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NextGen Healthcare, Inc. Reports Fiscal 2019 Fourth Quarter and Year-End Results
May 28, 2019 at 4:03 PM EDT

IRVINE, Calif.--(BUSINESS WIRE)--May 28, 2019-- NextGen Healthcare, Inc. (NASDAQ: NXGN), a leading provider of ambulatory-focused healthcare technology solutions, announced today its fiscal 2019 fourth quarter and year end March 31, 2019 operating results.

"The hallmarks of our FY’19 performance were: 1) significant bookings growth and deal-size growth, 2) Best-in-KLAS industry recognition for our practice management solution, 3) the launch of our integrated ambulatory care platform at our User Group Meeting, and 4) continued growth in client satisfaction,” commented Rusty Frantz, president and chief executive officer of NextGen Healthcare. “While we encountered some market headwinds in the second half that impacted top line revenue performance, we’re pleased to deliver EPS at the high end of our FY19 range. We remain confident in our growth strategy, the market opportunity, and our plan to deliver 20% operating margin in the next three years.”

Fiscal 2019 Fourth Quarter and Year-End Highlights

As a result of the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (“ASC 606”), the GAAP comparisons below compare fourth quarter and fiscal year 2019 results under ASC 606 to the fourth quarter and fiscal year 2018 results under the legacy revenue guidance (“ASC 605”). A reconciliation of fourth quarter and fiscal year results for fiscal 2019 from ASC 606 to ASC 605 can be found in the tables at the end of the press release.

On a GAAP basis, revenue for the fiscal 2019 fourth quarter was $134.8 million compared to $135.8 million a year-ago. On a pro forma basis under ASC 605, revenue for the fiscal 2019 fourth quarter was $134.3 million.

On a GAAP basis, net income for the fiscal 2019 fourth quarter was $3.9 million, compared with net loss of $11.0 million in the fiscal 2018 fourth quarter. On a pro forma basis under ASC 605, net income for the fiscal 2019 fourth quarter was $1.3 million.

On a GAAP basis, fully diluted net income per share was $0.06 in the fiscal 2019 fourth quarter compared to a loss of $0.17 per share for the same period a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2019 fourth quarter was $0.23 versus $0.16 reported in the fourth quarter a year ago. On a pro forma non-GAAP basis, under ASC 605, fully diluted earnings per share for the fiscal 2019 fourth quarter was $0.19.

For the fiscal year ended March 31, 2019, revenue on a GAAP basis was $529.2 million compared to $531.0 million a year-ago. On a pro forma basis under ASC 605, revenue for the fiscal year 2019 was $527.3 million.

On a GAAP basis, net income for the fiscal year 2019 was $24.5 million, compared with net income of $2.4 million in fiscal year 2018. On a pro forma basis under ASC 605, net income for the fiscal year 2019 was $17.7 million.

On a GAAP basis, fully diluted net income per share was $0.38 in the fiscal year 2019 compared to earnings of $0.04 per share for the same period a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal year 2019 was $0.86 versus $0.70 reported a year ago. On a pro forma non-GAAP basis, under ASC 605, fully diluted earnings per share for the fiscal year 2019 was $0.76.

Fiscal 2020 Financial Outlook

The company is providing initial outlook for fiscal 2020 and expects:

  • Revenue of between $543 million and $559 million
  • Non-GAAP EPS of between $0.86 and $0.94

Conference Call Information

NextGen Healthcare will host a conference call to discuss its fiscal 2019 fourth quarter and year-end results on Tuesday, May 28, 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 9175604 approximately 15 minutes prior to the call. A live webcast of the conference call will be available on the investor relations section of the company’s web site and an audio file of the call will also be archived for 90 days at investor.nextgen.com. After the conference call, a replay will be available until June 4, 2019 and can be accessed by dialing 800-585-8367 or 404-537-3406 for international callers, and referencing participant code 9175604.

2019 Annual Shareholders' Meeting

In addition, NextGen Healthcare will hold its 2019 Annual Shareholders' Meeting on Thursday, August 15, 2019 at 9:00 a.m. Pacific time. The meeting will be held at the Marriott Hotel, 18000 Von Karman Avenue, Irvine, California 92612. Shareholders of record as of June 17, 2019 are eligible to vote and attend. Proxy materials and the 2019 Annual Report will be made available to shareholders of record and will also be posted on the Company's website.

About NextGen Healthcare, Inc

NextGen Healthcare is enabling the transformation of ambulatory care by providing a range of software, services, and analytics solutions to medical and dental group practices. The company's portfolio delivers foundational capabilities to empower physician success, enrich the patient care experience, and enable the transition to value-based healthcare. Visit www.nextgen.com for additional information.

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 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 fiscal year 2019 was 22.0%, compared to 30.5% for fiscal year 2018, which was updated as a result of the enactment of the new tax reform legislation on December 22, 2017. 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, 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.
CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 
  Three Months Ended March 31,   Fiscal Year Ended March 31,
2019   2018 2019   2018
Revenues:
Recurring $ 120,151 $ 118,598 $ 473,921 $ 476,214
Software, hardware, and other non-recurring   14,634   17,177   55,252   54,805
Total revenues 134,785 135,775 529,173 531,019
Cost of revenue:
Recurring 48,174 48,856 191,496 194,360
Software, hardware, and other non-recurring 5,959 6,775 26,711 25,085
Amortization of capitalized software costs and acquired intangible assets   7,924   6,346   28,490   22,090
Total cost of revenue   62,057   61,977   246,697   241,535
Gross profit 72,728 73,798 282,476 289,484
Operating expenses:
Selling, general and administrative 44,710 65,709 164,879 193,226
Research and development costs, net 19,813 21,098 80,994 81,259
Amortization of acquired intangible assets 1,028 1,795 4,344 7,810
Impairment of assets 3,757 3,757
Restructuring costs   640   481   640   611
Total operating expenses   66,191   92,840   250,857   286,663
Income (loss) from operations 6,537 (19,042 ) 31,619 2,821
Interest income 103 19 216 55
Interest expense (595 ) (1,073 ) (2,814 ) (3,323 )
Other income (expense), net   (117 )   85   267   37
Income (loss) before provision for (benefit of) income taxes 5,928 (20,011 ) 29,288 (410 )
Provision for (benefit of) income taxes   2,000   (8,964 )   4,794   (2,830 )
Net income (loss) $ 3,928 $ (11,047 ) $ 24,494 $ 2,420
Net income (loss) per share:
Basic $ 0.06 $ (0.17 ) $ 0.38 $ 0.04
Diluted $ 0.06 $ (0.17 ) $ 0.38 $ 0.04
Weighted-average shares outstanding:
Basic 64,749 63,888 64,417 63,435
Diluted 64,917 63,888 64,600 63,440
 
 
NEXTGEN HEALTHCARE, INC.
CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 
  March 31, 2019   March 31, 2018
ASSETS
Current assets:
Cash and cash equivalents $ 33,079 $ 28,845
Restricted cash and cash equivalents 1,443 2,373
Accounts receivable, net 87,459 84,962
Contract assets 13,242
Inventory 120 180
Income taxes receivable 3,682 8,122
Prepaid expenses and other current assets   20,826   17,180
Total current assets 159,851 141,662
Equipment and improvements, net 21,404 26,795
Capitalized software costs, net 37,855 26,318
Deferred income taxes, net 6,194 9,219
Contract assets, net of current 3,747
Intangibles, net 52,595 74,091
Goodwill 218,771 218,875
Other assets   32,478   18,795
Total assets $ 532,895 $ 515,755
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,432 $ 4,213
Contract liabilities 56,009 54,079
Accrued compensation and related benefits 25,663 27,910
Income taxes payable 64 73
Other current liabilities   41,064   48,317
Total current liabilities 128,232 134,592
Contract liabilities, net of current 1,173
Deferred compensation 5,905 6,086
Line of credit 11,000 37,000
Other noncurrent liabilities   11,812   13,494
Total liabilities 156,949 192,345
Commitments and contingencies
Shareholders' equity:
Common stock
$0.01 par value; authorized 100,000 shares; issued and outstanding 64,838 and 63,995 shares at March 31, 2019 and March 31, 2018, respectively 648 640
Additional paid-in capital 264,908 244,462
Accumulated other comprehensive loss (1,231 ) (400 )
Retained earnings (1)   111,621   78,708
Total shareholders' equity   375,946   323,410
Total liabilities and shareholders' equity $ 532,895 $ 515,755
 

____________________

(1)

  Includes cumulative effect adjustment related to the adoption of ASC 606.
 
 
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,
2019   2018 2019   2018
Income before provision for income taxes - GAAP $ 5,928 $ (20,011 ) $ 29,288 $ (410 )
Non-GAAP adjustments:
Acquisition costs, net 1,010 339 3,068 1,908
Amortization of acquired intangible assets 5,316 6,029 21,496 23,380
Amortization of deferred debt issuance costs 178 803 710 1,610
Restructuring costs 640 481 640 611
Securities litigation defense costs and settlement, net of insurance 202 19,984 (5,205 ) 20,700
Share-based compensation 4,153 3,611 16,102 12,196
Impairment of assets 3,757 3,757
Other non-run-rate expenses*   1,492     5,471   263
Total adjustments to GAAP income before provision for income taxes:   12,991   35,004   42,282   64,425
Income before provision for income taxes - Non-GAAP 18,919 14,993 71,570 64,015
Provision for income taxes   4,161   4,573   15,745   19,525
Net income - Non-GAAP $ 14,758 $ 10,420 $ 55,825 $ 44,490
Diluted net income per share - Non-GAAP $ 0.23 $ 0.16 $ 0.86 $ 0.70
Weighted-average shares outstanding (diluted): 64,917 63,888 64,600 63,440
 
 

RECONCILIATION OF NON-GAAP DILUTED EARNINGS PER SHARE UNDER ASC 605

 
Income before provision for income taxes - Non-GAAP 18,919 71,570
Adjustments due to adoption of ASC 606   (3,100 )   (8,799 )
Income before provision for income taxes - Non-GAAP under ASC 605 15,819 62,771
Provision for income taxes   3,481   13,810
Net income - Non-GAAP under ASC 605 $ 12,338 $ 48,961
Diluted net income per share - Non-GAAP under ASC 605 $ 0.19 $ 0.76
Weighted-average shares outstanding (diluted): 64,917 64,600
 

 

* Other non-run-rate expenses consist primarily of severance and other employee-related costs and professional services costs not related to core operations.
 

We adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (“ASC 606”) and all related amendments as of April 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption. Results for reporting periods beginning after April 1, 2018 are presented under ASC 606, while prior period comparative information has not been adjusted and continue to be reported under the accounting standards in effect for those prior periods.

The impact of the adoption of ASC 606 on our consolidated statements of net income for the three months and fiscal year ended March 31, 2019, assuming that the previous revenue recognition guidance had been in effect, is summarized as follows:

  Three Months Ended March 31, 2019
As reported under   Adjustments due to   As disclosed under
ASC 606 adoption of ASC 606 ASC 605
Revenues:
Subscription services $ 29,884 $ (2,039 ) $ 27,845
Support and maintenance 40,242 (1,473 ) 38,769
Managed services 24,155 3,770 27,925
Electronic data interchange and data services   25,870   (25 )   25,845
Total recurring revenues 120,151 233 120,384
Software license and hardware 9,109 (662 ) 8,447
Other non-recurring services   5,525   (82 )   5,443
Total software, hardware, and other non-recurring revenues   14,634   (744 )   13,890
Total revenue 134,785 (511 ) 134,274
Total cost of revenue   62,057   30   62,087
Gross profit 72,728 (541 ) 72,187
Operating expenses:
Selling, general and administrative 44,710 2,559 47,269
Research and development costs, net 19,813 19,813
Amortization of acquired intangibles 1,028 1,028
Restructuring costs   640     640
Total operating expenses 66,191 2,559 68,750
Income from operations 6,537 (3,100 ) 3,437
Interest and other income, net   (609 )     (609 )
Income before provision for income taxes 5,928 (3,100 ) 2,828
Provision for income taxes   2,000   (432 )   1,568
Net income $ 3,928 $ (2,668 ) $ 1,260
 
 
Fiscal Year Ended March 31, 2019
As reported under   Adjustments due to   As disclosed under
ASC 606 adoption of ASC 606 ASC 605
Revenues:
Subscription services $ 117,502 $ (7,548 ) $ 109,954
Support and maintenance 160,798 (5,262 ) 155,536
Managed services 98,203 12,516 110,719
Electronic data interchange and data services   97,418   (136 )   97,282
Total recurring revenues 473,921 (430 ) 473,491
Software license and hardware 35,122 (1,830 ) 33,292
Other non-recurring services   20,130   382   20,512
Total software, hardware, and other non-recurring revenues   55,252   (1,448 )   53,804
Total revenue 529,173 (1,878 ) 527,295
Total cost of revenue   246,697   159   246,856
Gross profit 282,476 (2,037 ) 280,439
Operating expenses:
Selling, general and administrative 164,879 6,762 171,641
Research and development costs, net 80,994 80,994
Amortization of acquired intangibles 4,344 4,344
Restructuring costs   640     640
Total operating expenses 250,857 6,762 257,619
Income from operations 31,619 (8,799 ) 22,820
Interest and other income, net   (2,331 )     (2,331 )
Income before provision for income taxes 29,288 (8,799 ) 20,489
Provision for income taxes   4,794   (1,982 )   2,812
Net income $ 24,494 $ (6,817 ) $ 17,677
 

Source: NextGen Healthcare, Inc.

Media Contact:
NextGen Healthcare
Cynthia Ragland, (949) 255-2600 x75416
cragland@nextgen.com
or
Investor Contact:
Westwicke Partners
Bob East or Asher Dewhurst
Westwicke Partners
443-213-0500