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NextGen Healthcare Reports Fiscal 2023 First Quarter Results

7/26/2022 5:03:00 PM

ATLANTA--(BUSINESS WIRE)--Jul. 26, 2022-- 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 ended June 30, 2022.

Fiscal 2023 First Quarter Highlights

  • Total revenue was $153.3 million compared to $146.1 million for the same period a year ago, or 5% growth.
  • Recurring revenue was $139.8 million compared to $132.4 million for the same period a year ago, or 6% growth. Recurring revenue accounted for 91% of total revenue.
  • Subscription services revenue was $42.8 million compared to $38.3 million for the same period a year ago, or 12% growth. This growth reflects solid demand for NextGen Office, Mobile, Telehealth, and other services.
  • Bookings, which reflects annual contract value, was $39.2 million compared to $34.3 million for the same period a year ago, or 14% growth.
  • Fully diluted net income per share was $0.02 compared to $0.04 for the same period a year ago.
  • On a non-GAAP basis, fully diluted earnings per share was $0.16 compared to $0.25 for the same period a year ago.

“Fiscal first quarter results reflect continued solid execution and strong overall demand, as reflected in both bookings growth and subscription services revenue growth,” said David Sides, President and Chief Executive Officer of NextGen Healthcare. “We continue to invest prudently in each of our three domains; Enterprise, Office and Insights, and are on track with our long-term goals. In addition, our focused efforts in corporate development and portfolio management are moving forward as we recently sold certain, non-strategic, dental-related assets. NextGen Healthcare has started off the fiscal year with positive momentum and is well positioned to execute on our growth agenda.”

After giving effect for the sale of select dental assets, our outlook for fiscal 2023 is now as follows:

  • Revenue is between $621 million and $633 million, from between $628 million and $640 million
  • Adjusted EBITDA is between $109 million and $114 million, from between $111 million and $116 million
  • Non-GAAP earnings per share is between $0.92 and $0.98, from between $0.95 and $1.01

Conference Call Information

NextGen Healthcare will host a conference call today at 5:00 p.m. EST to discuss operating results from its fiscal 2023 first quarter. Shareholders and interested participants may listen to a live broadcast of the call by dialing 800-225-9448 or 203-518-9708 for international callers and referencing participant code NXGNQ123 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 we make regarding our fiscal year 2023 outlook, financial and operating results, strategic priorities, growth initiatives and expected capital expenditures. These forward-looking statements are based on the current beliefs, expectations, and assumptions of the Company's management relating to the future (including, without limitation, statements concerning revenue, net income, and earnings per share). The words “positioned,” “proposed,” “potential,” “project,” “expect,” “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “estimate, “strategy,” “expectations,” “future,” “likely,” “may,” “should,” “will,” variations thereof or similar expressions are intended to identify such 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: changes in laws and regulations applicable to our business; changes in market conditions and receptivity to our services and offerings; strategic actions, including acquisitions and dispositions 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 develop and grow partner relationships; our ability to attract and retain key employees; our ability to anticipate or respond quickly to market changes, execute our strategy and manage growth; the impact of litigation and governmental and regulatory agency investigations; the impact of governmental and regulatory agency investigations; 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; the impact of the COVID-19 pandemic on our operations and demand for our services; impact of breaches or failures of the Company’s information security measures or unauthorized access to a customer’s data; disruptions caused by acquisitions of companies, products, or technologies; and general economic conditions. Additional discussion of these and other risks, uncertainties and factors affecting our business is contained in our filings with the SEC, including our most recent Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q.

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, such as personnel and facilities, 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. These forward-looking statements speak only as of the date hereof. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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, net of insurance, which include net securities litigation defense and related costs, 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 2023 is 20.0%. 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 less cash and cash equivalents. 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, net of insurance, which include net securities litigation defense and related costs, 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, 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 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 dental 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,

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

Recurring

$

139,759

 

 

$

132,381

 

Software, hardware, and other non-recurring

 

13,543

 

 

 

13,703

 

Total revenues

 

153,302

 

 

 

146,084

 

Cost of revenue:

 

 

 

 

 

 

 

Recurring

 

62,244

 

 

 

57,160

 

Software, hardware, and other non-recurring

 

10,676

 

 

 

7,497

 

Amortization of capitalized software costs and acquired intangible assets

 

7,134

 

 

 

8,084

 

Total cost of revenue

 

80,054

 

 

 

72,741

 

Gross profit

 

73,248

 

 

 

73,343

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative

 

49,034

 

 

 

48,486

 

Research and development costs, net

 

21,795

 

 

 

19,321

 

Amortization of acquired intangible assets

 

705

 

 

 

881

 

Impairment of assets

 

524

 

 

 

382

 

Restructuring costs

 

 

 

 

539

 

Total operating expenses

 

72,058

 

 

 

69,609

 

Income from operations

 

1,190

 

 

 

3,734

 

Interest income

 

46

 

 

 

12

 

Interest expense

 

(330

)

 

 

(317

)

Other expense, net

 

(5

)

 

 

(22

)

Income before provision for (benefit of) income taxes

 

901

 

 

 

3,407

 

Provision for (benefit of) income taxes

 

(247

)

 

 

559

 

Net income:

$

1,148

 

 

$

2,848

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

0.02

 

 

$

0.04

 

Diluted

$

0.02

 

 

$

0.04

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

Basic

 

67,588

 

 

 

67,175

 

Diluted

 

68,283

 

 

 

67,799

 

 

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

 

June 30, 2022

 

 

March 31, 2022

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

40,361

 

 

$

59,829

 

Restricted cash and cash equivalents

 

8,054

 

 

 

6,918

 

Accounts receivable, net

 

77,279

 

 

 

76,057

 

Contract assets

 

25,464

 

 

 

25,157

 

Income taxes receivable

 

7,367

 

 

 

6,507

 

Prepaid expenses and other current assets

 

34,011

 

 

 

37,102

 

Total current assets

 

192,536

 

 

 

211,570

 

Equipment and improvements, net

 

8,326

 

 

 

9,120

 

Capitalized software costs, net

 

47,602

 

 

 

43,958

 

Operating lease assets

 

9,707

 

 

 

11,316

 

Deferred income taxes, net

 

19,187

 

 

 

19,259

 

Contract assets, net of current

 

1,729

 

 

 

1,910

 

Intangibles, net

 

21,817

 

 

 

24,303

 

Goodwill

 

267,212

 

 

 

267,212

 

Other assets

 

39,879

 

 

 

39,026

 

Total assets

$

607,995

 

 

$

627,674

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

15,042

 

 

$

9,125

 

Contract liabilities

 

63,094

 

 

 

61,280

 

Accrued compensation and related benefits

 

25,967

 

 

 

48,736

 

Income taxes payable

 

363

 

 

 

99

 

Operating lease liabilities

 

7,946

 

 

 

8,089

 

Other current liabilities

 

45,187

 

 

 

53,533

 

Total current liabilities

 

157,599

 

 

 

180,862

 

Deferred compensation

 

7,181

 

 

 

7,230

 

Operating lease liabilities, net of current

 

9,794

 

 

 

11,934

 

Other noncurrent liabilities

 

4,562

 

 

 

4,570

 

Total liabilities

 

179,136

 

 

 

204,596

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

Common stock, $0.01 par value; authorized 100,000 shares; issued and outstanding 68,064 and 67,075 shares at June 30, 2022 and March 31, 2022, respectively

 

704

 

 

 

692

 

Treasury stock, at cost, 2,318 shares and 2,170 shares at June 30, 2022 and March 31, 2022, respectively

 

(38,379

)

 

 

(35,874

)

Additional paid-in capital

 

337,071

 

 

 

329,917

 

Accumulated other comprehensive loss

 

(1,937

)

 

 

(1,909

)

Retained earnings

 

131,400

 

 

 

130,252

 

Total shareholders' equity

 

428,859

 

 

 

423,078

 

Total liabilities and shareholders' equity

$

607,995

$

627,674

 

 

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended June 30,

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

1,148

 

 

$

2,848

 

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

 

 

 

 

 

 

 

Amortization of capitalized software costs

 

5,354

 

 

 

5,866

 

Amortization of debt issuance costs

 

127

 

 

 

127

 

Amortization of other intangibles

 

2,486

 

 

 

3,099

 

Deferred income taxes

 

 

 

 

28

 

Depreciation

 

1,292

 

 

 

2,108

 

Excess tax benefit from share-based compensation

 

(411

)

 

 

(176

)

Impairment of assets

 

524

 

 

 

382

 

Loss on disposal of equipment and improvements

 

41

 

 

 

38

 

Loss on foreign currency exchange rates

 

6

 

 

 

 

Non-cash operating lease costs

 

914

 

 

 

1,628

 

Provision for bad debts

 

241

 

 

 

639

 

Share-based compensation

 

8,766

 

 

 

6,412

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

(1,464

)

 

 

3,407

 

Contract assets

 

(126

)

 

 

(919

)

Accounts payable

 

5,829

 

 

 

(4,334

)

Contract liabilities

 

1,814

 

 

 

(582

)

Accrued compensation and related benefits

 

(22,668

)

 

 

(21,964

)

Income taxes

 

(191

)

 

 

464

 

Deferred compensation

 

(49

)

 

 

743

 

Operating lease liabilities

 

(2,085

)

 

 

(2,676

)

Other assets and liabilities

 

(6,193

)

 

 

3,175

 

Net cash provided by (used in) operating activities

 

(4,645

)

 

 

313

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Additions to capitalized software costs

 

(8,998

)

 

 

(5,538

)

Additions to equipment and improvements

 

(455

)

 

 

(1,002

)

Net cash used in investing activities

 

(9,453

)

 

 

(6,540

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from issuance of shares under employee plans

 

2,068

 

 

 

671

 

Repurchase of common stock

 

(2,505

)

 

 

 

Payments for taxes related to net share settlement of equity awards

 

(3,668

)

 

 

(2,969

)

Net cash used in financing activities

 

(4,105

)

 

 

(2,298

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

(129

)

 

 

 

Net decrease in cash, cash equivalents, and restricted cash

 

(18,332

)

 

 

(8,525

)

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

 

66,747

 

 

 

78,575

 

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

$

48,415

 

 

$

70,050

 

 

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,

 

 

2022

 

 

2021

 

Recurring revenues:

 

 

 

 

 

 

 

Subscription services

$

42,759

 

 

$

38,284

 

Support and maintenance

 

39,138

 

 

 

38,486

 

Managed services *

 

30,645

 

 

 

27,908

 

Transactional and data services *

 

27,217

 

 

 

27,703

 

Total recurring revenues

 

139,759

 

 

 

132,381

 

 

 

 

 

 

 

 

 

Software, hardware, and other non-recurring revenues:

 

 

 

 

 

 

 

Software license and hardware

 

6,199

 

 

 

7,214

 

Other non-recurring services

 

7,344

 

 

 

6,489

 

Total software, hardware and other non-recurring revenues

 

13,543

 

 

 

13,703

 

 

 

 

 

 

 

 

 

Total revenues

$

153,302

 

 

$

146,084

 

 

 

 

 

 

 

 

 

Recurring revenues as a percentage of total revenues

 

91.2

%

 

 

90.6

%

* Beginning in fiscal year 2023, to align the presentation of disaggregated revenue with the manner in which management reviews such information, the presentation of disaggregated revenues by major revenue categories was revised to reclassify revenues related to patient pay services and certain other services from the managed services category into the transactional and data services category, which replaced the prior EDI and data services category. The prior period presentation of revenues disaggregated by major revenue categories and by occurrence in the tables below have been reclassified to conform with current period presentation.

 

Refer to our Investor Relations website at http://investor.nextgen.com for the revised tables of revenue disaggregated by major revenue categories and by occurrence for each interim reporting period within the fiscal years ended March 31, 2022 and 2021.

 

 

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,

 

 

2022

 

 

2021

 

Income before provision for income taxes - GAAP

$

901

 

 

$

3,407

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Amortization of acquired intangible assets

 

2,486

 

 

 

3,099

 

Amortization of deferred debt issuance costs

 

127

 

 

 

127

 

Impairment of assets

 

524

 

 

 

382

 

Restructuring costs

 

 

 

 

539

 

Shareholder disputes and related costs, net of insurance

 

121

 

 

 

4,858

 

Share-based compensation

 

8,766

 

 

 

6,412

 

Other non-run-rate expenses*

 

407

 

 

 

2,719

 

Total adjustments to GAAP income before provision for income taxes:

 

12,431

 

 

 

18,136

 

Income before provision for income taxes - Non-GAAP

 

13,332

 

 

 

21,543

 

Provision for income taxes

 

2,666

 

 

 

4,309

 

Net income - Non-GAAP

$

10,666

 

 

$

17,234

 

Diluted net income per share - Non-GAAP

$

0.16

 

 

$

0.25

 

Weighted-average shares outstanding (diluted):

 

68,283

 

 

 

67,799

 

 

 

 

 

 

 

 

 

* 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.

 

Other non-run-rate expenses for the three months ended June 30, 2021 consist primarily of $470 excess lease-related expense for vacated facilities, lease termination costs, and other costs, including retention bonuses, related to the restructuring plan and $2,249 of severance and other costs related to the departure of the former Chief Executive Officer.

 

 

RECONCILIATION OF FREE CASH FLOW

 

Three Months Ended June 30,

 

 

2022

 

 

2021

 

Net cash provided by (used in) operating activities

$

(4,645

)

 

$

313

 

Additions to capitalized software costs

 

(8,998

)

 

 

(5,538

)

Additions to equipment and improvements

 

(455

)

 

 

(1,002

)

Free cash flow

$

(14,098

)

 

$

(6,227

)

 

NEXTGEN HEALTHCARE, INC.

NON-GAAP FINANCIAL MEASURES

(In thousands)

 

RECONCILIATION OF ADJUSTED EBITDA

 

 

Three Months Ended June 30,

 

 

2022

 

 

2021

 

Income from operations - GAAP

$

1,190

 

 

$

3,734

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Amortization of acquired intangible assets

 

2,486

 

 

 

3,099

 

Impairment of assets

 

524

 

 

 

382

 

Restructuring costs

 

 

 

 

539

 

Shareholder disputes and related costs, net of insurance

 

121

 

 

 

4,858

 

Share-based compensation

 

8,766

 

 

 

6,412

 

Other non-run-rate expenses*

 

407

 

 

 

2,719

 

Total adjustments to GAAP income from operations

 

12,304

 

 

 

18,009

 

Income from operations - Non-GAAP

 

13,494

 

 

 

21,743

 

Amortization of capitalized software costs

 

5,354

 

 

 

5,866

 

Depreciation

 

1,292

 

 

 

2,108

 

Depreciation and Amortization - Non-GAAP

 

6,646

 

 

 

7,974

 

Adjusted EBITDA - Non-GAAP

$

20,140

 

 

$

29,717

 

Total revenues

$

153,302

 

 

$

146,084

 

Adjusted EBITDA margin - Non-GAAP

 

13.1

%

 

 

20.3

%

 

 

 

 

 

 

 

 

* 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.

 

Other non-run-rate expenses for the three months ended June 30, 2021 consist primarily of $470 excess lease-related expense for vacated facilities, lease termination costs, and other costs, including retention bonuses, related to the restructuring plan and $2,249 of severance and other costs related to the departure of the former Chief Executive Officer.

 

A reconciliation of adjusted EBITDA for each interim reporting period within the fiscal years ended March 31, 2022 and 2021 may be accessed through our Investor Relations website at http://investor.nextgen.com.

Media Relations Contact
Tami Andrade
(949) 237-6083
tandrade@nextgen.com

Investor Relations Contact
Matthew Scalo
(415) 370-9202
mscalo@nextgen.com

Source: NextGen Healthcare, Inc.