ATLANTA--(BUSINESS WIRE)--NextGen Healthcare, Inc. (Nasdaq: NXGN), a leading provider of ambulatory-focused technology solutions, today announced that it has commenced mailing its proxy materials in connection with the 2021 Annual Meeting of Shareholders. The Annual Meeting is currently scheduled to be held on Wednesday, October 13, 2021. Shareholders of record as of September 2, 2021 are eligible to vote at the Annual Meeting. The Company has launched nextgen.com/annual-meeting which contains important information for shareholders.
The NextGen Healthcare Board of Directors recommends that shareholders vote "FOR" the election of each of NextGen Healthcare’s highly qualified director nominees and “FOR” ALL other proposals listed on the WHITE proxy card.
Concurrently with the mailing of definitive proxy materials, the Company is mailing a letter to shareholders discussing:
- The importance of reincorporating in Delaware, eliminating cumulative voting and adopting a “one share, one vote” majority voting standard
- The success the Company is realizing under new leadership
- The many misleading statements Sheldon Razin and Lance Rosenzweig have made in connection with the proxy fight they initiated, and the risks to shareholder value creation if Sheldon’s director candidates are elected
The full text of the letter follows:
September 13, 2021
Dear Fellow Shareholders,
Sheldon Razin, the Company’s founder and 47-year tenured director, and his ally on the Board of Directors, Lance Rosenzweig, have initiated a costly, disruptive, self-serving proxy contest in connection with the 2021 Annual Meeting of Shareholders. If they are successful in their attempt to elect their director candidates, Sheldon and Lance would be able to preserve their Board seats, indefinitely, and take de facto control of NextGen Healthcare. While they now claim they are no longer seeking control of the Board, control was their intention from the start – when they put forward six of nine candidates, including themselves, for election at the Meeting.
Don’t Be Misled – In Our Opinion, Sheldon and Lance Want to Gain De Facto Control of the Company
At the Annual Meeting, you have an important decision to make. To ensure your company stays on the right course to drive shareholder value, we urge you to vote “FOR” ALL proposals listed on the WHITE proxy card, including:
- Reincorporation of the Company in the state of Delaware and related corporate governance changes, including eliminating cumulative voting and adopting a “one share, one vote” majority voting standard
- Election of each of the Company’s highly qualified independent director nominees, who will represent ALL shareholders’ interests and have the relevant skills and necessary experience to drive growth and value creation
New Leadership’s Actions and Achievements Over the Past Five Years Demonstrate Our Success in Addressing Sheldon’s Legacy Business Problems and Revitalizing NextGen Healthcare
In 2015, an independent investigation found that Sheldon hid from the Board side conversations he was having regarding a potential sale of the Company. These conversations were not authorized by the Board. As a result of the investigation’s findings and Sheldon’s actions, Sheldon resigned as Chair of the Board at the urging of all other Board members. In connection with his resignation, he was conferred the ceremonial title of Chairman Emeritus.
At the time of Sheldon’s resignation as Chair and as a result of his leadership of the Board, NextGen Healthcare was, in our opinion, a deteriorating business. It suffered from:
- Poor capital allocation that, for many years, favored dividends – a sizeable amount of which Sheldon received – instead of substantially increasing investment for the future
- A lack of timely investment in, and execution of, innovation to evolve the Company in line with industry trends
- Failed investments that did not effectively support product development, but instead resulted in more than $77 million in write-offs (including write-offs of acquisitions)
- Insufficient investment to broaden the solutions portfolio and diversify revenue drivers
- An underappreciated and demotivated employee base
- An underperforming management team, both limited and protected by Sheldon
After replacing Sheldon as Chair, new Board leadership, including a new Chair and Vice Chair, and the Company’s then recently appointed CEO, embarked on a transformation strategy to address these legacy problems and revitalize NextGen Healthcare. Actions taken over the past five years by new leadership included:
- Appointing an experienced, more diverse management team,including a:
- Chief Financial Officer (2016)
- Chief Solutions Officer (2016)
- Chief Technology Officer (2016)
- Senior Vice President, Managed Services (2017; now Executive Vice President of Operations)
- Senior Vice President, Sales (2017; now Executive Vice President, Commercial Growth)
- General Counsel and Secretary (2017)
- Executive Vice President of Human Resources (2017)
- Chief Medical Officer (2018)
- Senior Vice President, Marketing (2018)
- Chief Information Security Officer (2020)
- Chief Growth and Strategy Officer (2021)
- Allocating capital toward innovation and strategic acquisitions in software-as-a-service (SaaS) solutions for analytics, telehealth, integrated care and patient experience, which materially broadened and strengthened our portfolio. As part of these new capital allocation priorities, we:
- Increased average annual R&D expenditure to 18% of total revenue, an increase of 44%
- Ended the $43 million annual cash dividend, which has allowed us to invest in innovation and people and fund seven successful acquisitions from free cash flow
- Divested the Company’s underperforming hospital business unit
- Terminated poorly executed R&D programs
- Increased highly valued subscription services annual revenue 91% to $148 million
- Increased recurring revenue to 90% of total revenue from 80%
- Establishing programs that incentivize operational excellence and prioritize people, activate our DE&I values and deliver results. We have:
- Improved productivity, resulting in a 30% increase in revenue per employee
- Become a top-rated Electronic Health Record (EHR) and Practice Management (PM) vendor as measured by KLAS Research
- Increased Net Promoter Score (NPS) by 53 points
- Improved employee engagement by 33%, turning NextGen Healthcare into a destination for top talent
- Received the DivHERsity 2021 award alongside other premier companies
- Accelerated the Company’s momentum since removing Sheldon from Board leadership. Among our recent achievements:
- Produced the highest annual revenue and operating cash flow in the Company’s history for full year fiscal 2021
- Grew revenue 12% year-over-year to $146 million for first quarter of fiscal 2022, the highest quarterly revenue in the Company’s history
- Emerged as the preferred partner to large complex medical groups delivering innovative, integrated medical and behavioral health services
- Maintained a clean, strong balance sheet, with no debt, providing financial flexibility to continue making value-creating investments
- Ranked #6 in Healthcare Technology Report’s Top 100 Healthcare Technology Companies of 2021 and designated Market Leader in Medical Practice Management for the third straight year
As a result of the entire team’s hard work, including our more than 2,500 dedicated employees, we have established a strong foundation for sustainable growth. NextGen Healthcare has never been better positioned for growth and significant shareholder value creation.
NextGen Healthcare’s Independent Director Nominees Represent ALL Shareholders’ Interests; They Have Relevant Experience to Oversee and Guide Continued Strategic and Operating Execution
It is the Board’s view that as the Company evolves, so should the Board’s composition. Over the past four years, we have announced new independent directors, including four nominated at this year’s Annual Meeting, who advance the Board’s diversity across race, gender, age and tenure:
- Julie D. Klapstein. Founding CEO of Availity, one of the nation’s largest health information networks; more than 30 years of experience in the healthcare IT industry
- Geraldine McGinty, MD, MBA, FACR. Chief Strategy Officer and Chief Contracting Officer of the Weill Cornell Medicine Physician Organization; Senior Associate Dean for Clinical Affairs and Associate Professor of Clinical Radiology at Weill Cornell Medical College and internationally recognized expert in imaging economics
- Pamela S. Puryear, PhD, MBA. Former EVP and Chief Human Resources Officer of Walgreens Boots Alliance; executive experienced in driving value creation through expertise in human capital management, organizational transformation, innovation and operational excellence
- Darnell Dent, MPA. Strategic advisor to Softheon, a leading provider of cloud-based health insurance exchange technology, and prior President and CEO of FirstCare Health Plans, a provider-owned health plan
Including these individuals, our proposed slate has an average tenure of approximately six years, providing a combination of fresh perspectives and institutional knowledge to inform opportunities that build on the Company’s transformation.
The Board continues to make good progress on the selection of a new CEO and expects that individual to be a valuable contributor on the Board, once appointed. The CEO is expected to be appointed by the Company before the Annual Meeting and included on the Company’s director slate.
The Board has been actively working to continue its evolution with additional new independent directors. However, Sheldon and Lance have hindered our refreshment process.
In May of 2019, Lance agreed to step down from the Board and conclude his service no later than the 2020 Annual Meeting. Prior to the Company finalizing its director slate for that meeting, Lance requested a one-year extension after he was “replaced” in his role at another company, and Sheldon supported Lance in this request. The Board provided an accommodation with a very clear agreement from Lance that he would serve as a Board member for only one more year. Lance reneged on his agreement and now seeks to remain on the Board.
When the Board was finalizing its director slate for the 2021 Annual Meeting, Lance, once again, stated that he wanted to remain on the Board despite his prior commitment to step down. Sheldon was the only director who supported Lance in his request. Lance’s refusal to step down, and Sheldon’s unwavering support for him, sparked the disruption leading up to this year’s Annual Meeting.
We did not want a costly and disruptive proxy fight, and we tried to avoid it. We made multiple proposals to settle with Sheldon and included both Sheldon and Lance on the Board slate for the 2021 Annual Meeting. Sheldon did not participate in these discussions in good faith. All along, he was planning his proxy campaign and secretly recruiting four candidates to serve on his director slate. Two days after we announced the 2021 slate, Sheldon and Lance launched their proxy fight, seeking control of the Company. The Board revised its slate to include only director nominees who serve ALL shareholders’ best interests.
NextGen Healthcare’s Director Nominees Have the Experience and Skills Necessary to Oversee and Guide the Company’s Continued Strategic and Operating Execution
The healthcare industry is among the most complex. It is critical for a Board to have relevant expertise, and NextGen Healthcare’s director nominees have decades of experience across providers, health insurance, life sciences and enterprise software. In addition, the Company’s nominees have functional experience in commercialization, corporate strategy and M&A, corporate governance and compensation, finance and accounting, human capital and leading public company boards.
Our director nominees are independent thinkers whose interests are aligned with ALL shareholders. Their records show that they are credible and capable of accelerating the Company’s growth and capturing NextGen Healthcare’s value creation potential.
Sheldon and Lance Have Suddenly Dropped Two of Their Candidates
Is This Another Maneuver by Sheldon and Lance Geared Toward Self-Preservation and an Attempt to Obtain Votes?
Or, Are These Candidates Now Aware of Sheldon’s Inappropriate Behavior and Comments, Which Reflect Poorly Upon NextGen Healthcare?
In only two weeks, two of Sheldon’s recruits have mysteriously dropped off his slate. Shareholders should ask why they left.
- Why did these two candidates disassociate from Sheldon and Lance so fast? Why aren’t they supporting Sheldon and his quest for control?
- Were they troubled when they learned about Sheldon’s inappropriate behavior and comments made regarding diversity during his interviews of racially diverse director nominees?
- Did Sheldon disclose to his candidates the truth about his egregious behavior that led the Board to issue to him an official letter of censure and require him to participate in sensitivity training?
- Have these individuals come to understand that, despite Sheldon’s history of bad behavior, there is nothing the Board, nor shareholders, can practically do to remove him as long as he is able to preserve cumulative voting for his own benefit? The only reason Sheldon has been able to remain on the Board is due to cumulative voting, which gives Sheldon the power to unilaterally reelect himself and another individual – indefinitely.
- Will his remaining two candidates also abandon Sheldon and the NextGen Healthcare Board at some point after they are elected when they realize more about Sheldon’s past and experience his disruptive behavior?
The Chair of the Nominating and Governance Committee attempted to schedule interviews with all four of Sheldon’s candidates as part of the Company's standard policies and procedures. However, Sheldon and Lance prevented us from interviewing them. Why were Sheldon and Lance afraid of us having these conversations with their candidates?
Don’t be misled by Sheldon’s claims that he does not want to seize control of your Board of Directors: Sheldon and Lance say they are no longer running a “control slate” – because they are now only asking you for four seats out of our nine member Board of Directors. However, if they and their two additional candidates are elected, Sheldon would gain de facto control of the Board. The Board would consist of Sheldon and Lance – the first and fourth longest-tenured incumbent directors – and six brand new directors, two of which would be Sheldon and Lance’s candidates.
In Our View, When Sheldon Was Chair, NextGen Healthcare’s Growth Was Substantially the Direct Result of Government Stimulus, Not Sheldon’s Leadership
During the period leading up to Sheldon’s resignation as Chair, the Company’s growth and stock price performance were largely driven by government stimulus.
The 2009 Health Information Technology for Economic and Clinical Health Act (HITECH) portion of the American Recovery and Reinvestment Act provided significant funding and financial incentives for healthcare providers to adopt and “meaningfully use” EHR systems by a certain deadline. Providers, including NextGen Healthcare customers, were subject to substantial, ongoing penalties if they did not adopt EHR systems, which further propelled demand for NextGen Healthcare’s offerings.
By 2016, the market was largely saturated, and the business principles that had driven the Company’s success over the past decade were no longer available. Moreover, the software industry business models in healthcare and beyond evolved from perpetual on-premise licenses to software subscriptions in the cloud. Following these industry shifts, NextGen Healthcare found itself poorly positioned to compete as a result of Sheldon’s self-interested capital allocation priorities. Rather than re-investing to position NextGen Healthcare for the future, Sheldon instead directed capital to dividends that lined his own pockets.
To Serve Sheldon’s Own Interests and Distract from His Business Shortcomings as Chair, Sheldon Is Attacking Four Current Directors Who Partnered with Management to Revitalize the Company and Drive Growth
The meaningful progress the Board and management have made over the last five years is indisputable.
We have repositioned NextGen Healthcare and substantially strengthened the business. Sheldon’s attack on this progress has no merit given the clear results we have delivered, in spite of Sheldon’s efforts to the contrary. His proxy fight is disruptive, time consuming and distracting from the business, just like his behavior in the boardroom.
By finger pointing and name calling four fellow directors, Sheldon is trying to advance his own self-interests, namely:
Preserving his seat on the Board, indefinitely: Even though Sheldon resigned as Chair at the urging of the rest of the Board and was recently censured by the Board, the Board and shareholders have no practical way to remove him. Reincorporating in Delaware and the elimination of cumulative voting are good governance practices. Yet, Sheldon has opposed these proposals because they would reduce his power and his ability to preserve his seat, and that of another, on the Board – in perpetuity until they can no longer physically serve.
Although Sheldon has asserted that he will not invoke cumulative voting at this Annual Meeting, this is an empty promise given that (i) the Company’s bylaws permit all shareholders to cumulate their votes as long as any shareholder invokes cumulative voting at this Annual Meeting, (ii) Sheldon has refused to commit to not cumulating his votes if another shareholder invoked it, and (iii) Sheldon’s own proxy statement still contains detailed instructions on how shareholders should cumulate their votes should cumulative voting be invoked by any shareholder.
Sheldon is now arguing against the reincorporation in Delaware. However, he had the opportunity to defer this governance change as part of a proposal we made to reach a solution with him. Instead, he chose to launch an expensive and distracting proxy contest. It is this unconstructive behavior that makes the reincorporation and elimination of cumulative voting critical.
- Reinstituting a dividend that would line his pockets: Since resigning as Board Chair, Sheldon has argued that the Company should divert capital from value creating strategic growth investments and instead reinstitute a dividend. Recall, when Sheldon was Chair, the Company paid out $400 million in dividends, which largely benefitted him personally as the Company’s largest shareholder. As Sheldon’s ally, Lance has routinely supported Sheldon’s call for a dividend.
Your Vote Is Extremely Important - Vote FOR ALL Proposals on the WHITE Proxy Card Today
NextGen Healthcare is positioned for continued growth and value creation as a result of the strategic and purposeful actions taken by the Board and management over the last five years. Now is not the time to reverse course – but that is exactly what Sheldon is trying to do through his proxy contest.
We urge you to discard any blue proxy cards you receive from Sheldon and vote "FOR" ALL proposals listed on the WHITE proxy card, including each of NextGen Healthcare’s highly qualified director nominees. To have your vote recorded promptly, please follow the instructions to vote by Internet on your WHITE proxy card or WHITE voting instruction form from your bank or brokerage firm. If you get email delivery of your proxy materials, the email will contain a link or instructions on how to vote your shares.
For additional information, including instructions on how to vote, visit nextgen.com/annual-meeting.
Thank you for your support.
Craig A. Barbarosh
James C. Malone
Dr. Geraldine McGinty
Any shareholder with questions about the Annual Meeting or in need of assistance in voting their shares should contact:
MacKenzie Partners, Inc.
About NextGen Healthcare, Inc.
NextGen Healthcare, Inc. (Nasdaq: NXGN) is a leading provider of ambulatory-focused technology solutions. We are empowering the transformation of ambulatory care—partnering with medical, behavioral and dental providers in their journey to value-based care to make healthcare better for everyone. We go beyond EHR and PM. Our integrated solutions help increase clinical productivity, enrich the patient experience, and ensure healthy financial outcomes. We believe in better. Learn more at nextgen.com, and follow us on Facebook, Twitter, LinkedIn, YouTube and Instagram.
Certain Information Concerning the Participants
NextGen Healthcare has filed a definitive proxy statement with the U.S. Securities and Exchange Commission (the “SEC”), together with the associated WHITE proxy card, in connection with the solicitation of proxies for NextGen Healthcare’s 2021 Annual Meeting of Shareholders (the “Definitive Proxy Statement”). WE URGE SHAREHOLDERS TO READ THE DEFINITIVE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS TO SUCH PROXY STATEMENTS) AND ANY OTHER RELEVANT DOCUMENTS THAT NEXTGEN HEALTHCARE WILL FILE WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. NextGen Healthcare and certain of its directors and executive officers are participants in the solicitation of proxies from shareholders in respect of the 2021 Annual Meeting. Information regarding the names of NextGen Healthcare’s directors and executive officers and their respective interests in NextGen Healthcare by security holdings or otherwise are set forth in the Definitive Proxy Statement. To the extent holdings of such participants in NextGen Healthcare’s securities are not reported, or have changed since the amounts described, in the Definitive Proxy Statement, such changes will be reflected on Initial Statements of Beneficial Ownership on Form 3 or Statements of Change in Ownership on Form 4 filed with the SEC. Details concerning the nominees of NextGen Healthcare’s Board of Directors for election at the 2021 Annual Meeting are included in the Definitive Proxy Statement.
Shareholders will be able to obtain, free of charge, copies of the Definitive Proxy Statement, any amendments or supplements thereto and any other documents when filed by NextGen Healthcare with the SEC in connection with the Annual Meeting at the SEC’s website (http://www.sec.gov), at NextGen Healthcare’s website (https://investor.nextgen.com), by emailing NXGNproxy@mackenziepartners.com or by calling MacKenzie Partners at (800) 322-2885.
Forward Looking Statements
This communication may contain forward-looking statements within the meaning of the federal securities laws, including but not limited to, statements regarding future events including but not limited to the COVID-19 pandemic, developments in the healthcare sector and regulatory framework, the Company's future performance, as well as management's expectations, beliefs, intentions, plans, estimates or projections relating to the future (including, without limitation, statements concerning revenue, net income, and earnings per share). Risks and uncertainties exist that may cause the results to differ materially from those set forth in these forward-looking statements. Factors that could cause the anticipated results to differ from those described in the forward-looking statements and additional risks and uncertainties are set forth in Part I, Item A of our most recent Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q, including but not limited to: volatility and uncertainty in the global economy, financial markets and on our customers in light of the continuing COVID-19 pandemic, including the potential (i) slowdown or shutdown of preventive and elective medical procedures, (ii) delay in the contracting for additional products and services by our customers and (iii) delay in the sales cycle for new customers; a determination by the jury that the Company has liability in litigation advanced by a former director and shareholder; the volume and timing of systems sales and installations; length of sales cycles and the installation process; the possibility that products will not achieve or sustain market acceptance; seasonal patterns of sales and customer buying behavior; impact of incentive payments under The American Recovery and Reinvestment Act on sales and the ability of the Company to meet continued certification requirements; uncertainties related to the future impact of U.S. tax reform; the impact of governmental and regulatory agency investigations; the development by competitors of new or superior technologies; the timing, cost and success or failure of new product and service introductions, development and product upgrade releases; undetected errors or bugs in software; product liability; changing economic, political or regulatory influences in the health-care industry; changes in product-pricing policies; availability of third-party products and components; competitive pressures including product offerings, pricing and promotional activities; the Company's ability or inability to attract and retain qualified personnel; the impact of any proxy contest at the 2021 Annual Meeting of Shareholders; possible regulation of the Company's software by the U.S. Food and Drug Administration; changes of accounting estimates and assumptions used to prepare the prior periods' financial statements; disruptions caused by acquisitions of companies, products, or technologies; the extent to which the COVID-19 pandemic and measures taken in response thereto could adversely affect our financial condition and results of operations; and general economic conditions. A significant portion of the Company's quarterly sales of software product licenses and computer hardware is concluded in the last month of a fiscal quarter, generally with a concentration of such revenues earned in the final ten business days of that month. Due to these and other factors, the Company's revenues and operating results are very difficult to forecast. A major portion of the Company's costs and expenses, such as personnel and facilities, are of a fixed nature and, accordingly, a shortfall or decline in quarterly and/or annual revenues typically results in lower profitability or losses. As a result, comparison of the Company's period-to-period financial performance is not necessarily meaningful and should not be relied upon as an indicator of future performance. These forward-looking statements speak only as of the date hereof. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.