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, or a non-accelerated filer, ~~or a~~ 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.

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, 2018~~July 22, 2019 was ~~64,668,434~~65,381,886 shares.

	September 30, 2018			March 31, 2018			June 30, 2019			March 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	32,387		$	28,845		$	28,607		$	33,079
Restricted cash and cash equivalents		7,331			2,373			8,183			1,443
Accounts receivable, net		85,548			84,962			81,748			87,459
Contract assets		10,253			—			12,039			13,242
Inventory		153			180			72			120
Income taxes receivable		5,976			8,122			2,882			3,682
Prepaid expenses and other current assets		16,987			17,180			21,985			20,826
Total current assets		158,635			141,662			155,516			159,851
Equipment and improvements, net		24,815			26,795			22,772			21,404
Capitalized software costs, net		31,805			26,318			38,465			37,855
Operating lease assets								41,992			—
Deferred income taxes, net		6,264			9,219			6,207			6,194
Contract assets, net of current		2,942			—			3,554			3,747
Intangibles, net		63,227			74,091			47,442			52,595
Goodwill		218,771			218,875			218,771			218,771
Other assets		29,226			18,795			32,606			32,478
Total assets	$	535,685		$	515,755		$	567,325		$	532,895
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	6,237		$	4,213		$	5,848		$	5,432
Contract liabilities		50,023			54,079			53,963			56,009
Accrued compensation and related benefits		18,885			27,910			17,226			25,663
Income taxes payable		18			73			57			64
Operating lease liabilities								9,744			—
Other current liabilities		43,883			48,317			41,412			41,064
Total current liabilities		119,046			134,592			128,250			128,232
Contract liabilities, net of current		—			1,173
Deferred compensation		5,951			6,086			6,046			5,905
Line of credit		42,000			37,000			6,000			11,000
Operating lease liabilities, net of current								44,281			—
Other noncurrent liabilities		13,254			13,494			1,918			11,812
Total liabilities		180,251			192,345			186,495			156,949
Commitments and contingencies (Note 14)
Shareholders' equity:
Common stock
$0.01 par value; authorized 100,000 shares; issued and outstanding 64,382 and 63,995 shares at September 30, 2018 and March 31, 2018, respectively		644			640
$0.01 par value; authorized 100,000 shares; issued and outstanding 65,383 and 64,838 shares at June 30, 2019 and March 31, 2019, respectively								654			648
Additional paid-in capital		253,613			244,462			268,488			264,908
Accumulated other comprehensive loss		(1,692	)		(400	)		(1,177	)		(1,231	)
Retained earnings ⁽¹⁾		102,869			78,708
Retained earnings								112,865			111,621
Total shareholders' equity		355,434			323,410			380,830			375,946
Total liabilities and shareholders' equity	$	535,685		$	515,755		$	567,325		$	532,895

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

	Three Months Ended September 30,						Six Months Ended September 30,						Three Months Ended June 30,
	2018			2017			2018			2017			2019			2018
Revenues:
Recurring	$	116,317		$	119,441		$	236,324		$	238,619		$	119,447		$	120,007
Software, hardware, and other non-recurring		14,004			13,166			27,197			24,910			12,414			13,193
Total revenues		130,321			132,607			263,521			263,529			131,861			133,200
Cost of revenue:
Recurring		47,172			47,699			95,325			96,157			50,540			48,153
Software, hardware, and other non-recurring		7,022			5,947			14,176			11,987			6,278			7,154
Amortization of capitalized software costs and acquired intangible assets		6,924			5,109			13,468			9,780			8,413			6,544
Total cost of revenue		61,118			58,755			122,969			117,924			65,231			61,851
Gross profit		69,203			73,852			140,552			145,605			66,630			71,349
Operating expenses:
Selling, general and administrative		34,229			40,977			78,865			83,954			40,128			44,636
Research and development costs, net		18,371			19,527			40,499			39,516			22,051			22,128
Amortization of acquired intangible assets		1,121			2,012			2,289			4,059			865			1,168
Impairment of assets														489			—
Restructuring costs														1,707			—
Total operating expenses		53,721			62,516			121,653			127,529			65,240			67,932
Income from operations		15,482			11,336			18,899			18,076			1,390			3,417
Interest income		40			12			69			21			79			29
Interest expense		(769	)		(840	)		(1,499	)		(1,517	)		(472	)		(730	)
Other income (expense), net		237			15			611			(7	)		(133	)		374
Income before provision for income taxes		14,990			10,523			18,080			16,573
Provision for income taxes		1,896			2,493			2,338			4,647
Income before provision for (benefit of) income taxes														864			3,090
Provision for (benefit of) income taxes														(380	)		442
Net income	$	13,094		$	8,030		$	15,742		$	11,926		$	1,244		$	2,648
Other comprehensive income:
Foreign currency translation, net of tax		(794	)		(85	)		(1,293	)		(99	)		54			(499	)
Comprehensive income	$	12,300		$	7,945		$	14,449		$	11,827		$	1,298		$	2,149
Net income per share:
Basic	$	0.20		$	0.13		$	0.25		$	0.19		$	0.02		$	0.04
Diluted	$	0.20		$	0.13		$	0.24		$	0.19		$	0.02		$	0.04
Weighted-average shares outstanding:
Basic		64,265			63,513			64,143			63,077			65,015			64,019
Diluted		64,857			63,530			64,362			63,089			65,353			64,054

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

	Three Months Ended June 30, 2018
										Accumulated
					Additional					Other			Total
	Common Stock				Paid-in			Retained		Comprehensive			Shareholders'
	Shares		Amount		Capital			Earnings		Loss			Equity
Balance, March 31, 2018		63,995		640		244,462			78,708		(400	)		323,410
Common stock issued under stock plans, net of shares withheld for taxes		225		2		(204	)		—		—			(202	)
Stock-based compensation		—		—		3,116			—		—			3,116
Cumulative effect adjustment related to the adoption of ASC 606		—		—		—			8,419		—			8,419
Components of other comprehensive income:
Translation adjustments		—		—		—			—		(499	)		(499	)
Net income		—		—		—			2,648		—			2,648
Balance, June 30, 2018		64,220		642		247,374			89,775		(899	)		336,892

	Three Months Ended June 30, 2019
										Accumulated
					Additional					Other			Total
	Common Stock				Paid-in			Retained		Comprehensive			Shareholders'
	Shares		Amount		Capital			Earnings		Loss			Equity
Balance, March 31, 2019		64,838		648		264,908			111,621		(1,231	)		375,946
Common stock issued under stock plans, net of shares withheld for taxes		545		6		(1,311	)		—		—			(1,305	)
Stock-based compensation		—		—		4,891			—		—			4,891
Components of other comprehensive income:
Translation adjustments		—		—		—			—		54			54
Net income		—		—					1,244		—			1,244
Balance, June 30, 2019		65,383		654		268,488			112,865		(1,177	)		380,830

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

	Six Months Ended September 30,						Three Months Ended June 30,
	2018			2017			2019			2018
Cash flows from operating activities:
Net income	$	15,742		$	11,926		$	1,244		$	2,648
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of capitalized software costs								4,125			2,257
Amortization of debt issuance costs								177			177
Amortization of other intangibles								5,153			5,455
Deferred income taxes								(13	)		86
Depreciation		4,996			5,374			2,092			2,393
Amortization of capitalized software costs		4,892			2,571
Amortization of other intangibles		10,864			11,267
Amortization of debt issuance costs		355			538
Excess tax benefit from share-based compensation								(189	)		(33	)
Impairment of assets								489			—
Loss on disposal of equipment and improvements								41			106
Non-cash operating lease costs								1,815			—
Provision for bad debts		1,385			3,868			606			792
Provision for inventory obsolescence		11			36			—			10
Restructuring costs, net of amounts paid								1,707			—
Share-based compensation		7,251			5,132			4,891			3,116
Deferred income taxes		175			18
Excess tax deficiency (benefit) from share-based compensation		(260	)		346
Loss on disposal of equipment and improvements		106			45
Changes in assets and liabilities, net of amounts acquired:
Changes in assets and liabilities:
Accounts receivable		409			(120	)		5,105			486
Contract assets		2,982			—			1,396			2,998
Inventory		16			(25	)		48			9
Accounts payable		1,843			1,323			416			(1,172	)
Contract liabilities		(8,230	)		(929	)		(2,046	)		(6,057	)
Accrued compensation and related benefits		(9,770	)		(7,302	)		(9,994	)		(11,088	)
Income taxes		2,459			(348	)		982			624
Deferred compensation		(135	)		(191	)		141			(149	)
Operating lease liabilities								(2,286	)		—
Other assets and liabilities		(20,175	)		4,565			1,097			354
Net cash provided by operating activities		14,916			38,094			16,997			3,012
Cash flows from investing activities:
Additions to capitalized software costs		(10,379	)		(9,624	)		(4,735	)		(4,785	)
Additions to equipment and improvements		(2,941	)		(5,423	)		(3,689	)		(2,179	)
Payments for acquisitions, net of cash acquired		—			(58,892	)
Net cash used in investing activities		(13,320	)		(73,939	)		(8,424	)		(6,964	)
Cash flows from financing activities:
Proceeds from line of credit		26,000			50,000			—			20,000
Repayments on line of credit		(21,000	)		(10,000	)		(5,000	)		(13,000	)
Proceeds from issuance of shares under employee plans		4,108			4,320			1,096			1,352
Payment of contingent consideration related to acquisitions		—			(18,817	)
Payments for taxes related to net share settlement of equity awards		(2,204	)		(778	)		(2,401	)		(1,554	)
Net cash provided by financing activities		6,904			24,725
Net increase (decrease) in cash, cash equivalents, and restricted cash		8,500			(11,120	)
Net cash provided by (used in) financing activities								(6,305	)		6,798
Net increase in cash, cash equivalents, and restricted cash								2,268			2,846
Cash, cash equivalents, and restricted cash at beginning of period		31,218			37,673			34,522			31,218
Cash, cash equivalents, and restricted cash at end of period	$	39,718		$	26,553		$	36,790		$	34,064

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	486		$	5,396		$	257		$	191
Cash refunds from income taxes		373			713			1,430			367
Cash paid for interest		975			933			275			286
Non-cash investing and financing activities:
Tenant improvement allowance from landlord	$	473		$	1,442
Unpaid additions to equipment and improvements		181			117
Cash paid for amounts included in the measurement of operating lease liabilities								2,617			—
Operating lease assets obtained in exchange for operating lease liabilities								5,324			—
Accrued purchases of equipment and improvements								—			92

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

Principles of Consolidation. ~~On September 6, 2018,~~ ~~Quality Systems, Inc. changed its corporate name to NextGen Healthcare, Inc.~~ The condensed consolidated financial statements include the accounts of NextGen Healthcare, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). Each of the terms “we,” “us,” or “our” as used herein refers collectively to the Company, unless otherwise stated. All intercompany accounts and transactions have been eliminated.

Basis of Presentation. The accompanying unaudited condensed consolidated financial statements as of ~~September~~June 30, ~~2018~~2019 and for the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019 have been prepared in accordance with the requirements of Quarterly Report on Form 10-Q and Article 10 of the Securities and Exchange Commission Regulation S-X and therefore do not include all information and notes which would be presented were such condensed consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements presented in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2018.~~2019. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments which are necessary for a fair statement of the results of operations and cash flows for the periods presented. The results of operations for such interim periods are not necessarily indicative of results of operations to be expected for the full year.

Effective April 1, 2018, we changed the presentation of our consolidated statements of comprehensive income to present revenue and cost of revenue under separate ‘recurring’ captions and ‘software, hardware, and other non-recurring’ captions. Recurring consists of revenue and related cost of revenue for subscription services, support and maintenance, managed services, and electronic data interchange and data services. Software, hardware, and other non-recurring consists of revenue and related cost of revenue, for software licenses, hardware, and other non-recurring services, such as implementation, training, and consulting services. Cost of revenue within recurring and software, hardware, and other non-recurring are reported exclusive of the amortization of capitalized software costs and acquired intangible assets. Amortization of capitalized software costs and acquired intangible assets are now reported in a separate cost of revenue caption. Prior period amounts have been reclassified to conform to current year presentation.

~~Also effective April 1, 2018, prior period amounts previously presented as deferred revenue are now presented as contract liabilities. Prior period balances have not changed.~~

References to amounts in the condensed consolidated financial statement sections are in thousands, except shares and per share data, unless otherwise specified.

Significant Accounting Policies. We adopted Accounting Standards Update No. ~~2014-09,~~ ~~Revenue from Contracts with Customers: Topic 606~~2016-02, Leases (Topic 842), effective on April 1, ~~2018~~2019 using the ~~modified retrospective~~cumulative-effect adjustment transition method, ~~(see Note 2).~~as described further below. There have been no other material changes to our significant accounting policies from those disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2018.~~2019.

Share-Based Compensation. The following table summarizes total share-based compensation expense included in the condensed consolidated statements of comprehensive income for the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:

	Three Months Ended September 30,						Six Months Ended September 30,						Three Months Ended June 30,
	2018			2017			2018			2017			2019			2018
Costs and expenses:
Cost of revenue	$	348		$	290		$	581		$	427		$	463		$	233
Research and development costs		726			513			1,336			874			1,028			610
Selling, general and administrative		3,061			2,288			5,334			3,831			3,400			2,273
Total share-based compensation		4,135			3,091			7,251			5,132			4,891			3,116
Income tax benefit		(1,016	)		(1,144	)		(1,769	)		(1,860	)		(1,215	)		(753	)
Decrease in net income	$	3,119		$	1,947		$	5,482		$	3,272		$	3,676		$	2,363

Recently ~~adopted accounting pronouncements.~~Adopted Accounting Pronouncements. Recently adopted accounting pronouncements are discussed below or in the notes, where applicable.

~~In March 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-05,~~ ~~Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, to add various SEC paragraphs pursuant to the issuance of Staff Accounting Bulletin No. 118 (“SAB 118”) to Accounting Standards Codification 740. SAB 118 was issued by~~

the SEC in December 2017 to provide immediate guidance for accounting implications of the United States Tax Reform under the Tax Cuts and Jobs Act (“TCJA”). We have evaluated the potential impacts of SAB 118 and have applied this guidance to our consolidated financial statements and related disclosures (see Note 10).

~~In May 2017, FASB issued ASU 2017-09,~~ ~~Compensation–Stock Compensation (Topic 718): Scope of Modification Accounting~~ ("ASU 2017-09"). ASU 2017-09 clarifies the changes to terms or conditions of a share-based payment award that require an entity to apply modification accounting. ASU 2017-09 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early application is permitted and prospective application is required. ASU 2017-09 is effective for us in the first quarter of fiscal 2019. The adoption of this new standard did not have a material impact on our consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~ (“ASU 2017-01”). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted in two scenarios as identified in the new standard. ASU 2017-01 is effective for us in the first quarter of fiscal 2019. The adoption of this new standard did not have a material impact on our consolidated financial statements.

In ~~November 2016, the FASB issued Accounting Standards Update ("ASU") 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~ (“ASU 2016-18”). ASU 2016-18 provides guidance on the classification of restricted cash and cash equivalents in the statement of cash flows. Although it does not provide a definition of restricted cash or restricted cash equivalents, it states that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. ASU 2016-18 is effective for us in the first quarter of fiscal 2019. The adoption of this new standard resulted in an increase to net cash provided by operating activities of $4,958 and $1,572 for the six months ended September 30, 2018 and 2017, respectively.

~~In August~~February 2016, the FASB issued ASU ~~2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments.~~2016-02, Leases (Topic 842) (“ASU ~~2016-15 is~~2016-02”), which was intended to ~~add~~improve financial reporting about leasing transactions. The new guidance requires lessees to recognize on their balance sheets the assets and ~~clarify~~liabilities for the rights and obligations created by leases and to disclose key information about the leasing arrangements. We have implemented the necessary changes to our policies, processes, and internal controls over financial reporting to meet the requirements under the new guidance ~~on the classification of certain cash receipts and cash payments in the statement of cash flows to eliminate diversity in practice~~ related to ~~how such cash receipts~~identifying and ~~cash payments~~measuring right-of-use assets and lease liabilities, including related disclosures.

We adopted ASU 2016-02 and its subsequent amendments (together “ASC 842”) using the cumulative-effect adjustment transition method, which is the additional transition method described within ASU 2018-11, Leases (Topic 842): Targeted Improvements, issued by the FASB in July 2018, which allowed us to apply the new lease standard as of April 1, 2019, rather than the beginning of the earliest period presented. We elected the package of practical expedients that permitted us to not reassess: (1) whether any expired contracts are ~~presented~~or contain leases; (2) the lease classification for any existing or expired leases, and ~~classified in~~(3) the ~~statement~~initial direct costs for our existing leases.

Upon adoption of ~~cash flows. ASU 2016-15 is effective for interim~~ASC 842, we recognized operating lease right-of-use assets of $38,784, operating lease liabilities of $8,873, and ~~annual reporting periods beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. ASU 2016-15 is effective for us in the first quarter~~long-term operating lease liabilities of ~~fiscal 2019.~~$42,114 on our condensed consolidated balance sheet as of April 1, 2019, and corresponding reductions to other current liabilities of $2,342 and other noncurrent liabilities of $9,861 associated with previously recognized deferred rent and remaining lease obligations. There was no cumulative-effect adjustment required to retained earnings. The adoption of ~~this new standard~~ASC 842 did not have a ~~material impact~~significant effect on our condensed consolidated ~~financial statements.~~

~~In May 2014,~~results of operations or cash flows. Comparative information in this Report has not been adjusted and continues to be reported under the ~~FASB, along with the International Accounting Standards Board, issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers: Topic 606~~ ~~("ASC 606"), which supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605,~~ ~~Revenue Recognition~~ ~~(“ASC 605”). We adopted ASC 606 and all related amendments as of April 1, 2018 using the modified retrospective method~~previous lease accounting rules. Refer to Note 4 for ~~all contracts not completed as of the date of adoption (see Note 2).~~additional details.

Recent Accounting Standards Not Yet Adopted. Recent accounting pronouncements requiring implementation in current or future periods are discussed below or in the notes, where applicable.

In August 2018, the FASB issued ASU 2018-15, Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. ASU 2018-15 is effective for us in the first quarter of fiscal 2021. We are currently in the process of evaluating the potential impact of adoption of this updated authoritative guidance on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 modifies certain disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. ASU 2018-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. ASU 2018-13 is effective for us in the first quarter of fiscal 2021, and we currently do not expect the adoption of this new standard to have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of Step two of the goodwill impairment test. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. ASU 2017-04 is effective prospectively for annual ~~periods,~~ and interim ~~periods within those annual~~ periods beginning after December 15, 2019, and early adoption is permitted on goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 is effective for us in the first quarter of fiscal 2021, and we currently do not expect the adoption of this new standard to have a material impact on our consolidated financial statements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~ (“ASU 2016-02”), which is intended to improve financial reporting about leasing transactions. The new guidance will require lessees to recognize on their balance sheets the assets and liabilities for the rights and obligations created by leases and to disclose key information about the leasing arrangements. ASU 2016-02 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. ASU 2016-02 is effective for us in the first quarter of fiscal 2020. We currently expect to implement the new lease guidance, including all related updates, when it becomes effective for us on April 1, 2019. We are currently in the process of performing our preliminary impact assessment, including evaluation of the potential changes to our policies, processes, and internal controls over financial reporting that may be required to comply with the new guidance related to identifying and measuring right-of-use assets and lease liabilities. While we continue to evaluate the impact of the new lease guidance on our consolidated financial statements, we preliminary expect that the adoption of the new lease guidance will result in an increase in the assets and liabilities recorded on our consolidated balance sheet and require an additional level of disclosures related to our leases. We currently expect to implement the new lease guidance, including all related updates, when it becomes effective for us on April 1, 2019.

We do not believe that any other recently issued, but not yet effective accounting standards, if adopted, would have a material impact on our consolidated financial statements.

~~In May 2014, the FASB issued ASC 606, which~~ ~~supersedes the revenue recognition requirements in~~ ~~ASC 605~~ and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The new guidance provides a five-step process for determining the amount and timing of revenue recognition and establishes disclosure requirements to enable users of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers. It also provides guidance on the accounting treatment for the incremental costs of obtaining a contract that would not have been incurred had the contract not been obtained.

We adopted ASC 606 and all related amendments as of April 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption. Results for reporting periods beginning after April 1, 2018 are presented under ASC 606, while prior period comparative information has not been adjusted and continue to be reported under the accounting standards in effect for those prior periods. We have also implemented changes to our processes, policies, and internal controls over financial reporting to address the impacts of the new revenue recognition standard on our consolidated financial statements and related disclosures.

The adjustments to reflect the cumulative effect of the changes to the balances of our previously reported consolidated balance sheet as of March 31, 2018 for the adoption of ASC 606 are summarized as follows:

As Reported

ASC 606 Transition

Adjusted

March 31, 2018

Adjustments

April 1, 2018

ASSETS

Accounts receivable, net

$
84,962

$
2,380

$
87,342

Contract assets

—

13,446

13,446

Prepaid expenses and other current assets

17,180

(223
)

16,957

Deferred income taxes, net

9,219

(2,884
)

6,335

Contract assets, net of current

—

2,731

2,731

Other assets

18,795

6,679

25,474

LIABILITIES

Contract liabilities

54,079

4,174

58,253

Accrued compensation and related benefits

27,910

745

28,655

Other current liabilities

48,317

9,964

58,281

Contract liabilities, net of current

1,173

(1,173
)

—

SHAREHOLDERS' EQUITY

Retained earnings

78,708

8,419

87,127

We recorded a net increase to retained earnings of $8,419 as of April 1, 2018 due to the cumulative impact of adopting ASC 606, with the impact primarily related to (i) revenue cycle management (“RCM”) and related services revenue whereby revenue recognition may be accelerated under ASC 606 for software, subscriptions, support and maintenance, and professional services included with RCM arrangements as the timing of revenue recognition is based upon the transfer of value of the promised goods or services to our clients, which may occur prior to time that client collections occur, (ii) the amortization of capitalized direct sales commissions costs over a longer period of time under ASC 606, and (iii) the income tax impact of the cumulative transition adjustment. Further, we recorded reclassifications to present certain unbilled amounts as contract assets and sales returns reserves and certain customer liabilities as other current liabilities, which were both previously recorded within accounts receivables on our consolidated balance sheets.

~~We applied the practical expedient permitting the recognition of revenue in the amount to which the entity has a right to invoice based on the actual usage by the customers for our~~ ~~electronic data interchange~~ (“EDI”) services and other transaction-based services. We have reflected the aggregate effect of all contract modifications occurring prior to the ASC 606 adoption date when (i) identifying the satisfied and unsatisfied performance obligations, (ii) determining the transaction price, and (iii) allocating the transaction price to the satisfied and unsatisfied performance obligations.

~~The adoption of ASC 606 had no transition impact on cash provided by or used in operating, financing or investing activities reported in our consolidated statement of cash flows.~~

~~The impact of the adoption of ASC 606 on our consolidated balance sheet and~~ ~~consolidated statements of net income and comprehensive income~~ ~~as of September 30, 2018 and for the three and six months ended September 30, 2018, assuming that the previous revenue recognition guidance in ASC 605 had been in effect, is summarized as follows:~~

September 30, 2018

As reported under

Adjustments due to

As disclosed under

ASC 606

adoption of ASC 606

ASC 605

ASSETS

Accounts receivable, net

$
85,548

$
2,496

$
88,044

Contract assets

10,253

(10,253
)

—

Income taxes receivable

5,976

997

6,973

Prepaid expenses and other current assets

16,987

(2,190
)

14,797

Deferred income taxes, net

6,264

2,884

9,148

Contract assets, net of current

2,942

(2,942
)

—

Other assets

29,226

(6,773
)

22,453

LIABILITIES

Contract liabilities

50,023

2,911

52,934

Accrued compensation and related benefits

18,885

(6
)

18,879

Other current liabilities

43,883

(8,171
)

35,712

Contract liabilities, net of current

—

1,030

1,030

SHAREHOLDERS' EQUITY

Retained earnings

102,869

(11,511
)

91,358

Three Months Ended September 30, 2018

As reported under

Adjustments due to

As disclosed under

ASC 606

adoption of ASC 606

ASC 605

Revenues:

Recurring

$
116,317

$
(793
)

$
115,524

Software, hardware, and other non-recurring

14,004

(96
)

13,908

Total revenue

130,321

(889
)

129,432

Total cost of revenue

61,118

52

61,170

Gross profit

69,203

(941
)

68,262

Operating expenses:

Selling, general and administrative

34,229

1,957

36,186

Research and development costs, net

18,371

—

18,371

Amortization of acquired intangibles

1,121

—

1,121

Total operating expenses

53,721

1,957

55,678

Income from operations

15,482

(2,898
)

12,584

Interest and other income, net

(492
)

—

(492
)
Income before provision for income taxes

14,990

(2,898
)

12,092

Provision for income taxes

1,896

(751
)

1,145

Net income

$
13,094

$
(2,147
)

$
10,947

Six Months Ended September 30, 2018

As reported under

Adjustments due to

As disclosed under

ASC 606

adoption of ASC 606

ASC 605

Revenues:

Recurring

$
236,324

$
(106
)

$
236,218

Software, hardware, and other non-recurring

27,197

(737
)

26,460

Total revenue

263,521

(843
)

262,678

Total cost of revenue

122,969

94

123,063

Gross profit

140,552

(937
)

139,615

Operating expenses:

Selling, general and administrative

78,865

3,152

82,017

Research and development costs, net

40,499

—

40,499

Amortization of acquired intangibles

2,289

—

2,289

Total operating expenses

121,653

3,152

124,805

Income from operations

18,899

(4,089
)

14,810

Interest and other income, net

(819
)

—

(819
)
Income before provision for income taxes

18,080

(4,089
)

13,991

Provision for income taxes

2,338

(997
)

1,341

Net income

$
15,742

$
(3,092
)

$
12,650

~~As of September 30, 2018, the reported balances include the cumulative effect adjustments of adopting ASC 606.~~

We generate revenue from sales of licensing rights and subscriptions to our software solutions, hardware and third-party software products, support and maintenance, managed services, ~~(formerly referred to as revenue cycle management~~electronic data interchange (“EDI”) and ~~related services), EDI,~~data services, and other non-recurring services, including implementation, training, and consulting services. Our contracts with customers may include multiple performance obligations that consist of various combinations of our software solutions and related services, which are generally capable of being distinct and accounted for as separate performance obligations.

The total transaction price is allocated to each performance obligation within an arrangement based on estimated standalone selling prices.We generally determine standalone selling prices based on the prices charged to customers, except for certain software licenses that are based on the residual approach and certain maintenance customers that are based on substantive renewal rates. In instances where standalone selling price is not observable, such as software licenses included in our ~~RCM~~revenue cycle management (“RCM”) arrangements, we estimate standalone selling price utilizing an expected cost plus a margin approach. When standalone selling prices are not observable, significant judgment is required in estimating the standalone selling price for each performance obligation.

Revenue is recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration that we expect to be entitled to in exchange for those goods or services. We expect that the new revenue guidance in ASC 606 will result in additional complexity to our revenue recognition, including the use of an increased amount of significant judgments and estimates, particularly as it relates to our RCM services revenue.

We exclude sales tax from the measurement of the transaction price and record revenue net of taxes collected from customers and subsequently remitted to governmental authorities.

The following table presents our revenues disaggregated by our major revenue categories and by occurrence:

	Three Months Ended September 30,				Six Months Ended September 30,				Three Months Ended June 30,
	2018		2017		2018		2017		2019		2018
Recurring revenues:
Subscription services	$	29,255	$	26,788	$	57,583	$	52,363	$	30,144	$	28,328
Support and maintenance		39,594		41,693		80,842		82,809		39,652		41,248
Managed services		23,527		27,962		49,797		57,137		25,681		26,270
Electronic data interchange and data services		23,941		22,998		48,102		46,310		23,970		24,161
Total recurring revenues		116,317		119,441		236,324		238,619		119,447		120,007

Software, hardware, and other non-recurring revenues:
Software license and hardware		9,353		8,853		16,796		16,273		7,095		7,443
Other non-recurring services		4,651		4,313		10,401		8,637		5,319		5,750
Total software, hardware and other non-recurring revenues		14,004		13,166		27,197		24,910		12,414		13,193

Total revenues	$	130,321	$	132,607	$	263,521	$	263,529	$	131,861	$	133,200

Recurring revenues ~~consists~~consist of subscription services, support and maintenance, managed services, and EDI and data services. Software, hardware, and other non-recurring ~~consists~~revenues consist of ~~revenue from~~ sales of software license and hardware and certain non-recurring services, such as implementation, training, and consulting performed for clients who use our products.

Generally, we recognize revenue ~~under Topic 606~~ for our most significant performance obligations as follows:

Subscription services. Performance obligations involving subscription services, which include annual licenses, are satisfied over time as the customer simultaneously receives and consumes the benefits of the services throughout the contract period. We recognize revenue related to these services ratably over the respective noncancelable contract term.

Support and maintenance. Performance obligations involving support and maintenance are satisfied over time as the customer simultaneously receives and consumes the benefits of the maintenance services provided. Our support and maintenance services may consist of separate performance obligations, such as unspecified upgrades or enhancements and technical support, which are considered stand-ready in nature and can be offered at various points during the service period. Since the efforts associated with the combined support and maintenance services are rendered concurrently and provided evenly throughout the service period, we consider the series of support and maintenance services to be a single performance obligation. Therefore, we recognize revenue related to these services ratably over the respective noncancelable contract term.

Managed services. Managed services consist primarily of RCM and related services, but also includes transcription services and certain other recurring services. Performance obligations associated with RCM services are satisfied over time as the customer simultaneously receives and consumes the benefits of the services executed throughout the contract period. The majority of service fees under our RCM arrangements are variable consideration contingent upon collections by our clients. We estimate the variable consideration which we expect to be entitled to over the noncancelable contract term associated with our RCM service arrangements. The estimate of variable consideration included in the transaction price typically involves estimating the amounts we will ultimately collect on behalf of our clients and the relative fee we charge that is generally calculated as a percentage of those collections. Inputs to these estimates include, but are not limited to, historical service fees and collections amounts, timing of historical collections relative to the timing of when claims are submitted by our clients to their respective payers, macroeconomic trends, and anticipated changes in the number of providers. Significant judgement is required when estimating the total transaction price based on the variable consideration. We may apply certain constraints, when appropriate and permitted, ~~under ASC 606,~~ to our estimates around our variable consideration in order to ensure that our estimates do not pose a risk of significantly misstating our revenue in any reporting period. RCM and related services may not be rendered evenly over the contract period as the timing of services are based on customer collections, which may vary throughout the service period. We recognize revenue for RCM based on the amount of collections received throughout the contract term as it most closely depicts our efforts to transfer our service obligations to the customer. Performance obligations related to the transcription services and other recurring services are generally satisfied as the corresponding services are provided and revenue is recognized as such services are rendered.

Electronic data interchange and data services. Performance obligations related to EDI and other transaction processing services are satisfied at the point in time the services are rendered. The transfer of control occurs when the transaction processing services are delivered and the customer receives the benefits from the services provided.

Software license and hardware. Software license and hardware are considered point-in-time performance obligations as control is transferred to customers upon the delivery of the software license and hardware. Our software licenses are considered functional licenses, and revenue recognition generally occurs on the date of contract execution as the customer is provided with immediate access to the license. We generally determine the amount of consideration allocated to the software license performance obligation using the residual approach, except for certain RCM arrangements where the amount allocated to the software license performance obligation is determined based on estimated relative standalone selling prices. For hardware, we recognize revenue upon transfer of such hardware or devices to the customer.

Other non-recurring services. Performance obligations related to other non-recurring services, including implementation, training, and consulting services, are generally satisfied as the corresponding services are provided. Once the services have been provided to the customer, the transfer of control has occurred. Therefore, we recognize revenue as such services are rendered.

As of ~~September~~June 30, ~~2018,~~2019, the aggregate amount of transaction price related to remaining unsatisfied or partially unsatisfied performance obligations over the respective noncancelable contract term was approximately ~~$465,400,~~$492,100, of which we expect to recognize approximately 9%10% as services are rendered or goods are delivered, 48%50% over the next 12 months, and the remainder thereafter.

Contract balances result from the timing differences between our revenue recognition, invoicing, and cash collections. Such contract balances include accounts receivables, contract assets and liabilities, and other customer deposits and liabilities balances. Accounts receivable includes invoiced amounts where the right to receive payment is unconditional and only subject to the passage of time. Contract assets include amounts where revenue recognized exceeds the amount invoiced to the customer and the right to payment is not solely subject to the passage of time. Contract assets are generally associated with our sales of software licenses, but may also be associated other performance obligations such as subscription services, support and maintenance, annual licenses, and professional services, where control has been transferred to our customers but the associated payments are based on future customer collections (in the case of our RCM service arrangements) or based on future milestone payment due dates. In such instances, the revenue recognized may exceed the amount invoiced to the customer and such balances are included in contract assets since our right to receive payment is not unconditional, but rather is conditional upon customer collections or the continued functionality of the software and our ongoing support and maintenance obligations. Contract liabilities consist mainly of fees invoiced or paid by our clients for which the associated services have not been performed and revenues have not been recognized. Contract assets and contract liabilities are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are classified as current or long-term on our condensed consolidated balance sheets based on the timing of when we expect to complete the related performance obligations and invoice the customer. Contract liabilities are classified as current on our condensed consolidated balance sheets since the revenue recognition associated to the related customer payments and invoicing is expected to occur within the next 12twelve months. During the three months ended June 30, 2019 and 2018, we recognized $19,960 and $20,177, respectively, of revenues that were included in the contract liability balance at the beginning of the corresponding periods.

~~ASC 606 requires the capitalization of~~We capitalize all incremental costs of obtaining a contract with a customer to the extent that such costs are directly related to a contract and expected to be recoverable. Our sales commissions and related sales incentives are considered incremental costs requiring capitalization. Capitalized contract costs are amortized to expense utilizing a method that is consistent with the transfer of the related goods or services to the customer. The amortization period ranges from less than one year up to eight years, based on the period over which the related goods and services are transferred, including consideration of the expected customer renewals and the related useful lives of the products.

Capitalized commissions costs were ~~$14,571~~$19,997 as of ~~September~~June 30, ~~2018,~~2019, of which ~~$3,392~~$5,120 is current and included as ~~prepaid expenses and~~ other current assets and ~~$11,179~~$14,877 is long-term and included within other assets on our condensed consolidated balance sheets, based on the expected timing of expense recognition. During the three months ~~and six months~~ ended ~~September~~June 30, ~~2018,~~2019, we recognized ~~$1,275 and $2,864, respectively,~~$1,662 of commissions expense primarily related to the amortization of capitalized commissions costs, which is included as a selling, general and administrative expense in the condensed consolidated statement of comprehensive income.

The following tables set forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis at ~~September~~June 30, ~~2018~~2019 and March 31, ~~2018:~~2019:

	Balance At		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Unobservable Inputs		Balance At		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Unobservable Inputs
	September 30, 2018		(Level 1)		(Level 2)		(Level 3)		June 30, 2019		(Level 1)		(Level 2)		(Level 3)
ASSETS
Cash and cash equivalents ⁽¹⁾	$	32,387	$	32,387	$	—	$	—	$	28,607	$	28,607	$	—	$	—
Restricted cash and cash equivalents		7,331		7,331		—		—		8,183		8,183		—		—
	$	39,718	$	39,718	$	—	$	—	$	36,790	$	36,790	$	—	$	—
LIABILITIES
Contingent consideration related to acquisitions									$	1,000	$	—	$	—	$	1,000
									$	1,000	$	—	$	—	$	1,000

	Balance At		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Unobservable Inputs		Balance At		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Unobservable Inputs
	March 31, 2018		(Level 1)		(Level 2)		(Level 3)		March 31, 2019		(Level 1)		(Level 2)		(Level 3)
ASSETS
Cash and cash equivalents ⁽¹⁾	$	28,845	$	28,845	$	—	$	—	$	33,079	$	33,079	$	—	$	—
Restricted cash and cash equivalents		2,373		2,373		—		—		1,443		1,443		—		—
	$	31,218	$	31,218	$	—	$	—	$	34,522	$	34,522	$	—	$	—
LIABILITIES
Contingent consideration related to acquisitions									$	1,000	$	—	$	—	$	1,000
									$	1,000	$	—	$	—	$	1,000

The contingent liability as of June 30, 2019 and March 31, 2019 relates to the acquisition of Inforth Technologies on January 31, 2018, which included contingent consideration up to an additional $4,000 of cash in the form of an earnout, subject to Inforth Technologies achieving certain applicable bookings targets through March 31, 2020. The categorization of the framework used to measure fair value of the contingent consideration liability was considered to be within the Level 3 valuation hierarchy due to the subjective nature of the unobservable inputs used. We assess the fair value of the contingent consideration liability on a recurring basis and any adjustments to fair value subsequent to the measurement period are reflected in the condensed consolidated statements of comprehensive income as a component of selling, general and administrative expense. Key assumptions included probability-adjusted achievement estimates of applicable bookings targets that were not observable in the market.

We believe that the fair value of other financial assets and liabilities, including accounts receivable, accounts payable, and line of credit, approximate their respective carrying values due to their nominal credit risk.

We have certain assets, including goodwill and other intangible assets, which are measured at fair value on a non-recurring basis and are adjusted to fair value only if an impairment charge is recognized. The categorization of the framework used to measure fair value of the assets is considered to be within the Level 3 valuation hierarchy due to the subjective nature of the unobservable inputs used. During the three months ended June 30, 2019, we recorded certain impairments to our operating lease assets and equipment and improvements (see Note 15).

~~On January 31, 2018, we completed~~We have operating lease agreements for our offices in the ~~acquisition~~United States and India with lease periods expiring between 2020 and 2026. ASC 842 requires the recognition of ~~Inforth Technologies, LLC ("Inforth") pursuant~~leasing arrangements on the balance sheet as right-of-use assets and liabilities pertaining to the ~~Membership Interest Purchase Agreement, dated January 31, 2018. Headquartered in Traverse City, MI. Inforth was one~~rights and obligations created by the leased assets. We determine whether an arrangement is a lease at inception and classify it as finance or operating.All of our ~~premier clinical content~~existing material leases are classified as operating leases. Our leases do not contain any residual value guarantees.

Right-of-use lease assets and ~~technical services partners specializing in comprehensive solutions for physician practices. The preliminary purchase price of Inforth totaled $4,337 and was funded by cash flows from operations.~~

On August 16, 2017, we completed the acquisition of EagleDream Health, Inc. ("EagleDream") pursuant to the Agreement and Plan of Merger (the “Merger Agreement"), dated July 31, 2017. Headquartered in Rochester, NY, EagleDream is a cloud-based analytics company that drives meaningful insight across clinical, financial and administrative data to optimize practice performance. The purchase price totaled $25,609, which included certain working capital and other customary adjustments. The acquisition was partially funded by a draw against our revolving credit agreement (see Note 8). ~~The purchase price allocation of the EagleDream acquisition was considered final as of September 30, 2018.~~

On April 14, 2017, we completed our acquisition of Entrada, Inc. ("Entrada") pursuant to the terms of the Agreement and Plan of Merger, dated April 11, 2017 (the "Agreement"). Based in Nashville, TN, Entrada is a leading provider of cloud-based solutions thatcorresponding lease liabilities are reshaping the way care is delivered by leveraging the power of mobile whenever and wherever care happens. Entrada’s best-in-class mobile application integrates with multiple clinical platforms and all major electronic health record systems. Entrada enables organizations to maximize their existing technology investments while simultaneously enhancing physician and staff productivity. The acquisition of Entrada and its cloud-based, mobile application is part of our commitment to deliver systematic solutions that meet its clients' transforming work requirements to become increasingly nimble and mobile. The purchase price

totaled $33,958, which included working capital and other customary adjustments. The acquisition was primarily funded by a draw against our revolving credit agreement (see Note 8). The purchase price allocation of the Entrada acquisition was considered final as of June 30, 2018.

We accounted for the acquisitions noted above as purchase business combinations using the acquisition method of accounting. The purchase allocation of Inforth is deemed to be preliminary. The purchase price allocated to the tangible and intangible assets acquired and liabilities assumedrecognized at commencement date based on ~~their estimated fair values~~the present value of lease payments over the expected lease term. Since the interest rate implicit in our lease arrangements is not readily determinable, we determine an incremental borrowing rate for each lease based on the approximate interest rate on a collateralized basis with similar remaining terms and payments as of the ~~acquisition date. The preliminary fair values~~lease commencement date to determine the present value of ~~acquired~~future lease payments. Our lease terms may include options to extend or terminate the lease. Currently, it is not reasonably certain that we will exercise those options and therefore, we utilize the initial, noncancelable, lease term to calculate the lease assets and corresponding liabilities ~~assumed represent management’s estimate~~for all our leases. We have certain insignificant short-term leases with an initial term of ~~fair value~~twelve months or less that are not recorded in our condensed consolidated balance sheets. Operating right-of-use lease assets are classified as operating lease assets on our condensed consolidated balance sheets.

Our lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. We have applied the practical expedient to combine fixed payments for non-lease components with our lease payments for all of our leases and account for them together as a single lease component, which increases the amount of our lease assets and corresponding liabilities. Payments under our lease arrangements are ~~subject to change if additional information, such~~primarily fixed, however, certain lease agreements contain variable payments, which are expensed as ~~changes to deferred taxes and/or working capital, becomes available. We expect to finalize~~incurred and not included in the ~~purchase price allocation as soon as practicable within the measurement period, but not later than one year following the acquisition date.~~operating lease assets and liabilities.

~~Goodwill represents the excess of the purchase price~~Operating lease costs are recognized on a straight-line basis over the ~~net identifiable assets acquired~~lease term and ~~liabilities assumed. Goodwill primarily represents, among other factors,~~included as a selling, general and administrative expense in the ~~value~~condensed consolidated statements of ~~synergies expected to be realized~~comprehensive income. Total operating lease costs were $2,300 and the assemblage of all assets that enable us to create new client relationships, neither of which qualify as separate amortizable intangible assets. Goodwill arising from the acquisition of Inforth is considered deductible for tax purposes, and goodwill arising from the acquisitions of EagleDream and Entrada are not deductible for tax purposes.

~~The total preliminary purchase price~~$2,028 for the ~~acquisition~~three months ended June 30, 2019 and 2018, respectively.

Components of ~~Inforth, and final purchase price for the acquisitions of EagleDream and Entrada~~operating lease costs are summarized as follows:

Preliminary

Inforth

EagleDream

Entrada

Purchase Price

Purchase Price

Purchase Price

Initial purchase price
$
4,000

$
26,000

$
34,000

Settlement of pre-existing net liabilities

337

—

—

Working capital and other adjustments

—

(391
)

(42
)

Total purchase price
$
4,337

$
25,609

$
33,958

Fair value of the net tangible assets acquired and liabilities assumed:

Acquired cash and cash equivalents
$
25

$
573

$
102

Accounts receivable

6

217

1,836

Prepaid expense and other current assets

—

20

145

Equipment and improvements

—

—

163

Capitalized software costs

—

—

364

Deferred income tax asset

—

—

117

Accounts payable

—

(115
)

(639
)

Accrued compensation and related benefits

(49
)

(691
)

(120
)

Deferred revenues

—

(394
)

(234
)

Deferred income tax liability

—

(1,707
)

—

Other liabilities

(22
)

(122
)

(444
)

Total net tangible assets acquired and liabilities assumed

(40
)

(2,219
)

1,290

Fair value of identifiable intangible assets acquired:

Goodwill

1,177

14,428

17,268

Software technology

3,200

12,800

10,500

Customer relationships

—

600

3,300

Trade name

—

—

1,600

Total identifiable intangible assets acquired

4,377

27,828

32,668

Total purchase price
$
4,337

$
25,609

$
33,958

	Three Months Ended
	June 30, 2019
Operating lease costs	$	2,163
Short-term lease costs		26
Variable lease costs		139
Less: Sublease income		(28	)
Total operating lease costs	$	2,300

~~We recorded $3,200 of Inforth intangible assets~~Supplemental cash flow information related to ~~software technology, which~~operating leases is ~~being amortized over 5 years. We recorded $13,400~~summarized as follows:

As of ~~EagleDream intangible assets related to customer relationships~~June 30, 2019, our operating leases had a weighted average remaining lease term of 5.2 years and ~~software technology,~~a weighted average discount rate of 4.2%. Future minimum aggregate lease payments under operating leases as of June 30, 2019 are summarized as follows:

Future minimum lease payments (including interest) under non-cancelable operating leases as of March 31, 2019 are summarized as follows:

As of June 30, 2019, we have not entered any material leases, which are ~~being amortized over 8 years and 5 years, respectively. The weighted average amortization period for~~not reflected in the acquired EagleDream intangible assets is 5.1 years. We recorded $15,400 of Entrada intangible assets related to customer relationships, trade names, and software technology, which are being amortized over 10 years, 5 years, and 5 years, respectively. The weighted average amortization period for the acquired Entrada intangible assets is 6.1 years.

The revenues, earnings, and pro forma effects of the Inforth, EagleDream, and Entrada acquisitions would not have been material to our results of operations, individually and in aggregate, and are therefore not presented.table above.

We test goodwill for impairment annually during our first fiscal quarter, referred to as the annual test date. We will also test for impairment between annual test dates if an event occurs or circumstances change that would indicate the carrying amount may be impaired.~~We have~~

As part of our annual goodwill impairment test, we first assess qualitative factors to determine whether it is more likely than not ~~identified any events or circumstances~~that the fair value of goodwill is less than its carrying amount. The qualitative assessment includes consideration of factors such as margin of fair values of the reporting units as of ~~September 30, 2018~~the most recent quantitative impairment assessment compared to the relative carrying value of net assets for each reporting unit. We assess for potential adverse changes in fair value since the most recent quantitative impairment assessment by considering changes in macroeconomic variables, changes in the industry in which we operate, and relevant company-specific factors. If we conclude that ~~would require an interim~~it is more likely than not that the fair value is less than its carrying amount, we conduct a two-step quantitative goodwill impairment test. The first step of the impairment test involves comparing the fair values of goodwill with its carrying value. If the carrying amount of goodwill exceeds its fair value, we perform the second step of the goodwill impairment test. The second step of the goodwill impairment test involves comparing the implied fair value of goodwill with its carrying value. The amount by which the carrying value of the goodwill exceeds its implied fair value, if any, is recognized as an impairment loss. As of June 30, 2019, our qualitative assessment indicated that it was more likely than not that the fair value of goodwill exceeded its net carrying value and, therefore, additional impairment testing was not deemed necessary.

We do not amortize goodwill as it has been determined to have an indefinite useful life. The carrying amount of goodwill as of ~~September~~both June 30, ~~2018 was $218,771, which reflects the acquisitions of Entrada, EagleDream~~2019 and ~~Inforth (see Note 4). The carrying amount of goodwill as of~~ March 31, ~~2018~~2019 was ~~$218,875.~~$218,771.

Our definite-lived intangible assets, other than capitalized software development costs, are summarized as ~~follows, and reflects the acquisitions of Entrada, EagleDream and Inforth (see Note 4):~~follows:

	September 30, 2018									June 30, 2019
	Customer			Software						Customer			Software
	Relationships			Technology			Total			Relationships			Technology			Total
Gross carrying amount	$	54,450		$	94,310		$	148,760		$	32,400		$	93,000		$	125,400
Accumulated amortization		(37,819	)		(47,714	)		(85,533	)		(18,690	)		(59,268	)		(77,958	)
Net intangible assets	$	16,631		$	46,596		$	63,227		$	13,710		$	33,732		$	47,442

	March 31, 2018									March 31, 2019
	Customer			Software						Customer			Software
	Relationships			Technology			Total			Relationships			Technology			Total
Gross carrying amount	$	54,450		$	94,310		$	148,760		$	54,450		$	94,310		$	148,760
Accumulated amortization		(35,531	)		(39,138	)		(74,669	)		(39,875	)		(56,290	)		(96,165	)
Net intangible assets	$	18,919		$	55,172		$	74,091		$	14,575		$	38,020		$	52,595

During the three months ended June 30, 2019, we retired $23,360 of fully amortized intangible assets. Amortization expense related to customer relationships ~~and contracts~~ recorded as operating expenses in the condensed consolidated statements of comprehensive income was ~~$1,121~~$865 and ~~$2,012~~$1,168 for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Amortization expense related to software technology recorded as cost of revenue was $4,288 and ~~$3,807~~$4,287 for the three months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ respectively.

Amortization expense related to customer relationships and contracts recorded as operating expenses in the consolidated statements of comprehensive income was $2,289 and $4,059 for the six months ended September 30, 2018 and 2017, respectively. Amortization expense related to software technology recorded as cost of revenue was $8,575 and $7,208 for the six months ended September 30, 2018 and 2017, respectively.

The following table summarizes the remaining estimated amortization of ~~definite-lived~~ intangible assets as of ~~September~~June 30, ~~2018:~~2019:

	Estimated Remaining Amortization Expense						Estimated Remaining Amortization Expense
	Operating Expense		Cost of Revenue		Total		Operating Expense		Cost of Revenue		Total
For the year ended March 31,
2019 (remaining six months)	$	2,056	$	8,576	$	10,632
2020		3,460		17,151		20,611
2020 (remaining nine months)							$	2,595	$	12,864	$	15,459
2021		2,803		13,268		16,071		2,803		13,268		16,071
2022		2,273		5,480		7,753		2,273		5,480		7,753
2023		1,866		1,761		3,627		1,866		1,760		3,626
2024 and beyond		4,173		360		4,533
2024								1,548		180		1,728
2025 and beyond								2,625		180		2,805
Total	$	16,631	$	46,596	$	63,227	$	13,710	$	33,732	$	47,442

	September 30, 2018			March 31, 2018			June 30, 2019			March 31, 2019
Gross carrying amount	$	60,740		$	50,361		$	64,517		$	59,782
Accumulated amortization		(28,935	)		(24,043	)		(26,052	)		(21,927	)
Net capitalized software costs	$	31,805		$	26,318		$	38,465		$	37,855

Amortization expense related to capitalized software costs was ~~$2,635~~$4,125 and ~~$1,300~~$2,257 for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and is recorded as cost of revenue in the condensed consolidated statements of comprehensive income.

~~Amortization expense related to capitalized software costs was $4,892 and $2,571 for the six months ended September 30, 2018 and 2017, respectively.~~

The following table presents the remaining estimated amortization of capitalized software costs as of ~~September~~June 30, ~~2018.~~2019. The estimated amortization is comprised of (i) amortization of released products and (ii) the expected amortization for products that are not yet available for sale based on their estimated economic lives and projected general release dates.

For the year ended March 31,
2019 (remaining six months)	$	8,500
2020		12,900
2020 (remaining nine months)			$	15,800
2021		7,400		14,000
2022		3,005		7,200
2023				1,465
Total	$	31,805	$	38,465

On March 29, 2018, we entered into a $300,000 amended and restated revolving credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, U.S. Bank National Association, as syndication agent, and certain other agents and lenders. The Credit Agreement replaces our prior $250,000 revolving credit agreement originally entered into on January 4, 2016 (“Original Credit Agreement”). The Credit Agreement provides a subfacility of up to $10,000 for letters of credit and a subfacility of up to $10,000 for swing-line loans and also includes a $100,000 accordion feature that provides us with the ability to obtain up to $400,000 in the aggregate of revolving credit commitments and/or term loans upon satisfaction of certain ~~conditions.~~conditions.

The Credit Agreement matures on March 29, 2023 and the full balance of the revolving loans and all other obligations under the agreement must be paid at that time. In addition, we are required to prepay the revolving loan balance if at any time the aggregate principal amount outstanding under the Credit Agreement exceeds the aggregate commitments thereunder. The Credit Agreement is secured by substantially all of our existing and future property. The revolving loans under the Credit Agreement will be available for letters of credit, permitted acquisitions, working capital and general corporate purposes. We were in compliance with all financial and non-financial covenants under the Credit Agreement as of ~~September~~June 30, ~~2018.~~2019.

As of ~~September~~June 30, ~~2018,~~2019, we had ~~$42,000~~$6,000 in outstanding loans and ~~$258,000~~$294,000 of unused credit under the Credit Agreement. As of March 31, ~~2018,~~2019, we had ~~$37,000~~$11,000 in outstanding loans under the Credit Agreement.

Interest expense related to the Credit Agreement was ~~$591~~$294 and ~~$520~~$550 for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Amortization of deferred debt issuance costs was ~~$178 and $269~~$177 for both the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017, respectively.~~

Interest expense related to the Credit Agreement was $1,141 and $927 for the six months ended September 30, 2018 and 2017, respectively. Amortization of deferred debt issuance costs was $355 and $538 for the six months ended September 30, 2018 and 2017, respectively.2018.

~~Subsequent to the adoption of ASC 606 as of April 1, 2018, accounts~~Accounts receivable include billed amounts where the right to receive payment is unconditional and only subject to the passage of time, and sales return reserves are now classified as other current liabilities on our consolidated balance sheets. As of March 31, 2018, accounts receivable may include amounts invoiced for undelivered products and services at each period end.time. Undelivered products and services are included as a component of the contract liabilities balance on the accompanying condensed consolidated balance sheets.

	September 30, 2018			March 31, 2018			June 30, 2019			March 31, 2019
Accounts receivable, gross	$	89,635		$	94,358		$	86,209		$	93,513
Sales return reserve		—			(5,520	)
Allowance for doubtful accounts		(4,087	)		(3,876	)		(4,461	)		(6,054	)
Accounts receivable, net	$	85,548		$	84,962		$	81,748		$	87,459

	September 30, 2018		March 31, 2018		June 30, 2019		March 31, 2019
Prepaid expenses	$	12,888	$	13,865	$	16,028	$	15,548
Capitalized commissions costs		3,395		2,828		5,120		4,816
Other current assets		704		487		837		462
Prepaid expenses and other current assets	$	16,987	$	17,180	$	21,985	$	20,826

	September 30, 2018			March 31, 2018			June 30, 2019			March 31, 2019
Computer equipment	$	27,989		$	27,347		$	29,283		$	28,923
Internal-use software		16,767			15,804			19,383			17,084
Furniture and fixtures		11,469			11,432			11,714			11,660
Leasehold improvements		16,353			16,016			15,589			15,150
Equipment and improvements, gross		72,578			70,599			75,969			72,817
Accumulated depreciation and amortization		(47,763	)		(43,804	)		(53,197	)		(51,413	)
Equipment and improvements, net	$	24,815		$	26,795		$	22,772		$	21,404

	September 30, 2018		March 31, 2018		June 30, 2019		March 31, 2019
Capitalized commission costs	$	11,181	$	1,394	$	14,877	$	14,781
Deposits		5,484		4,666		5,123		5,318
Debt issuance costs		3,189		3,544		2,656		2,834
Other noncurrent assets		9,372		9,191		9,950		9,545
Other assets	$	29,226	$	18,795	$	32,606	$	32,478

	September 30, 2018		March 31, 2018		June 30, 2019		March 31, 2019
Sales returns reserves and other customer liabilities ⁽¹⁾	$	8,171	$	—
Care services liabilities		7,331		2,373	$	8,183		1,443
Sales returns reserves and other customer liabilities						7,234		7,838
Customer credit balances and deposits						3,865		3,988
Accrued hosting costs						3,234		4,674
Accrued employee benefits and withholdings		3,250		1,636		2,795		2,426
Customer credit balances and deposits		3,044		4,287
Accrued consulting and outside services						2,635		3,874
Accrued self insurance expense		2,960		2,145		2,604		2,225
Accrued outsourcing costs		2,511		2,898		2,194		2,128
Accrued hosting costs		2,223		1,600
User group meeting deposits		2,141		—
Accrued EDI expense		2,062		2,310		1,944		2,037
Accrued consulting and outside services		2,005		4,428
Deferred rent		1,403		1,594
Contingent consideration and other liabilities related to acquisitions						1,000		1,000
Accrued royalties		904		1,400		657		3,090
Sales tax payable						641		509
Accrued legal expense		750		1,793		551		699
Remaining lease obligations		602		672
Sales tax payable		485		499
Accrued securities litigation settlement		—		19,000
Deferred rent and related lease obligations						—		2,196
Other accrued expenses		4,041		1,682		3,875		2,937
Other current liabilities	$	43,883	$	48,317	$	41,412	$	41,064

Deferred rent	$	9,787	$	9,902
Uncertain tax positions		2,527		2,419
Remaining lease obligations		694		962
Other liabilities		246		211
Other noncurrent liabilities	$	13,254	$	13,494

The benefit of income taxes in the three months ended June 30, 2019 was $380 and the provision for income taxes in the three months ended ~~September~~June 30, 2018 ~~and 2017~~ was ~~$1,896 and $2,493, respectively.~~$442. The effective tax rates were ~~12.6%~~44.0% benefit and ~~23.7%~~14.3% for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. The decrease in the effective tax rate for the three months ended ~~September~~June 30, ~~2018~~2019 compared to the prior year ~~periods~~period was primarily due to ~~reduction~~the increased net benefit of the federal corporate tax rate from 35% to 21% effective January 1, 2018, enacted by new tax reform legislation, as described further below. The decrease in the effective tax rate was also due to an increased benefit from the research and development ~~credit~~credits and ~~was~~stock option windfall partially offset by ~~the elimination~~unfavorable impact of ~~the disqualified domestic manufacturer deduction, effective April 1, 2018.~~

The provision for income taxes in the six months ended September 30, 2018 and 2017 was $2,338 and $4,647, respectively. The effective tax rates were 12.9% and 28.0% for the six months ended September 30, 2018 and 2017, respectively. The decrease in the effective tax rate for the six months ended September 30, 2018 compared to the prior year periods was primarily due to reduction of the federal corporate tax rate from 35% to 21% effective January 1, 2018, and other ~~changes enacted by new tax reform legislation, as described further below.~~nondeductible expenses.

The deferred tax assets and liabilities are presented net in the accompanying condensed consolidated balance sheets as noncurrent. We expect to receive the full benefit of the deferred tax assets recorded, with the exception of certain state credits, and state net operating loss carryforwards, for which we have recorded a valuation allowance.

We had liabilities of ~~$2,527~~$3,206 and ~~$2,419~~$2,894 for unrecognized tax benefits related to various federal, state and local income tax matters as of ~~September~~June 30, ~~2018~~2019 and March 31, ~~2018,~~2019, respectively. If recognized, this amount would reduce our effective tax rate.

We are no longer subject to United States federal income tax examinations for tax years before fiscal year ended ~~2014.~~2015. With a few exceptions, we are no longer subject to state or local income tax examinations for tax years before fiscal year ended 2014. We do not anticipate the total unrecognized tax benefits to significantly change due to the settlement of audits or the expiration of statute of limitations within the next twelve months.

On December 22, 2017, the President of the United States signed and enacted into law H.R. 1 (the “Tax Reform”). This new tax legislation, effective for tax years beginning on or after January 1, 2018, except for certain provisions, resulted in significant changes to existing United States tax law, including various provisions, such as

~~We are subject to the provisions of FASB Accounting Standards Codification 740-10,~~ ~~Income Taxes~~ (“ASC 740”), which requires that the effect on deferred tax assets and liabilities of a change in tax rates be recognized in the period the tax rate change was enacted. The Tax Reform reduces the federal corporate tax rate from 35% to 21% effective January 1, 2018, and thus we have revised our estimated annual effective tax rate to reflect the change in the federal statutory rate of 21%.

The Tax Reform also required a one-time transition tax based on total post-1986 foreign cumulative earnings and profits previously deferred from United States federal taxation, which was reasonably estimated and recorded as a one-time income tax expense of $1,381 at March 31, 2018. We will continue to analyze the calculation of cumulative foreign earnings and finalize the amounts held in cash or other specified assets.

Due to the complexities involved in accounting for the enactment of the Tax Reform, Staff Accounting Bulletin No. 118 (”SAB 118”) allowed us to record provisional amounts in earnings for the year ended March 31, 2018 and quarter ended September 30, 2018. SAB 118 provides that where reasonable estimates can be made, the provisional accounting should be based on such estimates and when no reasonable estimate can be made, the provisional accounting may be based on the tax law in effect before the Tax Reform. We will continue to analyze the effects of the Tax Reform on our consolidated financial statements. Additional impacts from the enactment of the Tax Reform will be recorded as they are identified during the measurement period of up to one year from the enactment date as provided for in SAB 118. The final impact of the Tax Reform may differ from the provisional amounts that have been recognized, possibly materially, due to, among other things, changes in our interpretation of the Tax Reform, legislative or administrative actions to clarify the intent of the statutory language provided that differ from our current interpretation, any changes in accounting standards for income taxes or related interpretations in response to the Tax Reform, or any updates or changes to estimates utilized to calculate the impacts, including changes to current year earnings estimates and applicable foreign exchange rates. Additionally, our United States tax returns for March 31, 2018 will be filed on or before January 15, 2019 and any changes to the tax positions for temporary differences compared to the estimates used will result in an adjustment of the estimated tax expense recorded as of March 31, 2018.

The Tax Reform also includes a GILTI Tax, requiring inclusion of certain non US earnings effective April 1, 2018. The GILTI inclusion has been estimated and included in the effective tax rate used for the tax provision recorded at September 30, 2018. Currently, the estimate of the non-US income inclusion for current fiscal year is $3,028. We will continue to evaluate the impact of the GILTI provisions under the Tax Reform which are complex and subject to continuing regulatory interpretation by the United States Internal Revenue Service. We are required to make an accounting policy election of either (1) treating taxes due on future United States inclusions in taxable income related to GILTI as a current period expense when incurred or (2) factoring such amounts into our measurement of deferred taxes. The final election made with respects to the new GILTI Tax rules will depend, in part, on further analyzing our global income.

The Tax Reform legislation includes various other provisions with effective dates beginning April 1, 2018 and beyond. For other changes that impact business related income, exclusions, deductions and credits with effective dates for our fiscal year beginning April 1, 2018, we will continue to account for those items based on our existing accounting under ASC 740 and the provisions of the tax laws that were in effect immediately prior to the enactment of the Tax Reform.

The dual presentation of “basic” and “diluted” earnings per share is provided below. Share amounts below are in thousands.

	Three Months Ended September 30,				Six Months Ended September 30,				Three Months Ended June 30,
	2018		2017		2018		2017		2019		2018
Earnings per share — Basic:
Net income	$	13,094	$	8,030	$	15,742	$	11,926	$	1,244	$	2,648
Weighted-average shares outstanding — Basic		64,265		63,513		64,143		63,077		65,015		64,019
Net income per common share — Basic	$	0.20	$	0.13	$	0.25	$	0.19	$	0.02	$	0.04

Earnings per share — Diluted:
Net income	$	13,094	$	8,030	$	15,742	$	11,926	$	1,244	$	2,648
Weighted-average shares outstanding		64,265		63,513		64,143		63,077		65,015		64,019
Effect of potentially dilutive securities		592		17		219		12		338		35
Weighted-average shares outstanding — Diluted		64,857		63,530		64,362		63,089		65,353		64,054
Net income per common share — Diluted	$	0.20	$	0.13	$	0.24	$	0.19	$	0.02	$	0.04

The computation of diluted net income per share does not include ~~411~~639 and ~~2,567~~2,853 options to acquire shares of common stock for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~September~~June 30, ~~2017, respectively, because their inclusion would have an anti-dilutive effect on net income per share.~~

~~The computation of diluted net income per share does not include 1,895 and 2,565 options to acquire shares of common stock for the six months ended September 30,~~ 2018, ~~and September 30, 2017,~~ respectively, because their inclusion would have an anti-dilutive effect on net income per share.

In October 2005, our shareholders approved a stock option and incentive plan (the “2005 Plan”) under which 4,800,000 shares of common stock were reserved for the issuance of awards, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock units, performance shares, performance units (including performance options) and other share-based awards. The 2005 Plan provides that our employees and directors may, at the discretion of the Board of Directors ("Board") or a duly designated compensation committee, be granted certain share-based awards. In the case of option awards granted under the 2005 Plan, the exercise price of each option is determined based on the date of grant and expire no later than 10 years from the date of grant. Awards granted pursuant to the 2005 Plan are subject to the vesting schedule or performance metrics set forth in the agreements pursuant to which they are granted. Upon a change of control of our Company, as such term is defined in the 2005 Plan, awards under the 2005 Plan will fully vest under certain circumstances. The 2005 Plan expired on May 25, 2015. As of ~~September~~June 30, ~~2018,~~2019, there were ~~365,220~~264,420 outstanding options under the 2005 Plan.

In August 2015, our shareholders approved a stock option and incentive plan (the “2015 Plan”) under which 11,500,000 shares of common stock were reserved for the issuance of awards, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock awards and restricted stock unit awards, performance stock awards and other share-based awards. In August 2017, our shareholders approved an amendment to our 2015 Equity Incentive Plan, (the “Amended 2015 Plan”), to, among other items, increase the number of shares of common stock reserved for issuance thereunder by 6,000,000. The Amended 2015 Plan provides that our employees and directors may, at the discretion of the Board of Directors or a duly designated compensation committee, be granted certain share-based awards. In the case of option awards granted under the Amended 2015 Plan, the exercise price of each option is determined based on the date of grant and expire no later than 10 years from the date of grant. Awards granted pursuant to the Amended 2015 Plan are subject to the vesting schedule or performance metrics set forth in the agreements pursuant to which they are granted. Upon a change of control of our Company, as such term is defined in the Amended 2015 Plan, awards under the Amended 2015 Plan will fully vest under certain circumstances. As of ~~September~~June 30, ~~2018,~~2019, there were ~~3,245,955~~2,792,705 outstanding options, ~~1,625,390~~1,946,725 outstanding shares of restricted stock awards, ~~83,125~~46,375 outstanding shares of performance stock awards, and ~~7,610,648~~5,020,749 shares available for future grant under the Amended 2015 Plan.

The following table summarizes the stock option transactions during the ~~six~~three months ended ~~September~~June 30, ~~2018:~~2019:

Weighted-

Weighted-

Average

Average

Aggregate

Exercise

Remaining

Intrinsic

Employee Stock Options Summary

Number of

Price

Contractual

Value

Shares

per Share

Life (years)

(in thousands)

Outstanding, April 1, 2018

3,670,170

$
15.51

6.2

$
766

Granted

301,130

$
17.57

7.6

Exercised

(197,495
)

$
16.05

4.5

$
921

Forfeited/Canceled

(160,230
)

$
23.29

3.9

Expired

(2,400
)

$
28.15

Outstanding, September 30, 2018

3,611,175

$
15.31

6.0

$
18,900

Vested and expected to vest, September 30, 2018

3,236,147

$
15.39

6.0

$
16,862

Exercisable, September 30, 2018

1,087,470

$
16.80

4.7

$
5,188

				Weighted-		Weighted-
				Average		Average		Aggregate
				Exercise		Remaining		Intrinsic
Employee Stock Options Summary	Number of			Price		Contractual		Value
	Shares			per Share		Life (years)		(in thousands)
Outstanding, March 31, 2019		3,166,525		$	15.36		5.5	$	7,040
Exercised		(36,300	)		12.52		3.7	$	85
Forfeited/Canceled		(38,700	)		27.67		1.6
Expired		(34,400	)		43.04
Outstanding, June 30, 2019		3,057,125		$	14.88		5.4	$	15,915
Vested and expected to vest, June 30, 2019		2,801,387		$	14.90		5.3	$	14,575
Exercisable, June 30, 2019		1,491,953		$	15.06		4.8	$	7,718

~~We utilize the Black-Scholes valuation model for estimating the fair value of share-based compensation with the following assumptions:~~

~~The weighted-average grant date fair value of stock options granted during the six months ended September 30, 2018 and 2017 was $7.28 and $6.11 per share, respectively.~~

During the six months ended September 30, 2018, a total of 301,130 options to purchase shares of common stock were granted under the Amended 2015 Plan at an exercise price equal to the market price of our common stock on the date of grant, as summarized below:

Non-vested stock option award activity during the ~~six~~three months ended ~~September~~June 30, ~~2018~~2019 is summarized as follows:

				Weighted-					Weighted-
				Average					Average
				Grant-Date					Grant-Date
Non-Vested Stock Option Award Summary	Number of			Fair Value		Number of			Fair Value
	Shares			per Share		Shares			per Share
Outstanding, April 1, 2018		2,657,005		$	5.18
Granted		301,130			7.28
Outstanding, March 31, 2019							1,845,855		$	5.52
Vested		(351,400	)		4.89		(276,283	)		5.41
Forfeited/Canceled		(83,030	)		5.48		(4,400	)		6.62
Outstanding, September 30, 2018		2,523,705		$	5.46
Outstanding, June 30, 2019							1,565,172		$	5.54

As of ~~September~~June 30, ~~2018, $11,201~~2019, $7,072 of total unrecognized compensation costs related to stock options is expected to be recognized over a weighted-average period of ~~2.8~~2.1 years. This amount does not include the cost of new options that may be granted in future periods or any changes in our forfeiture percentage. The total fair value of options vested during the ~~six~~three months ended ~~September~~June 30, ~~2018 and 2017~~2019 was ~~$1,718 and $2,092, respectively.~~$1,494.

Restricted stock awards activity during the ~~six~~three months ended ~~September~~June 30, ~~2018~~2019 is summarized as follows:

				Weighted-					Weighted-
				Average					Average
				Grant-Date					Grant-Date
Restricted Stock	Number of			Fair Value		Number of			Fair Value
	Shares			per Share		Shares			per Share
Outstanding, April 1, 2018		1,820,910		$	14.52
Outstanding, March 31, 2019							1,715,958		$	16.29
Granted		491,345			17.76		623,705			19.25
Vested		(440,895	)		15.10		(373,038	)		15.75
Canceled		(245,970	)		14.54		(19,900	)		16.21
Outstanding, September 30, 2018		1,625,390		$	15.34
Outstanding, June 30, 2019							1,946,725		$	17.35

Share-based compensation expense related to restricted stock awards was ~~$2,833~~$3,296 and ~~$2,207~~$1,920 for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017, respectively. Share-based compensation expense related to restricted stock awards was $4,753 and $3,746 for the six months ended September 30,~~ 2018, ~~and 2017,~~ respectively.

The weighted-average grant date fair value for the restricted stock awards was estimated using the market price of the common stock on the date of grant. The fair value of the restricted stock awards is amortized on a straight-line basis over the vesting period, which is generally between one to ~~three~~four years.

As of ~~September~~June 30, ~~2018, $20,313~~2019, $28,350 of total unrecognized compensation costs related to restricted stock awards is expected to be recognized over a weighted-average period of ~~1.8~~2.1 years. This amount does not include the cost of new restricted stock awards that may be granted in future periods.

On December 29, 2016, the Compensation Committee of the Board ~~granted~~approved 123,082 performance stock awards to be granted to certain executive officers, of which ~~83,125~~46,375 shares are currently outstanding. The performance stock awards vest in four equal increments on each of the first four anniversaries of the grant date, subject in each case to the executive officer’s continued service and achievement of certain Company performance goals, including strong ~~Company~~ stock price performance. The weighted-average grant date fair value of the awards was $10.63 per share, which was estimated using a Monte Carlo-based valuation model. Share-based compensation expense related to the performance stock awards was ~~$68 and $141~~$61 for the three ~~and six~~ months ended ~~September~~June 30, 2019.

On October 23, 2018, ~~respectively.~~the Compensation Committee of the Board approved 248,140 performance stock unit awards to be granted to certain executives and non-executive members of the executive leadership team, which vest only in the event certain performance goals are achieved and with continuous service through the date the goals are certified. Approximately 34% of the performance stock units are tied to our cumulative 3-year total shareholder return, 33% are tied to our fiscal year 2021 revenue, and 33% are tied to our fiscal year 2021 adjusted earnings per share goals, each as specifically defined in the equity award agreements. The number of shares to be issued may vary between 50% and 200% of the number of performance stock units depending on performance, and no such shares will be issued if threshold performance is not achieved. The weighted-average grant date fair value of the awards was $17.84 per share, which was estimated using a Monte Carlo-based valuation model for the awards based on total shareholder return and using a probability-adjusted achievement rate combined with the market price of the common stock on the date of grant for the awards based on revenue and earnings per share targets. Share-based compensation expense related to the performance stock unit awards was $438 for the three months ended June 30, 2019.

On August 11, 2014, our shareholders approved an Employee Share Purchase Plan (the “Purchase Plan”) under which 4,000,000 shares of common stock were reserved for future grant. The Purchase Plan allows eligible employees to purchase shares through payroll deductions of up to 15% of total base salary at a price equal to 90% of the lower of the fair market values of the shares as of the beginning or the end of the corresponding offering period. Any shares purchased under the Purchase Plan are subject to a six-month holding period. Employees are limited to purchasing no more than 1,500 shares on any single purchase date and no more than ~~$25,000~~$25 in total fair market value of shares during any one calendar year. As of ~~September~~June 30, ~~2018,~~2019, we have issued ~~411,387~~497,487 shares under the Purchase Plan and ~~3,588,613~~3,502,513 shares are available for future issuance.

Share-based compensation expense recorded for the employee share purchase plan was ~~$100~~$122 and ~~$80~~$132 for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017, respectively. Share-based compensation expense recorded for the employee share purchase plan was $232 and $177 for the six months ended September 30,~~ 2018, ~~and 2017,~~ respectively.

We had cash deposits at United States banks and financial institutions which exceeded federally insured limits at ~~September~~June 30, ~~2018.~~2019. We are exposed to credit loss for amounts in excess of insured limits in the event of non-performance by the institutions; however, we do not anticipate non-performance by these institutions.

Our software license agreements include a performance guarantee that our software products will substantially operate as described in the applicable program documentation for a period of 365 days after delivery. To date, we have not incurred any significant costs associated with our performance guarantee or other related warranties and do not expect to incur significant warranty costs in the future. Therefore, no accrual has been made for potential costs associated with these warranties. Certain arrangements also include performance guarantees related to response time, availability for operational use, and other performance-related guarantees. Certain arrangements also include penalties in the form of maintenance credits should the performance of the software fail to meet the performance guarantees. To date, we have not incurred any significant costs associated with these warranties and do not expect to incur significant warranty costs in the future. Therefore, no accrual has been made for potential costs associated with these warranties.

We have historically offered short-term rights of return in certain sales arrangements. If we are able to estimate returns for these types of arrangements and all other criteria for revenue recognition have been met, revenue is recognized and these arrangements are recorded in the condensed consolidated financial statements. If we are unable to estimate returns for these types of arrangements, revenue is not recognized in the condensed consolidated financial statements until the rights of return expire, provided also, that all other criteria of revenue recognition have been met.

Our standard sales agreements contain an indemnification provision pursuant to which we shall indemnify, hold harmless, and reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with any United States patent, any copyright or other intellectual property infringement claim by any third-party with respect to our software. As we have not incurred any significant costs to defend lawsuits or settle claims related to these indemnification agreements, we believe that our

estimated exposure on these agreements is currently minimal. Accordingly, we have no liabilities recorded for these indemnification obligations.

On October 7, 2013, a complaint was filed against our Company and certain of our officers and directors in the Superior Court of the State of California for the County of Orange, captioned Ahmed D. Hussein v. Sheldon Razin, Steven Plochocki, Quality Systems, Inc. and Does 1-10, inclusive, No. 30-2013-00679600-CU-NP-CJC, by Ahmed Hussein, a former director and significant shareholder of our Company. We filed a demurrer to the complaint, which the Court granted on April 10, 2014. An amended complaint was filed on April 25, 2014. The amended complaint generally alleges fraud and deceit, constructive fraud, negligent misrepresentation and breach of fiduciary duty in connection with statements made to our shareholders regarding our financial condition and projected future performance. The amended complaint seeks actual damages, exemplary and punitive damages and costs. We filed a demurrer to the amended complaint. On July 29, 2014, the Court sustained the demurrer with respect to the breach of fiduciary duty claim, and overruled the demurrer with respect to the fraud and deceit claims. On August 28, 2014, we filed an answer and also filed a cross-complaint against Hussein, alleging that he breached fiduciary duties owed to the Company, Mr. Razin and Mr. Plochocki. Mr. Razin and Mr. Plochocki have dismissed their claims against Hussein, leaving QSI as the sole plaintiff in the cross-complaint. On June 26, 2015, we filed a motion for summary judgment with respect to Hussein’s claims, which the Court granted on September 16, 2015, dismissing all of Hussein’s claims against us. On September 23, 2015, Hussein filed an application for reconsideration of the Court's summary judgment order, which the Court denied. Hussein filed a renewed application for reconsideration of the Court’s summary judgment order on August 3, 2017. The Court again denied Hussein’s application. On October 28, 2015, May 9, 2016, and August 5, 2016, Hussein filed a motion for summary judgment, motion for summary adjudication, and motion for judgment on the pleadings, respectively, seeking to dismiss our cross-complaint. The Court denied each motion. Trial on our cross-complaint began June 12, 2017. On July 26, 2017, the Court issued a statement of decision granting Hussein’s motion for judgment on our cross-complaint. Final judgment over Hussein’s claims and our cross-claims was entered on January 9, 2018. Hussein has noticed his appeal of the order granting summary judgment over his claims, and we noticed a cross-appeal on the court’s statement of decision granting Hussein’s motion for judgment on our cross-complaint. Briefing on the cross-appeals ~~will be~~was completed in fall 2018. A hearing on the cross-appeals was held on July 15, 2019. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this claim.

Exchange Act. The complaint seeks compensatory damages, court costs and attorneys' fees. We filed a motion to dismiss the amended complaint on June 20, 2014, which the Court granted on October 20, 2014, dismissing the complaint with prejudice. Plaintiffs filed a motion for reconsideration of the Court's order, which the Court denied on January 5, 2015. On January 30, 2015, Plaintiffs filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit, captioned In re Quality Systems, Inc. Securities Litigation, No. 15-55173. On July 28, 2017, the Ninth Circuit issued a decision reversing and remanding the District Court's order on our motion to dismiss. On September 5, 2017, we filed a petition for rehearing en banc, which was denied on September 29, 2017. On January 26, 2018, we filed a petition for a writ of certiorari with the Supreme Court of the United States. The Supreme Court ordered the plaintiffs to file a response to the petition, which they filed on March 22, 2018.

On May 10, 2018, the parties reached an agreement-in-principle to resolve the action for $19,000, and on May 11, 2018, the parties requested that the Supreme Court stay any decision regarding whether to hear the Company’s petition for a writ of certiorari, pending the parties’ ongoing settlement negotiations. On July 16, 2018, the parties signed a definitive settlement agreement resolving this matter and submitted it to the Court for approval. On July 30, 2018, the Court granted preliminary approval of the settlement and scheduled a final approval hearing for November 19, 2018. Under the terms of this agreement, the settlement will be partially funded by certain of the Company’s insurance carriers, and defendants will continue to deny any liability or wrongdoing.

~~The settlement does not resolve the Hussein Litigation or the Shareholder Derivative Litigation.~~ ~~The $19,000 settlement of the~~ ~~Federal Securities Class Action complaint, which was~~ ~~partially funded by certain of our insurance carriers, was tendered to a court-supervised settlement account during the three months ended September 30, 2018~~.

On January 24, 2014, a complaint was filed against our Company and certain of our officers and current and former directors in the United States District Court for the Central District of California, captioned Timothy J. Foss, derivatively on behalf of himself and all others similarly situated, vs. Craig A. Barbarosh, George H. Bristol, James C. Malone, Peter M. Neupert, Morris Panner, D. Russell Pflueger, Steven T. Plochocki, Sheldon Razin, Lance E. Rosenzweig and Quality Systems, Inc., No. SACV14-00110-DOC-JPPx, by Timothy J. Foss, a purported shareholder of ours. The complaint arises from the same allegations described above under the captions “Hussein Litigation” and “Federal Securities Class Action” and generally alleges breach of fiduciary duties, abuse of control and gross mismanagement by our directors, in addition to unjust enrichment and insider selling by individual directors. The complaint seeks compensatory damages, restitution and disgorgement of all profits, court costs, attorneys’ fees and implementation of enhanced corporate governance procedures. The matter was stayed pending the Ninth Circuit’s decision in the appeal described above under the caption, “Federal Securities Class Action.” This stay now has been lifted and, Defendants filed a motion to dismiss on February 2, 2018. On July 25, 2018, the Court dismissed the complaint with prejudice. On September 28, 2017, a complaint was filed against our Company and certain of our current and former officers and directors in the United States District Court for the Central District of California, captioned Kusumam Koshy, derivatively on behalf of Quality Systems Inc. vs. Craig Barbarosh, George H. Bristol, James C. Malone, Peter M. Neupert, Morris Panner, D. Russell Pflueger, Steven T. Plochocki, Sheldon Razin, Lance E. Rosenzweig, Paul A. Holt, and Quality Systems, Inc., No. 8:17-cv-01694, by Kusumam Koshy, a purported shareholder of ours. The complaint alleges breach of fiduciary duties and abuse of control, as well as unjust enrichment and insider selling by individual directors arising out of the allegations described above under the ~~captions~~caption “Hussein Litigation” and ~~“Federal Securities Class Action,” QSI’s~~a related, now-settled, federal securities class action, as well as the Company’s adoption of revised indemnification agreements, and the resignation of certain officers of the Company. The complaint seeks restitution and disgorgement, court costs and attorneys’ fees, and enhanced corporate governance reforms and internal control procedures. On January 12, 2018, Defendants filed a motion to dismiss the derivative complaint. On July 25, 2018, the Court dismissed the complaint with prejudice. On August 24, 2018, the plaintiff filed a notice of appeal to the United States Court of Appeals for the Ninth ~~Circuit.~~Circuit and filed her opening brief on January 23, 2019. We filed our response on March 25, 2019, and the plaintiff filed her reply on May 15, 2019. We believe that the plaintiff’s appeal is without merit and intend to defend against it vigorously. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this claim.

InCommencing in April 2017, we have received a request for documents and information from the United States Attorney's Office for the District of Vermont ~~pursuant to a Civil Investigative Demand (“CID”). The CID relates to~~and other government agencies in connection with an investigation concerning the certification we obtained for our software under the United States Department of Health and Human Services' Electronic Health Record (EHR) Incentive Program. ~~We have provided documents and~~The requests for information ~~in response~~relate to, ~~that CID. On December 11, 2017, we received a subpoena from the United States Department of Justice in connection with the same matter seeking~~ among other ~~things records relating to~~things: (a) data used to determine objectives and measures under the Meaningful Use (MU) and the Physician Quality Reporting System (PQRS) programs, (b) EHR software code used in certifying ~~the 2014 EHR~~our software and information, and (c) payments provided for the referral of EHR business. We continue to ~~respond to~~cooperate in this ~~CID and subpoena and intend to cooperate fully with the government, including responding to any future requests.~~investigation. Requests and investigations of this nature may lead to future requests for information and ultimately the assertion of claims or the commencement of legal proceedings against us, as well as other material liabilities. In addition, our responses to these and any future requests require time and effort, which can result in additional cost to us. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this matter. Given the highly-regulated nature of our industry, we may, from time to time, be subject to subpoenas, requests for information, or investigations from various government agencies. It is our practice to respond to such matters in a cooperative, thorough and timely manner.

During the three months ended June 30, 2019, we implemented a business restructuring plan as part of our continued efforts to preserve and grow the value of the Company through client-focused innovations while reducing our cost structure. As part of the restructuring, we reduced our total workforce by approximately 4% primarily within the research and development function and intend to expand on our research and development resources in India. We recorded $1,707 of restructuring costs within operating expenses in our condensed consolidated statements of comprehensive income. The restructuring costs consisted primarily of payroll-related costs, such as severance, outplacement costs, and continuing healthcare coverage, associated with the involuntary separation of employees pursuant to a one-time benefit arrangement. These amounts were accrued when it was probable that the benefits would be paid, and the amounts were reasonably estimable. As of June 30, 2019, the remaining liability associated with the payroll-related costs was $1,707, which we expect to be substantially paid during the second quarter of fiscal 2020.

In connection with the restructuring plan, we also vacated a portion of our Irvine, CA location and recorded impairments of $143 to our operating right-of-use assets and certain related fixed assets. Furthermore, we recorded impairments of $346 to our operating right-of-use assets and certain related fixed assets associated with our previously vacated locations, or portions thereof, in St. Louis, MO and Horsham, PA based on changes to our projected sublease rental income and estimated sublease commencement dates. We are actively marketing each of these vacated locations for sublease. The impairment analysis was performed at the asset group level and the impairment charge was estimated by comparing the fair value of each asset group based on the expected cash flows to its respective book value. We determined the discount rate for each asset group based on the approximate interest rate on a collateralized basis with similar remaining terms and payments as of the impairment date. Significant judgment was required to estimate the fair value of each asset group and actual results could vary from the estimates, resulting in potential future adjustments to amounts previously recorded.

This Quarterly Report on Form 10-Q ("Report") and certain information incorporated herein by reference contain forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Report, other than statements that are purely historical, are forward-looking statements. Words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,” “should,” “would,” “could,” “may,” and similar expressions also identify forward-looking statements. These forward-looking statements include, without limitation, discussions of our product development plans, business strategies, future operations, financial condition and prospects, developments in and the impacts of government regulation and legislation, including, without limitation, The American Recovery and Reinvestment Act, the Patient Protection and Affordable Care Act, and the Medicare Access and CHIP Reauthorization Act of 2015, uncertainties related to the future impact of United States tax reform, and market factors influencing our results. Our expectations, beliefs, objectives, intentions and strategies regarding our future results are not guarantees of future performance and are subject to risks and uncertainties, both foreseen and unforeseen, that could cause actual results to differ materially from results contemplated in our forward-looking statements. These risks and uncertainties include, but are not limited to, our ability to continue to develop new products and increase systems sales in markets characterized by rapid technological evolution, consolidation, and competition from larger, better-capitalized competitors. Many other economic, competitive, governmental and technological factors could affect our ability to achieve our goals, and interested persons are urged to review any risks that may be described in “Item 1A. Risk Factors” as set forth herein and other risk factors appearing in our most recent Annual Report on Form 10-K for the fiscal year ended March 31, ~~2018~~2019 (“Annual Report”), as supplemented by additional risk factors, if any, in our interim filings on our Quarterly Reports on Form 10-Q, as well as in our other public disclosures and filings with the Securities and Exchange Commission ("SEC"). Because of these risk factors, as well as other variables affecting our financial condition and results of operations, past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. We assume no obligation to update any forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of the filing of this Report.

This management's discussion and analysis of financial condition and results of operations ("MD&A") is provided as a supplement to the condensed consolidated financial statements and notes thereto included elsewhere in this Report in order to enhance your understanding of our results of operations and financial condition and should be read in conjunction with, and is qualified in its entirety by, the condensed consolidated financial statements and related notes thereto included elsewhere in this Report. Historical results of operations, percentage margin fluctuations and any trends that may be inferred from the discussion below are not necessarily indicative of the operating results for any future period.

~~On September 6, 2018,~~ ~~Quality Systems, Inc. changed its corporate name to~~ NextGen Healthcare ~~Inc.~~

~~NextGen Healthcare, Inc. provides~~is a ~~range~~leading provider of ambulatory-focused healthcare software and services ~~and analytics solutions to medical and dental group practices. The company's portfolio delivers foundational capabilities~~solutions. In pursuit of our mission to empower ~~physician success, enrich~~ the ~~patient~~transformation of ambulatory care, ~~experience,~~we provide innovative technology-based solutions that help our clients succeed while they are managing more complexity and ~~enable the transition to value-based healthcare.~~assuming greater financial risk.

Our clients span the ambulatory care market from ~~large multi-specialty to~~ small single specialty practices and include network of practices such as physician hospital organizations (“PHOs”), management service organizations (“MSOs”), independent physician associations (“IPAs”), accountable care organizations (“ACOs”), ambulatory care centers (“ACCs”), and community health centers(“CHCs”).

~~At the core of~~to larger multi-specialty organizations. We have fully integrated our ~~offerings are industry leading electronic health record (“EHR”) and practice management (“PM”)~~ solutions so that support the foundational clinical and financial activities of any ambulatory practice. We strive to enable our clients’ ability to maintain control of their organizational identity and destiny, rather than dictating a technology-driven road map. To meet our clients’ unique, evolving needs, we continue to expand and enrich our core offerings to create a comprehensive platform essential to our client’s success in the new value-based environment. Our platform includes one of the industry’s most recognized suites of vendor-agnostic cloud-based interoperability tools as well as our recently acquired, cloud-based Population Health Management and Analytics platform which allows our clients are able to ~~cost effectively manage populations of~~provide their patients ~~– improving outcomes~~with comprehensive services utilizing a single platform. Our highly interoperable platform allows ambulatory practices to thrive especially in complex, heterogeneous healthcare communities where frictionless clinical data exchange is required to coordinate and ~~enhancing the quality of care rendered. Our mobile solution significantly enhances, automates and streamlines physician workflows reducing physician burnout and resulting physician attrition.~~optimize patient care.

~~We have a history of enhancing~~NextGen Healthcare has historically enhanced our solutions through both organic and inorganic activities. ~~Over the last few years, we have entered into strategic transactions to complement and enhance our ambulatory market product portfolio.~~ In October 2015, we divested our former Hospital Solutions division to focus exclusively on the ambulatory ~~market place.~~marketplace. In January 2016, we acquired HealthFusion Holdings, Inc. ~~("HealthFusion"),~~ and its cloud-based ~~EHR/PM.~~electronic health record and practice management solution. In April 2017, we acquired Entrada, Inc. ~~("Entrada"), a~~and its cloud-based, mobile platform for clinical documentation and collaboration. In August 2017, we acquired EagleDream Health, Inc. ~~(“EagleDream”)~~ and its cloud-based population health analytics ~~and in~~solution. In January 2018, we acquired Inforth Technologies ~~(“Inforth”)~~ for its specialty-focused clinical content.

The integration of these acquired technologies have made NextGen ~~Healthcare, Inc.~~Healthcare’s solutions among the most comprehensive and powerful in the market.

The Company was incorporated in California in 1974. Previously named Quality Systems, Inc., the Company changed its corporate name to NextGen Healthcare, Inc. in September 2018. Our principal offices are located at 18111 Von Karman Ave., Suite 800, Irvine, California, ~~92612. Our~~92612, and our principal website is ~~located at~~ www.nextgen.com. We operate on a fiscal year ending on March 31.

We believe that the ~~following~~ trends and events as described below have contributed to our consolidated results of operations and may continue to impact our future results.

~~We believe~~Over the last decade, the ambulatory healthcare ~~is more heavily influenced by~~market has experienced significant regulatory change, which has driven practice transformation and ~~national~~technology advancements. Recognizing that it was imperative to digitize the American health ~~projects than by~~system to stem the ~~cycles~~escalating cost of ~~our economy. The~~ healthcare ~~industry has been significantly impacted by~~and improve the ~~Obama Administration's broad healthcare reform efforts, including~~quality of care being delivered, Congress enacted the Health Information Technology for Economic and Clinical Health ~~portion of~~Act in 2009 (“HITECH Act”). The legislation stimulated healthcare organizations to not only adopt electronic health records, but to use them to collect discrete data that could be used to drive quality care. This standardization supported early pay for reporting and pay-for-performance programs.

In 2010, the ~~American Recovery and Reinvestment Act of 2009 ("HITECH Act") and the Patient Protection and~~ Affordable Care Act ~~("ACA"~~(“ACA”) established the roadmap for shifting American healthcare from volume (fee-for-service) to a value-based care (“VBC”) system that ~~provided significant incentives to health care organizations for "Meaningful Use" adoption and interoperable electronic health record solutions.~~

~~We also believe that healthcare reform, including the repeal of the sustainable growth rate (SGR) formula as part of~~rewards improved outcomes at lower costs (fee-for-value). This was followed by the Medicare Access and CHIP Reauthorization Act of 2015 ~~("MACRA"~~(“MACRA”), ~~and~~bipartisan legislation that further changed the way Medicare rewards clinicians for value vs. volume. Initially focused on government-funded care, the domain of the Centers for Medicare & Medicaid Services (“CMS”), these programs are now firmly established on the commercial insurance side of the industry as well.

VBC created the need for a ~~movement towards a value-based, pay-for-performance model and quality initiative efforts will stimulate demand for robust electronic health record solutions as well as~~ new ~~health~~category of healthcare information technology ~~solutions from bundled billing capabilities~~(“HIT”) tools that could be used to identify and treat groups of patients, or cohorts, based on risk. Population Health Management (“PHM”) tools support these needs by identifying patient ~~engagement~~risk, engaging patients, coordinating care, and ~~population health management. We believe MACRA may be~~determining when interventions are needed to improve clinical and financial outcomes. The United States PHM market was estimated at $3.1 billion in 2018 and is expected to more than double by 2022.

Importantly, the ~~most important~~introduction of VBC programs was only an element of the ~~three regulations for our market because it permanently changes how ambulatory~~broader approach to reducing healthcare ~~providers are reimbursed~~expenditure. It was also accompanied by ~~Medicare. It offers certainty and~~significant reductions in Medicare spending with a ~~timeline for~~projected reduction of $218 billion in payments by 2028, as reported by RevCycle Intelligence. The drive to reduce costs initially led to consolidation in the ~~market’s move away~~healthcare system that was followed by a significant shift of care from ~~volume-based, fee-for-service models~~the inpatient to ~~value-based payment models that reward~~ the ~~delivery of~~outpatient setting as more care is being moved to this lower cost ~~high quality~~environment. Ambulatory care settings have become an essential component of comprehensive, low cost distributed care.

~~While we expect~~ In 2018, outpatient volumes reached over 3.5 billion encounters and are forecasted to ~~benefit from the increasing demands for greater efficiency~~grow 15% by 2028, as ~~well~~reported by Becker’s Health IT and CIO Report. The independent physicians’ practices segment is expected to generate more revenue than non-affiliated hospitals as ~~government support for increased adoption of~~it accepts electronic health records ~~the market~~integrated PHM programs for ~~physician based electronic health records software is becoming increasingly saturated while physician group~~better primary and follow-up care, as reported by Frost & Sullivan. The need to sustain revenue has made it extremely important for practices ~~are rapidly being consolidated by hospitals, insurance payers and other entities. Hospital software providers are leveraging~~to secure their ~~position with their hospital clients to gain~~patient market share, elevating patient loyalty to be a significant determinant of provider success. Capturing patient market share and thriving in a market driven by VBC requires both an integrated platform and a full view of the patient population’s clinical and cost data neither of which could be accomplished without new technologies to collect and analyze multi-sourced patient data. Effectively implemented, these new technologies allow organizations to enhance financial viability while exercising the freedom to join, affiliate, integrate or interoperate in ways that maximize strategic control.

In order to maintain financial success with ~~hospital owned physician practices. Insurance providers~~shifting reimbursement rules and ~~large physician groups are also consolidating physician offices creating additional opportunity~~shrinking reimbursement, we believe demand for ~~ambulatory software providers like us.~~ managed services, including revenue cycle management (“RCM”) services, hosting, transcription and scribe services, aligned and integrated with clinical technology solutions, will increase in the coming years.

Based on these trends, successful clients must undertake the following imperatives: 1) ensure healthy predictable financial outcomes, 2) provide high quality care at a lower cost in a risk-bearing environment, 3) ensure engaged and loyal patients, and 4) optimize clinician productivity while deploying HIT solutions, 5) support frictionless interoperability.

Our core strategy is to ~~focus~~become a trusted partner to our clients as they embark on ~~addressing the growing needs~~their value-based journey and begin to take on risk as part of ~~accountable care organizations around interoperability, patient engagements, population health, and data analytics.~~

value-based contracts. We ~~believe~~understand that our ~~core strength lies in~~clients are now faced with a more complex, rapidly changing practice environment and that the ~~central role~~HIT solutions that support these endeavors must evolve to meet these challenging requirements. Providing our ~~software products~~clients with a comprehensive multi-faceted platform and accompanying services ~~play in~~to enable their success is the delivery of healthcare by the primary physician in an ambulatory setting. We intend to remain at the forefront of upcoming new regulatory requirements and meaningful use requirements for stimulus payments. We intend to continue the development and enhancement of our software solutions to support healthcare reform, such as MACRA, which promotes the transition from fee-for-service to value-based, pay-for-performance and patient-centric and quality initiatives such as accountable care organizations. Key elements of our future software development will be to expand our interoperability capabilities enhancing the competitiveness of our software offerings, make our products more intuitive and easy to use, and to enhance the capability of our ~~NextGen®~~ ~~Office platform to allow us to deliver our software over the cloud to larger ambulatory care practices.~~

We have and intend to continue investments in our infrastructure, including but not limited to maintaining and expanding sales, marketing and product development activities to improve patient care and reduce healthcare costs, providing industry-leading, integrated clinical and administrative healthcare data systems, services, and expertise to clinical, medical, technology, and healthcare business professionals while continuing our strong commitment of service in support of our client satisfaction programs. These investments in our infrastructure will continue while maintaining reasonable expense discipline. We strive to add new clients and expand our relationship with existing clients through delivery of add-on and complementary products and services and believe that our client base that is using our software on a daily basis is a strategic asset. We intend to leverage this strategic asset by expanding our product and service offerings towards this client base.

~~Led by our vision and mission, we are resetting our strategy and structure to deliver value~~key to our clients. To achieve a lower-cost, increased capability structure, our new management team is building what we believe is an aligned, client-focused organization, supported by a recurring revenue stream and a large and diverse existing client base.strategy.

We strive to be the trusted partner for clients of all sizes, integrating services and software into a consolidated solution that enables an efficient and effective caregiver and patient experience while driving positive financial outcomes. As a healthcare information technology and services company, we plan to continue investing inBased on current market trends, our current capabilities as well as building and/or acquiring new capabilities as we guide our clients through an evolving healthcare marketplace that is transitioning from fee-for-service to fee-for-value reimbursement models. With approximately 90,000 providers using our solutions, we are enabling care and believe we can truly transform the delivery of care through the following strategic ~~priorities:~~priorities are:

The discussion and analysis of our condensed consolidated financial statements and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenue and expenses, and related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends, and other factors we believe to be reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. On a regular basis, we review the accounting policies and update our assumptions, estimates, and judgments, as needed, to ensure that our condensed consolidated financial statements are presented fairly and in accordance with GAAP. Actual results could differ materially from our estimates under different assumptions or conditions. To the extent that there are material differences between our estimates and actual results, our financial condition or results of operations will be affected.

We describe our significant accounting policies in Note 1, “Summary of Significant Accounting Policies,” of our notes to consolidated financial statements included in our Annual Report. We discuss our critical accounting policies and estimates in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report.

We adopted Accounting Standards Update No. ~~2014-09,~~ ~~Revenue from Contracts with Customers: Topic 606~~ (“~~ASC 606”~~2016-02, Leases (Topic 842) and its subsequent amendments (together “ASC 842”) ~~and all related amendments~~during the quarter ended June 30, 2019 using the transition approach provided for under ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which allowed us to apply the new lease standard as of April 1, ~~2018 using~~2019, rather than the ~~modified retrospective method for all contracts not completed as~~beginning of the ~~date of adoption.~~earliest period presented. ASC ~~606~~ 842 supersedes ~~the revenue recognition requirements in~~ ~~Accounting Standards Codification Topic 605,~~ ~~Revenue Recognition~~ (“ASC ~~605”),~~840 and requires ~~entities~~the recognition of leased arrangements on the balance sheet as right-of-use assets and liabilities pertaining to ~~recognize revenue when control of~~ the ~~promised goods or services is transferred to customers at an amount that reflects~~rights and obligations created by the ~~consideration to which the entity expects to be entitled to in exchange for those goods or services.~~leased assets. Refer to Note ~~2, "Revenue from Contracts with Customers"~~4, "Leases" of our notes to condensed consolidated financial statements included elsewhere in this Report for additional information regarding our ~~revenue recognition policies under~~adoption of ASC ~~606.~~842.

There have been no other material changes in our significant accounting policies or critical accounting policies and estimates since the fiscal year ended March 31, ~~2018.~~2019.

The following table sets forth the percentage of revenue represented by each item in our condensed consolidated statements of comprehensive income for the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (certain percentages below may not sum due to rounding):

	Three Months Ended September 30,						Six Months Ended September 30,						Three Months Ended June 30,
	2018			2017			2018			2017			2019			2018
Revenues:
Recurring		89.3	%		90.1	%		89.7	%		90.5	%		90.6	%		90.1	%
Software, hardware, and other non-recurring		10.7			9.9			10.3			9.5			9.4			9.9
Total revenues		100.0			100.0			100.0			100.0			100.0			100.0
Cost of revenue:
Recurring		36.2			36.0			36.2			36.5			38.3			36.2
Software, hardware, and other non-recurring		5.4			4.5			5.4			4.5			4.8			5.4
Amortization of capitalized software costs and acquired intangible assets		5.3			3.9			5.1			3.7			6.4			4.9
Total cost of revenue		46.9			44.3			46.7			44.7			49.5			46.4
Gross profit		53.1			55.7			53.3			55.3			50.5			53.6
Operating expenses:
Selling, general and administrative		26.3			30.9			29.9			31.9			30.4			33.5
Research and development costs, net		14.1			14.7			15.4			15.0			16.7			16.6
Amortization of acquired intangible assets		0.9			1.5			0.9			1.5			0.7			0.9
Impairment of assets														0.4			0.0
Restructuring costs														1.3			0.0
Total operating expenses		41.2			47.1			46.2			48.4			49.5			51.0
Income from operations		11.9			8.5			7.2			6.9			1.1			2.6
Interest income		0.0			0.0			0.0			0.0			0.1			0.0
Interest expense		(0.6	)		(0.6	)		(0.6	)		(0.6	)		(0.4	)		(0.5	)
Other income (expense), net		0.2			0.0			0.2			0.0			(0.1	)		0.3
Income before provision for income taxes		11.5			7.9			6.9			6.3
Provision for income taxes		1.5			1.9			0.9			1.8
Income before provision for (benefit of) income taxes														0.7			2.3
Provision for (benefit of) income taxes														(0.3	)		0.3
Net income		10.0	%		6.1	%		6.0	%		4.5	%		0.9	%		2.0	%

The following table presents our disaggregated revenues for the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,				Three Months Ended June 30,
	2018		2017		2018		2017		2019			2018
Recurring revenues:
Subscription services	$	29,255	$	26,788	$	57,583	$	52,363	$	30,144		$	28,328
Support and maintenance		39,594		41,693		80,842		82,809		39,652			41,248
Managed services		23,527		27,962		49,797		57,137		25,681			26,270
Electronic data interchange and data services		23,941		22,998		48,102		46,310		23,970			24,161
Total recurring revenues		116,317		119,441		236,324		238,619		119,447			120,007

Software, hardware, and other non-recurring revenues:
Software license and hardware		9,353		8,853		16,796		16,273		7,095			7,443
Other non-recurring services		4,651		4,313		10,401		8,637		5,319			5,750
Total software, hardware and other non-recurring revenues		14,004		13,166		27,197		24,910		12,414			13,193

Total revenues	$	130,321	$	132,607	$	263,521	$	263,529	$	131,861		$	133,200

Recurring revenues as a percentage of total revenues										90.6	%		90.1	%

Consolidated revenue for the three months ended ~~September~~June 30, ~~2018~~2019 decreased ~~$2.3~~$1.3 million compared to the prior year due to a ~~$3.1~~$0.5 million decrease in recurring revenues and a ~~$0.8 million increase~~$0.8 decrease in software, hardware and other non-recurring revenues. The decrease in recurring revenues. ~~Consolidated~~ was driven by lower support and maintenance revenue ~~for the six months ended September 30, 2018 remained flat~~ ~~compared to the prior year~~resulting from client attrition, lower managed services revenue also due to a ~~$2.3 million~~client attrition, partially offset by an increase in subscription services revenue associated with our analytics, patient portal, and NextGen Enterprise solutions. The decrease in software, hardware, and other non-recurring revenues ~~offset by a $2.3 million decrease in recurring revenues. The decrease in recurring revenues for the three and six months ended September 30, 2018~~ was primarily due to lower ~~managed services~~ ~~revenue~~software bookings and ~~lower support and maintenance revenue, partially offset by higher~~ ~~subscriptions and higher EDI~~a decrease in consulting services revenue. ~~The decrease in managed services~~

Cost of Revenue and corresponding increase in subscription services is primarily associated with the adoption of ASC 606, whereby a portion of service fees associated with revenue cycle management (“RCM”) arrangements are now classified as subscription services revenue. Subscription services also benefited from higher sales of our NextGen Office cloud-based subscriptions and NextGen Mobile subscriptions and incremental sales of NextGen Population Health cloud-based solutions acquired from EagleDream in August 2017. Support and maintenance revenue decreased primarily due to higher client attrition. EDI revenue increased due to higher EDI services sold with our NextGen Office cloud-based solutions and growth in EDI transaction volume due to the addition of new clients and further penetration of our existing client base. For the three months ended September, 30, 2018, software, hardware, and other non-recurring increased primarily due to higher software sales. For the six months ended September, 30, 2018, software, hardware, and other non-recurring increased primarily due to higher software sales and higher consulting services revenue, which is based on the demand of our clients. A portion of our RCM service fees are now also allocated as software license and support and maintenance revenue subsequent to the adoption of ASC 606.

Recurring revenue represented 89% and 90% of total revenue for the three months ended September 30, 2018 and 2017, respectively. For the six months ended September 30, 2018 and 2017, recurring revenue represented 90% and 91%, respectively, of total revenue.

Our goals include further enhancement of our existing products, including expansion of our software and service offerings that support pay-for-performance initiatives around accountable care organizations, bringing greater ease of use and intuitiveness to our software products, enhancing our managed cloud and hosting services to lower our clients' total cost of ownership, expanding our interoperability and enterprise analytics capabilities, and further development and enhancements of our portfolio of specialty focused templates within our electronic health records software.

We intend to remain at the forefront of upcoming new regulatory requirements, including meaningful use requirements for stimulus payments and recent healthcare reform that is driving the transition towards pay-for-performance, value-based reimbursement models. We believe that the expanded requirements for continued eligibility for incentive payments under meaningful use rules will result in an expanded replacement market for electronic health records software. We also intend to continue selling additional software and services to existing clients, expanding penetration of connectivity and other services to new and existing clients, and capitalizing on growth and cross selling opportunities. We continue to expand our client base and cloud-based solution capabilities in the ambulatory market to meet the needs of practices of increasing size and complexity, and focus our strategy on accountable care organizations around interoperability, patient engagements, population health and collaborative care management, and enterprise analytics. Our software and service offerings offer clients a full suite of cloud-based solutions that better enable our clients to focus on care delivery. We believe we are well-positioned within the evolving healthcare market to deliver products and services that address the growing importance of quality collaborative care and shift from fee-for-service to value-based, pay-for-performance care. We also believe that a significant opportunity exists to continue cross-selling managed services to our existing clients as the portion of existing clients who are using managed services is approximately 10%. We are actively pursuing efforts to achieve faster growth from expanded efforts to leverage our existing sales force towards selling managed services. We also believe that ongoing increases in the complexity of medical billing and collections processes, including the migration to value-based reimbursement models, will create additional opportunities.

While it remains difficult to assess the relative impact or the timing of positive and negative trends affecting the aforementioned market opportunities, we believe we are well-positioned to remain a leader in serving the evolving market needs for healthcare information technology. We believe that our operating results are attributed to a strong brand name and reputation within the marketplace for healthcare information technology software and services, as well as investments in sales and marketing activities, including new marketing campaigns, Internet advertising investments, tradeshow attendance and other expanded advertising and marketing expenditures.

The following table presents our consolidated cost of revenue and gross profit for the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,						Three Months Ended June 30,
	2018			2017			2018			2017			2019			2018
Cost of revenue:
Recurring													$	50,540		$	48,153
Software, hardware, and other non-recurring														6,278			7,154
Amortization of capitalized software costs and acquired intangible assets														8,413			6,544
Total cost of revenue	$	61,118		$	58,755		$	122,969		$	117,924		$	65,231		$	61,851

Gross profit		69,203			73,852			140,552			145,605		$	66,630		$	71,349
Gross margin %		53.1	%		55.7	%		53.3	%		55.3	%		50.5	%		53.6	%

Cost of revenue consists primarily of compensation expense, including share-based compensation, for personnel that deliver our products and services. Cost of revenue also includes amortization of capitalized software costs and acquired technology, third party consultant and outsourcing costs, costs associated with our EDI business partners and clearinghouses, hosting service costs, third party software costs and royalties, and other costs directly associated with delivering our products and services. Refer to Note 6, "Intangible Assets" and Note 7, "Capitalized Software Costs" of our notes to condensed consolidated financial statements included elsewhere in this Report for additional information on current period amortization of capitalized software costs and acquired technology and an estimate of future expected amortization.

Share-based compensation expense included in cost of revenue was ~~$0.3~~$0.5 million and ~~$0.3~~$0.2 million for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017, and is included in the amounts in the table above. Share-based compensation expense included in cost of revenue was $0.6 and $0.4 million for the six months ended September 30,~~ 2018 ~~and 2017,~~ and is included in the amounts in the table above.

Gross profit for the three months ended ~~September~~June 30, ~~2018~~2019 decreased ~~$4.6~~$4.7 million compared to the prior year period due to a ~~$2.4~~$3.4 million increase in cost of revenue ~~combined with $2.3~~and $1.3 million lower revenues as discussed above. ~~Gross profit for the six months ended September 30, 2018 decreased $5.1 million compared to the prior year period due to a $5.0 million increase in cost of revenue.~~ The increase in cost of revenue ~~for both the three and six months ended September 30, 2018 compared to~~over the prior year period ~~was~~is primarily ~~driven by~~due to higher amortization of previously capitalized software ~~development~~costs, increased third party outsourcing costs and ~~higher amortization of the software technology intangible assets~~personnel costs related to our delivering our managed services, as well as an increase in hosting costs associated with the acquisitions of EagleDream Health in August 2017 and Inforth Technologies in January 2018. Costs of revenue associated with software, hardware, and other non-recurring services also increased due to higher related ~~revenue.~~subscription services revenues. As a result, ~~of such increases in cost of revenue,~~ our gross margin ~~declined~~decreased to ~~approximately 53% for the three and six months ended September 30, 2018, compared to 56%~~50.5% for the three months ended ~~September~~June 30, ~~2017 and 55% for~~2019 compared to 53.6% in the ~~six months ended September 30, 2017.~~prior year.

The following table presents our consolidated selling, general and administrative expense for the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,						Three Months Ended June 30,
	2018			2017			2018			2017			2019			2018
Selling, general and administrative	$	34,229		$	40,977		$	78,865		$	83,954		$	40,128		$	44,636
Selling, general and administrative, as a percentage of revenue		26.3	%		30.9	%		29.9	%		31.9	%		30.4	%		33.5	%

Selling, general and administrative expense consist of compensation expense, including share-based compensation, for management and administrative personnel, selling and marketing expense, facilities costs, depreciation, professional service fees, including legal, consulting, and accounting services, acquisition and transaction-related costs, and other general corporate and administrative expenses.

Share-based compensation expense included in selling, general and administrative expenses was ~~$3.1~~$3.4 million and $2.3 million for the three months ended ~~September~~June 30, ~~2018~~2019 and 2017, respectively, and is included in the amounts in the table above. Share-based compensation expense included in selling, general and administrative expenses was $5.3 million and $3.8 million for the six months ended September 30, 2018, ~~and 2017,~~ respectively, and is included in the amounts in the table above. The increase in share-based compensation for the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019 compared to the same prior year ~~periods~~period is due to increased utilization of share-based awards to incentivize our executives and employees. Refer to Note 12, "Share-Based Awards" of our notes to condensed consolidated financial statements included elsewhere in this Report for additional information of our share-based awards and related incentive plans.

Selling, general and administrative expenses decreased ~~$6.7 million and $5.1~~$4.5 million for the three ~~and six~~ months ended ~~September~~June 30, ~~2018, respectively,~~2019 compared to the prior year ~~primarily due to a $5.7 million net benefit recorded in the quarter from insurance recoveries related to the~~ ~~settlement of the~~ Federal Securities Class Action complaint (refer to Note 14, " Commitments, Guarantees and Contingencies" of our notes to consolidated financial statements included elsewhere in this Report for additional information). The decrease in selling, general and administrative was also due to lower commissions expense as a result of ~~the adoption of ASC 606 (refer to Note 2, “Revenue from Contracts with Customers” for additional information), lower bad debt expense as we continue to resolve aged accounts receivable balances,~~$2.5 million in certain employee severance and ~~higher~~ ~~consulting~~exit costs ~~that were~~ incurred in the prior year not related to any restructuring plan and a decrease in salaries and wages in the current year associated with ~~our adoption of ASC 606.~~lower headcount.

The following table presents our consolidated net research and development costs, capitalized software costs, and gross expenditures prior to capitalization, for the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,						Three Months Ended June 30,
	2018			2017			2018			2017			2019			2018
Gross expenditures	$	23,965		$	23,903		$	50,878		$	49,140		$	26,786		$	26,913
Capitalized software costs		(5,594	)		(4,376	)		(10,379	)		(9,624	)		(4,735	)		(4,785	)
Research and development costs, net	$	18,371		$	19,527		$	40,499		$	39,516		$	22,051		$	22,128

Research and development costs, as a percentage of revenue		14.1	%		14.7	%		15.4	%		15.0	%		16.7	%		16.6	%
Capitalized software costs as a percentage of gross expenditures		23.3	%		18.3	%		20.4	%		19.6	%		17.7	%		17.8	%

Gross research and development expenditures, including costs expensed and costs capitalized, consist of compensation expense, including share-based compensation for research and development personnel, certain third-party consultant fees, software maintenance costs, and other costs related to new product development and enhancement to our existing products. We intend to continue to invest heavily in research and development expenses as we continue to bring additional functionality and features to the medical community and develop a new integrated inpatient and outpatient, web-based software platform.

The capitalization of software development costs results in a reduction to our reported net research and development costs. Our software capitalization rate, or capitalized software costs as a percentage of gross expenditures, has varied historically and may continue to vary based on the nature and status of specific projects and initiatives in progress. Although changes in software capitalization rates have no impact on our overall cash flows, it results in fluctuations in the amount of software development costs being expensed up front and the amount of net research and development costs reported in our condensed consolidated statement of ~~net income and~~ comprehensive income.

Share-based compensation expense included in research and development costs was ~~$0.7~~$1.0 million and ~~$0.5~~$0.6 million for the three months ended ~~September~~June 30, ~~2018~~2019 and 2017, respectively, and is included in the amounts in the table above. Share-based compensation expense included in research and development costs was $1.3 million and $0.9 million for the six months ended September 30, 2018, ~~and 2017,~~ respectively, and is included in the amounts in the table above.

Net research and development costs for the three months ended ~~September~~June 30, ~~2018 decreased $1.2 million~~2019 were flat compared to the prior year ~~period, which is due~~period. Gross expenditures relate to ~~$1.2 million higher capitalization~~the development of the next major versions of our core software ~~costs.~~products and enhancements to our existing products. Our gross expenditures and software capitalization rate ~~fluctuates~~fluctuate due to differences in the nature and status of our projects and initiatives during a given year, which affects the amount of development costs that may be capitalized. Net research and development costs for the six months ended September 30, 2018 increased $0.9 million compared to the prior year period, which is due to $1.7 million higher gross expenditures, partially offset by a $0.8 million increase in capitalization of software costs. The increase in gross expenditures was primarily due to increased hosting fees and utilization of our Bangalore development center resources, as well as $0.7 million in employee exit costs. These increases were partially offset by decreases in consulting and outside services with the completion of several projects in the prior year period.

The following table presents our amortization of acquired intangible assets for the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):

Amortization of acquired intangible assets included in operating expense consist of the amortization related to our customer relationships, trade name, and contracts intangible assets acquired as part of our business combinations. Refer to Note 6, "Intangible Assets" of our notes to condensed consolidated financial statements included elsewhere in this Report for an estimate of future expected amortization.

Amortization of acquired intangible assets for the three ~~and six~~ months ended ~~September~~June 30, ~~2018 decreased $0.9~~2019 declined $0.3 million ~~and $1.8 million, respectively~~ compared to ~~the~~ prior year ~~periods~~period due to certain acquired intangible assets being fully amortized in the prior fiscal ~~year~~year.

During the three months ended June 30, 2019, we implemented a business restructuring plan as part of our continued efforts to preserve and grow the value of the Company through client-focused innovations while reducing our cost structure. As part of the restructuring, we reduced our total workforce by approximately 4% primarily within the research and development function and intend to expand on our research and development resources in India. We recorded $1.7 million of restructuring costs within operating expenses in our condensed consolidated statements of comprehensive income. The restructuring costs consisted primarily of payroll-related costs, such as severance, outplacement costs, and continuing healthcare coverage, associated with the involuntary separation of employees pursuant to a one-time benefit arrangement. These amounts were accrued when it was probable that the benefits would be paid, and the ~~impairment~~amounts were reasonably estimable.

In connection with the restructuring plan, we also vacated a portion of our ~~acquired trade names intangible~~Irvine, CA location and recorded impairments of $0.1 million to our operating right-of-use assets and certain related fixed assets. Furthermore, we recorded impairments of $0.3 million to our operating right-of-use assets and certain related fixed assets associated with our previously vacated locations, or portions thereof, in St. Louis, MO and Horsham, PA based on changes to our projected sublease rental income and estimated sublease commencement dates. Significant judgment was required to estimate the ~~fourth quarter~~fair value of ~~fiscal year 2018.~~each asset group and actual results could vary from the estimates, resulting in potential future adjustments to amounts previously recorded. Refer to Note 15, “Restructuring Plan” of our notes to condensed consolidated financial statements included elsewhere in this Report for further details.

The following table presents our interest expense for the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,						Three Months Ended June 30,
	2018			2017			2018			2017			2019			2018
Interest income	$	40		$	12		$	69		$	21		$	79		$	29
Interest expense		(769	)		(840	)		(1,499	)		(1,517	)		(472	)		(730	)
Other income (expense), net		237			15			611			(7	)		(133	)		374

Interest expense relates to our revolving credit agreement and the related amortization of deferred debt issuance costs. Other income and expense relate primarily to fluctuations in foreign currency associated with our operations in India. Refer to Note 8, “Line of Credit” of our notes to condensed consolidated financial statements included elsewhere in this Report for additional information.

The changes in interest expense is primarily caused by fluctuations in outstanding balances under our revolving credit agreement and the related amortization of debt issuance costs. As of ~~September~~June 30, ~~2018,~~2019, we had ~~$42.0~~$6.0 million in outstanding balances under the revolving credit agreement, compared to an outstanding balance of ~~$37.0~~$11.0 million as of March 31, ~~2018~~2019 and ~~$55.0~~$44.0 million as of ~~September~~June 30, ~~2017. All other fluctuations~~2018. The change in ~~interest and~~ other income and expense are ~~not deemed significant.~~due to fluctuations in the exchange rate of the Indian Rupee.

The following table presents our provision for (benefit of) income taxes for the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,						Three Months Ended June 30,
	2018			2017			2018			2017			2019			2018
Provision for income taxes	$	1,896		$	2,493		$	2,338		$	4,647
Provision for (benefit of) income taxes														(380	)	$	442
Effective tax rate		12.6	%		23.7	%		12.9	%		28.0	%		-44.0	%		14.3	%

The decrease in the effective tax rate for the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019 compared to the prior year ~~periods~~period was primarily due to ~~reduction~~the increased net benefit of ~~the federal corporate tax rate from 35% to 21% effective January 1, 2018, enacted by tax reform legislation. The decrease in the effective tax rate was also due to an increased benefit from~~ the research and development ~~credit~~credits and ~~was~~stock option windfall partially offset by ~~the elimination~~unfavorable impact of ~~the qualified domestic manufacturer deduction, effective April 1, 2018.~~other nondeductible expenses.

We continue to fully assess the impact of the new tax reform legislation, which was enacted December 22, 2017, on our future taxes and on our consolidated financial statements. We have recorded the provisional impacts of the new tax reform legislation as of September 30, 2018 based on our most reasonable estimates. Our estimated impacts of the new tax reform legislation are based on our current knowledge, interpretation, and assumptions, and the recognized impacts could be materially different from current estimates based on our future results, actions taken by the Company, the issuance of further guidance, and our further analysis of the new tax reform legislation. Refer to Note 10, "Income Taxes" of our notes to consolidated financial statements included elsewhere in this Report for more information.

The following table presents our net income (in thousands) and net income per share and for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:

	Three Months Ended September 30,				Six Months Ended September 30,				Three Months Ended June 30,
	2018		2017		2018		2017		2019		2018
Net income	$	13,094	$	8,030	$	15,742	$	11,926	$	1,244	$	2,648
Net income per share:
Basic	$	0.20	$	0.13	$	0.25	$	0.19	$	0.02	$	0.04
Diluted	$	0.20	$	0.13	$	0.24	$	0.19	$	0.02	$	0.04

As a result of the foregoing changes in revenue and expense, net income for the three months ended ~~September~~June 30, ~~2018 increased $5.1~~2019 decreased $1.4 million compared to the prior year ~~period.~~

~~As a result of the foregoing changes in revenue and expense, net income for the six months ended September 30, 2018 increased $3.8 million compared to the prior~~ period.

The following table presents selected financial statistics and information for the ~~six~~three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	Six Months Ended September 30,				Three Months Ended June 30,
	2018		2017		2019		2018
Cash and cash equivalents	$	32,387	$	26,553	$	28,607	$	26,544
Unused portion of revolving credit agreement ⁽¹⁾		258,000		195,000		294,000		256,000
Total liquidity	$	290,387	$	221,553	$	322,607	$	282,544

Net income	$	15,742	$	11,926	$	1,244	$	2,648
Net cash provided by operating activities	$	14,916	$	38,094	$	16,997	$	3,012

Our principal sources of liquidity are our cash generated from operations, driven mostly by our net income and working capital management, our cash and cash equivalents, and our revolving credit agreement.

As of September 30, 2018, our cash and cash equivalents balance of $32.4 million reflects a $3.5 million increase compared to $28.8 million as of March 31, 2018. Our outstanding loans under our revolving credit agreement was $42.0 million as of September 30, 2018.

We may continue to use a portion of our funds as well as available financing from our revolving credit agreement for future acquisitions or other similar business activities, although the specific timing and amount of funds to be used is not currently determinable. We intend to expend some of our available funds for the development of products complementary to our existing product line as well as new versions of certain of our products. These developments are intended to take advantage of more powerful technologies and to increase the integration of our products.

Our investment policy is determined by our Board of Directors. Excess cash, if any, may be invested in very liquid ~~short term~~short-term assets including tax exempt and taxable money market funds, certificates of deposit and ~~short term~~short-term municipal bonds with average maturities of 365 days or less at the time of purchase. Our Board of Directors continues to review alternate uses for our cash including an expansion of our investment policy and other items. Any or all of these programs could significantly impact our investment income in future periods.

We believe that our cash and cash equivalents on hand at ~~September~~June 30, ~~2018,~~2019, together with our cash flows from operations and liquidity provided by our revolving credit agreement, will be sufficient to meet our working capital and capital expenditure requirements for the next twelve months.

The following table summarizes our condensed consolidated statements of cash flows for the ~~six~~three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	Six Months Ended September 30,						Three Months Ended June 30,
	2018			2017			2019			2018
Net income	$	15,742		$	11,926		$	1,244		$	2,648
Non-cash expenses		29,775			29,195			20,894			14,359
Cash from net income, as adjusted	$	45,517		$	41,121		$	22,138		$	17,007
Change in contract assets and liabilities, net		(5,248	)		(929	)		(650	)		(3,059	)
Change in accounts receivable		409			(120	)		5,105			486
Change in other assets and liabilities		(25,762	)		(1,978	)		(9,596	)		(11,422	)
Net cash provided by operating activities	$	14,916		$	38,094		$	16,997		$	3,012

For the ~~six~~three months ended ~~September~~June 30, ~~2018,~~2019, cash provided by operating activities ~~decreased $23.2~~increased $14.0 million compared to the prior year period, ~~primarily~~of which $6.5 million of the increase was related higher non-cash expenses, $2.4 million in net changes in contract assets and liabilities, $4.6 million associated with lower accounts receivable balances, and $1.8 million due to ~~the change in~~changes to other assets and liabilities, ~~which was mostly~~partially offset by lower net income. The increase in non-cash expenses is primarily related to ~~the settlement~~higher amortization of ~~the Federal Securities Class Action complaint. This was partially funded by certain~~previously capitalized software costs, amortization of ~~our insurance carriers,~~operating lease assets, accrued restructuring costs, and the ~~remainder was tendered by us to a court-supervised settlement account~~non-cash impairment of assets recorded during the three months ended ~~September~~June 30, ~~2018.~~2019. The increase in cash associated with net changes in contract assets and liabilities is primarily due to lower contract liabilities related to support and maintenance from higher client attrition. Accounts receivable balances decreased due to continued efforts to collect and resolve aged balances, resulting in a corresponding increase in cash from collections in the three months ended June 30, 2019. The net change in other asset and liabilities was primarily due to the timing of invoice vouchering and payments of our accounts payable, as well as changes in accrued compensation and related benefits primarily due to the payments and accruals of the annual bonuses. Net income for the ~~six~~three months ended ~~September~~June 30, ~~2018 increased $3.8~~2019 decreased $1.4 million compared to the prior year period, as described in the "Net Income" section above.

Net cash used in investing activities for the ~~six~~three months ended ~~September~~June 30, ~~2018~~2019 was ~~$13.3~~$8.4 million compared with ~~$73.9~~$7.0 million of cash used in investing activities in the prior year period. The ~~decrease~~increase in ~~net~~ cash used in investing activities is primarily due to ~~$58.9 million of cash paid (net of acquired) for the acquisitions of Entrada and EagleDream in the prior year period as well as lower~~higher additions to ~~equipment and improvements.~~fixed assets.

Net cash ~~provided by~~used in financing activities for the ~~six~~three months ended ~~September~~June 30, ~~2018~~2019 was ~~$6.9~~$6.3 million compared with ~~$24.7~~$6.8 million cash provided by financing activities in the prior year period. The ~~decrease~~increase in cash ~~provided~~used in financing activities relates to $5.0 million of ~~net cash provided by our revolving credit agreement, including $26.0 million of additional borrowings and $21.0 million of~~ principal repayments, compared to ~~the~~ prior year period net additional borrowings of ~~$40.0~~$7.0 million on our line of ~~credit, which was partially offset by $18.8 million in payment of contingent consideration related to the acquisition of HealthFusion.~~credit.

We have minimum purchase commitments of ~~$34.7~~$26.3 million related to payments due under certain non-cancelable agreements to purchase goods and services.

The following table summarizes our significant contractual obligations at ~~September~~June 30, ~~2018~~2019 and the effect that such obligations are expected to have on our liquidity and cash in future periods (in thousands):

			For the year ended March 31,														For the year ended March 31,
Contractual Obligations	Total		2019 (remaining six months)		2020		2021		2022		2023		2024 and beyond		Total		2020 (remaining nine months)		2021		2022		2023		2024		2025 and beyond
Operating lease obligations	$	57,451	$	4,656	$	9,508	$	9,672	$	9,391	$	9,079	$	15,145	$	55,144	$	7,830	$	10,681	$	10,353	$	10,111	$	8,370	$	7,799
Remaining lease obligations for vacated properties⁽¹⁾		3,990		601		897		921		659		467		445		5,274		929		1,270		1,019		837		674		545
Line of credit obligations (Note 8)		42,000		—		—		—		—		42,000		—		6,000		—		—		—		6,000		—		—
Total	$	103,441	$	5,257	$	10,405	$	10,593	$	10,050	$	51,546	$	15,590	$	66,418	$	8,759	$	11,951	$	11,372	$	16,948	$	9,044	$	8,344

The deferred compensation liability as of ~~September~~June 30, ~~2018~~2019 was $6.0 million, which is not included in the table above as the timing of future benefit payments to employees is not determinable.

Refer to Note 1, “Summary of Significant Accounting Policies” of our notes to condensed consolidated financial statements included elsewhere in this Report for a discussion of new accounting standards.

As of ~~September~~June 30, ~~2018,~~2019, we were subject to minimal market risk on our cash and cash equivalents as we maintained our balances in very liquid funds with maturities of 90 days or less at the time of purchase.

As of ~~September~~June 30, ~~2018,~~2019, we had ~~$42.0~~$6.0 million in outstanding loans under our revolving credit agreement. The revolving borrowings under our revolving credit agreement bear interest at our option of either, (a) for base rate loans, a base rate based on the highest of (i) 0%, (ii) the rate of interest publicly announced by the administrative agent as its prime rate in effect at its principal office in New York City, (iii) the overnight bank funding rate (not to be less than zero) as determined by the Federal Reserve Bank of New York plus 0.50% or (iv) the LIBOR-based rate for one, two, three or six months Eurodollar deposits plus 1%, and (b) for Eurodollar loans, the LIBOR-based rate for one, two, three or six months (as selected by us) Eurodollar deposits plus 1.00%, plus, in each case, an applicable margin based on our total leverage ratio from time to time, ranging from 0.50% to 1.50% for base rate loans, and from 1.50% to 2.50% for Eurodollar loans. Accordingly, we are exposed to interest rate risk, primarily changes in LIBOR, due to our loans under the revolving credit agreement. A one hundred basis point (1.00%) change in the interest rate on our outstanding loans as of ~~September~~June 30, ~~2018~~2019 would result in a corresponding change in our annual interest expense of approximately ~~$0.4~~$0.1 million. Refer to Note 8, “Line of Credit” of our notes to condensed consolidated financial statements included elsewhere in this Report for additional information.

As of ~~September~~June 30, ~~2018,~~2019, we had international operations that exposed us to the risk of fluctuations in foreign currency exchange rates against the United States dollar. However, the impact of foreign currency fluctuations has not been material to our financial position or operating results.

Our Chief Executive Officer (principal executive officer) and Chief Financial Officer ~~(our principal executive~~(principal financial officer and principal ~~financial officer, respectively)~~accounting officer) have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Security Exchange Act of 1934, as amended, the "Exchange Act") as of ~~September~~June 30, ~~2018,~~2019, the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). They have concluded that, as of the Evaluation Date, these disclosure controls and procedures were effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities and would be disclosed on a timely basis. The Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the rules and forms of the Securities and Exchange Commission. They have also concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act are accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Effective April 1, 2019, we adopted the new lease standard under ASC 842. We implemented changes to our processes, policies, and internal controls over financial reporting to address the impacts of the new lease guidance on our condensed consolidated financial statements and related disclosures. During the quarter ended ~~September~~June 30, ~~2018,~~2019, there were no other changes in our “internal control over financial reporting” (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

On November 19, 2013, a putative class action complaint was filed on behalf of the shareholders of our Company other than the defendants against us and certain of our officers and directors in the United States District Court for the Central District of California by one of our shareholders. After the Court appointed lead plaintiffs and lead counsel for this action, and recaptioned the action In re Quality Systems, Inc. Securities Litigation, No. 8:13-cv-01818-CJC-JPR, lead plaintiffs filed an amended complaint on April 7, 2014. The amended complaint, which is substantially similar to the litigation described above under the caption “Hussein Litigation,” generally alleges that statements made to our shareholders regarding our financial condition and projected future performance were false and misleading in violation of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that the individual defendants are liable for such statements because they are controlling persons under Section 20(a) of the Exchange Act. The complaint seeks compensatory damages, court costs and attorneys' fees. We filed a motion to dismiss the amended complaint on June 20, 2014, which the Court granted on October 20, 2014, dismissing the complaint with prejudice. Plaintiffs filed a motion for reconsideration of the Court's order, which the Court denied on January 5, 2015. On January 30, 2015, Plaintiffs filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit, captioned In re Quality Systems, Inc. Securities Litigation, No. 15-55173. On July 28, 2017, the Ninth Circuit issued a decision reversing and remanding the District Court's order on our motion to dismiss. On September 5, 2017, we filed a petition for rehearing en banc, which was denied on September 29, 2017. On January 26, 2018, we filed a petition for a writ of certiorari with the Supreme Court of the United States. The Supreme Court ordered the plaintiffs to file a response to the petition, which they filed on March 22, 2018.

On May 10, 2018, the parties reached an agreement-in-principle to resolve the action for $19 million, and on May 11, 2018, the parties requested that the Supreme Court stay any decision regarding whether to hear the Company’s petition for a writ of certiorari, pending the parties’ ongoing settlement negotiations. On July 16, 2018, the parties signed a definitive settlement agreement resolving this matter and submitted it to the Court for approval. On July 30, 2018, the Court granted preliminary approval of the settlement and scheduled a final approval hearing for November 19, 2018. Under the terms of this agreement, the settlement will be partially funded by certain of the Company’s insurance carriers, and defendants will continue to deny any liability or wrongdoing.

The settlement does not resolve the Hussein Litigation or the Shareholder Derivative Litigation. The $19 million settlement of the Federal Securities Class Action complaint, which was partially funded by certain of our insurance carriers, was tendered to a court-supervised settlement account during the three months ended September 30, 2018.

On September 28, 2017, a complaint was filed against our Company and certain of our current and former officers and directors in the United States District Court for the Central District of California, captioned Kusumam Koshy, derivatively on behalf of Quality Systems Inc. vs. Craig Barbarosh, George H. Bristol, James C. Malone, Peter M. Neupert, Morris Panner, D. Russell Pflueger, Steven T. Plochocki, Sheldon Razin, Lance E. Rosenzweig, Paul A. Holt, and Quality Systems, Inc., No. 8:17-cv-01694, by Kusumam Koshy, a purported shareholder of ours. The complaint alleges breach of fiduciary duties and abuse of control, as well as unjust enrichment and insider selling by individual directors arising out of the allegations described above under the ~~captions~~caption “Hussein Litigation” and ~~“Federal Securities Class Action,” QSI’s~~a related, now-settled, federal securities class action, as well as the Company’s adoption of revised indemnification agreements, and the resignation of certain officers of the Company. The complaint seeks restitution and disgorgement, court costs and attorneys’ fees, and enhanced corporate governance reforms and internal control procedures. On January 12, 2018, Defendants filed a motion to dismiss the derivative complaint. On July 25, 2018, the Court dismissed the complaint with prejudice. On August 24, 2018, the plaintiff filed a notice of appeal to the United States Court of Appeals for the Ninth ~~Circuit.~~Circuit and filed her opening brief on January 23, 2019. We filed our response on March 25, 2019, and the plaintiff filed her reply on May 15, 2019. We believe that the plaintiff’s appeal is without merit and intend to defend against it vigorously. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this claim.

Commencing in April 2017, we have received a request for documents and information from the United States Attorney's Office for the District of Vermont ~~pursuant to a Civil Investigative Demand (“CID”). The CID relates to~~and other government agencies in connection with an investigation concerning the certification we obtained for our software under the United States Department of Health and Human Services' Electronic Health Record (EHR) Incentive Program. ~~We have provided documents and~~The requests for information ~~in response~~relate to, ~~that CID. On December 11, 2017, we received a subpoena from the United States Department of Justice in connection with the same matter seeking~~ among other ~~things records relating to~~things: (a) data used to determine objectives and measures under the Meaningful Use (MU) and the Physician Quality Reporting System (PQRS) programs, (b) EHR software code used in certifying ~~the 2014 EHR~~our software and information, and (c) payments provided for the referral of EHR business. We continue to ~~respond to~~cooperate in this ~~CID and subpoena and intend to cooperate fully with the government, including responding to any future requests.~~investigation. Requests and investigations of this nature may lead to future requests for information and ultimately the assertion of claims or the commencement of legal proceedings against us, as well as other material liabilities. In addition, our responses to these and any future requests require time and effort, which can result in additional cost to us. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this matter. Given the highly-regulated nature of our industry, we may, from time to time, be subject to subpoenas, requests for information, or investigations from various government agencies. It is our practice to respond to such matters in a cooperative, thorough and timely manner.

Our business is subject to many risks and uncertainties, which may materially and adversely affect our future business, prospects, financial condition and results of operations. These risk factors are disclosed in “Item 1A. Risk Factors” in our Annual Report.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 Par Value	NXGN	NASDAQ Global Select Market

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Small reporting company ☐
	Emerging growth company ☐

	Item	Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
	Unaudited Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2018~~2019 and March 31, ~~2018~~2019	3
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	4
	Unaudited ~~Consolidated~~ Statements of ~~Cash Flows~~Condensed Consolidated Stockholders’ Equity for the ~~six~~three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2019 and 2018	6
	Notes to Unaudited Condensed Consolidated Financial Statements	68
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	2623
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	3733
Item 4.	Controls and Procedures.	3733
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings.	3834
Item 1A.	Risk Factors.	3935
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	3935
Item 3.	Defaults Upon Senior Securities.	3935
Item 4.	Mine Safety Disclosure.	3935
Item 5.	Other Information.	3935
Item 6.	Exhibits.	4036
	Signatures	4137

For the year ended March 31,
2020	$	10,511
2021		10,701
2022		10,161
2023		9,660
2024		7,730
Thereafter		8,097
Total obligations and commitments	$	56,860

	September 30, 2018		March 31, 2018
Payroll, bonus and commission	$	9,783	$	18,120
Vacation		9,102		9,790
Accrued compensation and related benefits	$	18,885	$	27,910

Note		Page

Note 1	Summary of Significant Accounting Policies	8
Note 2	Revenue from Contracts with Customers	9
Note 3	Fair Value Measurements	12
Note 4	Leases	13
Note 5	Goodwill	14
Note 6	Intangible Assets	14
Note 7	Capitalized Software Costs	15
Note 8	Line of Credit	15
Note 9	Composition of Certain Financial Statement Captions	16
Note 10	Income Taxes	17
Note 11	Earnings Per Share	18
Note 12	Share-Based Awards	18
Note 13	Concentration of Credit Risk	20
Note 14	Commitments, Guarantees and Contingencies	20
Note 15	Restructuring Plan	22

	As Reported		ASC 606 Transition			Adjusted
	March 31, 2018		Adjustments			April 1, 2018
ASSETS
Accounts receivable, net	$	84,962	$	2,380		$	87,342
Contract assets		—		13,446			13,446
Prepaid expenses and other current assets		17,180		(223	)		16,957
Deferred income taxes, net		9,219		(2,884	)		6,335
Contract assets, net of current		—		2,731			2,731
Other assets		18,795		6,679			25,474

LIABILITIES
Contract liabilities		54,079		4,174			58,253
Accrued compensation and related benefits		27,910		745			28,655
Other current liabilities		48,317		9,964			58,281
Contract liabilities, net of current		1,173		(1,173	)		—

SHAREHOLDERS' EQUITY
Retained earnings		78,708		8,419			87,127

	September 30, 2018
	As reported under		Adjustments due to			As disclosed under
	ASC 606		adoption of ASC 606			ASC 605
ASSETS
Accounts receivable, net	$	85,548	$	2,496		$	88,044
Contract assets		10,253		(10,253	)		—
Income taxes receivable		5,976		997			6,973
Prepaid expenses and other current assets		16,987		(2,190	)		14,797
Deferred income taxes, net		6,264		2,884			9,148
Contract assets, net of current		2,942		(2,942	)		—
Other assets		29,226		(6,773	)		22,453

LIABILITIES
Contract liabilities		50,023		2,911			52,934
Accrued compensation and related benefits		18,885		(6	)		18,879
Other current liabilities		43,883		(8,171	)		35,712
Contract liabilities, net of current		—		1,030			1,030

SHAREHOLDERS' EQUITY
Retained earnings		102,869		(11,511	)		91,358

	Three Months Ended September 30, 2018
	As reported under			Adjustments due to			As disclosed under
	ASC 606			adoption of ASC 606			ASC 605
Revenues:
Recurring	$	116,317		$	(793	)	$	115,524
Software, hardware, and other non-recurring		14,004			(96	)		13,908
Total revenue		130,321			(889	)		129,432
Total cost of revenue		61,118			52			61,170
Gross profit		69,203			(941	)		68,262
Operating expenses:
Selling, general and administrative		34,229			1,957			36,186
Research and development costs, net		18,371			—			18,371
Amortization of acquired intangibles		1,121			—			1,121
Total operating expenses		53,721			1,957			55,678
Income from operations		15,482			(2,898	)		12,584
Interest and other income, net		(492	)		—			(492	)
Income before provision for income taxes		14,990			(2,898	)		12,092
Provision for income taxes		1,896			(751	)		1,145
Net income	$	13,094		$	(2,147	)	$	10,947

	Six Months Ended September 30, 2018
	As reported under			Adjustments due to			As disclosed under
	ASC 606			adoption of ASC 606			ASC 605
Revenues:
Recurring	$	236,324		$	(106	)	$	236,218
Software, hardware, and other non-recurring		27,197			(737	)		26,460
Total revenue		263,521			(843	)		262,678
Total cost of revenue		122,969			94			123,063
Gross profit		140,552			(937	)		139,615
Operating expenses:
Selling, general and administrative		78,865			3,152			82,017
Research and development costs, net		40,499			—			40,499
Amortization of acquired intangibles		2,289			—			2,289
Total operating expenses		121,653			3,152			124,805
Income from operations		18,899			(4,089	)		14,810
Interest and other income, net		(819	)		—			(819	)
Income before provision for income taxes		18,080			(4,089	)		13,991
Provision for income taxes		2,338			(997	)		1,341
Net income	$	15,742		$	(3,092	)	$	12,650

	Preliminary
	Inforth			EagleDream			Entrada
	Purchase Price			Purchase Price			Purchase Price
Initial purchase price	$	4,000		$	26,000		$	34,000
Settlement of pre-existing net liabilities		337			—			—
Working capital and other adjustments		—			(391	)		(42	)
Total purchase price	$	4,337		$	25,609		$	33,958

Fair value of the net tangible assets acquired and liabilities assumed:
Acquired cash and cash equivalents	$	25		$	573		$	102
Accounts receivable		6			217			1,836
Prepaid expense and other current assets		—			20			145
Equipment and improvements		—			—			163
Capitalized software costs		—			—			364
Deferred income tax asset		—			—			117
Accounts payable		—			(115	)		(639	)
Accrued compensation and related benefits		(49	)		(691	)		(120	)
Deferred revenues		—			(394	)		(234	)
Deferred income tax liability		—			(1,707	)		—
Other liabilities		(22	)		(122	)		(444	)
Total net tangible assets acquired and liabilities assumed		(40	)		(2,219	)		1,290
Fair value of identifiable intangible assets acquired:
Goodwill		1,177			14,428			17,268
Software technology		3,200			12,800			10,500
Customer relationships		—			600			3,300
Trade name		—			—			1,600
Total identifiable intangible assets acquired		4,377			27,828			32,668
Total purchase price	$	4,337		$	25,609		$	33,958

	June 30, 2019		March 31, 2019
Accrued vacation	$	10,319	$	9,893
Accrued bonus		4,825		11,598
Accrued commissions		1,479		3,418
Accrued payroll		603		754
Accrued compensation and related benefits	$	17,226	$	25,663

Exhibit Number	Exhibit Description	Filed Herewith

~~2.1~~	Agreement and Plan of Merger, dated as of September 6, 2018, of NextGen Healthcare, Inc. with and into Quality Systems, Inc. (incorporated by reference from Exhibit 2.1 of the registrant’s Current Report on Form 8-K filed September 10, 2018).

~~3.1~~	Certificate of Ownership filed with the Secretary of State of California on September 6, 2018 (incorporated by reference from Exhibit 3.1 of the registrant’s Current Report on Form 8-K filed September 10, 2018).

~~3.2~~	~~Amended and Restated Bylaws of NextGen Healthcare, Inc. (incorporated by reference from Exhibit 3.2 of the registrant’s Current Report on Form 8-K filed September 10, 2018).~~

31.1	Certification of Principal Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X

31.2	Certification of Principal Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X

32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X

101.INS**	XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH**	XBRL Taxonomy Extension Schema

101.CAL**	XBRL Taxonomy Extension Calculation

101.DEF**	XBRL Taxonomy Extension Definition

101.LAB**	XBRL Taxonomy Extension Label

101.PRE**	XBRL Taxonomy Extension Presentation

		NEXTGEN HEALTHCARE, INC.
Date: ~~October 30, 2018~~July 24, 2019	By:	/s/ John R. Frantz
		John R. Frantz
		Chief Executive Officer (Principal Executive Officer)

Date: ~~October 30, 2018~~July 24, 2019	By:	/s/ James R. Arnold
		James R. Arnold
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)