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NextGen Healthcare Reports Fiscal 2023 Fourth Quarter and Full Year Results

REMOTE-FIRST COMPANY/NEW YORK, May 16, 2023--(BUSINESS WIRE)--NextGen Healthcare, Inc. (Nasdaq: NXGN), a leading provider of innovative, cloud-based healthcare technology solutions, today announced its operating results for the fiscal fourth quarter and year ended March 31, 2023.

Fiscal 2023 Fourth Quarter Highlights

  • Total revenue was $178.6 million compared to $151.3 million for the same period a year ago, an increase of 18.0%.

  • Recurring revenue was $161.9 million compared to $137.2 million for the same period a year ago, an increase of 18.0%.

  • Non-recurring revenue was $16.6 million compared to $14.0 million for the same period a year ago, an increase of 18.4%.

  • Fully diluted net loss per share was $0.38, which includes an accrual for the settlement of the DOJ matter, compared to $0.01 net income per share for the same period a year ago.

  • On a non-GAAP basis, fully diluted earnings per share was $0.31 compared to $0.19 for the same period a year ago.

  • Adjusted EBITDA was $33.7 million compared to $23.7 million for the same period a year ago.

  • Bookings, which reflects annual contract value excluding renewals, were $45.0 million and included several deals greater than $1.0 million.

Fiscal 2023 Full Year Highlights

  • Total revenue was $653.2 million compared to $596.4 million for the same period a year ago, an increase of 9.5%.

  • Fully diluted net loss per share was $0.04 compared to a net income per share of $0.02 for the same period a year ago.

  • On a non-GAAP basis, fully diluted earnings per share was $0.98 compared to $0.98 for the same period a year ago.

  • Adjusted EBITDA was $111.7 million compared to $114.2 million for the same period a year ago.

  • Bookings, which reflects annual contract value excluding renewals, were $166.5 million compared to $152.5 million for the same period a year ago.

"These solid results put us one step closer to achieving our long-term goal of double-digit revenue growth, operating leverage, and disciplined capital management," said David Sides, president and chief executive officer of NextGen Healthcare. "We’re living our mission to advance ambulatory care with innovations for healthier communities, and find ourselves in a great position to deliver another year of balanced growth."

Introducing Fiscal 2024 Financial Guidance

  • Revenue is expected to be in the range of $712 million to $722 million.

  • Adjusted EBITDA is expected to be in the range of $125 million to $131 million.

  • Non-GAAP earnings per share is expected to be in the range of $1.04 to $1.11.

Conference Call Information

NextGen Healthcare will host a conference call today at 5:00 p.m. EDT to discuss operating results from its fiscal 2023 fourth quarter and full year. Shareholders and interested participants may listen to a live broadcast of the conference call by dialing 800-343-4136 or 203-518-9843 for international callers and referencing participant code NXGNQ423 approximately 15 minutes prior to the call. A recording of the live webcast will be available on investor.nextgen.com after the call. It will be archived for 90 days.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our fiscal year 2024 outlook, financial and operating results and statements related to the settlement of the DOJ matter, strategic priorities, growth initiatives and expected capital expenditures. These forward-looking statements are based on the current beliefs, expectations, and assumptions of our management with respect to future events, only speak as of the date that they are made and are subject to significant risks and uncertainties. Such statements can be identified by the use of words such as "positioned," "proposed," "potential," "project," "expect," "anticipate," "intend," "plan," "goal," "seek," "believe," "estimate, "strategy," "expectations," "future," "likely," "may," "should," "will," and similar terms, although not all forward-looking statements contain such words or expressions. Actual results could differ significantly from those set forth in the forward-looking statements.

Risks and uncertainties exist that may cause the results to differ materially from those set forth in these forward-looking statements, including but not limited to: the final outcome of the DOJ investigation, including our ability to negotiate a final settlement agreement with the DOJ; potential additional investigations and proceedings from governmental entities or third parties related to the same or similar conduct; cybersecurity and data protection risks and related liabilities; potential litigation involving us; a shifting revenue mix that may impact gross margin; changes in laws and regulations applicable to our business; changes in market conditions and receptivity to our services and offerings; impact of strategic actions, including acquisitions and dispositions; management of and our success in integrating acquired businesses; our ability to maintain and expand our business with existing clients or effectively transition clients to newer products; our ability to attract new partners and successfully capture new opportunities; our ability to anticipate or respond quickly to market changes, execute our strategy and manage growth; the development by competitors of new or superior technologies; the timing, cost and success or failure of new product and service introductions, development and product upgrade releases; disruptions caused by acquisitions of companies, products, or technologies; and general economic conditions. A significant portion of the Company's quarterly sales of software product licenses and computer hardware is concluded in the last month of a fiscal quarter, generally with a concentration of such revenues earned in the final ten business days of that month. Due to these and other factors, the Company's revenues and operating results are very difficult to forecast. A major portion of the Company's costs and expenses are of a fixed nature and, accordingly, a shortfall or decline in quarterly and/or annual revenues typically results in lower profitability or losses. As a result, comparison of the Company's period-to-period financial performance is not necessarily meaningful and should not be relied upon as an indicator of future performance.

Additional discussion of these and other risks, uncertainties and factors that could affect our business and financial results is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings we make with the Securities and Exchange Commission from time to time. These forward-looking statements speak only as of the date hereof. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

USE OF NON-GAAP FINANCIAL MEASURES

This news release contains certain non-GAAP (Generally Accepted Accounting Principles) financial measures, which are provided only as supplemental information. Investors should consider these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures. These non-GAAP measures are not in accordance with or a substitute for U.S. GAAP. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of non-GAAP financial measures to the most directly comparable financial measure in the accompanying financial tables. Other companies may calculate non-GAAP measures differently than NextGen Healthcare, Inc., which limits comparability between companies. The Company believes that its presentation of non-GAAP diluted earnings per share provides useful supplemental information to investors and management regarding the Company's financial condition and results. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP.

The Company calculates non-GAAP diluted earnings per share by excluding net acquisition costs, amortization of acquired intangible assets, amortization of deferred debt issuance costs, gain on disposition of Commercial Dental assets, impairment of assets, restructuring costs, shareholder disputes and related costs, net of insurance, which include net securities litigation defense, proxy contest, other regulatory and litigation matters, and related costs, share-based compensation, and other non-run-rate expenses from GAAP income before provision for income taxes.

The Company utilizes a normalized non-GAAP tax rate to provide better consistency across the interim reporting periods within a given fiscal year by eliminating the effects of non-recurring and period-specific items, which can vary in size and frequency, and which are not necessarily reflective of the Company’s longer-term operations. The normalized non-GAAP tax rate applied to each quarter of fiscal year 2023 was 20.0%. The normalized non-GAAP tax rate expected to be applied to each quarter of fiscal year 2024 is 21.0%. The determination of this rate is based on the consideration of both historic and projected financial results. The Company may adjust its non-GAAP tax rate as additional information becomes available and in conjunction with any other significant events occur that may materially affect this rate, such as merger and acquisition activity, changes in business outlook, or other changes in expectations regarding tax regulations.

The Company calculates free cash flow as total net cash provided by operating activities, net of cash used for the additions of capitalized software costs and equipment and improvements. The Company calculates net debt as line of credit and convertible senior notes less cash and cash equivalents and marketable securities. The Company calculates non-GAAP adjusted EBITDA by excluding net acquisition costs, amortization of acquired intangible assets, impairment of assets, restructuring costs, shareholder disputes and related costs, net of insurance, which include net securities litigation defense, proxy contest, other regulatory and litigation matters, and related costs, share-based compensation, and other non-run-rate expenses from GAAP income from operations and then adding back amortization of capitalized software costs and depreciation as presented within the condensed consolidated statements of cash flows. Non-GAAP adjusted EBITDA margin is calculated as non-GAAP adjusted EBITDA divided by total revenues. The Company calculates Rule of 40 as annual revenue growth rate plus non-GAAP adjusted EBITDA margin.

The Company’s future period guidance in this release includes adjustments for items not indicative of the Company’s core operations. Such adjustments are generally expected to be of a nature similar to those adjustments applied to the Company’s historic GAAP financial results in the determination of the Company’s non-GAAP diluted earnings per share. Such adjustments, however, may be affected by changes in ongoing assumptions and judgments as to the items that are excluded in the calculation of non-GAAP adjusted net income and adjusted diluted earnings per share, as described in this release. The exact amount and probable significance of these adjustments, including net acquisition costs, impairment of assets, restructuring costs, shareholder disputes and related costs, which include net securities litigation defense, proxy contest, other regulatory and litigation matters, and related costs, and other non-run-rate expenses, are not currently determinable without unreasonable efforts, but may be significant. These items cannot be reliably quantified or forecasted due to the combination of their historic and expected variability. It is therefore not practicable to reconcile this non-GAAP guidance to the most comparable GAAP measures.

About NextGen Healthcare, Inc.

NextGen Healthcare, Inc. (Nasdaq: NXGN) is a leading provider of innovative healthcare technology solutions. We are reimagining ambulatory healthcare with award-winning solutions that enable high-performing practices to create healthier communities. We partner with medical, behavioral and dental providers in their journey toward whole person health and value-based care. Our highly integrated, intelligent and interoperable solutions go beyond EHR and Practice Management to increase clinical quality and productivity, enrich the patient experience and drive superior financial performance. We are on a quest to achieve better healthcare outcomes for all. Learn more at nextgen.com, and follow us on Facebook, Twitter, LinkedIn, YouTube and Instagram.

NEXTGEN HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)

Three Months Ended March 31,

Fiscal Year Ended March 31,

2023

2022

2023

2022

Revenues:

Recurring

$

161,936

$

137,227

$

593,918

$

539,713

Software, hardware, and other non-recurring

16,614

14,032

59,254

56,637

Total revenues

178,550

151,259

653,172

596,350

Cost of revenue:

Recurring

74,861

60,169

269,191

232,481

Software, hardware, and other non-recurring

11,893

7,949

44,881

31,034

Amortization of capitalized software costs and acquired intangible assets

7,276

7,643

27,941

31,889

Total cost of revenue

94,030

75,761

342,013

295,404

Gross profit

84,520

75,498

311,159

300,946

Operating expenses:

Selling, general and administrative

83,327

50,046

223,424

209,661

Research and development costs, net

20,027

19,428

82,300

76,657

Amortization of acquired intangible assets

1,336

882

3,665

3,525

Impairment of assets

1,587

2,329

3,163

3,906

Restructuring costs

2,152

2,473

539

Total operating expenses

108,429

72,685

315,025

294,288

Income (loss) from operations

(23,909

)

2,813

(3,866

)

6,658

Interest income

1,891

22

3,541

101

Interest expense

(3,404

)

(541

)

(6,298

)

(1,499

)

Other income (expense), net

661

(21

)

10,927

(64

)

Income (loss) before provision for income taxes

(24,761

)

2,273

4,304

5,196

Provision for income taxes

479

1,925

6,958

3,578

Net income (loss)

$

(25,240

)

$

348

$

(2,654

)

$

1,618

Net income (loss) per share:

Basic

$

(0.38

)

$

0.01

$

(0.04

)

$

0.02

Diluted

$

(0.38

)

$

0.01

$

(0.04

)

$

0.02

Weighted-average shares outstanding:

Basic

66,049

66,929

67,005

67,370

Diluted

66,049

67,547

67,005

67,788

NEXTGEN HEALTHCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)

March 31, 2023

March 31, 2022

ASSETS

Current assets:

Cash and cash equivalents

$

98,719

$

59,829

Restricted cash and cash equivalents

7,269

6,918

Marketable securities

139,612

Accounts receivable, net

88,498

76,057

Contract assets

19,561

25,157

Income taxes receivable

5,248

6,507

Prepaid expenses and other current assets

42,916

37,102

Total current assets

401,823

211,570

Equipment and improvements, net

6,421

9,120

Capitalized software costs, net

54,516

43,958

Operating lease assets

3,335

11,316

Deferred income taxes, net

29,472

19,259

Contract assets, net of current

5,572

1,910

Intangibles, net

28,968

24,303

Goodwill

321,756

267,212

Other assets

44,238

39,026

Total assets

$

896,101

$

627,674

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

12,022

$

9,125

Contract liabilities

61,601

61,280

Accrued compensation and related benefits

36,241

48,736

Income taxes payable

622

99

Operating lease liabilities

3,826

8,089

Other current liabilities

83,799

53,533

Total current liabilities

198,111

180,862

Contract liabilities, net of current

10,310

Deferred compensation

8,033

7,230

Convertible senior notes, net, noncurrent

266,843

Operating lease liabilities, net of current

4,095

11,934

Other noncurrent liabilities

8,274

4,570

Total liabilities

495,666

204,596

Commitments and contingencies

Shareholders' equity:

Common stock, $0.01 par value; authorized 100,000 shares; 70,875 shares and 69,245 shares issued at March 31, 2023 and March 31, 2022, respectively; 66,026 shares and 67,075 shares outstanding at March 31, 2023 and March 31, 2022, respectively

709

692

Treasury stock, at cost, 4,849 shares and 2,170 shares at March 31, 2023 and March 31, 2022, respectively

(85,752

)

(35,874

)

Additional paid-in capital

359,342

329,917

Accumulated other comprehensive loss

(1,462

)

(1,909

)

Retained earnings

127,598

130,252

Total shareholders' equity

400,435

423,078

Total liabilities and shareholders' equity

$

896,101

$

627,674

NEXTGEN HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Three Months Ended March 31,

Fiscal Year Ended March 31,

2023

2022

2023

2022

Cash flows from operating activities:

Net income (loss)

$

(25,240

)

$

348

$

(2,654

)

$

1,618

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of capitalized software costs

6,168

5,424

22,571

23,016

Amortization of debt issuance costs

381

127

834

508

Amortization of other intangibles

2,445

3,099

9,035

12,397

Net amortization (accretion) of premiums/discounts on marketable securities

(476

)

(476

)

Change in fair value of contingent consideration

200

100

7

Deferred income taxes

(9,539

)

180

(9,076

)

215

Depreciation

1,247

1,496

5,088

6,902

Excess tax deficiency (benefit) from share-based compensation

(374

)

(191

)

(1,052

)

643

Impairment of assets

1,587

2,329

3,163

3,906

Loss on disposal of equipment and improvements

16

20

90

97

Loss on foreign currency exchange rates

30

17

Non-cash operating lease costs

524

1,277

2,716

5,732

Provision for bad debts

814

773

1,914

1,915

Restructuring costs, net of amounts paid

1,990

1,990

Share-based compensation

6,942

7,867

33,458

26,552

Gain on disposition of Commercial Dental assets

(10,296

)

Changes in assets and liabilities, net of amounts acquired:

Accounts receivable

(9,754

)

(6,750

)

(12,379

)

(431

)

Contract assets

(1,259

)

(824

)

5,930

(5,610

)

Accounts payable

(3,784

)

(5,921

)

333

(2,329

)

Contract liabilities

(1,798

)

6,401

(6,739

)

8,417

Accrued compensation and related benefits

10,449

6,717

(13,142

)

(1,638

)

Income taxes

1,968

1,564

2,790

(5,650

)

Deferred compensation

464

(441

)

803

610

Operating lease liabilities

(1,383

)

(2,672

)

(8,808

)

(12,734

)

Other assets and liabilities

26,065

(3,914

)

17,450

(10,598

)

Net cash provided by operating activities

7,683

16,909

43,660

53,545

Cash flows from investing activities:

Additions to capitalized software costs

(8,081

)

(7,663

)

(34,987

)

(25,500

)

Additions to equipment and improvements

(219

)

(545

)

(2,277

)

(2,582

)

Payments for acquisitions, net of cash acquired

(3,851

)

(51,302

)

Proceeds from disposition of Commercial Dental assets

11,253

Proceeds from sales of marketable securities

506

506

Purchases of marketable securities

(140,087

)

(140,087

)

Net cash used in investing activities

(151,732

)

(8,208

)

(216,894

)

(28,082

)

Cash flows from financing activities:

Proceeds from convertible senior notes

275,000

Proceeds from line of credit

50,000

Repayments on line of credit

(50,000

)

Payment of debt issuance costs

(8,483

)

Proceeds from issuance of shares under employee plans

1,440

4,137

6,835

5,014

Repurchase of common stock

(49,878

)

(35,874

)

Payment of contingent consideration related to acquisitions

(540

)

Payments for taxes related to net share settlement of equity awards

(874

)

(441

)

(10,851

)

(5,891

)

Net cash provided by (used in) financing activities

566

3,696

212,623

(37,291

)

Effect of exchange rate changes on cash and cash equivalents

1

(148

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

(143,482

)

12,397

39,241

(11,828

)

Cash, cash equivalents, and restricted cash at beginning of period

249,470

54,350

66,747

78,575

Cash, cash equivalents, and restricted cash at end of period

$

105,988

$

66,747

$

105,988

$

66,747

NEXTGEN HEALTHCARE, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands)

The following table presents our revenues disaggregated by our major revenue categories and by occurrence:

Three Months Ended March 31,

Fiscal Year Ended March 31,

2023

2022

2023

2022

Recurring revenues:

Subscription services

$

52,022

$

42,055

$

184,047

$

162,636

Support and maintenance

38,850

39,887

153,520

155,623

Managed services

34,452

27,741

129,115

111,377

Transactional and data services

36,612

27,544

127,236

110,077

Total recurring revenues

161,936

137,227

593,918

539,713

Software, hardware, and other non-recurring revenues:

Software license and hardware

8,487

7,145

27,860

31,347

Other non-recurring services

8,127

6,887

31,394

25,290

Total software, hardware and other non-recurring revenues

16,614

14,032

59,254

56,637

Total revenues

$

178,550

$

151,259

$

653,172

$

596,350

Recurring revenues as a percentage of total revenues

90.7

%

90.7

%

90.9

%

90.5

%

NEXTGEN HEALTHCARE, INC.
NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)

RECONCILIATION OF NON-GAAP DILUTED EARNINGS PER SHARE

Three Months Ended March 31,

Fiscal Year Ended March 31,

2023

2022

2023

2022

Income before provision for income taxes - GAAP

$

(24,761

)

$

2,273

$

4,304

$

5,196

Non-GAAP adjustments:

Acquisition costs, net

832

2,345

Amortization of acquired intangible assets

2,445

3,099

9,035

12,397

Amortization of deferred debt issuance costs

381

127

834

508

Gain on disposition of Commercial Dental assets

(10,296

)

Impairment of assets

1,587

2,329

3,163

3,906

Restructuring costs

2,152

2,473

539

Shareholder disputes, other regulatory and litigation matters, and related costs, net of insurance*

36,026

531

36,513

29,747

Share-based compensation

6,942

7,867

33,458

26,552

Other non-run-rate expenses**

160

107

939

4,486

Total adjustments to GAAP income before provision for income taxes:

50,525

14,060

78,464

78,135

Income before provision for income taxes - Non-GAAP

25,764

16,333

82,768

83,331

Provision for income taxes

5,153

3,266

16,554

16,666

Net income - Non-GAAP

$

20,611

$

13,067

$

66,214

$

66,665

Diluted net income per share - Non-GAAP

$

0.31

$

0.19

$

0.98

$

0.98

Weighted-average shares outstanding (diluted):

66,561

67,547

67,647

67,788

* Includes $35,095 of legal settlement and related costs associated with the DOJ investigation regulatory matter.

** Other non-run-rate expenses for the three months ended March 31, 2023 consist of $111 excess lease-related expense for vacated facilities and $49 of professional services costs not related to core operations.

Other non-run-rate expenses for the three months ended March 31, 2022 consist of $107 excess lease-related expense for vacated facilities.

Other non-run-rate expenses for the year ended March 31, 2023 consist of $740 excess lease-related expense for vacated facilities and $199 of professional services costs not related to core operations.

Other non-run-rate expenses for the year ended March 31, 2022 consist primarily of $1,242 excess lease-related expense for vacated facilities, lease termination costs, and other costs, including retention bonuses, related to the restructuring plan and $2,707 of executive transition costs, including severance and other costs related to the departure of the CEO, $498 of incremental costs and penalties primarily due to the cancellation of certain events directly associated with the COVID-19 pandemic, and $39 of professional services costs not related to core operations.

RECONCILIATION OF FREE CASH FLOW

Three Months Ended March 31,

Fiscal Year Ended March 31,

2023

2022

2023

2022

Net cash provided by operating activities

$

7,683

$

16,909

$

43,660

$

53,545

Additions to capitalized software costs

(8,081

)

(7,663

)

(34,987

)

(25,500

)

Additions to equipment and improvements

(219

)

(545

)

(2,277

)

(2,582

)

Free cash flow

$

(617

)

$

8,701

$

6,396

$

25,463

NEXTGEN HEALTHCARE, INC.
NON-GAAP FINANCIAL MEASURES
(In thousands)

RECONCILIATION OF ADJUSTED EBITDA

Three Months Ended March 31,

Fiscal Year Ended March 31,

2023

2022

2023

2022

Income from operations - GAAP

$

(23,909

)

$

2,813

$

(3,866

)

$

6,658

Non-GAAP adjustments:

Acquisition costs, net

832

2,345

Amortization of acquired intangible assets

2,445

3,099

9,035

12,397

Impairment of assets

1,587

2,329

3,163

3,906

Restructuring costs

2,152

2,473

539

Shareholder disputes, other regulatory and litigation matters, and related costs, net of insurance*

36,026

531

36,513

29,747

Share-based compensation

6,942

7,867

33,458

26,552

Other non-run-rate expenses**

160

107

939

4,486

Total adjustments to GAAP income from operations

50,144

13,933

87,926

77,627

Income from operations - Non-GAAP

26,235

16,746

84,060

84,285

Amortization of capitalized software costs

6,168

5,424

22,571

23,016

Depreciation

1,247

1,496

5,088

6,902

Depreciation and Amortization - Non-GAAP

7,415

6,920

27,659

29,918

Adjusted EBITDA - Non-GAAP

$

33,650

$

23,666

$

111,719

$

114,203

Total revenues

$

178,550

$

151,259

$

653,172

$

596,350

Adjusted EBITDA margin - Non-GAAP

18.8

%

15.6

%

17.1

%

19.2

%

* Includes $35,095 of legal settlement and related costs associated with the DOJ investigation regulatory matter.

** Other non-run-rate expenses for the three months ended March 31, 2023 consist of $111 excess lease-related expense for vacated facilities and $49 of professional services costs not related to core operations.

Other non-run-rate expenses for the three months ended March 31, 2022 consist of $107 excess lease-related expense for vacated facilities.

Other non-run-rate expenses for the year ended March 31, 2023 consist of $740 excess lease-related expense for vacated facilities and $199 of professional services costs not related to core operations.

Other non-run-rate expenses for the year ended March 31, 2022 consist primarily of $1,242 excess lease-related expense for vacated facilities, lease termination costs, and other costs, including retention bonuses, related to the restructuring plan and $2,707 of executive transition costs, including severance and other costs related to the departure of the CEO, $498 of incremental costs and penalties primarily due to the cancellation of certain events directly associated with the COVID-19 pandemic, and $39 of professional services costs not related to core operations.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230516005941/en/

Contacts

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Tami Andrade
(949) 517-2380
tandrade@nextgen.com

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James Hammerschmidt
(949) 237-6112
jhammerschmidt@nextgen.com

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