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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, 2022

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.)

 

 

Not Applicable(1)

(Address of principal executive offices)

Not Applicable(1)

(Zip Code)

 

Not Applicable(1)

(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 21, 2022 was 67,604,797 shares.

 

 

(1)

NextGen Healthcare, Inc. is a remote-first company and no longer maintains its principal executive office. For purposes of compliance with applicable requirements of the Securities Act of 1933, as amended, and Securities Exchange Act of 1934, as amended, stockholder communications required to be sent to our principal executive offices should be directed to the email address set forth in our proxy materials and/or identified on our investor relations website.


 

 

 

NEXTGEN HEALTHCARE, INC.

TABLE OF CONTENTS

FORM 10-Q

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022

 

 

 

Item

 

Page

 

 

PART I.  FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements.

 

3

 

 

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2022 and March 31, 2022

 

3

 

 

Unaudited Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss) for the six months ended September 30, 2022 and 2021

 

4

 

 

Unaudited Statements of Condensed Consolidated Stockholders’ Equity for the six months ended September 30, 2022 and 2021

 

5

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2022 and 2021

 

6

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

7

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.

 

38

Item 3.

 

Defaults Upon Senior Securities.

 

38

Item 4.

 

Mine Safety Disclosure.

 

38

Item 5.

 

Other Information.

 

38

Item 6.

 

Exhibits.

 

39

 

 

Signatures

 

40

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, 2022

 

 

March 31, 2022

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

70,728

 

 

$

59,829

 

Restricted cash and cash equivalents

 

 

7,580

 

 

 

6,918

 

Accounts receivable, net

 

 

76,948

 

 

 

76,057

 

Contract assets

 

 

25,474

 

 

 

25,157

 

Income taxes receivable

 

 

3,052

 

 

 

6,507

 

Prepaid expenses and other current assets

 

 

34,363

 

 

 

37,102

 

Total current assets

 

 

218,145

 

 

 

211,570

 

Equipment and improvements, net

 

 

7,398

 

 

 

9,120

 

Capitalized software costs, net

 

 

49,791

 

 

 

43,958

 

Operating lease assets

 

 

5,197

 

 

 

11,316

 

Deferred income taxes, net

 

 

19,128

 

 

 

19,259

 

Contract assets, net of current

 

 

1,595

 

 

 

1,910

 

Intangibles, net

 

 

19,739

 

 

 

24,303

 

Goodwill

 

 

267,212

 

 

 

267,212

 

Other assets

 

 

38,933

 

 

 

39,026

 

Total assets

 

$

627,138

 

 

$

627,674

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

12,414

 

 

$

9,125

 

Contract liabilities

 

 

62,498

 

 

 

61,280

 

Accrued compensation and related benefits

 

 

28,113

 

 

 

48,736

 

Income taxes payable

 

 

172

 

 

 

99

 

Operating lease liabilities

 

 

7,095

 

 

 

8,089

 

Other current liabilities

 

 

58,320

 

 

 

53,533

 

Total current liabilities

 

 

168,612

 

 

 

180,862

 

Deferred compensation

 

 

6,981

 

 

 

7,230

 

Operating lease liabilities, net of current

 

 

5,147

 

 

 

11,934

 

Other noncurrent liabilities

 

 

4,556

 

 

 

4,570

 

Total liabilities

 

 

185,296

 

 

 

204,596

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value; authorized 100,000 shares; 70,351 shares and 69,245 shares issued at September 30, 2022 and March 31, 2022, respectively; 67,605 shares and 67,075 shares outstanding at September 30, 2022 and March 31, 2022, respectively

 

 

704

 

 

 

692

 

Treasury stock, at cost, 2,746 shares and 2,170 shares at September 30, 2022 and March 31, 2022, respectively

 

 

(45,752

)

 

 

(35,874

)

Additional paid-in capital

 

 

343,809

 

 

 

329,917

 

Accumulated other comprehensive loss

 

 

(1,942

)

 

 

(1,909

)

Retained earnings

 

 

145,023

 

 

 

130,252

 

Total shareholders' equity

 

 

441,842

 

 

 

423,078

 

Total liabilities and shareholders' equity

 

$

627,138

 

 

$

627,674

 

 

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,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

$

143,503

 

 

$

135,609

 

 

$

283,262

 

 

$

267,990

 

 

Software, hardware, and other non-recurring

 

15,940

 

 

 

13,677

 

 

 

29,483

 

 

 

27,380

 

 

Total revenues

 

159,443

 

 

 

149,286

 

 

 

312,745

 

 

 

295,370

 

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

65,039

 

 

 

57,119

 

 

 

127,283

 

 

 

114,279

 

 

Software, hardware, and other non-recurring

 

10,797

 

 

 

7,610

 

 

 

21,473

 

 

 

15,107

 

 

Amortization of capitalized software costs and acquired intangible assets

 

6,744

 

 

 

7,969

 

 

 

13,878

 

 

 

16,053

 

 

Total cost of revenue

 

82,580

 

 

 

72,698

 

 

 

162,634

 

 

 

145,439

 

 

Gross profit

 

76,863

 

 

 

76,588

 

 

 

150,111

 

 

 

149,931

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

44,886

 

 

 

63,891

 

 

 

93,920

 

 

 

112,377

 

 

Research and development costs, net

 

20,857

 

 

 

18,518

 

 

 

42,652

 

 

 

37,839

 

 

Amortization of acquired intangible assets

 

705

 

 

 

881

 

 

 

1,410

 

 

 

1,762

 

 

Impairment of assets

 

805

 

 

 

1,195

 

 

 

1,329

 

 

 

1,577

 

 

Restructuring costs

 

321

 

 

 

 

 

 

321

 

 

 

539

 

 

Total operating expenses

 

67,574

 

 

 

84,485

 

 

 

139,632

 

 

 

154,094

 

 

Income (loss) from operations

 

9,289

 

 

 

(7,897

)

 

 

10,479

 

 

 

(4,163

)

 

Interest income

 

74

 

 

 

17

 

 

 

120

 

 

 

29

 

 

Interest expense

 

(325

)

 

 

(320

)

 

 

(655

)

 

 

(637

)

 

Other income (expense), net

 

10,292

 

 

 

(12

)

 

 

10,287

 

 

 

(34

)

 

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

 

19,330

 

 

 

(8,212

)

 

 

20,231

 

 

 

(4,805

)

 

Provision for (benefit of) income taxes

 

5,707

 

 

 

(1,441

)

 

 

5,460

 

 

 

(882

)

 

Net income (loss)

$

13,623

 

 

$

(6,771

)

 

$

14,771

 

 

$

(3,923

)

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation, net of tax

 

(5

)

 

 

50

 

 

 

(33

)

 

 

12

 

 

Comprehensive income (loss)

$

13,618

 

 

$

(6,721

)

 

$

14,738

 

 

$

(3,911

)

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.20

 

 

$

(0.10

)

 

$

0.22

 

 

$

(0.06

)

 

Diluted

$

0.20

 

 

$

(0.10

)

 

$

0.22

 

 

$

(0.06

)

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

67,806

 

 

 

67,406

 

 

 

67,698

 

 

 

67,291

 

 

Diluted

 

68,422

 

 

 

67,406

 

 

 

68,353

 

 

 

67,291

 

 

 

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, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Accumulated Other

 

 

Total

 

 

 

Common Stock

 

 

Treasury

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

Income

 

 

Equity

 

Balance, March 31, 2022

 

 

67,075

 

 

$

692

 

 

$

(35,874

)

 

$

329,917

 

 

$

130,252

 

 

$

(1,909

)

 

$

423,078

 

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

 

 

1,137

 

 

 

12

 

 

 

 

 

 

(1,612

)

 

 

 

 

 

 

 

 

(1,600

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

8,766

 

 

 

 

 

 

 

 

 

8,766

 

Repurchase of common stock (1)

 

 

(148

)

 

 

 

 

 

(2,505

)

 

 

 

 

 

 

 

 

 

 

 

(2,505

)

Components of other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28

)

 

 

(28

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,148

 

 

 

 

 

 

1,148

 

Balance, June 30, 2022

 

 

68,064

 

 

 

704

 

 

 

(38,379

)

 

 

337,071

 

 

 

131,400

 

 

 

(1,937

)

 

 

428,859

 

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

 

 

(31

)

 

 

 

 

 

 

 

 

(1,949

)

 

 

 

 

 

 

 

 

(1,949

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

8,687

 

 

 

 

 

 

 

 

 

8,687

 

Repurchase of common stock (2)

 

 

(428

)

 

 

 

 

 

(7,373

)

 

 

 

 

 

 

 

 

 

 

 

(7,373

)

Components of other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

(5

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,623

 

 

 

 

 

 

13,623

 

Balance, September 30, 2022

 

 

67,605

 

 

 

704

 

 

 

(45,752

)

 

 

343,809

 

 

 

145,023

 

 

 

(1,942

)

 

 

441,842

 

 

 

 

(1)

Weighted-average repurchase price (dollars per share) for the three months ended June 30, 2022 was $16.93.

 

(2)

Weighted-average repurchase price (dollars per share) for the three months ended September 30, 2022 was $17.21

 

 

 

Six Months Ended September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Accumulated Other

 

 

Total

 

 

 

Common Stock

 

 

Treasury

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

Income (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 loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50

 

 

 

50

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,771

)

 

 

 

 

 

(6,771

)

Balance, September 30, 2021

 

 

68,394

 

 

 

684

 

 

 

 

 

 

311,793

 

 

 

124,711

 

 

 

(1,912

)

 

 

435,276

 

 

5


 

 

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended September 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

14,771

 

 

$

(3,923

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Amortization of capitalized software costs

 

 

10,725