NextGen Healthcare, Inc. Reports Fiscal 2020 Second Quarter

On a GAAP basis, revenue for the fiscal 2020 second quarter was $134.3 million compared to $130.3 million a year ago.

Oct. 23, 2019 20:05 UTC

IRVINE, Calif.--(BUSINESS WIRE)-- NextGen Healthcare, Inc. (NASDAQ: NXGN), a leading provider of ambulatory-focused healthcare technology solutions, announced today its fiscal 2020 second quarter ended September 30, 2019 operating results.

Fiscal 2020 Second Quarter Highlights

On a GAAP basis, revenue for the fiscal 2020 second quarter was $134.3 million compared to $130.3 million a year ago.

On a GAAP basis, net income for the fiscal 2020 second quarter was $6.1 million compared with net income of $13.1 million in the fiscal 2019 second quarter.

On a GAAP basis, fully diluted net income per share was $0.09 in the fiscal 2020 second quarter compared to net income per share of $0.20 per share for the same period a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2020 second quarter remained at $0.24 compared to the second quarter a year ago.

Cash flow from operations was $23.8 million in the fiscal 2020 second quarter compared to $11.9 million for the same period a year ago. Free cash flow was $17.1 million compared to $5.5 million in the same period a year ago.

“I’m pleased to report a solid second quarter in which we delivered revenue growth and positive free cash flow, as well as strong bookings bolstered by cross-selling, RCM traction, multiple ‘all-in’ deals, and competitive displacements. Immediately after quarter end, we completed the acquisition of Topaz Information Solutions, which expands our capabilities to better serve behavioral health providers and enables our planned growth in this important market. Halfway through our fiscal year, we are confident that our current position will enable us to deliver on our full year outlook,” said Rusty Frantz, president and chief executive officer of NextGen Healthcare.

Fiscal 2020 Financial Outlook

The Company is reiterating their outlook for fiscal 2020 and expects:

  • Revenue of between $536 million and $550 million
  • Non-GAAP EPS of between $0.82 and $0.90

Conference Call Information

NextGen Healthcare will host a conference call to discuss its fiscal 2020 second quarter operating results on Wednesday, October 23, 2019 at 5:00 PM ET (2:00 PM PT). Shareholders and interested participants may listen to a live broadcast of the conference call by dialing 866-750-8947 or 720-405-1352 for international callers, and referencing participant code 7179172 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 until January 22, 2020.

About NextGen Healthcare, Inc

We empower the transformation of ambulatory care—partnering with medical, behavioral and dental providers in their journey to value-based care to make healthcare better for everyone. We go beyond EHR and PM. Our integrated solutions help increase clinical productivity, enrich the patient experience, and ensure healthy financial outcomes. We believe in better. Learn more at nextgen.com, and follow us on Facebook, Twitter, LinkedIn and Instagram.

SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS

This news release may contain forward-looking statements within the meaning of the federal securities laws, including but not limited to, statements regarding future events, developments in the healthcare sector and regulatory framework, the Company’s future performance, as well as management’s expectations, beliefs, intentions, plans, estimates or projections relating to the future (including, without limitation, statements concerning revenue, net income, and earnings per share). Risks and uncertainties exist that may cause the results to differ materially from those set forth in these forward-looking statements. Factors that could cause the anticipated results to differ from those described in the forward-looking statements and additional risks and uncertainties are set forth in Part I, Item A of our most recent Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q, including but not limited to: the volume and timing of systems sales and installations; length of sales cycles and the installation process; the possibility that products will not achieve or sustain market acceptance; seasonal patterns of sales and customer buying behavior; impact of incentive payments under The American Recovery and Reinvestment Act on sales and the ability of the Company to meet continued certification requirements; uncertainties related to the future impact of U.S. tax reform; 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; undetected errors or bugs in software; product liability; changing economic, political or regulatory influences in the health-care industry; changes in product-pricing policies; availability of third-party products and components; competitive pressures including product offerings, pricing and promotional activities; the Company’s ability or inability to attract and retain qualified personnel; possible regulation of the Company’s software by the U.S. Food and Drug Administration; changes of accounting estimates and assumptions used to prepare the prior periods’ financial statements; 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, 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 free cash flow by 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 non-GAAP diluted earnings per share by excluding net acquisition costs, amortization of acquired intangible assets, amortization of deferred debt issuance costs, restructuring costs, net securities litigation defense costs and settlement, share-based compensation, impairment of assets, 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 applied to each quarter of fiscal year 2019 was 22.0% and is expected to remain at 22.0% for each quarter of fiscal year 2020. 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’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, restructuring costs, net securities litigation defense costs, impairment of assets, 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.

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

Three Months Ended
September 30,

Six Months Ended
September 30,

2019

2018

2019

2018

Revenues:

Recurring

$

120,589

$

116,317

$

240,036

$

236,324

Software, hardware, and other non-recurring

13,667

14,004

26,081

27,197

Total revenues

134,256

130,321

266,117

263,521

Cost of revenue:

Recurring

50,328

47,172

100,868

95,325

Software, hardware, and other non-recurring

6,563

7,022

12,841

14,176

Amortization of capitalized software costs and acquired intangible assets

8,843

6,924

17,256

13,468

Total cost of revenue

65,734

61,118

130,965

122,969

Gross profit

68,522

69,203

135,152

140,552

Operating expenses:

Selling, general and administrative

39,046

34,229

79,174

78,865

Research and development costs, net

19,789

18,371

41,840

40,499

Amortization of acquired intangible assets

865

1,121

1,730

2,289

Impairment of assets

1,916

2,405

Restructuring costs

175

1,882

Total operating expenses

61,791

53,721

127,031

121,653

Income from operations

6,731

15,482

8,121

18,899

Interest income

36

40

115

69

Interest expense

(387

)

(769

)

(859

)

(1,499

)

Other income, net

210

237

77

611

Income before provision for income taxes

6,590

14,990

7,454

18,080

Provision for income taxes

509

1,896

129

2,338

Net income

$

6,081

$

13,094

$

7,325

$

15,742

Net income per share:

Basic

$

0.09

$

0.20

$

0.11

$

0.25

Diluted

$

0.09

$

0.20

$

0.11

$

0.24

Weighted-average shares outstanding:

Basic

65,401

64,265

65,209

64,143

Diluted

65,560

64,857

65,445

64,362

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

September 30, 2019

March 31, 2019

ASSETS

Current assets:

Cash and cash equivalents

$

42,930

$

33,079

Restricted cash and cash equivalents

7,501

1,443

Accounts receivable, net

83,708

87,459

Contract assets

11,973

13,242

Inventory

58

120

Income taxes receivable

3,272

3,682

Prepaid expenses and other current assets

20,612

20,826

Total current assets

170,054

159,851

Equipment and improvements, net

22,049

21,404

Capitalized software costs, net

39,076

37,855

Operating lease assets

38,230

Deferred income taxes, net

6,166

6,194

Contract assets, net of current

3,175

3,747

Intangibles, net

42,290

52,595

Goodwill

218,771

218,771

Other assets

33,017

32,478

Total assets

$

572,828

$

532,895

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

4,837

$

5,432

Contract liabilities

54,101

56,009

Accrued compensation and related benefits

21,825

25,663

Income taxes payable

64

Operating lease liabilities

9,947

Other current liabilities

41,545

41,064

Total current liabilities

132,255

128,232

Deferred compensation

5,933

5,905

Line of credit

11,000

Operating lease liabilities, net of current

41,622

Other noncurrent liabilities

1,890

11,812

Total liabilities

181,700

156,949

Commitments and contingencies

Shareholders’ equity:

Common stock

$0.01 par value; authorized 100,000 shares; issued and outstanding 65,436 and 64,838 shares at September 30, 2019 and March 31, 2019, respectively

654

648

Additional paid-in capital

272,848

264,908

Accumulated other comprehensive loss

(1,320

)

(1,231

)

Retained earnings

118,946

111,621

Total shareholders’ equity

391,128

375,946

Total liabilities and shareholders’ equity

$

572,828

$

532,895

NEXTGEN HEALTHCARE, INC.

NON-GAAP FINANCIAL MEASURES

(In thousands, except per share data)

RECONCILIATION OF NON-GAAP DILUTED EARNINGS PER SHARE

Three Months Ended
September 30,

Six Months Ended
September 30,

2019

2018

2019

2018

Income before provision for income taxes - GAAP

$

6,590

$

14,990

$

7,454

$

18,080

Non-GAAP adjustments:

Acquisition costs, net

739

315

739

1,949

Amortization of acquired intangible assets

5,152

5,409

10,305

10,865

Amortization of deferred debt issuance costs

178

178

355

355

Impairment of assets

1,916

2,405

Restructuring costs

175

1,882

Securities litigation defense costs and settlement, net of insurance

339

(5,715

)

376

(5,436

)

Share-based compensation

4,316

4,135

9,207

7,251

Other non-run-rate expenses*

815

691

905

2,639

Total adjustments to GAAP income before provision for income taxes:

13,630

5,013

26,174

17,623

Income before provision for income taxes - Non-GAAP

20,220

20,003

33,628

35,703

Provision for income taxes

4,448

4,401

7,398

7,855

Net income - Non-GAAP

$

15,772

$

15,602

$

26,230

$

27,848

Diluted net income per share - Non-GAAP

$

0.24

$

0.24

$

0.40

$

0.43

Weighted-average shares outstanding (diluted):

65,560

64,857

65,445

64,362

* Other non-run-rate expenses for the three and six months ended September 30, 2019 consist primarily of excess lease-related expense for vacated facilities and other costs, including retention bonuses, related to the restructuring plan. Other non-run-rate expenses for the three and six months ended September 30, 2018 consist primarily of severance and other employee-related costs.

Contacts

Media Contact:
NextGen Healthcare
Cynthia Ragland
(949) 255-2600 x 75416
cragland@nextgen.com
or
Investor Contact:
Westwicke Partners
Bob East or Asher Dewhurst
Westwicke Partners
443-213-0500

Source: NextGen Healthcare, Inc.

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