Welcome to the NextGen Healthcare Fiscal 2020 First 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 opened 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 statements that are forward-looking within the meaning of the federal security laws, including and without limitations, statements relating to anticipated industry trends, the Company’s plans, future performance, products, perspectives and strategies. Risks 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 Report on the Form 10-K and any subsequent quarterly reports on Form 10-Q. Any forward-looking statements speak only as of today. The Company expressly 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 descriptions 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 to everyone for joining us this afternoon to review NextGen Healthcare’s fiscal fourth quarter – excuse me to review NextGen Healthcare’s fiscal first quarter of FY 2020. However, before I do, I would like to welcome Jamie Arnold back to the earnings call. As I said on the last call, Jamie has been hospitalized and discharged to a rehab facility from what was a scary moment for all of us only eight weeks ago to now, I can only say that I am so grateful both personally and professionally to have Jamie back at full speed. Turning now to NextGen. In Q1 our revenue came in at a $131.9 million, compared to $133.2 million a year ago and our non-GAAP EPS of $0.16 compared to $0.19. Bookings for the quarter came in nicely at $31.7 million versus $21.1 million in the same quarter last year. Operating cash flow for the quarter was $17 million and NextGen generated $9 million in free cash flow as our cash generation capabilities continue to expand our storehouse of dry powder. While we are excited to see a 9% year-over-year uplift on bookings performance in line with our expectations, we are seeing our recognizable perpetual bookings becoming a smaller than expected percentage of the overall bookings, which is having an impact on full year revenue. Additionally, on the revenue line, one of our larger client bookings from last year has run into challenges. As we moved into this year, we expected to see that turn into recurring revenue. Unfortunately the client has had significant operational and financial troubles and we no longer expect to see revenue from this client putting further pressure on our FY 2020 full year top-line. Jamie will dive deeper into the impacts in a few minutes. As for EPS, our $0.16 came in line with our expectations and should increase nicely through the year as the benefit of both revenue growth and our focus on efficiency enable increased earnings production. Legacy maintenance retention came in at 89% over the trailing 12 months or right there at our FY 2020 modeled level. As we stated on the last call, we anticipate some volatility in the retention rate as we move forward and believe our modeled level is appropriate. As we look at Q1 deal flow, 14 clients entered into arrangements over $500,000 in the quarter. These larger deals continue to show how our broader platform and all-in deal approach are driving increased deal sizes and how our cross-sell capabilities continue to support our bookings growth. As we look into the accomplishments since the last earnings call, a number of key achievements and events standout. From a client satisfaction standpoint, we are very gratified to once again be recognized by KLAS. In February, we were awarded best-in-KLAS for project management for 11 to 75 providers. Just recently, Class updated their analysis announcing that NextGen now has the top scores across all ambulatory organizations greater than 11 providers. In fact, 50% of our large practice clients with greater than 75 providers reporting high satisfaction, the most among all measured vendors. We are very proud of this accomplishment by no means resting on our laurels. In addition, we recently received the results for our internal Voice of Client scores for our Enterprise Financial Services Solutions which primarily include our revenue cycle management business. We have completely reinvented and replatformed this part of NextGen, a path that has great benefit as well as some risk during the transition. As we emerge from the significant change, we are very proud to see amazingly positive feedback from our clients. Our net promoter score for NextGen Enterprise Financial Services rose 33 points from a year ago, up to 46.3. In fact, 90% of our clients responded that they are likely to recommend our services. Great to see the progress and the resulting client satisfaction increases. In June, we had our large client user group. We get together with a 100 to 150 of our largest clients twice a year to discuss market dynamics, our strategic response and to get feedback on how we are performing for them. It was great to get both a good bit of positive feedback but also to identify some key needs that span our clients and discuss some areas where we can continue to improve. Every user groups of my tenure has been better and more beneficial than the one before and this one was no exception. Turning to our expanding capabilities, I’d like to discuss a few recent introductions. In April, we released the Spring 2019 release of our NextGen Enterprise Platform. With this release, our clients have seen another step forward in usability, scalability and performance. Client feedback has been very positive and we are starting to see some meaningful uptake on the release. In addition, in late May, we announced the release of our Behavioral Health Suite 3.0, a major step forward as we look to be a strong part of enabling behavioral health to be a key part of improving both mental and full body health in our country. We see opportunity in this increasingly important and growing part of our healthcare ecosystem and look forward to further building out both innovation and commercial capabilities for this market. Our population of analytics suite continues to see success in the market both within our client base, but also in new to NextGen footprint. In fact, in the quarter, we were proud to close another critical care hospital further illustrating the broad value that our solution can provide not only in the ambulatory segment but in others. We look forward to further success and increasingly broad capabilities as we continue to focus on enabling our clients to perform well in both fee-per-service and risk-based arrangements. We are also starting to see success with our optimization services as clients become much more comfortable with NextGen as a long-term partner, they are moving from a potential replacement to desired optimization. We have signed a number of value-added service engagements to come in and work with the clients to ensure that their clinical, financial and operational processes are hitting on all cylinders. More to come as this capability continues to evolve and expand and begins to show up on the non-recurring service line. Last quarter, we discussed a couple of areas where we were evolving our structure investing in some areas and pulling back in others. Most notably, we have chosen to expand our footprint in our Bangalore Development Center. We are ways through that pivot and can report that it is going very well. We have nearly fully staffed our teams there and already gaining great momentum. In addition, we recently received the Zinnov Awards 2019 jury special mention award for our exceptional work in a relatively short span in India. The Zinnov Award is an important – are a very important in the India market and it was amazing to be recognized along some very large, long tenured companies in the India market such as PayPal, Dell, Samsung and Mastercard. This recognition increases the attractiveness of us an employer in the market, but also validates the great work both the team has done there and the great works that our broader team has done for our clients. However, with this expansion in Bangalore, we have also pulled back in select markets across the U.S. To that end, we have established a restructuring bucket as we ensure anyone leaving the organization has a smooth transition and a soft landing. Now let me turn to Jamie for a dive into the numbers. Jamie?

Thank you, Rusty and thank you to everyone on the call. Before I provide commentary on the numbers, I want to thank all of you who sent notes and well wishes while I was ill. During my stay in the hospitals and subsequent recovery at home, the notes brightened my spirits and provided much needed positive energy. Over the last eight weeks, I have learned a lot about healthcare and healthcare IT. I feel fortunate to be almost fully recovered from a very scary situation and I am excited to be back and part of the NextGen team. Again, thank you for your support. As Paul Harvey used to say, and now for the rest of the story. Total revenue of $132 million declined 1% compared to the same period last year. It was largely in line with our expectations. Recurring revenue of $119.4 million was essentially flat compared to a year ago with the decline in maintenance and managed services, largely offset by an increase in subscription services. Recurring revenue is 91% of our total revenues, slightly higher than the 90% in the same quarter of the prior year. Subscription revenue of $30.1 million increased 6% compared to a year ago. The growth was primarily driven by our patient portal, NGE SaaS and analytic solutions, support and maintenance revenue of $39.7 million decreased 4% year-over-year due to attrition in our legacy NGE customers partially offset by new contracts and CPI increases. Managed services revenue of $25.7 million decreased 2% compared to a year ago due to attrition within the RCM customer base as noted on previous calls, almost entirely offset by new contracts. And while we work through the challenge Rusty referenced in his comments, we remain focused on driving RCM penetration in our customer base, as well as leading with in new proposals to new customers. EDI and data services revenue of $24 million was essentially flat year-over-year with a decline in third-party data revenue, largely offset by increase in EDI to clients. Note we are down relative to the prior quarter Q4 of FY 2019 as last quarter, we had a one-time benefit from the signing of the Veradigm contract. Non-recurring or one-time revenue of $12.4 million, a 6% reduction over the same quarter last year. Software license and hardware revenue of $7.1 million declined 5% year-over-year and as Rusty noted, we’ve seen a measurable trend away from licenses and towards subscription. Non-recurring service revenue of $5.3 million decreased 7% compared to a year ago, due to lower legacy consulting engagements offset by analytics-related services. Bookings came in at $31.7 million in the quarter, up 9% on a year-over-year basis. Cost of goods increased due to higher amortization of capitalized development costs and the direct charging of hosting to cost of goods sold and transfer of personnel from operating expenses to cost of goods. Gross profit declined 7% to $66.6 million and gross margin declined to 50.5% compared to the prior year quarter of 53.6%. And this is due to the decrease in COGS just discussed above along with modest decline in revenue. Taking a look at our operating expenses, SG&A of $40.1 million is 10% reduction from $44.6 million a year ago. The decrease is primarily due to lower acquisition-related cost, and the transfer of cost to COGS mentioned above, as well as other lower cost due to cost savings initiatives. R&D of $22.1 million was flat compared to a year ago. The restructuring charge of $1.7 million is related to cost associated with the reduction of approximately 4% of our workforce, primarily within research and development as we transition to more resources in India. As part of the restructuring, we also downsized several facilities which resulted in the $500,000 impairment charge. Our GAAP tax rate for Q1 fiscal 2020 was a benefit of 43.9 with a non-GAAP tax rate of 22%. The GAAP tax benefit for Q1 is the result of federal IRS audit adjustments and excess tax benefits related to stock compensation. For fiscal year 2020, we will continue to use a non-GAAP tax rate of 22%. To conclude my comments on the income statement, our Q1 GAAP EPS of $0.02 compared to $0.04 a year ago. Our non-GAAP EPS of $0.16 for Q1 decreased by $0.03 year-over-year. Turning to the balance sheet, we ended the quarter with $28.6 million in cash and equivalents, and $6 million outstanding against our revolving credit agreement. We paid down $5 million against the revolving credit agreement in the quarter just ended. DSOs in the quarter were 57 days, a decrease of two days from last year and last quarter, all within our expected range of 55 to 60 days. Our CapEx excluding capitalized R&D was $3.8 million, capitalized R&D was $4.7 million. To close the call, I will update our initial outlook for fiscal 2020. We expect revenue to be between $536 million and $550 million. Previously, we had expected revenue to be between $543 million to $559 million. This reflects the headwinds we are facing in the managed services and software areas. Non-GAAP EPS is now expected to be between $0.82 and $0.90 per share. This was previously $0.86 to $0.94 per share. Note that we see the year backward loaded in terms of growth as we are only starting to see the benefits of current client and corporate projects. Overall, I am generally pleased with our performance in Q1 as we execute on our strategic plan and I am looking forward to continued progress in fiscal 2020. This concludes my review of the first quarter financial results. I will turn the call back to Rusty.

Thanks, Jamie. In summary, while we are not pleased with the impacts to full year revenue and the resulting impacts for earnings, we are gratified with the great progress the organization is making, our continued solid bookings performance and the continuous improvements to client satisfaction and organizational capabilities we are delivering. We have confidence in our ability to execute and look forward to continued progress throughout the year towards our goal of mid to high-single-digit revenue growth in FY 2021 leading to significant operating leverage in FY 2022. In closing, I wanted to express my gratitude to the amazing clinical folks across our client base in our nation. I wake up every day thankful for the commitment to great outcomes that have brought the most important person in my life back from the edge in multiple occasions and now we have our friend and teammate Jamie back in and good health following a scary time. We at NextGen have the honor to work tirelessly to support these amazing caregivers, all the while making healthcare better, more accessible, more affordable and more rewarding to practice. It’s an effort that we know can enable the great outcomes that keep our friends and family healthy, happy and productive. We are a business that constantly strives to do well, but more importantly are gratified to doing welcomes and doing good. Thank you. And I will now open it up to questions.

[Operator Instructions] And your first question comes from the line of Ricky Goldwasser with Morgan Stanley. Please go ahead.

Hi, this is actually Alexa in for Ricky. Can you hear me okay?

Yes.

Great. So I kind of wanted to unpack your comments on the client – the larger booking loss from last year. So, you said they went to operational challenges. So, could you maybe give a little bit more color on what was happening with them? When they notified you about these issues? And…

My apologies, but that is confidential and proprietary for the client. What I would say is that, it was not a NextGen issue that caused this to go in this direction. And so, we had a significant booking. The booking was give or take about $4 million annually and we had reason to expect that they were going to solve their financial problems as we came into this year. And just in the last month or so, we’ve realized that that is – we have come to the conclusion that that is not going to happen, fortunately, because we are conservative, we did not actually book revenue on this and so as they came to this point, we are simply removing it from our revenue forecast then moving on.

Got it. Okay. And I guess, just to follow-up on that, do you - in terms of your other clients, the bookings that you made last year, do you foresee this issue coming up with anybody else or are you fairly confident in the rest of the revenue forecast for the year?

Yes, the only reason we actually bring this forward is two-fold. Number one, it’s material to the forecast this year and number two, it’s an extraordinary event for us to have something go this way and therefore we felt like in the interest of transparency that we needed to share with the investment community, the fact that one of the two very large bookings for last year was not turning into revenue and therefore impairing this year’s revenue forecast.

Got it. Okay, and then, just a second one from me on the retention of – you said the 89% which is exactly in line with what you guys are modeling for the full year. So that that’s great. Just in terms of how you are thinking about it for the rest of the year, you guys have previously mentioned the key factor to watch is just hospitals and systems migrating towards single stack. And so, do you guys foresee any of that happening later to the year? Is everything kind of just stable as of now?

Look, I mean, I think we’ve been very clear in the past that a lot of our exposure to hospital consolidation has already run-off and so, attrition is just a difficult thing to forecast. That’s why we say the number is somewhat volatile because frankly you can read so much into the minds of your clients. But as we’ve talked about we put a robust proactive process to stabilize the client base and because of that, we feel like we’ve done a good job of managing and retaining our clients. But as I said, it is a volatile number.

Okay, thanks.

Thank you.

And your next question comes from the line of Sean Wieland with Piper Jaffray. Caller, please go ahead.

Closing out, it’s Sean Wieland with Piper. Hey, thanks. So, what’s going on with the transfer of expenses from OpEx to COGS particularly in sales and marketing?

It’s really G&A, Sean. We moved some people from who historically had been part of our IT organization into – because of this, and over time they’ve been doing more work, it’s related to supporting clients, particularly in the managed services area. And so, we made the decision and it should be that they should be – and classified as cost of goods.

Yes, they are supporting ongoing revenue generation.

And so, it is just one of the things at legacy we started using on them and then as we look at it and organizationally, we actually I think made this move middle of last year, but it didn’t really show up in the cost of goods and then as I was reviewing the variants for this quarter and I figured it was worth calling out. So it’s G&A went down, cost of goods went up, it’s easy – and I think to explain it. Does that make sense?

Yes, I think so. Can you maybe quantify what the points of impact is on the margin or the number of people?

In round numbers, it’s about $2 million this quarter. I think about $1.5 million to $2 million, I am doing it off the top of my head, but I believe that’s pretty accurate.

And then, so, other than the $4 million annualized check from the deferral of the bookings, what else is going on with the revenue to cause the step down?

What we are seeing, Sean is, we are seeing clients, and we think this is also a function of the financial pressure on the client base. We are seeing clients move more and more towards recurring and subscription models. And so, we had over the last two years, we’ve been relatively FY 2018 and 2019, we were relatively stable from a soft perpetual instantly recognizable, perpetual license standpoint as we both got in through this quarter and then started to look at the full year forecast, we do feel like it’s taking another step down. And so, unfortunately as perpetual license revenue turns into subscription revenue, it’s great for the long-term. But it does create a temporal problem within the year. And so, as quickly as we started to see this dynamic emerge and take another step down, we had to build that into our forecast.

Okay. And then, one more quick one. Do you have any update on the 20% operating margin goal for FY 2022?

Yes, as I said in the opening call if you’ll notice, I said significant operating leverage, I did not say 20%. Our view and we are still, frankly somewhere still updating our model based on kind of this new reality. Our view is this probably pushes the 20% into FY 2023.

Okay. Thank you.

Thank you.

And your next question comes from the line of Mike Ott with Oppenheimer. Please go ahead.

Good afternoon and thanks for taking my question. Curious if it’s possible to allocate the rev guidance reduction between the lower perpetual bookings mix and then the customer had the challenges if you can break that out?

Well, it was a $4 million client and we lowered by $8 million.

Okay. That makes it easy. Okay.

Even for the CEO, that’s math I could fill.

Okay. And then…

Even with $20 it’s the next time, you see him.

Great. And then sticking with the bookings, last quarter, I recall, they were $4 million to $5 million behind your internal expectations. Curious if any of that benefit this quarter that you just reported cite here?

No, I mean, as I said in the last call, I said, look, every single quarter I have my sales team tell me that something slipped. If something slips every quarter, it’s not slipping. So last quarter, we delivered the lower expectations. This quarter we delivered on our expectations and frankly, most of that was more of the organic things we expected to happen in this quarter, maybe on the margins something slipped from Q4 to Q1, but as I said, you can say that about pretty much every quarter.

All right. Fair enough. Thanks guys.

And your next question comes from the line of Stephanie Demko with Citi. Please go ahead.

Hey guys. Thank you for taking my questions. I just want to get a quick update on Veradigm and the stats you are seeing there. Just any early traction and if you looking at other ways to monetize that beta opportunity to kind of help your top-line?

Yes, I think, look, the Veradigm piece, as Jamie said, we had a small one-time revenue event in Q4 that represented kind of the instantiation of the agreement. We expect revenue to start flowing from the Veradigm relationship in the back half of the year and so at this point in time, we are still in the process of onboarding onto the Veradigm consortium and as we move through towards the back end of the year, we will update you there. From the standpoint of additional data monetization opportunities, I’d say right now we are focused – we are kind of sticking to our knitting. We’ve joined the Veradigm consortium. We are very focused on making that effective. And then, on the other side, we are very focused more on the operational players of supporting our clients’ business, rather than finding additional ways at this point to drive value from the identified data.

All right. Thank you so much. And could we talk a little bit of how that affects kind of margin side of things, if you look at margin in out years?

I am sorry, say that, you broke up a little bit. And so, can you repeat that Stephanie?

Sorry about that. I was just wondering if there is any sort of margin contributions you can think of and how that can impact your out year margin expansion targets?

This is specific to Veradigm?

Specific to Veradigm, the revenue stream. How we should think about that incrementally?

I would think about that as being a revenue contributor. But I would be much more focused on the rest of the P&L, right. As we sit here today, we see Veradigm a little more on the margins. It’s a nice additive, but it’s not by no means the core focus and the core value driver in the P&L. And so, we think, look, it may have a slight positive. But you know it’s a complex P&L. There is positives, there is negatives. I think, it’s more that we feel like, when it comes out in the wash, it is revenue growth and efficiencies on the broad P&L that are going to get us to the margin target.

All right. Understood. Thanks for taking my questions.

Thanks, Stephanie.

[Operator Instructions] And we have a question from the line of Gene Mannheimer with Dougherty & Company. Please go ahead.

Thanks. Good afternoon. And first of all, good to have you back in the saddle, Jamie.

Thank you, Gene.

You are welcome. My question, just going back to the trend in bookings toward more subscription and longer term recognition, I mean, if we just save the $32 million or so in bookings that you did this quarter, how much of that, say, would convert to revenue in the current year versus historically?

I would say that the vast majority of it converts within the current year, especially given that it’s Q1. But we haven’t really unpacked kind of time for bookings as much to say that the vast majority of our bookings do go turn the revenue within a year. In fact, I mean, the reason both the materiality to the forecast of this one transaction, but also because, frankly we do have such good conversion that’s a loss of this one deal was actually a relatively extraordinary event which is why we talked about it on the call, because frankly what it means is, there is $4 million out of the give or take $130 million that we delivered last year, that we now expect to not turn into revenue. That’s a somewhat extraordinary event for us and one that because of that we elevate it to the level of an earnings call.

Okay. That’s very helpful. Thanks. And with respect to the restructuring and the shift of R&D resources to Bangalore, I mean, I would think that would be a benefit to you on the EPS line and maybe you could quantify that for us, Jamie, because, certainly you are reducing the EPS guidance. I understand why, but how much of a benefit would this R&D restructuring deliver?

Gene, and let’s going to answer that qualitatively. The R&D restructuring was not driven by cost reductions. The R&D restructuring was driven by increased regulatory intensity from the government as well as continuing increasing needs in the client base. When it came down to us, our capacity model was not enough with the ramping up of government regulation to be able to both deliver the capabilities our clients need to win and also deliver the capabilities that the government requires them to. And so, based on that, we actually needed to expand our capabilities and expand our headcount. And so, we are – this enabled us to do that cost neutrally, but does not create EPS favorability. It creates future optionality from an innovation standpoint.

All right. Very good. Thank you.

Thank you.

And we have no further questions at this time.

Right. Well, I am going to thank Cerner for taking all the rest of the questions away since our earnings call just started. But thanks everybody for hanging in there. We will look forward to speaking to everybody on the next call. Thank you.

And this concludes today’s conference call. You may now disconnect.