NextGen Healthcare Reports Fiscal 2024 Second Quarter Results

REMOTE-FIRST COMPANY/NEW YORK--(BUSINESS WIRE)--NextGen Healthcare, Inc. (Nasdaq: NXGN), a leading provider of innovative, cloud-based healthcare technology solutions, today announced its operating results for the fiscal second quarter ending September 30, 2023.

Fiscal 2024 Second Quarter Highlights

• Total revenue was $176.4 million compared to $159.4 million for the same period a year ago, an increase of 10.6%.
• Recurring revenue was $161.3 million compared to $143.5 million for the same period a year ago, an increase of 12.4%.
• Non-recurring revenue was $15.1 million compared to $15.9 million for the same period a year ago, a decrease of 5.3%.
• Fully diluted net income per share was $0.07 compared to $0.20 for the same period a year ago.
• On a non-GAAP basis, fully diluted earnings per share was $0.31 compared to $0.25 for the same period a year ago.
• Adjusted EBITDA was $34.4 million compared to $28.6 million for the same period a year ago.
• Bookings, which reflects annual contract value excluding renewals, were $40.8 million and included four deals greater than $1.0 million.

“The team produced solid financial and operational results this quarter as we look forward to the next chapter in the company’s history,” said David Sides, president and chief executive officer of NextGen Healthcare. “I would like to thank our shareholders for their support over the past 40 years as a public company.”

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, Gain on disposition of Commercial Dental 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 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.

About NextGen Healthcare, Inc.

NextGen Healthcare, Inc. (Nasdaq: NXGN) is a leading provider of innovative healthcare technology and data solutions. We are reimagining ambulatory healthcare with award-winning EHR, practice management and surround solutions that enable providers to deliver whole-person health and value-based care. Our highly integrated, intelligent, and interoperable solutions increase clinical quality and productivity, enrich the patient experience and drive superior financial performance. We are on a relentless quest to achieve better healthcare outcomes for all. Learn more at nextgen.com, and follow us on Facebook, X, LinkedIn, YouTube, and Instagram.

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,
	2023			2022			2023			2022
Revenues:
Recurring	$	161,316		$	143,503		$	324,690		$	283,262
Software, hardware, and other non-recurring		15,102			15,940			29,935			29,483
Total revenues		176,418			159,443			354,625			312,745
Cost of revenue:
Recurring		75,585			65,039			154,806			127,283
Software, hardware, and other non-recurring		12,031			10,797			24,205			21,473
Amortization of capitalized software costs and acquired intangible assets		7,181			6,744			14,172			13,878
Total cost of revenue		94,797			82,580			193,183			162,634
Gross profit		81,621			76,863			161,442			150,111
Operating expenses:
Selling, general and administrative		54,175			44,886			102,368			93,920
Research and development costs, net		18,020			20,857			38,945			42,652
Amortization of acquired intangible assets		1,189			705			2,377			1,410
Impairment of assets		166			805			525			1,329
Restructuring costs		15			321			105			321
Total operating expenses		73,565			67,574			144,320			139,632
Income from operations		8,056			9,289			17,122			10,479
Interest income		1,520			74			3,189			120
Interest expense		(3,310	)		(325	)		(6,549	)		(655	)
Other income, net		430			10,292			1,480			10,287
Income before provision for income taxes		6,696			19,330			15,242			20,231
Provision for income taxes		1,641			5,707			4,031			5,460
Net income	$	5,055		$	13,623		$	11,211		$	14,771
Net income per share:
Basic	$	0.08		$	0.20		$	0.17		$	0.22
Diluted	$	0.07		$	0.20		$	0.17		$	0.22
Weighted-average shares outstanding:
Basic		67,074			67,806			66,749			67,698
Diluted		67,690			68,422			67,280			68,353

NEXTGEN HEALTHCARE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited)
	September 30, 2023			March 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	53,867		$	98,719
Restricted cash and cash equivalents		4,914			7,269
Marketable securities		146,432			139,612
Accounts receivable, net		89,277			88,498
Contract assets		20,489			19,561
Income taxes receivable		8,134			5,248
Prepaid expenses and other current assets		39,684			42,916
Total current assets		362,797			401,823
Equipment and improvements, net		4,939			6,421
Capitalized software costs, net		59,875			54,516
Operating lease assets		2,615			3,335
Deferred income taxes, net		29,210			29,472
Contract assets, net of current		5,616			5,572
Intangibles, net		24,480			28,968
Goodwill		322,001			321,756
Other assets		46,217			44,238
Total assets	$	857,750		$	896,101
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	10,467		$	12,022
Contract liabilities		45,932			61,601
Accrued compensation and related benefits		28,407			36,241
Income taxes payable		604			622
Operating lease liabilities		3,471			3,826
Other current liabilities		54,997			83,799
Total current liabilities		143,878			198,111
Contract liabilities, net of current		2,809			10,310
Deferred compensation		8,722			8,033
Convertible senior notes, net, noncurrent		267,565			266,843
Operating lease liabilities, net of current		2,464			4,095
Other noncurrent liabilities		9,037			8,274
Total liabilities		434,475			495,666
Commitments and contingencies
Shareholders' equity:
Common stock, $0.01 par value; authorized 100,000 shares; 71,946 shares and 70,875 shares issued at September 30, 2023 and March 31, 2023, respectively; 67,097 shares and 66,026 shares outstanding at September 30, 2023 and March 31, 2023, respectively		719			709
Treasury stock, at cost, 4,849 shares and 4,849 shares at September 30, 2023 and March 31, 2023, respectively		(85,752	)		(85,752	)
Additional paid-in capital		371,080			359,342
Accumulated other comprehensive loss		(1,581	)		(1,462	)
Retained earnings		138,809			127,598
Total shareholders' equity		423,275			400,435
Total liabilities and shareholders' equity	$	857,750		$	896,101

NEXTGEN HEALTHCARE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
	Three Months Ended September 30,						Six Months Ended September 30,
	2023			2022			2023			2022
Cash flows from operating activities:
Net income	$	5,055		$	13,623		$	11,211		$	14,771
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of capitalized software costs		6,125			5,371			12,061			10,725
Amortization of debt issuance costs		536			127			976			254
Amortization of other intangibles		2,244			2,078			4,488			4,564
Net amortization (accretion) of premiums/discounts on marketable securities		(983	)		—			(1,956	)		—
Change in fair value of contingent consideration		300			—			400			—
Depreciation		946			1,354			2,064			2,646
Excess tax deficiency (benefit) from share-based compensation		(41	)		(23	)		170			(434	)
Impairment of assets		166			805			171			1,329
Loss on disposal of equipment and improvements		37			33			37			74
Loss on foreign currency exchange rates		16			1			100			7
Non-cash operating lease costs		371			768			763			1,682
Provision for bad debts		951			359			1,826			600
Realized loss on marketable securities		734			—			734			—
Share-based compensation		9,466			8,687			17,422			17,453
Gain on disposition of Commercial Dental assets		—			(10,296	)		—			(10,296	)
Changes in assets and liabilities, net of amounts acquired:
Accounts receivable		(6,106	)		(63	)		(2,606	)		(1,527	)
Contract assets		708			124			(972	)		(2	)
Accounts payable		(1,701	)		(2,676	)		(1,571	)		3,153
Contract liabilities		(1,859	)		(75	)		(23,170	)		1,739
Accrued compensation and related benefits		5,572			2,246			(7,802	)		(20,422	)
Income taxes		(4,781	)		4,125			(2,825	)		3,934
Deferred compensation		(113	)		(200	)		689			(249	)
Operating lease liabilities		(912	)		(2,012	)		(1,979	)		(4,097	)
Other assets and liabilities		(26,149	)		14,085			(27,746	)		7,892
Net cash provided by (used in) operating activities		(9,418	)		38,441			(17,515	)		33,796
Cash flows from investing activities:
Additions to capitalized software costs		(9,195	)		(9,418	)		(17,420	)		(18,416	)
Additions to equipment and improvements		(401	)		(971	)		(854	)		(1,426	)
Proceeds from disposition of Commercial Dental assets		—			11,253			—			11,253
Proceeds from sales of marketable securities		8,599			—			15,457			—
Proceeds from maturities and redemptions of marketable securities		22,111			—			42,871			—
Purchases of marketable securities		(28,316	)		—			(63,942	)		—
Net cash provided by (used in) investing activities		(7,202	)		864			(23,888	)		(8,589	)
Cash flows from financing activities:
Proceeds from issuance of shares under employee plans		780			507			1,430			2,575
Repurchase of common stock		—			(7,373	)		—			(9,878	)
Payments for taxes related to net share settlement of equity awards		(3,206	)		(2,456	)		(7,104	)		(6,124	)
Net cash used in financing activities		(2,426	)		(9,322	)		(5,674	)		(13,427	)
Effect of exchange rate changes on cash and cash equivalents		(78	)		(90	)		(130	)		(219	)
Net increase (decrease) in cash, cash equivalents, and restricted cash		(19,124	)		29,893			(47,207	)		11,561
Cash, cash equivalents, and restricted cash at beginning of period		77,905			48,415			105,988			66,747
Cash, cash equivalents, and restricted cash at end of period	$	58,781		$	78,308		$	58,781		$	78,308

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 September 30,						Six Months Ended September 30,
	2023			2022			2023			2022
Recurring revenues:
Subscription services	$	50,263		$	43,416		$	102,761		$	86,175
Support and maintenance		37,561			38,150			76,070			77,288
Managed services		35,063			31,055			69,822			61,700
Transactional and data services		38,429			30,882			76,037			58,099
Total recurring revenues		161,316			143,503			324,690			283,262
Software, hardware, and other non-recurring revenues:
Software license and hardware		5,521			7,916			10,492			14,115
Other non-recurring services		9,581			8,024			19,443			15,368
Total software, hardware and other non-recurring revenues		15,102			15,940			29,935			29,483
Total revenues	$	176,418		$	159,443		$	354,625		$	312,745
Recurring revenues as a percentage of total revenues		91.4	%		90.0	%		91.6	%		90.6	%

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,
	2023			2022			2023			2022
Income before provision for income taxes - GAAP	$	6,696		$	19,330		$	15,242		$	20,231
Non-GAAP adjustments:
Acquisition costs, net		8,372			225			8,705			225
Amortization of acquired intangible assets		2,244			2,078			4,488			4,564
Amortization of deferred debt issuance costs		536			127			976			254
Gain on disposition of Commercial Dental assets		—			(10,296	)		—			(10,296	)
Impairment of assets		166			805			525			1,329
Restructuring costs		15			321			105			321
Shareholder disputes, other regulatory and litigation matters, and related costs, net of insurance		(1,059	)		224			(527	)		345
Share-based compensation		9,466			8,687			17,422			17,453
Other non-run-rate expenses*		92			205			186			612
Total adjustments to GAAP income before provision for income taxes:		19,832			2,376			31,880			14,807
Income before provision for income taxes - Non-GAAP		26,528			21,706			47,122			35,038
Provision for income taxes		5,571			4,342			9,896			7,008
Net income - Non-GAAP	$	20,957		$	17,364		$	37,226		$	28,030
Diluted net income per share - Non-GAAP	$	0.31		$	0.25		$	0.55		$	0.41
Weighted-average shares outstanding (diluted):		67,690			68,422			67,280			68,353
* Other non-run-rate expenses for the three and six months ended September 30, 2023 consist of $92 and $186, respectively, excess lease-related expense for vacated facilities not related to core operations. Other non-run-rate expenses for the three months ended September 30, 2022 consist of $205 excess lease-related expense for vacated facilities. Other non-run-rate expenses for the six months ended September 30, 2022 consist of $462 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 September 30,						Six Months Ended September 30,
	2023			2022			2023			2022
Net cash provided by (used in) operating activities	$	(9,418	)	$	38,441		$	(17,515	)	$	33,796
Additions to capitalized software costs		(9,195	)	$	(9,418	)		(17,420	)		(18,416	)
Additions to equipment and improvements		(401	)	$	(971	)		(854	)		(1,426	)
Free cash flow	$	(19,014	)	$	28,052		$	(35,789	)	$	13,954

NEXTGEN HEALTHCARE, INC.
NON-GAAP FINANCIAL MEASURES
(In thousands)
RECONCILIATION OF ADJUSTED EBITDA
	Three Months Ended September 30,						Six Months Ended September 30,
	2023			2022			2023			2022
Income from operations - GAAP	$	8,056		$	9,289		$	17,122		$	10,479
Non-GAAP adjustments:
Acquisition costs, net		8,372			225			8,705			225
Amortization of acquired intangible assets		2,244			2,078			4,488			4,564
Impairment of assets		166			805			525			1,329
Restructuring costs		15			321			105			321
Shareholder disputes, other regulatory and litigation matters, and related costs, net of insurance		(1,059	)		224			(527	)		345
Share-based compensation		9,466			8,687			17,422			17,453
Other non-run-rate expenses*		92			205			186			612
Total adjustments to GAAP income from operations		19,296			12,545			30,904			24,849
Income from operations - Non-GAAP		27,352			21,834			48,026			35,328
Amortization of capitalized software costs		6,125			5,371			12,061			10,725
Depreciation		946			1,354			2,064			2,646
Depreciation and Amortization - Non-GAAP		7,071			6,725			14,125			13,371
Adjusted EBITDA - Non-GAAP	$	34,423		$	28,559		$	62,151		$	48,699
Total revenues	$	176,418		$	159,443		$	354,625		$	312,745
Adjusted EBITDA margin - Non-GAAP		19.5	%		17.9	%		17.5	%		15.6	%
* Other non-run-rate expenses for the three and six months ended September 30, 2023 consist of $92 and $186, respectively, excess lease-related expense for vacated facilities not related to core operations. Other non-run-rate expenses for the three months ended September 30, 2022 consist of $205 excess lease-related expense for vacated facilities. Other non-run-rate expenses for the six months ended September 30, 2022 consist of $462 excess lease-related expense for vacated facilities and $150 of professional services costs not related to core operations.