Back to top

Image: Bigstock

NextGen Healthcare (NXGN) Beats on Q1 Earnings, Cuts FY23 View

Read MoreHide Full Article

NextGen Healthcare, Inc. (NXGN - Free Report) delivered adjusted earnings per share (EPS) of 16 cents in the first quarter of fiscal 2023, down 36% year over year. The figure beat the Zacks Consensus Estimate by a penny.

GAAP EPS in the quarter was 2 cents, down 50% year over year.

Revenue Details

NextGen registered revenues of $153.3 million in the fiscal first quarter, up 4.9% year over year. The figure surpassed the Zacks Consensus Estimate by a marginal 0.01%.

Segment Details

NextGen generates revenues from two sources, namely Recurring revenues, and Software, hardware and other non-recurring revenues.

Total Recurring revenues (91.2% of total revenues) were $139.8 million, up 5.6% from the year-ago quarter’s figure, driven by solid performances by NextGen’s subscription services and managed services.

Subscription services revenues in the fiscal first quarter amounted to $42.8 million, up 11.7% from the prior-year period’s level, driven by solid demand for NextGen Office, Mobile, Telehealth and other services.

Total Software, hardware and other non-recurring revenues (8.8% of total revenues) amounted to $14 million, down 1.2% on a year-over-year basis.

NextGen Healthcare, Inc. Price, Consensus and EPS Surprise

NextGen Healthcare, Inc. Price, Consensus and EPS Surprise

NextGen Healthcare, Inc. price-consensus-eps-surprise-chart | NextGen Healthcare, Inc. Quote

Margins

In the quarter under review, NextGen’s adjusted gross profit fell 1.3% to $80.4 million. Adjusted gross margin contracted 331 basis points (bps) to 52.4%.

Selling, general and administrative expenses rose 1.1% to $49 million. Research and development expenses climbed 12.8% year over year to $21.8 million. Adjusted operating expenses of $70.8 million rose 4.5% year over year.

Adjusted operating profit totaled $9.6 million, reflecting a 29.9% decline from the prior-year quarter. Adjusted operating margin in the fiscal first quarter contracted 309 bps to 6.2%.

Financial Position

NextGen exited first-quarter fiscal 2023 with cash and cash equivalents of $40.4 million compared with $59.8 million at the end of fiscal 2022.

Net cash used in operating activities at the end of first-quarter fiscal 2023 was $4.6 million against net cash provided by operating activities of $0.3 million a year ago.

Fiscal 2023 Guidance

NextGen has lowered its financial outlook for fiscal 2023.

The company now projects revenues in the range of $621-$633 million compared with the earlier projection of $628-$640 million for the full fiscal year. The Zacks Consensus Estimate for the same is pegged at $633.8 million.

Adjusted EPS is now projected in the band of 92-98 cents, lowered from the earlier expected range of 95 cents-$1.01. The Zacks Consensus Estimate for the same stands at 97 cents.

Our Take

NextGen exited the first quarter of fiscal 2023 with better-than-expected results. Solid uptick in the top line, along with strength in Recurring revenues, is impressive. Robust increase in Subscription services revenues in the quarter is encouraging. Continued strength in the NextGen Office and Enterprise domains as well as a host of surround solutions, such as mobile and telehealth, augur well. During its earnings call, NXGN confirmed that it introduced a line in recurring revenue, transactional and Data Services, which is promising.

However, NextGen’s year-over-year decline in adjusted EPS, and Software, hardware and other non-recurring revenues is disappointing. Contraction of both margins is worrying. NextGen lowered its financial outlook for the full fiscal year, which raises our apprehensions.

Zacks Rank and Stocks to Consider

NextGen Healthcare currently carries a Zacks Rank #4 (Sell).

Here are some medical stocks with the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), which are expected to post an earnings beat this quarter.

Centessa Pharmaceuticals plc (CNTA - Free Report) has an Earnings ESP of +2.70% and a Zacks Rank of 2. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

CNTA has an estimated growth rate of 20.6% for 2023. Centessa Pharmaceuticals’ earnings surpassed estimates in two of the trailing four quarters and lagged the same in the other two, with the average being 6.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

STERIS plc (STE - Free Report) has an Earnings ESP of +1.85% and is a Zacks #1 Rank stock. STE has an estimated growth rate of 9.9% for fiscal 2023.

STERIS’ earnings surpassed estimates in all the trailing four quarters, with the average surprise being 9.2%.

GoodRx Holdings, Inc. (GDRX - Free Report) has an Earnings ESP of +20.00% and is a Zacks #2 Ranked stock. GDRX has an estimated long-term growth rate of 16.6%.

GoodRx Holdings’ earnings surpassed estimates in two of the trailing four quarters, lagged the same in one and broke even in one, the average being 6.9%.