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NextGen Healthcare Reports Fiscal 2024 First Quarter Results

Raises Midpoint of Fiscal 2024 Revenue Guidance Range

NextGen Healthcare, Inc. (Nasdaq: NXGN), a leading provider of innovative, cloud-based healthcare technology solutions, today announced its operating results for the fiscal first quarter ending June 30, 2023.

Fiscal 2024 First Quarter Highlights

  • Total revenue was $178.2 million compared to $153.3 million for the same period a year ago, an increase of 16.2%.
  • Recurring revenue was $163.4 million compared to $139.8 million for the same period a year ago, an increase of 16.9%.
  • Non-recurring revenue was $14.8 million compared to $13.5 million for the same period a year ago, an increase of 9.5%.
  • Fully diluted net income per share was $0.09 compared to $0.02 for the same period a year ago.
  • On a non-GAAP basis, fully diluted earnings per share was $0.24 compared to $0.16 for the same period a year ago.
  • Adjusted EBITDA was $27.7 million compared to $20.1 million for the same period a year ago.
  • Bookings, which reflects annual contract value excluding renewals, were $38.9 million and included four deals greater than $1.0 million.

“We are pleased to report solid top and bottom-line results to start the new fiscal year,” said David Sides, president and chief executive officer of NextGen Healthcare. “Building on the momentum created during fiscal 2023, the Company executed across all fronts and is well positioned to deliver double-digit revenue growth, create operating leverage, and demonstrate effective capital management.”

Updating Fiscal 2024 Full-Year Guidance

  • Revenue is expected to be in the range of $714 million to $722 million, an increase from prior guidance range of $712 million to $722 million.
  • Adjusted EBITDA is expected to be in the range of $125 million to $131 million, consistent with prior guidance.
  • Non-GAAP earnings per share is expected to be in the range of $1.04 to $1.11, consistent with prior guidance.

Conference Call Information

NextGen Healthcare will host a conference call today at 5:00 p.m. EDT to discuss operating results from its fiscal 2024 first quarter. Shareholders and interested participants may listen to a live broadcast of the conference call by dialing 800-343-4136 or 203-518-9843 for international callers and referencing participant code NXGNQ124 approximately 15 minutes prior to the call. A recording of the live webcast will be available on investor.nextgen.com after the call. It will be archived for 90 days.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our fiscal year 2024 outlook, financial and operating results and statements related to the settlement of the DOJ matter, strategic priorities, growth initiatives and expected capital expenditures. These forward-looking statements are based on the current beliefs, expectations, and assumptions of our management with respect to future events, only speak as of the date that they are made and are subject to significant risks and uncertainties. Such statements can be identified by the use of words such as “positioned,” “proposed,” “potential,” “project,” “expect,” “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “estimate, “strategy,” “expectations,” “future,” “likely,” “may,” “should,” “will,” and similar terms, although not all forward-looking statements contain such words or expressions. Actual results could differ significantly from those set forth in the forward-looking statements.

Risks and uncertainties exist that may cause the results to differ materially from those set forth in these forward-looking statements, including but not limited to: the final outcome of the DOJ investigation, including our ability to negotiate a final settlement agreement with the DOJ; potential additional investigations and proceedings from governmental entities or third parties related to the same or similar conduct; cybersecurity and data protection risks and related liabilities; potential litigation involving us; a shifting revenue mix that may impact gross margin; changes in laws and regulations applicable to our business; changes in market conditions and receptivity to our services and offerings; impact of strategic actions, including acquisitions and dispositions; management of and our success in integrating acquired businesses; our ability to maintain and expand our business with existing clients or effectively transition clients to newer products; our ability to attract new partners and successfully capture new opportunities; our ability to anticipate or respond quickly to market changes, execute our strategy and manage growth; the development by competitors of new or superior technologies; the timing, cost and success or failure of new product and service introductions, development and product upgrade releases; disruptions caused by acquisitions of companies, products, or technologies; and general economic conditions. A significant portion of the Company's quarterly sales of software product licenses and computer hardware is concluded in the last month of a fiscal quarter, generally with a concentration of such revenues earned in the final ten business days of that month. Due to these and other factors, the Company's revenues and operating results are very difficult to forecast. A major portion of the Company's costs and expenses are of a fixed nature and, accordingly, a shortfall or decline in quarterly and/or annual revenues typically results in lower profitability or losses. As a result, comparison of the Company's period-to-period financial performance is not necessarily meaningful and should not be relied upon as an indicator of future performance.

Additional discussion of these and other risks, uncertainties and factors that could affect our business and financial results is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings we make with the Securities and Exchange Commission from time to time. These forward-looking statements speak only as of the date hereof. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

USE OF NON-GAAP FINANCIAL MEASURES

This news release contains certain non-GAAP (Generally Accepted Accounting Principles) financial measures, which are provided only as supplemental information. Investors should consider these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures. These non-GAAP measures are not in accordance with or a substitute for U.S. GAAP. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of non-GAAP financial measures to the most directly comparable financial measure in the accompanying financial tables. Other companies may calculate non-GAAP measures differently than NextGen Healthcare, Inc., which limits comparability between companies. The Company believes that its presentation of non-GAAP diluted earnings per share provides useful supplemental information to investors and management regarding the Company's financial condition and results. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP.

The Company calculates non-GAAP diluted earnings per share by excluding net acquisition costs, amortization of acquired intangible assets, amortization of deferred debt issuance costs, impairment of assets, restructuring costs, shareholder disputes and related costs, which include net securities litigation defense, proxy contest, other regulatory and litigation matters, and related costs, net of insurance, share-based compensation, and other non-run-rate expenses from GAAP income before provision for income taxes.

The Company utilizes a normalized non-GAAP tax rate to provide better consistency across the interim reporting periods within a given fiscal year by eliminating the effects of non-recurring and period-specific items, which can vary in size and frequency, and which are not necessarily reflective of the Company’s longer-term operations. The normalized non-GAAP tax rate expected to be applied to each quarter of fiscal year 2024 is 21.0%. The determination of this rate is based on the consideration of both historic and projected financial results. The Company may adjust its non-GAAP tax rate as additional information becomes available and in conjunction with any other significant events occur that may materially affect this rate, such as merger and acquisition activity, changes in business outlook, or other changes in expectations regarding tax regulations.

The Company calculates free cash flow as total net cash provided by operating activities, net of cash used for the additions of capitalized software costs and equipment and improvements. The Company calculates net debt as line of credit and convertible senior notes less cash and cash equivalents and marketable securities. The Company calculates non-GAAP adjusted EBITDA by excluding net acquisition costs, amortization of acquired intangible assets, impairment of assets, restructuring costs, shareholder disputes and related costs, which include net securities litigation defense, proxy contest, other regulatory and litigation matters, and related costs, net of insurance, share-based compensation, and other non-run-rate expenses from GAAP income from operations and then adding back amortization of capitalized software costs and depreciation as presented within the condensed consolidated statements of cash flows. Non-GAAP adjusted EBITDA margin is calculated as non-GAAP adjusted EBITDA divided by total revenues. The Company calculates Rule of 40 as annual revenue growth rate plus non-GAAP adjusted EBITDA margin.

The Company’s future period guidance in this release includes adjustments for items not indicative of the Company’s core operations. Such adjustments are generally expected to be of a nature similar to those adjustments applied to the Company’s historic GAAP financial results in the determination of the Company’s non-GAAP diluted earnings per share. Such adjustments, however, may be affected by changes in ongoing assumptions and judgments as to the items that are excluded in the calculation of non-GAAP adjusted net income and adjusted diluted earnings per share, as described in this release. The exact amount and probable significance of these adjustments, including net acquisition costs, impairment of assets, restructuring costs, shareholder disputes and related costs, which include net securities litigation defense, proxy contest, other regulatory and litigation matters, and related costs, net of insurance, and other non-run-rate expenses, are not currently determinable without unreasonable efforts, but may be significant. These items cannot be reliably quantified or forecasted due to the combination of their historic and expected variability. It is therefore not practicable to reconcile this non-GAAP guidance to the most comparable GAAP measures.

About NextGen Healthcare, Inc.

NextGen Healthcare, Inc. (Nasdaq: NXGN) is a leading provider of innovative healthcare technology solutions. We are reimagining ambulatory healthcare with award-winning solutions that enable high-performing practices to create healthier communities. We partner with medical, behavioral and oral health providers in their journey toward whole person health and value-based care. Our highly integrated, intelligent and interoperable solutions go beyond EHR and Practice Management to increase clinical quality and productivity, enrich the patient experience and drive superior financial performance. We are on a quest to achieve better healthcare outcomes for all. Learn more at nextgen.com, and follow us on Facebook, Twitter, LinkedIn, YouTube and Instagram.

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 

 

 

 

Three Months Ended June 30,

 

 

2023

 

 

2022

 

Revenues:

 

 

 

 

 

Recurring

$

163,374

 

 

$

139,759

 

Software, hardware, and other non-recurring

 

14,833

 

 

 

13,543

 

Total revenues

 

178,207

 

 

 

153,302

 

Cost of revenue:

 

 

 

 

 

Recurring

 

79,221

 

 

 

62,244

 

Software, hardware, and other non-recurring

 

12,174

 

 

 

10,676

 

Amortization of capitalized software costs and acquired intangible assets

 

6,991

 

 

 

7,134

 

Total cost of revenue

 

98,386

 

 

 

80,054

 

Gross profit

 

79,821

 

 

 

73,248

 

Operating expenses:

 

 

 

 

 

Selling, general and administrative

 

48,193

 

 

 

49,034

 

Research and development costs, net

 

20,925

 

 

 

21,795

 

Amortization of acquired intangible assets

 

1,188

 

 

 

705

 

Impairment of assets

 

359

 

 

 

524

 

Restructuring costs

 

90

 

 

 

 

Total operating expenses

 

70,755

 

 

 

72,058

 

Income from operations

 

9,066

 

 

 

1,190

 

Interest income

 

1,669

 

 

 

46

 

Interest expense

 

(3,239

)

 

 

(330

)

Other income (expense), net

 

1,050

 

 

 

(5

)

Income before provision for (benefit of) income taxes

 

8,546

 

 

 

901

 

Provision for (benefit of) income taxes

 

2,390

 

 

 

(247

)

Net income

$

6,156

 

 

$

1,148

 

Net income per share:

 

 

 

 

 

Basic

$

0.09

 

 

$

0.02

 

Diluted

$

0.09

 

 

$

0.02

 

Weighted-average shares outstanding:

 

 

 

 

 

Basic

 

66,420

 

 

 

67,588

 

Diluted

 

66,853

 

 

 

68,283

 

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

June 30, 2023

 

 

March 31, 2023

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

70,325

 

 

$

98,719

 

Restricted cash and cash equivalents

 

7,580

 

 

 

7,269

 

Marketable securities

 

147,772

 

 

 

139,612

 

Accounts receivable, net

 

84,123

 

 

 

88,498

 

Contract assets

 

21,422

 

 

 

19,561

 

Income taxes receivable

 

3,250

 

 

 

5,248

 

Prepaid expenses and other current assets

 

40,259

 

 

 

42,916

 

Total current assets

 

374,731

 

 

 

401,823

 

Equipment and improvements, net

 

5,561

 

 

 

6,421

 

Capitalized software costs, net

 

56,805

 

 

 

54,516

 

Operating lease assets

 

3,129

 

 

 

3,335

 

Deferred income taxes, net

 

29,474

 

 

 

29,472

 

Contract assets, net of current

 

5,391

 

 

 

5,572

 

Intangibles, net

 

26,724

 

 

 

28,968

 

Goodwill

 

321,756

 

 

 

321,756

 

Other assets

 

44,898

 

 

 

44,238

 

Total assets

$

868,469

 

 

$

896,101

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

12,184

 

 

$

12,022

 

Contract liabilities

 

48,349

 

 

 

61,601

 

Accrued compensation and related benefits

 

22,870

 

 

 

36,241

 

Income taxes payable

 

675

 

 

 

622

 

Operating lease liabilities

 

3,490

 

 

 

3,826

 

Other current liabilities

 

80,273

 

 

 

83,799

 

Total current liabilities

 

167,841

 

 

 

198,111

 

Contract liabilities, net of current

 

2,251

 

 

 

10,310

 

Deferred compensation

 

8,835

 

 

 

8,033

 

Convertible senior notes, net, noncurrent

 

267,156

 

 

 

266,843

 

Operating lease liabilities, net of current

 

3,365

 

 

 

4,095

 

Other noncurrent liabilities

 

8,499

 

 

 

8,274

 

Total liabilities

 

457,947

 

 

 

495,666

 

Commitments and contingencies

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

Common stock, $0.01 par value; authorized 100,000 shares; 71,892 shares and 70,875 shares issued at June 30, 2023 and March 31, 2023, respectively; 67,043 shares and 66,026 shares outstanding at June 30, 2023 and March 31, 2023, respectively

 

719

 

 

 

709

 

Treasury stock, at cost, 4,849 shares and 4,849 shares at June 30, 2023 and March 31, 2023, respectively

 

(85,752

)

 

 

(85,752

)

Additional paid-in capital

 

364,040

 

 

 

359,342

 

Accumulated other comprehensive loss

 

(2,239

)

 

 

(1,462

)

Retained earnings

 

133,754

 

 

 

127,598

 

Total shareholders' equity

 

410,522

 

 

 

400,435

 

Total liabilities and shareholders' equity

$

868,469

 

 

$

896,101

 

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

Three Months Ended June 30,

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

Net income

$

6,156

 

 

$

1,148

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Amortization of capitalized software costs

 

5,936

 

 

 

5,354

 

Amortization of debt issuance costs

 

440

 

 

 

127

 

Amortization of other intangibles

 

2,244

 

 

 

2,486

 

Net amortization (accretion) of premiums/discounts on marketable securities

 

(973

)

 

 

 

Change in fair value of contingent consideration

 

100

 

 

 

 

Depreciation

 

1,118

 

 

 

1,292

 

Excess tax deficiency (benefit) from share-based compensation

 

211

 

 

 

(411

)

Impairment of assets

 

5

 

 

 

524

 

Loss on disposal of equipment and improvements

 

 

 

 

41

 

Loss on foreign currency exchange rates

 

84

 

 

 

6

 

Non-cash operating lease costs

 

392

 

 

 

914

 

Provision for bad debts

 

875

 

 

 

241

 

Share-based compensation

 

7,956

 

 

 

8,766

 

Changes in assets and liabilities, net of amounts acquired:

 

 

 

 

 

Accounts receivable

 

3,500

 

 

 

(1,464

)

Contract assets

 

(1,680

)

 

 

(126

)

Accounts payable

 

130

 

 

 

5,829

 

Contract liabilities

 

(21,311

)

 

 

1,814

 

Accrued compensation and related benefits

 

(13,374

)

 

 

(22,668

)

Income taxes

 

1,956

 

 

 

(191

)

Deferred compensation

 

802

 

 

 

(49

)

Operating lease liabilities

 

(1,067

)

 

 

(2,085

)

Other assets and liabilities

 

(1,597

)

 

 

(6,193

)

Net cash used in operating activities

 

(8,097

)

 

 

(4,645

)

Cash flows from investing activities:

 

 

 

 

 

Additions to capitalized software costs

 

(8,225

)

 

 

(8,998

)

Additions to equipment and improvements

 

(453

)

 

 

(455

)

Proceeds from sales of marketable securities

 

6,858

 

 

 

 

Proceeds from maturities and redemptions of marketable securities

 

20,760

 

 

 

 

Purchases of marketable securities

 

(35,626

)

 

 

 

Net cash used in investing activities

 

(16,686

)

 

 

(9,453

)

Cash flows from financing activities:

 

 

 

 

 

Proceeds from issuance of shares under employee plans

 

650

 

 

 

2,068

 

Repurchase of common stock

 

 

 

 

(2,505

)

Payments for taxes related to net share settlement of equity awards

 

(3,898

)

 

 

(3,668

)

Net cash used in financing activities

 

(3,248

)

 

 

(4,105

)

Effect of exchange rate changes on cash and cash equivalents

 

(52

)

 

 

(129

)

Net decrease in cash, cash equivalents, and restricted cash

 

(28,083

)

 

 

(18,332

)

Cash, cash equivalents, and restricted cash at beginning of period

 

105,988

 

 

 

66,747

 

Cash, cash equivalents, and restricted cash at end of period

$

77,905

 

 

$

48,415

 

NEXTGEN HEALTHCARE, INC.

SUPPLEMENTAL FINANCIAL INFORMATION

(In thousands)

 

The following table presents our revenues disaggregated by our major revenue categories and by occurrence:

 

 

Three Months Ended June 30,

 

 

2023

 

 

2022

 

Recurring revenues:

 

 

 

 

 

Subscription services

$

52,498

 

 

$

42,759

 

Support and maintenance

 

38,509

 

 

 

39,138

 

Managed services

 

34,759

 

 

 

30,645

 

Transactional and data services

 

37,608

 

 

 

27,217

 

Total recurring revenues

 

163,374

 

 

 

139,759

 

 

 

 

 

 

 

Software, hardware, and other non-recurring revenues:

 

 

 

 

 

Software license and hardware

 

4,971

 

 

 

6,199

 

Other non-recurring services

 

9,862

 

 

 

7,344

 

Total software, hardware and other non-recurring revenues

 

14,833

 

 

 

13,543

 

 

 

 

 

 

 

Total revenues

$

178,207

 

 

$

153,302

 

 

 

 

 

 

 

Recurring revenues as a percentage of total revenues

 

91.7

%

 

 

91.2

%

NEXTGEN HEALTHCARE, INC.

NON-GAAP FINANCIAL MEASURES

(In thousands, except per share data)

 

RECONCILIATION OF NON-GAAP DILUTED EARNINGS PER SHARE

 

 

Three Months Ended June 30,

 

 

2023

 

 

2022

 

Income before provision for income taxes - GAAP

$

8,546

 

 

$

901

 

Non-GAAP adjustments:

 

 

 

 

 

Acquisition costs, net

 

333

 

 

 

 

Amortization of acquired intangible assets

 

2,244

 

 

 

2,486

 

Amortization of deferred debt issuance costs

 

440

 

 

 

127

 

Impairment of assets

 

359

 

 

 

524

 

Restructuring costs

 

90

 

 

 

 

Shareholder disputes, other regulatory and litigation matters, and related costs, net of insurance

 

532

 

 

 

121

 

Share-based compensation

 

7,956

 

 

 

8,766

 

Other non-run-rate expenses*

 

94

 

 

 

407

 

Total adjustments to GAAP income before provision for income taxes:

 

12,048

 

 

 

12,431

 

Income before provision for income taxes - Non-GAAP

 

20,594

 

 

 

13,332

 

Provision for income taxes

 

4,325

 

 

 

2,666

 

Net income - Non-GAAP

$

16,269

 

 

$

10,666

 

Diluted net income per share - Non-GAAP

$

0.24

 

 

$

0.16

 

Weighted-average shares outstanding (diluted):

 

66,853

 

 

 

68,283

 

 

 

 

 

 

 

* Other non-run-rate expenses for the three months ended June 30, 2023 consist of $94 excess lease-related expense for vacated facilities not related to core operations.



Other non-run-rate expenses for the three months ended June 30, 2022 consist of $257 excess lease-related expense for vacated facilities and $150 of professional services costs not related to core operations.

RECONCILIATION OF FREE CASH FLOW

 

Three Months Ended June 30,

 

 

2023

 

 

2022

 

Net cash used in operating activities

$

(8,097

)

 

$

(4,645

)

Additions to capitalized software costs

 

(8,225

)

 

$

(8,998

)

Additions to equipment and improvements

 

(453

)

 

$

(455

)

Free cash flow

$

(16,775

)

 

$

(14,098

)

 

NEXTGEN HEALTHCARE, INC.

NON-GAAP FINANCIAL MEASURES

(In thousands)

 

RECONCILIATION OF ADJUSTED EBITDA

 

 

Three Months Ended June 30,

 

 

2023

 

 

2022

 

Income from operations - GAAP

$

9,066

 

 

$

1,190

 

Non-GAAP adjustments:

 

 

 

 

 

Acquisition costs, net

 

333

 

 

 

 

Amortization of acquired intangible assets

 

2,244

 

 

 

2,486

 

Impairment of assets

 

359

 

 

 

524

 

Restructuring costs

 

90

 

 

 

 

Shareholder disputes, other regulatory and litigation matters, and related costs, net of insurance

 

532

 

 

 

121

 

Share-based compensation

 

7,956

 

 

 

8,766

 

Other non-run-rate expenses*

 

94

 

 

 

407

 

Total adjustments to GAAP income from operations

 

11,608

 

 

 

12,304

 

Income from operations - Non-GAAP

 

20,674

 

 

 

13,494

 

Amortization of capitalized software costs

 

5,936

 

 

 

5,354

 

Depreciation

 

1,118

 

 

 

1,292

 

Depreciation and Amortization - Non-GAAP

 

7,054

 

 

 

6,646

 

Adjusted EBITDA - Non-GAAP

$

27,728

 

 

$

20,140

 

Total revenues

$

178,207

 

 

$

153,302

 

Adjusted EBITDA margin - Non-GAAP

 

15.6

%

 

 

13.1

%

 

 

 

 

 

 

* Other non-run-rate expenses for the three months ended June 30, 2023 consist of $94 excess lease-related expense for vacated facilities not related to core operations.



Other non-run-rate expenses for the three months ended June 30, 2022 consist of $257 excess lease-related expense for vacated facilities and $150 of professional services costs not related to core operations.

 

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