10-Q

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 June 30, 2023


☐	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 July 21, 2023 was 67,018,411 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 June 30, 2023


	Item	Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2023 and March 31, 2023	3
	Unaudited Condensed Consolidated Statements of Net Income and Comprehensive Income for the three months ended June 30, 2023 and 2022	4
	Unaudited Statements of Condensed Consolidated Stockholders’ Equity for the three months ended June 30, 2023 and 2022	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2023 and 2022	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	40
Item 4.	Controls and Procedures.	40
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings.	41
Item 1A.	Risk Factors.	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	41
Item 3.	Defaults Upon Senior Securities.	41
Item 4.	Mine Safety Disclosure.	41
Item 5.	Other Information.	41
Item 6.	Exhibits.	42
	Signatures	43

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)


	June 30, 2023			March 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	70,325		$	98,719
Restricted cash and cash equivalents		7,580			7,269
Marketable securities		147,772			139,612
Accounts receivable, net		84,123			88,498
Contract assets		21,422			19,561
Income taxes receivable		3,250			5,248
Prepaid expenses and other current assets		40,259			42,916
Total current assets		374,731			401,823
Equipment and improvements, net		5,561			6,421
Capitalized software costs, net		56,805			54,516
Operating lease assets		3,129			3,335
Deferred income taxes, net		29,474			29,472
Contract assets, net of current		5,391			5,572
Intangibles, net		26,724			28,968
Goodwill		321,756			321,756
Other assets		44,898			44,238
Total assets	$	868,469		$	896,101
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	12,184		$	12,022
Contract liabilities		48,349			61,601
Accrued compensation and related benefits		22,870			36,241
Income taxes payable		675			622
Operating lease liabilities		3,490			3,826
Other current liabilities		80,273			83,799
Total current liabilities		167,841			198,111
Contract liabilities, net of current		2,251			10,310
Deferred compensation		8,835			8,033
Convertible senior notes, net, noncurrent		267,156			266,843
Operating lease liabilities, net of current		3,365			4,095
Other noncurrent liabilities		8,499			8,274
Total liabilities		457,947			495,666
Commitments and contingencies (Note 17)
Shareholders' equity:
Common stock, $0.01 par value; authorized 100,000 shares; 71,892 shares and 70,875 shares issued at June 30, 2023 and March 31, 2023, respectively; 67,043 shares and 66,026 shares outstanding at June 30, 2023 and March 31, 2023, respectively		719			709
Treasury stock, at cost, 4,849 shares and 4,849 shares at June 30, 2023 and March 31, 2023, respectively		(85,752	)		(85,752	)
Additional paid-in capital		364,040			359,342
Accumulated other comprehensive loss		(2,239	)		(1,462	)
Retained earnings		133,754			127,598
Total shareholders' equity		410,522			400,435
Total liabilities and shareholders' equity	$	868,469		$	896,101

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 June 30,
	2023			2022
Revenues:
Recurring	$	163,374		$	139,759
Software, hardware, and other non-recurring		14,833			13,543
Total revenues		178,207			153,302
Cost of revenue:
Recurring		79,221			62,244
Software, hardware, and other non-recurring		12,174			10,676
Amortization of capitalized software costs and acquired intangible assets		6,991			7,134
Total cost of revenue		98,386			80,054
Gross profit		79,821			73,248
Operating expenses:
Selling, general and administrative		48,193			49,034
Research and development costs, net		20,925			21,795
Amortization of acquired intangible assets		1,188			705
Impairment of assets		359			524
Restructuring costs		90			—
Total operating expenses		70,755			72,058
Income from operations		9,066			1,190
Interest income		1,669			46
Interest expense		(3,239	)		(330	)
Other income (expense), net		1,050			(5	)
Income before provision for (benefit of) income taxes		8,546			901
Provision for (benefit of) income taxes		2,390			(247	)
Net income	$	6,156		$	1,148
Other comprehensive income:
Foreign currency translation, net of tax		(1	)		(28	)
Unrealized gain (loss) on marketable securities, net of tax		(776	)		—
Comprehensive income	$	5,379		$	1,120
Net income per share:
Basic	$	0.09		$	0.02
Diluted	$	0.09		$	0.02
Weighted-average shares outstanding:
Basic		66,420			67,588
Diluted		66,853			68,283

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)


	Three Months Ended June 30, 2023
								Additional					Accumulated Other			Total
	Common Stock				Treasury			Paid-in			Retained		Comprehensive			Shareholders'
	Shares		Amount		Stock			Capital			Earnings		Income			Equity
Balance, March 31, 2023		66,026	$	709	$	(85,752	)	$	359,342		$	127,598	$	(1,462	)	$	400,435
Common stock issued under stock plans, net of shares withheld for taxes		1,017		10		—			(3,258	)		—		—			(3,248	)
Stock-based compensation		—		—		—			7,956			—		—			7,956
Components of other comprehensive income:
Unrealized loss on marketable securities														(776	)		(776	)
Translation adjustments		—		—		—			—			—		(1	)		(1	)
Net income		—		—		—			—			6,156		—			6,156
Balance, June 30, 2023		67,043		719		(85,752	)		364,040			133,754		(2,239	)		410,522


	Three Months Ended June 30, 2022
									Additional					Accumulated Other			Total
	Common Stock					Treasury			Paid-in			Retained		Comprehensive			Shareholders'
	Shares			Amount		Stock			Capital			Earnings		Income (Loss)			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

(1)

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

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)


	Three Months Ended June 30,
	2023			2022
Cash flows from operating activities:
Net income	$	6,156		$	1,148
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of capitalized software costs		5,936			5,354
Amortization of debt issuance costs		440			127
Amortization of other intangibles		2,244			2,486
Net amortization (accretion) of premiums/discounts on marketable securities		(973	)		—
Change in fair value of contingent consideration		100			—
Depreciation		1,118			1,292
Excess tax deficiency (benefit) from share-based compensation		211			(411	)
Impairment of assets		5			524
Loss on disposal of equipment and improvements		—			41
Loss on foreign currency exchange rates		84			6
Non-cash operating lease costs		392			914
Provision for bad debts		875			241
Share-based compensation		7,956			8,766
Changes in assets and liabilities, net of amounts acquired:
Accounts receivable		3,500			(1,464	)
Contract assets		(1,680	)		(126	)
Accounts payable		130			5,829
Contract liabilities		(21,311	)		1,814
Accrued compensation and related benefits		(13,374	)		(22,668	)
Income taxes		1,956			(191	)
Deferred compensation		802			(49	)
Operating lease liabilities		(1,067	)		(2,085	)
Other assets and liabilities		(1,597	)		(6,193	)
Net cash used in operating activities		(8,097	)		(4,645	)
Cash flows from investing activities:
Additions to capitalized software costs		(8,225	)		(8,998	)
Additions to equipment and improvements		(453	)		(455	)
Proceeds from sales of marketable securities		6,858			—
Proceeds from maturities and redemptions of marketable securities		20,760			—
Purchases of marketable securities		(35,626	)		—
Net cash used in investing activities		(16,686	)		(9,453	)
Cash flows from financing activities:
Proceeds from issuance of shares under employee plans		650			2,068
Repurchase of common stock		—			(2,505	)
Payments for taxes related to net share settlement of equity awards		(3,898	)		(3,668	)
Net cash used in financing activities		(3,248	)		(4,105	)
Effect of exchange rate changes on cash and cash equivalents		(52	)		(129	)
Net decrease in cash, cash equivalents, and restricted cash		(28,083	)		(18,332	)
Cash, cash equivalents, and restricted cash at beginning of period		105,988			66,747
Cash, cash equivalents, and restricted cash at end of period	$	77,905		$	48,415

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	228		$	360
Cash refunds from income taxes		4			9
Cash paid for interest		5,529			—
Non-cash investing and financing activities:
Cash paid for amounts included in the measurement of operating lease liabilities		1,144			2,308