NextGen Healthcare is eyeing opportunities to take on financial risk with its physician practice offerings to support doctors making the shift to value-based care.
The ambulatory technology company currently offers a population health solution used by many accountable care organizations (ACOs) and wants to expand this product to smaller physician practices, CEO David Sides said during the company's fiscal second-quarter earnings call.
"We looked at recently how we've done in CMS [Centers for Medicare & Medicaid Services] data, and we've driven tens of millions of shared savings for our ACO clients. And then, on the even better side probably for how most people perceive risk, zero percent downside. So, 100% elimination of downside and a lot of upside," Sides told investors.
He added, "So, thinking about that tool and that capability, how do we take that into the average physician practice and help doctors who are maybe in a small five- or 10-person practice be able to have the analytics to understand their risk profile and then take that risk on? And then, what services would we wrap around that to make that easier for them to do?"
Sides said NextGen Healthcare will begin to "more aggressively market these solutions and then integrate them together to bring a better holistic solution to market."
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Sides took the reins at the technology company in late September after two years at telehealth giant Teladoc. He served as chief operating officer of Teladoc Health, where he led worldwide commercial and operations teams.
Sides said he joined NextGen Healthcare because he sees opportunities to leverage technology to enhance patient care as consumers look to get more care outside of hospitals and turn to the doctors with whom they have established relationships.
"I think that is a trend that continues going forward and accelerates as a way to both improve access to care and reduce health inequity and drive down the cost of care, because we can enable those doctors to kind of operate as doctors and think about ways to improve their clinical outcomes, financial outcomes and operational outcomes," he said.
He added, "We have all the tools and assets and technology you could want for that kind of problem, and I think it's an exciting place to be."
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Sides said he was "bullish" about the company's future growth in the ambulatory technology market.
"NextGen addresses attractive markets with a well-defined strategy and an enhanced ability to execute through both its commercial capabilities and expanding portfolio solutions," he said. "I also see potential opportunities to further unlock value by more effectively pointing certain of our assets toward attractive high-growth markets, which potentially offer significant return on investment."
Quarterly results beat Wall Street estimates
The company had a solid second quarter, reporting revenue of $149 million, up 7% compared to $140 million for the same period a year ago.
Of this total, recurring revenue accounted for $135.6 million, or 91%, of the total.
NextGen Healthcare reported a loss of $6.2 million in its fiscal second quarter compared to a net loss of $10.4 million in the same quarter last year.
Operating expenses during the quarter increased by $22 million as a result of costs related to the company's proxy contest and litigation defense against a lawsuit filed by a former board member alleging fraud. The company paid out $11.4 million in litigation costs from that lawsuit.
NextGen won that case in a jury verdict in July.
The company also had to contend with a proxy campaign launched by NextGen founder, Sheldon Razin, who was looking to elect an alternate slate of directors in an effort to shake up the leadership. During the company's annual meeting in October, shareholders sided with company leadership, electing all nine of the company’s director nominees to the board as opposed to Razin's alternative candidates.
On a per-share basis, the Atlanta-based company said it had a loss of 10 cents compared to net income of 16 cents per share during the same period a year ago.
On a non-GAAP basis, fully diluted earnings per share for the fiscal 2022 second quarter was 29 cents compared to 30 cents for the same period a year ago.
The company's results beat Wall Street analysts' estimates, with earnings beating the Zacks Consensus Estimate of 23 cents by 26.1%.
The company's top line surpassed the Zacks Consensus Estimate by 4.1%.
Bookings for the quarter came in at $39 million in the quarter, up 25% on a year-over-year basis and 14% quarter over quarter.
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"We believe this momentum speaks to the advantages of our solutions in certain medical specialties and the attractiveness of the breadth of our solutions. And for another quarter in a row, new client wins accounted for over 25% of bookings," Jamie Arnold, executive vice president and chief financial officer, said during the earnings call.
Of its total $149 million in second-quarter revenue, software subscription services brought in $41 million in revenue, up 12% from the same period a year ago.
"This stronger than expected growth reflects that our clients adopt our surround solutions like telehealth and mobile to better engage their patients and improve the patient-provider experience," Arnold said.
Managed services revenue came to $30 million, up 13%, and EDI and data generated $26 million in revenue, up 6% over the year-ago period.
The company ended the fiscal second quarter with $75 million in cash and equivalents and no balance outstanding on a line of credit. Free cash flow this quarter came to $13 million.
The company's board has approved a share repurchase program under which NextGen may repurchase up to $60 million of its outstanding shares of common stock through March 2023.
The company raised its financial guidance for the year, projecting full-year revenue between $584 million and $590 million, and projects non-GAAP earnings per share to range to between 90 cents and 96 cents, an increase from its prior guidance between 89 cents and 95 cents.