NEXTGEN HEALTHCARE,

NXGN
Delayed Quote. Delayed  - 08/07 04:00:00 pm
14.82USD +1.02%

NextGen Healthcare, Inc. : Reports Fiscal 2020 Fourth Quarter and Year-End Results

06/01/2020 | 04:10pm

NextGen Healthcare, Inc. (Nasdaq: NXGN), a leading provider of ambulatory-focused healthcare technology solutions, announced today its fiscal 2020 fourth quarter and year end March 31, 2020 operating results.

Fiscal 2020 Fourth Quarter and Year-End Highlights

Revenue for the fiscal 2020 fourth quarter was $136.4 million compared to $134.8 million for the same period a year ago. Net loss for the fiscal 2020 fourth quarter was ($4.2) million compared to net income of $3.9 million for the same period a year ago. On a GAAP basis, fully diluted net loss per share in the fiscal 2020 fourth quarter was ($0.06) compared to $0.06 net income per share the same period a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2020 fourth quarter was $0.20 compared to $0.23 for the same period a year ago. Cash flow from operations for the fiscal 2020 fourth quarter was $21.2 million compared to $17.2 million for the same period a year ago. Free cash flow for the fiscal 2020 fourth quarter was $16.1 million compared to $10.6 million for the same period a year ago. Revenue for the fiscal year ended March 31, 2020 was $540.2 million compared to $529.2 million a year ago. Net income for the fiscal year 2020 was $7.5 million compared with net income of $24.5 million a year ago.

On a GAAP basis, fully diluted net income per share for fiscal year 2020 was $0.11 compared to $0.38 per share a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2020 was $0.83 compared to $0.86 reported a year ago. Cash flow from operations for fiscal year 2020 was $85.6 million compared to $50.5 million for the same period a year ago. Free cash flow for fiscal year 2020 was $58.7 million compared to $25.0 million for the same period a year ago.

CEO Rusty Frantz stated, “We delivered a solid Q4 in a tough time, showing a great deal of momentum until the last weeks of the quarter when contract activity slowed dramatically. We successfully navigated the initial phase of the COVID-19 pandemic, keeping our teams safe and operating very effectively throughout. In the interest of prudence, we made the decision to draw $100 million from our revolving credit facility in March and an additional $50 million in April. That being said, we concluded Q4 with no net debt and our accounts receivable performance was better than we anticipated. As we look forward, the strategic expansion of our solution over the last three years has uniquely positioned our broad and integrated platform as the right solution at the right time to enable the transformation of ambulatory care in this historic and pivotal moment.”

Fiscal 2021 Financial Outlook

In its business update on April 28, the Company announced that given the uncertainty going forward it will not be providing any forward-looking guidance either for FY21 or the years beyond. As things stabilize and there is more confidence in the macro environment, the Company will evaluate returning to guidance.

“This year looks to be the tale of two halves. The first half ending in October impacted by the significant drop-off in volume due to the shutdown of care and the second half showing signs of returning to a new normal,” said Frantz. “Based on our overall financial health and the opportunity in front of us, we made some important decisions on how to approach the next two quarters. In early May, we announced a go forward move to minimize our perpetual license revenue in favor of recurring subscription revenue. This will impact gross margin percentages as we will book less high-margin perpetual licenses than we have historically, but ultimately it will produce high-margin recurring revenue. In addition, we executed cost reductions with a goal of mitigating COVID-based impacts to earnings. Most of these cost reductions are temporary, as we believe that preserving our employee base, organizational momentum and robust capabilities for the near future will be a win for the company and our shareholders.

Frantz continued, “The net effect of the aforementioned actions and decisions will result in earnings being down markedly and negative free cash flow in the first half of the fiscal year. However, our solid financial health, decisive action, and strong employee culture enablers us to both weather the initial storm and be well positioned for increasing earnings, revenue and opportunity as volume begins to return in the second half of the year.

Conference Call Information

The Company provided a business update and hosted a call to share preliminary unaudited fiscal 2020 fourth quarter and year end results on May 4, 2020. A recording of the live webcast is available on investor.nextgen.com until August 4, 2020.

2020 Annual Shareholders' Meeting

In addition, NextGen Healthcare will hold its 2020 Annual Shareholders' Meeting on August 18, 2020 at 9:00 a.m. Pacific time. The meeting will be held at NextGen Healthcare’s corporate headquarters located at 18111 Von Karman Avenue, Suite 800, Irvine, California 92612. Shareholders of record as of June 25, 2020 are eligible to vote and attend. Proxy materials and the 2020 Annual Report will be made available to shareholders of record and will also be posted on the Company's website.

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 and financial markets in light of the evolving COVID-19 pandemic; 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 March 31,

 

 

Fiscal Year Ended March 31,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

$

124,490

 

 

$

120,151

 

 

$

489,313

 

 

$

473,921

 

Software, hardware, and other non-recurring

 

11,892

 

 

 

14,634

 

 

 

50,926

 

 

 

55,252

 

Total revenues

 

136,382

 

 

 

134,785

 

 

 

540,239

 

 

 

529,173

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

51,992

 

 

 

48,174

 

 

 

205,057

 

 

 

191,496

 

Software, hardware, and other non-recurring

 

7,088

 

 

 

5,959

 

 

 

26,904

 

 

 

26,711

 

Amortization of capitalized software costs and acquired intangible assets

 

9,259

 

 

 

7,924

 

 

 

35,478

 

 

 

28,490

 

Total cost of revenue

 

68,339

 

 

 

62,057

 

 

 

267,439

 

 

 

246,697

 

Gross profit

 

68,043

 

 

 

72,728

 

 

 

272,800

 

 

 

282,476

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

43,159

 

 

 

44,710

 

 

 

165,174

 

 

 

164,879

 

Research and development costs, net

 

21,429

 

 

 

19,813

 

 

 

83,295

 

 

 

80,994

 

Amortization of acquired intangible assets

 

1,449

 

 

 

1,028

 

 

 

4,143

 

 

 

4,344

 

Impairment of assets

 

8,218

 

 

 

 

 

 

12,571

 

 

 

 

Restructuring costs

 

77

 

 

 

640

 

 

 

2,505

 

 

 

640

 

Total operating expenses

 

74,332

 

 

 

66,191

 

 

 

267,688

 

 

 

250,857

 

Income (loss) from operations

 

(6,289

)

 

 

6,537

 

 

 

5,112

 

 

 

31,619

 

Interest income

 

111

 

 

 

103

 

 

 

256

 

 

 

216

 

Interest expense

 

(661

)

 

 

(595

)

 

 

(1,955

)

 

 

(2,814

)

Other income (expense), net

 

632

 

 

 

(117

)

 

 

846

 

 

 

267

 

Income (loss) before provision for (benefit of) income taxes

 

(6,207

)

 

 

5,928

 

 

 

4,259

 

 

 

29,288

 

Provision for (benefit of) income taxes

 

(1,965

)

 

 

2,000

 

 

 

(3,239

)

 

 

4,794

 

Net income (loss)

$

(4,242

)

 

$

3,928

 

 

$

7,498

 

 

$

24,494

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.06

)

 

$

0.06

 

 

$

0.11

 

 

$

0.38

 

Diluted

$

(0.06

)

 

$

0.06

 

 

$

0.11

 

 

$

0.38

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

65,988

 

 

 

64,749

 

 

 

65,474

 

 

 

64,417

 

Diluted

 

65,988

 

 

 

64,917

 

 

 

65,612

 

 

 

64,600

 

 

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

 

 

March 31, 2020

 

 

March 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

138,012

 

 

$

33,079

 

Restricted cash and cash equivalents

 

 

2,307

 

 

 

1,443

 

Accounts receivable, net

 

 

80,006

 

 

 

87,459

 

Contract assets

 

 

12,529

 

 

 

13,242

 

Income taxes receivable

 

 

856

 

 

 

3,682

 

Prepaid expenses and other current assets

 

 

26,305

 

 

 

20,946

 

Total current assets

 

 

260,015

 

 

 

159,851

 

Equipment and improvements, net

 

 

19,836

 

 

 

21,404

 

Capitalized software costs, net

 

 

37,004

 

 

 

37,855

 

Operating lease assets

 

 

31,004

 

 

 

 

Deferred income taxes, net

 

 

10,620

 

 

 

6,194

 

Contract assets, net of current

 

 

3,007

 

 

 

3,747

 

Intangibles, net

 

 

57,809

 

 

 

52,595

 

Goodwill

 

 

267,165

 

 

 

218,771

 

Other assets

 

 

33,656

 

 

 

32,478

 

Total assets

 

$

720,116

 

 

$

532,895

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

10,521

 

 

$

5,432

 

Contract liabilities

 

 

56,786

 

 

 

56,009

 

Accrued compensation and related benefits

 

 

23,792

 

 

 

25,663

 

Income taxes payable

 

 

148

 

 

 

64

 

Operating lease liabilities

 

 

10,619

 

 

 

 

Other current liabilities

 

 

41,352

 

 

 

41,064

 

Total current liabilities

 

 

143,218

 

 

 

128,232

 

Deferred compensation

 

 

5,300

 

 

 

5,905

 

Line of credit

 

 

129,000

 

 

 

11,000

 

Operating lease liabilities, net of current

 

 

38,823

 

 

 

 

Other noncurrent liabilities

 

 

3,281

 

 

 

11,812

 

Total liabilities

 

 

319,622

 

 

 

156,949

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common stock

 

 

 

 

 

 

 

 

$0.01 par value; authorized 100,000 shares; issued and outstanding 66,134 and 64,838 shares at March 31, 2020 and March 31, 2019, respectively

 

 

661

 

 

 

648

 

Additional paid-in capital

 

 

282,857

 

 

 

264,908

 

Accumulated other comprehensive loss

 

 

(2,143

)

 

 

(1,231

)

Retained earnings

 

 

119,119

 

 

 

111,621

 

Total shareholders' equity

 

 

400,494

 

 

 

375,946

 

Total liabilities and shareholders' equity

 

$

720,116

 

 

$

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 March 31,

 

 

Fiscal Year Ended March 31,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Income (loss) before provision for (benefit of) income taxes - GAAP

$

(6,207

)

 

$

5,928

 

 

$

4,259

 

 

$

29,288

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition costs, net

 

(263

)

 

 

1,010

 

 

 

2,112

 

 

 

3,068

 

Amortization of acquired intangible assets

 

6,585

 

 

 

5,316

 

 

 

22,536

 

 

 

21,496

 

Amortization of deferred debt issuance costs

 

178

 

 

 

178

 

 

 

710

 

 

 

710

 

Impairment of assets

 

8,218

 

 

 

 

 

 

12,571

 

 

 

 

Restructuring costs

 

77

 

 

 

640

 

 

 

2,505

 

 

 

640

 

Securities litigation defense costs and settlement, net of insurance

 

1,333

 

 

 

202

 

 

 

2,426

 

 

 

(5,205

)

Share-based compensation

 

5,866

 

 

 

4,153

 

 

 

19,694

 

 

 

16,102

 

Other non-run-rate expenses*

 

1,522

 

 

 

1,492

 

 

 

3,226

 

 

 

5,471

 

Total adjustments to GAAP income before provision for income taxes:

 

23,516

 

 

 

12,991

 

 

 

65,780

 

 

 

42,282

 

Income before provision for income taxes - Non-GAAP

 

17,309

 

 

 

18,919

 

 

 

70,039

 

 

 

71,570

 

Provision for income taxes

 

3,808

 

 

 

4,161

 

 

 

15,409

 

 

 

15,745

 

Net income - Non-GAAP

$

13,501

 

 

$

14,758

 

 

$

54,630

 

 

$

55,825

 

Diluted net income per share - Non-GAAP

$

0.20

 

 

$

0.23

 

 

$

0.83

 

 

$

0.86

 

Weighted-average shares outstanding (diluted):

 

65,988

 

 

 

64,917

 

 

 

65,612

 

 

 

64,600

 

* Other non-run-rate expenses for the three months ended March 31, 2020 consist primarily of $787 excess lease-related expense for vacated facilities and other costs, including retention bonuses, related to the restructuring plan, $474 of professional services costs not related to core operations, and $261 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 months ended March 31, 2019 consist primarily of severance and other employee-related costs and professional services costs not related to core operations.

 

Other non-run-rate expenses for the year ended March 31, 2020 consist primarily of $2,411 excess lease-related expense for vacated facilities and other costs, including retention bonuses, related to the restructuring plan, $554 of professional services costs not related to core operations, and $261 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 year ended March 31, 2019 consist primarily of severance and other employee-related costs and professional services costs not related to core operations.

 

Business Wire 2020
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