Q3 2023 NextGen Healthcare Inc Earnings Call
[music].
Yeah.
Welcome to Nexgen Health care fiscal 2023 third quarter results conference call hosting the call today from Nexgen are David sides, President and Chief Executive Officer, and Jamie Arnold Chief Financial Officer, today's call is B.
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At this time I would like to turn the call over to James Hammerschmidt, Senior Vice President of Finance and Investor Relations of Nexgen like James you may begin.
Thank you operator before we start please note that we will be making forward looking statements during the presentation and the Q&A part of the call.
Statements are based on management's current expectations and assumptions.
Object to risks and uncertainties.
Factors that may cause actual results to materially differ from expectations are detailed in our earnings release and SEC.
Milling.
This call will also reference certain non-GAAP financial measures information about non-GAAP financial measures, including reconciliations to U S. GAAP can be found in our earnings release, which is available on our Investor Relations website. At this time I'd like to turn the call over to our president and CEO .
Thank you James.
In May of last year, we described our multiyear journey to deliver double digit revenue growth.
Operating leverage.
And disciplined capital management.
And I am pleased to report strong execution and solid results across all three fronts in the quarter.
But before I go into my prepared remarks.
Like to address an important topic.
On January six we became aware of unauthorized access to a limited part of the Nexgen network.
Upon investigation, we learned the company was the target of sophisticated cyber attack.
We immediately executed our internal response procedures.
It contains a threat secured our network.
Have returned to normal operations.
Our forensic review is ongoing and to date, we have not uncovered any evidence of access to ore and filtration of client or patient data.
Based on our investigation to date this incident impacted select administrative non client files within our network.
In total this affected less than 1% of the devices used by our employees.
Out of an abundance of caution as soon as we noticed the threat, we suffered connectivity to some systems and notified clients who were impacted in a timely manner.
Vas majority of clients continue to operate as usual without any disruption.
Those systems have all been securely restored and operations have returned to normal.
While unfortunate we're happy to note that previous investments in cyber security paid off we.
We will continue to invest in keeping our systems safe and secure for our employees clients and the patients they serve.
Now back to our progress in the quarter I'd like to start with growth.
Our integrated solution creates a foundation to deliver insights at the point of care.
Which allows for us to partner with clients to improve outcomes.
This differentiation is resonating in the market, especially among leading integrated care organizations.
For a holistic platform to deliver medical behavioral and dental care.
Our bookings in the quarter reflect this differentiation.
Despite the macroeconomic environment, we continued to see success in gaining new logos and cross selling our surround solutions.
There were six deals over $1 million spanning both inside and outside the base.
Bookings from net new clients represented approximately 30% of sales in the quarter, bringing our full year average back above 25%.
We continue to see opportunities to help our clients address the problems they face in today's environment.
Such as staffing shortages wage increases and higher patient volumes.
These challenges create demand for our managed cloud services revenue cycle and patient engagement solutions.
Lions looked again practice efficiencies and improved financial outcomes.
While continuing to deliver quality care.
These factors in addition to strong client retention.
Bolted in continued growth acceleration across our diverse revenue streams.
It is especially clear in our recurring revenues, which has been building momentum and exceeded 10% growth in the quarter.
While our commercial efforts are focused on delivering growth in fiscal year 'twenty three our solutions and development organization are innovating to build new offerings that drive growth in fiscal year, 'twenty four and beyond.
We believe there is tremendous opportunity to expand our platform.
Especially when we looked at the patient intake process and other front end offerings that are currently in early testing with clients.
We see strong proof points that our solutions are delivering value and a clear return on investment.
I look forward to updating you all on the progress the team is making when we approach the start of our new fiscal year.
Moving on to our operations and investments, we're making to scale.
Our ability to deliver operating leverage starts with the foundation of our employees and our culture.
We just recently conducted our annual vote survey.
His voice of the employee.
Which measures employee engagement across 14 dimensions.
I am pleased to say employment engagement has increased for the sixth year in a row and is well above the benchmark with.
With strong improvement in culture, working environment and client focus.
We've been thoughtful in managing our head count throughout the year from the expansion of our sales development Rep program create.
Creating the upgrade center of excellence.
And moving to remote work from anywhere organization.
It allows us to access talent pools on a global scale, while minimizing our facility footprint.
The company is focused on making investments and taking the actions required to show operating leverage.
We will continue to optimize our resource mix rationalized vendor spend and rethink processes and technologies to improve our productivity as we close out the final quarter of fiscal year 'twenty three.
Now turning to our capital allocation effort.
We believe total shareholder return is enhanced by taking a disciplined and deliberate approach to capital acquisition and deployment.
Our strategy is focused on investing in innovation.
Celebrating growth through M&A.
And returning capital to shareholders through opportunistic buybacks.
Following our last earnings call, we raised $275 million in convertible debt.
Concurrently purchased approximately $2 1 million shares for $40 million as part of the offering.
These proceeds in addition to our cash generation and credit facility.
Provides ample capital to execute on our inorganic growth agenda.
We also announced the acquisition of Tsi healthcare.
Longstanding partner and the first acquisition the company has done in almost three years.
Yes, hi expands the addressable market served by our enterprise demand.
Unlocking new attractive specialties.
Such as cardiology, rheumatology and Pulmonology.
The company provides purpose built clinical content and a differentiated service offering.
Which when paired with our strong commercial channel will drive long term sustainable topline and Bottomline growth.
Given the similarities in culture and align strategy I am pleased to say the integration effort is going well as we start making foundational investments back into the business.
Looking forward, we maintain an active M&A pipeline and we'll continue to assess future acquisitions, especially as it relates to capabilities that accelerate our effort behind nexgen insights.
We believe data analytics and value based care, enabling.
We will continue to be an attractive opportunity for the company to pursue.
Lastly, I'd like to acknowledge the passing of Nextgen healthcare's founder Sheldon horizon.
So it was an intensely passionate and entrepreneurial innovator.
Digitizing Health Records and automating workflows decades before the high Tech Act mandated the use of Ehr's.
Chile is improve the lives of thousands of clients.
Thousands of providers and millions of patients.
He will be missed.
Building upon his legacy.
It's more focused than ever to innovate and deliver better health care outcomes for all.
And now I'll turn the call over to Jamie to provide details on our financial performance in the quarter Jamie.
Jamie.
Thank you David.
Turning to the third quarter fiscal year 'twenty three financial results.
Total bookings came in at 44 8 million.
This represents a 19% increase from the third quarter of last year.
And a 20% increase from last quarter, bringing year to date bookings growth to 9%.
Software license bookings were below recent trends, which has an outsized impact on both quarterly revenue and earnings.
Total revenue for the quarter was 161 9 million and increased 8% increase year over year.
Occurring revenue accounted for $148 7 million or 92% of total revenue.
This equates to 11% year over year growth.
Excluding the impact of the Tsi acquisition.
Organic growth recurring revenue was 8% primarily due to the strong performance in transactional and data services and managed services.
Most of the contribution from the Tsi acquisition is reflected in the subscription revenue line.
Nonrecurring revenue for the quarter was $13 2 million and represents a 14% decrease compared to the same quarter last year and a 17% decrease from last quarter.
While we expect Q4 software bookings will return to the prior six quarter trend. We are closely watching for changes in client purchasing preference it could be affected by the macroeconomic environment.
Gross margin of 47, 3% was down approximately 310 basis points compared to the same quarter last year and down 94 basis points compared to the prior quarter.
As noted in the discussion about nonrecurring revenue software revenues are off recent trends, which had a significant impact on gross margin decline.
Additionally, as discussed on last quarters call. We have made significant investment in our upgrade center of excellence and professional services as well as a shift in product mix.
And improvement will continue to be a focus.
Brian related to upgrades should start to moderate in the back half of fiscal year 'twenty four.
Turning to operating expenses SG&A of $46 2 million decreased by 2% compared to the same quarter last year due to lower variable compensation as well as cost reduction actions, we have been executing such as reducing facilities footprint.
Net R&D expense was $19 6 million for the quarter and represents 12% of total revenue.
This is a 1% increase compared to the same quarter last year.
We had a GAAP tax provision of $1 million this quarter with a GAAP effective tax rate of 11, 5%.
Our non-GAAP tax rate remains at 20%.
On a GAAP basis Q3 fully diluted net income per share was <unk> <unk> compared to net income of <unk> <unk> per share in the fiscal third quarter of 2022.
non-GAAP basis fully diluted earnings per share for the fiscal third quarter.
According to <unk> was 26.
<unk> 24 in the year ago.
Turning to the balance sheet, we ended the fiscal third quarter with $241 6 million in cash and equivalents.
And no balance outstanding on our line of credit.
Free cash flow for the quarter was a negative $6 9 million.
As David noted in November we issued $275 million convertible senior notes with net proceeds to the company of $266 million after debt issuance cost.
Key terms include a 375% coupon rate.
Five year maturity period, and a conversion price of $25 68.
We can call them on or after November 20th 2025.
More detail please refer to the debt footnote in our financial statements.
Concurrent with the convertible debt offering we purchased two 1 million shares for 40.
$40 million at an average cost of $19 <unk> per share.
Since the authorization of our share repurchase program in Q3 of fiscal 2022, we have purchased a total of $4 8 million shares for $85 8 million at an average cost of $17 68 per share.
As of December 2022, we still have $74 million remaining in the share repurchase authorization.
On November 30, we acquired Tsi healthcare the acquisition provided minimal impact to our Q3 financial performance.
This represents only one month of actuals, we expect the acquisition to contribute between 10 and $12 million of revenue for fiscal year, 'twenty, three and will be accretive to earnings within a year.
Mentioned earlier in the call the impact to revenue will be mainly in the subscription revenue line.
Turning to our fiscal 'twenty three financial guidance as noted in the press release, we are updating our prior guidance to account for the acquisition of GSI and the convertible debt offering now.
We now expect fiscal 'twenty three total revenue to be in the range of 642 million to 650 billion, which represents a year over year growth of eight 3% at the midpoint.
Moving to adjusted EBITDA, we are maintaining our prior guidance range of $110 million to $115 million in our prior fiscal year non-GAAP EPS range of 93 to 99.
In closing I believe the company is well positioned to meet our long term objectives based on our strong bookings performance in Q3 operational execution and disciplined deployment of capital for smart acquisitions like CSI.
And now let me turn the call back to David for closing comments.
Thank you Jamie.
Nexgen continues to execute with a focus on driving growth for both us and our clients.
And we're making the investments required to deliver long term profitability and scale.
Our overall positive outlook reflects the tailwind we created by solely focusing on ambulatory care.
Our resilient business model and our focus on driving shareholder value.
In summary, I am pleased with this quarter's results.
Sets us up for sustainable double digit revenue growth in fiscal year, 'twenty, four which starts for us in April . This is one year earlier than we said at our Investor day in May which targeted the double digit growth in fiscal year 'twenty five.
We will provide fiscal year 'twenty for guidance in May after we announce our fiscal year 'twenty three year end results and I am incredibly proud of the commitment and care shown by the Nexgen family both to each other and to our clients.
This concludes my comments, let's move to questions operator.
At this time, if you'd like to ask a question. Please press star one on your Touchtone phone you may remove yourself from the queue at any time by pressing star to you once again that as Don wants to ask a question. We will take our first question from Stephanie Davis SBB Securities.
Hey, guys. Thanks for taking my question.
Just a quick one from me when I think about what takes up most of your guys at this time.
I think about the progress of Nexgen is first.
Dr. David He had to focus really on turning around in your experience. It felt like your first priority was gained about double digit growth target.
Now that you're there.
It is pure execution or is there anything else in mind as Youre next to golf.
I think it's pure execution from here. So some of the new organic products that we're coming out with an insight domain.
We're seeing good early client interest.
And so we will talk about those more but.
Some of the things we talked about our behavioral health last quarter, we had a really good sales quarter for behavioral health, which is a new organic area for us So those were.
We're part of the contribution to having a record sales quarter. So I think from here, it's just execution.
Getting those new products out.
Driving the margin expansion that we know is there now that we have the revenue growth.
And then continuing to be smart on how we deploy capital that we've raised and make really smart acquisitions.
Just doing that from here should should get us where we want to go.
Not a bad place today.
And just a quick follow up then when you think about the quarterly cadence of margins for the year is the uptake in <unk> should I, just assume that license sales shifting from <unk> to <unk> and helping the margin.
Yes, I mean, thats basically yes.
And then I think next year or two we think over time as we've talked about this before if we sell more subscription.
We're going to temper our expectations for recognizable in our next year plan and account for that by.
Sure.
Taking out some cost to allow for that reduction in kind of higher octane revenue. So we can see the growth that we're looking for from that next year.
Yes, it's mainly youll see a rebound next year as Jamie said in his comments our next quarter I mean.
And the recognizable license revenue.
It will be.
As we as we talked about on the full year number.
As we projected in the guidance.
It's very helpful. Congrats on a set of forgetting ear.
Thank you.
Thanks.
Our next question comes from Jack Wallace from Government government Securities.
Yeah.
Hey, guys. Thanks for taking the questions.
Just a quick question on the hacking.
The hacking incident has that had any impact.
Current and potential clients.
And I've got a couple of follow ups.
No not so far.
Unfortunately, it's more common than you would think nowadays.
We were we were glad to contain it.
No client systems affected at all no client they have no patient data and no provider data none of those systems, where we are.
Compromising at all.
So.
We had a few less than 1% of devices.
Were compromised we quickly shut that down within a day of realizing that.
So we contained it and then.
Stored everything communicated with any clients, who might have had a process disruption because we didnt answer his support call or other.
Kind of ancillary things, but overall.
All of the practice that we've done in all of our policies and procedures served us well during this.
As you can imagine we're speeding up some of our investments in cyber that we had planned we implemented a number of those even in the last couple of weeks.
Overall.
Not material it doesn't affect our results financially.
We've had good conversations with our clients. They appreciate the honesty and transparency.
<unk>.
From here, we will we will adopt a really strong culture and we've learned from it. It's one thing to do the tabletop exercise. It's another joint in practice I think low practice now.
Got it that's helpful and then.
And the last quarter, you talked about the.
The application of become a QA Cheyenne and just wondering about the timeline.
That to go operational and then as a.
A follow up to that.
The other participants.
Are the other applicants are you encouraged by the level of industry interest in then.
As everyone goes live can you just talk a little bit about how that that can impact the business going forward. Thanks.
So we're encouraged by.
The ability of our software to kind of scale to <unk> level.
We have a number of opportunities there talking with clients about our mirth cloud connect so let's start the offering that helps client connects and connect to any kind of any source at scale.
And.
The application process Hasnt come out for Q head, yet, but we feel like we are there from a technology perspective, we need to work through kind of the commercial terms and we'll see what those guidelines are.
But when we talk with clients about it I'm encouraged because.
The idea of.
Doing an interface onetime for all clients. So for example.
If you're in Phoenix, you connect to a hospital and then all of our clinics in Phoenix can be connected at hospital through us.
Having to do that work, it's just so much more efficient.
That it's got to kind of both speed interoperability and lowered the price of health care, because we did at one time.
Effort perspective.
Which just substantially better.
So we're encouraged that there are other people in the industry thinking about this the same way it could be really straightforward does then just connect <unk>.
With nexgen to him to another supplier SKU and then all of a sudden all of that is interoperable from one connection between US both were already connected to all of our clients.
If another supplier was connected all of their clients one connection could be enormous advantages to your fragmentation to the healthcare marketplace and the medical records.
As well as improve things like.
How you do care management across.
Domains and across venues.
In summary, we're really encouraged I think we're in the right place we have the right technology.
As the application process becomes clear.
Work through the rest of it but I think it's a good it's turning out to be a good move for us.
And with.
Let's say all of the plumbing getting setup.
On the other end of this year.
Do you suspect that this will.
Eliminate some of the bad actor of the info blocking in the industry or.
Yes.
Information highway the presence of that.
Not necessarily guarantee for your flow of information from a decision making standpoint.
Yes.
Jack I'm, sorry, I misspoke on the Q, an application that has come out we're going through it but I agree with your premise that this will make data much more liquid.
Then it was before I think.
Some of our other suppliers set up Q2, it should slowdown 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 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 with national scale, how do we think through how do we run the system.
And get and get value from it so.
I think it's all good for the American health care system.
The kind of.
<unk> are coming in to into effect and we intend to capitalize on them.
Great. Thanks, I'll hop back in queue.
Our next question comes from Julien Zhang from <unk> Securities.
Thank you and thanks for taking my questions I, just wanted to better understand the top line growth and margin profile for Tsi healthcare longer. It seems the deal is not adding any EBITDA in fiscal 'twenty period, which I understand to 24 months, but you talked about the deal becoming accretive to EBITDA.
And next year in a year or so maybe talk about what will drive that is it just the cost management cost synergies like what are the key drivers, which.
Is that improving margins at ESI, just maybe flesh out a little bit to add some details there.
Okay. Thanks, Phil 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've got operating leverage from some of the ways that we're automating ourselves, meaning automating nexgen. So we've deployed systems too.
Better automate how we handle our support processes.
Deployed things like AI that when one of our support staff talking with clients that suggest here might be the possible answers so as we're.
Hiring in scaling as we grow we can bring people on line two.
To do their job more effectively and more productively quickly. We're also making a large investment in all of the upgrades of spring 'twenty, one, which we've talked about 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 a.
One time to get through this cures act process and then.
It will fade away.
I'll turn that into another revenue generating.
Capability with those with those employees so.
There are 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.
However, 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 multiyear journey.
And I'll hand, it to Jamie further other comments.
Thats.
We've laid out a multiyear plan and we would expect.
Think of it more as our progress on the rule of 40 score. So we will show some operating leverage.
As David indicated in his prepared remarks, we will also accelerate revenue growth next year.
And on the on the EPS EBITDA side too we can land that exactly was spent.
So I feel like that's the easier part of the equation to work on.
I think worked on and are achieving the harder part, which is double digit revenue growth certainly achieved that in fiscal year 'twenty four and then just the 92% recurring nature of our revenue a record Q3, we can see fiscal year 'twenty four very clearly now from a revenue perspective, we'll give guidance in our call in may but.
We're spending money this year.
There's still hit our EPS guidance range, but we're using that money to improve our cyber profile to improve our productivity to do more robotic process automation and some of these things that will.
Have a good NPV for us in that present value for years to take care of these things one time.
I'm, assuming all of those initiatives kind of apply to your tsi healthcare transaction Thats, what I was actually stuffing too right.
Right so.
Taking tsi, which we've worked with for many years really like it.
The company Love the people.
Them from a privately owned organization up to a sox compliant public.
Public companies standard takes investment and so we're working through those investments whether it's on the <unk> side the finance side.
How are we how we run.
We will get through those and then as we said it will be accretive in the first year.
Okay, and then I know we've talked about this in the previous calls and you guys made some comments on this call too about the impact of macro environment, but.
Don't know if maybe it's just me I mean, it looks like you had a little bit more cautious at this time like watching the trends and macro impact have you seen any early indications and the impact on the sales cycle. I mean this is in the process. Among your clients have you been indications to put any spending on hold plenty of bookings do onto a flatbed, but just curious like why because any change in tone.
So do you think that there is no no impact as such.
Well I mean, it doesn't impact our clients from their ability to recruit staff their bottom lines right.
But to the point of record bookings right, we're doing well from a sales perspective.
We're not seeing an impact there.
We feel good about the current quarter of Q4 that were end to end the year.
So it's not affecting us from from that perspective, obviously like anyone.
Have our own.
Cost internally, where it affects us we've seen seem that we're mitigating that and feeling good about that but the main pieces.
I'll hand, it to Jamie Yes, David.
It was more about when we talk about it today it was more in context.
The software revenue and the software bookings in this quarter.
Last quarter, we were kind of nonplussed about the bookings level.
And we said it was.
Kind of a timing, we clearly made it up.
Through the first three quarters. This year, our bookings are up 9% in total what we did see this quarter. It makes.
We called out was the lower software level.
So we are monitoring the macro trends all this discussion about potentially a recession this year and other conditions that affect our clients we are seeing.
As we see the pipeline develops there seems to be more of a preference for the SaaS product.
And the license product.
What we were commenting on.
Got it thanks a lot.
Yep.
Our next question comes from Sean Dodge from RBC capital markets.
Thanks, Scott and good afternoon, maybe just jumping off Jamie on your last point there David your previous point around license sales you had.
It sounds like some confidence this is going to pick back up in Q4.
I guess, there's a little bit of softness there in Q3 was that then for deals that simply slipped from Q3 to Q4, I guess have you actually seen a pickup in this already in Q4 of those in our pipeline.
You're off to a quicker start with those this quarter than you have historically.
Yes, Sean it's a little bit of a slip and so we have high confidence because some of those may have even close by now.
What gives you confidence that.
This quarter looks looks good.
But I do think like I said in the earlier answer I think next year, we're going to move the license revenue down from our own budgetary expectations.
Because of the Lumpiness and.
We're seeing that trend because we are selling everything a subscription so.
That's that's kind of an expected it's been coming down as we've said before for multiple years. It used to be 6 million five years ago now it's around $30 million.
People won't go to zero, but it will keep.
Getting a little bit smaller as all of our new offerings and surround the offerings are all subscription. So that's that's where we're seeing a lot of growth in the business.
Okay.
That's very helpful.
Yes go ahead Jamie.
No I was just going to say it is if you look at the longer term trend over us as David said five or six years, you'll see a very very clear trend lines.
Change as we started to come out of Covid.
We're just being we're calling it out.
<unk>.
But we have an adequate working said so this quarter so.
We just wanted to highlight it we try to be transparent.
Okay and then.
With cross selling continuing to be an important part David you mentioned the strong solutions that would be an important part of the growth algorithm going forward.
What's the backdrop like there now and what I'm trying to get at is just.
The motivation for clients to swap out and consolidate ancillary systems on Nexgen is is that it.
The main factor there just your ability to integrate all of these solutions are more seamlessly present them with kind of one offering.
Or is there some element when you bundle all of these together can you just price all of these.
Thats, a little bit more competitive than Standalone point solutions could.
Yes, so we think integration wins, so integration is an easier way to manage this system. So you have less interfaces between us and maybe point solutions the teaser to host right. So we can host everything for our client and our.
AWS and have an integrated cloud offerings, and it's less from a cyber perspective to.
To protect as well as less to manage so if you're a physician office you are under pressure from a revenue perspective.
Youre thinking okay, I'm going to have less systems. We think the same thing when we're looking at our own cost internally, we want to simplify the number of suppliers that we work with and we'll pick integrated suppliers to do more with fewer people and.
As you do more you expect.
To see a return there nothing else from your own staff, because theres less systems that they have to know how to how to work. So I think that trends playing out I think it's favorable for us from a integrated provider perspective.
And it should continue.
See people still wanting to buy these solutions, it's easier to add one on than it is to go contract with somebody new and go through that process.
Okay. That's great. Thanks again.
Our next question comes from Jessica to San from Piper Sandler.
Hi, Thanks for taking my 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 and maybe near term and then also steady state just because I think there are a couple of different specialty EMR space that you guys will be maintaining as you scale that.
Thanks.
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 to use our EMR. So over time that the EBIT profile looks really good it'll it'll look like our own EBITDA profile.
In some ways they do better in some places.
And then we might do so long term I think the EBIT profile will approach ours.
And Jimmy I don't know if you want to add any color on the gross margin yes.
David.
Wanted to go back to why we acquired DSI is more silicon I'm talking about the margins are going to look pretty similar to ours.
But the reason we acquired DSI is their specialty content and their high level of service that they provide to their customers.
So the content is in rheumatology cardiology Pulmonology these are specialty areas.
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 Nexgen enterprise domain and the other thing is some of the things they provide services to their customers. They have some some offerings.
Their customers value when we will bring those to our nexgen clients also so it's more about the opportunity it creates.
On the top line.
How I think about it.
Got it and then I think.
I think just as you were discussing that tsi revenue acceleration potential you might have mentioned that the sales force with kind of limited at the time of the acquisition I'm wondering.
What are the costs associated with ramping the sales force for that business.
Reflected in the physical thank you.
And then if not.
Just when might when might those investments.
Begin to appear.
Well, we only we didn't own the asset that long.
<unk>, so youll see it ongoing but it should offset with the with the growth. We think we'll see from that business too. So.
It'll be in going forward, but it's in all of our guidance.
Got it thank you.
Thanks.
Hey, Matt.
Next question comes from George Hill from Deutsche Bank.
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 interest industry. I know this is always a sensitive topic, but I know that 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 down swing I guess I'd ask you how you feel about 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.
The question is kind of spun from the <unk>.
SG&A spend in the quarter was kind of flattish to down slightly year over year and below where we had expected. So just kind of kind of that kind of a headline cost and head count question. Please.
Yes, Thanks for your question George.
I think we see it as an opportunity to acquire talent. So when we see salesforce Twitter those kinds of organizations.
Being off large numbers, we think there's probably a great architect in there who could be building software with us.
And a more resilient industry that health care.
No.
We're thinking about it is this is good.
Good time to be us to start growing in thinking about how can we acquire really great talent.
We always look at our cost basis.
Talked a little bit earlier about how we're thinking about getting efficiency and making investments in systems to automate our own staff and the productivity of our own teams.
That will continue I think we'll be through most of that in this fiscal year.
And then that's why we will see earnings growth next year, it's one of the leverage points for us but.
We're pleased to be hiring in this environment I'll, let Jamie.
Some color Dave.
David.
What I would say is we've worked really hard over the last few years to build a scalable infrastructure. We will continue to invest in technology that increases our efficiency and.
We manage we've managed our headcount very tightly over the even during the growth period.
The last year and a half and we will continue.
David's point about bringing on the.
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For us to get certain skill sets that are have been hard to find.
So we will be selective in it.
It's all part of our plan to demonstrate operating leverage over the coming years. So you have to be very disciplined to make that a reality.
Okay I appreciate the color.
And once again, if you'd like to ask a question where you'd like to have a follow up question. Please press star one on your Touchtone phone that.
Well there is no other questions. Thanks for joining good quarter, great quarter as far as the bookings perspective.
Still being able to sell in this market.
Cited about the prospects going forward double digit growth coming up here very shortly.
As we start fiscal year 'twenty four and April 1st Thanks for your continued interest in Nextgen healthcare.
This does conclude today's program. Thank you for your participation you may now disconnect.
Okay.
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Okay.
Okay.
Sure.
Okay.