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NextGen Healthcare (NXGN) Beats on Q2 Earnings, Lags Revenues

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NextGen Healthcare (NXGN) Beats on Q2 Earnings, Lags Revenues

NextGen Healthcare (NXGN) delivers strong growth in software, hardware and other non-recurring revenues in Q2; lowers fiscal 2019 view.

NextGen Healthcare, Inc NXGN reported second-quarter fiscal 2019 adjusted earnings of 24 cents, which beat the Zacks Consensus Estimate of 19 cents. Further, earnings rose 9.1% year over year.

Revenues in the fiscal second quarter totaled $130.3 million, which missed the Zacks Consensus Estimate of $134 million. Revenues also fell 1.7% on a year-over-year basis.

The stock has a Zacks Rank #4 (Sell).

Bookings Update

Per management, the company witnessed consistent momentum in quarterly bookings, which improved 39% year over year to $36.1 million in the reported quarter. Bookings increased 24% on a sequential basis.

Further, management stated that the company’s growing pipeline and coveted RCM (Revenue Cycle Management) services platform mainly drove bookings.

NextGen Healthcare, Inc. Price and Consensus

 

Segment Details

The company reported fiscal second-quarter 2019 revenues under the following segments:

Total Recurring revenues grossed $116.3 million, down 2.6% from the year-ago quarter’s figure.

Total Software, hardware and other non-recurring revenues came in at $14 million, up 6.4% on a year-over-year basis driven by large professional consulting engagements.

Margins

In the quarter under review, gross profit totaled $69.2 million, down 6.3% from the prior-year quarter’s tally.

Gross margin in the quarter was 53.1%, down 260 basis points (bps).

Operating income totaled $15.5 million, which increased a significant 36.5%.

Lowers ’19 View

For fiscal 2019, NextGen Healthcare expects revenues in the range of $525-$535 million, lower than the previous guidance of $532-$548 million. The Zacks Consensus Estimate for revenues is pegged at $541.6 million, which is above the current guidance.         

Full-year earnings per share are expected between 70 cents and 74 cents, the high end of which is lower than the previous projection of 70 cents and 78 cents. Meanwhile, the Zacks Consensus Estimate for earnings is pegged at 75 cents, which is above the current guidance.

Wrapping Up

NexGen Healthcare ended the second quarter on a mixed note, with adjusted earnings beating the consensus mark, while revenues missing the same. A lowered guidance indicates looming concerns ahead. The company’s plummeting gross profit raise is a negative as well. Lower recurring revenues is a headwind. The company is highly exposed to integration risks. Cutthroat competition in the niche space also adds to the woes.

On the positive side, NextGen Healthcare rides on Software, hardware and other non-recurring segment. Management currently foresees solid growth prospects in the RCM pipeline as well. The NextGen population health analytics suite and NextGen mobile platform registered significant growth lately. A solid bookings growth also deserve mention. Moreover, the flagship NextGen Mobile and NextGen Office solutions act as drivers. For investors’ notice, the company expects high-single digit revenue growth by fiscal 2020.

Q3 Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space, which reported solid earnings this season are, Stryker Corporation SYK, Intuitive Surgical, Inc ISRG and Merit Medical Systems, Inc MMSI.

All the three companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported adjusted earnings of $2.83 per share in the third quarter of 2018, which beat the Zacks Consensus Estimate of $2.65. Adjusted earnings improved 1.8% year over year.

Stryker delivered third-quarter 2018 adjusted earnings per share (EPS) of $1.69, which beat the Zacks Consensus Estimate of $1.68. Earnings improved 11.2% year over year, within the company’s guidance.

Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, beating the Zacks Consensus Estimate of 42 cents. Adjusted earnings improved 46.9% from the year-ago quarter’s tally.

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