NextGen Healthcare, Inc. (NASDAQ:NXGN) Q3 2023 Earnings Call Transcript

David Sides : Yes. Jack, sorry, I misspoke on the Q1 application. It has come out and we’re going through it. But I agree with your premise that this will make data much more liquid than it was before. I think some of our other suppliers set-up QHINs too, it should slow down any information blocking from any of those other suppliers or whether it’s some aggregators like commonwealth or others. So, those are all I think good. We can €“ every one of the suppliers can, kind of handle the volume of this and is built to already. And like I said, we’re already connected to all of our clients. So, for us to take the next step is really, okay, how do we do this at national scale, how do we think through, how do we run the system, and get value from it. So, I think it’s all good for the American healthcare system that these, kind of regulations are coming into effect and we intend to capitalize on them.

Jack Wallace: Great. Thanks. I’ll hop back in queue.

Operator: Our next question comes from Jailendra Singh from Truist Securities.

Jailendra Singh: Thank you and thanks for taking my questions. I just want to better understand the top line growth and margin profile for TSI Healthcare longer-term. It seems the deal is not adding any EBITDA in fiscal 2023, which I understand 24 months, but you talked about the deal becoming accretive to EBITDA in next year, in a year or so. Maybe talk about like what will drive that? Is it just the cost management, cost synergies? Like what are the key drivers, which is that improving margins at TSI? Just maybe flush out a little bit some details there?

David Sides : It’s a good question. So, we’re still making investments in our own internal technology this year. When we went to Investor Day we talked about, we’ll get operating leverage from some of the ways that we’re automating ourselves, meaning automating NextGen. So, we’ve deployed systems to better automate how we handle our support process. We’ve deployed things like AI that when one of our support staff talking with a client that suggests here might be the possible answer. So, as we’re hiring and scaling as we grow, we can bring people online to do their job more effectively and more productively quickly. We’re also making a large investment in all the upgrades of Spring 2021, which we’ve talked about and obviously that will have an end date sometime this year, but that’s been a big investment to set up that center of excellence.

It’s kind of one-time to get through this Cures Act process and then that will fade away or we’ll turn that into another revenue generating capability with those employees. So, there’s some things that we’re doing now to try to set ourselves up to scale for the growth. And that’s why we said this year, we’re going to have our EPS be similar to last year as we take some of that margin and invest in our own business. And then that sets us up for operating leverage next year and the following years because we’re planning on this being a multi-year journey. And I’ll hand it to Jamie for other comments.

Jamie Arnold: I think David, we’ve laid out a multi-year plan and we would expect, I think a bit more is our progress on the Rule of 40 scores, so we will show some operating leverage. But as David indicated in his prepared remarks, we will also accelerate revenue growth next year.