NXGN - Earnings call transcript Q3 2018 | Nextgen Healthcare, Inc.

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Operator

Welcome to the Quality Systems Incorporated Fiscal Third Quarter 2018 Conference Call. Hosting the call today from Quality Systems NextGen are Rusty Frantz, President and Chief Executive Officer; and Jamie Arnold, Chief Financial Officer. Today’s call is being recorded. All lines have been placed on listen-only mode. And the floor will be opened for your questions following the presentation. meaning start, made like include limitation, on are and within we that remind statements statements Before securities strategies. future forward-looking comments federal performance, industry the this the company’s relating Instructions] to I and trends, to would everyone that laws, anticipated [Operator including the the without plans, of call perspectives may products, among differ others, including uncertainties that US Securities on and discussion Quarterly Reports risks heading Exchange with forward-looking company’s subsequent Annual may materially any to Commission, Risk the from exist Factors Report results most on and these filings recent the in those and Form in Risks the XX-K Form the statements, under forth XX-Q. actual including those set policy the in expressed cause company’s the today. speak Any forward-looking statements as only of The these update obligation company forward-looking intent statements. disclaims expressly or to any

certain which Our measures. remarks and results on guidance, today’s earnings call non-GAAP financial our both contains include

like contained Rusty SEC our QSI NextGen. This Investors descriptions measures time, and calculated CEO Frantz, of measures financial the XXXX earnings guidance. is qualitative most section posted of At to between our For measure, quarter to President each website. turn also be in would release any over have GAAP I measure release found non-GAAP fourth used was financial the and the that can to discussed measure call non-GAAP provides of each our within reconciliation differences financial financial press results, Rusty? to with and comparable our directly and of we this comparable or the the earnings how GAAP Mr. filed the financial non-GAAP

Rusty Frantz

NextGen’s to results. for you afternoon this third operator everyone to review thank joining Thanks, quarter us and QSI

compared year our of us a non-GAAP however ago, XX.X another bookings solid quarter, We we in are reflecting sequentially. continue of $X.XX a million XXX.X execute to third of guidance have to XXXX quarter increase saw as this where quarter is make investments continue and million EPS plan. fiscal enabling made of that confirm in to indicative the We revenue the the our and XXX.X to in progress we quarter, over of strategic we reflects well XX% pleased compared which progress million Most $X.XX to our the year as the range. had

We expect -- third quarter increases into the well. continue fourth as trend this quarter of sequential as into well the to

today, details, some Before I on dive the quarter into way my quarters our fiscal through three year. share stand the of of more I to company perspectives third the of we where wanted from

sequential acquired our makes the many with we've physician along efficiency. the year, the We've and the the aligned business full flow our recognize through quarter. our for on force accomplishments to delivered acquisitions early third that pipeline. others to with I'm with. team us but this this of far Based time staffed So manifest We've business and team, have fully align capable does and simplified and clients' billing clients, effect more focus delivery team do to areas key and enhanced of approach based growth, take solution that success to broadened value signs disciplined care solution to financial growth it and integrated some our that new a bookings model transition These of we've two our sales invigorated transformed the in the from and sales a introduced of organization. leadership with the begun results our that's easier confident we the selling in and pipeline

and signs a couple the interest around user items. on few provide selling of color quarterly from on our I a results, Dream, along swift force with uptake success other to some early Eagle transformation our the Before Jamie sales update goes deeper areas; an base our in of cross into wanted

The represents the quarter solution solution and short of into which period of in in deal for Dream from ROI to offers the that first physicians service Eagle we're and fee value. our in is tangible already time. our some physician incorporated a Dream Eagle are flow groups, with the client they full where interest resonated and has message for base. third That significant regardless for quarter fee experiencing on transition strongly both

number efforts around spectrum by our the a the the of broad as In pipeline of Furthermore, fact, effort clients specialty XX also And the geography. folks we base in current by across during quarter, focused both meaningful and we're our on webinars deals base, new are we while client offering. client of evidenced some the the roughly additional closed interest of build of a accounts, outside our progress. XX% our participating focused of bulk promising of seeing base, within

seen throughout quarter. our the during Eagle peaked of base suite client trends Beyond a Dream, positive broader be interest and could solutions from

RCM, move few our nine In than we XX% The own the signed continued net two stage pipeline nicely early which as RCM in our of to we entirely were clients use expect whole. a through terms grow new solution, continues of clients progress as NextGen the quarter, of and where quarters. next deals fewer we new to

efficiencies them. experienced bookings last has as increased X% compared and sequential year, now both can to growth the realized clients and offer Entrada EDI we pipeline in Additionally, revenue to

framework Our quarter. delivered success the interoperability in notable some

into national are XX, December over XXX to we new well more clients as and interoperability for every adding had quality upgrade the of framework month clients integrated release. care As the

fire to our clients bringing are compliant API. we addition, on based cloud In live

and patient the across continue the ensure base, client our to is NextGen framework, all interoperability data the transportable, but not into bring that an In also clients within just the national We proud industry. to been open inhibitor for on we enhanced era be where blocking seamless interoperability data of patient competitive exchange. reasons care, has are data to to forefront seamless and an

past, upgrade our client present by base we the times value plenty the comprehensive platform. In heard demonstrating remain enhanced one of and in the our acutely significant of of into opinion, happy solutions an the opportunity is them clients investment keeping latest realizing This biggest of plays on leverage but You've factors our strides current process, and me in our for area to my delivering where focused we've the into lately. a made this them. significant smooth put that that is all we've technology say enabling

no about weekend, our clients all teams to Monday not largest our and to each just on of us, progress, completed glowing release volume recent over just experienced increase but XX call in upgrades, the released other. morning. September also Some when have back our latest upgraded came remarks a with to in notable Anecdotally, we

those across of improvements all who've fact, of in including EHR. some we the In substantial have upgraded, client the aspects satisfaction solution,

taken keep but we've effort process, receptive open to behind to the breath version look are a into the On that us, our the we Over significantly XX% happy, to the latest important capabilities. of spend note leading out for more solutions. similar increased stability uptake move technical clients some on as our to new clients new of us we always to up last It's focus calendar and R&D challenges upgrade releases. note, of years, of of leaving also robust exploring our to our two happy new the relevant on XXXX,

focus we on in as workflow addition, invest in continue patient In our efficiency. and to also core we physician platforms,

this releases workflows significant We're mean our the adding top as for workflow two will will physician patient plus great use and HEMS percent to this clients the to what and that workflow well key will the HER from the types. year, time their more introduce We're significant excited excited complex patient walking XX there. about We year look streamlining forward and portal very enhancements as specialties capabilities on clients XX of and the first effect of our them to deliver those capabilities support to step of through population. forward moving at our forward and to expansion impact looking our this what have and client

spots attrition team. progress the two era our being team. As quarter and our second I enhanced pleased the wanted in of I I the how refreshed a mentioned filled made you experienced vacant by the we sales am had time in share call, last force area call, with and sales About at quarter to the already -- our with later, had

the higher play There's for that of attrition. over progress great is as the reversal new this of see I that a in to on of Looking a been growth, last don't our level opportunity but growth, review sales seeing afternoon end swelling and to number impressive team force of the for factors to clients, this quarter, the the quarterly clear to on In discussion, into trends anticipated slightly which we've tick pipeline sales bookings had level closed was X.X%, we've a and reaching week. eager our third the clients our indicative here, and in it's is is range. our at deals take sequential the The did sequential our fourth of the industry primarily NextGen. understanding want grasp the quick or couple billings attrition our past. our Dream, of I The client Eagle of thing see years. quarter problem asset, I'm newest to quite a this sit I made comment last we've one excited future. the up watch calendar and business solutions two of last our

some quarter, did to for plan have cycle from year regulatory of a MIPS, delays longstanding are somewhat from -- departures facing Macra of caused a third we and has couple that allowed the anticipated anticipated clients the clients, while delay came element During who by upgrade go. but out, which to they our of the

for energy our this fiscal we're and in business guidance range quarter, confident in activity the past achieving XXXX. our Given

growth from and to we very continue confident the in single meaningful validate from in trends point, single mid our detail. close margin our fiscal over Naturally, in line revenue, in top growth FYXX expansion the our pipeline with results to forward, Jamie? term confidence review digit vantage turn With the I'll continue to have call pipeline longer Jamie positive financial in to Looking digit into the bookings the but my to that, convert and in those greater to our low non-leverage execute. XXXX. ability outlook I'm sales to in high deals

Jamie Arnold

sentiment for that by call. solid Rusty’s was you Rusty Thanks, on NextGen. this another will and quarter all for start QSI joining thank today's echoing us I

the Our members work results are to of two years. past show over team our hard starting the

X% third license quarter’s increased total ago was Turning financial flat roughly revenue software sequentially. decrease XX% year fiscal XXX.X of hardware million from and results, to of XX.X million compared to a Revenue a year-over-year. our was and

million related XX.X of expect in under pressure year-over-year calls, by expect up the million modest did be headwinds MediTouch hurricanes. growth. be year-over-year. revenue insurance, of to the headwinds, has to generate customer last due was to as only increases, was health on and we deductibles continued maintenance beginning revenue The QX. last earnings of base our we Subscription quarter to that recent comes revenue well the as we management As payers. The of we reducing acquisitions. was maintenance of software this last down offset well benefiting normal penetrating experience one-time year last and continues will growth our and a driven X% quarter growth last mentioned to -- was expected couple not the flat hardware we primarily year-over-year. as the and year resetting due to due license increased it collections on from to two XX.X which XX% basically from indicated from growth XX.X Support headwinds Not effect on due were The contribution CPI decline call, we attrition. MediTouch from new the compared of transactions license maintenance million we Revenue cycle earnings quarter by on revenue In true-up. QX, and multiple from able in service as

and quarter The related up up recurring decline quarter in RCM from was line total for our transcription invest compared net a lower this Regarding expenses from and year. to compression some do for have against have Entrada’s revenue, our RCM with have in modest conclude portion impact million to and offsets my decline relatively this lower was Gross to encouraged services. $XXX in not were our in to and due expectations. we by growth accounted our to confidence to revenue gross software contributions for X.X% based due due last To margins continue expenses. X% grew I is previously our and general on Recurring hardware material also XX% in right and discussions one profit which our shift this data to fixed million trending revenues of large from perpetual of XX.X million continue year-over-year related margin this direction to efficiencies services we revenue, compressed electronic be year-over-year, and margin this to of being in subscription subscription the future the revenue, expect revenue of revenue quarter perpetual of revenue revenue licenses lower XX% margin comments we headwinds expect this interchange the these X.X subscription increasing attrition the with margins in growth quarter year-over-year Revenue that as us we one-off gives client comments the down future discussed, and services. -- the revenues the a XX% year-over-year of million. XX% Professional a to of shift the in exposure was quarter. to the quarter. client we It's million of revenue XX.X and curve. license had personnel XX.X

this from operating was in by one-time million statement year R&D related with to personnel, sales XXX X.X to X SG&A incremental usability sales offset XX.X increased year from increased million, acquisition two mandated increase The is issues R&D a the due of million last year Gross invest down a due to plans government X.X marketing ago. consideration and of enhancements. costs. partially of the incremental million resolve our true-up expenses, in to up including contingent deliver software of the of the cost to XX.X benefit consistent development X%, the Moving investment to income marketing, acquisitions, and XX.X legal and million HealthFusion. partially and million an capitalized

are discussion on of tax rate EPS to continuing effective our $X.XX the the compares $X.XX ago. we use XX.X%. income is statement, year-to-date to Our GAAP tax of XX.X% and rate non-GAAP out my Rounding year a GAAP

to From the financial We days. the XX remain EPS total agreement of of had end outstanding positioned $X.XX compared non-GAAP against credit at available quarter. the XXX revolving a a in Our year and equivalents $X.XX million DSOs with cash of quarter XX.X and we for liquidity. in well million our by declined cash in flexibility in million terms XX perspective, were ago.

year million I'll our third my and reiterating are closing we Finally, Rusty fiscal quarter financial between $X.XX his of EPS the Revenues to XXX outlook and XXX now, And million for That Rusty? to non-GAAP the call back XXXX. $X.XX. remarks. concludes over turn the review results. for of

Rusty Frantz

closing, in Through and pleased our we're In work plan. team’s with quarter strategic results. Jamie. progress third dedication, Thanks, hard the our making steady I'm

Operator? the see believe an NextGen aggressive in to years the has questions. I'll a player open growth once With become in to the I positioned again and appropriately come. market we company to competitive call return have that, to a

Operator

first Piper with comes Our from Instructions] Jaffray. question [Operator Wieland Sean

Sean Wieland

you. Thank

wanted the start on bookings to side. So

a Was new good of unpack Was could those bit unpack you booking of If incremental you customers, you versus bookings? net kind the that softwares, of just in it terms detail whatever source little this? number, can just revenue on existing provide it could customers? cycle --

Rusty Frantz

of would Eagle mix contribution, that that and on from this experience continue a But but contribution was but really to over number Yes. Dream it's balanced yet solution unpacked balanced I the not shift. to standpoint, of in what going a this is haven't gross And side say an The earnings pretty this maintain the say to say we we've from maintain very still RCM of quickly. transaction was as across is quarters. last well, definitely production to the the kind license parts couple standpoint, return acquired. those From pressure I past would perpetual -- we it of was to seen see of volume large our an new number thing have would to from I portfolio. our and we bookings and one what the Sean, bookings the increasing as continue X deals able we margin a are our degree

Sean Wieland

say XX% bookings I expecting fourth expect that up? All a are then you’re right. teens sequential you at quarter, increase you number think same that roughly into to rate it’s or And fiscal you I it saying sequentially heard rate, growth just

Rusty Frantz

percentage, We’re just growth. out call be if saying accuracy. a I precision we that I without expect sequential to would was say, would

sequential continued growth. But we that. haven't out see put do on we So a bookings number there

Operator

Your line Wells next with question the Stockton from Fargo. of Jamie comes

Jamie Stockton

environment, causing with was following up were Rusty, little questions you assume I I I attrition the mean respect that more more other maybe few bit, sides, seeing from their government that happen deals I you're picking the where with oriented, threw maybe Sean’s there to but a off ticked more quarter. mandates guess because maybe stick this you're people some it software seem to on just on subscription to deals software up weren't but where current vendors. a deals, you're think that seeing out maybe also both I vendors. people assume

Rusty Frantz

think, overall first we me well, all, just said, reframe of the I Well, effort. let as

of effort monetizing client XX% I focused existing base. said, As is our on about our

looking there selling clients These are were well. Same are base somebody are seeing that outside Dream, on of remember with that client our in out solution. are is of competitive clients there the the clients at signing rate. not for and our the these aren’t net as our at we also deals, -- some see and side example else's this for but RCM for That up to success new starting I frankly same my least So thing signing first seeing, being out are RCM. for now time that up tenure we said, can new are Eagle

And The how transition think so, a government time. of standpoint, ready implementation to now value see for we from do or the lot folks base. to and flow this right MACRA at whatever deals I MIPS the place the of get now. actually client next replacement at to and they implement that market's our our continue mean, Xst January I looking tough a within are and chooses

think, an And I folks so opportunity. took

like getting quarters to will sit think X% go in we We mean feel get expect it range, you where that accelerates calendar as I year clients to kind I QX end be attrition to New forward to to and tend the and I of own like, calendar, of X% and there where when regulatory get fresh the that, to top the their Year the as said, they're piece moves. like start of on

So we below that the And flow, the historic very -- we're something it's frankly, we're well haven't see levels we're multi-year in ebb in and within comfortable we just that natural but levels. guidance. our

Jamie Stockton

up And on you Jamie. out. if quarter, spending you housekeeping, then your some number bookings flow can have maybe just we’ll the you fingertips this check that later. guys Operating capital then don't look and And cash the threw it and during

you I but XX% didn’t growth number. sequentially, That catch great. a year-over-year I said Thank you. think, was up it be would

Jamie Arnold

bookings Actually, year-over-year down year-over-year. last number XX%. were They’re the year, bookings to sorry, it trying now, but the get our right about bookings to were because down I’m down

second. down about one Bookings basis. me were That’s XX% year-over-year. on an give organic Sorry,

operating So, flow. and question your cash other was

Jamie Stockton

if in you’ve got it? That CapEx

Jamie Arnold

X.X flow cash operating was the the is million. CapEx XX.X and

– software capitalization. can about me ask I didn't But You

Rusty Frantz

But tell you we're going to anyway.

Jamie Arnold

It million. was $X

Operator

Raymond Jansen of line Nicholas next comes James from and question Your Associates. with the

Nicholas Jansen

really are four quarters to revenue Question high in call that get bookings about need digit it, the of next, that five growth ’XX? single guys for let’s thinking guys terms you dollars you for of to over assumption what do me or fiscal level

Rusty Frantz

out think -- plan. forward But -- of being actually started we've a color like number. sure you now would of What solutions about, the haven't number as with that's me of the That to and put by up well the to guidance. et done bottoms to on actually is let forward. constructed little provide a and the that mapped we gone be cross looking very penetration ready sell sales how various activity we've would talked what and get targets I Entrada, Dream conservative you conservative, client rate the can we've very rep kind prior to as We as Eagle RCM us make to number I give we’ve cetera. We that

down bit plan, client As confidence down we of deliver and ability the the to we're because is a did of conservative, our top targets So up at to based think type support as has now, to well, right deliver there's through always bottoms on our sure that right is a pathways we up we that? top different up, geez, the a which that salespeople but that can our to make going down, to clients increased only getting guidance, to gone as we're trued bottoms well solution little the in the adoption time. right bringing we've

So with of far activity the because as as of a that integration find those sales guidance we our and at our step but up down back see and middle. that achievable possibility, the we look we're bottoms of of with achievable the all things, plan firmly not attrition, to at committed -- with with outside numbers down that right modeling we plan, top the we

Nicholas Jansen

terms the and takes, layer thoughts quarter, we on maybe term of was there but a And in the maybe tax about the think in Jamie, nearer reform? then how and for margin quickly margins trend in gross of you your gross puts do then lot just

Jamie Arnold

Yeah.

-- the gross we’ve gross think margins pressure is, had the put on perpetual to margin shift our way think has that the licenses, last I it lot the, given relative year. it of I about from the a So away

tax it’s near term. had couple the we improvement a may saying of experiencing for expecting our reform, the that affect dramatically bit manufacturing, to So it I'm domestic simple be -- regarding of as I There areas, a think margin. charge our because in factors still that impact of There -- what credits, little but we a other change little rate there's because credits. number is qualified gross as will is one-time of a working bit a not it, R&D tax the we're there's deductibility changes of quite now tax drop, for be were And in rate. through are of it not a way foreign

really a but more it’s there's I in lot goes answer to QX everything, number So like it, when complicated, we always headline. complicated the I non-GAAP do sound, that we it the into next as make Short expecting give guidance is, will on the year. in basis the in, move the will be that give results, a for I'm low-XXs next year. expect

Rusty Frantz

Percentage, [indiscernible] not million.

Operator

question line next the from Oppenheimer. comes of Mohan Your with Naidu

Mohan Naidu

about hear opportunity can customers to the your in up portion great is within your the this? is within base? you of that you traction the Dream, Rusty, Eagle large from not of fair one, What can customer the say it two your physician practices? set And us to customers, benefit have opportunity

Rusty Frantz

Let me see.

fee So fully-capitated clients for what to that both the such all I'd to say it is, as up well simply, incredible the the Eagle service provides clients. nature as platform of value way is Dream

And can so clients Eagle them. our has platform and that it where Dream regardless of the that journey, deliver to value capabilities are on

of simply XXX% look at built say, clients clients our said, model, are need because your our benefit buy may that we very to just from somewhere that because being your as Now, significantly XXX% of going Dream. our of south so clients have we the in near XXX% into a number That Eagle model, it. doesn't could mean it we of

doctors. that's provide so way single metrics, do And Yes. multi-year more value clients in let's on look forward, down the penetration to of be. more model kind the from say we looking at conservative kind XX% XX% a we can of just standpoint. platform, benefit Large of taken but as how we've More they're to to that approach frankly services our we when do move to is to where smaller what ones come at very around that continue but penetration the desired should at the we a that we're look wrap all that it, and some we things so range. the that So

the conservative client broad appropriately applicability of the base. to a swath are we fact So in spite of our of

Mohan Naidu

you more Maybe questions it? on right great. on are recurring revenue based Is couple or you how Eagle how patients Dream That's one, pricing pricing I it now? the this a are guess

Rusty Frantz

At this point, it’s per provider per month.

a business patient the volume. it’s so model top we easy that’s it. we're -- got of may And here that, but associated put refreshing simple and it a It's that’s today, will we’re predictability new We sit on versus on with evolve time, offering understand. we for what as clients over

to abundantly we license perpetual to we Just clear, add looking the portfolio not everybody to for forward. are on products this call, be just as maintenance move

We will continue to more to move subscription revenue. more and

Operator

Your line comes the of Sean from Dodge next question with Jefferies.

Sean Dodge

some or functionality? could for How on offering Eagle moment, it big maybe Dream Eagle a of it a integrate So staying it a MERF like sounds a NextGen Dream that be maybe the just opportunity. long is until see we

Rusty Frantz

booth to that come will You at see if you our HIMSS.

Sean Dodge

available that’s out so the generally and now? already right in Okay, markets

Rusty Frantz

but No to great sit is years release What the an we're and the analytics figure spring preview in we we're reach is doing of of giving who you without platform, to out NextGen platform which outreach generally have had front it for out Care available. a a to. is reality can't

Eagle analytics asset with been value Now had an that the all we two things. sudden NextGen have the a creates in frankly that somewhat now that of combination Care and marginalized Dream those platform of takes

or Having that the chronic out with value to you up patient wellness generating either enabling a have make answer. reach you or to be show them fixed. outcome A provider simple profitability to or for platform just to a protecting to patient done is patient identification a feel for into doesn't the things arrangement. that that conditions opportunity when not you're to appropriate alone ability your population increased real inserting that patient are sure fee just able and an patient that shows and patient be we the sure they show fee so identification enable great with make and to in complex have workflow by but analytics outreach service and you And health generating to but not problems but treat patient revenue

Sean Dodge

good. us And sense it realize, that's you entire Okay, how and you will switch your migrated and base XXXX give Can a going very very sounds long well. of then so now it Rusty many – over? expect take clients like to have been how

Rusty Frantz

Let’s have XXXX. XX% migrated in test about XX% take NextGen to clients say of our on give are Ambulatory or or either

the it our darn clients that on clients of the and get took was best in of from the the Some migrated actually single clients largest NextGen. fact had release to one opportunity other told list and all have they even the serve

we the to continuing on release. so And see uptake are

are also people the evaluating release. and to frankly get a We on more push more

of of we expect -- to actually requirements to government by implementing the we expected the a backed XXX expected day the lot money to away requirements government's the and forward We the we to respond our government number enable spent significant period. reporting Unfortunately a from move meeting regulations. and clients

the satisfaction the at the to to frankly we degree. are And also best them but on so up to we're how them experience looking move latest looking it to release continue also we're enables because side come to cross starting clients sell XXXX, to do both greatest but it the gives incent the

Operator

Blair Your of next with the line William from Jeff Garro question comes Company. &

Jeff Garro

good any a benefit guidance guys QX little of taking At does guidance. and afternoon tax bit first, rate? in I the the reiteration a dig to from questions. more reflect lower into the Yeah, thanks fiscal for want

Jamie Arnold

it does not. Not,

Jeff Garro

Understood.

Jamie Arnold

apples of message the it, full rather have updated non-GAAP with this everybody I just XX.X to then will show – the be to the not tax when basis for confused and the impact would so – on guidance what than analysts an and of year give was some so we provide apples we use my intention a that of tax the change you mixed for rate guidance, Because

Rusty Frantz

So or it's this is of a identified, playing confusion not in -- also the common keep we as, clearly so common old everybody but community that model understanding investment there's the the on a and field model. in new

Jeff Garro

likely more on second factors a to use contributing results guidance. wider any end Really hit a that bit range we the so Understood. And wide on then the any range? a thoughts or revenue to range are which in might be of

Rusty Frantz

we haven’t range. the Well, widened

quarter actually We're it to it we because continuing range just frankly and -- or range. not we've executing are qualify whether it's our a just to range. chose we upper the and have our is put to that collapsed the keep lower going plan. hit We're in or to guidance forward the execute we also middle We last expect or plan where

I we the the fact think going as see along out well performance more. the we're consistent that year that you years invest to that started as can

You're come that in. seeing

we the I with said, to leave at I comfortable going And so, that. just range. like am feel

Jeff Garro

growth me, That's you year-over-year bookings. fair. One for on achieving maybe Any follow Sean’s a last on towards imagine update in the timing one up on questions bookings.

Rusty Frantz

haven't put whether in commented So quarter will we certainly we us yet. that on up that next below growth neighborhood, see. into above or but Sequential end we'll

As we growth. expect would year year move year definitely into over I the next

Jeff Garro

Got it. Thanks for taking questions, the guys.

Jamie Arnold

we back QX, sequential will and will said, so anybody. step surprise of think year to And give on clarification QX one just growth a as what in come I of to that don't expect next from be a QX Rusty point

Rusty Frantz

sequential in don't Yes, expect growth from QX in do growth expect QX, we absolutely. We QX. year-over-year but

Operator

Your Markets. from with the Capital Hill RBC comes of next line George question

Stephen Hagan

on Stephen for it’s Hi, George.

dig wondering just come drove of services this strength expectations. professional I strength. Let’s quarter, it has in ahead what into was that

Jamie Arnold

services would number. which services transcription is by largely have not year The the professional in Entrada last driven the in been strength

So back the strength of has the Entrada. there been on

Stephen Hagan

issues have And then acquisition? seen your Fusion and expectations far are related works Okay. what so the e-clinical what you the Practice to then from

Rusty Frantz

haven't So on from an ECW specifically commented competitors. really standpoint, we

continue We them in the see field. to

have engage combat still and that out But said, that hand especially that have a the do. hand But they're of come solution down robust ECW. patch to and given to to being commenting in client dissatisfaction to competitor. that we continued Do is really inexpensive don't relatively hand see viable to on get there? they continue things we've We hand see in opportunity combat. specific we a We

ours a Allscripts their think Their strategy their than bringing solution them have -- we and I Practice cloud the ours. based different is Fusion I as see cloud in and side, solution. have have and based strategy P&L aspects different executing than a it’s On is

comment it. all that's I so can on And about

Stephen Hagan

Okay, thank you.

Operator

line Gillmor from with question Robert of comes Matthew Baird. Your next the

Matthew Gillmor

average they new an sort we'll quarter? from hires see benefit running Hey, or the thanks fully about productivity in wanted in and the for the from the so more folks are results sales of quarter the sales and and for we the cohort. rep ramping still to up those new future Were this than did of ask ramp productive terms and they question. I the in that

Rusty Frantz

folks ambulatory in Yeah, had management sales that had had experience. selling we and I solutions experience experience, revenue brought mean cycle experience, analytic

capability market solution. up So the speed competency sector. have still we come NextGen the specifics to in and in folks time They brought solution who have and the on of absolute to

quicker engaged progress. but So beginnings than of seen a market. still expected, seen We've we much we've get it's them frankly complex the

are clients and complex is broad. clients solution Our the

got -- the next continuing effectiveness confidence it year, move And what because me So we bookings we're year rate, increased improve as and on will already to it's because see and gives seeing I the well improve. to to beginnings into trajectory in say room of have will. think still we're some yet next that and still doing that's I’d room we it we're we've awesome,

Matthew Gillmor

that clients And thanks. was that left, comment. clients Were phenomena? and a term up you a the it, -- happen quarters quarter or near where were leave they follow then to from were they attrition those the knew ago, that just they leaving on Got this

Rusty Frantz

Yes.

Matthew Gillmor

Okay.

Rusty Frantz

it increase. increase. that's really And the the that's but totality been consolidation driven of ago that coming There's had that's -- natural kind this finally slight quarter's what that so it primarily plate by fruition. right, a hospital the rate to And attrition as kind drove was not was of on years well, of

Matthew Gillmor

Rusty. Thanks, it. Got

Operator

comes Ricky question the next Stanley. with Morgan from line of Goldwasser Your

Mark Rosenblum

my but Mark for in can a Hey, but answered, the guys, have on it's Most been on Ricky. had of division, comment you utilization outside Rosenblum questions of guys you trends? that client loss, RCM the

Rusty Frantz

forward But patient more little got we are is, come so you've of increase bit seeing seeing a resets say into we adoptable we there. course, move as we as so would see I What revenue are down. you move proposition that as and we QX, into move

talked sure okay. past going about the get any than Beyond really to that I'm that that we deeper and – in I'm that not really if haven't not that’s we

Mark Rosenblum

Thank That's Okay, all you. on right. side. it my

Operator

from line comes JPMorgan. the Samuel Anne Your of next with question

Anne Samuel

taking thinking question. pieces cadence we for and as leverage? moving guys, your base move Hi, towards On from as my the investment you be base, thanks the how about move margins, you to then should your growth margin

Rusty Frantz

if me question. understand let so see Okay, I the

operating through move should see margin how on forward plan we growth this. basis the as basically we an So

Anne Samuel

the that? Right then and in the going we pieces about to that you the well, the be as and investments between. should growth think Yeah, cadence of making then are how

Rusty Frantz

a you you What all on you see to -- we of about from should because should one how is that close growth bit basis, see you'll continue. one year primarily percentage a but leverage first to to think may earnings about will a revenue next think little somewhere

the year primarily certainly what you an revenue. takes investment expand time. see we're us advance subscription recurring, ahead in just next comes bookings Next year of sales see can number and you'll of Cost even in and it to is marketing because continue and in bigger

year But bottom. year you you growth And top we've next growth a look as the really after maybe into that's digit on where that, to digit into in low of see leverage mid-single built on business. infrastructure probably the and so mid-single as get you this

to in investing you'll structure next years into see so internal higher growth but an year now X we see we're relatively FYXX, non-leverage, but as sufficiency at us to the we where out year really we are you past And from revenue the up still get first plus as standpoint. get percent get

but see the those for just bit and to part the kind most a future. we've deliver driven [indiscernible] you of the maybe around built necessary so growth merit organization little into CPI And or growth of things,

really see we a that service help? by because kind integrated so already kind so R&D flat how We’ve And strategy. delivering out entire getting marketing a and FYXX platform of the the we're flat, we that together, built as we've structure Does see sales that's capabilities. flat leverage of the organization

Anne Samuel

that's helpful. very Thanks much. Yes, very

Rusty Frantz

Thank you

Operator

of with David Your next Leerink. the for Larsen question comes line

David Larsen

that? you that I will improve, you Can – XXXX something the think mentioned you times some a those else? that Rusty, talk about major product Is you're Hi. bit that are on is or media releases a workflow. releases it couple said working maybe new little

Rusty Frantz

-- XXXX No, enhancements these are platform. these are for the next the actually

a good we XXXX usability, and on performance regulations some So worked continued bit a of with government lot and of stability.

not regulations of clients to product workflows Ambulatory enter reinventing the work most. a flow set the where we're our is NextGen that chase, on you leave application. fact the specifically that the A XX our government a turning investment given Now to we have don't another you from where top screen, the use workflow dollars is application to

time year. core which physician release, thrive we provider that for really goals sure we with forward so the at great a focusing experience now spring to is our work And delivering and –we done actually and tremendous And that over for release. efficiency usability on we their to will and We've a amount as We'll we also clients had ability a meets move to we're their delivered working make do really truly clients while. fall been our this point grow. do a a have will physician feel of like what

we that but that patient enabling also focusing the to in both addition In are effectively to as team we to the interact best well – sure more provider addition portal outcome though, on possible. experience great the that patient as are and make do on them experience driving one more to significantly the also how

David Larsen

great. very Okay, Thanks that's much.

fees there the that Is charges or available? made any then So and be tied to fall that generally ‘XX higher ‘XX leases that's new the those? of will of are correct and spring

Rusty Frantz

are charges are spring revenue getting. we that fall those we inherent correct in the that not in and year. you the for maintenance are or higher fees that our view this around tied yes, There agreement to as value And, and providing maintenance of

David Larsen

deals. I very be to you helpful? one would talked Entrada of think around new I or sort to XX of mean, deals, can pricing anything those Eagle anyway Entrada, more. bookings number whether those, new just about What Thanks. size the the tied about deals several tied And

Rusty Frantz

deals little seeing the unpacking two talked at by understanding frankly notable Entrada a line we of get beginning cross on the is What habit number say reason with net because in going cross to this increase a about of Dream to ramp an of to came and is going to we more It the draw no time -- client. we’ve opportunity. expose that I'd given are sell to is of RCM decided grow the new. there. in to dependence and the revenue to going sell not those the so It's detail the We're and wanted continues the it's and Eagle We're in point almost investors material in of just we nicely. give things not

David Larsen

much. very Thanks great. Okay,

Rusty Frantz

Thank you.

Operator

question KeyBanc. next Hooker from Your comes Donald the with line of

Donald Hooker

Great. Good evening.

said that were unwrap about margins better the good margin One you but the margins, of to if of is you I quality I course. here licenses revenue a of you from little a gross great weeds and revenue, Can mix the to lower subscription in things lower subscription around right. which margin, heard perpetual But understand subscription the something but down comments am type recurring bit? the getting overall I didn't I understand shift quite Jamie's maybe away revenues not from

Jamie Arnold

a Kind a there subscriptions little margin period. overall through was I when in at that all here bunch that this there's of because that look brought noise the whole down of of and small board products the across run bit for number

the One subscription, were it's previous down recurring margin EDI, number, the the things points is into RCM, overall going on. two but revenue a of like the there then from the shift inside So quarter. subscription lower of couple business, streams

around there is but And is are through couple revenue in the couple – the wrapped there detail. is a in I'm by the of part moves it little sometimes it there, that completely. axle it so had but hundred dollars you complete of unpack of give quarter itself falling that charges I points to get some the this bigger and thousand trying a fact it disclosure,

Donald Hooker

Yeah.

payments Okay, that's I to sell last dealing economics. I just value fee And volume trends than of slower guess delays models versus that MIPS are thought? with uncertainty ACOs, just guys generally kind the was for you curious helpful. practices alternative seeing, little with with a more fee was one, you Eagle maybe understand is maybe Dream trend last year? seeing and Maybe things Or and it there I I like toward are bundled physician any you're of but you both one for that if curious kind

Rusty Frantz

than It's going slower. It's industry slower thought. the going

maybe I the test, lot but woke transition our for it a study honestly delayed didn't up from But clients this actually and to when were I've of is go kid found say finding next it you months a thinking slowly you if you you mean and you -- day. that were darn such of I spur been for the happy. in pretty train I that watching you were yourself away think definitely day There's a study But got present would and now. lot a nothing years four mind. like

our delayed. all it. getting to run XXX, many are, That I at we some degree that the think other mean right. it's sudden companies not the are looking same I into is shock of think of I way and awe have one here clients that's a kind

in of where something think term. regardless both is, government is in invest, on appetite can sides kind what I of capabilities. for to longer ROI of frankly great these this a has so I And actually and the that clients journey achieve the the their line that's and point applicable said that the of The therefore regardless does are back earlier they positive they increased is news

Donald Hooker

insight. the for Thanks

Operator

question from Halper Cantor with of Steve next the Fitzgerald. Your line comes

Steve Halper

said slightly than earnings yet? assuming not When revenue, reflect any growth ’XX grow tax rate I'm does will that fiscal change faster in you

Rusty Frantz

pro Steve, situation. truly just complex That's correct. new we relatively the the impact a of looking We're at tax forma, until understand

Steve Halper

a fiscal mechanical – for comment your just to -- of as the now but Right, of range low ’XX range thing XX% is sort sort

Rusty Frantz

yes, a from rate from sorry, a standpoint, tax correct. tax -- are you standpoint Yeah, I'm

Steve Halper

fourth number will going to a be but just standpoint, in your lower not quarter? tax Yeah, mechanical you a change fiscal fourth paying quarter rate the from

Jamie Arnold

Yes.

Steve Halper

Yes.

good. Okay, That's good thing. Thank you.

Jamie Arnold

to emphasize leveraged. slightly I word the want

Rusty Frantz

’XX. for leverage Slight Absolutely.

weren’t we XX%, you I'm no, said talking no, growth second earnings year. next The Steve, no, XX% like about

Steve Halper

tax talking No, was I rate.

Rusty Frantz

on we so bit I'd to of I leverage wouldn't I Yeah, be may one. it close look the tailwind much. to get expect and expect but one little mean a to very

Steve Halper

you. thank Okay,

Operator

Mannheimer question line comes next Your Company. with of Dougherty the & Gene from

Gene Mannheimer

in just afternoon. prior Thanks squeezing question here. Good Thanks. businesses. I want for off piggyback the of acquired to me some on

Entrada Eagle Rusty, quarter? that So calling came call you the in the out are of would and revenue Jamie or you amount from out

Rusty Frantz

talked because subscription for uptake no, simply in because this subscription professional integration line. No, about all and and speed the -- of important to a of investors impact. line We've it's services disclose understand bit simply we in those the we in speed think Entrada as I show transcription a business. line the little But, case of to up only

Gene Mannheimer

on it Is fair we see. though businesses, would say have been that if there year I those an growth out were year? to to back organic

Rusty Frantz

Looking to Jamie.

Jamie Arnold

It's close.

Rusty Frantz

yeah. close, It’s

Gene Mannheimer

all X Good. periodically January or is do Okay, right. the on basis? I Is stream. you do you implement on some that And that – then more rolling adjustments. question Jamie maintenance inflationary on that know a

Jamie Arnold

X. It’s January largely on

Gene Mannheimer

Okay.

than expect on year, all be the would ’XX inflationary. equal should maintenance fiscal just we higher prior based So that else

Rusty Frantz

take we there get Here I’d can't providing additions number of – not What also -- there's percentage what are to attrition, but attrition we just that number. only are gross and CPI a a maintenance also say you is because I’d provide means is is that say because licenses. when what that increases

purely a net so quarter. what to with, is of it number maintenance the that from dollars end you the attrition started And that's clients the you number, retention with, the the start from a dollar client, not is at

Jamie Arnold

indicated in you if where attrition, back if an be with go color have expect amber a had associated that Gene, to it it, we I to Day and the will presentation I that Analyst slight you because what's CPI even maintenance such to the new the software, replace a the to is increase. because decline not go adequate contract lost forward be is small with part, software as intrusion you getting in maintenance,

Gene Mannheimer

Right.

very good. you. Thank Okay,

Rusty Frantz

more one then close take it We'll out. question and

Operator

Yes, sir.

the Your Davis final Stephanie with question of Citi comes line from Research.

Stephanie Davis

thank Jamie, question. hey, my Rusty, for Hey, taking you

at the Let end. round me

despite NextGen walk hires, hire maybe standard you the average existing how your that you us force coming can improve sales could so versus time gaps, improvements sales bookings for at Given recent new ramp through in up and are turnover, the any seeing if quarters? the productivity the

Rusty Frantz

our that we're have been for this we're the in very and about an What all, we starting time, here seeing evolve getting so for What up would long bookings as new an precise process, would time. reps and It making, in being back really invest folks company in the to commit I for folks -- sales of the here, in a seeing of the to that From idea up in given we're right continue opportunity on see I when ramp time the is who I to following excited the that balanced think that are to as attrition What you're a absolute increase across and are progress get say first don't see that ramp as productivity of are have long company up sales reps evolving say that time. discipline, So, that far this the productivity them. you're we're following way productivity that comes been calling will clients are more standpoint is don't they're answer good we this job. have very per an that from committed, they're is productive. time it organization and disclose I time all know they the and happened What benefits. continue also ramp rep. both right

Jamie Arnold

to say, were in is already takeaway would solution opportunities know this to reps I close that and been What industry had the identified. how bringing from I able think selling, we quarter are who know experienced my that do

I think we're there.

build think little have out. their a area, it's maybe pipelines, to to as versed individual them to well behave if going – take with it’s So to six like because to rep where on they're it's going but nine where probably coming any months than better you somebody that's industry, go new the into who you I an had wasn't

You've become with your acclimated got clients. to

part so been to I to to that -- to I've is last be expect years, like ramped. everywhere the traditional more it you become And nine twelve for takes I view would fully think them XX months the think the

growth. and I some come close and think we why that's They we had we to fortunate opportunities opportunities. sequential those had able in were were

Rusty Frantz

get they situation next especially And we’ve quarter, beginnings but of really of as next that are on RCM we where them to seen come year that's the of much opportunities fruition. really the same start to the we into the see creating

Stephanie Davis

follow up that’s Understandable. That bit a makes a little conceptual. of lot sense. more a And

recent trying Apple around given think that how EMR Just working more they're is about the patient the patient intermediary and business between the can an kind and of news health of data become aggregating data we to clinician to EDI built the that system, you've your moat exchange? and

Rusty Frantz

going sure the I'm not and totally not they're the press I comment totally of what don't sure they're all on it is I'm Have built around? doing understand end Apple So the not moat doing me understand release, that time we really put versus I of – let but really the a first say to not until can what understand press releases. I'm question out I announcements I comment.

Stephanie Davis

idea like offers than term a solution of just idea entry that it’s your much contracts, more sort to data interchange. that It’s maybe barrier the long

Rusty Frantz

data not pulling health so API data that's a have. fire-based which the of app Apple interchange, already off Well, we that's

Stephanie Davis

I get that.

Rusty Frantz

our that And I’d continue so we what is value. for clients the them, can more perform fact to more we and drive the moat around say is, effectively

continuing in completely of client and experience force. reflected a are executive we the and providing great the are market class as our increase ambulatory focused on We intimacy

our whether plan. introduction whether release, comment whether that. I Apple, press it's on any just Amazon, it's And it's just can't on executing We're so a

Stephanie Davis

right. All

Well, Sounds Appreciate guys. it. thank you good. much so

Rusty Frantz

Thank you, Stephanie.

Operator

gentlemen, And ladies concludes today's call. and this

You may now disconnect.

Nextgen Healthcare (NXGN) 26 Jan 182018 Q3 Earnings call transcript