SEC Filing | NextGen Healthcare, Inc.

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nxgn-10q_20210930.htm

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

☐	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

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.

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.

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.

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	)