Earnings call transcript Q1 2024

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Operator

Welcome to the NextGen Healthcare Fiscal 2024 First Quarter Results Conference Call. Hosting the call today from NextGen are David Sides, President and Chief Executive Officer; and Jamie Arnold, Chief Financial Officer. Today's call is being recorded. All lines have been placed in listen-only mode. The floor will be open for questions following the presentation. Instructions] [Operator

begin. I'd Vice the Investor President NextGen. you time, James over Relations to James, Senior Hammerschmidt, of may like this call turn to of At Finance and

James Hammerschmidt

Thank you, operator.

differ Factors presentation results we Before start, making expectations during release risks of from based statements please to call. that on to expectations uncertainties. and we and will SEC management's are part and Q&A in subject that current note detailed forward-looking actual our be statements These materially may are cause the the are and and assumptions earnings filings.

Relations reference non-GAAP earnings measures, our can also will call non-GAAP US be about also measures. release, financial which This reconciliations GAAP website. to certain Investor financial is in Information available found including our on

I'd call President the time, this over turn to CEO, and like our Sides. David to At

David Sides

you, first XXXX company the solid to all our and Building fiscal well And effective quarter to is operating executed fronts welcome and demonstrate year. double earnings start bottom Thank everyone report capital to deliver leverage fiscal XXXX, pleased growth, results created during create to revenue line new and top I'm management. fiscal digit across James. the momentum positioned call. on

trusted wins. the and strong testament net to strength creates to and and quarter cross the This a the client was we've which of the our practices to serve, retention, made for growth. advisor the as sell We're partner mission new the business future investments we company position to right solutions living our

financial in staffing interoperability sustainability, client is meaningfully related platform constraints. to addresses and differentiated clearly and experience, market integrated Our the physician concerns

well. The commercial team execute to continues

such care clearly is resonating. health the value and when behavioral Our as serving markets proposition attractive integrated

is we and product, flagship version to pleased are I'm from we of our our on net and ensuring majority latest clients and of out have, offerings to have overall line wins the clients to of success cross-sell that provider bookings sight a with Given XX% the the Cures-certified leveraging are closing the latest space. of the Foundation in clients announce new clear came our our remainder.

As adoption this transition, we Solution us leader were we and Surround well a believe positions further scale. remain to accelerate and the that in first

clients adopt them helps existing optimize solutions, continue clear financial high outcomes, our a Surround and diverse our on clinical recurring in Our streams. to investment, resulting which revenue growth performance their return across and

This example We revenue and originally momentum than strong transaction experience led where higher patient the ranked our planned our in in system clients, saw in pair line, created which space. the data a volumes, we've an partnership management our great practice payment to leading is in a our Pay offering. integrated specifically with in demand Patient quarter top leveraging for

based to with managed to our our modeled first saw quarter. client down what we've the perpetual that license licenses, with we in how deliver maintenance finally, to ramp And a which from business model model in today. with acceleration service This saw comes we continues a lumpiness lessen aligned software based transition, we the transaction exposure transition which value to model, and a or subscription shifting our best aligns

solutions to like and agenda. areas, cover innovation. advancing quarter to We've I'd last we're continuing key that our and these such we're invest the initiatives. we on making new in mentioned good to I Now in which interoperability delivering as in data is the over create and progress call care, based all progress value analytics, made organic several as invest in growth our

data to them, our unlock along for Enterprise in set including customers. those the the few investment our started a data partnership Snowflake and with continued access Working to our using value ability dimensions, solutions We clients Data health in quality we've and with of data of visualize clinical to broad deliver the measures. AWS to Cloud a

found XX and expands to customers NextGen pharma we clients completed measures. as XX clinical this to (ph) outperformed our national the core models help research data several This capabilities quality We've average leverage of reimbursement our studies, advanced sciences evolve. We advanced our life last quarter in and broader [fields] opportunities that of clinical benchmarking CMS support have thrive many platform practice and current is companies with through beyond which intelligence just one partnerships.

to in who include and studies. I’m focus our high Working potential with scaled excited we're a clients open excited the supporting partners, clients in specifically with the also have operability, for opportunity on also global we've value new our seen to research about specialties aperture the needs.

compliant, We market XX Connect us ability over for are countries. use solutions gives which Mirth in the leading to GDPR now like

wraparound we enrollment on through excited finally, leading representing and use XXXX remains risk. approximately generate models. health for We believe ACOs, XX,XXX system And the outcomes lives. attributed using nearly I'm why current to in we take providers and quality CMS the participating to clients a care Savings] the achieve care, been seeking enrolled quality with population XXX at insights announce of based are payment period significant of (ph) and have savings. These successfully point for partnering superior when provider's ACOs on touching solutions providers to that value to differentiating providers other services NextGen's care enabling That's analytics to [Medicare in improve financial alternative and capability Shared the deliver ability

to our for model, opportunity journey operating We to Now operating at the to optimize further come. in deliver leverage. scale deliver right to our and we see have capabilities place ensuring scale turning years to growth

sales, of in the growth services. Focusing the delivered made professional and support effort on Cures to upgrade past investments in cost we've

services plans staff the cycle billable we place service maintenance, as to on upgraded of upgrade [indiscernible] moderate. percentage start predictable cost initiatives. creation of to will cadence, new year and in third near to revenue be end in managed back sales we value a reduce supporting utilization, half actions As These as apparent reliance have augmentation, and services to own fiscal our our our the begins of of our optimize the resources redeploy party professional

invest how growth expense. and should like while more evolved to always we delivery improve group operating a which sales while thoughtful growing speed significantly also capacity modern at We've G&A functions organization. been development marketing, in Looking our model agile our and the rationalizing quality, product without expense, on oriented we've maximizing R&D,

We on client sales continue base. to our representatives favorable lead higher cost leverage a to improve cost to sales development acquisition conversions with more

the back function, forward. how And even been investing and in business automation when streamline we've at going looking support the further to systems office we

market we One I the is secure from with. collaboration want extensible get to transitioned as improve in channel. taking we the into strategic year. We call their May with already office operations out the advantage this a of to where commercial and back the new successfully to also and aim co-lo and of see partners bringing expand and potential We leverage do this offerings setting, for partners environment into Web segments have our partnerships NextGen an our AWS calendar like Services, established product vendors place Amazon beyond and work these we've geographies

arena. Leaders expanded as collaboration in great will on new in XXX in we're front our deepen over health new of clients In quarter margin. sales on and an the our and and by The it Rheumatology data the marketing partners Insights we had What's start with relationships prospective year. partners. will for agreements close clients with we're at and our future first plan a data host even is, an Conference, where health the acquisition attendees which the to revenue is attractive drive sales more position our integration providing growth acquisition. to and exceeded to and unified pursuing the with We about track to we targets TSI get excited strengthens exciting NextGen update our at want team, our further actively team I opportunity

provide turn to the the update that, on with And an to I'd over Jamie to Jamie? financials. call like

James Arnold

you, Thank David.

represent our on transition. were with Now And renewals. streams, quarter model business million $XX.X reminder, quarter. towards bookings four flat turning excluding Recurring bookings came the There as revenue million, at the our annual value Total year-over-year. value the X% transactions recurring made in to as the a mix which results. bookings than aligns higher increased greater comments roughly David $X earlier shifted first bookings in contract

a increase a dental pro Recurring on the million, $XXX.X XX for was pre combination revenue $XXX.X of year-over-year million as revenue of the a The XX% million divested total of and revenue grew revenue of is the of services TSI, July the and basis. revenue growth an post-acquisition from revenue. commercial XXXX. $XX.X of Services the percent XX% of managed on in reported and increase acceleration $XX.X grew for That accounted quarter year-over-year point organic forma million excluding and XX%. Subscription Total a assets we of by $XX.X XX% revenue plus Transaction fueled and XX% was grew XX%. Data and services grew TSI contribution solutions. acquisition of basis million historical

quarter Nonrecurring revenue the for year. XX% compared increase quarter a million, $XX.X same was to last the

of work from down XX% line fee services continue customers down which onetime there also million trend the year-over-year but the under trend, longer in six revenue Software with internal and was Professional $X our $X.X line plan. revenue and of in term quarter resulted benefit in to was contracts, live, grew bring a and we to the fixed as million backlog closing new a uplift. with

business revenue to and quarter be quarter, XXX sequentially, next points benefit days revenue. to last margin year. in the to fewer onetime basis Gross was the forward of expect flattish Looking to services one compared we approximately down XX.X% same due

last upgrade end and investment as excellence to a services, start on mix. moderate XXXX. fiscal Margin the to towards excellence have we center well and center related shift spend focus discussed professional our to a quarter's continue significant will made improvement of As services product upgrade should and in be the earnings of of transformation call, in as

forward the quarter compared million year, This quarter quarter operating quarter. net X% $X.XX a share $XX.X a basis, several quarter included million the pull earnings the non per share to same for earnings the expense year. $XX.X per year. to of a GAAP GAAP year. was basis, same Turning $X.XX $X.XX On the On in compared to compared decreased in same compared expenses, was $X.XX decrease investments. last which was last to SG&A same to by last onetime X% R&D is last

quarter Our was non GAAP the tax for XX%. rate

$XXX sales $XX.X cash convertible with payment. marketable we and was Turning was customer quarter million impacted quarter flow interest arrangements, and for balance outstanding the in to of bonus and credit. ended sheet, for a payments annual equivalents financing no negative our line securities, TSI and balance cash we on debt million cash, had the the Free by

repurchase not quarter be remainder quarter expect the on due cash a We more to return We the shares then million flow have of repurchase the to flow and for in to cash the current $XX.X remaining negative year. settlement free did the normalized rate next DOJ authorization. share conversion and

Turning financial full year XXXX fiscal guidance. to our

of raising million. noted As in to $XXX end based release, start $XXX solid press year. million We range are the the the revenue now range the on total to our revenue to expect in we of the be bottom

and guidance EBITDA non adjusted EPS Our GAAP unchanged. remains

now let David closing And back comments. for to call the turn me

David Sides

Jamie. you, Thank

NextGen required continues investments the both our long to us growth and and making profitability execute with clients focus on driving term for to deliver a scale. who are

focus Our the ambulatory by and we resilient on value. our care, driving solely outlook overall shareholder on business positive created reflects focusing tailwinds model our

They the sustained X,XXX basis. close are operating growth opportunity team our our of a success had and for work. champions to the and of work members behind on with driven thanking foundation the thousands leverage by the want to equation making have regular clients I and mission

I'll that, with turn questions. Operator? for And the back open to to operator the call up

Operator

Garro [Operator with first Instructions] you. from Stephens. Our will Jeff question Thank come

Jeff Garro

taking where environment. that questions. color in quarter? ask on Yeah. the Good quite the the for And give you recurring the demand metric, your win on and book comments given currently? and I the helpful. further appreciate on want of would tracking pipeline afternoon. bookings bookings How current level Thanks sits the is that activity that's I sales to Any rate

David Sides

Jeff. Thanks,

a SaaS So quarter from good a -- from especially SaaS perspective perspective. was from sales it a -- a

went some which down probably that saw in You is expected. we perpetual,

good. kind long down down still term new pushing go to really we clients. all of trend We is as The are SaaS expect to the or environment

our good. otherwise, pretty a down. up quarter, this good So feeling the looks we're But little perspective, year, good for good growth, looks for pipeline continued from and for buyer's looks

Jeff Garro

mix, comments margins on to Got strength the it. ask gross of recent some things. get much side in that maybe revenue You implementation Thanks. and to have in That had that around I out the help then line to wanted you to presumably of on clients can of be profitability you timing, work is attributable further margins? the but where could helpful regulatory headwind have you comments that how looming Then areas transactional of specifically Any that on partners helps. attributed much gross how parse the and Cures services ahead data some upgraded some deadline? version some to

James Arnold

Jeff, But of of margin. solutions see upgrade the and and line. and spend increased in our trying solution requiring you little sticky probably are round becomes the I'm I the talked between it spend happy lower very and about. evenly. but The transactional we to -- the we're a the would on very say customers continued -- center it split with did a services is increase it's about the out with two it does come factors a headwinds data services, in bit Clearly, helps excellence increased

those probably of combination about half two gross the the of are headwind. So margin

Jeff Garro

queue. back the Thanks. hop Great. I'll in

James Arnold

Thank you.

Operator

you. Thank

next question with will from Jack Wallace come Securities. Guggenheim Our

Jack Wallace

for Hey, Thanks good taking evening. questions. my

any that on of the on, also of a got there you. impact timing quarter. space of add follow Surround upgrades and of be. since the just other would Thank going -- upgrades the any seen the you just from bookings office does And couple any impact a Was with add-ons, there You've the then some color ups in in impact any standpoint leak? data kind have the

David Sides

Yeah. Thanks.

office, the did softness So base. we some from the see in

the base softness. clients, recover. new ironically, already outside started but in base, some So to getting no the change, saw That we're

back steady could this Surround live still see state the for We should normal on get And think October, a Cures synergies through to on lot quarter the of not well is come impact, lot set this an be So of a addition we really our well in which seeing the that quarter. that to expecting that. current so we're Surround, the us. clients and should us by final up doing

we When calls version calls support what For know the they on. the example, version they're know on. when somebody client, the salesperson they're

helpful So us are from that up for things it some sets think we perspective. that

center as question us that bit, year just of second well to As this down half adding upgrade to of ramp start last little the the excellence. you'll a on see in

down all that -- to that but You'll forward. see going we're are excited improvements on hopefully, up that'll gradually parts people other good the those our built gross margin of going more redeployed as forward, business, really roles we've into to go talent and billable here keep great

Jack Wallace

That's valuations? just just And then you private how pipeline changed Great. comment around on helpful. market thoughts M&A your has could and the last your quarter

David Sides

continuing improve, I the think perspective. our Especially if market are raise continues a the rates. private valuations to at from from perspective, Fed least to buyer

later to that haven't in rates I through think people things lot that in of coming healthcare we the factored about thought one to the are cost maybe premiums. this a insurance year

to I be higher think floor. a going it'll they're high and set

our through in feeds and that that beneficiary that some higher year, to payments a providers how same be see that we'll we'd of next from time through. of coming at but So, the better

I through interesting to the feel market, be care increases meant the are not and helping private at XX%. that we -- increases this increase And health spend public. just it's bring those say, if rate to market if X% closer may valuations So last an or come

because and like competition financing So with they're out like we're new equity with from they're assets the it private takes the that some those of it prices. we for also we cash. -- It debt not financing

on a have and on that's working out and do still on we good are M&A, good team the we there balance to So cash what focused it. seeing sheet opportunities have want

now. we So see the that like right pipeline

Jack Wallace

helpful. you. that's That Thank

Operator

Thank you.

come will from RBC Capital question Dodge with Markets. next Sean Our

Sean Dodge

bit we going time. past, saw revenue helped the one afternoon. back Jamie's or just year, I much in like more now Maybe how improve. around center pass gross license good to I David, margins in guess, makes should said margin and tougher Yes. we gross on to mix just to you think, the to a back quick When just years sales those moderate Thanks a lot how point, that a about do winds upgrade later begin and the you spend think to achieve? fifties the and little low by was that see down.

James Arnold

I will help the to generated XX think about revenue would lift this do is to start going to see, and increase as to longer [indiscernible] take expect is margin insights, year, enhanced. the revenue be margins payout say longer. and is the a half When will that overall particularly the will but be insights we said, I a We John, be Jamie. to XX corporate see higher will Yes, margin. expect back little in the the David this of to bit

think settle going not margin. NextGen pick of time, in in bit little gross the to its but dramatically. enterprise I is current over a kind probably up this It'll

and improvement ago year think as XXXX. and in contribution revenue comes starts I the XXXX bigger up a produce we insights that to starting pick meaningful to identified

Sean Dodge

good of Okay. order $XX the share on bookings, color maybe ahead the plans? to from the guidance you quarters? year? you you in is in there with bit a any for or need there there higher that $XX on something of than Great. or And Was the signed And in was you going pull? forward? achieve little then slipped kind helpful. that can of enough, the us Anything more adjacent Were quarter? any kind That's very give a then, million need or million sense cadence a pulled line that pushes the do quarter Is

David Sides

the in first -- that higher mean, something need that talked especially, forward. Certainly out when think till quarter. kind I we XXXX. you before going for than about We of

QX. recurring of the talking business about really we like XX%, third The the we're QX have first visibility. good And model the following once But get and our year. is to beauty we quarter, quarter really does feed into

of like, we do people So still than forecast your QX forecast around that. better nature. because, better million your are you need in know But and that how -- current it's recurring in than the looks revenue we're confidence kind is $XX

you not -- when nervous up you're into So we're that. really get about starting But QX XXXX. setting for

quarter So was this good.

should continue feel year's at will And better. in quarter good still be do those half the be how really of double digits about we Next XXXX. growth this latter We the year. about bookings

Sean Dodge

Great. again. Thanks Okay.

David Sides

Thanks.

Operator

Thank you.

Truist Our Jailendra next Singh comes from question Securities. with

Jailendra Singh

want for and MSSP thanks data and actually lives on ACO few Thank CMS you I questions. XXXX XXX there. XX,XXX attributed enrollment for my shared taking around providers double you the A to products. and click in questions

based First, how XXX just bit of versus you doing, you vendors these on maybe clients MSSP compared differentiation value deeper providers have were these clients are there or dig your existing the little guys based single working with many on several value second, care in to care solutions? solutions you And solutions? who you like, a out key can other

David Sides

Jailendra. Thanks,

So they're all existing clients.

we've the the as health We're generate bring clinical tech lot is, so having population that through actually So to our better shared a targeted face into has that everyone the things in will telling workflow need to of the you do application without kind they savings. bringing insights a applications work, outcomes so of those technology them following a mean bringing And achieve with the so what I And we and that integrated been we're can existing. savings of them, patient. what check we're they're far encounter the that by the get is, to up all and analytics, right? going and

bring I'd putting have clinical our model that's together, and places proven it of we to are point all lots bring We're to support. importantly change a of -- here. So and taking of able And that too, the that differentiates it tech we're out with some then tech what some not us.

generating better So this are and clients we're we've to press put our in some with models do releases construct. seen of refining together we're our $XXX in savings. us million learning out shared those clients learning from further that We're and

Jailendra Singh

It's kind of related to that.

if weeks be lives conversation couple because think I but of some be and from around it CMS participation to had because know with proposal clients any more early, any the changes. might a attributed and provider a you more there I little to a it early changes like program was back those curious of seems just expects CMS some

last Just curious heard anything of so? have the weeks in like couple you or

David Sides

have anything couple the We up haven't in weeks. to time heard sign providers. last still of more We

won't that But number final at. So we're end through that this optimistic the changes. it we come we yet marketplace up haven't the those be heard from

Jailendra Singh

last one one. And Okay.

On talked think I the that. free about flow trend, cash you

just the So just sure guidance you year, like number provide ballpark? the for are we make any to in any can

James Arnold

cash No. expecting Almost to payment. we're that issue. next share on out $XX tried to cash the went it to of DOJ We negative -- the with because quarter for be related million the payment

in of afterwards EBITDA I we will negative. you as And it that area. I year half expect probably a good back so, obviously, believe target think cash of and will be the are the is give we conversions of pretty to XX% able

David Sides

entire generating cash year, entire for for free Limited flow year. the cash on year. the But still flow the free

Jailendra Singh

right, lot. Thanks All guys. a

Operator

Thank [Operator question with Our Jessica comes from Instructions] Sandler. Piper Tassan next you.

Jessica Tassan

you Thank Hi. for the question. taking guys

bookings So a few Hopefully, bear with have me. related ones. can you I more

So cycle Or completion spring of month existing going so, years kind to you of bookings are just the if to is and upgrades? are from sales that same-store volume are bookings? seeing who customers of upgrading the coming in from existing upgrade customer XXXX? moderate the to the of And of XX% the customers the majority subsequent

David Sides

are the Cures and XX% base addition. the the on the from the the -- I of base So mean, majority is now

these From So, that's almost addition the that certainly things? easier getting I addition. implementation it's is everyone where Cures of but perspective, kind they driving or It's not an just on that's probably. presence, of absence do the that guess, the it bookings because stands Act need the Cures -- reason

newer check, Surround it's much years put it That's that think, on now. two probably that. can all whatever are some is, where, this implementation I require So when solutions pretty there it you to ago There without goes that.

-- to point point. work this all do this to same on are release on less at implement because there's clients most people -- at the are no there's So

Jessica Tassan

Got it.

just of the are of should bookings So continue from the through to? coming status customers, existing irrespective and upgrade of kind those the

David Sides

Yes.

think so. I

Jessica Tassan

Got then a new And with now bookings update compliant of any the would compliance competitive mean that XXXX it. or any for that have practices you Cures conversion? to broadly. that neutral or what does ambulatory what does prospect? kind Do market Cures of net update just sense are just and is irrelevant a recent mean be XXXX convert update Basically, a or client of to kind factor harder competitive

David Sides

I for think think not it, you live it, -- get the it's for on positive they're somebody in that us if you're on we I deadline if it's not a by still. could

So live the happy time. them to clients to we'd process conversion of any get those be through in take

So by that Most mainly us. now. competitors to of still NextGen. practice come Those we'd lower good ends. opportunity larger problem that's they're for not And our a to think the offer upgraded, on certified them are I is an still

ones aren't, addition, already we come still So get some think NextGen -- or that happen But them to market. the they're to in to movement there probably on I could the in not. if but still there's

Jessica Tassan

Got it.

would mix kind to just bookings expect should from despite having the bookings compliant? of And or that upgraded be pace remain to customers the moderate so net the market generally then or of new you strong of

David Sides

Yeah.

once, nice about solutions applications part they're been you've very Surround a this clients bit it. But is, stays those of And it XX%. better at the and a did always around hosted. seen We've it's strong like We lot think consistent quarter, consistent. little bringing I XX%.

everything So another them saying way is, buying of sticky. and it that makes they're

are that once. are more at installed like become So and that the those things, like we us we is, clients stickier coming they the then we get new see the more everything part that about to buying solutions

from It's have that start. we've the sticky the if over mature start, and base, sticky client everything years sales moving a process create been along very once they're to from which, they our may is nice sell think our at right them about enough somewhere time. So XX you started ago,

Jessica Tassan

who just again. previously participating? Thanks final they one that were MSSP? helpful. their would those signed to if support really for in providers so, the That's And my it. all be, Got already MSSP. using what providers so And Are you far participation are are

Jessica Tassan

question. it's good Yes, a

class to So providers. but right? some thanks, that -- of out that looking is, process, the converted Jessica. start very at that Most not converted have them conversions create our we're is did from the to or So we of profitable of whoever, like competitors we it's them from the competitor new them from MSSP with aren't of normal from their new to [indiscernible] kind model are profitability we model. XXX the still trying different first yet business to prove it the business right we're And way a competitors,

one to market differentiated the way going it's So that, from of not it's we're going to be the spending, profitable we're is start.

scale we unprofitable of moving we're but business a over Let move movement spending me from here, just and providers say think into lot the profitable an model. We'd and our make size start. rather for that. We're not tons of to time money there's

Jessica Tassan

again. Thanks

Operator

the Thank you. conference like time. I'd David And no to questions this any remarks. Mr. for Sides additional there turn at are to now closing over

David Sides

call. conference for look really talking October for in an Thank Day to We you the again in to call you joining fall, Investor the potentially and in for November. forward all earning

everyone's appreciate and interest So talk we'll soon. you Thanks. to

Operator

today's Thank you. Ladies concludes and gentlemen, presentation. this

You may now disconnect.

Nextgen Healthcare (NXGN) 24 Jul 232024 Q1 Earnings call transcript