Nextgen Healthcare — Proxy Contest (September 2021)
58 slides from Nextgen Healthcare's proxy contest presentation, Sep 27, 2021
Slide 1: Executing Our Strategy to Drive Value Creation
Executing Our Strategy to Drive Value Creation Investor Presentation September 2021
Slide 2: Legal Disclosures
Legal Disclosures Certain Information Concerning the Participants NextGen Healthcare has filed a definitive proxy statement and supplement to the proxy statement (the “Supplement”) with the U.S. Securities and Exchange Commission (the “SEC”), together with the associated WHITE proxy card attached to
Slide 3: NextGen Healthcare Is Poised for Accelerating Shareholder Value Creation
NextGen Healthcare Is Poised for Accelerating Shareholder Value Creation Leadership has transformed NextGen Healthcare into a market leader with a winning platform and exceptionally engaged employees A robust foundation is now in place. We have never been better positioned to accelerate growth and c
Slide 4: Who We Are
Who We Are A market-leading provider of integrated healthcare software, services and analytics solutions. Our solutions help healthcare providers manage risk and complexity, and more effectively deliver high quality care in a rapidly evolving U.S. healthcare sector. $1.1B Market cap $556M Annual rev
Slide 5: What We Do
What We Do Engage and empower patients in their care Improve the quality and efficiency of care delivery Drive healthy, predictable financial outcomes Orchestrate delivery to manage risk Enable frictionless interoperability
Slide 6: In 2015 NextGen Healthcare was challenged by decisions made when Sheldon Razin was Chair
In 2015 NextGen Healthcare was challenged by decisions made when Sheldon Razin was Chair. It took a number of years for new leadership to address the damage that was done. Poor capital allocation that prioritized dividends over internal investment Lack of timely investment that hindered innovation a
Slide 7: We Inherited a Destabilized, Underperforming and Rapidly Deteriorating Company
*Voice Of The Employee (V.O.T.E) Annual engagement Survey Scores 2015 Out of 100% scale We Inherited a Destabilized, Underperforming and Rapidly Deteriorating Company Declining Revenue Growth Under-invested employee base* 40% Culture 37% Company Potential 37% Sr. Mgr. Relationships 38% Learning & De
Slide 8: NXGN Share Price: We Inherited a Deteriorating Company
NXGN Share Price We Inherited a Destabilized, Underperforming and Rapidly Deteriorating Company 2009 American Recovery and Reinvestment Act (ARRA) required and provided funding to nearly all medical practices to implement EHR A rising tide lifts all boats, NXGN rides the wave of “Meaningful Use” NXG
Slide 9: Incomplete Solutions Portfolio
*Voice Of The Employee (V.O.T.E) Annual engagement Survey Scores 2015 We Inherited a Destabilized, Underperforming and Rapidly Deteriorating Company Incomplete Solutions Portfolio Discovered material gaps in the product portfolio due to lack of investment over many years
Slide 10: We Implemented Far-Reaching Changes to Revitalize the Company…
We Implemented Far-Reaching Changes to Revitalize the Company…
Slide 11: We Undertook a Multiphase Transformation
We Undertook a Multiphase Transformation Reinforced and Scaled Offerings Increased R&D and focus on product quality Built a commercial foundation Invested in talent and culture Pursued strategic M&A Diversified revenue “Surround Solutions” Expanded services Established new partnerships and business
Slide 12: Assessed and Realigned the Portfolio
Assessed and Realigned the Portfolio Eliminated underperforming assets; began adding new growth opportunities in ambulatory healthcare Divested hospital business in 2015 to focus on profitable elements of the portfolio Discontinued NGNow, reallocated spend into more attractive development programs S
Slide 13: Increased R&D and Investment Focus, Which Drove Significant Results
Increased R&D and Investment Focus, Which Drove Significant Results In last six years, NextGen Healthcare has invested more in R&D than previous 15 years, turning core offerings into “Best in KLAS” R&D Spend (% of Total Revenue) Efficiency ~20% increase in available capacity Quality >95% defects det
Slide 14: Unlocked High-Growth Markets Through Strategic M&A
Mobile and Analytics High-Growth Specialties Patient Engagement Unlocked High-Growth Markets Through Strategic M&A Entrada (2017): Core mobile capabilities, augmenting the EHR and improving the provider experience Eagle Dream (2017): Population health management capabilities, broadens offering and c
Slide 15: Broadened Partnerships and Scale
Broadened Partnerships and Scale Strategic partners drive $100M+ in annual revenue with potential to scale even further Priority Business Development Opportunities Service Extenders Marketplace launch Modern API Interoperability 243M+ direct messages 150M+ documents exchanged 40M countries with Mirt
Slide 16: Instilled Operational Excellence to Drive Margin Expansion
* SG&A has been adjusted to remove shareholder litigation expense Instilled Operational Excellence to Drive Margin Expansion Leadership’s ongoing efforts to drive costs out of the business model has led to SG&A below 30% of total revenue in FY21 Migrated hosting infrastructure to Amazon Web Services
Slide 17: Transformational Employee Engagement 2015 – 2020
Transformational Employee Engagement 2015 – 2020 *Voice Of The Employee (V.O.T.E) Annual engagement Survey Scores from 2015 through 2020 Targeted Investments in Talent and Culture Improved employee engagement dramatically, turning NextGen Healthcare into a destination for top talent Instituted Diver
Slide 18: Industry Thought Leaders Recognize NextGen Healthcare's Transformation
Industry Thought Leaders Recognize NextGen Healthcare’s Transformation Our actions have turned NextGen Healthcare into an award-winning HCIT company with #1 KLAS Rated Core Offering
Slide 19: Independent Industry Analysts Also Recognize the Progress We Are Making
Over the past few years, the company has made significant investments in its product portfolio and restructured its sales force to put a greater emphasis on expanding its footprint. This is paying off” July 29, 2021 “ We continue to applaud the turnaround the company has made” June 14, 2021 “ NXGN c
Slide 20: Our Actions Are Driving Improved Financial Performance…
Our Actions Are Driving Improved Financial Performance…
Slide 21: Subscription Growth and Major Near-Term Cross Sell Opportunities
Subscription Growth and Major Near-Term Cross Sell Opportunities 123% increase in highly-valued subscription services annual revenue to $148 million in FY21 Subscription Services Revenue ($M) 5-Year CAGR Meaningful Surround Solution Opportunity Alone 18% Surround Solution Subscription Revenue per Pr
Slide 22: Strong Momentum in Recurring Revenues
Total Recurring Revenue ($M) 91%+* 80% * % of FY21 Total Revenue Strong Momentum in Recurring Revenues Significantly increased recurring revenue as a % of total revenue Better Margins Long Term Recurring revenue continues to support margin expansion and cash flow goals longer term Enhanced Revenue P
Slide 23: Enhanced Operating Performance and Free Cash Flow
Enhanced Operating Performance and Free Cash Flow $300M+ in free cash flow generated; no debt, strong balance sheet Collections Effective management of collections as revenue increased and A/R balance decreased FQ1’22 DSO of 46 days Cash and Capacity $63M unrestricted cash (FQ1’22) $300M + $100M in
Slide 24: New Client Wins and Expanding Customer Base
New Client Wins and Expanding Customer Base Our value proposition grows with client complexity; unmatched scalability and configurability Our offering enables clients to be ahead of the curve as industry moves to integrated and value-based care models Comprehensive and expanding offering enables “on
Slide 25: Materially Expanded Employee Engagement, Creating Leverage
Source: McLean & Company Benchmark Dataset, 2020 Materially Expanded Employee Engagement, Creating Leverage Through Employee Productivity Gains Annual Employee Survey Results (Nov 2020) N = 2,256; 87% Response Rate Increasing Average Revenue Per Employee 30%+
Slide 26: We Now Have a Strong Foundation to Support Accelerated Growth
We Now Have a Strong Foundation to Support NextGen Healthcare’s Accelerated Growth Reinforced and Scaled Offerings Increased R&D and focus on product quality Built a commercial foundation Invested in talent and culture Pursued strategic M&A Diversified revenue “Surround Solutions” Expanded services
Slide 27: No Longer Just a Market Leader… An Emerging Market Shaper
— Population Health — Mobile Care — Interoperability — Physician Network — Consumerism Innovating the integration of medical and behavioral health solutions with multiple leading Federally Qualified Health Centers (FQHCs) Accelerating virtual health (2M+ visits in 18 mos) and accessibility (2M patie
Slide 28: Unlocking the Value of Our Data and Network
Unlocking the Value of Our Data and Network 243M sent and received secure direct messages 150M clinical docs exchanged thru CareQuality 35% of Health Information Exchanges (HIEs) are powered by NextGen Healthcare solutions 179M patient records in the NextGen Record Locator Service 71% of all clinica
Slide 29: Accelerating Revenue Growth with Our Integrated Platform
Accelerating Revenue Growth with Our Integrated Platform NextGen Healthcare has been rapidly evolving from an EHR-centric company to an integrated platform for ambulatory health solutions Today, NextGen Healthcare is well positioned to pursue double digit growth with turnkey solutions in several hig
Slide 30: Our Growth Acceleration Ladder
Our Growth Acceleration Ladder Tail wind categories and geographies Core business growth through operational excellence Growth through “green box” innovation Growth through inorganic means Mid-Point of FY22 Revenue Guidance FY24+ Revenue Target $581M
Slide 31: Key Growth Drivers
Key Growth Drivers Growth drivers that unlock the full potential of NextGen Healthcare’s strengths and investments Sustaining the momentum in our portfolio with priority growth markets and specialties e.g., Spring21, Surround Growth Further unlocking the value of our data, physician and network asse
Slide 32: Strong Corporate Governance and Active and Engaged Board Oversight
Strong Corporate Governance and Active and Engaged Board Oversight Setting the right vision: Board in partnership with management is executing a transformation strategy, revitalizing NextGen Healthcare and establishing a strong foundation for sustainable growth Modernizing the Board: Evolving the Bo
Slide 33: NextGen Healthcare's Director Nominees
Darnell Dent Geraldine McGinty Julie Klapstein NextGen Healthcare’s Director Nominees Jeffrey Margolis Pamela Puryear Craig Barbarosh Morris Panner George Bristol David Sides Deep, Diverse, Relevant Expertise Director Nominee Skills 4 of 9 Director nominees are diverse by gender, race 8 of 9 Directo
Slide 34: Annual Meeting Proposals Build on Existing Strong Governance
Annual Meeting Proposals Build on Existing Strong Governance Current Governance Features: Independent Chair Annual election of all directors Single class of shares with equal voting rights Simple majority voting for charter amendments, bylaw amendments, and M&A Shareholders holding at least 10% of v
Slide 35: Delaware Reincorporation Provides Important Benefits
Delaware Reincorporation Provides Important Benefits Reflects Prevailing Standard >50% All U.S. publicly traded companies >66% All Fortune 500 companies >90% NextGen Healthcare peers Supports Ongoing Strengths Other than corporate domicile change, no change to: Business strategy or operations Board
Slide 36: Elimination of Cumulative Voting and Adoption of Majority Voting Standard
Elimination of Cumulative Voting and Adoption of Majority Voting Standard We believe each director should represent ALL shareholders’ interests rather than just their self-interests Cumulative Voting Structure Promotes Self-Interests Allows one individual to exercise disproportionate voting power, c
Slide 37: Compensation Aligned with Performance
1 Includes NEOs Arnold, Metcalfe, and Linton 2 Total Target Compensation includes annualized base salary, target annual incentive, and grant date fair value of long-term incentives Compensation Aligned with Performance Continuing NEO1 Compensation Program Summary Pay program motivates value creation
Slide 38: Committed to Sustainability and Corporate Responsibility
Committed to Sustainability and Corporate Responsibility Delivering Positive Social Outcomes — Our strategy is specifically focused on health equity and eliminating health disparities in our communities — Prioritizing and supporting our workforce of over 2,600 global employees, activating our DE&I v
Slide 39: Our Programs and Investments Have Tangible Results
Committed to Sustainability and Corporate Responsibility Our Programs and Investments Have Tangible Results Health equity Connected health and virtual visits are critical to these health equity efforts, as particularly demonstrated against backdrop of COVID-19 pandemic We have enabled over 2M+ conne
Slide 40: Summary and Close
Summary and Close
Slide 41: Analyst Commentary 2017–2018
2017 “we are encouraged by the turn-around efforts that management is putting forth” May 19, 2017 “The bleeding has stopped and the wounds have healed, and encouraging statements on the call around bookings acceleration leading to revenue acceleration and more acquisitions signal a stronger outlook.
Slide 42: NextGen Healthcare's Progress is Resonating with The Street
NextGen Healthcare’s Progress is Resonating with The Street Independent Industry Analysts Recognize the Time It Takes to Revitalize a Deteriorating Business, the Transformative Actions We Have Taken and the Progress We Are Making to Accelerate Growth 2021 “Mgt has improved product quality and custom
Slide 43: Committed to Delivering Growth, Shareholder Value and Strong Corporate Governance
NextGen Healthcare is Committed to Delivering Growth, Shareholder Value and Strong Corporate Governance NextGen Healthcare’s director nominees have deep, diverse, relevant expertise and are committed to serving the best interests of ALL shareholders Leadership has transformed NextGen Healthcare into
Slide 44: Thank You and We Appreciate Your Support
Thank You and We Appreciate Your Support Vote “FOR” All Proposals on WHITE Proxy Card Reincorporating into Delaware Eliminating Cumulative Voting Electing Each of NextGen Healthcare’s Director Nominees We believe approval of these proposals serves the best interests of all shareholders and supports
Slide 45: Additional Information
Additional Information
Slide 46: Commercial Growth Evolution
Commercial Growth Evolution Average deal size per enterprise client increased 80% from FY18 to FY21 225% increase in marketing-sourced revenue concurrent with a 32% reduction in cost Hired New SVP, Marketing Established integrated market strategy and alignment Built Pre-Sales Engineering Team and Es
Slide 47: Building Momentum: Why NextGen Healthcare is Winning Larger Deals
Building Momentum Why NextGen Healthcare is Winning Larger Deals Client NextGen Solutions Deployed Rationale New York-based large integrated care network Full Suite — NG Enterprise EHR, PM, Behavioral Health, Patient Experience Platform, Ophthalmic, Population Health, Mobile Trusted advisor and part
Slide 48: Customer Testimonials
Customer Testimonials “By using the integrated NextGen Patient Experience Platform, we were able to optimize staff time while offering a better patient experience. Our providers enjoy using the platform and play an instrumental role in encouraging patients to enroll and utilize the portal.”—Director
Slide 49: Our World Class Management Team
Our World Class Management Team David Sides President and CEO James Arnold EVP and CFO Srinivas Velamoor EVP, Chief Growth and Strategy Officer Donna Greene EVP, HR David Metcalfe EVP, CTO Jeffrey Linton EVP, GC Dr. Betty Rabinowitz Chief Medical Officer Allen Plunk EVP, Operations David Slazyk Chie
Slide 50: New CEO David Sides Background
Accomplished leader with proven record growing, scaling and diversifying premier healthcare technology/software companies — we believe this hire is a perfect fit for NextGen and should help guide the company to accelerated revenue growth and margin expansion in future years.” Sept 20, 2021 “ “ As CO
Slide 51: Director Compensation in Line with Public Company Peers
1 Includes full-year non-executive directors and excludes special one-time payments. Peer companies are as disclosed in the Company’s proxy and include ACI Worldwide, Allscripts Healthcare Solutions, Aspen Technology, Blackbaud, Castlight Health, Commvault Systems, Computer Programs & Systems, Fair
Slide 52: Sheldon Razin's Self-Serving Actions
We believe that Shelly Razin (sic) had been pulling too much cash out of the business to create passive income for himself...in our view these dividend payments should have been R&D dollars and investment dollars going back into the business” May 30, 2017 “ Sheldon Razin’s Self-Serving Actions
Slide 53: NextGen Healthcare Under Sheldon Razin
NextGen Healthcare Under Sheldon Razin Sheldon Razin oversaw a series of missteps that led to the erosion of product quality and enterprise value — Poor Capital Allocation — Innovation Not a Focus — Poor Corporate Development Execution — Eroding Corporate Culture and Morale Paying dividends, a sizea
Slide 54: Erosion of Revenue Growth but Protected Dividends
Erosion of Revenue Growth but Protected Dividends From FY12, Sheldon protected dividends while the Company’s revenue growth and stock price plummeted Overall compensation drawn from NextGen Healthcare was significantly diminished without his $7M of annual dividend income At the end of FY16, after re
Slide 55: Capital Allocation Comparison: Sheldon vs. New Board and Management
Capital Allocation Comparison: Sheldon vs. New Board and Management $540M in R&D spend (FY16-FY21) (more than previous 15 years under Sheldon) $100M+ in revenue generated from acquisitions made under new leadership $400M+ in dividends paid (of which went $71M to Sheldon) $77M+ in write-offs from poo
Slide 56: Total Shareholder Return with Sheldon as Chairman (2010 – 15)
Total Shareholder Return with Sheldon as Chairman (2010 – 2015) Shareholders cannot afford to return to a Company led by Sheldon and Lance DOWN54% NXGN CPSI: -14% MDRX: -28% CERN: +179% R2K Value: +46% ATHN: +308% NXGN: -54% TSR excludes dividends
Slide 57: NextGen Healthcare's Nominees Bring Relevant Experience; Razin's Do Not
NextGen Healthcare's Nominees Bring Relevant Experience; Sheldon Razin’s Candidates Do Not NXGN Nominees Corporate strategy M&A and strategic partnerships Deep clinical expertise Commercialization Healthcare information technology Expertise in human capital management Sheldon Razin Candidates Organi
Slide 58: Total Shareholder Return Under New Leadership
NXGN: +24% Peers*: +2% Phase 1 Phase 2 Phase 3 Avg. Price - $13.62 Avg. Price - $16.40 Industry Discontinuities and Price Volatility Entrada acquisition InForth acquisition Topaz acquisition MedFusion & Otto acquisitions Hospital Business Divested EagleDream acquisition * Simple average, peers inclu