 2
Price to Cash Flow (TTM) 21.53 9.64 50.81 3.6 25.91 Error 1.1 3
Price to Free Cash Flow (TTM) 1168.28 34.81 0 16.83 145.37 Error 12.74 1

Dividends
Dividend Yield 2.91 NA NA NA NA Error 0.09 1
Dividend Yield - 5 Year Avg. 2.68 0 0 0 0 Error 0.66 1
Dividend 5 Year Growth Rate 0 0 0 0 0 Error 9.12 1
Payout Ratio (TTM) 66.94 0 0 0 0 Error 1.36 1

Growth Rates
Sales (MRQ) vs Qtr. 1 Yr. Ago 36.16 18.06 75.22 1.94 46.98 Error -0.92 3
Sales (TTM) vs TTM 1 Yr. Ago 5.06 2.06 3.55 0.98 6.47 Error 0.19 2
Sales - 5 Yr. Growth Rate 27.77 14.83 29.04 15.16 0 Error 15.79 2
EPS (MRQ) vs Qtr. 1 Yr. Ago 14.06 80.02 -150.05 -86.37 898.97 Error -374.59 3
EPS (TTM) vs TTM 1 Yr. Ago 21.58 49.98 -95.09 142 174.58 Error 0 4
EPS - 5 Yr. Growth Rate 39.29 30.89 0 0 0 Error 15.05 1
Capital Spending - 5 Yr. Growth Rate 24.04 5.09 37.86 4.79 0 Error 14.76 2

Financial Strength
Quick Ratio (MRQ) 2.14 2.49 1.65 1.43 4.16 Error 1.9 3
Current Ratio (MRQ) 2.16 2.52 1.69 1.43 4.16 Error 2.08 3
LT Debt to Equity (MRQ) 0 8.49 11.05 26.38 7.22 Error 45.6 5
Total Debt to Equity (MRQ) 0 10.79 11.18 26.38 8.98 Error 73.28 5

Profitability
Gross Margin (TTM) 65.1 38.25 50.99 42.29 57.87 Error 4.17 1
Gross Margin - 5 Yr. Avg. 65.57 38.16 47.07 40.68 0 Error 43.49 1
EBITD Margin (TTM) 34.33 26.81 7.66 10.69 12.9 Error 0 1
EBITD - 5 Yr. Avg. 33.42 23.28 11.5 4.3 0 Error 21.19 1
Operating Margin (TTM) 30.74 16.64 0.09 2.66 8.6 Error 1.31 1
Operating Margin - 5 Yr. Avg. 30.08 13.53 6.62 0.2 0 Error 15.56 1
Pre-Tax Margin (TTM) 31.43 16.79 -1 3.31 9.19 Error 1.35 1
Pre-Tax Margin - 5 Yr. Avg. 31.73 13.45 7.09 1.16 0 Error 16.01 1
Net Profit Margin (TTM) 19.93 11.26 -0.59 19.29 20.69 Error 0.97 2
Net Profit Margin - 5 Yr. Avg. 19.77 8.66 4.93 5.25 0 Error 9.21 1

Management Effectiveness
Return On Assets (TTM) 22.19 10.57 -0.27 17.37 21.7 Error 0.94 1
Return On Assets - 5 Yr. Avg. 20.99 8.43 3 5.76 0 Error 8.68 1
Return On Investment (TTM) 33.66 12.84 -0.32 24.83 26.28 Error 1.4 1
Return On Investment - 5 Yr Avg 32.3 10.46 3.6 9.9 0 Error 12.16 1
Return On Equity (TTM) 34.68 15.44 -0.4 30.34 30.15 Error 3.02 1
Return On Equity - 5 Yr. Avg. 33.46 13.36 5.1 11.23 0 Error 14.95 1

Efficiency
Revenue/Employee (TTM) 334661 223470 307157 184201 170185 Error 237301 NA
Net Income/Employee (TTM) 66688 25154 -1809 35538 35209 Error 3347 NA
Receivable Turnover (TTM) 2.67 3.81 3.11 4.67 7.46 Error 0.68 NA
Inventory Turnover (TTM) 62.32 97.08 34.15 0 0 Error 2.6 NA
Asset Turnover (TTM) 1.11 0.94 0.46 0.9 1.05 Error 0.09 1
Company Name ticker
QUALITY SYSTEMS INC www.oldschoolvalue.com QSII
3/18/2009

Net Profit Margin Cash Flow (Continuing Operations)

22% 21% 43.6
20% 20% 38.7
18%
15% 29.6 30.7
13% 12%
21.6
9% 17.3
7% 13.2
8.2 6.1
2% 3.6 3.3

TTM 2008/03 2007/03 2006/03 2005/03 2004/03 2003/03 2002/03 2001/03 2000/03 1999/03 TTM 2008/03 2007/03 2006/03 2005/03 2004/03 2003/03 2002/03 2001/03 2000/03 1999/03
20% 22% 21% 20% 18% 15% 13% 12% 9% 7% 2% 38.7 43.6 29.6 30.7 21.6 17.3 13.2 8.2 6.1 3.6 3.3
% Change 1.8% 8.1% 8.0% 23.3% 14.8% 7.0% 36.1% 27.7% 286.9% -- % Change 47.3% -3.6% 42.1% 24.9% 31.1% 61.0% 34.4% 69.4% 9.1% --

Magic Formula Investing -- Return on Capital Magic Formula Investing -- Earnings Yield
1.23 21.6%
18.4%
0.99 17.0%
0.86 14.9%
0.65 11.2%
9.7%
0.51 8.1%
0.36 0.36 0.37 6.8% 5.8%
0.34 0.32 4.6% 5.5%
0.21

Now 2008/03 2007/03 2006/03 2005/03 2004/03 2003/03 2002/03 2001/03 2000/03 1999/03 Now 2008/03 2007/03 2006/03 2005/03 2004/03 2003/03 2002/03 2001/03 2000/03 1999/03
1.23 0.99 0.86 0.65 0.51 0.36 0.34 0.36 0.37 0.32 0.21 6.8% 8.1% 5.8% 4.6% 5.5% 9.7% 11.2% 14.9% 18.4% 21.6% 17.0%
% Change 15.2% 32.7% 27.0% 43.9% 6.2% -7.6% -3.0% 15.4% 57.1% -- % Change 38.0% 26.5% -16.6% -43.0% -13.0% -24.8% -19.0% -15.1% 27.3% --

Return on Assets (ROA) Return on Equity (ROE)

21% 22% 35.2% 36.4%
20% 19% 30.5% 32.2%
16% 25.7%
12%
10% 10% 17.0%
14.8% 13.2%
8%
6% 10.4%
7.8%
2% 2.0%

2008/12 2008/03 2007/03 2006/03 2005/03 2004/03 2003/03 2002/03 2001/03 2000/03 1999/03 2008/12 2008/03 2007/03 2006/03 2005/03 2004/03 2003/03 2002/03 2001/03 2000/03 1999/03
20% 21% 22% 19% 16% 12% 10% 10% 8% 6% 2% 30.5% 35.2% 36.4% 32.2% 25.7% 17.0% 14.8% 13.2% 10.4% 7.8% 2.0%
% Change -3.6% 15.7% 17.9% 35.0% 15.4% 3.0% 29.5% 36.8% 280.0% -- % Change -3.3% 13.0% 25.3% 51.2% 14.9% 12.1% 26.9% 33.3% 290.0% --

Current Ratio Quick Ratio

3.5 3.5
3.2 3.1
3.0 2.9 3.0 2.9
2.6 2.8 2.7 2.7 2.6
2.6
2.4 2.3 2.3 2.3
2.2 2.1 2.1 2.1

2008/12 2008/03 2007/03 2006/03 2005/03 2004/03 2003/03 2002/03 2001/03 2000/03 1999/03 2008/12 2008/03 2007/03 2006/03 2005/03 2004/03 2003/03 2002/03 2001/03 2000/03 1999/03
2.2 2.1 2.4 2.3 2.6 3.0 2.9 3.5 3.2 2.8 2.7 2.1 2.1 2.3 2.3 2.6 3.0 2.9 3.5 3.1 2.7 2.6
% Change -9.2% 1.5% -11.6% -12.3% 2.3% -17.5% 10.8% 15.9% 1.9% -- % Change -9.0% 1.1% -11.1% -12.4% 2.6% -16.3% 11.1% 16.1% 1.7% --
Company Name ticker
QUALITY SYSTEMS INC QSII
3/18/2009 www.oldschoolvalue.com

Company Assessment: Quantitative

Valuation Criteria over 10yrs Value Points User Points

> 25% or 50% depending on
DCF Valuation Discount 0% 0
moat
Graham Intrinsic Value Discount > 66% 39% 0

Margins, Profit and Growth Criteria over 10yrs Value Points User Points
Median Revenue growth 10% 23.9% 2
Median Gross Margin 30% 58.3% 2
Median Operating Margin 15% 21.5% 1
Median Net Margin 10% 13.7% 1
Median EPS growth 10% 43.1% 2

Business and Management Performance Criteria over 10yrs Value Points User Points
Cash growth from Operations 15% 36.0% 2
CROIC is postive and capable of paying off financing 13% 19.8% 1
Median FCF growth positive and consistent 10% 36.6% 2
Median FCF/Sales 7% 15.3% 2
Consistent ROE (manually check) Consistent over 10yrs N/A 1 N/A
Consistent ROA (manually check) Consistent over 10yrs N/A 1 N/A

Balance Sheet Criteria for TTM Value Points User Points

Current assets > 1.5 x current liabilities > 1.5 x current liabilities 2.1 1
Price to Book ratio < 2 N/A 10.21 N/A N/A
Debt to Equity < 100% 65.3% 1
FCF to Debt > 10% 51.9% 2
Capitalization Ratio < 30% 0% 2
Intangibles % of assets < 15% of assets 20.0% 0

Company Assessment: Qualitative

Quality Systems, Inc. develops and markets healthcare information systems that automate certain aspects of medical and dental
practices, networks of practices, such as physician hospital organizations (PHOs) and management service organizations (MSOs),
ambulatory care centers, community health centers, and medical and dental schools. The Company is consisted of the QSI Division and a
wholly owned subsidiary, NextGen Healthcare Information Systems, Inc. (NextGen Division). The QSI Division focuses on developing,
marketing and supporting software suites sold to dental and certain niche medical practices. In addition, it supports a number of
medical clients that utilize the QSI Division's UNIX-based medical practice management software product. The NextGen Division focuses
on developing and marketing products and services for medical practices.

Competitive Advantage Comment User Points Max Points

Stable market share? 1 max 2
Dominant company in industry, segment? 1 max 2
Low barriers to entry and exit? 0 max 2
Experience goods (brand effect, trademarks) 1 max 2
High switching costs? 1 max 2
Network effect? E.g. eBay 0 max 2

Business Model Comment User Points Max Points

Growth due to:
a) Yes
a) existing product / existing market (yes/no)
b) Yes
b) existing product / new market (yes/no) 1 max 2
c) Yes
c) new product / existing market (yes/no)
d) No
d) new product / new market (yes/no)

Able to increase prices and retain customers? 1 max 1

Compete on price? (1 for no, 0 for yes) max 1
Barriers of entry to the business? max 1
Diverse customers? (1 for diverse, 0 for concentrated) 1 max 1
Involved in competition? Monopoly, duopoly, crowded max 2
Company has a recurring revenue stream? 1 max 1
Capital intensive company? (1 for no, 0 for yes) 1 max 1
Management Comment User Points Max Points
High insider ownership? 1 max 1
Candid management on positives and negatives? 1 max 1
Management performance at previous jobs? 1 max 1
Compensation levels compared to sales? 1 max 1

Industry Comment User Points Max Points

Boring industry? (1 for slow, 0 for fast industry) max 1
Can company adapt to changing industry environment? 1 max 1
Industry leader or lagger? (1 for leader, 0 for lagger) max 1

Psychological Factors to Consider. Not Weighted. Comment

Recency bias? no
Hindsight bias? no
Framing issues correctly and in different manners? DCF, graham, compare to peers
Is there a data framing bias? maybe
Am I too overconfident on the situation? no
Performed probability analysis for -ve factors? no
Too much loss aversion? no
Sunk cost mentality? no
Slow in changing opinion? no
Psychological denial ? no
Bias from commitment and consistency tendency? no
Pavlovian association? no
Social proof bias? no
Status quo bias? no
False consensus bias? no
Do I have an exit plan?

Category Total Points out of 5

Valuation 0.0
Margins, Profit and Growth 4.0
Business and Management Performance 4.5
Balance Sheet 3.0
Competitive Advantage 1.7
Business Model 2.5
Management 5.0

Low Risk High Growth Under Valued Well Managed Good Financial Health Strong Moat
2.6 4.0 1.0 4.5 4.0 1.7
1.0 4.5 4.0

Low Risk
5.0

4.0

3.0
Strong Moat High Growth
2.0

1.0

0.0

Good Financial Health Under Valued

Well Managed