NextGen Healthcare CEO says company prioritizing investments in virtual care for providers

NextGen Healthcare announced Monday it expects 2019 revenue to reach between $538 million and $542 million.

With those new projections, the company's 2019 revenue grew 2% compared to revenue of $529 million in 2018. That's lower than the company's previous projection of annual revenue between $541 million and $547 million.

Recurring revenue is expected to be between $488 million and $490 million, an increase of approximately 3% compared to a year ago.

The Irving, California-based ambulatory technology provider announced Monday its preliminary unaudited financial results for the fourth quarter and year-end 2020 fiscal year ending March 31. 

For the fourth quarter, NextGen Healthcare's preliminary unaudited revenue is expected to be between $134 million and $138 million, up 1% compared to a year ago.  Recurring revenue is expected to be between $123 million and $125 million, up 3% compared to a year ago.

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Preliminary unaudited cash and cash equivalents are expected to be approximately $138 million at the end of fiscal 2020, as the company drew $100 million against its credit line.

“We achieved solid results in the fourth quarter and for the full year as the coronavirus pandemic had a minimal impact until March,” said Rusty Frantz, president and CEO of NextGen Healthcare, during a conference call to discuss the company's business update.

"As COVID-19 transitioned from headline to reality, we focused on employee safety, business continuity and financial strength to ensure we can guide and help our provider customers during this tumultuous period, and we remain focused on our end-to-end solutions strategy," he said.

While circumstances caused a delay in some year-end deals, the COVID-19 pandemic simultaneously drove rapidly increasing demand for the company's telehealth solution, Frantz said.

"Beginning in mid-March, many clients encountered reduced patient volume that will impact our fiscal 2021 revenue in our volume-related services. Accordingly, we’ve taken a number of steps in an effort to mitigate the variable effects of this difficult-to-predict volume disruption," he said.

Frantz said earnings from the first half of the year will be down markedly, and free cash flow will go negative for the first half of 2020. Client patient volume in aggregate will bottom out around 50% sometime this quarter and then rebuild, according to Frantz.

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As part of longer-term cost-cutting actions, NextGen Healthcare laid off about 3% of its employee base last week, Frantz said. The company employs about 2,900 people, according to its website.

"We don’t do this lightly. We needed to organize for a future than may look somewhat different than the past," he said.

Short-term cost reduction strategies include suspending merit-based increases and 401(k) match programs. During the next two quarters, Frantz and Chief Financial Officer James Arnold will take a voluntary 20% pay cut and members of the executive team will see a 10% cut, he said.

Changes to the healthcare market

"We look at this year as a tale of two halves. The first half, ending in October, will be impacted by the drop in volume due to the shutdown in care, and the second half will be beginning to show signs of returning to a new normal. There is an opportunity in front of us to take share post-COVID," he said.

In March, NextGen rolled out a patient experience platform with integrated virtual visit capabilities as a result of its recent acquisitions and integration of Medfusion and Otto Health. NextGen's telehealth and patient engagement platform includes telehealth capabilities, mobile check-in for patients and online patient payment processing options integrated with its electronic health record.

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In November, NextGen announced it was acquiring patient experience platform Medfusion for $43 million to give its clients a better patient engagement platform.

The company also acquired telehealth company Otto Health in December, and those two deals followed NextGen's acquisition of Topaz Information Solutions, a behavioral health solutions provider, in October.

One impact of the COVID-19 crisis is the accelerated transformation of ambulatory care, Frantz said.

"We see patient experience becoming paramount—self-scheduling, frictionless payment, telehealth—these will be essential to acquiring and retaining patients," he said.

Physician practices also will need to manage the flow of patients through a "hybrid world" that includes in-person care, virtual care and drive-thru encounters and that will determine practices' ability to scale and be successful, he said.

Solution platforms must support the patient experience for both physical and virtual visits, and practices must have integrated financial, EMR and population health capabilities to support both risk and fee-for-service. 

"I believe NextGen Healthcare is very well-positioned to empower providers with the solutions required to thrive in the new reality of care delivery," Frantz said.