Welcome to the NextGen Healthcare Fiscal 2020 Second Quarter Results Conference Call. Hosting the call today from NextGen are Rusty Frantz, President and Chief Executive Officer and Jamie Arnold, the 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'd like to remind everyone that the comments made on this call may include statements that are forward-looking within the meaning of the federal securities 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 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 second quarter FY'20 results. Q2, FY'20 was a solid quarter of NextGen as we continue to execute on our strategic plan. In Q2, our revenue came in at $134.3 million, compared to $130.3 million a year ago, both under ASC-606. This represents more than 3% year-over-year growth. Our non-GAAP EPS of $0.24 was flat compared to Q2, FY'19 and in line with our expectations. Looking further quarter came in nicely at $36.6 million, showing growth over a very strong $36.1 million in the same quarter of last year. Operating cash flow for the quarter was $23.8 million and NextGen generated $17.1 million in free cash flow as our cash generation capabilities continue to expand our store house and dry powder. In addition, we are able to fully pay down the remaining balance on our revolver at this quarter giving us a current total available liquidity of $324 million. As we move forward, we will continue to look for uses in this capital to drive additional value for the shareholders. Legacy maintenance retention came in at 90.4% over the trailing 12-months or slightly ahead of our FY'20 model level of 89%. As we stated on the last call, we anticipate some volatility in the retention rate as we move forward and believe our model level continues to be appropriate. As we look back at Q2 deal flow, we saw continued success in signing all-in deals and further cross-selling our RCM or Revenue Cycle Management solution which represented almost the third of the bookings in the quarter. Notably in the quarter, we signed another larger all-in deals totaling over $5 million annually. A software only client that was frankly highly dissatisfied four years ago when I started my tenure has reached the level of confidence and satisfaction that they were comfortable adopting entire integrated ambulatory platform. Including Revenue Cycle Management, our mobile platform and our top health analytics which is the competitive replacement. Clearly, a great validation that our performances are driving satisfaction and innovation is opening us opportunities within our client base. This wasn't only significant deal as we in Q2 we closed the total of 11 clients who entered into arrangement of over $400,000. I am really proud of the momentum that team is driving and look forward to the back half of the year. From an M&A standpoint, we announced that acquisition of TOPAZ information solutions, a deal closed in the last month of the quarter. TOPAZ has been a strong reseller partner into the behavioral health space and brings both strong, commercial end solution capabilities to NextGen. While this acquisition brings negligible revenue, we see behavioral health and integrated care as key strategic areas for NextGen and this transaction expands our capabilities to deliver our planned growth in this part of the market. We will be augmenting the capabilities of both NextGen and the incoming TOPAZ team with further investments, both from a solution standpoint and by further expanding our sales team. Diving a bit deeper in the sales, last quarter we discussed the couple of areas in which we are changing and enhancing the structural parts of our organization. And this quarter we have continued that evolution. To that end, we made a couple of strategic changes to our sales structure. Without significant disruptions to our client relationships, we've chosen to both expand the number of quota carrying feet on the street, while at the same time more closely aligning our sales team with their managers to promote more of player coach relationships. Reorganizing this fashion will allow for the managers to become specialists in their geographies and declared specialties, taking a proven commercial model and evolving to become even more effective. Ultimately, this will be a very important shift as we focus more on new client acquisition in areas that we have competitively advantage TAM to play. While we expect this evolution to have minimal impact on our full year bookings expectation, we do expect to see bookings a bit more back loaded into Q4 as these changes settle in and the newer organizational model takes hold. From client satisfaction standpoint, we made a meaningful progress in the quarter as our class scores continue to move in the right direction. In the practice management all provider sizes, we now rank just a touch behind the largest spender on our space. In the 11 to 75 provider category, we maintained our number one practice management ranking and our enterprising EHR score have increased 12.5 points since September 2017, representing a more than 19% improvement in only two years. Our voice for the client survey provides another proof point that our clients are pleased with the NextGen experience. Specifically, 81% of our respondents in the quarter said they would recommend NextGen enterprise EHR, and 87% would recommend our enterprise practice management solution. This increase in client satisfaction along with the continued expansion of our solutions has made us increasingly competitive in the field. This quarter was another point of validation for this improvement and I am very pleased with the nine competitive takeaways captured in our second quarter bookings number. Coming up, we are looking forward to our User Group Meeting in a few weeks. UGM 2019 represents an amazing opportunity to both gather feedback from our clients as well as showcase a number of key areas of evolution. Among the many areas we will showcase, we are excited to present to our strong new capabilities and behavioral health and integrated care areas that resonate with both our large federally qualified health centre base as well as our growing base of behavioral health clients. We are also on a significant journey to educate our clients on the breadth of the capabilities of the NextGen solution platform. Many of our clients are not leveraging significant aspect of the platform. And we see opportunity to drive both further value and increased client satisfaction by educating them on how to get more from the investments they've already made. This education also supports the cross-sell strategy of expanding our clients NextGen footprint. In addition, we will show the clients another great step forward from usability standpoint as we show our first look at a new users interface for our EHR, specifically launched in the primary area providers operate in the soap note. We are excited to spend time on these and so many other exciting areas with existing client and an increasing number of new prospects as we look forward to another great user group meeting. As we look at revenue for the full year, we are happy to reaffirm our guidance of $536 million to $550 million for FY'20 revenue. We see Q3 revenue growth being a bit more muted with Q4 being more meaningful chunk as our Veradigm relationships begins to deliver. As we look at the back half of the year on the EPS line, we also happy to reaffirm our full year guidance of $0.82 to $0.90. We continue to be pleased with our progress on our strategic plan and the beginning of organic revenue growth. We are excited to see this year's bookings growth and revenue growth continue for years into the future. As we deliver on our current plan, as we seek our competitive increase and our ability to execute improve, our confidence only increases. Now let met to Jamie for dive into the numbers. Jamie?

Thank you, Rusty. And thank you to everyone on the call. Total revenue of $134.3 million increased $4 million or 3% compared to the same period last year and was in line with our expectations. Recurring revenue of $120.6 million increased $4.3 million or 4% compared to a year ago with increases of 7% in subscription services and managed services and 3% for EDI and data services. Offset partially by a modest decline of approximately 1% and support maintenance revenue. Recurring revenue is 90% of our total revenue, slightly higher than the 89% in the prior year. Subscription revenue of $31.4 million increased $2.2 million compared to a year ago. The growth was primarily driven by analytics and NextGen office. Support and maintenance revenue of $39.4 million decreased $300,000 year-over-year due to attrition in our legacy NGE customers largely offset by new contracts and CPI increases. Managed services revenue of $25.2 million increased $2 million compared to a year ago mainly due to growth in hosting services and RCM services related to the large new customer we signed in June of last year. We remained focused on driving RCM penetration in our customer base, as well as leading with it proposals to new customers. EDI and data services revenue of $24.6 million increased $700,000 year-over-year, largely due to increases in existing and new customer volume, offset by modest decrease in data services revenue. Non-recurring and one time revenue was $13.7 million, a $300,000 or 2% reduction over the same quarter last year. Software license and hardware revenue of $8.3 million declined $1.1 million, or 12% year-over-year, consistent with the trend we discussed last quarter. Non-recurring services revenue of $5.4 million increased $800,000 or 16% compared to a year ago due to growth in connected health and analytics professional services. Bookings came in at $36.6 million in the quarter, up 1.4% on a year-over-year basis against the very tough comparison. Cost of goods increased by 8% due to higher amortization of capitalized development cost and higher managed services cost due to a mix shift. Gross profit declined 1% to $68.5 million and gross margin declined to 51% compared to the prior year quarter of 53.1%. This is due to the increases in cost of goods just discussed. Taking a look at our operating expense. SG&A of $39 million is an increase of $4.8 million or 14% from $34.2 million a year ago. The increase is primarily due to prior year insurance credit of $5.7 million related to shareholder litigation. R&D of $19.8 million increased $1.4 million, or 8% from $18.4 million a year ago. This increase is related to increase gross spending and a slight reduction in capital and software development cost. Impairment and restructuring charges of $2.1 million are primarily related to cost associated with the reduction and expected sub lease income on the vacated portion of our Horsham property. Our GAAP tax rate for Q2 FY'20 was 7.7% with a non-GAAP tax rate of 22%. For FY'20, we will continue to use the non-GAAP tax rate of 22%. To conclude my comments on the income statement, our Q2 GAAP EPS of $0.09 decreased from $0.20 a year ago. Our non-GAAP EPS of $0.24 for Q2 was flat to the prior year. Turning to the balance sheet. We ended the quarter with $42.9 million in cash and equivalent and a zero balance outstanding on a revolving credit agreement. DSOs in the quarter were 57 days, a decrease of three days from last year and flat to last quarter. All within our expected range of 55 to 60 days. Our CapEx excluding capitalized R&D was $1.5 million and capitalized R&D was $5.2 million. To close the call today, I reiterate our outlook for fiscal 2020. We expect revenue to be between $536 million and $550 million. And non-GAAP EPS to be between $0.82 and $0.90 per share. So that $0.82 to $0.90 per share. Overall, I am generally pleased with our performance in Q2. And as we execute our strategic plan, I am looking forward to continue progress throughout this year and into next year. This concludes my review of the second quarter financial results. I'll now turn the call back to Rusty.

Thank you, Jamie. If I look back over the last four plus years here at NextGen, I continue to be amazed to the tremendous progress we've made. We've come from having one of the worst client satisfaction levels in our sector to one of the best. We've significantly expand our solution platform, both organically as well as through multiple successful acquisitions. We built a robust employee culture that has enabled our both client satisfaction and strong innovation. We delivered significant bookings growth and are now moving into revenue and earnings growth. And most importantly, we have once become a positive force in the evolution of healthcare as we seek to do well by doing good. I am so proud of our team and so grateful to be part of this amazing organization. With that, I'll pass it over to the operator and open it up for questions. Thank you.

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

Yes, good afternoon and thanks for taking the questions. Maybe I'll start off with a question on bookings. I was hoping you could help us set expectations for bookings growth for the full year. And certainly the first half performance has been good against some challenging comparable and the set of sound promising for the second half, I want to make sure we understand all the puts and takes relative to some of those small changes to sales organization.

Yes. I mean as I look through the back half of the year, what I'd say is I am very -- I would confirm the guidance I provided at the beginning of the year which is we expect, last year we delivered I think 14% year-over-year bookings growth. This year we are expected to be a little bit more muted but kind of in that top half the single digits. I feel like we've got clear line of sight to that, a robust pipeline. We had a great quarter this last quarter. And my expectation is that Q3 will be a good quarter and Q4 will really rebound.

Great. That's very helpful. And still on the bookings front, one thing that didn't come specifically in the script is the population health win at university hospital health system. I think that's one that people have an eye on and curios about both the process there, so set a large system outside of your core client base. And then that substance of why they chose NextGen?

Yes. So the reason why didn't include in this quarter's deal because it is actually signed a couple of days before the beginning of this quarter. But we press release at this quarter which kind of makes net new news. We are very excited about it. If you remember deal is closed about a year and year and half ago. I talked about an interesting win in a hospital system in the Northeast where these four hospitals that are pulled in our top health. And I said you know what it is an interesting win but until I got more data points I am not going to declare an opportunity. With the university win, we really feel like we are starting to become a little more interested in a broader space beyond our core client base. That one we were chosen really because we've shown the ability to bring together multi source data in a way that is truly excellent. By multi source data I mean not just clinical feeds and not just claim feeds but bringing those together so you both have clinical information but also the cost information necessary to validate not just quality outcome but the cost of achieving those. By bringing that altogether and by showing that we can interoperate across a multiple EHR platform system which we did in that pre or prior group that I talked about where they have I'd say across our entire ecosystem somewhere in the high-teens from an EHR standpoint. Almost and maybe 2020 and so ability to bring all that together and then deliver truly actionable information that really drive activity from a top health standpoint. I think all of those things are really positioning us in a somewhat of a unique space in a part of the market that is as much of an agnostic opportunity maybe even more than just an extension of a single EMR.

Your next question is from Jamie Stockton with Wells Fargo.

Good evening. Rusty, I guess there, thanks for taking the question. The sales restructuring, could you just give us a sense of for your quarter carrying reps kind of what look like, what their experience will be on a go forward basis versus what it was in the past, what will change about their job?

Yes, it's a great question. So think about it this way. So in a prior to October 1st, a Regional Vice President may be managing reps that are focused on the cross-sell inside the base on new client acquisition outside of the base, on parts of the healthcare ecosystem like a federally qualified health center behavioral health and an orthopedic group and a multi-specialty group in a primary care group. And so when you think about mentoring and being that player coach to their entire team, the breadth of knowledge that regional Vice President had to have was very significant. And frankly they were managing more of the sales process in the forecasting than being able to participate as directly and mentoring, both mentoring reps but also being able to truly engage the client. And so by segmenting our leadership team out so that there is more of a pure group under them. So for example, a Regional Vice President might be solely responsible for sales executives who are new client hunters, and so by bringing that kind of alignment we're enabling the leadership to better support the team, Jamie any color.

Sure, Rusty. So the most important thing about this pivot is it starts, it's primarily focused at the leadership, the sales leadership. We previously had bifurcated the sales organization between those who focused inside the base and outside the base. The reps who are focused inside the base, there is no change to them right now. To those who are outside the base, they are -- they have been divided into specialty focuses. So there is a little bit of change for them, but it will help them narrow their scope and become more targeted. And but it's the biggest change is it for the regional Vice President where we now have separated them to the same kind of category whether is three Regional Vice President in charge of the inside the base or the farmers and there's three that are outside the base.

Yes. And I think one of the core principles of this was to really disrupt the sales rep client relationship to the lease degree possible, because here we are in the middle of the year. We're driving great bookings growth and the other thing I'd say is this was not in response to any problem as much as this is leaning forward into opportunity.

Okay, that's great. Maybe just one more, the R&D spend. If I look at it sequentially, I want to say maybe it came down a fair amount, and I guess the thing that runs through my mind there, although I realize there might be some noise, your capitalized levels were up a little bit, but maybe not as much as I think the pro forma R&D number came down if you like, or have we -- is this seeing the head count shift to India and like this is the new number that we should think about, just any color on that would be great.

Yes, we are in the process as we talked about in a couple of quarters ago of making that head count shift and expansion. We're well on the way through that, but there are puts and takes along the way as we move through that. I will say that we have no intention of saving our way to success on the R&D line. Our expectation is right in line with what we said at the beginning of the year and while there will be some ebb and flows from a cap software standpoint, you should expect the full-year number to very closely resembles last year's number.

Your next question is from Matthew Gillmor with Baird.

Hey, thanks for the question. One more on the sales reorg and some of the goals there. It seems like this will give you a little bit of a clear focus outside of the base. So I was hoping you could kind of confirm where you are from a bookings standpoint. Is it still sort of 85:25 and then with the sales where you are where do you expect that will trend as we get into next year?

Like as I say it's not 85: 25 because that doesn't - that ways mathematically possible. But what I would say is I feel like we are starting to move past 85:15. And I think if we look down the road, we see that probably going as somewhere in the 75: 25 range as we look at next year because we are having success. Now the great news is we're having continuous success inside the base. And so if we can accelerate outside the base that creates the natural bookings growth curve that we've really discussed over the last few years and expect to extend going forward. We are expanding the number of quota carrying reps that are focused outside the base simply because we've played a reasonably successful hand there and we see that as a good investment in a win for the shareholders.

Got it. Thanks for the math lesson too. Let me ask one more on the just capital deployment priorities, you've got no debt at this point, your cash is building up, the Topaz deal it seems pretty small. So just where are you focused on acquisitions and are you close to anything?

Well, if we're close to something we'll tell you when we're there. But what I would say is, look we,--the --last prior to this acquisition in the last one was, I think about a year and a half ago, which was another small tuck-in of an orthopedic and musculoskeletal focused reseller. Prior to that would have been all the way back in October 17, which was the acquisition of EagleDream Health, our population health analytics play. As we sit here today, we've done a really good job of both integrating and delivered on value of the things that we've done. And as we now start to look forward especially with we believe more energy in the transition to value, as well as a greater emphasis on patient provider interaction. I would expect to see us continue to focus in those areas. And given the liquidity we have, we definitely have some opportunities to do some interesting things and so my expectation is that you'll see us make moves as we move through the next two to four quarters. But you can never forecast those things depends on the right asset being actionable at the right time and frankly at a price that we believe is a win for the shareholders.

Your next question is from Donald Hooker with KeyBanc.

Great. You referenced that interesting population health deal win, it sounded like it was last quarter in the University Health System, and can you give us an update on that EagleDream. I guess you call it NextGen population health analytics I think now kind of how much of that -- where are you in terms of client count there, but it's been growing nicely, and are you getting more traction now outside of the legacy NextGen base like that will maybe a break down there, what is that, now 50.50 .

Well, we haven't actually broken that out and, but what I would say is I think we're having as much success agnostically as we are within the base. The client count continues to increase. We're plus or minus around 100 clients and I think are getting more than that though are starting to see clients really start to expand the number of feeds and expand the distribution of the product as people are really starting to wrap their heads around what it can do for their organization. I think also we've talked publicly about the fact that we are in the process now of adding care management capabilities to population health that will show up in calendar FY'20 calendar '20 rather, sorry, not calendar FY '20 that will show up in calendar '20 and that's really then taking the analytics and allowing those analytics to really extend into consistent, personalized action around and what the cohort identified population health needs. And so it's really focused on not just identifying the cohorts that can -- that need special attention, but actually ensuring that you have a relatively consistent approach to what kind of attention you're paying to that patient, which then allows you to continue to evolve practice and deliver better quality at lower costs proactively to patients before they become a bad fact from a profitability standpoint for the client. And so we are really right now, we're kind stepping back and really taking a look at the success we've had in top health and now starting to figure out what are the broader set of capabilities that we can integrate with population health. And so we can play an even more important and strategic hand for clients, both within the NextGen base, but also outside of the NextGen base in ambulatory and potentially over time more and more in the critical care space. Time will tell on that.

And just maybe one last question, just love your perspective on sort of any change in appetite among your clients that you might or might not be seeing with regards to taking on risk. I guess we're looking ahead to 2020 where there'll be some new ACO contracts or direct contracting model. I guess we're waiting for details on but love to hear your broader perspective on your clients taking on risk?

Yes. And certainly, I'll be also able to update that next quarter as we get through our user group meeting in our clinical Summit. But let's just say the conversations -- I've spent a lot of time in the field. The conversations I'm having with clients are both how can they be successful in the current model, but people are definitely becoming aware when they look at things like a lot of episodic capitation, a lot of bundles coming out, bundle capitation coming out. There is some real concern around having the right analytics to be able to be successful those kinds of models. And we feel like folks are on one hand, starting to become aware that they need to do something but a lot of our clients are still not aware what that something should be beyond I need a top health solution. Our goal and our job is to educate them more on how they manage that transition not just by slapping analytics on the organization, but actually retooling the way that organization works to truly be successful in risk-based arrangements. It's an entirely different world when you're paid on outcomes versus paid on activity. And I think our clients are starting to face that more and more. And our expectation is that heavy investment in both solutions and education will pay dividends for the clients and in return for us.

Your next question is from Ricky Goldwasser with Morgan Stanley.

Yes, hi, good afternoon. So when we think about the Topaz acquisition, obviously small in revenue contribution, but it seems that it's strategic value could be very interesting here, so a when do you think kind of like a list of used took back, do you see any other opportunities where you can develop solutions outside comfort that core 31:35.2provider physician market it really enhance the offering the fits in within that.

Yes I mean, will certainly as we look at -- as we look at Integrated care is one of those kind of emerging pieces classically there has been a real stigma around behavioral health in this country. And yet as people step back they realize that behavioral health is actually the proactive treatment that prevents a lot of costly medical problems down the way. And so for us for that would, especially given that integrated care is actually a combination of behavioral mental -- medical and dental, we have a really interesting hand to play there as we bring all of that to the table through our QHC base. And so really as we start to work with effectively a relatively new segment of the industry for us. We're starting to see some real opportunity to there to go above and beyond just kind of what's been done in the past and bring together a couple of great solutions to really support them. When we look further, Ricky, I'd say that right now our primary focus is really on the integrated ambulatory market. We've added behavioral health, but we're still focused very much on multi-specialty, enrolling up single specialties in FQHC. The only other thing we started doing, which is of the University Health an example is to really start to think about is there a broader play from an agnostic top health and value based care solution standpoint in the critical care space, but at this point in time, we have two wins and two wins it does not make a full offensive business strategy at this point, it's a little more opportunistic than planned form.

Okay and then I know that in the past you said the vast majority of bookings convert to revenue within the year. You're seeing more all-in deals. Does this change the way you think about the timeline or how we should model it?

No, it doesn't. In fact, for example, the large deal that we just signed should start producing revenue before the end of this financial year or right at the beginning of next one. And so that timeline still holds. And if anything it's getting more repeatable as we get more experience in these deals.

Your next question is from Anne Samuel with JPMorgan.

Hi, guys, thanks for taking the question. I was just wondering if there are any margin implications from the sales force changes, especially given the expansion of quota-carrying reps. And then should we think about this is in the area of investment going forward. Thanks.

Actually what we did in, so we've acquired a number of solutions over the years as you're aware of. And when you first acquired the solution, we as a general rule keep a sales overlay that helps make sure that we do not lose momentum with the solution post acquisition. However, as time goes on and the general field force becomes more facile with the solution that enables us to depend more on the individual rep rather than perhaps double comping on certain solutions. So what we were able to do here is actually pull some of those specialists back into the rep pool rather than having them double covering. And frankly, the way that we've now maybe narrowed a little bit. The market segment for each rep also makes it a little more possible for them to have a broader understanding of the solution itself. And so actually we are able to pull all of this off in a budget neutral way.

Thanks very helpful.

Yes. And so for us, I mean it was really about, I mean how we just become more efficient and effective with the dollars we have today.

Our next question is from Sandy Draper with SunTrust.

Thanks very much. A couple of quick housekeeping ones probably for you. Jamie. I guess the first is can you just remind me on the retention number? What are the inputs? Is that revenue base number of clients or number of docs? I just can't remember on that. And then second on the Veradigm relationship. Should we pretty much expect that to be a consistent fourth quarter event? Or are there things that eventually start to move around? Because it sounds like it's going to hit again in the fourth quarter.

So let me answer the first question on the retention statistic. That is a dollar-based statistic and so think of it is how much was available at that at the -- beginning of the quarter for renewal and how much renewed in the quarter. So that is what that statistic trying to make it easier to use it as a modeling tool.

Yes, so just to be clear, it's and it is, we look at the population of clients on the front end of the quarter and what that population is paying us. And we look at that same population on the back end. It is not, it does not include added because we always add clients as well. We exclude that from the calculation and it does not include any CPI increases. And it is specifically for legacy maintenance. Is that makes sense?

Yes, it absolutely does. And then the Veradigm?

And then relative to Veradigm, once those contracts, the vast majority of the, what we would expect to get from Veradigm will be taken ratably over the course of the year. So it will start, we expected to start showing up in our fourth quarter of this fiscal year.

And the Q4 number from last fiscal year was a one time not under that ratable revenue.

Okay. That's really helpful. And then maybe if I can squeeze in one bigger picture for you, Rusty. And this maybe not one consistent trend, when you think about the new wins you're getting. When you think about market drivers and you talked a little bit about top health as well that fuzzy what's driving it dissatisfaction with their existing vendor, maybe someone moves. I mean are there any consistent trends when you see someone coming to you or going out to market? And what's actually getting that client out into the market actually doing RFP. Thanks.

Yes. So it's interesting because I mean I think the replacement market has been bouncing around as a meme now for about four years, right. And when I look at the replacement market, when a client is going to replace their EHR, PM infrastructure for one of the couple of reasons. One is because their vendor can't keep up from a regulatory standpoint and therefore they just can't stay there. The second is because the vendor has done frankly just a really poor job and the client has gotten to their wits end and then the third one is because somebody is being acquired by somebody else. And when we look at that certainly we are doing a phenomenal job on the regulatory side. We continue to innovate and bring a broader solution to the table because frankly EHR and PM were necessary and sufficient in the 2010 timeframe as we sit here today, a broader ecosystem is necessary to really enable to clients to be successful. And so we've seen a lot of bucket one and two and then given the fact that we have a really good size footprint in rolling up single specialties. We're also seeing that M&A tailwind come to the table for us. And I think really the combination of those things plus when you think about the fact that we are driving very visible client satisfaction. If you were really to map out the class scores for all the major vendors over the last four years, you would see that really only NextGen has been on a very significant upward trajectory. And almost everybody else in the space is flat to down. And so I think we've separated ourselves to a degree based on trajectory. It is not that there aren't other great solutions out there, but often times clients don't look at where somebody is at a point in time, they look at the trajectory because the trajectory really implies where the company is going to be in the future. And so all of those things I think are really nice tailwind for us.

Your next question is from David Windley with Jefferies.

Hi, good afternoon. Thanks for taking my question. So kind of a granular sales force follow-up question, I have heard you talking about all-in deals, Rusty; your comments just then about a broader solution set required in the marketplace really to effectively compete. If I understood from your earlier comments, the sales force outside the base is being asked to focus more narrowly and those seem a little incongruent. Is the reason there because your sales outside the base are going to start with maybe one solution or a limited amount of solution, and then potentially expand from there? Is that how that makes sense?

Actually maybe I didn't speak as clearly as I could. When we say focused more narrowly, we don't mean focus narrowly from a solutions standpoint. What we mean is if you think about it right, the difference between the languages, the business practices, the challenges facing a federally qualified health center are entirely different than the challenges facing a rolling up orthopedic private equity-backed group. And so what we've done is we've bifurcated the market a little bit. So that a rep can bring the entire solution to the table and map it onto a relatively consistent client base. I'm always worried about people becoming so broad in their market segmentation they have to manage that they become very lightweight and when you're talking to, for example, if you're talking to the orthopedic group and you talk about patients. If you go talk to behavioral health group, you're talking about clients; you're not talking about patients. It seems like a simple thing. But even just being able to talk in the right lexicon for the client base you're dealing with is so important because the client base wants to feel like the person that they're dealing with and the company that are dealing with truly understands their space. And so what we've done is we've narrowed the market segment a little bit. But frankly when we're going into these clients, we are going in saying you need an entire integrated ambulatory solution that enables you to be successful in both fee for service, as well as fee for value. Now interestingly enough, we're not going to wave a magic wand and tomorrow you're going to be up in live on all of this. What we're going to do and this work very well at the large client we signed last year. We're going to work with that client to understand their resource map, the strategic priorities, and their timelines and based on that we're going to deliver to them a roadmap of evolution. Because you don't go through that much organizational change all at once and become successful. You have to take it step-wise. This is really different than this organization sold in the past, where our salesperson would just show up and sell some licenses and move on. Now, we're really establishing that high level C-Suite strategic conversation with the client. And truly understanding both their strategy and the roadblocks for them to get there. And I think that just completely -- I said at UGM my first user group meeting four years ago and I stop on the stage. And I said, look we're on a journey. We're on a journey from being a vendor to being a partner to aspirationally being a trusted advisor. Your vendor wants to sell you something. Your partner understands your problems and help through solve them. A trusted advisor on the other hand shows you problems you didn't even know are coming and helps you solve them before they become real issues for your company. We're starting to move through that spectrum and in some cases aspirationally getting the being a trusted advisor because we are seeing a broader market view. We are seeing the problems from a more objective standpoint, and we do have solutions that can help. And so it's an exciting time. It's -- look, anytime we make, any time tweaks or adjustments to our sales structure there is always a little bit of risk there, but if you think about a year and half, two years ago when we were completely reinventing our sales structure, we saw a significant drop in bookings. This time on the other hand, we feel like, yes, there may be a little bit of -- we may not get as far up as we'd like to. But this once again is not an emergency. This is really leaning in to get a much more intimate sales team with the client base and frankly continue our path of driving multi-year bookings growth.

Got it. And that definition as you've just described, does that definition of say client category for a rep to focus on applies both inside the base and outside the base?

Yes, that's correct.

Right. Okay and then dovetailing kind of on that trusted advisor commentary. Your discussion to an earlier answer or an earlier question about clients and bundles and capitation and potentially helping them to understand how they need to retool to be able to operate in those situations. It sounds like a different type of consultative relationship or service provision. Do you have the knowledge base, the professional services in the organization today to do that or is that an area that you need to expand as well?

I would say yes and yes. We have that capability. I want to see it expand and flourish. For example, if we look at our account management framework. So we have account executives and account executives for an existing client are responsible really for selling the strategic evolution of the client. We have account managers who are responsible for consistent contact with the client. We are now continuing to educate our account managers. We are bringing in as well augmenting with new talent to start to provide more and more of that consultative solution and not just as an engagement, but also just as an everyday conversation with your account manager. And that's the kind of evolution. It's one thing to build a great service organization; it's another thing to have knowledge for major entire organization. And have your client be constantly, frankly amazed by the fact that when they talk to people, those people understand their world and their challenges. And so this is -- it is not a wave magic wand type of thing, but it's something that we have in the organization. We are just now looking to expand it and expand that knowledge.

Your next question is from George Hill with Deutsche Bank.

Hey guys, thanks for taking the question. Rusty and Jamie, I guess my question is we're two quarters through the year and the guidance range at the revenue line is about $14 million. But you've acquired Topaz. You've announced [Indiscernible]; you won UH, you've probably got a little visibility in Veradigm kind of. Can you just walk through kind of what are the big moving pieces? What gets us to the high end of guidance versus the low end of guidance?

I mean, well, as we sit here right now. If we were on the high end of guidance or the low end of the guidance, we would have put out a different message, first of all. We feel like the guidance we put out is appropriate. Certainly, if we see over performance from Veradigm that gives us maybe a little bit on the upside. If we see underperformance on Veradigm that puts us on the downside. From the standpoint of bookings and revenue, I think we've got pretty good line of sight on to kind of the normally generated revenue and so like I said. We feel pretty good about where we are in the range, George. And as I said, if I felt like things are really trending upwards, we would have indicated that and if things were falling off the bottom, we'd indicate that too much like we did last quarter when we had the bankrupt client and on top of that. So that was a $4 million loss of revenue, but then on top of that, you're also seeing in the software and hardware line. You're seeing that flip from perpetual to subscription happening in real time as we go through the year. It's unfortunate that flip came in under what we expected. But I'd actually argue it's fortunate because the reality is more subscription bookings are better for the lifetime revenue growth of this company and that moved from perpetual to subscription while it may be a little painful in one year is actually a win for the shareholders in the medium and long term.

Your next question is from Mike Ott with Oppenheimer.

Good afternoon and thanks for taking my question. It's great to hear that nearly one-third of bookings are now from RCM cross-sell. Just wondered if you could update us on RCM penetration in your base or any qualitative color you could share there. Thanks.

I'd say that we've gone through a lot of transformation in RCM. We're really starting to see the sales volume. Our expectation is as we move into next year that volumes should start really showing up on the revenue line. From a penetration standpoint, yes, we've made some inroads. I'm not ready to put out a percentage number or anything like that. But what I would say is there still a ton of room out there.

Your next question is from Stephanie Demko with Citi.

Hi, guys. Thank you for taking my questions. Just given some of your color around takeaways in your prepared remarks. Are there any trends to call out what's been driving this such as what about solution gain traction or may be a pure acquisition resulting in heightened attrition you benefit from?

I'm sorry can you, sorry Stephanie you broke up there. Can you repeat it one more time?

Does any of the big drivers of some of your competitive takeaways given that it's a pretty [realistic] some historical trends.

Well, we've seen, look in some cases we're taking away from a vendor that's perhaps distracted by a lot of merger and acquisition activities that they are part of. And so that distraction certainly as a help. In one case, we had a vendor end of life a core platform for a lot of clients and the frankly an attempt to switch them onto another one of their platforms. And we were successful in coming in and taking some of those clients. And so it's really, I go back to what I said about the replacement market, it's really when a vendor end of life something, it's when vendors going through significant distraction and unable to deliver the experience that the client wants or the value that the client wants. And if I look across our competitive takeaways, those two are the primary drivers.

I got it and then looking at bookings for this year. Could you just walk us through the puts and takes to some of tough comps and how you're going to think about the all-in growth versus growth normalized for the tough comp?

Yes, I mean if I look at, if I look at bookings for the full year. Look, I mean as I think I said at the beginning of the year, we expect reasonable year-over-year growth not necessarily the 14% of last year, but somewhere in the upper half of the single digits. Look, it's honestly the puts and takes on it or just continued execution the way we have been. The pipeline continues to get more robust. Our forecasting continues to get better, both from a number, but also from a deal traceability standpoint, which is not to be undervalued and sales forecast, sales forecasting. And I think as we sit here today, we feel, frankly, last year we had a good first half start and then we got a little soft in the back half. This year we've had a good first half start and we're very, very focused on having a good second half as well, which I think will put us right where we need to be.

Is there any way to benchmark that just sticking the level growth you would need to get to the mid or the high point of the projected 21 range?

So we haven't put out of 21 ranges at this point in time and frankly have held off a bit and probably won't refresh the long term until we get into the -- to the end of the year call it have more visibility on next year. But what I would say is, look, given the amount of subscription bookings we are driving versus perpetual that gives us increased confidence in revenue growth next year. Because rather than having that big drop-off from a perpetual license to the maintenance stream that comes after at, which is about an 80% drop off on $1, we're now looking at purely ratable revenue which just generates a natural growth curves as we get into next year. And so my expectation is that we're going to continue to see bookings growth, but we don't need 14% every year to deliver that. It's actually a smaller number especially given the high quality subscription nature and recurring nature of the bookings.

Got it and which is it seemed that prior mid to high single digit target no longer hold on?

No, we should just assume that we haven't refreshed our guidance for next year. I think it might literally just don't know at this point in time, Stephanie. We have our own theories but we got to see how the back half of the year finishes out before we push anything forward.

And our final question comes from Gene Mannheimer with Dougherty.

Hey, thanks guys. Congrats on the good progress this quarter. I wanted to dig in the Topaz a little bit more how much client overlap with you. What's the level of integration between your NextGen EHR and their behavioral platform? And how would you characterize the competition in that space? I know you didn't raise revenue guidance this year, so the revenue is immaterial from Topaz but how would we look towards the long-term?

Think of this almost more as a forward integration of a reseller partner. Their capabilities are built on and around our platform and their clients, frankly we are forward to integrating the revenue that we in many cases much of it we already had, right. This is less about integrating in revenue and earnings to your point, and it's much more about, you think about it, behavioral health for example is roughly different in every single state. It's a patchwork clothe of regulations. Each state has a very intimate group that no at all of them knows each other. And so going into that market is a little bit different than going into kind of a nationally consistent market. It takes expertise; it takes passion. It takes carrying about integrated care and behavioral health in ways that are different than we might have seen on the medical side. And so I almost look at it as almost and aqua higher. In this case, we've brought them into this organization because we think there's a great hand to play. We've taken some share from the largest player in the space. We've taken some share from other players in the space. And so when we look at that we say, ha, in that case, we can have a reseller out there, but if this is important enough. We'd like strategic control and frankly the ability to augment investment in this area in a very consolidated and consistent way. And therefore using a small part of our very large store house of dry powder to simply forward integrate this and make sure that we can deliver on our expectations for growth as architected in our plan in behavioral health. I think it was a pretty easy decision for us.

Okay. No, that makes good sense. Thanks. And with respect to your guidance for the balance of the year, you referenced some muted growth in Q3. But it sounds like there will be growth just not as much as from Q3 to Q4. Is that the way to think about it?

Yes, I'd say that, look; we definitely expect growth in Q3. Let's be abundantly clear on that, right. Year-over-year growth on in Q3 and yet as we look at it in Q4, first of all, as always a better quarter for us anyways. And we expect to see frankly the perpetual number be a little bit bigger of the smaller number in Q4 as well. And so when you think about all of those things, it creates a greater level of revenue uplift in Q4 then we'll see in Q3. And we just wanted to make sure that folks were accurately understanding how the revenue is going to show up in this year.

Okay, very good. Thank you.

Jamie has a comment too.

Gene. So I appreciate Rusty is exuberance. I do want to remind everybody we had an exceptional Q2 last year. The fact that we overachieved against that number from a booking standpoint and the timing of transaction. So I just want to be clear. Rusty is giving our firm position for the full year. And so having the timing of deals sometimes falls in and out of a quarter. So a couple of deals close a little sooner than I would have expected. So at the end of Q2, which allowed us to overachieve against last year's very tough comparison? So I have a little more cautious outlook for Q3, but I'm comfortable --

On the booking side.

On the booking side but I'm comfortable with the full year number, the guidance that Rusty is providing.

And on the revenue side. Jamie?

I am comfortable with the guidance that you and I both have reiterated.

Perfect. Is that helpful, Gene?

It sure is thank you. End of Q&A

Awesome. Thank you very much and thank you, operator and thanks everybody for joining in on the call. Have a great rest of your weekend and we'll talk to you in January.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.