CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Report”) and certain information
incorporated herein by reference contain forward-looking statements within the
“safe harbor” provisions of the Private Securities Litigation Reform Act of
1995. All statements included or incorporated by reference in this Report, other
than statements that are purely historical, are forward-looking
statements. Words such as “anticipate,” “expect,” “intend,” “plan,” “believe,”
“seek,” “estimate,” “will,” “should,” “would,” “could,” “may,” and similar
expressions also identify forward-looking statements. These forward-looking
statements include, without limitation, discussions of the impact of the
COVID-19 pandemic and measures taken in response thereto, as well as our product
development plans, business strategies, future operations, financial condition
and prospects, share repurchases, developments in and the impacts of government
regulation and legislation and market factors influencing our results. Our
expectations, beliefs, objectives, intentions and strategies regarding our
future results are not guarantees of future performance and are subject to risks
and uncertainties, both foreseen and unforeseen, that could cause actual results
to differ materially from results contemplated in our forward-looking
statements. These risks and uncertainties include, but are not limited to, our
ability to continue to develop new products and increase systems sales in
markets characterized by rapid technological evolution, consolidation, and
competition from larger, better-capitalized competitors. Many other economic,
competitive, governmental and technological factors could affect our ability to
achieve our goals, and interested persons are urged to review any risks that may
be described in “Item 1A. Risk Factors” as set forth herein and other risk
factors appearing in our most recent Annual Report on Form 10-K for the fiscal
year ended
factors, if any, in our interim filings on our Quarterly Reports on Form 10-Q,
as well as in our other public disclosures and filings with the
Exchange Commission
variables affecting our financial condition and results of operations, past
financial performance may not be a reliable indicator of future performance and
historical trends should not be used to anticipate results or trends in future
periods. We assume no obligation to update any forward-looking statements. You
are cautioned not to place undue reliance on forward-looking statements, which
speak only as of the date of the filing of this Report. Each of the terms
“
throughout this Report refers collectively to
wholly-owned subsidiaries, unless otherwise indicated.
This management’s discussion and analysis of financial condition and results of
operations (“MD&A”) is provided as a supplement to the condensed consolidated
financial statements and notes thereto included elsewhere in this Report in
order to enhance your understanding of our results of operations and financial
condition and should be read in conjunction with, and is qualified in its
entirety by, the condensed consolidated financial statements and related notes
thereto included elsewhere in this Report. Historical results of operations,
percentage margin fluctuations and any trends that may be inferred from the
discussion below are not necessarily indicative of the operating results for any
future period.
Company Overview
technology solutions that empower healthcare practices to manage the risk and
complexity of delivering care in
combination of technological breadth, depth, and domain expertise makes us a
preferred solution provider and trusted advisor for our clients. In addition to
highly configurable core clinical and financial capabilities, our portfolio
includes tightly integrated solutions that deliver on ambulatory healthcare
imperatives, including consumerism, digitization, risk allocation, regulatory
influence, and integrated care and health equity.
We serve clients across all 50 states. Over 100,000 providers use
Healthcare
variety of practice models including accountable care organizations (“ACOs”),
independent physician associations (“IPAs”), managed service organizations
(“MSOs”), Veterans service organizations (“VSOs”), and dental service
organizations (“DSOs”). Our clients range from some of the largest and most
progressive multi-specialty groups in the country to sole practitioners with a
wide variety of business models. With the addition of behavioral health to our
medical and oral health capabilities, we continue to extend our share not only
in federally qualified health centers (“FQHCs”) but also in the growing
integrated care market.
Our company was incorporated in
Systems, Inc.
Our principal executive offices are located at
6, Suite 700,
operate on a fiscal year ending on
Our Vision, Mission and Strategy
achieve this vision by delivering innovative solutions and insights aimed at
creating healthier communities. We focus on improving care delivered in
ambulatory settings but do so recognizing that the entire healthcare ecosystem
needs to work in concert to achieve the quadruple aim… “to improved patient
experience, improved provider experience, improve the health of a population,
and reduce per capita health care costs.”
Our long-term strategy is to position
integrated, delivery platform and the most trusted advisor for the ambulatory
practices of the future. To that end, we primarily serve organizations that
provide or orchestrate care in
24
——————————————————————————–
ambulatory settings and do so across diverse practice sizes, specialties, care
modalities, and business models. These customers include conventional practices
as well as new market entrants.
We plan to continue investing in our current capabilities as well as building
and/or acquiring new capabilities. In
Information Systems, LLC
we acquired
(i.e., patient portal, self-scheduling, and patient pay) and
for its virtual care solutions, notably telemedicine. The integration of these
acquired technologies has made
comprehensive in the market. Further, we are also actively innovating our
business models and exploring new high-growth market domains as we extend our
position as the essential, integrated, delivery platform and trusted impact
partner for the ambulatory practices of the future.
Market Opportunity, and Trends
The scale and scope of the healthcare industry continues to expand. Annual
GDP. A significant portion of this spend is directed towards the treatment of
chronic conditions and administering an increasingly complex system with diverse
stakeholders. While there are several convergent market forces reshaping the
healthcare industry landscape, we are focused on six trends we believe will
materially impact the markets we participate in and our customer value
proposition:
1. Regulatory Influence - Medicare and Medicaid continue to expand and
represent approximately a third of covered lives. Further, the 21st Century
Cures Act ("Cures Act") certification requirements and impending changes by
Centers for Medicare & Medicaid Services ("CMS") to Medicare reimbursement
and shared savings programs parameters (i.e., MIPS, MSSP and telehealth
programs) represent continued and escalating regulatory requirements in the
healthcare industry broadly and the shape of primary healthcare. Considering
these regulatory and market-based changes, many ambulatory practices have
come to place a very high value on partnering with vendors that stay ahead
of these regulatory and industry changes
2. Risk Reallocation - As healthcare shifts away from defined benefit models
towards defined contribution, employers, payors, providers and consumers are
increasingly evaluating models to share and reallocate risk. In 2020, nearly
40% of all healthcare payments representing over 75% of all covered lives
flowed through an alternative payment model. While Medicare Advantage
related payments led the charge with over 55% of payments tied to
alternative models, a plurality of commercial payors are also leveraging
value-based provider arrangements to incent care quality standards and
reduce health disparities. For providers, effective participation in these
models requires a full view of the patient population's clinical and cost
data and robust financial management solutions and services to navigate
multiple contract types.
3. Consumerism - Consumers are increasingly directing their own healthcare and
are expecting greater levels of access, convenience, and experience
personalization. Beyond tailoring healthcare interactions to their needs and
preferences, they also expect much greater transparency about the costs for
visits, medications, and procedures. Accompanied by a significant shift of
care from inpatient to lower cost outpatient settings and virtual modes,
healthcare is poised to becomes increasingly 'retail-like' and will place
unique demands on practices and care providers who need comprehensive
engagement platforms to attract, retain and engage patients through their
complete health journey
4. New Modalities and Coordinated Team Based Care - Untethered from physical
clinics and desktops, care is now being delivered in "boundless" venues by
multiple, coordinated care providers.
5. Meaningful Interoperability & Digitization - Greater levels of data
exchange, automation, Artificial Intelligence (AI) and speech enabled
workflows.
6. Integrated Care and Health Equity - Integrated, whole-person health
continues to trend strongly as evidenced by FQHCs/CHCs receiving Health
Resources and Services Administration ("HRSA") funding to drive integrated
medical, behavioral, and oral health. Public sector and private investment
in understanding and addressing social determinants of health and improving
community health are growing.
through short-term and long-term changes that impact healthcare in
States
Our Value Proposition
four “I’s” as follows:
• Integration - Delivering a broad and highly integrated set of solutions and
end-user experiences. NextGen Healthcare , a top KLAS-ranked platform
solution provider, is driving greater levels of efficiency and experience
for practices. Our clients value the full breadth of our solution offering
and seamless integration into their clinical workflows. This integration is
an important determinant of our success.
• Interoperability - Building seamlessly connected data and human networks
across ambulatory healthcare. NextGen Healthcare's Interoperability
solutions help create a frictionless environment where those that need
important healthcare data can rapidly find and utilize it. For example,
NextGen Healthcare powers over a third of all United States Health
Information Exchanges ("HIE's"), with over 170 million patient records
passing over our network of almost 2.8 million directory addresses.
25
——————————————————————————–
• Insights - Providing intelligence at the point of care to enable better
health and financial decision-making. We are helping our clients move from
being data rich to insight rich. By providing intelligence, through
innovative solutions that take data out of electronic health records
("EHR"), normalize, cleanse, and present it back as usable data pipelines,
NextGen Healthcare can help optimize prescription guidance, care gap
reviews, billing quality, practice variance, etc. and insert it directly
into clinician's workflows in order to facilitate sound clinical and
financial decisions when serving patients.
• Impact - Delivering and shaping outcomes in all aspects of our solutions and
service. NextGen Healthcare is pivoting towards becoming a true performance
partner for our clients and is evidenced by proactively helping manage
performance and outcomes for our clients.
enable our clients to address current needs while preparing for the needs of the
future including expanding access to health services, enhancing the coordination
and management of care, and optimizing patient outcomes while also ensuring the
sustainability of their practices. Specifically, we offer a range of solutions
to allow clinicians to practice anywhere and in new and innovative collaboration
models.
align with our client’s strategic imperatives. Ultimately, this value is
reflected in the overall insights and impact delivered to the client. The
foundation for our integrated ambulatory care platform is a core of our
industry-leading EHR and practice management (“PM”) systems that support
clinical, financial and patient engagement activities.
We optimize the core with an automation and workflow layer that gives our
clients control over how platform capabilities are implemented to drive their
desired outcomes. The workflow layer includes mobile and voice-enabled
capabilities proven to reduce physician burden. Recognizing that engaged
patients are key to positive outcomes, our patient experience platform enables
our clients to create personalized care experiences that enhance trust and drive
patient loyalty. Further, we support the advances in integrated care that
focuses on the whole person with solutions supporting behavioral and oral
health. Our cloud-based population health and analytics engine allows our
clients to improve results in both fee-for-service and fee-for-value
environments.
In support of extensibility, we surround the core with open, web-based
application programming interfaces (“APIs”) to drive the secure exchange of
health and patient data with connected health solutions. Our commitment to
interoperability, defragmenting care and our experience powering many of the
nation’s HIE’s places us in a unique position to enable our clients to leverage
this technology to lower the cost of care and improve the patient and provider
experience by providing an integrated community patient record.
Finally, to ensure our clients get maximum value from our solutions, we have
augmented our technology with key services aligned with their needs, helping to
ensure they reach their organizational goals. We partner with our clients to
optimize their information technology (“IT”) operations, enhance revenue cycle
processes across fee-for-service and fee-for-value models, service line
expansion and operations, as well as advise on long-term strategy.
Positioning
value proposition framework across the ambulatory care market, we incorporate
some or all our current solution offerings within three broad domains
illustrated in Figure 1 below:
• Enterprise - The Enterprise domain is both the largest and incorporates our
broadest portfolio of solutions (e.g., clinical, financial, and patient
engagement solution portfolios) provided to ambulatory care practices that
incorporate 10 or more healthcare providers. One of these solutions, our
practice management offering, NextGen® Enterprise PM, was recognized as the
#1 Practice Management Solution (11-75 Physicians) for four consecutive
years - 2019, 2020, 2021 and 2022 Best in KLAS Report.
• Office - The Office domain reflects almost all solutions (software solutions
and adjacent services) provided to an ambulatory care practice that
incorporates fewer than 10 healthcare providers. Our main offering in this
group is a cloud-based, multi-tenant SaaS EHR and PM solution, called
NextGen® Office, which was recognized as the #1 Small Practice Ambulatory
EMR/PM (<10 Physicians) in the 2022 Best in KLAS Report.
• Insights - The Insights domain incorporates solutions that address
interoperability, data and analytics, and value-based care. Previously
described as population health and connected health, the Insights solutions
portfolio is offered to clients across both our Enterprise and Office
domains as well as additional ambulatory healthcare stakeholders addressing
connectivity or value-based care needs. NextGen is highlighting this domain
as a reflection of its overall importance and high future growth
potential.
26
——————————————————————————–
Figure 1: NextGen Healthcare Solutions Domains
[[Image Removed]]
Results of Operations
The following table sets forth the percentage of revenue represented by each item in our condensed consolidated statements of net income for the three months endedJune 30, 2022 and 2021 (certain percentages below may not sum due to rounding): Three Months Ended June 30, 2022 2021 Revenues: Recurring 91.2 % 90.6 % Software, hardware, and other non-recurring 8.8 9.4 Total revenues 100.0 100.0 Cost of revenue: Recurring 40.6 39.1 Software, hardware, and other non-recurring 7.0 5.1 Amortization of capitalized software costs and acquired intangible assets 4.7 5.5 Total cost of revenue 52.2 49.8 Gross profit 47.8 50.2 Operating expenses: Selling, general and administrative 32.0 33.2 Research and development costs, net 14.2 13.2 Amortization of acquired intangible assets 0.5 0.6 Impairment of assets 0.3 0.3 Restructuring costs 0.0 0.4 Total operating expenses 47.0 47.6 Income from operations 0.8 2.6 Interest income 0.0 0.0 Interest expense (0.2 ) (0.2 ) Other expense, net 0.0 0.0 Income before provision for (benefit of) income taxes 0.6 2.3 Provision for (benefit of) income taxes (0.2 ) 0.4 Net income 0.7 % 1.9 % 27
——————————————————————————–
Revenues
The following table presents our disaggregated revenues for the three months
ended
Three Months Ended June 30,
2022 2021
Recurring revenues:
Subscription services $ 42,759 $ 38,284
Support and maintenance 39,138 38,486
Managed services 30,645 27,908
Transactional and data services 27,217 27,703
Total recurring revenues 139,759 132,381
Software, hardware, and other non-recurring revenues:
Software license and hardware
6,199 7,214 Other non-recurring services 7,344 6,489 Total software, hardware and other non-recurring revenues 13,543 13,703 Total revenues$ 153,302 $ 146,084 Recurring revenues as a percentage of total revenues 91.2 % 90.6 %
We generate revenue from sales of licensing rights and subscriptions to our
software solutions, hardware and third-party software products, support and
maintenance, managed services, transactional and data services, and other
non-recurring services, including implementation, training, and consulting
services performed for clients who use our products.
Beginning in fiscal year 2023, in order to align the presentation of
disaggregated revenue with the manner in which management reviews such
information, we revised our presentation of disaggregated revenues by major
revenue categories to reclassify revenues related to patient pay services and
certain other services from the managed services category into the transactional
and data services category, which replaced the prior EDI and data services
category. The prior period presentation of revenues disaggregated by our major
revenue categories and by occurrence above have been reclassified to conform to
current year presentation.
Consolidated revenue for the three months ended
million
recurring revenues, partially offset by a
hardware and other non-recurring revenues. The increase in recurring revenues
was driven by a
increase in managed services, and a
maintenance, offset by
The increase in subscription services was primarily due to higher subscriptions
of our NextGen Office and insights solutions, including interoperability,
population health, virtual visits, mobile, and financial analytics, due to
higher recent bookings. The increase in managed services revenue was primarily
due to an increase in revenue cycle management (“RCM”) and hosting services
revenues associated with higher recent bookings. Support and maintenance
increased
fee increases, partially offset by client attrition. Transactional and data
services revenue decreased due to lower volume of data services, partially
offset by higher EDI transaction volumes compared to the prior year. Software,
hardware, and other non-recurring revenues decreased
software bookings, partially offset by higher professional services revenue from
more hours incurred in the current year.
Bookings reflect the estimated annual value of our executed contracts, adjusted
to include the effect of pre-acquisition bookings if applicable, and are
believed to provide a broad indicator of the general direction and progress of
the business. Total bookings were
months ended
bookings RCM and transactional and data services, including patient pay
services, partially offset by lower bookings in subscriptions of mobile,
population health, and virtual visits solutions.
We continue to see overall practice volumes at healthy, pre-pandemic levels.
This reflects in our volume- and transaction-based solutions, as noted above,
and reflects an ongoing industry trend of procedure volumes migrating out of
higher cost settings, like hospitals, favoring lower cost care settings and
independent healthcare providers. We also continue to see healthy activity
levels in our current pipeline. Sales development activities, such as lead
generation and demos, indicate a positive demand environment. We have not been
significantly impacted by the current economic concerns and general market
conditions, and we continue to constructively engage prospects and our clients
to find ways to achieve better outcomes for all.
28
——————————————————————————–
Cost of Revenue and Gross Profit
The following table presents our consolidated cost of revenue and gross profit
for the three months ended
Three Months Ended June 30,
2022 2021
Cost of revenue:
Recurring $ 62,244 $ 57,160
Software, hardware, and other non-recurring 10,676 7,497
Amortization of capitalized software costs and
acquired intangible assets 7,134 8,084
Total cost of revenue $ 80,054 $ 72,741
Gross profit $ 73,248 $ 73,343
Gross margin % 47.8 % 50.2 %
Cost of revenue consists primarily of compensation expense, including
share-based compensation, for personnel that deliver our products and services.
Cost of revenue also includes amortization of capitalized software costs and
acquired technology, third party consultant and outsourcing costs, costs
associated with our EDI business partners and clearinghouses, hosting service
costs, third party software costs and royalties, and other costs directly
associated with delivering our products and services. Refer to Note 7,
“Intangible Assets” and Note 8, “Capitalized Software Costs” of our notes to
condensed consolidated financial statements included elsewhere in this Report
for additional information on current period amortization of capitalized
software costs and acquired technology and an estimate of future expected
amortization.
Share-based compensation expense included in cost of revenue was
and
respectively.
Gross profit for the three months ended
revenues as discussed above, offset by a
revenue associated with the higher revenues. Our gross margin decreased to 47.8%
for the three months ended
The increase in cost of revenue for the three months ended
compared to the prior year period was due to higher costs of subscription
services and managed services, including higher hosting costs associated with
delivering our software solutions and higher salaries and benefits from
increased employee headcount. Transactional and data services costs also
increased due to higher third party costs, partially offset by a decrease in
salaries and benefits. Software, hardware, and other non-recurring services
revenue costs increased compared to the prior periods primarily due to higher
salaries and benefits from increased employee headcount and an increase in
consulting costs associated with the delivery of our professional services as we
accelerate Spring’21 migration. These increases in cost of revenue were
partially offset by lower amortization of capitalized software costs and
acquired intangible assets, as noted above.
Selling, General and Administrative Expense
The following table presents our selling, general and administrative expense for
the three months ended
Three Months Ended June 30,
2022 2021
Selling, general and administrative $ 49,034 $ 48,486
Selling, general and administrative, as a percentage
of revenue 32.0 % 33.2 %
Selling, general and administrative expense consists of compensation expense,
including share-based compensation, for management and administrative personnel,
selling and marketing expense, facilities costs, depreciation, professional
service fees, including legal and accounting services, legal settlements,
acquisition and transaction-related costs, and other general corporate and
administrative expenses.
Share-based compensation expense included in selling, general and administrative
expenses was
2022
notes to condensed consolidated financial statements included elsewhere in this
Report for additional information of our share-based awards and related
incentive plans.
Selling, general and administrative expenses increased
months ended
primarily due to increases in travel, conferences, and conventions costs as
these activities begin to resume, higher personnel costs from our annual merit
increases, higher commissions, and increased employee insurance costs, and
29
——————————————————————————–
increases in consulting and marketing costs. These increases were partially
offset by lower legal and related costs associated with the Hussein Litigation
matter that concluded in
“Commitments, Guarantees and Contingencies.”
Research and Development Costs, net
The following table presents our consolidated net research and development costs, capitalized software costs, and gross expenditures prior to capitalization, for the three months endedJune 30, 2022 and 2021 (in thousands): Three Months Ended June 30, 2022 2021 Gross expenditures$ 30,793 $ 24,859 Capitalized software costs (8,998 ) (5,538 ) Research and development costs, net$ 21,795 $ 19,321
Research and development costs, as a percentage of
revenue
14.2 % 13.2 %
Capitalized software costs as a percentage of gross
expenditures
29.2 % 22.3 %
Gross research and development expenditures, including costs expensed and costs
capitalized, consist of compensation expense, including share-based compensation
for research and development personnel, certain third-party consultant fees,
software maintenance costs, and other costs related to new product development
and enhancement to our existing products.
The healthcare information systems and services industry is characterized by
rapid technological change, requiring us to engage in continuing investments in
our research and development to update, enhance and improve our systems. This
includes expansion of our software and service offerings that support
pay-for-performance initiatives around accountable care organizations, bringing
greater ease of use and intuitiveness to our software products, enhancing our
managed cloud and hosting services to lower our clients’ total cost of
ownership, expanding our interoperability and enterprise analytics capabilities,
and furthering development and enhancements of our portfolio of
specialty-focused templates within our electronic health records software.
The capitalization of software development costs results in a reduction to our
reported net research and development costs. Our software capitalization rate,
or capitalized software costs as a percentage of gross expenditures, has varied
historically and may continue to vary based on the nature and status of specific
projects and initiatives in progress. Although changes in software
capitalization rates have no impact on our overall cash flows, it results in
fluctuations in the amount of software development costs that may be capitalized
or expensed up front and the amount of net research and development costs
reported in our condensed consolidated statements of net income and
comprehensive income, and ultimately also affects the future amortization of our
previously capitalized software development costs. Refer to Note 8, “Capitalized
Software Costs” of our notes to condensed consolidated financial statements
included elsewhere in this Report for additional information on current period
amortization of capitalized software costs and an estimate of future expected
amortization.
Share-based compensation expense included in research and development costs was
respectively.
Net research and development costs for the three months ended
increased
higher gross expenditures, offset by
software costs.
The increase in gross expenditures in the three months ended
compared to the prior year was primarily driven by higher personnel costs due to
our annual merit increases and increased headcount as well as an increase in
consulting costs. Our software capitalization rate fluctuates due to differences
in the nature and status of our projects and initiatives during a given year,
which affects the amount of development costs that may be capitalized.
Amortization of Acquired Intangible Assets
The following table presents our amortization of acquired intangible assets for
the three months ended
Three Months Ended June 30,
2022 2021
Amortization of acquired intangible assets $ 705 $ 881
30
——————————————————————————–
Amortization of acquired intangible assets included in operating expense
consists of the amortization related to our customer relationships and trade
names intangible assets acquired as part of our business combinations. Refer to
Note 7, “Intangible Assets” of our notes to condensed consolidated financial
statements included elsewhere in this Report for an estimate of future expected
amortization.
Amortization of acquired intangible assets for the three months ended
2022
amortization of the customer relationships intangible assets associated with
method of amortization.
Interest and Other Income and Expense
The following table presents our interest expense for the three months ended
Three Months Ended June 30,
2022 2021
Interest income $ 46 $ 12
Interest expense (330 ) (317 )
Other expense, net (5 ) (22 )
Interest expense relates to our revolving credit agreement and the related
amortization of deferred debt issuance costs. Refer to Note 9, “Line of Credit”
of our notes to condensed consolidated financial statements included elsewhere
in this Report for additional information.
The changes in interest expense are primarily caused by fluctuations in
outstanding balances under our revolving credit agreement and the related
amortization of debt issuance costs. As of
had no outstanding balances under the revolving credit agreement. Interest
income is earned from funds in our money market accounts. The fluctuation of
other income and expense compared to the prior year period are primarily due to
changes to the
Provision for (Benefit of) Income Taxes
The following table presents our provision for (benefit of) income taxes for the
three months ended
Three Months Ended June 30,
2022 2021
Provision for (benefit of) income taxes (247 ) $ 559
Effective tax (benefit) rate (27.4 )% 16.4 %
The decrease in the effective tax rate for the three months ended
compared to the prior period was primarily due to the impact of reduced pre-tax
book income on rate reconciling items and the increased net benefit of discrete
items in the current period compared to prior year, offset by a net decrease of
the research and development credit, foreign rate differential benefit, and
higher nondeductible officer compensation.
Liquidity and Capital Resources
The following table presents selected financial statistics and information for
the three months ended
Three Months Ended June 30,
2022 2021
Cash and cash equivalents $ 40,361 $ 63,002
Unused portion of revolving credit agreement (1) 300,000 300,000
Total liquidity $ 340,361 $ 363,002
Net income $ 1,148 $ 2,848
Net cash provided by operating activities $ (4,645 ) $ 313
(1) As of
revolving credit agreement.
31
——————————————————————————–
We had no outstanding borrowings under our revolving credit agreement as of
30, 2022
are our cash generated from operations, driven mostly by our net income and
working capital management, our cash and cash equivalents, and our revolving
credit agreement.
We believe that our cash and cash equivalents balance as of
together with our cash flows from operating activities and liquidity provided by
our revolving credit agreement, will be sufficient to meet our working capital
and capital expenditure requirements for the next twelve months.
At present, we are conducting business as usual with certain modifications to
employee travel, employee work locations, and marketing events, among other
modifications. However, the extent to which COVID-19 may continue to impact our
business, financial results, cash flows, and liquidity requirements depends on
numerous evolving factors including, but not limited to, the magnitude and
duration of COVID-19; the impact on our employees; the extent to which it
impacts worldwide macroeconomic conditions, including interest rates, employment
rates, and health insurance coverage; the speed of the recovery; and
governmental and business reactions to the pandemic. We continue to monitor the
broader implications of the global COVID-19 pandemic and may take further
actions that we determine are in the best interests of our employees, customers,
partners, suppliers, and shareholders.
Cash and Cash Equivalents
As of
compares to
2021
We may continue to use a portion of our funds as well as available financing
from our revolving credit agreement, to the extent permissible, for share
repurchases, future acquisitions, or other similar business activities, although
the specific timing and amount of funds to be used is not currently
determinable. We intend to expend some of our available funds for the
development of products complementary to our existing product line as well as
new versions of certain of our products. These developments are intended to take
advantage of more powerful technologies and to increase the integration of our
products.
Our investment policy is determined by our Board of Directors. Excess cash, if
any, may be invested in very liquid short term assets including tax exempt and
taxable money market funds, certificates of deposit and short term municipal
bonds with average maturities of 365 days or less at the time of purchase. Our
Board of Directors continues to review alternate uses for our cash including an
expansion of our investment policy and other items. Any or all of these programs
could significantly impact our investment income in future periods.
Cash Flows from Operating Activities
The following table summarizes our condensed consolidated statements of cash
flows for the three months ended
Three Months Ended June 30,
2022 2021
Net income $ 1,148 $ 2,848
Non-cash expenses 19,340 20,151
Cash from net income, as adjusted $ 20,488 $ 22,999
Change in contract assets and liabilities, net 1,688 (1,501 )
Change in accounts receivable (1,464 ) 3,407
Change in all other assets and liabilities (25,357 ) (24,592 )
Net cash provided by operating activities
For the three months ended
increased
lower cash from net income, as adjusted for non-cash expenses, and
of decreases in cash from changes in other assets and liabilities, partially
offset by an increase in cash of
assets and liabilities. The decrease in cash from changes in accounts receivable
is primarily due to higher accounts receivable from our annual CPI fee increases
and increases in invoicing from higher recent bookings, partially offset by
continued efforts to resolve aged balances and improve collections. Net income
for the three months decreased
as described in the sections above. Non-cash expenses decreased primarily due to
lower depreciation, lower amortization of our operating right of use assets,
lower amortization of our purchased intangibles, and lower amortization of
capitalized software costs, partially offset by higher share-based compensation
expense. The decrease in cash from changes in other assets and liabilities is
primarily due to lower accruals of legal expenses and deferred payroll taxes, as
well as higher prepaid commissions, prepaid insurance, and other general prepaid
expenses. These decreases were partially offset by an increase in cash from
changes in accounts payable due to timing of invoice
32
——————————————————————————–
payments. The increase in cash from changes in net contract assets and
liabilities was primarily due to higher invoicing associated with higher
bookings and sales volume and our annual CPI fee increases.
Cash Flows from Investing Activities
Net cash used in investing activities for the three months ended
was
increase in net cash used in investing activities is primarily due to higher
additions to capitalized software, partially offset by lower additions in
equipment and improvements in the current period.
Cash Flows from Financing Activities
Net cash used in financing activities for the three months ended
was
the prior year period. The decrease in cash used in financing activities is
primarily due to
payments for taxes related to net share settlement of equity awards, partially
offset by higher proceeds from the issuance of shares under our employee equity
plans in the three months ended
Contractual Obligations
Debt
On
revolving credit agreement (the “Credit Agreement”). The Credit Agreement
matures on
other obligations under the Credit Agreement must be paid at that time. In
addition, we are required to prepay the revolving loan balance if at any time
the aggregate principal amount outstanding under the Credit Agreement exceeds
the aggregate commitments thereunder. On
amendment to the Credit Agreement, which, among other changes, provides more
favorable terms and flexibility with regards to our ability to obtain additional
revolving credit commitments and/or term loans thereunder, including amendments
to the net leverage ratio and definition of restricted payments.
As of
Agreement. Refer to Note 9, “Line of Credit” of our notes to condensed
consolidated financial statements included elsewhere in this Report for
additional information.
Non-cancelable Operating Leases
As of
leases was
leases have a weighted average remaining lease term of 2.5 years. Included in
our total future lease payments are
for vacated properties, of which
obligations for vacated properties relates to certain locations, including Cary,
efforts and are actively marketing for sublease. Refer to Note 5, “Leases” of
our notes to consolidated financial statements included elsewhere in this Report
for additional information. The remaining obligations have not been reduced by
projected sublease rentals or by minimum sublease rentals of
future periods under non-cancelable subleases.
Purchase Obligations
As of
related to payments due under certain non-cancelable agreements to purchase
goods and services, of which
Share Repurchase Program
In
may repurchase up to
through
share repurchase program will be determined by our management at its discretion
based on ongoing assessments of the capital needs of the business, the market
price of our common stock and general market conditions. The program does not
obligate the Company to acquire any particular amount of our common stock, and
the share repurchase program may be suspended or discontinued at any time at our
discretion.
During the three months ended
of common stock for a total of
repurchase price of approximately
remained available for share repurchases pursuant to the Company’s share
repurchase program.
33
——————————————————————————–
Deferred Compensation
Deferred compensation liability was
benefit payments to employees is not determinable. To offset this liability, we
have purchased life insurance policies on some of the participants. The Company
is the owner and beneficiary of the policies and the cash values are intended to
produce cash needed to help make the benefit payments to employees when they
retire or otherwise leave the Company. The cash surrender value of the life
insurance policies for deferred compensation was
Income Taxes
We have an uncertain tax position liability of
for which timing of expected payments is not determinable.
Off-Balance Sheet Arrangements
During the three months ended, we did not have any relationships with
unconsolidated organizations, financial partnerships, or special purpose
entities that would have been established for the purpose of facilitating
off-balance sheet arrangements or other limited purposes.
New Accounting Pronouncements
Refer to Note 1, “Summary of Significant Accounting Policies” of our notes to
condensed consolidated financial statements included elsewhere in this Report
for a discussion of new accounting standards.
Critical Accounting Policies and Estimates
The discussion and analysis of our condensed consolidated financial statements
and results of operations is based upon our condensed consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in
these condensed consolidated financial statements requires us to make estimates
and judgments that affect our reported amounts of assets, liabilities, revenue
and expenses, and related disclosures. We base our assumptions, estimates and
judgments on historical experience, current trends, and other factors we believe
to be reasonable under the circumstances, and we evaluate these estimates on an
ongoing basis. On a regular basis, we review the accounting policies and update
our assumptions, estimates, and judgments, as needed, to ensure that our
condensed consolidated financial statements are presented fairly and in
accordance with GAAP. Actual results could differ materially from our estimates
under different assumptions or conditions. To the extent that there are material
differences between our estimates and actual results, our financial condition or
results of operations will be affected.
We describe our significant accounting policies in Note 1, “Summary of
Significant Accounting Policies,” of our notes to consolidated financial
statements included in our Annual Report. We discuss our critical accounting
policies and estimates in Part II, Item 7, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” of our Annual Report.
There have been no other material changes in our significant accounting policies
or critical accounting policies and estimates since the fiscal year ended
31, 2022
34
——————————————————————————–
© Edgar Online, source
link