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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Q & A
Operator
Operator

[Operator Instructions] Your first question comes from Jeff Garro with William Blair.

Analyst
Jeff Garro

Hey, good afternoon, guys, and thanks for taking the question. I wanted to ask about the move to more subscription deals in bookings. I know that was a point of emphasis last quarter. You called out the bolus of license revenue in the most recent quarter. So if you could give any background on those discrete deals in this quarter that would be helpful. And then an update on how the outlook is for the push to subscription going forward.

Executive
Rusty Frantz

Yes. So first of all, Jeff, great question. As we -- the actual shift to subscription started happening really almost within about a year of me joining the organization. So it's been going on for a number of years. We haven't talked about it as much, but it's been quietly and very rapidly building into a very significant portion of our revenue and one that continues to grow really as we see for the foreseeable future.

Now what we said was, we are actually now removing kind of the incentives for our team to sell perpetual and really balancing that neutrally or even slightly towards recurring, and with the thought that we're just going to let the natural kind of organic demand for perpetual licenses happen, but we're always going to be leading with subscription. Now what we found is that certainly as demands come back, first of all, there was some pent-up demand in our base. But also there are clients who absolutely prefer that model.

What I would say is, because it's really based on discrete pieces of demand, for example there was one very large deal that came in, in September, that had a significant amount of recurring of a perpetual revenue. These things are going to happen and because the number is pretty small now, it's going to be a little bit lumpy. And the reason I call it out in the call is only because when that lumpy revenue comes in, sometimes it has some very accelerating effects on the EPS line compared to maybe some other pieces of revenue.

Analyst
Jeff Garro

Got it. That's very helpful. And one more for me is on the Spring '21 release. It sounds like a little bit more emphasis on one of your new product releases than we've heard historically. And it sounds like this release could have a positive impact on several fronts and might be from specific add-on products or more competitive displacements or better retention. I just love to hear more comments on kind of where and how you see that new release play out positively and how we should think about the potential timing of that impact.

Executive
Rusty Frantz

Yeah, well, sure, I mean, first of all, the reason we talk about this release is, we've been doing a tremendous amount of work behind the scenes to build out all of the different capabilities necessary to truly empower an ambulatory organization's success. And we have built a