NextGen Healthcare Reports Fiscal 2023 First Quarter Results
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
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
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
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
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
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (Unaudited) |
|||||||
|
|
Three Months Ended |
|
|||||
|
|
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 |
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited) |
|||||||
|
|
|
|
|
|
|
||
|
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 |
|
|
|
|
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, |
|
704 |
|
|
|
692 |
|
|
|
|
(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 |
|
||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
|||||||
|
|
Three Months Ended |
|
|||||
|
|
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 |
|
|
SUPPLEMENTAL FINANCIAL INFORMATION (In thousands) |
|||||||
| The following table presents our revenues disaggregated by our major revenue categories and by occurrence: | |||||||
|
|
Three Months Ended |
|
|||||
|
|
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 |
|
|
NON-GAAP FINANCIAL MEASURES (In thousands, except per share data) |
|||||||
|
RECONCILIATION OF NON-GAAP DILUTED EARNINGS PER SHARE |
|||||||
|
|
Three Months Ended |
|
|||||
|
|
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
Other non-run-rate expenses for the three months ended |
|
||||||
RECONCILIATION OF FREE CASH FLOW
|
|
Three Months Ended |
|
|||||
|
|
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 |
) |
|
NON-GAAP FINANCIAL MEASURES (In thousands) |
|||||||
|
RECONCILIATION OF ADJUSTED EBITDA |
|||||||
|
|
Three Months Ended |
|
|||||
|
|
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
Other non-run-rate expenses for the three months ended |
|
||||||
A reconciliation of adjusted EBITDA for each interim reporting period within the fiscal years ended
View source version on businesswire.com: https://www.businesswire.com/news/home/20220726005807/en/
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