Welcome to the NextGen Healthcare Fiscal 2021 Third Quarter Results Conference Call. Hosting the call today from NextGen are Rusty Frantz, President and Chief Executive Officer; and Jamie Arnold, Chief Financial Officer. Today’s call is being recorded. All lines have been placed on listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] Before we start, I would like to remind everyone that the comments made on this call may include forward-looking statements within the meaning of the federal securities laws, including and without limitations, statements related to anticipated industry trends and the company’s plans, future performance, products, perspectives and strategies. Risk and uncertainties exist that may cause results to differ materially from those expressed in these forward-looking statements, including among others, those risks set forth in the company’s public filings with the U.S. Securities and Exchange Commission, including the discussion under the heading Risk Factors in the company’s most recent annual form on Form 10-K and any other subsequent quarterly report on Form 10-Q. Any forward-looking statements speak only as of today. The company disclaims any intent or obligation to update these forward-looking statements. Our remarks on today’s call include both our earnings results and guidance, which contains certain non-GAAP financial measures. For our earnings results, the GAAP financial measures most directly comparable to each non-GAAP financial measure used or discussed and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found within our latest quarterly earnings press release that was filed with the SEC and is posted to the Investors section of our website. This release also provides qualitative description of how we have calculated non-GAAP financial measures contained in our guidance. At this time, I would like to turn the call over to Mr. Rusty Frantz, President and CEO of NextGen. Sir, you may begin.

Thank you operator and thank you all for joining our call. Q3 FY 21 extended our run of strong performance as we continue to execute on our growth. We're delivering a great client experience to complement our leading integrated ambulatory platform. We're adding new client booking at an accelerated rate and we are delivering growth simultaneously improving our balance sheet. Q3 was truly another great step for Nextgen. Highlights in this quarter include Nextgen's strong Q3 performance across every operational metric driving bookings, revenue, earnings and free cash flow. Another quarter of strong double-digit growth in subscription services which is now surpass maintenance as our largest revenue stream. Nextgen's delivery of the best overall client experience in the independent ambulatory market continues to show up in commercial wins both inside and outside of the base and validated by external feedback. We continue to play our parts as both frontlines of care as well as helping enable the vaccine administration process for our providers and our patients. Our strong execution on revenue earnings and collections continue to generate robust free cash flow opening up a full range of options for growth in the future and most importantly Nextgen culture and employee engagement continue to be the core foundation of all our success. Let's start with our robust Q3 operational performance. Bookings came in strong at $37.5 million an increase of 22% year-over-year on an as reported bassist including a high-water mark in recurrent bookings. We saw strong subscription services bookings from our recent patient engagement focused acquisitions and increased managed service bookings as clients look for us to take more on their rack office operations. On the revenue line for Q3 Nextgen came in at $141.8 an increase of 3% year-over-year on as reported basis. Among notable growth drivers is our continued delivery of [surround] solutions that bring the platform to life for clients and generate recurring growth. This has shown up most notably in the continued double digits continued subscription growth. We continue to win in the replacement market primarily fueled by organizations seeking an integrated purpose-built platform to replace fractured underperforming or failed applications. Furthermore we continue to see success given the maturity of our client success model that provides a specialty base experience aligned to our client’s strategic goals and objectives. This is also a quarter where we saw more clients going all-in with our managed service offering. Managed cloud services continued to be a nice growth area for us and managed financial services notably RCM continued to growth more slowly than cloud services. Digging a little deeper in the RCM the area most correlated patient volume we saw volume maintained at 93% to 95% in the quarter continuing to be a drag on that revenue line and that's 93% to 95% of our pre-COVID levels. We have modeled this range through Q4. Our earnings performance this quarter was also positively impacted by a strong level of perpetual license revenue as come clients continued to prefer this license and methodology. At $20 million our free cash flow is strong reflects another quarter of strong performance from our collections teams resulting in a DSO of 49 days. This is the second quarter in a row of DSO of 49 days and gives us another sign of the strength of our relationship with our clients. These numbers represent one of our best performances in recent memory and continue to support our confidence in the road ahead. Jamie will provide the full recap on the financials in a bit but I would like to take a step into how and why the news continues to be so good. The power of our integrated platform continues to gain traction in the market which resulted in competitive success as bookings from new client wins increased to 25% of total bookings compared to an already impressive over 24% last quarter. Truly our broad solution, great client experience and new footprint sales team continue to bring clients to NextGen. Looking back this performance reflects our directing of 25% of our sales spend at new footprint [indiscernible] in late FY19. It's great to see that new team delivering and as we move forward this will be an area of further investment in the near term which should produce fully in three or four quarters. Our platform capabilities are also resonating with our current clients. We have seen increasing success in cross-selling our broad portfolio, especially around the patient experience as our client base revolves around consumer-driven care. We are seeing the fruits of our work on strategy and client satisfaction as our solutions are very well aligned with our current clients goals and extended objectives. This success both inside and outside the base with the integrated platform strategy is leading the larger deal size is resulting from our new sales approach. We're selling a vision and reality of transformation to the ambulatory market at a time when change requires. To that end we had four deals in this quarter over $1 million for multi-year trend of increasing deal size. Ambulatory organizations continue to seek flexibility within a scalable platform that enables them to address the progressive transformation in areas such as reimbursement models, specialty uniqueness and certainly relying on great interoperability to the truly operate across the continuum of care. Sales success is also a function of client rest activity and satisfaction. Every quarter we focus on delivering great provider and patient experiences and this quarter was no exception. In point of fact, we're gratified the score at the top of the interoperability, patient engagement and EHR Telehealth reports from class. And that was based on Spring 20 until spring 2021. As we move towards the annual best-in-class awards will be excited to see where we land but more excited for the impact of our spring 21 platform and client satisfaction as we move through the year. Dipping a little deeper into Telehealth we continue to see nice growth here. Now having enabled well over 1 million integrated Telehealth visits while delivering a great and increased patient satisfaction rating of 9.1. It's pretty amazing considering we acquire the capability in December 2019, and it only completed less than 30,000 visits with an already high score from patients of 8.9 at the end of March 2020. By delivering this level of scaling and increasing satisfaction we have once again shown that we can leverage our balance sheet combined with our organizational capabilities to deliver a homerun for our clients and shareholders. Moving to that spring 2021 platform release we're well on track to deliver the platform to the breadth of our clients base. We will partner with them to ensure that they can leverage our integrated approach of [indiscernible] workflows in the pursuit of a better journey for the patient the provider the practice in the population. As we take them into a bright future we will also ensure that our clients are ready in advance to meet the planned regulatory requirements coming in December 2022 with the planned implementation deadline for the 21st century CARES Act. Our 2020 UGM, our User Group Meeting naturally went virtual this year. I was concerned about the attendance being light and my team was not and I turned out to be quite wrong. Instead of the expected 2,500 plus attendees that we normally have we actually had over 8000 this year. Fortunately the team was ready even if I wasn't and put together a great and tremendous program and we did just a phenomenal job of engaging, educating and inspiring our clients. We really value our time at the user group meeting because we get so much bidirectional feedback, and certainly this year was a little tougher. And so we really look forward to late this year in 2021 when we hopefully we'll all be back together in Orlando for an in-person user group meeting. From NextGen culture standpoint, we continue to evolve and increased our employee satisfaction engagement at an accelerated pace. We increase on every dimension in the survey and are above benchmarking every dimension across the board. As of the end of the year based on our annual survey we have 85% of our organization fully or nearly fully engaged. Our culture score increased again this year more than 10% year-over-year to 82 and that's from the mid-40s in 2016. We continue to evolve our employee experience as we become an even more fully engaged diverse and inclusive organization. Our journey to 100% will continue and these scores really represent alignment, collaboration, optimism, but most notably the joy of working to advance health care. Touching on that mission we’re privileged and humbled to be able to play are supporting role in the fight against COVID specifically, we've created an internal COVID immunization task force to ensure we safely and effectively enable our clients document, track and report these important vaccinations. For their education or advice software to make the administration process more efficient regulatory guidance to help streamline the process and the data to support the broad analysis of where COVID is and where it's going we're all in. That being said, we're actually a very small part of the broader effort and we can see the weight of the true heroics in the faces of our frontline clients. Thank you for that. Now I'd like to turn the call over to Jamie to go into a deeper dive on the financials, Jamie?

Thank you Rusty and thank you to everyone who is joining the call today. Now the Q3 results. Total revenue of $141.8 million increased $4 million or 3% compared to the same period last year and was that 1% from Q2 FY21. These results reflect strong demand for our solutions and also that volumes remain consistent with Q2 rate of 93% to 95% of pre-COVID levels. Recurring revenue of $128.2 million was 90% of our total revenue in line with the prior year and the prior quarter. Recurring revenue increased $3.5 million or 3% compared to a year ago with an increase of 14% in subscription services, 2% managed services offset by a 5% decline in maintenance and support. To provide additional color on recurring revenue, I'll provide a comparison of the current quarter to the immediately preceding quarter. Quarter-over-quarter recurring revenue increased $2.6 million or 2%. Subscription services revenue increased $1.1 million or 3% which is in line with our average quarterly and quarter-over-quarter increase over the past several years and in line with our expectations for the future. Managed services increased $1.2 million or 4% EDI and data services increased $400,000 or 2% and maintenance and support decreased to $100,000. Non-recurring revenue of $13.5 million increased 600,000 or 4% over the same quarter last year. Software license and hardware revenue of $7.9 million increased $700,000 or 10% year-over-year. Software license and hardware in Q3 was in line with the preceding quarter, but significantly ahead of Q4 FY20 and Q1 of FY21. Non-recurring services revenue of $5.6 million declined $100,000 or 2% compared to a year ago. Bookings came in and at $37.5 million in the quarter up 22% compared to the same quarter a year ago. We had strong performance in the replacement market and several of the large net new wins were put in NGE based Solutions where the customer opted for a perpetual license model including two instances where the client contracted with us to host the solution for them. We believe this reflects demand for our holistic solutions and that the sales management reorganization we announced in Q3 last year is producing results. Cost of goods increased by $2.2 million or 3% due to higher amortization of capitalized development cost and higher subscription services cost. Gross profit increased 3% to $71.4 million and gross margin declined slightly to 50.4% compared to the prior year quarter of 50.5%. Turning to our operating expenses. SG&A of $49 million increased $6.1 million or 14% from a year ago. The increase is primarily due to an increase in legal expenses and personnel costs compared to Q3 last year offset by decreases in travel, conference and acquisition cost. R&D of $18.2 million decreased $1.8 million or 9% from a year ago. The decrease is mostly due to higher R&D capitalization, which reduces net R&D expense. We recorded an impairment charge of $2.2 million in Q3 associated with terminating our facilities lease in San Diego and vacating the eighth floor of our office in Irvine. In the 8K, we file today we announced that the board approved an amendment to our bylaws regarding the location of our principal executive office. As we have vacated the executive office in Irvine we will be changing our principal executive office to our existing Atlanta facility. Our GAAP tax rate for Q3 FYI 21 was a benefit of 57% with a non-GAAP tax rate of 20%. To conclude my comments on the income statement our Q3 GAAP EPS was $0.01 compared to $0.07 a year ago. Our non-GAAP EPS of $0.26 was an increase of $0.03 compared to the $0.23 in the prior year. Turning to the balance sheet we ended the quarter with $89.5 million in cash and equivalents. After having paid down $35 million on our revolving line of credit. This left us with a 29 million balance outstanding on the line of credit on December 31 which we have now repaid. DSOs in the quarter were 49 days a decrease of 4 days from last year, flat from last quarter and below our target range in the mid 50's. Our capital expenditure excluding capitalized R&D was $800,000, capitalized R&D was $6.8 million for the quarter. Turning to Q4 in our update to full-year guidance I want the first touch on expected headwinds in both revenue and expenses. First there are less work days in Q4 than each of the previous three quarters. There are 61 work days in Q4 which is 2 less work days than the average for the previous three quarters. This means there are less days for visits to the doctor during normal business hours. Second, patient deductibles reset at the beginning of the calendar year which typically reduces managed services and EDI revenue as patients referring from now essential doctor visits. Third, we will capitalize less R&D expenditures due to the imminent spring 21 release. Finally, there is uncertainty in how the current environment will impact client preference regarding licensing our technology. As noted in the earlier comments over the last four quarters we have seen significant variability in the procurement preferences. This client decision has disproportionate impact on our quarterly earnings due to the high margin on software licenses. After considering these headwinds a strong performance in Q3 and continued stability in the market earlier this month we revised full-year guidance as follows. Revenue in the range of $547 million to $555 million up from the previously announced $535 million to 551 million. Non-GAAP EPS is expected to be in the range of $0.92 to $0.98 up from $0.83 to $0.93 previously expected. In closing I am pleased with our performance in the quarter and proud of the organization for their resilience and determination. I am looking forward to our continued progress. This concludes my review of the third quarter financial results and I will now turn the call back to Rusty.

All right. Thank you, Jamie and along the lines of looking forward as I look down the road here I see I expect our current momentum is an organization to continue to be able to post this kind of quarter and do it without heroics but with just great process, great culture and great execution gives me a ton of confidence as we move forward. In addition as I look forward NextGen will continue to be prime focus. We are absolutely focused on driving to the 100% engagement and creating just a great and robust community with the NextGen because that is the fuel that enables us to do what we do. From booking standpoint we expect our tenure sales to continue to perform strongly. It was a great performance in Q3. That'll be a tough one to beat sequentially in Q4, but we do really see that we come into our own from a commercial capability standpoint. Looking at top line notably we definitely expect subscription services to be growing in double digits annually and as Jamie discuss certainly in Q4 we will see a little pressure on revenue cycle management, but overall we're continuing to see growth in the managed services portfolio both cloud services and financial services. From an investment standpoint I'd expect to see us working to build back some of the headcount that we delayed during the run-up to COVID and as we've gotten more certainty and we look forward now some of that delayed headcount start to come to the table. We have also began to increase our investment and sales implementation in R&D really ahead of that bolt of opportunity I discussed because we have to seize that opportunity, deliver on that opportunity and then of course creating further opportunity from that success and so expect as an investment to begin to show in Q4. From a dry powder standpoint, we expected to continue to grow our available liquidity over the near end longer term. As we move forward we'll be looking for ways to further expand that dry powder and certainly to enable us to be opportunistic over the next few years. We will continue to drive continuous visible enhancement of our client experience as we move through Q4 and beyond. We're really proud of our achievements and recognition is gratifying us and illuminating to our current new client base. And then finally mid-March we will demonstrate the power of the platform our virtual analyst investor day. At that point will also be within a few weeks of release of the broader deployment. We're actually in [beta] today in about 12 clients three of them, live in 12 clients with three of those being large and complex clients. And so at that point what we will really be looking to do is will be within weeks of release and as well as the broader deployment of the general release for our commercial clients and so at that point our focus is really going to be walking the investor community through the broad workflows that truly differentiate the platform and really bringing that to life. We will also provide an update, of course on release and deployment and really excited about that effort. That effort has the opportunity to both delight our clients, bring them to regulatory compliance, creating great experience for their patients and become regulatory compliant all in one [full] swoop and in doing so that opens up significant commercial opportunity for us. So as I close my 22nd earnings call with NextGen a very-very different place from the start of my first one I want to thank every client, every teammate and every investor had the faith and trust in myself and our team. It's been a transformational journey and an amazing one, and I want to thank everyone on this journey, but most of all our clients. Our ability to serve you well at a time like this is truly our repayment of your trust. Thank you. And with that we'll take questions.

[Operator Instructions] Our first question is from Jeff Garro with William Blair & Company.

Yes. good afternoon guys. And thanks for taking my questions. I'll start off with a couple on bookings and you mentioned that this quarter was a high-water mark for recurring bookings. So it appears as if that was a gap up from prior quarters or simply incremental progress. And then is there further room to grow from this high water mark?

Jamie you want to take that and I'll jump in.

Sure. It is the high water mark going back several years Jeffrey and the second part of your question is there room to go up from this. Is that second question?

Yes. Let me take the second one. So look what I'd say is first of all, I think when Jamie says it's a higher water mark over a number of years he's talking about the total bookings number, not the recurring buckets number which is actually a high water mark. We just see that number continually growing over time and I mean you can get close to it by subtracting the one-time revenue away from the total revenue and you get close to see that growth, but that growth is also shown up in the bookings number. We haven't necessarily broken in out every time but we expect to see that continue and in fact when you really think about the contribution of the broader platform that we brought to the table we're really starting to deliver that much more to SaaS business model and the assets around the edge are all in a SaaS business model. And so you are just going to continue to see that recurring pump continue to grow.

Excellent. I have follow-up question on bookings. Your call-out telemedicine in the script. Just curious if there are any other highlights from the quarter in terms of [indiscernible] rate from the adjacent solutions in the portfolio or is it broad base and it's just a meeting clients where they're at with their own unique needs.

Yes. I would say it's more broad-based. There have been clients where they're at but certainly there's trends emerging. We're certainly seeing patient experience as a whole be a primary attachment especially as we're implementing the patient portal aspect of Med fusion. That's an easy expansion because at this face we're just basically doing a portal swab for them. It's interesting I mean managed cloud services have been a really nice grower for us, especially as we really have implemented a very robust framework and client experience built around the capabilities of AWS. And so that's really flourished very nicely and then we saw a really strong -- a nice round quarter on managed financial services, on revenue cycle management as well. So it is. it's kind of meeting clients not as much where they're at. It's actually meeting them where they're not and that's really what we're seeing as clients are looking at their capabilities, their portfolio and their processes and really then started to take a different look at their client base, the patient base and looking at what that journey looks like and really starting to focus more on the journey rather than individual capabilities.

Excellent. It's great to hear that you're having success with the goal talked about previously about becoming a trusted advisor. I would like to turn to guidance and one questions there. You came in at the high end of the range this quarter and reiterated the outlook. Clearly you mentioned some puts and takes in the March quarter. Some explained by seasonality and sequential trend but still a wider than typical range imply for the March quarter. So maybe you could balance the momentum you’ve seen in the business with the rationale for conservative approach to forecasting.

Yes, I mean, I don't know we just look at it and we've seen some pretty wild shifts in volume. We've got a presidential inauguration that just happened. There is a little bit of volatility in the market out there. So we keep a little bit more of a range certainly just to make sure that we're handling the ups and downs of things that are outside of our control but also there is always going to be a little bit of a range especially on the earnings line in this company simply because as Jamie said perpetual license is lumpy and hard to predict. It's very, it's kind of the natural demand that showing up right now. We don't have it tilted any one way or the other. We are meeting clients where they are really, tried to convince them for recurring but sometimes have really attach the capital and that's just hard to predict. And so there will be some fluctuation in that revenue line and just because of the 90-plus percent margin of that revenue line it leads us that's another contributor to a slightly wider range on the EPS line and you'll generally see us approach it that way as COVID starts to fall behind us, we will start to tighten that up, but it will still be a little wide because of that dynamic.

Okay. Makes sense given that agnostic approach to subscription versus perpetual license base Thanks again for taking the questions.

Yes.

Your next question is from Sean Wieland with Piper Sandler.

Hi, it's actually [indiscernible] on for Sean. Thanks for taking the question. So I think we wanted to start you guys are describing wins for some good wins in the replacement market. Interested if you could provide any color around maybe the types or sizes of practices that you're seeing convert there and what about the sales or do you think is driving some of those conversions.

Yes. For sure. Well, I mean the types and sizes much like our client base it's all types and all sizes, everything from BH2 to multi-specialty to single specialty we've seen a lot of success in the small end of the market. We've seen great success of large end of the market. It's partially because our efforts are quite stressed. Our salesforce is stratified appropriately around different market segments. And so it's kind of been a little bit all over the place and same thing kind of from a competitive standpoint it's been a little bit all over the place which I mean we're seeing more RFP volume it come in certainly, but yes so we made it in late 2019 it's interesting when I came in our goal was not to lose our clients. Shortly after that our goal became to start to actually deliver additional capabilities and open up some share of wallet for us to happier clients but we didn't really think about outside of the base because we honestly weren't in a very good position at that point in time. As we came through the year before and last year our external brand has significantly improved and as we sit here today very much so and that gives us more confidence in investing a little bit of ahead of the market. Right now we're at 25% of our sales headcount is purely focused on new wins not on existing clients. And yet and we're kind of at 25% of our bookings being at that. So that kind of says that that's kind of the level that this team supports plus or minus, but as we look forward, we see more opportunities, so expect us now to continue to and add headcount primarily focused on new wins but also more focused on a larger already in the base client base to continue to explore the opportunity.

That makes sense. I think it's a follow-up just interested as COVID kind of receives and some of the suppressed T&E spend begins to come back. What should we think about as a new normalized range of SG&A as a percent of sales?

I'm not really ready to comment on that. I think it's a longer term question. Why don't we revisit that in May as we start to talk about next year?

All right. Sounds good. Thank you.

Thank you.

Your next question is from Steve Halper with Cantor.

Hi, just to expand on the previous your question in terms of the footprint expansion that you talked about and appreciate the caller there, why don't you characterize where those winds are coming from? Is it the large legacy vendors, the small guys it's always been fragmented and a lot of these your clients so they going to cloud for the first time?

Some not many. Some of them are going full cloud versus kind of part hybrid. So we've seen some that are going full cloud for the first time some that have already had some of the assets in the cloud and so it's really more of a migration into just a larger footprint was certainly a more robust framework for management security, upgrading, etc. So it's actually not just because we're in the cloud it's because we're hosting our own stuff and so that gives us a kind of an inherent advantage in the experience that we can deliver on that side. I'm sorry Steve what was the rest of your question?

Where's the new footprint of coming from –

Footprint. Yes. Look it's coming legacy vendors. I would say it's coming from some vendors that have really almost fallen by the wayside at this point in time. It's coming from how we worked toe to toe with some of the new vendors still. It's, like I said, we don't want to dig too much into it because it really I don't think there's a single pool that we're swimming in as much as we're swimming in the ocean right now.

Appreciate that and how important is the telehealth capabilities that you appear to have done really well with at least initially --?

Yes. I would say it's very important for our clients. But it's not the fact of this telehealth. It's the fact that it's truly integrated into their workflow. So it's the same scheduling with patients whether it's virtual or not. It's the same experience for the provider and it's integrated into the handheld and the patient experience platform, the patient portal and so it's just been a super frictionless way for them to maintain volume. It's interesting I mean, we see a certainly more adoption in the behavioral health space than we do in the medical space from a volume standpoint, which is somewhat understandable. But what we do see is, we see kind of I'd say, I don't know, I'd say probably 20% maybe 30% of our clients patient volume is going virtual sometimes. It depends on the practice but we don't see them going much higher than that. So I think I mean the real news is telehealth is an essential part of your ability to interact and engage your patients, but it is not the ability. It's actually the clinician and the patient communicating together effectively in an informed way that is captured. That's actually what health is and telehealth is just another way for that to happen.

Great. Thanks.

Yes.

Your next question is from Sandy Draper with Truist.

Thanks very much. A couple of questions. One, I know you guys are already pre-released the upside to the guidance, but compared to the prior guidance when I'm trying to see if target right Jamie the push-up in guidance how much of that would be just maybe some more one time license that came in and mix shift or is it more driven by the bookings and growth recurring? I'm just trying to think about how to sort of bucket the main things that pushed us the guidance?

I would say he was pushed up the guidance is first is the higher software licenses. I think we had talked about this earlier and that's why we mention it again now. It is also that I think part of it is that volumes have remained strong throughout the entire quarter and we're looking now and seeing them continue to stay relatively stable. So that's part of the reason and then the other third part is the bookings in the recurring revenue lines.

Okay. Got it. That's helpful. And the follow-up and Rusty I know you don't want to get into next year and guidance. I try to ask this in a way that you can answer it. When I look sort of it in your comments about booking, it's going to be a tough one, if I just ballpark it, say maybe 130 millions of booking this year that's flat with last year. I think the 2019 number is still apples to apples. That's 133. I'm just trying to think in terms of algorithm. If you have and again, I know it's really tough because it depends on the mix, but I'm just thinking okay, if you just consistently still stay flat with bookings is that where you sort of drive –

I see where your question is going. And here is what I said first of all. This year in Q1 we weren't forecasting Q1 to be about $12 million, $13 million to $15 million net of telehealth. Telehealth was like a saver in Q1 but let's just be clear. It was a saver in Q1 because about $13 million of bookings vacated the building because of COVID. And so when I look at this as a flat year I don't look at this as a flat year at all. Now when I say sequentially it's hard it is sequentially hard. We're at Q1 calendar one company with a Q4 client base. And so there is always Q4 is always an interesting one and I don't know what it's going to be. I said 37 for being a high water mark in three years. It's a stout number to get past but I did say that expect the bookings to generally float up. I said we're going to be adding sales people and I said our momentum continues to increase and so what I'd say is if you build your model based on us staying at 130 you're probably going to build the wrong model.

Okay. That's really helpful. Appreciate it.

Yes.

Your next question is from Sean Dodge with RBC Capital Markets.

Thanks. Good afternoon. Rusty, the spring ‘21 release you've talked about that being a good opportunity to talk to clients about your other modules. So kind of putting cross-selling on the table as you start to implement the new release what would be a good cross-selling attachment rate? I guess what proportion of those implementing the new release do you think you can expand your –?

It's a great question. I think we'll comment more on that Sean on analyst day. We're not really ready to comment on that yet. We want to get a little further into the process before we start commenting on attachment rates if you know what I'm saying.

Sure.

Because right now we're implementing the patient experience platform. So we're already seeing attachment there but we're not implementing the spring ‘21 and patient experience including the patient experience platform which is really what starts in earnest as we move through the spring and into the summer and so either in March or more likely in May we'll start commenting on that because then we'll have enough track record but what I would say is we didn't have a strong bookings quarter because we have crappy attachment rates. So I think stay tuned for more but we're very satisfied with what we're seeing.

Okay. Fair enough. If we look at fiscal, if we kind of zoom out look at fiscal ‘21 the narrative just about a year ago was EPS would be pretty flat through fiscal ‘22 while you all went through the re-platforming and now we're looking at $0.12 to $0.13 of growth this year based on the midpoint of your guidance and that's despite weathering the pandemic. It sounds like there was some hiring delays that that –

$0.04 to $0.05 of growth that's $0.04 to $0.05 of growth with a one-time $0.08 short-term cost reduction borne by NextGen.

Okay. So maybe the $0.04 to $0.05 with lower T&E and the higher end delays and then Jamie mentioned the higher software licenses or something else that's helping out there?

Well no. What I've said kind of along the arc of COVID was first of all we're much more efficient after COVID. We've done some great work from a workforce management standpoint as well as process efficiency and interestingly enough what you're seeing in spring ‘21 is a platform release with an underlying micro services platform which kind of what we told you we were going to do all along and so as we sit here today it's actually a different investment thesis. Right now we're driving revenue growth and if you think about subscription services it's going in the mid double digits and that also includes a line where it's just third third-party licenses that we're kind of passing through and so we've got a high growth subscription revenue stream, a high growth recurring revenue stream. And we're actually starting to see that really lift up and so now what we're saying is basically okay we got that work done for the most part. We're still going to need to do some more of it but we're a long way through it but now what we're talking about is we're actually competitively a force. Expect us to focus on top line and expect us to invest ahead of that focus on top line as we move forward and that was really what I meant in my closing comments with R&D implementation and sales. Now I'm not talking about massive step functions but once again I'm saying focus on top line, focus on recurring and subscription growth, focus on dry powder accumulation because that's actually the value creation story here that got us from somewhere in the single digits to where we are today.

Okay. That's very helpful. Thank you.

Your next question is from Donald Hooker with KeyBanc.

Great. Good afternoon. So maybe one mundane question. On the SG&A expenses which were up I think Jamie you mentioned that you referenced legal costs and there was an earlier question about what sort of as a normalized run right there. I know you don't want to give guidance but I'm just trying to understand those legal costs and I think you reference head count. Can you elaborate on that so we can at least understand maybe how much of that might be one time or not?

Yes. And so the biggest uptick in legal cost this quarter had to do with the lawsuit with the shareholder. The shareholder lawsuit which from a non-GAAP standpoint we removed. So when you look at the GAAP to non-GAAP earnings reconciliation you'll see the impact of the legal expense and it gets removed if you're dealing with it on a non-GAAP basis. The numbers I discuss here tied to the earnings release which are on a GAAP basis so just to clear. Hopefully that helps answer your question.

Yes. It does. I can see that. Thank you. And then maybe you guys, I guess maybe back to the replacement market topic obviously the bookings are fantastic. You seemed to attribute it to the salesforce. I mean is there any reason to think that there also might be any kind of change in the end market around maybe at some point physician groups are going to kind of switch out older systems. I guess we're all waiting for at some point it's such a fragmented market. I don't know I don't want to over interpret one quarter.

Yes. But what I'd say is look, I mean one was meaningful use. The meeting meaningful use is what 11 to 14. So think about it. I mean what do you do with a large information system you generally start, you generally evaluate the, is there something else out there around six or seven years no matter how good it is. and so that's why you can never be bad as a vendor because when people hit those windows whether it goes to RFP or whether you just have a conversation about how you get the relationship even better is really depends on how they think of you at that time and so the replacement market isn't just about the competitive hand you have to play. It's about the stability and satisfaction that you drove in your existing client base which enables you not to defend your walls but actually play offense out in the community.

Okay that's super. Thanks for that insight.

Yes.

Your next question is from Dave Windley with Jeffries.

Hi, good afternoon thanks for taking my question. Rusty you've mentioned a couple of times on the call and I think also mentioned to kick off the year at the industry, big industry conference JP Morgan's conference dry powder and expanding, maybe even expanding your capital base in some ways. I can't help but ask like what might you be looking at you even mentioned like returning capital to shareholders. So kind of two very different directions I wanted to you to --

No. I didn't, what I mentioned is at some point in time should we not find a better use for capital then we will consider returning it to shareholders but as we sit here today we've demonstrated a very effective track record of leveraging our balance sheet to create greater creative wins for the shareholders. So we've done that and that's awesome and we've built a great string of pearls that is really showing success in the ambulatory market and then the question is what next and we don't know. What we do know however is that this is a great time both externally and in our life cycle to look at different ways to accumulate more dry powder but that doesn't necessarily mean that we have a use for that right now. It just simply means that we're at a good advantageous spot. We've created bandwidth for the senior team to look more broadly at the industry and at our business and that kind of although that begets an opportunistic posture should something interesting and potentially even larger come along.

Got it. When you talk about rolling out patient experience are you seeing clients take, can they take that down a la carte at all? Can they even do that?

Yes.

And if they can are they doing that mostly or are they more inclined? You've kind of hinted during the call that the attachment rate or the purchasing vision for them is more fulsome and in that regard is telehealth part of that or is that really a different discussion?

So what's happening. When I say some clients are taking it alone well first of all we have an agnostic client base that are not our clients that were clients of Med Fusion and continue to be clients of NextGen. On top of that though we have within our client base there are some folks who are existing clients that are comfortable with the great capabilities of our new patient experience platform but has a couple of capabilities that are in the old patient portal that need to be ported forward. That's happening in spring ‘21. On top of that every client needs to be on spring ‘21 that needs to deliver regulatory compliance under 21st century cures. So that's kind of the back fence but what we're really seeing is the integration it's not the patient experience platform. It's the integration directly into the broader platform. It's that telehealth works directly between handhelds with the provider and the patient. It's that interoperability affects the entire thing. So the patient can see their entire record I mean. As we go forward certainly the rules which I think are a great rule around having an API so the patient can access their own information. These are the kind of things that come out when you integrate a broad patient experience platform into the entirety of our integrated ambulatory platform. And so I don't, I see this much less as a fragmented approach and much more as that rollout that's hitting the 60 to 70 to 80 to 90 clients a month and that's where we're going with this.

Understood thank you for that --

Which is also why you'll see us once again a best ahead of the bolus of opportunity on the sales and implementation side.

Okay. Good highlight. Last question for me client attrition has become kind of somewhat distant memory not the problem that it once was. Maybe you haven't really even touched on it in this call. I guess is a good sign is that a function of the clients that were consolidated are now out of your book of business? Is there any element of that that was a say the last year or so is probably not a heavy acquisitive time as people are just trying to get through the war of COVID and could come back. I'd be curious your views on the clients consolidation.

Yes, look I'll never report on maintenance attrition again because it doesn't matter in the broader P&L and we've shown that over a five year period. Now just a point of fact the only time I'll comment on this it goes above 10 and for one last time I will answer the question that's only kind of asked it's 8.1 right now. And so it's not a number that really matters. We're at 7.4, 7.1, 8.1 and that's kind of where it's bouncing around and so we're not really focused on it. What we're really focused on now is this is a growth business and so we've already closed off the back fence and there is always people that are going to consolidate and then there are others that are going to there is always a client that decides that you're not doing a great job for them and there is always going to be a little bit of that but look focus on the bookings and then focus on the growth and focus on the growth and recurring. The maintenance line is kind of so like five years ago.

Right. Understood.

It's a great line because it generates free cash flow and so that's awesome and we love that. I mean basically when you think about dry powder we're going out to raise give or take $60 million from our clients for the value we deliver them and that puts dry powder on our balance sheet which is a little different than other ways that people acquire dry powder.

Got it. Thank you for the answers.

Yes.

If I could just add to what Rusty said. Rusty said we're not focused on it. I would quietly change that we are focused on it so that you don't have to be. Every day we get up and go to work and make sure that we're pleasing our clients giving them a delighted level of service and that is a large why that retention rate has gone up.

When I say we're not focused on attrition we're absolutely focused on attrition. We're not focused on the financial metric of maintenance attrition because we don't think it's a material metric to view the business spy anymore.

Again appreciate the answers.

No worries.

Your next question is from George Hill with Deutsche Bank.

Hey good afternoon guys and thanks for taking the questions. Rusty and Jamie kind of two and first is I guess Rusty can you talk about where you think we are in the life cycle of telemed bookings and telemed revenue and maybe have you guys provide any metrics around the penetration of your telemed solution into your client base and then the second one is just can you provide an update on the paradigm relationship and whether that's started to scale into something yet that's a meaningful contribution?

So the first one what I'd say is I think we're moving into the life cycle of enterprise adoption from a telehealth standpoint and stratification of the market and my view on it is what you'll see is kind of the cheap and cheerful horizontal non-integrated solutions. We'll continue to be successful in the smaller end and we'll have some success on the larger end but what we're seeing is folks are now looking at how does it integrate into their broader workflow platform and so we've moved more in kind of the RFP part of it which is it's less growth but it's still growth and as you can see in our transaction increases we're still seeing a lot of utilization and we're still seeing provider growth. On the second one George. On the second one what I'd say is I'd say that we have the paradigm relationship starting to produce revenue and it's built into our forecast and honestly beyond that I kind of stay out of that because that's really more of another company's broader public message.

Okay. Yes, I was really just focused on the economic contribution to you guys as it relates to that but –

Yes. I would say it's not material yet but we have hopes.

Okay. All right. I appreciate the color. Thank you.

Yes.

Your next question is from Ricky Goldwasser with Morgan Stanley.

Yes hi, good evening. So I have a question on pop health. I think you talked about using your pop health tool is pop health as a tool for assisting your customers in vaccine distribution. Clearly it's a topic that's on everybody's minds right now. Can you maybe share with us what are you seeing in terms of physicians preparing for it and what are you assuming in your budget for that to start uptaking?

I'm sorry I didn't hear for what I didn't hear the one thing that was the most important of the sentence which was [indiscernible].

Just kind of like when you, I mean if you think about kind of like your customer base and kind of like when they are kind of like going to start using the pop health tool in order to accommodate vaccine distribution sort of when do you think that's going to happen in timeline?

We're seeing that more use, we're certainly seeing them use the pop health tool for cohort identification and then passing that into outreach to get out to the cohort and so the clients because we have put a good bit of intelligence really around finding those high-risk cohorts within a patient population. Honestly the overall vaccine distribution challenge right now is a little broader than our view and so we kind of know what we're doing Ricky but I'm not so sure that we can tell you whether there is a big bullets coming or not. We're not as close to the actual act as much as we're providing the supporting capabilities for our providers to do it. And so we are seeing a lot of cohort identification but when it comes to like how much is actually being delivered from that cohort identification that's a challenging one for us to answer.

Okay and when we think about, I mean this call is emphasizing the focus on growth and aligning kind of like your development initiative and products with the client strategies, it seems like 2020 was all about telehealth. When you think about kind of like the areas where you're seeing most demand or interest from clients kind of like going back to the user group what are the areas that we should focus on for 2021 and 2022?

Well, I tell you what everybody went from not appreciating healthcare to really, really valuing it in a very short period of time and so we see this as the time when the patient has truly achieved a level of primacy in the system because between high deductible health plans a real appreciation for health at a perception of the scarcity of healthcare for a while, I think we come out of this with an entirely different galvanized consumer-driven patient population and our providers absolutely all the conversations went from last year in December when we met with our clinical leaders across our company, I mean across our client base all of that conversation was about impending risk. This year the entire conversation was about and actually two years ago it was about Dr. [Bernal] this year was all about the patient and engagement and consumerism and how do we truly activate the patient, how do we make them a part of the care, how do we get the outreach going. It's really become that patient experience that truly matters especially in a consolidating market.

Great. Thank you very much.

Thank you.

Your next question is from David Larsen with BTIG.

Hi, can you talk a little bit about the cross-sell opportunity? Are you happy with where that is right now or not? If I heard you correctly I think you said that 25% of bookings came from new footprints, 75% were into the existing base. It sounds to me like that's a good in sell or cross-sell performance there. I mean just what are your thoughts on that? And then what exactly is in the spring ‘21 version? Will that augment or supplement across all potential there? Thanks.

Yes. So on the second one first, first of all, you have to show up at our analyst day to actually know what's truly in. They don't let me tell that kind of stuff on earnings calls. But what I would say is what's in the spring ‘21 release will absolutely augment the integrated platform. We've done some light integration in the past. But now we have an underlying microservices platform. We've delivered great integration some foundational capabilities, but it's really about workflows that span the entire platform. For example back to Ricky's question. If you identify a cohort, you've identified a cohort that you need to apply your clinical population to treat and reduce risk up. Well, from there you want to be able to do outreach. From there you wanted to pop in to hear management and care coordination, which is actually then allowing you to decide how you're going to treat this cohort and make sure that you're assigning those tasks to the right license at the right time. And you're managing a consistent approach to a subpopulation that has similarity. Then you want to actually take that and go straight into the provider portal whether it's on the handheld or the EHR and make sure that they truly understand what and when and why things need to be done to absolutely reduce the risk of that cohort. On top of that all of that is then directly integrated into the patient experience. And so you're really taking going from population down to practice, down to provider-patient and then on the back end of course through financial analytics to make sure the organization gets paid and so there's journeys through the platform. Patients have a journey through a practice and they've written all these things called hassle maps about that journey because we've all lived those hassle maps. What our clients want is they want seamless integrated experience that is pleasing and consistent to the patient because that's what activates, engages and attracts patients to your practice. And so that's what I look like the and that's when I see the advantage of the 2021 release coming. Now from cross-sell standpoint I'm incredibly happy where we are. Our clients trust us as partners and advisors and we've seen great success. I tell you what I've got like 13 clients, large clients in this organization they told me they were leaving about five months into this job because we were not doing a good job for them. And as we sit here today, they are true partners to us. And that's really the foundation of the cross-sell but as I said in the prepared remarks, we're not selling a piece of something. We're selling a vision of transformation and that's entirely different than it was when I came in or even in the middle of my tenure. I think we're running out of question. One more question and then we got to close it off.

I'm all set. Thanks.

Your next question is from Stephanie Davis with SVB Leerink.

Hey guys congrats on the quarter and thank you taking my questions.

Thank you Steph.

You guys made a ton of acquisitions at the end of 2019 and 2020 was really quiet given a healthy demand environment of ambulatory practices are playing catch-up and free cash flow. How should we think about this? Are there any gaps left in your portfolio or are you just kind of on the sidelines given where valuation are?

Well, yes and no. It's great question. What I say is we build a string of pearls that's actually a pretty complete string and you got to be careful if you had too many pearls on a string the pearls start competing with each other for the same dollar and there is a point of time when if you're looking -- no, because I mean at certain point in time you don't actually leverage up further acquisitions attacking the same wallet. And then you have to start to think do I look further afield? Do I look at adjacencies going in different directions? And there's a number of those and I won't comment on any of them at this point in time. But what I would say is we don't just acquire stuff. We are building towards a strategy and we always look at accretion very-very seriously. And so as we step back now I'd say we've kind of filled up the current string of pearls, but you know what, there's some interesting ones in there that have off shoots that come into different market spaces and perhaps we could augment and build an entirely new string of pearls going a different direction and I think that is actually a possibility for this organization. What I would say is I didn't get to buy a car at 16 because I bought nice clothes at 12. And so 2020 was really about integration, focus, making sure that all the money of the shareholders we'd spent was actually returned and turned into revenue growth. 2022 it's going to be continued to focus on execution and growth and then we'll continue to focus on how do we create different opportunities going forward.

To ask the same question that a few other folks asked before what happens all the free cash flow?

All of the free cash sits and grows to more free cash and then we evaluate what to do with that with an absolute bias towards returning value to our shareholders through equity growth through investing in revenue growth and hopefully at some point getting this company into the double digit revenue growth range.

All right. Well sounds like a plan. Hope it doesn't take --

I would say it's more of an idea than a plan at this point in time. Plan comes when we talk to you and lay out a much broader framework. So that's all I've got for today. Thank you everybody for spending time with us, and we'll talk to you in mid-March at our analysts day.

Ladies and gentlemen, this concludes today's conference call and thank you for your participation. You may now disconnect.