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UNITED STATES

SECURITIES and EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2021

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number: 001-12537

NEXTGEN HEALTHCARE, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

(State or other jurisdiction of incorporation or organization)

95-2888568

(IRS Employer Identification No.)

 

 

3525 Piedmont Rd., NE, Building 6, Suite 700, Atlanta, GA

(Address of principal executive offices)

30305

(Zip Code)

 

(404) 467-1500

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.01 Par Value

NXGN

NASDAQ Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Small reporting company

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No

The number of outstanding shares of the Registrant’s common stock as of October 26, 2021 was 68,387,405 shares.

 

 

 


 

 

NEXTGEN HEALTHCARE, INC.

TABLE OF CONTENTS

FORM 10-Q

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021

 

 

 

Item

 

Page

 

 

PART I.  FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements.

 

3

 

 

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and March 31, 2021

 

3

 

 

Unaudited Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss) for the three and six months ended September 30, 2021 and 2020

 

4

 

 

Unaudited Statements of Condensed Consolidated Stockholders’ Equity for the six months ended September 30, 2021 and 2020

 

5

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2021 and 2020

 

6

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

24

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk.

 

36

Item 4.

 

Controls and Procedures.

 

36

 

 

PART II.  OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings.

 

37

Item 1A.

 

Risk Factors.

 

37

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds.

 

37

Item 3.

 

Defaults Upon Senior Securities.

 

37

Item 4.

 

Mine Safety Disclosure.

 

38

Item 5.

 

Other Information.

 

38

Item 6.

 

Exhibits.

 

39

 

 

Signatures

 

41

2


 

 

PART I.  FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

 

 

September 30, 2021

 

 

March 31, 2021

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

75,303

 

 

$

73,295

 

Restricted cash and cash equivalents

 

 

6,261

 

 

 

5,280

 

Accounts receivable, net

 

 

71,988

 

 

 

77,541

 

Contract assets

 

 

20,521

 

 

 

19,481

 

Income taxes receivable

 

 

9,066

 

 

 

765

 

Prepaid expenses and other current assets

 

 

27,574

 

 

 

31,282

 

Total current assets

 

 

210,713

 

 

 

207,644

 

Equipment and improvements, net

 

 

12,030

 

 

 

14,539

 

Capitalized software costs, net

 

 

41,570

 

 

 

41,474

 

Operating lease assets

 

 

14,431

 

 

 

18,446

 

Deferred income taxes, net

 

 

19,445

 

 

 

19,474

 

Contract assets, net of current

 

 

1,991

 

 

 

1,976

 

Intangibles, net

 

 

30,502

 

 

 

36,700

 

Goodwill

 

 

267,212

 

 

 

267,212

 

Other assets

 

 

37,628

 

 

 

37,021

 

Total assets

 

$

635,522

 

 

$

644,486

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

12,687

 

 

$

11,378

 

Contract liabilities

 

 

53,506

 

 

 

52,863

 

Accrued compensation and related benefits

 

 

34,053

 

 

 

50,374

 

Income taxes payable

 

 

201

 

 

 

584

 

Operating lease liabilities

 

 

11,290

 

 

 

12,735

 

Other current liabilities

 

 

59,440

 

 

 

52,699

 

Total current liabilities

 

 

171,177

 

 

 

180,633

 

Deferred compensation

 

 

7,275

 

 

 

6,620

 

Operating lease liabilities, net of current

 

 

14,646

 

 

 

18,453

 

Other noncurrent liabilities

 

 

7,148

 

 

 

7,136

 

Total liabilities

 

 

200,246

 

 

 

212,842

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common stock

 

 

 

 

 

 

 

 

$0.01 par value; authorized 100,000 shares; issued and outstanding 68,394 and 67,069 shares at September 30, 2021 and March 31, 2021, respectively

 

 

684

 

 

 

671

 

Additional paid-in capital

 

 

311,793

 

 

 

304,263

 

Accumulated other comprehensive loss

 

 

(1,912

)

 

 

(1,924

)

Retained earnings

 

 

124,711

 

 

 

128,634

 

Total shareholders' equity

 

 

435,276

 

 

 

431,644

 

Total liabilities and shareholders' equity

 

$

635,522

 

 

$

644,486

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended September 30,

 

 

Six Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

$

135,609

 

 

$

125,691

 

 

$

267,990

 

 

$

245,213

 

 

Software, hardware, and other non-recurring

 

13,677

 

 

 

14,311

 

 

 

27,380

 

 

 

25,668

 

 

Total revenues

 

149,286

 

 

 

140,002

 

 

 

295,370

 

 

 

270,881

 

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

57,119

 

 

 

52,906

 

 

 

114,279

 

 

 

103,335

 

 

Software, hardware, and other non-recurring

 

7,610

 

 

 

6,083

 

 

 

15,107

 

 

 

12,124

 

 

Amortization of capitalized software costs and acquired intangible assets

 

7,969

 

 

 

9,961

 

 

 

16,053

 

 

 

19,860

 

 

Total cost of revenue

 

72,698

 

 

 

68,950

 

 

 

145,439

 

 

 

135,319

 

 

Gross profit

 

76,588

 

 

 

71,052

 

 

 

149,931

 

 

 

135,562

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

63,891

 

 

 

41,950

 

 

 

112,377

 

 

 

82,687

 

 

Research and development costs, net

 

18,518

 

 

 

17,692

 

 

 

37,839

 

 

 

35,914

 

 

Amortization of acquired intangible assets

 

881

 

 

 

1,112

 

 

 

1,762

 

 

 

2,224

 

 

Impairment of assets

 

1,195

 

 

 

 

 

 

1,577

 

 

 

 

 

Restructuring costs

 

 

 

 

 

 

 

539

 

 

 

2,562

 

 

Total operating expenses

 

84,485

 

 

 

60,754

 

 

 

154,094

 

 

 

123,387

 

 

Income (loss) from operations

 

(7,897

)

 

 

10,298

 

 

 

(4,163

)

 

 

12,175

 

 

Interest income

 

17

 

 

 

12

 

 

 

29

 

 

 

18

 

 

Interest expense

 

(320

)

 

 

(1,135

)

 

 

(637

)

 

 

(2,242

)

 

Other expense, net

 

(12

)

 

 

(18

)

 

 

(34

)

 

 

(2

)

 

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

 

(8,212

)

 

 

9,157

 

 

 

(4,805

)

 

 

9,949

 

 

Provision for (benefit of) income taxes

 

(1,441

)

 

 

(1,298

)

 

 

(882

)

 

 

318

 

 

Net income (loss)

$

(6,771

)

 

$

10,455

 

 

$

(3,923

)

 

$

9,631

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation, net of tax

 

50

 

 

 

102

 

 

 

12

 

 

 

89

 

 

Comprehensive income (loss)

$

(6,721

)

 

$

10,557

 

 

$

(3,911

)

 

$

9,720

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.10

)

 

$

0.16

 

 

$

(0.06

)

 

$

0.14

 

 

Diluted

$

(0.10

)

 

$

0.16

 

 

$

(0.06

)

 

$

0.14

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

67,406

 

 

 

66,688

 

 

 

67,291

 

 

 

66,493

 

 

Diluted

 

67,406

 

 

 

66,689

 

 

 

67,291

 

 

 

66,493

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

NEXTGEN HEALTHCARE, INC.

STATEMENTS OF CONDENSED CONSOLIDATED STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

 

 

Six Months Ended September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Accumulated Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance, March 31, 2021

 

 

67,069

 

 

 

671

 

 

 

304,263

 

 

 

128,634

 

 

 

(1,924

)

 

 

431,644

 

Common stock issued under stock plans, net of shares withheld for taxes

 

 

293

 

 

 

3

 

 

 

(2,301

)

 

 

 

 

 

 

 

 

(2,298

)

Stock-based compensation

 

 

 

 

 

 

 

 

6,412

 

 

 

 

 

 

 

 

 

6,412

 

Components of other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38

)

 

 

(38

)

Net income

 

 

 

 

 

 

 

 

 

 

 

2,848

 

 

 

 

 

 

2,848

 

Balance, June 30, 2021

 

 

67,362

 

 

 

674

 

 

 

308,374

 

 

 

131,482

 

 

 

(1,962

)

 

 

438,568

 

Common stock issued under stock plans, net of shares withheld for taxes

 

 

1,032

 

 

 

10

 

 

 

(1,804

)

 

 

 

 

 

 

 

 

(1,794

)

Stock-based compensation

 

 

 

 

 

 

 

 

5,223

 

 

 

 

 

 

 

 

 

5,223

 

Components of other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50

 

 

 

50

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

(6,771

)

 

 

 

 

 

(6,771

)

Balance, September 30, 2021

 

 

68,394

 

 

 

684

 

 

 

311,793

 

 

 

124,711

 

 

 

(1,912

)

 

 

435,276

 

 

 

 

Six Months Ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Accumulated Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance, March 31, 2020

 

 

66,134

 

 

 

661

 

 

 

282,857

 

 

 

119,119

 

 

 

(2,143

)

 

 

400,494

 

Common stock issued under stock plans, net of shares withheld for taxes

 

 

535

 

 

 

6

 

 

 

(1,414

)

 

 

 

 

 

 

 

 

(1,408

)

Stock-based compensation

 

 

 

 

 

 

 

 

5,393

 

 

 

 

 

 

 

 

 

5,393

 

Components of other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13

)

 

 

(13

)

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

(824

)

 

 

 

 

 

(824

)

Balance, June 30, 2020

 

 

66,669

 

 

 

667

 

 

 

286,836

 

 

 

118,295

 

 

 

(2,156

)

 

 

403,642

 

Common stock issued under stock plans, net of shares withheld for taxes

 

 

65

 

 

 

 

 

 

(45

)

 

 

 

 

 

 

 

 

(45

)

Stock-based compensation

 

 

 

 

 

 

 

 

5,437

 

 

 

 

 

 

 

 

 

5,437

 

Components of other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

102

 

 

 

102

 

Net income

 

 

 

 

 

 

 

 

 

 

 

10,455

 

 

 

 

 

 

10,455

 

Balance, September 30, 2020

 

 

66,734

 

 

 

667

 

 

 

292,228

 

 

 

128,750

 

 

 

(2,054

)

 

 

419,591

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended September 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(3,923

)

 

$

9,631

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Amortization of capitalized software costs

 

 

11,617

 

 

 

9,853

 

Amortization of debt issuance costs

 

 

254

 

 

 

355

 

Amortization of other intangibles

 

 

6,198

 

 

 

12,232

 

Change in fair value of contingent consideration

 

 

 

 

 

50

 

Deferred income taxes

 

 

29

 

 

 

(27

)

Depreciation

 

 

3,781

 

 

 

3,937

 

Excess tax deficiency from share-based compensation

 

 

640

 

 

 

941

 

Impairment of assets

 

 

1,577

 

 

 

 

Loss on disposal of equipment and improvements

 

 

77

 

 

 

 

Non-cash operating lease costs

 

 

3,087

 

 

 

3,421

 

Provision for bad debts

 

 

679

 

 

 

1,399

 

Share-based compensation

 

 

11,635

 

 

 

10,830

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

4,874

 

 

 

3,505

 

Contract assets

 

 

(1,055

)

 

 

(2,481

)

Accounts payable

 

 

1,108

 

 

 

(3,756

)

Contract liabilities

 

 

643

 

 

 

(8,344

)

Accrued compensation and related benefits

 

 

(16,321

)

 

 

8,348

 

Income taxes

 

 

(9,324

)

 

 

(2,083

)

Deferred compensation

 

 

655

 

 

 

840

 

Operating lease liabilities

 

 

(5,360

)

 

 

(5,224

)

Other assets and liabilities

 

 

9,608

 

 

 

4,605

 

Net cash provided by operating activities

 

 

20,479

 

 

 

48,032

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Additions to capitalized software costs

 

 

(11,713

)

 

 

(12,083

)

Additions to equipment and improvements

 

 

(1,685

)

 

 

(764

)

Acquisition related working capital adjustment payments

 

 

 

 

 

(206

)

Net cash used in investing activities

 

 

(13,398

)

 

 

(13,053

)

Cash flows from financing activities: