NXGN - NextGen Healthcare Inc. (NXGN) Q4 2023 Earnings Call Transcript
2023-05-16 22:41:07 ET
NextGen Healthcare, Inc. (NXGN)
Q4 2023 Earnings Conference Call
May 16, 2023, 17:00 ET
Company Participants
James Hammerschmidt - SVP, Finance & Investor Relations
David Sides - CEO, President & Director
James Arnold - EVP & CFO
Conference Call Participants
Anna Kruszenski - SVB Securities
Jack Wallace - Guggenheim Securities
Jeffrey Garro - Stephens Inc.
Eduardo Ron - Truist Securities
Vishal Patel - Piper Sandler & Co.
George Hill - Deutsche Bank
Presentation
Operator
Welcome to the NextGen Healthcare Fiscal 2023 Fourth Quarter Results Conference Call. Hosting the call today from NextGen are David Sides, President and Chief Executive Officer; and Jamie Arnold, Chief Financial Officer. Today's call is being recorded. [Operator Instructions].
At this time, I would like to turn the call over to James Hammerschmidt, Senior Vice President of Finance and Investor Relations of NextGen. James, you may begin.
James Hammerschmidt
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. These statements are based on management's current expectations and assumptions and are subject to risks and uncertainties. Factors that may cause actual results to materially differ from expectations are detailed in our earnings release and SEC filings.
This call will also reference certain non-GAAP financial measures. Information about non-GAAP financial measures, including reconciliations to U.S. GAAP, can also 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, David Sides.
David Sides
Thank you, James, and thank you to all who have joined the call today. I will start today's call by covering some of the more notable accomplishments in our fiscal fourth quarter, then review our performance for the fiscal year and finally provide an outlook on why we are excited for fiscal year 2024 before turning the call over to Jamie to take you through the financial commentary. We will then close the call and open it up for questions.
Starting with fourth quarter accomplishments, the team continues to execute well, which resulted in solid performance to end the fiscal year. Bookings grew both year-over-year and sequentially, which means another new quarterly bookings record. We continue to see strong demand inside the base for our Surround solutions and interoperability capabilities. Our ability to serve integrated care organizations, who need a single platform that combines both medical and behavioral health, continues to differentiate us in the market, leading to more flagship wins.
Revenue came in better than expected for the quarter, resulting in 18% year-over-year growth for the company. While subscription showed significant growth as expected with the acquisition of TSI, we also are pleased that revenue cycle management saw an increase in collections, and our transactional and data services were ahead of plan. Furthermore, perpetual license sales came in above our prior 6-quarter trend and our expectations.
We had the opportunity to spend time with both current and prospective clients at ViVE and HIMSS the last 2 months. We approach these industry trade shows to validate our areas of focus and investment. Clients are looking for EHR-powered workflows that enable care beyond traditional practice settings, mobile tools that allow doctors to treat patients wherever they may be and increased focus on equitable patient access and provider well-being. From an interoperability perspective, fire and integrations with social determinants of health content and social services continue to be a repeating thing. These are all key areas that we are investing in, which will position us nicely in the market.
We also see opportunities in health care IT to partner with leading tech players to accelerate innovation and unlock new business models. At ViVE, we hosted a joint event with Snowflake and AWS, which had over 200 attendees. One example of these partnerships was the launch of Mirth Cloud Connect, a trial-based solution that provides interoperability as a managed service, leveraging our market-leading Mirth Connect interoperability engine and our partnership with AWS. The new offering is designed to help solve clinical data exchange challenges faced by large physician networks and health technology vendors.
From an operations standpoint, we continue to invest in building a scalable infrastructure to facilitate growth. The team is focused on process improvement, identifying areas where we can leverage technology systems and automation to improve our own operating model. One recent example was the decision to consolidate multiple HR, payroll and recruiting systems to a single integrated global platform.
Now I'd like to take a moment to provide a brief update on a security-related matter that occurred during the quarter. At the end of March, we were alerted to suspicious activity involving our NextGen Office system. As a reminder, this is our small physician office system and is 1/10 the size of our NextGen Enterprise system, which has the bulk of our client base. We executed our internal response procedures, engaged the support of leading outside cyber experts and notified law enforcement.
Following our forensic investigation, we determined that an unknown third party gained unauthorized access to a limited set of personal information stored on the NextGen Office system. Based on our investigation, this did not include patient health or medical information. At the end of April, we notified impacted NGO providers and their patients as well as state regulatory authorities.
As you know from our discussion on our last earnings call, we also experienced an incident in January. We continue to work with independent experts to ascertain whether personal information has been impacted. And to the extent the detailed analysis reveals that personal information has been impacted, we will notify individuals accordingly.
Security in all its forms is and will continue to be a top priority for NextGen Healthcare. While we have determined that the recent incident was a result of stolen client credentials from sources and incidents unrelated to NextGen, we are taking action to further strengthen our security with the help of our independent experts.
I will close my comments on the quarter by discussing our progress on the integration of TSI, the first acquisition the company has done in several years. It's on track and going well. We're making the investments we said we'd make, which includes ramping up dedicated sales resourcing and demand generation, migrating from a colocation facility to AWS in the cloud and continuing the base upgrade to the latest Cures-certified version. We remain encouraged by the opportunity it represents not just with NextGen Enterprise but also with NextGen Insights and the data potential.
Now to reflect on the full year. We've made significant progress on the long-term goals we outlined last May, which include building a path to deliver double-digit revenue growth, investing to great operating leverage and demonstrating disciplined capital management. Here are some key accomplishments I'd like to highlight.
Bookings came in, in line with our plan, growing 9% year-over-year with net new client wins, contributing about 25% of total bookings while continuing to cross-sell our Surround solutions. Revenue for the year grew 9.5%, which was a combination of turning bookings into revenue and maintaining strong client retention, which has been further accelerated by the TSI acquisition. We were one of the first to achieve Cures Act certification and invested in the Upgrades Center of Excellence to give our clients predictably -- predictability and best practices throughout their upgrade process.
We became a remote-first organization, reducing our facility and carbon footprint, also improving the employee experience, which was recognized by Forbes on Newsweek America for the second year in a row. We divested our commercial dental assets, which further focused the company on our core mission, and we raised capital through a convertible, which provides us access to dry powder at a favorable cost. It feels like a full year lining us up to achieve our long-term financial goals.
Looking forward to next year and the strategic drivers that will lead to sustainable growth. Fiscal year '24 will be about commercial execution and continuing to invest in innovation, which will carry momentum into fiscal year '25 and beyond. I'd like to talk about some of the areas we are investing in to deliver sustained organic growth.
We will continue to scale our investment in the enterprise data cloud in partnership with AWS and Snowflake to deliver a broad set of data solutions to our customers. We will work with our clients to unlock the value of their own data and make it seamless to integrate with third-party data and test new monetization models. This will ultimately become a flywheel for innovation, improving our speed to market and ability to impact client outcomes.
I'm also excited for the opportunity we see in interoperability, both the migration to a fully managed interoperability as a service in the cloud as well as the ability to support international clients who also have scaled needs. We will be focused on enhancing our value-based care analytics capabilities and clinical operations support to help providers achieve superior quality and financial outcomes when participating in ACOs and other alternative payment models. We believe the ability to deliver insights at the point of care through the providers' current systems of use like the EHR will be a differentiating capability for enabling providers to take on risk.
And finally, we will continue to focus on removing friction out of the physician experience with investments in mobility and voice enablement. I'm confident that with our strong position in the market, our highly engaged and committed client base and these new organic growth initiatives, we can sustain mid- to high single-digit revenue growth, which provides a solid foundation to layer on inorganic effort to reach our 10% plus revenue growth target.
Touching on M&A. Our corporate development team is busy building and maintaining an active pipeline of opportunities. We see opportunity to further accelerate growth, especially related to NextGen Insights where the right acquisition could gain access to new capabilities and solutions we can sell back into our well-established commercial channel. And of course, we will continue to be prudent when considering strategic and financial fit during the M&A process.
And with that, I'd like to turn the call over to Jamie to provide an update on the financials. Jamie?
James Arnold
Thank you, David. Before diving into the fourth quarter results, I would like to comment on our fiscal year 2023 accomplishments. As David mentioned, total revenue of $653.2 million increased 9.5% compared to last year and was ahead of our full year guidance updated in January. Subscription services revenue of $184 million grew 13.2%. Managed services revenue grew -- of $129.1 million, grew 15.9%. And transaction and data services revenue of $127.2 million grew 15.6%. Software revenue of $27.9 million declined 11.6%.
On a GAAP basis, fully diluted net loss per share was $0.04 compared to a net earnings per share of $0.02 a year ago. On a non-GAAP basis, fully diluted earnings per share of $0.98 compared to $0.98 in the prior year. These results reflect strong execution on the commercial side and deliberate cost management efforts balanced against the investments made to support long-term growth plans.
Now turning to the fourth quarter results. Total bookings came in at $45 million. This represents a 9% increase from the fourth quarter of last year and slightly above the prior quarter. There were 4 $1 million deals in the quarter. As a reminder, bookings represent the annual contract value, excluding renewals.
Total revenue for the quarter was $178.6 million, an 18% increase year-over-year. Recurring revenue accounted for $161.9 million or 91% of total revenue. Recurring revenue grew 18% year-over-year. Subscription services revenue of $52 million grew 23.7%. Managed services revenue of $34.5 million grew 24.2%. And transaction and data services revenue of 36.6% grew 32.9%. The growth was fueled by a combination of revenue from acquisition of TSI plus acceleration of organic solutions.
Nonrecurring revenue for the quarter was $16.6 million, an 18% increase compared to the same quarter last year and a 26% increase from last quarter. Software revenue at $8.5 million came in higher than the prior 6-quarter trend and exceeded our internal forecast largely due to a transaction where an existing client expanded licenses to consolidate acquired practices on our solution.
Gross margin of 47.3% was down approximately 250 basis points compared to the same quarter last year, but modestly better than last quarter. As discussed on last quarter's earnings calls, we have made significant investment in our Upgrades Center of Excellence and professional services as well as a shaft in product mix. Margin improvement will continue to be a focus, and spend related to Upgrades Center of Excellence should start to moderate towards the end of fiscal year '24.
Turning to operating expenses. Net R&D expense was $20 million for the quarter. This is 1.6% decrease compared to the same quarter last year, which included several onetime pull-forward investments. SG&A of $83.3 million increased by 67% compared to the same quarter last year, largely because of a $35 million accrual for settlement of the DOJ matter.
As noted in the earnings press release, we have an agreement in principle with the DOJ subject to final approval by them resolving all claims against the company related to our previously disclosed investigation and key TAM lawsuit. We accrued approximately $32 million in anticipated settlement expense and $3 million in legal fees and costs related to the mediation and settlement. We do not anticipate a corporate integrity agreement as a result of this settlement. We expect to finalize the agreement soon and look forward to putting this behind us.
Our non-GAAP tax rate for the year was 20%, and we plan our non-GAAP tax rate for fiscal year '24 will be 21%. On a GAAP basis, Q4 diluted net loss per share was $0.38, which includes the DOJ settlement accrual, compared to a net income of $0.01 per share for the same period a year ago. On a non-GAAP basis, fully diluted earnings per share for the fiscal fourth quarter of 2023 was $0.31 compared to $0.19 in the year ago quarter.
Turning to the balance sheet. We ended the fiscal fourth quarter with $238.3 million in cash, cash equivalents and marketable securities, and we had no balance outstanding on our line of credit. Free cash flow for the quarter was a negative $600,000. We did not repurchase shares in Q4, which means for the full fiscal year, we repurchased 2.7 million shares of common stock for a total of $49.9 million. And as of March 31, 2023, we have $74.3 million remaining in our share repurchase authorization. We plan to opportunistically assess share repurchases as a means of offsetting shareholder dilution from employee stock compensation with deploying capital to support M&A as the top priority for capital allocation.
Turning to our fiscal 2024 financial guidance. As noted in the press release, we expect fiscal '24 total revenue to be in the range of $712 million to $722 million, which represents a year-over-year growth of 9.8% at the midpoint.
Moving to our profitability targets. We expect adjusted EBITDA to be in the range of $125 million to $131 million and a non-GAAP EPS range of $1.04 to $1.11.
In closing, I believe the company is well positioned to meet our long-term objectives based on our strong bookings performance, operational execution and disciplined deployment of capital for smart acquisitions like TSI.
And now let me turn the call back to David for closing comments.
David Sides
Thank you, Jamie. NextGen 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 tailwinds we created by solely focusing on ambulatory care, our resilient business model and our focus on driving shareholder value.
Our ability to deliver sustained revenue growth and create a scalable infrastructure comes from our people and culture and our ability to deliver value to the clients we serve. As always, I'm incredibly proud of the commitment and care shown by the NextGen family and their ability to drive results, both to each other and to our clients.
This concludes my comments. Let's move to questions. Operator?
Question-and-Answer Session
Operator
[Operator Instructions]. And our first question will come from Stephanie Davis with SVB Securities.
Anna Kruszenski
This is Anna Kruszenski on for Stephanie. I'd first love to hear more about your commercial strategy execution being a key focus point for fiscal '24. Just curious how your approach here is shifting looking into this year and fiscal '25.
David Sides
Thanks, Anna. So on '24, we're shifting some more resource to Insights. So as we've created some of the new organic products in Insights, like we mentioned, the Enterprise data cloud, Mirth Cloud Connect, we're looking at and also taking Mirth international. Those 3 products, we've now run through pilot stages. So we have feedback based from clients to refine our go-to-market strategy and then are also how do we go to market from a sales perspective to garner interest. And we're going to really fully execute that strategy starting this year. So we kind of built new products, new organic products, testing them with clients, refine them, solve what worked for them as far as how do we approach it, what messaging works, what's the pricing. And now we're taking that to market, and we'll roll it out in earnest with additional resource.
Anna Kruszenski
Got it. That's super helpful color. And then as a quick follow-up, can you provide any color on the key swing factors and macro assumptions embedded in guidance. But what could get you to the high end versus the low end of the range?
David Sides
So we always look at guidance as of today. So the debt feeling limit, maybe we'll see how that goes. So that's one of the things we kind of think that just works through. We're looking at the macro of this next year for a fed that is going to keep interest rates higher or raise rates. So I think we're looking at it as kind of what you read in the paper, what you'd expect.
And then what we've seen from the last quarter and last year's performance were 91% recurring revenues. So that gives us a nice basis to look at the year every time we budget when 91% is recurring and some of the nonrecurring or things like services, which we can see with good visibility in our pipeline.
So we feel good about the guidance today. The macro could always throw things off, but that's how we're thinking about it. Jamie, anything you want to add?
James Arnold
Yes. I mean I think what would drive the number to the high end or the low end, probably the biggest variable is software. We've talked about it last quarter. You heard us talk about it this quarter. We had a really good quarter with software, but it appears to be trending down if you look a little bit longer term, and so that is a variable.
It could move us on either side. If it remains strong, it would be upside to the forecast. And if it weakens off of the -- not just the current run rate but even the quarterly trends when you look back over the last 6 quarters or so, that would probably move us a little bit lower. Those are probably the areas of most variability. And that obviously has an impact on the EPS because of the high margin the software carries.
Operator
Our next question will come from Jack Wallace with Guggenheim Securities.
Jack Wallace
Congrats on a great fourth quarter and pretty positive outlook for the year. Back at the Analyst Day last year, you broke out your segments, Enterprise, Office, Data and Insights. I was wondering if you could give us an update on the relative growth rate for those 3 segments and how they compare to your expectations, the preacquisition and divestitures.
David Sides
Yes. Thanks, Jack. So how does Enterprise, Office and Insight compared to our expectations from Investor Day last year as far as growth? I would say so far, on track. So our guidance of this year is in the range that we talked about at Investor Day. You'll see maybe a little bit more growth from enterprise now that we've bought TSI, which consolidates into that segment than we might have said at the time. So a little stronger on enterprise but otherwise in line with our thinking from Investor Day.
Jack Wallace
Got it. And then on the Data and Insights business, obviously, smaller growing faster. It sounds like there's been some R&D and...
James Arnold
Yes, it's -- we're having a little trouble hearing you, Jack. On the Insights, what we said -- if you recall, what we said last year is that over the longer term, we expect it to grow between 25% and 35%, but that it was going to take a couple of years to reach that level of production. And so '23, the performance was below that range, but we do expect to see some acceleration in '24. And certainly by '25, we would expect it to be at the low end of the guidance range that we provided last year.
Jack Wallace
Got you. That's helpful. Can you hear me better now?
James Arnold
Yes, yes.
Jack Wallace
Okay. Just a quick follow-up on Insights. And it sounds like there's an acceleration of resources going to those solutions. But if I heard you correctly, and that's not even including the potential for M&A. Is it fair to say that in terms of incremental contribution to growth over the next 2 to 3 years, that, that segment will be as large as, say, the Office segment, if not larger?
David Sides
It depends on the year you look, but it is accelerating. So there is an intercept there. Office will still grow in the double digits. But the 20% to 30% for Insights catches up in some period of years. So we do see disproportionate growth there. And it's also, to your point, where we've invested in organic new product solutions. And any M&A will help with that piece, too, where we round out any parts of the offering that we need to bring additional technical capabilities.
James Arnold
Yes. The intercept is -- if you think of last year is year 1 and a 5-year, we gave kind of a 5-year outlook. It's closer to the year 4 and 5 for the intercept to occur.
Operator
Our next question will come from Jeff Garro with Stephens.
Jeffrey Garro
Yes. I want to ask about the series of behavioral health deals announced in the quarter. It seems like there is clear momentum in that vertical. So I was hoping you could help us think about your positioning in that space and the growth opportunity from here as well as just in the individual releases. It seems like an interesting mix of in-person and virtual service as well as an ability to grow with those clients over time.
David Sides
Yes. So behavioral health is one of the specialties we really focused on the last couple of years. Our virtual capabilities add to that substantially as across health care, mental health and behavioral health have been delivered virtually during the pandemic, and that has persisted. So we have a technological advantage there. We also have done behavioral health for some time in our federally qualified health centers and our community health centers where they integrate medical, dental and behavioral. So it's a big advantage for us with those clients against all of our competitors.
We've added in functionality last year. We would have seen some organic additions to that solution set that we announced, and that's really resonated with the market. So the ability to have in-person virtual hybrid models to support the workflow of behavioral health and to bill for them, which they can be very complex, especially at the state level of how you build Medicaid and others, those are good for us.
Jeffrey Garro
Excellent. That's super helpful. And I want to ask one on the cost and operations side of things, some comments around the Upgrades Center of Excellence and monitoring spend towards the end of FY '24. I want to follow up and ask what that means in terms of the client upgrade cycle and also, ultimately, your ability to deliver speed and quality of client upgrades.
David Sides
Yes. So the Upgrades Center of Excellence is working on getting everyone to the Cures-certified addition of our software. That, if you'll recall, needs to be done ideally by September 30. So they have a full quarter to report without penalty. So we should be through the bulk of all the upgrades by the end of September, which is the second quarter of our fiscal '24.
From there, we're going to take all those talented people and either do things like sell them back to clients as billable resources. To the extent our hosting business expands, put them in our hosting business. So we have a wealth of talent to redeploy other places in the organization that we're excited about. And so that will help us as we think about how do we transition this bulk of work into more value-added things for our clients like driving outcomes for them.
Operator
Our next question will come from Jailendra Singh with Truist Securities.
Eduardo Ron
This is Eduardo on for Jailendra. Just to recycle on the macro. You guys have talked about a challenging environment opened up more opportunities for the company in hosting EDI and patient engagement. I guess what are your updated thoughts around staff shortages, claims processing times and health guarantee budget spend?
David Sides
Yes, Eduardo. It's a good question because ironically, not seeing an improvement in unemployment, right? It's still a very tight market despite the fed's tightening. So I think from a macro level, people had expected that, that would start to modify and it hasn't.
It works well for us in that we're adding to our RCM or the breadth of our RCM process to move things upstream. It also helps with our patient engagement solutions to be able to get patients to self-schedule and take that pressure off the front-line staff. We're seeing continued enthusiasm there.
And on the EDI side, we're constantly working with our partners on how can we automate parts of this to make this an easier process. For example, it would be prior authorization is one of the things that we're adding into the solution set so that we don't have to do claims edits or claims resubmission because we've gotten the authorization upfront.
Those -- any one of those 3 are things that clients are looking for as they work through staffing shortages and really how to become more productive with staff in addition to things we've talked about before, like doing robotic process automation to automate our own processes to be more efficient on behalf of our clients to constantly think about how can we drive down the price of doing business, especially as they're seeing rising costs throughout their own labor pools.
Eduardo Ron
That's helpful. You guys recently launched Mirth Cloud Connect as an upgrade to Mirth Connect, which you guys talked about today. As that sits inside of the Insights segment, just sort of how does that go into the 25% to 35% growth outlook as you're talking about getting to the low end in 2025? Just curious how that -- you envision that contributing to that target.
David Sides
That one, I would say, is a direct result of your last question. So we have clients who are running a lot of interfaces or using our solution to interface to run whole states as a health information exchange or they might be -- this is the one place we sell to hospitals, interoperability to hospitals. They may have connections to lots of offices, labs, et cetera. And it's just really difficult to find the skilled workforce to support these applications.
And so if you look at Mirth Cloud Connect, one of the first things we offer is we monitor and run these systems for them. So they can move their people to creating new interfaces rather than monitoring the existing ones. And if we help them create new, we can reuse the ones we've already used or the connections we've already made to make them more efficient at a price point that's hard to compete with. But at the same time, it's really the labor shortage that could be driving it. It's difficult to compete for these resources, and they can be more expensive.
Operator
Our next question will come from Vishal Patel with Piper Sandler.
Vishal Patel
This is Vishal on for Jess Tassan. First, I wanted to ask, how should we think about fiscal '25 in respect to the Rule of 40 measure? At the midpoint, I believe you've guided to 27.6% for fiscal '24. And during the Investor Day, I believe you mentioned nearing 30% by fiscal '25. Is that still a reasonable expectation? And if so, how should we get comfortable with that EBITDA margin expansion in light of the investments highlighted in the prepared remarks?
James Arnold
Yes. This is Jamie Arnold. And while we're not prepared right now to give guidance on '25 with that degree of specificity, I think our -- this year's performance plus what we've guided for '24, the 30% would certainly be within sort of the realm of our expectation.
Vishal Patel
Got it. Got it. That's helpful. And if I could ask, what was the contribution of TSI in the quarter?
James Arnold
I'm sorry, could you ask that again?
Vishal Patel
Yes. What was the contribution of TSI in the quarter?
James Arnold
We're not going to break -- what I would tell you on TSI is that it was -- it performed right in line with the guidance we had provided for this year for the stub period. And -- but we're not going to break it out as a separate line item. If it was outside the range of the guidance that we had provided, we'd let you know.
Operator
Our next question will come from George Hill with Deutsche Bank.
George Hill
Yes. I guess, David, it seems like fiscal '24 is going to be a year where you guys get close to hitting the double-digit revenue growth from maybe now with the operating leverage that you guys were looking for. I guess can you talk about has anything changed with the growth algorithm longer term? And maybe how should we think about the breakdown of like share gains, new footprints versus like client wallet share gains? And kind of like how big -- or will you expect capital deployment to play? And I'm really thinking kind of like repo versus M&A and where you're seeing the best opportunity now given where the share price is.
David Sides
Yes. Thanks, George. Good to hear you. The view of the growth is maintained, right? So we see 10% growth. We got there a year earlier than we said at Investor Day. We see that continuing through '25. We have also -- and beyond, so not just in the next couple of years, but ongoing. We also, from a new business, existing business, have hit the numbers that we want to see from a sales bookings perspective and 25% of our bookings coming from new clients, even as we're increasing sales and having a record quarter last quarter from the sales side.
And then on the question on M&A versus repurchase, we prefer M&A. So we prefer to find new solutions that our clients will love, and that's our preferred use of cash. But we have an outstanding authorization for repurchases that if we don't have uses for that cash, to return it to shareholders. But our preference is M&A. And we've said before, too, we're looking primarily at the Insights business because we see so much opportunity there to round out our offerings as we go to market.
George Hill
Okay. And maybe just a quick follow-up on the M&A question. I guess maybe could you comment on the valuations that you're seeing in the market right now as you look around, given kind of like the markets had a pretty severe retrenchment, especially around what -- I guess what we would consider growth names like VCs aren't funding like B rounds and C rounds for companies that are showing any type of financial distress [indiscernible] shopping for assets.
David Sides
Yes, we think it's a great time to be a strategic because the leverage collateralized market is kind of difficult now, right? It's a lot harder to make something work at 11% to 15% than it was a few years ago at 5%. That's good for us in that our cost of capital is below that. We are seeing the private markets obviously lag the public markets, right? The public markets correct every time there's an increase. But we're starting to see the private markets correct. We think the latter half of this year from the companies we talk to, their valuations will become attractive, and we will be active.
So that it's nice to see that expectations come down. I think they're also coming down later this year as people start to run through their last round of funding from the latter half of last year or middle of next year. And there's no easy path for many of these companies to get debt financing. And so even the SVB kind of meltdown that weekend, we called some of our targets on the Friday and said, look, we know you may not be able to make payroll on Monday. We're happy to help you make payroll because we've got hundreds of millions of cash and we can work out the terms of some of these things later. So I think it's a good time from a macro investment perspective for us from an M&A perspective, and we'll be aggressive.
Operator
[Operator Instructions]. And at this time, there are no further questions in the queue. So I would like to turn the call back over to management for any additional or closing remarks.
David Sides
Thank you all for attending the call and your continued interest in NextGen Healthcare. Have a great quarter and a great year. We look forward to more to come in fiscal year '24. This concludes our call.
Operator
Thank you, ladies and gentlemen. This concludes today's call, and we appreciate your participation. You may disconnect at any time.
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NextGen Healthcare, Inc. (NXGN) Q4 2023 Earnings Call Transcript