SEC Filing | NextGen Healthcare, Inc.

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nxgn-10q_20211231.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 December 31, 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 January 21, 2022 was 66,864,899 shares.

NEXTGEN HEALTHCARE, INC.

TABLE OF CONTENTS

FORM 10-Q

FOR THE THREE MONTHS ENDED DECEMBER 31, 2021

	Item	Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
	Unaudited Condensed Consolidated Balance Sheets as of December 31, 2021 and March 31, 2021	3
	Unaudited Condensed Consolidated Statements of Net Income and Comprehensive Income for the three and nine months ended December 31, 2021 and 2020	4
	Unaudited Statements of Condensed Consolidated Stockholders’ Equity for the nine months ended December 31, 2021 and 2020	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2021 and 2020	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	37
Item 4.	Controls and Procedures.	37
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings.	38
Item 1A.	Risk Factors.	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	39
Item 3.	Defaults Upon Senior Securities.	39
Item 4.	Mine Safety Disclosure.	39
Item 5.	Other Information.	39
Item 6.	Exhibits.	40
	Signatures	41

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

	December 31, 2021			March 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	49,429		$	73,295
Restricted cash and cash equivalents		4,921			5,280
Accounts receivable, net		70,080			77,541
Contract assets		24,246			19,481
Income taxes receivable		6,966			765
Prepaid expenses and other current assets		30,098			31,282
Total current assets		185,740			207,644
Equipment and improvements, net		10,818			14,539
Capitalized software costs, net		41,719			41,474
Operating lease assets		13,047			18,446
Deferred income taxes, net		19,439			19,474
Contract assets, net of current		1,997			1,976
Intangibles, net		27,402			36,700
Goodwill		267,212			267,212
Other assets		37,960			37,021
Total assets	$	605,334		$	644,486
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	15,232		$	11,378
Contract liabilities		54,879			52,863
Accrued compensation and related benefits		42,019			50,374
Income taxes payable		405			584
Operating lease liabilities		8,437			12,735
Other current liabilities		49,436			52,699
Total current liabilities		170,408			180,633
Deferred compensation		7,671			6,620
Operating lease liabilities, net of current		12,781			18,453
Other noncurrent liabilities		3,331			7,136
Total liabilities		194,191			212,842
Commitments and contingencies (Note 15)
Shareholders' equity:
Common stock, $0.01 par value; authorized 100,000 shares; issued and outstanding 66,865 and 67,069 shares at December 31, 2021 and March 31, 2021, respectively		690			671
Treasury stock, at cost, 2,170 shares at December 31, 2021		(35,874	)		—
Additional paid-in capital		318,356			304,263
Accumulated other comprehensive loss		(1,933	)		(1,924	)
Retained earnings		129,904			128,634
Total shareholders' equity		411,143			431,644
Total liabilities and shareholders' equity	$	605,334		$	644,486

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

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME AND COMPREHENSIVE INCOME

(In thousands, except per share data)

(Unaudited)

	Three Months Ended December 31,						Nine Months Ended December 31,
	2021			2020			2021			2020
Revenues:
Recurring	$	134,496		$	128,243		$	402,486		$	373,456
Software, hardware, and other non-recurring		15,225			13,509			42,605			39,177
Total revenues		149,721			141,752			445,091			412,633
Cost of revenue:
Recurring		58,033			54,204			172,312			157,539
Software, hardware, and other non-recurring		7,978			6,800			23,085			18,924
Amortization of capitalized software costs and acquired intangible assets		8,193			9,320			24,246			29,180
Total cost of revenue		74,204			70,324			219,643			205,643
Gross profit		75,517			71,428			225,448			206,990
Operating expenses:
Selling, general and administrative		47,238			48,972			159,615			131,659
Research and development costs, net		19,390			18,197			57,229			54,111
Amortization of acquired intangible assets		881			1,112			2,643			3,336
Impairment of assets		—			2,215			1,577			2,215
Restructuring costs		—			—			539			2,562
Total operating expenses		67,509			70,496			221,603			193,883
Income from operations		8,008			932			3,845			13,107
Interest income		50			9			79			27
Interest expense		(321	)		(631	)		(958	)		(2,873	)
Other expense, net		(9	)		(15	)		(43	)		(17	)
Income before provision for (benefit of) income taxes		7,728			295			2,923			10,244
Provision for (benefit of) income taxes		2,535			(169	)		1,653			149
Net income	$	5,193		$	464		$	1,270		$	10,095
Other comprehensive income:
Foreign currency translation, net of tax		(21	)		171			(9	)		260
Comprehensive income	$	5,172		$	635		$	1,261		$	10,355
Net income per share:
Basic	$	0.08		$	0.01		$	0.02		$	0.15
Diluted	$	0.08		$	0.01		$	0.02		$	0.15
Weighted-average shares outstanding:
Basic		67,958			66,943			67,514			66,644
Diluted		68,167			67,140			67,851			66,649

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)

	Nine Months Ended December 31, 2021
									Additional						Accumulated Other			Total
	Common Stock					Treasury			Paid-in			Retained			Comprehensive			Shareholders'
	Shares			Amount		Stock			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
Common stock issued under stock plans, net of shares withheld for taxes		641			6					(487	)		—			—			(481	)
Stock-based compensation		—			—		—			7,050			—			—			7,050
Repurchase of common stock⁽¹⁾		(2,170	)		—		(35,874	)		—			—			—			(35,874	)
Components of other comprehensive income:
Translation adjustments		—			—		—			—			—			(21	)		(21	)
Net income		—			—		—			—			5,193			—			5,193
Balance, December 31, 2021		66,865		$	690	$	(35,874	)	$	318,356		$	129,904		$	(1,933	)	$	411,143

⁽¹⁾Weighted-average repurchase price (dollars per share) for the three months ended December 31, 2021 was $16.53.

NEXTGEN HEALTHCARE, INC.

STATEMENTS OF CONDENSED CONSOLIDATED STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

	Nine Months Ended December 31, 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		—		—		—			—