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

Jessica Tassan: Hi. Thanks for taking the questions. I just wanted to follow-up a little bit on the TSI margin questions, can you maybe talk about the gross margin profile? And then the EBITDA margin profile of that business, maybe near-term and then also steady state just because I think there are a couple of different specialty EMRs that you guys will be maintaining as you scale that business? Thanks.

David Sides: Well, it’s not multiple EMR. So, they use our EMR. They have content that’s specific to three specialties, the pulmonology, rheumatology, and cardiology. That’s really attractive to us because we haven’t gone after those specialties, but we use our EMR. So, over time that the EBITDA profile looks really good. It’ll look like our own EBITDA profile. And in some ways, they do better in some places than we might do. So, long-term, I think the EBITDA profile will approach ours. And Jamie, I don’t know if you want to add any color on the gross margin?

Jamie Arnold: Yeah, David. I’m going to go back to why we acquired TSI is more so than talking about €“ the margins are going to look pretty similar to ours, but the reason we acquired TSI is their specialty content. And their high level of service that they provide to their customers, which €“ so the content is in rheumatology, cardiology, and pulmonology. These are specialty areas that they had built content and we didn’t have it. So, we think it opens up new areas for us and can help accelerate our growth for the NextGen enterprise domain. And the other thing is, some of the things they provide services to their customers. They have some offerings that their customers value and we will bring those to our NextGen clients also. So, it’s more about the opportunity it creates on the top line is how I think about it.

Jessica Tassan: Got it. And then I think just as you were discussing the TSI revenue acceleration potential, you might have mentioned that the sales force was, kind of limited at the time of the acquisition. I’m wondering were the costs associated with ramping the sales force for that business fully reflected in the fiscal 3Q? And then if not, just when might those investments begin to appear? Thanks.

David Sides: Well, we didn’t own the asset that long in 3Q. So, you’ll see it ongoing, but it should offset with the growth we think we’ll see from that business too. So, it’ll be going forward, but it’s in all of our guidance.

Jessica Tassan: Got it. Thank you.

David Sides: Thanks.

Operator: The next question comes from George Hill from Deutsche Bank.

George Hill: Yes. Good evening, guys, and thanks for taking the question. David and Jamie, kind of a macro question as cost cutting and HR levels and staffing levels seem to be a trend across the industry. I know this is always a sensitive topic, but I know it was hard to hire employees during the upswing. We’re seeing a lot of layoffs across a lot of macro tech sectors during this downswing. I guess, I’d ask you how you feel that cost structure and staffing? And does the company see this more as an opportunity to opportunistically hire people and bring on talent or as you look at the demand environment, is this something where you’re kind of trying to match staffing levels to end market? And the questions, kind of spun from the SG&A spend in the quarter was, kind of flattish to down slightly year-over-year and below what we had expected. So, just kind of a headline cost and headcount question please.