10-Q
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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 December 31, 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 January 20, 2023 was 66,021,556 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 DECEMBER 31, 2022

 

 

 

Item

 

Page

 

 

PART I. FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements.

 

3

 

 

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

 

3

 

 

Unaudited Condensed Consolidated Statements of Net Income and Comprehensive Income for the nine months ended December 31, 2022 and 2021

 

4

 

 

Unaudited Statements of Condensed Consolidated Stockholders’ Equity for the nine months ended December 31, 2022 and 2021

 

5

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2022 and 2021

 

7

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

8

Item 2.

 

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

 

29

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk.

 

42

Item 4.

 

Controls and Procedures.

 

42

 

 

PART II. OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings.

 

43

Item 1A.

 

Risk Factors.

 

43

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds.

 

43

Item 3.

 

Defaults Upon Senior Securities.

 

43

Item 4.

 

Mine Safety Disclosure.

 

43

Item 5.

 

Other Information.

 

43

Item 6.

 

Exhibits.

 

44

 

 

Signatures

 

46

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

 

 

December 31, 2022

 

 

March 31, 2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

241,550

 

 

$

59,829

 

Restricted cash and cash equivalents

 

 

7,920

 

 

 

6,918

 

Accounts receivable, net

 

 

79,419

 

 

 

76,057

 

Contract assets

 

 

19,594

 

 

 

25,157

 

Income taxes receivable

 

 

6,897

 

 

 

6,507

 

Prepaid expenses and other current assets

 

 

34,257

 

 

 

37,102

 

Total current assets

 

 

389,637

 

 

 

211,570

 

Equipment and improvements, net

 

 

7,230

 

 

 

9,120

 

Capitalized software costs, net

 

 

52,603

 

 

 

43,958

 

Operating lease assets

 

 

4,982

 

 

 

11,316

 

Deferred income taxes, net

 

 

19,970

 

 

 

19,259

 

Contract assets, net of current

 

 

4,280

 

 

 

1,910

 

Intangibles, net

 

 

31,563

 

 

 

24,303

 

Goodwill

 

 

321,284

 

 

 

267,212

 

Other assets

 

 

39,474

 

 

 

39,026

 

Total assets

 

$

871,023

 

 

$

627,674

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

14,509

 

 

$

9,125

 

Contract liabilities

 

 

62,592

 

 

 

61,280

 

Accrued compensation and related benefits

 

 

25,818

 

 

 

48,736

 

Income taxes payable

 

 

12

 

 

 

99

 

Operating lease liabilities

 

 

4,312

 

 

 

8,089

 

Other current liabilities

 

 

46,955

 

 

 

53,533

 

Total current liabilities

 

 

154,198

 

 

 

180,862

 

Contract liabilities, net of current

 

 

11,117

 

 

 

 

Deferred compensation

 

 

7,569

 

 

 

7,230

 

Convertible senior notes, net, noncurrent

 

 

266,589

 

 

 

 

Operating lease liabilities, net of current

 

 

4,992

 

 

 

11,934

 

Other noncurrent liabilities

 

 

8,794

 

 

 

4,570

 

Total liabilities

 

 

453,259

 

 

 

204,596

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

Common stock, $0.01 par value; authorized 100,000 shares; 70,888 shares and 69,245 shares issued at December 31, 2022 and March 31, 2022, respectively; 66,039 shares and 67,075 shares outstanding at December 31, 2022 and March 31, 2022, respectively

 

 

709

 

 

 

692

 

Treasury stock, at cost, 4,849 shares and 2,170 shares at December 31, 2022 and March 31, 2022, respectively

 

 

(85,752

)

 

 

(35,874

)

Additional paid-in capital

 

 

351,834

 

 

 

329,917

 

Accumulated other comprehensive loss

 

 

(1,865

)

 

 

(1,909

)

Retained earnings

 

 

152,838

 

 

 

130,252

 

Total shareholders' equity

 

 

417,764

 

 

 

423,078

 

Total liabilities and shareholders' equity

 

$

871,023

 

 

$

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 AND COMPREHENSIVE INCOME

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended December 31,

 

 

Nine Months Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

$

148,720

 

 

$

134,496

 

 

$

431,982

 

 

$

402,486

 

 

Software, hardware, and other non-recurring

 

13,157

 

 

 

15,225

 

 

 

42,640

 

 

 

42,605

 

 

Total revenues

 

161,877

 

 

 

149,721

 

 

 

474,622

 

 

 

445,091

 

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

67,047

 

 

 

58,033

 

 

 

194,330

 

 

 

172,312

 

 

Software, hardware, and other non-recurring

 

11,515

 

 

 

7,978

 

 

 

32,988

 

 

 

23,085

 

 

Amortization of capitalized software costs and acquired intangible assets

 

6,787

 

 

 

8,193

 

 

 

20,665

 

 

 

24,246

 

 

Total cost of revenue

 

85,349

 

 

 

74,204

 

 

 

247,983

 

 

 

219,643

 

 

Gross profit

 

76,528

 

 

 

75,517

 

 

 

226,639

 

 

 

225,448

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

46,177

 

 

 

47,238

 

 

 

140,097

 

 

 

159,615

 

 

Research and development costs, net

 

19,621

 

 

 

19,390

 

 

 

62,273

 

 

 

57,229

 

 

Amortization of acquired intangible assets

 

919

 

 

 

881

 

 

 

2,329

 

 

 

2,643

 

 

Impairment of assets

 

247

 

 

 

 

 

 

1,576

 

 

 

1,577

 

 

Restructuring costs

 

 

 

 

 

 

 

321

 

 

 

539

 

 

Total operating expenses

 

66,964

 

 

 

67,509

 

 

 

206,596

 

 

 

221,603

 

 

Income from operations

 

9,564

 

 

 

8,008

 

 

 

20,043

 

 

 

3,845

 

 

Interest income

 

1,530

 

 

 

50

 

 

 

1,650

 

 

 

79

 

 

Interest expense

 

(2,239

)

 

 

(321

)

 

 

(2,894

)

 

 

(958

)

 

Other income (expense), net

 

(21

)

 

 

(9

)

 

 

10,266

 

 

 

(43

)

 

Income before provision for income taxes

 

8,834

 

 

 

7,728

 

 

 

29,065

 

 

 

2,923

 

 

Provision for income taxes

 

1,019

 

 

 

2,535

 

 

 

6,479

 

 

 

1,653

 

 

Net income

$

7,815

 

 

$

5,193

 

 

$

22,586

 

 

$

1,270

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation, net of tax

 

77

 

 

 

(21

)

 

 

44

 

 

 

(9

)

 

Comprehensive income

$

7,892

 

 

$

5,172

 

 

$

22,630

 

 

$

1,261

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.12

 

 

$

0.08

 

 

$

0.34

 

 

$

0.02

 

 

Diluted

$

0.12

 

 

$

0.08

 

 

$

0.33

 

 

$

0.02

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

66,561

 

 

 

67,958

 

 

 

67,317

 

 

 

67,514

 

 

Diluted

 

67,307

 

 

 

68,167

 

 

 

68,005

 

 

 

67,851

 

 

 

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)

 

 

 

Nine Months Ended December 31, 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

 

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

 

 

537

 

 

 

5

 

 

 

 

 

 

(1,038

)

 

 

 

 

 

 

 

 

(1,033

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

9,063

 

 

 

 

 

 

 

 

 

9,063

 

Repurchase of common stock(3)

 

 

(2,103

)

 

 

 

 

 

(40,000

)

 

 

 

 

 

 

 

 

 

 

 

(40,000

)

Components of other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

77

 

 

 

77

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,815

 

 

 

 

 

 

7,815

 

Balance, December 31, 2022

 

 

66,039

 

 

$

709

 

 

$

(85,752

)

 

$

351,834

 

 

$

152,838

 

 

$

(1,865

)

 

$

417,764

 

 

 

(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.
(3)
Weighted-average repurchase price (dollars per share) for the three months ended December 31, 2022 was $19.02.

 

5


 

 

 

Nine Months Ended December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Accumulated Other

 

 

Total