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NextGen Healthcare, Inc. Reports Fiscal 2021 Third Quarter Results

·14-min read

NextGen Healthcare, Inc. (Nasdaq: NXGN), a leading provider of ambulatory-focused healthcare technology solutions, today announced its fiscal 2021 third quarter ended December 31, 2020 operating results.

Fiscal Third Quarter 2021 Highlights

On a GAAP basis, revenue for the fiscal 2021 third quarter was $141.8 million compared to $137.7 million in the fiscal 2020 third quarter.

On a GAAP basis, net income for the fiscal 2021 third quarter was $0.5 million compared to $4.4 million in the fiscal 2020 third quarter.

On a GAAP basis, fully diluted net income per share was at $0.01 in the fiscal 2021 third quarter compared to $0.07 for the same period a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2021 third quarter was $0.26 compared to $0.23 in the third quarter a year ago.

Cash flow from operations was $27.9 million in the fiscal 2021 third quarter compared to $23.6 million for the same period a year ago. Free cash flow was $20.3 million in fiscal 2021 third quarter compared to $17.0 million in the same period a year ago.

"Our solid fiscal third quarter results demonstrate that our strategy is working – both within our client base and with increasing new client bookings. This success reflects the strength of our integrated platform and client experience," said Rusty Frantz, president and chief executive officer of NextGen Healthcare. "As we look forward, we expect to continue to drive revenue growth as well as investing in opportunities to expand that growth in the future."

Fiscal Year 2021 Financial Outlook

The Company is reiterating its outlook for fiscal 2021 and expects:

  • Revenue between $547 and $555 million

  • Non-GAAP earnings per share range between $0.92 and $0.98

Conference Call Information

NextGen Healthcare will host a conference call to discuss its fiscal 2021 third quarter operating results on Wednesday, January 27, 2021 at 5:00 p.m. Eastern Time. 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 8675815 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 April 27, 2021.

About NextGen Healthcare, Inc.

We empower the transformation of ambulatory care—partnering with medical, behavioral and oral health 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, YouTube 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 including but not limited to the COVID-19 pandemic, 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: volatility and uncertainty in the global economy, financial markets and on our customers in light of the continuing COVID-19 pandemic, including the potential (i) slowdown or shutdown of preventive and elective medical procedures, (ii) delay in the contracting for additional products and services by our customers and (iii) delay in the sales cycle for new customers; 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; the extent to which the COVID-19 pandemic and measures taken in response thereto could adversely affect our financial condition and results of operations; 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 net debt as line of credit less cash and cash equivalents. 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, 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 2020 was 22.0%. The normalized non-GAAP tax rate expected to be applied to each quarter of fiscal year 2021 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’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, net securities litigation defense 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.

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

Three Months Ended December 31,

Nine Months Ended December 31,

2020

2019

2020

2019

Revenues:

Recurring

$

128,243

$

124,787

$

373,456

$

364,823

Software, hardware, and other non-recurring

13,509

12,953

39,177

39,034

Total revenues

141,752

137,740

412,633

403,857

Cost of revenue:

Recurring

54,204

52,197

157,539

153,065

Software, hardware, and other non-recurring

6,800

6,975

18,924

19,816

Amortization of capitalized software costs and acquired intangible assets

9,320

8,963

29,180

26,219

Total cost of revenue

70,324

68,135

205,643

199,100

Gross profit

71,428

69,605

206,990

204,757

Operating expenses:

Selling, general and administrative

48,972

42,841

131,659

122,015

Research and development costs, net

18,197

20,026

54,111

61,866

Amortization of acquired intangible assets

1,112

964

3,336

2,694

Impairment of assets

2,215

1,948

2,215

4,353

Restructuring costs

546

2,562

2,428

Total operating expenses

70,496

66,325

193,883

193,356

Income from operations

932

3,280

13,107

11,401

Interest income

9

30

27

145

Interest expense

(631

)

(435

)

(2,873

)

(1,294

)

Other income (expense), net

(15

)

137

(17

)

214

Income before provision for (benefit of) income taxes

295

3,012

10,244

10,466

Provision for (benefit of) income taxes

(169

)

(1,403

)

149

(1,274

)

Net income

$

464

$

4,415

$

10,095

$

11,740

Net income per share:

Basic

$

0.01

$

0.07

$

0.15

$

0.18

Diluted

$

0.01

$

0.07

$

0.15

$

0.18

Weighted-average shares outstanding:

Basic

66,943

65,493

66,644

65,304

Diluted

67,140

65,664

66,649

65,516

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

December 31, 2020

March 31, 2020

ASSETS

Current assets:

Cash and cash equivalents

$

89,523

$

138,012

Restricted cash and cash equivalents

4,208

2,307

Accounts receivable, net

76,741

80,006

Contract assets

17,404

12,529

Income taxes receivable

3,397

856

Prepaid expenses and other current assets

26,074

26,305

Total current assets

217,347

260,015

Equipment and improvements, net

15,009

19,836

Capitalized software costs, net

41,090

37,004

Operating lease assets

26,268

31,004

Deferred income taxes, net

10,662

10,620

Contract assets, net of current

2,190

3,007

Intangibles, net

40,121

57,809

Goodwill

267,212

267,165

Other assets

36,000

33,656

Total assets

$

655,899

$

720,116

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

7,817

$

10,521

Contract liabilities

48,655

56,786

Accrued compensation and related benefits

40,002

23,792

Income taxes payable

65

148

Operating lease liabilities

12,398

10,619

Other current liabilities

51,104

41,352

Total current liabilities

160,041

143,218

Deferred compensation

6,624

5,300

Line of credit

29,000

129,000

Operating lease liabilities, net of current

29,291

38,823

Other noncurrent liabilities

5,231

3,281

Total liabilities

230,187

319,622

Commitments and contingencies

Shareholders' equity:

Common stock

$0.01 par value; authorized 100,000 shares; issued and outstanding 67,002 and 66,134 shares at December 31, 2020 and March 31, 2020, respectively

670

661

Additional paid-in capital

297,711

282,857

Accumulated other comprehensive loss

(1,883

)

(2,143

)

Retained earnings

129,214

119,119

Total shareholders' equity

425,712

400,494

Total liabilities and shareholders' equity

$

655,899

$

720,116

NEXTGEN HEALTHCARE, INC.

NON-GAAP FINANCIAL MEASURES

(In thousands, except per share data)

RECONCILIATION OF NON-GAAP DILUTED EARNINGS PER SHARE

Three Months Ended December 31,

Nine Months Ended December 31,

2020

2019

2020

2019

Income before provision for income taxes - GAAP

$

295

$

3,012

$

10,244

$

10,466

Non-GAAP adjustments:

Acquisition costs, net

118

1,636

380

2,375

Amortization of acquired intangible assets

5,456

5,646

17,688

15,951

Amortization of deferred debt issuance costs

177

177

532

532

Impairment of assets

2,215

1,948

2,215

4,353

Restructuring costs

546

2,562

2,428

Securities litigation defense costs and settlement, net of insurance

5,955

717

10,214

1,093

Share-based compensation

5,933

4,621

16,763

13,828

Other non-run-rate expenses*

1,669

799

4,134

1,704

Total adjustments to GAAP income before provision for income taxes:

21,523

16,090

54,488

42,264

Income before provision for income taxes - Non-GAAP

21,818

19,102

64,732

52,730

Provision for income taxes

4,363

4,203

12,946

11,601

Net income - Non-GAAP

$

17,455

$

14,899

$

51,786

$

41,129

Diluted net income per share - Non-GAAP

$

0.26

$

0.23

$

0.78

$

0.63

Weighted-average shares outstanding (diluted):

67,140

65,664

66,649

65,516

* Other non-run-rate expenses for the three months ended December 31, 2020 consist primarily of $1,204 excess lease-related expense for vacated facilities, lease termination costs, and other costs, including retention bonuses and severance expense, related to the restructuring plan and $465 of professional services costs not related to core operations. Other non-run-rate expenses for the nine months ended December 31, 2020 consist primarily of $2,631 excess lease-related expense for vacated facilities, lease termination costs, and other costs, including retention bonuses and severance expense, related to the restructuring plan, $1,404 of professional services costs not related to core operations, and $99 of incremental costs and penalties primarily due to the cancellation of certain events directly associated with the COVID-19 pandemic.

Other non-run-rate expenses for the three and nine months ended December 31, 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 nine months ended December 31, 2018 consist primarily of severance and other employee-related costs.

RECONCILIATION OF FREE CASH FLOW

Three Months Ended December 31,

Nine Months Ended December 31,

2020

2019

2020

2019

Net cash provided by operating activities

$

27,946

$

23,607

$

75,978

$

64,371

Additions to capitalized software costs

(6,831

)

(4,884

)

(18,914

)

(14,785

)

Additions to equipment and improvements

(782

)

(1,758

)

(1,546

)

(6,951

)

Free cash flow

$

20,333

$

16,965

$

55,518

$

42,635

View source version on businesswire.com: https://www.businesswire.com/news/home/20210127005949/en/

Contacts

Media Contact:
NextGen Healthcare
Tami Stegmaier
O: (949) 237-6083
tstegmaier@nextgen.com
or
Investor Contact:
Westwicke Partners
Bob East or Asher Dewhurst
Westwicke Partners
443-213-0500