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NextGen (NXGN) Q2 Earnings Top Estimates, Margins Down
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NextGen Healthcare, Inc. delivered adjusted earnings per share (EPS) of 31 cents in the second quarter of fiscal 2024, up 24% year over year. The figure topped the Zacks Consensus Estimate by 24%.
GAAP EPS in the quarter was 7 cents, down 65% from the year-ago period’s EPS of 20 cents.
Revenue Details
NextGen registered revenues of $176.4 million in the fiscal second quarter, up 10.6% year over year. The figure surpassed the Zacks Consensus Estimate by 0.2%.
Segment Details
NextGen generates revenues from two sources, namely, Recurring revenues and Software, hardware and other non-recurring revenues.
Total Recurring revenues were $161.3 million, up 12.4% from the year-ago quarter’s figure. This figure compares to our Recurring revenues’ fiscal second-quarter projection of $158.8 million.
Subscription services revenues in the fiscal second quarter amounted to $50.3 million, up 15.8% from the prior-year period’s level. This figure compares to our fiscal second-quarter projection of $49.8 million.
Support and maintenance revenues amounted to $37.6 million, down 1.5%. This figure compares to our quarterly projection of $39 million.
Managed services revenues amounted to $35.1 million, up 12.9%. This figure compares to our projection of $34.3 million.
Transactional and data services revenues amounted to $38.4 million, up 24.4% from the prior-year period’s level. This figure compares to our projection of $35.7 million.
Total Software, hardware and other non-recurring revenues amounted to $15.1 million, down 5.3% on a year-over-year basis. This figure compares to our segmental fiscal second-quarter projection of $15.6 million.
Software license and hardware revenues amounted to $5.5 million, down 30.3%. This figure compares to our fiscal second-quarter projection of $6.8 million.
Other non-recurring services revenues amounted to $9.6 million, up 19.4% year over year. This figure compares to our projection of $8.8 million.
NextGen Healthcare, Inc. Price, Consensus and EPS Surprise
In the quarter under review, NextGen’s adjusted gross profit increased 6.2% to $88.8 million. However, the adjusted gross margin contracted 210 basis points to 50.3%.
Selling, general and administrative expenses increased 20.7% to $54.2 million. Research and development expenses fell 13.6% year over year to $18 million. Adjusted operating expenses of $72.2 million increased 9.8% year over year.
Adjusted operating profit totaled $16.6 million, declining 7% from the prior-year quarter. Adjusted operating margin in the quarter contracted 179 bps to 9.4%.
Financial Position
NextGen exited second-quarter fiscal 2024 with cash and cash equivalents of $53.9 million compared with $70.3 million at the fiscal first-quarter end.
As of Sep 30, 2023, 71,946 shares were issued and 67,097 shares were outstanding.
Cumulative net cash used in operating activities at second-quarter fiscal 2024-end was $17.5 million against cumulative net cash provided by operating activities of $33.8 million a year ago.
Fiscal 2024 Guidance
NextGen has not provided its outlook for fiscal 2024 due to its impending acquisition by software investment firm — Thoma Bravo.
In September, NextGen entered into a definitive agreement to be acquired by Thoma Bravo. Per management, the company will likely benefit from increased capital, expertise and strategic flexibility to provide healthcare technology solutions. Upon completion of the transaction, NextGen will become a privately-held company.
Our Take
NextGen exited the second quarter of fiscal 2024 with better-than-expected results. The solid uptick in the top line and bottom line, along with strength in Recurring revenues, were impressive. Robust increases in Subscription services, Managed services and Transactional and data services revenues in the quarter were encouraging. The improvement in Other non-recurring services revenues was also promising. The continued adoption of NextGen’s products was also encouraging. The proposed buyout of the company by Thoma Bravo looks promising for the company.
However, NextGen’s year-over-year decline in Support and maintenance revenues, Software, hardware, and other non-recurring revenues and Software license and hardware revenues was worrying. Rising operating costs leading to the contraction of both margins do not bode well.
Zacks Rank and Key Picks
NextGen currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader medical space that are supposed to report earnings soon are DaVita Inc. (DVA - Free Report) , Shockwave Medical, Inc. (SWAV - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
The Zacks Consensus Estimate for DaVita’s third-quarter 2023 adjusted EPS is currently pegged at $1.92. The consensus estimate for revenues is pegged at $3.01 billion. DVA currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita has an estimated long-term growth rate of 12.7%. DVA’s earnings yield of 9.1% compares favorably with the industry’s 4.3%.
Shockwave Medical currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its third-quarter 2023 adjusted EPS is currently pegged at 81 cents. The same for revenues is pegged at $184.8 million.
SWAV has an estimated long-term growth rate of 4.6%. Shockwave Medical’s earnings yield of 1.7% compares favorably with the industry’s negative yield.
Boston Scientific currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its third-quarter 2023 adjusted EPS is currently pegged at 48 cents. The same for its revenues stands at $3.47 billion.
BSX has an estimated long-term growth rate of 12.8%. Boston Scientific’s earnings yield of 3.9% compares favorably with the industry’s negative yield.
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NextGen (NXGN) Q2 Earnings Top Estimates, Margins Down
NextGen Healthcare, Inc. delivered adjusted earnings per share (EPS) of 31 cents in the second quarter of fiscal 2024, up 24% year over year. The figure topped the Zacks Consensus Estimate by 24%.
GAAP EPS in the quarter was 7 cents, down 65% from the year-ago period’s EPS of 20 cents.
Revenue Details
NextGen registered revenues of $176.4 million in the fiscal second quarter, up 10.6% year over year. The figure surpassed the Zacks Consensus Estimate by 0.2%.
Segment Details
NextGen generates revenues from two sources, namely, Recurring revenues and Software, hardware and other non-recurring revenues.
Total Recurring revenues were $161.3 million, up 12.4% from the year-ago quarter’s figure. This figure compares to our Recurring revenues’ fiscal second-quarter projection of $158.8 million.
Subscription services revenues in the fiscal second quarter amounted to $50.3 million, up 15.8% from the prior-year period’s level. This figure compares to our fiscal second-quarter projection of $49.8 million.
Support and maintenance revenues amounted to $37.6 million, down 1.5%. This figure compares to our quarterly projection of $39 million.
Managed services revenues amounted to $35.1 million, up 12.9%. This figure compares to our projection of $34.3 million.
Transactional and data services revenues amounted to $38.4 million, up 24.4% from the prior-year period’s level. This figure compares to our projection of $35.7 million.
Total Software, hardware and other non-recurring revenues amounted to $15.1 million, down 5.3% on a year-over-year basis. This figure compares to our segmental fiscal second-quarter projection of $15.6 million.
Software license and hardware revenues amounted to $5.5 million, down 30.3%. This figure compares to our fiscal second-quarter projection of $6.8 million.
Other non-recurring services revenues amounted to $9.6 million, up 19.4% year over year. This figure compares to our projection of $8.8 million.
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 increased 6.2% to $88.8 million. However, the adjusted gross margin contracted 210 basis points to 50.3%.
Selling, general and administrative expenses increased 20.7% to $54.2 million. Research and development expenses fell 13.6% year over year to $18 million. Adjusted operating expenses of $72.2 million increased 9.8% year over year.
Adjusted operating profit totaled $16.6 million, declining 7% from the prior-year quarter. Adjusted operating margin in the quarter contracted 179 bps to 9.4%.
Financial Position
NextGen exited second-quarter fiscal 2024 with cash and cash equivalents of $53.9 million compared with $70.3 million at the fiscal first-quarter end.
As of Sep 30, 2023, 71,946 shares were issued and 67,097 shares were outstanding.
Cumulative net cash used in operating activities at second-quarter fiscal 2024-end was $17.5 million against cumulative net cash provided by operating activities of $33.8 million a year ago.
Fiscal 2024 Guidance
NextGen has not provided its outlook for fiscal 2024 due to its impending acquisition by software investment firm — Thoma Bravo.
In September, NextGen entered into a definitive agreement to be acquired by Thoma Bravo. Per management, the company will likely benefit from increased capital, expertise and strategic flexibility to provide healthcare technology solutions. Upon completion of the transaction, NextGen will become a privately-held company.
Our Take
NextGen exited the second quarter of fiscal 2024 with better-than-expected results. The solid uptick in the top line and bottom line, along with strength in Recurring revenues, were impressive. Robust increases in Subscription services, Managed services and Transactional and data services revenues in the quarter were encouraging. The improvement in Other non-recurring services revenues was also promising. The continued adoption of NextGen’s products was also encouraging. The proposed buyout of the company by Thoma Bravo looks promising for the company.
However, NextGen’s year-over-year decline in Support and maintenance revenues, Software, hardware, and other non-recurring revenues and Software license and hardware revenues was worrying. Rising operating costs leading to the contraction of both margins do not bode well.
Zacks Rank and Key Picks
NextGen currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader medical space that are supposed to report earnings soon are DaVita Inc. (DVA - Free Report) , Shockwave Medical, Inc. (SWAV - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
The Zacks Consensus Estimate for DaVita’s third-quarter 2023 adjusted EPS is currently pegged at $1.92. The consensus estimate for revenues is pegged at $3.01 billion. DVA currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita has an estimated long-term growth rate of 12.7%. DVA’s earnings yield of 9.1% compares favorably with the industry’s 4.3%.
Shockwave Medical currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its third-quarter 2023 adjusted EPS is currently pegged at 81 cents. The same for revenues is pegged at $184.8 million.
SWAV has an estimated long-term growth rate of 4.6%. Shockwave Medical’s earnings yield of 1.7% compares favorably with the industry’s negative yield.
Boston Scientific currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its third-quarter 2023 adjusted EPS is currently pegged at 48 cents. The same for its revenues stands at $3.47 billion.
BSX has an estimated long-term growth rate of 12.8%. Boston Scientific’s earnings yield of 3.9% compares favorably with the industry’s negative yield.