NextGen Healthcare, Inc. delivered adjusted earnings per share (EPS) of 25 cents in the second quarter of fiscal 2023, down 13.8% year over year. The figure beat the Zacks Consensus Estimate by a penny.

Our projection of adjusted EPS was 25 cents, which matched the company’s reported figure.

GAAP EPS in the quarter was 20 cents against the year-earlier loss of 10 cents per share.

Revenue Details

NextGen registered revenues of $159.4 million in the fiscal second quarter, up 6.8% year over year. The figure surpassed the Zacks Consensus Estimate by 1.9%.

The fiscal second-quarter revenue compares to our estimate of $156.9 million.

Segment Details

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

Total Recurring revenues were $143.5 million, up 5.8% from the year-ago quarter’s figure, driven by solid performances by NextGen’s transactional and data services, and managed services, especially patient pay and managed cloud services offering.

This figure compares to our Recurring revenues’ fiscal Q2 projection of $142.2 million.

Subscription services revenues in the fiscal second quarter amounted to $43.4 million, up 5.5% from the prior-year period’s level. Managed services revenues amounted to $31.1 million, up 10.1%, whereas Transactional and data services revenues amounted to $30.9 million, up 13.3% from the prior-year period’s level. Support and maintenance revenues amounted to $38.2 million, down 2.2%.

This figure compares to our fiscal Q2 projections of $43.4 million, $30.6 million, $27.5 million and $40.6 million, respectively.

Total Software, hardware and other non-recurring revenues amounted to $15.9 million, up 16.5% on a year-over-year basis. Strength in non-recurring services primarily drove the segmental revenues.

This figure compares to our segmental fiscal Q2 projection of $14.7 million.

Software license and hardware revenues amounted to $7.9 million, down 1.9%, whereas Other non-recurring services revenues amounted to $8 million, up 43.1% year over year.

This figure compares to our fiscal Q2 projections of $7.9 million and $6.8 million, respectively.

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 1.1% to $83.6 million. Adjusted gross margin contracted 420 basis points (bps) to 52.4%.

Selling, general and administrative expenses fell 29.7% to $44.9 million. Research and development expenses climbed 12.6% year over year to $20.9 million. Adjusted operating expenses of $65.7 million fell 20.2% year over year.

Adjusted operating profit totaled $17.9 million, reflecting a stupendous 731.7% surge from the prior-year quarter. Adjusted operating margin in the fiscal second quarter expanded a huge 977 bps to 11.2%.

Financial Position

NextGen exited second-quarter fiscal 2023 with cash and cash equivalents of $70.7 million compared with $40.4 million at the end of the fiscal first quarter.

Cumulative net cash provided by operating activities at the end of second-quarter fiscal 2023 was $33.8 million compared with net cash provided by operating activities of $20.5 million a year ago.

Fiscal 2023 Guidance

NextGen has upped its financial outlook for fiscal 2023 on the back of its performance in the first half of fiscal 2023 and updated view of the business.

NextGen now projects revenues in the range of $630 million-$640 million compared with the earlier projection of $621-$633 million for the full fiscal year. The Zacks Consensus Estimate for the same is pegged at $627 million.

Adjusted EPS is now projected in the band of 93-99 cents, up from the earlier expected range of 92-98 cents. The Zacks Consensus Estimate for the same stands at 95 cents.

Our Take

NextGen exited the second quarter of fiscal 2023 with better-than-expected results. The solid uptick in the top line, along with strength in both revenue sources, is impressive. Robust increases in Subscription services, Managed services, and Transactional and data services revenues in the quarter are encouraging. The solid improvement in Other non-recurring services revenues is also promising. Lower operating costs led to the expansion in adjusted operating margin during the quarter, which bodes well for the stock. An upbeat guidance for fiscal 2023 also buoys optimism.

However, NextGen’s year-over-year decline in adjusted EPS and lower Support and maintenance revenues, and Software license and hardware revenues are disappointing. The contraction of adjusted gross margin also does not bode well.

Zacks Rank and Key Picks

NextGen currently carries a Zacks Rank #3 (Hold).

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 which are expected to post an earnings beat this quarter.

McKesson Corporation (MCK Quick QuoteMCK - Free Report) has an Earnings ESP of +0.27% 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.

MCK has an estimated long-term growth rate of 10.1%. McKesson’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, with the average surprise being 13%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nevro Corp. (NVRO Quick QuoteNVRO - Free Report) has an Earnings ESP of +10.91% and is a Zacks #2 Rank stock. NVRO has an estimated growth rate of 23.3% for 2022.

Nevro’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and matched in the other, with the average surprise being 5.7%.

GoodRx Holdings, Inc. (GDRX Quick QuoteGDRX - Free Report) has an Earnings ESP of +21.62% and carries a Zacks Rank of 2 at present. GDRX has an estimated long-term growth rate of 16.4%.

GoodRx’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, with the average surprise being 19.4%.