NextGen Healthcare (NYSE:NXGN) Q2 2021 Earnings Conference Call - Final Transcript

Oct 22, 2020 • 05:00 pm ET

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NextGen Healthcare (NYSE:NXGN) Q2 2021 Earnings Conference Call - Final Transcript

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Presentation
Executive
Rusty Frantz

We saw a gradual return of our volume-based businesses throughout the quarter and as we had forecast, our volume driven lines RCM and EDI are at about 93% to 95% of pre-COVID volume levels.

Additionally, we saw a spike to more classic levels on perpetual license revenue which pushed our software and hardware line up $3.3 million higher than each of the two previous quarters. Non-GAAP EPS of $0.30 increased $0.06 year-over-year and $0.07 quarter-over-quarter. This strong performance benefited from the $0.04 of short-term cost initiatives that have expired as of the start of Q3, contribution from the higher than expected perpetual license revenue, as well as excellent cost management across the organization.

As we move through the balance of this year, we expect this number to move down to a more normal, fully-laden run rate. Free cash flow of $23.7 million highlights another great performance by our collections team. Based on our continuing track record and improved market conditions, we are comfortable further reducing the amount drawn on our revolver early in the pandemic, resulting us -- in us paying down a total of $115 million in Q2. This leaves an outstanding balance of $64 million as of September 30, and we are in a net cash positive position.

Taking a deeper dive into commercial execution, we had a great quarter. Bookings of $31.2 million were up $5.7 million quarter-over-quarter, and they are down from a stellar $36.9 million year-over-year, last year did include a $5.5 million recurring deal. We are seeing some recovery of demand and we'll discuss our forward-looking views later on this call.

Consistent with last quarter, we were successful in competitive takeaways, as more than 20% of our bookings came from takeaways, showing the growing strength of our solution coupled with an increasing brand tailwind from our clients satisfaction. As we continue on our journey to becoming a trusted advisor to our clients and a relentless focus on delivering the solution that enables our clients future, I expect to see our continue -- commercial success continue. And finally, let me turn to the legacy maintenance line. Retention once again came in strong at over 90%, and point of fact 92.9%.

Given the rapid client and revenue growth in subscription services and recurring revenue and the relatively -- relative stability and now lesser importance of the legacy maintenance line, we will no longer be reporting on this metric unless it trends below our forecast range of 90%. We saw continued validation of our great client satisfaction in the latest release of the KLAS Interoperability Report. NextGen was identified as, "the only ambulatory specific EMR vendor to provide a strong usability experience for all interoperability workflows measured in the support." This is a great validation of how NextGen is giving our clients the unique capability to access the patient's entire available clinical records and put that information to use in the care process.

To be able to treat the whole patient and create a great patient experience,