10-Q

UNITED STATES

SECURITIES and EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-12537

NEXTGEN HEALTHCARE, INC.

(Exact name of registrant as specified in its charter)

California (State or other jurisdiction of incorporation or organization)	95-2888568 (IRS Employer Identification No.)
18111 Von Karman Avenue, Suite 800, Irvine, California (Address of principal executive offices)	92612 (Zip Code)

(949) 255-2600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 Par Value	NXGN	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Small reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐   No ☒

The number of outstanding shares of the Registrant’s common stock as of October 21, 2019 was 65,433,363 shares.

NEXTGEN HEALTHCARE, INC.

TABLE OF CONTENTS

FORM 10-Q

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019

	Item	Page
	PART I.  FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
	Unaudited Condensed Consolidated Balance Sheets as of September 30, 2019 and March 31, 2019	3
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and six months ended September 30, 2019 and 2018	4
	Unaudited Statements of Condensed Consolidated Stockholders’ Equity for the six months ended September 30, 2019 and 2018	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2019 and 2018	6
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	33
Item 4.	Controls and Procedures.	33
	PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings.	34
Item 1A.	Risk Factors.	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	35
Item 3.	Defaults Upon Senior Securities.	35
Item 4.	Mine Safety Disclosure.	35
Item 5.	Other Information.	35
Item 6.	Exhibits.	36
	Signatures	37

2

PART I.  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

	September 30, 2019			March 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	42,930		$	33,079
Restricted cash and cash equivalents		7,501			1,443
Accounts receivable, net		83,708			87,459
Contract assets		11,973			13,242
Inventory		58			120
Income taxes receivable		3,272			3,682
Prepaid expenses and other current assets		20,612			20,826
Total current assets		170,054			159,851
Equipment and improvements, net		22,049			21,404
Capitalized software costs, net		39,076			37,855
Operating lease assets		38,230			—
Deferred income taxes, net		6,166			6,194
Contract assets, net of current		3,175			3,747
Intangibles, net		42,290			52,595
Goodwill		218,771			218,771
Other assets		33,017			32,478
Total assets	$	572,828		$	532,895
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	4,837		$	5,432
Contract liabilities		54,101			56,009
Accrued compensation and related benefits		21,825			25,663
Income taxes payable		—			64
Operating lease liabilities		9,947			—
Other current liabilities		41,545			41,064
Total current liabilities		132,255			128,232
Deferred compensation		5,933			5,905
Line of credit		—			11,000
Operating lease liabilities, net of current		41,622			—
Other noncurrent liabilities		1,890			11,812
Total liabilities		181,700			156,949
Commitments and contingencies (Note 14)
Shareholders' equity:
Common stock
$0.01 par value; authorized 100,000 shares; issued and outstanding 65,436 and 64,838 shares at September 30, 2019 and March 31, 2019, respectively		654			648
Additional paid-in capital		272,848			264,908
Accumulated other comprehensive loss		(1,320	)		(1,231	)
Retained earnings		118,946			111,621
Total shareholders' equity		391,128			375,946
Total liabilities and shareholders' equity	$	572,828		$	532,895

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Recurring	$	120,589		$	116,317		$	240,036		$	236,324
Software, hardware, and other non-recurring		13,667			14,004			26,081			27,197
Total revenues		134,256			130,321			266,117			263,521
Cost of revenue:
Recurring		50,328			47,172			100,868			95,325
Software, hardware, and other non-recurring		6,563			7,022			12,841			14,176
Amortization of capitalized software costs and acquired intangible assets		8,843			6,924			17,256			13,468
Total cost of revenue		65,734			61,118			130,965			122,969
Gross profit		68,522			69,203			135,152			140,552
Operating expenses:
Selling, general and administrative		39,046			34,229			79,174			78,865
Research and development costs, net		19,789			18,371			41,840			40,499
Amortization of acquired intangible assets		865			1,121			1,730			2,289
Impairment of assets		1,916			—			2,405			—
Restructuring costs		175			—			1,882			—
Total operating expenses		61,791			53,721			127,031			121,653
Income from operations		6,731			15,482			8,121			18,899
Interest income		36			40			115			69
Interest expense		(387	)		(769	)		(859	)		(1,499	)
Other income, net		210			237			77			611
Income before provision for income taxes		6,590			14,990			7,454			18,080
Provision for income taxes		509			1,896			129			2,338
Net income	$	6,081		$	13,094		$	7,325		$	15,742
Other comprehensive income:
Foreign currency translation, net of tax		(143	)		(793	)		(89	)		(1,292	)
Comprehensive income	$	5,938		$	12,301		$	7,236		$	14,450
Net income per share:
Basic	$	0.09		$	0.20		$	0.11		$	0.25
Diluted	$	0.09		$	0.20		$	0.11		$	0.24
Weighted-average shares outstanding:
Basic		65,401			64,265			65,209			64,143
Diluted		65,560			64,857			65,445			64,362

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

NEXTGEN HEALTHCARE, INC.

STATEMENTS OF CONDENSED CONSOLIDATED STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

	Three and Six Months Ended September 30, 2019
										Accumulated
					Additional					Other			Total
	Common Stock				Paid-in			Retained		Comprehensive			Shareholders'
	Shares		Amount		Capital			Earnings		Loss			Equity
Balance, March 31, 2019		64,838		648		264,908			111,621		(1,231	)		375,946
Common stock issued under stock plans, net of shares withheld for taxes		545		6		(1,311	)		—		—			(1,305	)
Stock-based compensation		—		—		4,891			—		—			4,891
Components of other comprehensive income:
Translation adjustments		—		—		—			—		54			54
Net income		—		—					1,244		—			1,244
Balance, June 30, 2019		65,383		654		268,488			112,865		(1,177	)		380,830
Common stock issued under stock plans, net of shares withheld for taxes		53		—		44			—		—			44
Stock-based compensation		—		—		4,316			—		—			4,316
Components of other comprehensive income:
Translation adjustments		—		—		—			—		(143	)		(143	)
Net income		—		—					6,081		—			6,081
Balance, September 30, 2019		65,436		654		272,848			118,946		(1,320	)		391,128

	Three and Six Months Ended September 30, 2018
										Accumulated
					Additional					Other			Total
	Common Stock				Paid-in			Retained		Comprehensive			Shareholders'
	Shares		Amount		Capital			Earnings		Loss			Equity
Balance, March 31, 2018		63,995		640		244,462			78,708		(400	)		323,410
Common stock issued under stock plans, net of shares withheld for taxes		225		2		(204	)		—		—			(202	)
Stock-based compensation		—		—		3,116			—		—			3,116
Cumulative effect adjustment related to the adoption of ASC 606		—		—		—			8,419		—			8,419
Components of other comprehensive income:
Translation adjustments		—		—		—			—		(499	)		(499	)
Net income		—		—		—			2,648		—			2,648
Balance, June 30, 2018		64,220		642		247,374			89,775		(899	)		336,892
Common stock issued under stock plans, net of shares withheld for taxes		162		2		2,104			—		—			2,106
Stock-based compensation		—		—		4,135			—		—			4,135
Components of other comprehensive income:
Translation adjustments		—		—		—			—		(793	)		(793	)
Net income		—		—		—			13,094		—			13,094
Balance, September 30, 2018		64,382		644		253,613			102,869		(1,692	)		355,434

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

NEXTGEN HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended September 30,
	2019			2018
Cash flows from operating activities:
Net income	$	7,325		$	15,742
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of capitalized software costs		8,680			4,892
Amortization of debt issuance costs		355			355
Amortization of other intangibles		10,305			10,864
Change in fair value of contingent consideration		400			—
Deferred income taxes		28			175
Depreciation		4,102			4,996
Excess tax benefit from share-based compensation		(50	)		(260	)
Impairment of assets		2,405			—
Loss on disposal of equipment and improvements		41			106
Non-cash operating lease costs		3,842			—
Provision for bad debts		1,635			1,385
Provision for inventory obsolescence		6			11
Share-based compensation		9,207			7,251
Changes in assets and liabilities:
Accounts receivable		2,116			409
Contract assets		1,841			2,982
Inventory		56			16
Accounts payable		(638	)		1,843
Contract liabilities		(1,908	)		(8,230	)
Accrued compensation and related benefits		(3,838	)		(9,770	)
Income taxes		396			2,459
Deferred compensation		28			(135	)
Operating lease liabilities		(4,657	)		—
Other assets and liabilities		(913	)		(20,175	)
Net cash provided by operating activities		40,764			14,916
Cash flows from investing activities:
Additions to capitalized software costs		(9,901	)		(10,379	)
Additions to equipment and improvements		(5,193	)		(2,941	)
Proceeds from corporate-owned life insurance policies		2,500			—
Net cash used in investing activities		(12,594	)		(13,320	)
Cash flows from financing activities:
Proceeds from line of credit		—			26,000
Repayments on line of credit		(11,000	)		(21,000	)
Proceeds from issuance of shares under employee plans		1,582			4,108
Payments for taxes related to net share settlement of equity awards		(2,843	)		(2,204	)
Net cash provided by (used in) financing activities		(12,261	)		6,904
Net increase in cash, cash equivalents, and restricted cash		15,909			8,500
Cash, cash equivalents, and restricted cash at beginning of period		34,522			31,218
Cash, cash equivalents, and restricted cash at end of period	$	50,431		$	39,718
Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	1,362		$	486
Cash refunds from income taxes		1,576			373
Cash paid for interest		552			975
Cash paid for amounts included in the measurement of operating lease liabilities		5,480			—
Operating lease assets obtained in exchange for operating lease liabilities		5,324			—
Accrued purchases of equipment and improvements		43			181

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

NEXTGEN HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES INDEX

Note		Page
Note 1	Summary of Significant Accounting Policies	8
Note 2	Revenue from Contracts with Customers	9
Note 3	Fair Value Measurements	12
Note 4	Leases	13
Note 5	Goodwill	14
Note 6	Intangible Assets	14
Note 7	Capitalized Software Costs	15
Note 8	Line of Credit	15
Note 9	Composition of Certain Financial Statement Captions	16
Note 10	Income Taxes	17
Note 11	Earnings Per Share	18
Note 12	Share-Based Awards	18
Note 13	Concentration of Credit Risk	20
Note 14	Commitments, Guarantees and Contingencies	20
Note 15	Restructuring Plan	22
Note 16	Subsequent Events	22

7

NEXTGEN HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

(Unaudited)

1. Summary of Significant Accounting Policies

Principles of Consolidation. The condensed consolidated financial statements include the accounts of NextGen Healthcare, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). Each of the terms “we,” “us,” or “our” as used herein refers collectively to the Company, unless otherwise stated. All intercompany accounts and transactions have been eliminated.

Basis of Presentation.  The accompanying unaudited condensed consolidated financial statements as of September 30, 2019 and for the three and six months ended September 30, 2019 have been prepared in accordance with the requirements of Quarterly Report on Form 10-Q and Article 10 of the Securities and Exchange Commission Regulation S-X and therefore do not include all information and notes which would be presented were such condensed consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements presented in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments which are necessary for a fair statement of the results of operations and cash flows for the periods presented. The results of operations for such interim periods are not necessarily indicative of results of operations to be expected for the full year.

References to amounts in the condensed consolidated financial statement sections are in thousands, except shares and per share data, unless otherwise specified.

Significant Accounting Policies. We adopted Accounting Standards Update No. 2016-02, Leases (Topic 842), effective on April 1, 2019 using the cumulative-effect adjustment transition method, as described further below. There have been no other material changes to our significant accounting policies from those disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019.

Share-Based Compensation. The following table summarizes total share-based compensation expense included in the condensed consolidated statements of comprehensive income for the three and six months ended September 30, 2019 and 2018:

	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
Costs and expenses:
Cost of revenue	$	536		$	348		$	999		$	581
Research and development costs		817			726			1,845			1,336
Selling, general and administrative		2,963			3,061			6,363			5,334
Total share-based compensation		4,316			4,135			9,207			7,251
Income tax benefit		(1,102	)		(1,016	)		(2,317	)		(1,769	)
Decrease in net income	$	3,214		$	3,119		$	6,890		$	5,482

Recently Adopted Accounting Pronouncements.  Recently adopted accounting pronouncements are discussed below or in the notes, where applicable.

In July 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-07, Codification Updates to SEC Sections—Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33- 10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates (SEC Update), to amend SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC final rules on Disclosure Update and Simplification and Investment Company Reporting Modernization, and make other updates. ASU 2019-07 was effective upon issuance. The requirements of ASU 2019-07 have been implemented and did not have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which was intended to improve financial reporting about leasing transactions. The new guidance requires lessees to recognize on their balance sheets the assets and liabilities for the rights and obligations created by leases and to disclose key information about the leasing arrangements. We have implemented the necessary changes to our policies, processes, and internal controls over financial reporting to meet the requirements under the new guidance related to identifying and measuring right-of-use assets and lease liabilities, including related disclosures.

We adopted ASU 2016-02 and its subsequent amendments (together “ASC 842”) using the cumulative-effect adjustment transition method, which is the additional transition method described within ASU 2018-11, Leases (Topic 842): Targeted Improvements, issued by the FASB in July 2018, which allowed us to apply the new lease standard as of April 1, 2019, rather than the beginning of the earliest period presented. We elected the package of practical expedients that permitted us to not reassess: (1) whether any expired contracts are or contain leases; (2) the lease classification for any existing or expired leases, and (3) the initial direct costs for our existing leases.

8

Upon adoption of ASC 842, we recognized operating lease right-of-use assets of $38,784, operating lease liabilities of $8,873, and long-term operating lease liabilities of $42,114 on our condensed consolidated balance sheet as of April 1, 2019, and corresponding reductions to other current liabilities of $2,342 and other noncurrent liabilities of $9,861 associated with previously recognized deferred rent and remaining lease obligations. There was no cumulative-effect adjustment required to retained earnings. The adoption of ASC 842 did not have a significant effect on our condensed consolidated results of operations or cash flows. Comparative information in this Report has not been adjusted and continues to be reported under the previous lease accounting rules. Refer to Note 4 for additional details.

Recent Accounting Standards Not Yet Adopted.   Recent accounting pronouncements requiring implementation in current or future periods are discussed below or in the notes, where applicable.

In August 2018, the FASB issued ASU 2018-15, Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. ASU 2018-15 is effective for us in the first quarter of fiscal 2021. We are currently in the process of evaluating the potential impact of adoption of this updated authoritative guidance on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 modifies certain disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. ASU 2018-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. ASU 2018-13 is effective for us in the first quarter of fiscal 2021, and we currently do not expect the adoption of this new standard to have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of Step two of the goodwill impairment test. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. ASU 2017-04 is effective prospectively for annual and interim periods beginning after December 15, 2019, and early adoption is permitted on goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 is effective for us in the first quarter of fiscal 2021, and we currently do not expect the adoption of this new standard to have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides new guidance regarding the measurement and recognition of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. ASU 2016-13 is effective for us in the first quarter of fiscal 2021, and we currently do not expect the adoption of this new standard to have a material impact on our consolidated financial statements.

We do not believe that any other recently issued, but not yet effective accounting standards, if adopted, would have a material impact on our consolidated financial statements.

2. Revenue from Contracts with Customers

Revenue Recognition and Performance Obligations

We generate revenue from sales of licensing rights and subscriptions to our software solutions, hardware and third-party software products, support and maintenance, managed services (formerly referred to as revenue cycle management and related services), EDI, and other non-recurring services, including implementation, training, and consulting services. Our contracts with customers may include multiple performance obligations that consist of various combinations of our software solutions and related services, which are generally capable of being distinct and accounted for as separate performance obligations.

The total transaction price is allocated to each performance obligation within an arrangement based on estimated standalone selling prices. We generally determine standalone selling prices based on the prices charged to customers, except for certain software licenses that are based on the residual approach because their standalone selling prices are highly variable and certain maintenance customers that are based on substantive renewal rates. In instances where standalone selling price is not observable, such as software licenses included in our RCM arrangements, we estimate standalone selling price utilizing an expected cost plus a margin approach. When standalone selling prices are not observable, significant judgment is required in estimating the standalone selling price for each performance obligation.

Revenue is recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration that we expect to be entitled to in exchange for those goods or services.

9

We exclude sales tax from the measurement of the transaction price and record revenue net of taxes collected from customers and subsequently remitted to governmental authorities.

The following table presents our revenues disaggregated by our major revenue categories and by occurrence:

	Three Months Ended September 30,				Six Months Ended September 30,
	2019		2018		2019		2018
Recurring revenues:
Subscription services	$	31,411	$	29,255	$	61,555	$	57,583
Support and maintenance		39,360		39,594		79,012		80,842
Managed services		25,219		23,527		50,900		49,797
Electronic data interchange and data services		24,599		23,941		48,569		48,102
Total recurring revenues		120,589		116,317		240,036		236,324
Software, hardware, and other non-recurring revenues:
Software license and hardware		8,258		9,353		15,353		16,796
Other non-recurring services		5,409		4,651		10,728		10,401
Total software, hardware and other non-recurring revenues		13,667		14,004		26,081		27,197
Total revenues	$	134,256	$	130,321	$	266,117	$	263,521

Recurring revenues consist of subscription services, support and maintenance, managed services, and EDI and data services. Software, hardware, and other non-recurring revenues consist of sales of software licenses and hardware and certain non-recurring services, such as implementation, training, and consulting performed for clients who use our products.

Generally, we recognize revenue for our most significant performance obligations as follows:

Subscription services. Performance obligations involving subscription services, which include annual libraries, are satisfied over time as the customer simultaneously receives and consumes the benefits of the services throughout the contract period. Our subscription services primarily include our hosting services, which we refer to as managed cloud services and our software-as-a-service (“SaaS”) based offerings, such as our electronic health records and practice management, mobile, patient portal, and population health management solutions. Our managed cloud services represent a single performance obligation to provide cloud hosting services to our customers. Our SaaS-based offerings may include multiple goods and services, such as providing access to our technology-based solutions together with our managed cloud services. These offerings are concurrently delivered with the same pattern of transfer to our customers and are accounted for as a single performance obligation because the technology-based solutions and other goods and services included within our overall SaaS-based offerings are each individually not capable of being distinct as the customer receives benefits based on the combined offering. Our annual libraries primarily consist of providing stand-ready access to certain content, knowledgebase, databases, and SaaS-based educational tools, which are frequently updated to meet the most current standards and requirements, to be utilized in conjunction with our core solutions. We recognize revenue related to these subscription services, including annual libraries, ratably over the respective noncancelable contract term.

Support and maintenance. Performance obligations involving support and maintenance are satisfied over time as the customer simultaneously receives and consumes the benefits of the maintenance services provided. Our support and maintenance services may consist of separate performance obligations, such as unspecified upgrades or enhancements and technical support, which are considered stand-ready in nature and can be offered at various points during the service period. Since the efforts associated with the combined support and maintenance services are rendered concurrently and provided evenly throughout the service period, we consider the series of support and maintenance services to be a single performance obligation. Therefore, we recognize revenue related to these services ratably over the respective noncancelable contract term.

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Managed services. Managed services consist primarily of RCM and related services, but also includes transcription services and certain other recurring services. Performance obligations associated with RCM services are satisfied over time as the customer simultaneously receives and consumes the benefits of the services executed throughout the contract period. The majority of service fees under our RCM arrangements are variable consideration contingent upon collections by our clients. We estimate the variable consideration which we expect to be entitled to over the noncancelable contract term associated with our RCM service arrangements. The estimate of variable consideration included in the transaction price typically involves estimating the amounts we will ultimately collect on behalf of our clients and the relative fee we charge that is generally calculated as a percentage of those collections. Inputs to these estimates include, but are not limited to, historical service fees and collections amounts, timing of historical collections relative to the timing of when claims are submitted by our clients to their respective payers, macroeconomic trends, and anticipated changes in the number of providers. Significant judgement is required when estimating the total transaction price based on the variable consideration. We may apply certain constraints when appropriate whereby we include in the transaction price estimated variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Such estimates are assessed at the contract level. RCM and related services may not be rendered evenly over the contract period as the timing of services are based on customer collections, which may vary throughout the service period. We recognize revenue for RCM based on the amount of collections received throughout the contract term as it most closely depicts our efforts to transfer our service obligations to the customer. Performance obligations related to the transcription services and other recurring services are generally satisfied as the corresponding services are provided and revenue is recognized as such services are rendered.

Electronic data interchange and data services. Performance obligations related to EDI and other transaction processing services are satisfied at the point in time the services are rendered. The transfer of control occurs when the transaction processing services are delivered and the customer receives the benefits from the services provided.

Software license and hardware. Software license and hardware are considered point-in-time performance obligations as control is transferred to customers upon the delivery of the software license and hardware. Our software licenses are considered functional licenses, and revenue recognition generally occurs on the date of contract execution as the customer is provided with immediate access to the license. We generally determine the amount of consideration allocated to the software license performance obligation using the residual approach, except for certain RCM arrangements where the amount allocated to the software license performance obligation is determined based on estimated relative standalone selling prices. For hardware, we recognize revenue upon transfer of such hardware or devices to the customer.

Other non-recurring services. Performance obligations related to other non-recurring services, including implementation, training, and consulting services, are generally satisfied as the corresponding services are provided. Once the services have been provided to the customer, the transfer of control has occurred. Therefore, we recognize revenue as such services are rendered.

Transaction Price Allocated to Remaining Performance Obligations

As of September 30, 2019, the aggregate amount of transaction price related to remaining unsatisfied or partially unsatisfied performance obligations over the respective noncancelable contract term was approximately $492,700, of which we expect to recognize approximately 9% as services are rendered or goods are delivered, 47% over the next 12 months, and the remainder thereafter.

Contract Balances

Contract balances result from the timing differences between our revenue recognition, invoicing, and cash collections. Such contract balances include accounts receivables, contract assets and liabilities, and other customer deposits and liabilities balances. Accounts receivable includes invoiced amounts where the right to receive payment is unconditional and only subject to the passage of time. Contract assets include amounts where revenue recognized exceeds the amount invoiced to the customer and the right to payment is not solely subject to the passage of time. Contract assets are generally associated with our sales of software licenses, but may also be associated with other performance obligations such as subscription services, support and maintenance, annual libraries, and professional services, where control has been transferred to our customers but the associated payments are based on future customer collections (in the case of our RCM service arrangements) or based on future milestone payment due dates. In such instances, the revenue recognized may exceed the amount invoiced to the customer and such balances are included in contract assets since our right to receive payment is not unconditional, but rather is conditional upon customer collections or the continued functionality of the software and our ongoing support and maintenance obligations. Contract liabilities consist mainly of fees invoiced or paid by our clients for which the associated services have not been performed and revenues have not been recognized. Contract assets and contract liabilities are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are classified as current or long-term on our condensed consolidated balance sheets based on the timing of when we expect to complete the related performance obligations and invoice the customer. Contract liabilities are classified as current on our condensed consolidated balance sheets since the revenue recognition associated with the related customer payments and invoicing is expected to occur within the next twelve months. During the three months ended September 30, 2019 and 2018, we recognized $16,188 and $15,909, respectively, of revenues that were included in the contract liability balance at the beginning of the corresponding periods. During the six months ended September 30, 2019 and 2018, we recognized $36,147 and $36,086, respectively, of revenues that were included in the contract liability balance at the beginning of the corresponding periods.

Our contracts with customers do not include any major financing components.

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Costs to Obtain or Fulfill a Contract

We capitalize all incremental costs of obtaining a contract with a customer to the extent that such costs are directly related to a contract and expected to be recoverable. Our sales commissions and related sales incentives are considered incremental costs requiring capitalization. Capitalized contract costs are amortized to expense utilizing a method that is consistent with the transfer of the related goods or services to the customer. The amortization period ranges from less than one year up to eight years, based on the period over which the related goods and services are transferred, including consideration of the expected customer renewals and the related useful lives of the products.

Capitalized commissions costs were $22,970 as of September 30, 2019, of which $5,989 is current and included as prepaid expenses and other current assets and $16,981 is long-term and included within other assets on our consolidated balance sheets, based on the expected timing of expense recognition. During the three months ended September 30, 2019 and 2018, we recognized $1,791 and $1,275, respectively, of commissions expense. During the six months ended September 30, 2019 and 2018, we recognized $3,453 and $2,864, respectively, of commissions expense. Commissions expense primarily relate to the amortization of capitalized commissions costs, which is included as a selling, general and administrative expense in the condensed consolidated statement of comprehensive income.

3. Fair Value Measurements

The following tables set forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis at September 30, 2019 and March 31, 2019:

	Balance At		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Unobservable Inputs
	September 30, 2019		(Level 1)		(Level 2)		(Level 3)
ASSETS
Cash and cash equivalents (1)	$	42,930	$	42,930	$	—	$	—
Restricted cash and cash equivalents		7,501		7,501		—		—
	$	50,431	$	50,431	$	—	$	—
LIABILITIES
Contingent consideration related to acquisitions	$	1,400	$	—	$	—	$	1,400
	$	1,400	$	—	$	—	$	1,400

	Balance At		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Unobservable Inputs
	March 31, 2019		(Level 1)		(Level 2)		(Level 3)
ASSETS
Cash and cash equivalents (1)	$	33,079	$	33,079	$	—	$	—
Restricted cash and cash equivalents		1,443		1,443		—		—
	$	34,522	$	34,522	$	—	$	—
LIABILITIES
Contingent consideration related to acquisitions	$	1,000	$	—	$	—	$	1,000
	$	1,000	$	—	$	—	$	1,000

⁽¹⁾ Cash equivalents consist primarily of money market funds.

The contingent liability balance relates to the acquisition of Inforth Technologies in which up to an additional $4,000 of cash is payable in the form of an earnout subject to the achievement of certain bookings targets through March 31, 2020. The categorization of the framework used to measure fair value of the contingent consideration liability was considered to be within the Level 3 valuation hierarchy due to the subjective nature of the unobservable inputs used. We assess the fair value of the contingent consideration liability on a recurring basis and any adjustments to fair value subsequent to the initial measurement period are reflected in the condensed consolidated statements of net income and comprehensive income. Key assumptions included probability-adjusted achievement estimates of applicable bookings targets that were not observable in the market. During the three and six months ended September 30, 2019, we recorded $400 in fair value adjustments to the contingent consideration liability, which is included as a component of selling, general and administrative expense in the condensed consolidated statements of net income and comprehensive income.

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We believe that the fair value of other financial assets and liabilities, including accounts receivable, accounts payable, and line of credit, approximate their respective carrying values due to their nominal credit risk.

Non-Recurring Fair Value Measurements

We have certain assets, including goodwill and other intangible assets, which are measured at fair value on a non-recurring basis and are adjusted to fair value only if an impairment charge is recognized. The categorization of the framework used to measure fair value of the assets is considered to be within the Level 3 valuation hierarchy due to the subjective nature of the unobservable inputs used. During the three and six months ended September 30, 2019, we recorded certain impairments to our operating lease assets and equipment and improvements (see Note 15).

4. Leases

We have operating lease agreements for our offices in the United States and India with lease periods expiring between 2020 and 2026. ASC 842 requires the recognition of leasing arrangements on the balance sheet as right-of-use assets and liabilities pertaining to the rights and obligations created by the leased assets. We determine whether an arrangement is a lease at inception and classify it as finance or operating. All of our existing material leases are classified as operating leases. Our leases do not contain any residual value guarantees.

Right-of-use lease assets and corresponding lease liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Since the interest rate implicit in our lease arrangements is not readily determinable, we determine an incremental borrowing rate for each lease based on the approximate interest rate on a collateralized basis with similar remaining terms and payments as of the lease commencement date to determine the present value of future lease payments. Our lease terms may include options to extend or terminate the lease. Currently, it is not reasonably certain that we will exercise those options and therefore, we utilize the initial, noncancelable, lease term to calculate the lease assets and corresponding liabilities for all our leases. We have certain insignificant short-term leases with an initial term of twelve months or less that are not recorded in our condensed consolidated balance sheets. Operating right-of-use lease assets are classified as operating lease assets on our condensed consolidated balance sheets.

Our lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. We have applied the practical expedient to combine fixed payments for non-lease components with our lease payments for all of our leases and account for them together as a single lease component, which increases the amount of our lease assets and corresponding liabilities. Payments under our lease arrangements are primarily fixed, however, certain lease agreements contain variable payments, which are expensed as incurred and not included in the operating lease assets and liabilities.

Operating lease costs are recognized on a straight-line basis over the lease term and included as a selling, general and administrative expense in the condensed consolidated statements of comprehensive income. Total operating lease costs were $2,751 and $2,027 for the three months ended September 30, 2019 and 2018, respectively. Total operating lease costs were $5,051 and $4,055 for the six months ended September 30, 2019 and 2018, respectively.

Components of operating lease costs are summarized as follows:

	Three Months Ended			Six Months Ended
	September 30, 2019			September 30, 2019
Operating lease costs	$	2,514		$	4,677
Short-term lease costs		67			93
Variable lease costs		198			337
Less: Sublease income		(28	)		(56	)
Total operating lease costs	$	2,751		$	5,051

Supplemental cash flow information related to operating leases is summarized as follows:

	Three Months Ended		Six Months Ended
	September 30, 2019		September 30, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	2,864	$	5,480
Operating lease assets obtained in exchange for operating lease liabilities		—		5,324

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As of September 30, 2019, our operating leases had a weighted average remaining lease term of 5.0 years and a weighted average discount rate of 4.2%. Future minimum aggregate lease payments under operating leases as of September 30, 2019 are summarized as follows:

For the year ended March 31,
2020 (remaining six months)	$	5,921
2021		11,919
2022		11,323
2023		10,954
2024		9,045
Thereafter		8,316
Total future lease payments		57,478
Less interest		(5,909	)
Total lease liabilities	$	51,569

Future minimum lease payments (including interest) under non-cancelable operating leases as of March 31, 2019 are summarized as follows:

For the year ended March 31,
2020	$	10,511
2021		10,701
2022		10,161
2023		9,660
2024		7,730
Thereafter		8,097
Total obligations and commitments	$	56,860

As of September 30, 2019, we have not entered any material leases, which are not reflected in the table above.

5. Goodwill

We test goodwill for impairment annually during our first fiscal quarter, referred to as the annual test date.  We will also test for impairment between annual test dates if an event occurs or circumstances change that would indicate the carrying amount may be impaired. We have not identified any events or circumstances as of September 30, 2019 that would require an interim goodwill impairment test.

We do not amortize goodwill as it has been determined to have an indefinite useful life. The carrying amount of goodwill as of September 30, 2019 and March 31, 2019 was $218,771.

6. Intangible Assets

Our definite-lived intangible assets, other than capitalized software development costs, are summarized as follows:

	September 30, 2019
	Customer			Software
	Relationships			Technology			Total
Gross carrying amount	$	32,400		$	93,000		$	125,400
Accumulated amortization		(19,554	)		(63,556	)		(83,110	)
Net intangible assets	$	12,846		$	29,444		$	42,290

	March 31, 2019
	Customer			Software
	Relationships			Technology			Total
Gross carrying amount	$	54,450		$	94,310		$	148,760
Accumulated amortization		(39,875	)		(56,290	)		(96,165	)
Net intangible assets	$	14,575		$	38,020		$	52,595

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Amortization expense related to customer relationships and contracts recorded as operating expenses in the condensed consolidated statements of comprehensive income was $864 and $1,121 for the three months ended September 30, 2019 and 2018, respectively. Amortization expense related to software technology recorded as cost of revenue was $4,288 and $4,288 for the three months ended September 30, 2019 and 2018, respectively.

Amortization expense related to customer relationships and contracts recorded as operating expenses in the condensed consolidated statements of comprehensive income was $1,729 and $2,289 for the six months ended September 30, 2019 and 2018, respectively. Amortization expense related to software technology recorded as cost of revenue was $8,576 and $8,575 for the six months ended September 30, 2019 and 2018, respectively.

The following table summarizes the remaining estimated amortization of definite-lived intangible assets as of September 30, 2019:

	Estimated Remaining Amortization Expense
	Operating Expense		Cost of Revenue		Total
For the year ended March 31,
2020 (remaining six months)	$	1,730	$	8,576	$	10,306
2021		2,803		13,268		16,071
2022		2,273		5,480		7,753
2023		1,866		1,760		3,626
2024		1,548		180		1,728
2025 and beyond		2,626		180		2,806
Total	$	12,846	$	29,444	$	42,290

7. Capitalized Software Costs

Our capitalized software costs are summarized as follows:

	September 30, 2019			March 31, 2019
Gross carrying amount	$	68,879		$	59,782
Accumulated amortization		(29,803	)		(21,927	)
Net capitalized software costs	$	39,076		$	37,855

Amortization expense related to capitalized software costs was $4,555 and $2,635 for the three months ended September 30, 2019 and 2018, respectively, and is recorded as cost of revenue in the condensed consolidated statements of comprehensive income.

Amortization expense related to capitalized software costs was $8,680 and $4,892 for the six months ended September 30, 2019 and 2018, respectively.

The following table presents the remaining estimated amortization of capitalized software costs as of September 30, 2019. The estimated amortization is comprised of (i) amortization of released products and (ii) the expected amortization for products that are not yet available for sale based on their estimated economic lives and projected general release dates.

For the year ended March 31,
2020 (remaining six months)	$	11,100
2021		16,900
2022		8,400
2023		2,676
Total	$	39,076

8. Line of Credit

On March 29, 2018, we entered into a $300,000 amended and restated revolving credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, U.S. Bank National Association, as syndication agent, and certain other agents and lenders. The Credit Agreement replaces our prior $250,000 revolving credit agreement originally entered into on January 4, 2016 (“Original Credit Agreement”). The Credit Agreement provides a subfacility of up to $10,000 for letters of credit and a subfacility of up to $10,000 for swing-line loans and also includes a $100,000 accordion feature that provides us with the ability to obtain up to $400,000 in the aggregate of revolving credit commitments and/or term loans upon satisfaction of certain conditions.

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The Credit Agreement matures on March 29, 2023 and the full balance of the revolving loans and all other obligations under the agreement must be paid at that time. In addition, we are required to prepay the revolving loan balance if at any time the aggregate principal amount outstanding under the Credit Agreement exceeds the aggregate commitments thereunder. The Credit Agreement is secured by substantially all of our existing and future property. The revolving loans under the Credit Agreement will be available for letters of credit, permitted acquisitions, working capital and general corporate purposes. We were in compliance with all financial and non-financial covenants under the Credit Agreement as of September 30, 2019.

As of September 30, 2019, we had no outstanding loans and $300,000 of unused credit under the Credit Agreement. As of March 31, 2019, we had $11,000 in outstanding loans under the Credit Agreement.

Interest expense related to the Credit Agreement was $211 and $591 for the three months ended September 30, 2019 and 2018, respectively. Amortization of deferred debt issuance costs was $178 and $178 for the three months ended September 30, 2019 and 2018, respectively.

Interest expense related to the Credit Agreement was $505 and $1,141 for the six months ended September 30, 2019 and 2018, respectively. Amortization of deferred debt issuance costs was $355 and $355 for the six months ended September 30, 2019 and 2018, respectively.

9. Composition of Certain Financial Statement Captions

Accounts receivable includes billed amounts where the right to receive payment is unconditional and only subject to the passage of time. Undelivered products and services are included as a component of the contract liabilities balance on the accompanying condensed consolidated balance sheets.

	September 30, 2019			March 31, 2019
Accounts receivable, gross	$	87,258		$	93,513
Allowance for doubtful accounts		(3,550	)		(6,054	)
Accounts receivable, net	$	83,708		$	87,459

Inventory is comprised of computer systems and components.

Prepaid expenses and other current assets are summarized as follows:

	September 30, 2019		March 31, 2019
Prepaid expenses	$	13,868	$	15,548
Capitalized commissions costs		5,989		4,816
Other current assets		755		462
Prepaid expenses and other current assets	$	20,612	$	20,826

Equipment and improvements are summarized as follows:

	September 30, 2019			March 31, 2019
Computer equipment	$	31,908		$	28,923
Internal-use software		17,426			17,084
Furniture and fixtures		12,075			11,660
Leasehold improvements		15,656			15,150
Equipment and improvements, gross		77,065			72,817
Accumulated depreciation and amortization		(55,016	)		(51,413	)
Equipment and improvements, net	$	22,049		$	21,404

Other assets are summarized as follows:

	September 30, 2019		March 31, 2019
Capitalized commission costs	$	16,981	$	14,781
Deposits		5,747		5,318
Debt issuance costs		2,479		2,834
Other noncurrent assets		7,810		9,545
Other assets	$	33,017	$	32,478

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Accrued compensation and related benefits are summarized as follows:

	September 30, 2019		March 31, 2019
Accrued vacation	$	9,323	$	9,893
Accrued bonus		8,063		11,598
Accrued commissions		3,628		3,418
Accrued payroll		811		754
Accrued compensation and related benefits	$	21,825	$	25,663

Other current liabilities are summarized as follows:

	September 30, 2019		March 31, 2019
Care services liabilities	$	7,501		1,443
Sales returns reserves and other customer liabilities		6,743		7,838
Customer credit balances and deposits		4,358		3,988
Accrued hosting costs		3,440		4,674
Accrued self insurance expense		2,616		2,225
Accrued employee benefits and withholdings		2,407		2,426
Accrued outsourcing costs		2,328		2,128
Accrued EDI expense		2,061		2,037
User group meeting deposits		1,813		—
Accrued consulting and outside services		1,732		3,874
Contingent consideration related to acquisitions		1,400		1,000
Accrued legal expense		895		699
Sales tax payable		599		509
Accrued royalties		587		3,090
Deferred rent and related lease obligations		—		2,196
Other accrued expenses		3,065		2,937
Other current liabilities	$	41,545	$	41,064

10. Income Taxes

The provision for income taxes in the three months ended September 30, 2019 and 2018 was $509 and $1,896, respectively. The effective tax rates were 7.7% and 12.6% for the three months ended September 30, 2019 and 2018, respectively. The decrease in the effective tax rate for the three months ended September 30, 2019 compared to the prior year period was primarily due to the increased net benefit of the research and development credits, partially offset by nondeductible stock option related expenses, nondeductible officer’s compensation, and reserves for uncertain tax position.

The provision for income taxes in the six months ended September 30, 2019 and 2018 was $129 and $2,338, respectively. The effective tax rates were 1.7% and 12.9% for the six months ended September 30, 2019 and 2018, respectively. The decrease in the effective tax rate for the six months ended September 30, 2019 compared to the prior year period was primarily due to the increased net benefit of the research and development credits and other one-time discrete benefits, partially offset by nondeductible stock option related expenses.

The deferred tax assets and liabilities are presented net in the accompanying condensed consolidated balance sheets as noncurrent. We expect to receive the full benefit of the deferred tax assets recorded, with the exception of certain state credits, and state net operating loss carryforwards, for which we have recorded a valuation allowance.

Uncertain tax positions

We had liabilities of $3,206 and $2,894 for unrecognized tax benefits related to various federal, state and local income tax matters as of September 30, 2019 and March 31, 2019, respectively. If recognized, this amount would reduce our effective tax rate.

We are no longer subject to United States federal income tax examinations for tax years before fiscal year ended 2015. With a few exceptions, we are no longer subject to state or local income tax examinations for tax years before fiscal year ended 2014. We do not anticipate the total unrecognized tax benefits to significantly change due to the settlement of audits or the expiration of statute of limitations within the next twelve months.

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11. Earnings per Share

The dual presentation of “basic” and “diluted” earnings per share is provided below. Share amounts below are in thousands.

	Three Months Ended September 30,				Six Months Ended September 30,
	2019		2018		2019		2018
Earnings per share — Basic:
Net income	$	6,081	$	13,094	$	7,325	$	15,742
Weighted-average shares outstanding — Basic		65,401		64,265		65,209		64,143
Net income per common share — Basic	$	0.09	$	0.20	$	0.11	$	0.25
Earnings per share — Diluted:
Net income	$	6,081	$	13,094	$	7,325	$	15,742
Weighted-average shares outstanding		65,401		64,265		65,209		64,143
Effect of potentially dilutive securities		159		592		236		219
Weighted-average shares outstanding — Diluted		65,560		64,857		65,445		64,362
Net income per common share — Diluted	$	0.09	$	0.20	$	0.11	$	0.24

The computation of diluted net income per share does not include 1,794 and 411 options to acquire shares of common stock for the three months ended September 30, 2019 and September 30, 2018, respectively, because their inclusion would have an anti-dilutive effect on net income per share.

The computation of diluted net income per share does not include 894 and 1,895 options to acquire shares of common stock for the six months ended September 30, 2019 and September 30, 2018, respectively, because their inclusion would have an anti-dilutive effect on net income per share.

12. Share-Based Awards

Employee Stock Option and Incentive Plans

In October 2005, our shareholders approved a stock option and incentive plan (the “2005 Plan”) under which 4,800,000 shares of common stock were reserved for the issuance of awards, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock units, performance shares, performance units (including performance options) and other share-based awards. The 2005 Plan provides that our employees and directors may, at the discretion of the Board of Directors ("Board") or a duly designated compensation committee, be granted certain share-based awards. In the case of option awards granted under the 2005 Plan, the exercise price of each option is determined based on the date of grant and expire no later than 10 years from the date of grant. Awards granted pursuant to the 2005 Plan are subject to the vesting schedule or performance metrics set forth in the agreements pursuant to which they are granted. Upon a change of control of our Company, as such term is defined in the 2005 Plan, awards under the 2005 Plan will fully vest under certain circumstances. The 2005 Plan expired on May 25, 2015. As of September 30, 2019, there were 255,320 outstanding options under the 2005 Plan.

In August 2015, our shareholders approved a stock option and incentive plan (the “2015 Plan”) under which 11,500,000 shares of common stock were reserved for the issuance of awards, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock awards and restricted stock unit awards, performance stock awards and other share-based awards. In August 2017, our shareholders approved an amendment to our 2015 Equity Incentive Plan, (the “Amended 2015 Plan”), to, among other items, increase the number of shares of common stock reserved for issuance thereunder by 6,000,000, which was further amended in August 2019 as approved by our shareholders, to, among other items, increase the number of shares of common stock reserved for issuance thereunder by an additional 3,575,000. The Amended 2015 Plan provides that our employees and directors may, at the discretion of the Board or a duly designated compensation committee, be granted certain share-based awards. In the case of option awards granted under the Amended 2015 Plan, the exercise price of each option is determined based on the date of grant and expire no later than 10 years from the date of grant. Awards granted pursuant to the Amended 2015 Plan are subject to the vesting schedule or performance metrics set forth in the agreements pursuant to which they are granted. Upon a change of control of our Company, as such term is defined in the Amended 2015 Plan, awards under the Amended 2015 Plan will fully vest under certain circumstances. As of September 30, 2019, there were 2,782,330 outstanding options, 1,849,438 outstanding shares of restricted stock awards, 46,375 outstanding shares of performance stock awards, and 8,800,491 shares available for future grant under the Amended 2015 Plan.

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The following table summarizes the stock option transactions during the six months ended September 30, 2019:

				Weighted-		Weighted-
				Average		Average		Aggregate
				Exercise		Remaining		Intrinsic
Employee Stock Options Summary	Number of			Price		Contractual		Value
	Shares			per Share		Life (years)		(in thousands)
Outstanding, March 31, 2019		3,166,525		$	15.36		5.5	$	7,040
Exercised		(45,925	)		15.75		4.7	$	131
Forfeited/Canceled		(48,550	)		25.41		2.0
Expired		(34,400	)		43.04
Outstanding, September 30, 2019		3,037,650		$	14.88		5.1	$	4,134
Vested and expected to vest, September 30, 2019		2,796,120		$	14.89		5.1	$	3,826
Exercisable, September 30, 2019		1,559,428		$	15.02		4.5	$	2,247

Non-vested stock option award activity during the six months ended September 30, 2019 is summarized as follows:

				Weighted-
				Average
				Grant-Date
Non-Vested Stock Option Award Summary	Number of			Fair Value
	Shares			per Share
Outstanding, March 31, 2019		1,845,855		$	5.52
Vested		(358,783	)		5.26
Forfeited/Canceled		(8,850	)		6.51
Outstanding, September 30, 2019		1,478,222		$	5.58

As of September 30, 2019, $6,069 of total unrecognized compensation costs related to stock options is expected to be recognized over a weighted-average period of 1.9 years. This amount does not include the cost of new options that may be granted in future periods or any changes in our forfeiture percentage. The total fair value of options vested during the six months ended September 30, 2019 and 2018 was $1,886 and $1,718, respectively.

Restricted stock awards activity during the six months ended September 30, 2019 is summarized as follows:

				Weighted-
				Average
				Grant-Date
Restricted Stock	Number of			Fair Value
	Shares			per Share
Outstanding, March 31, 2019		1,715,958		$	16.29
Granted		723,361			18.59
Vested		(517,528	)		16.56
Canceled		(72,353	)		17.13
Outstanding, September 30, 2019		1,849,438		$	17.08

Share-based compensation expense related to restricted stock awards was $3,713 and $2,833 for the three months ended September 30, 2019 and 2018, respectively. Share-based compensation expense related to restricted stock awards was $7,009 and $4,753 for the six months ended September 30, 2019 and 2018, respectively.

The weighted-average grant date fair value for the restricted stock awards was estimated using the market price of the common stock on the date of grant. The fair value of the restricted stock awards is amortized on a straight-line basis over the vesting period, which is generally between one to three years.

As of September 30, 2019, $25,123 of total unrecognized compensation costs related to restricted stock awards is expected to be recognized over a weighted-average period of 1.9 years. This amount does not include the cost of new restricted stock awards that may be granted in future periods.  

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On December 29, 2016, the Compensation Committee of the Board granted 123,082 performance stock awards to certain executive officers, of which 46,375 shares are currently outstanding. The performance stock awards vest in four equal increments on each of the first four anniversaries of the grant date, subject in each case to the executive officer’s continued service and achievement of certain Company performance goals, including strong Company stock price performance. Share-based compensation expense related to the performance stock awards was $62 and $123 for the three and six months ended September 30, 2019, respectively.  Share-based compensation expense related to the performance stock awards was $68 and $141 for the three and six months ended September 30, 2018, respectively.

On October 23, 2018, the Compensation Committee of the Board approved 248,140 performance stock unit awards to be granted to certain executives and non-executive members of the executive leadership team, which vest only in the event certain performance goals are achieved and with continuous service through the date the goals are certified. Approximately 34% of the performance stock units are tied to our cumulative 3-year total shareholder return, 33% are tied to our fiscal year 2021 revenue, and 33% are tied to our fiscal year 2021 adjusted earnings per share goals, each as specifically defined in the equity award agreements. The number of shares to be issued may vary between 50% and 200% of the number of performance stock units depending on performance, and no such shares will be issued if threshold performance is not achieved. The weighted-average grant date fair value of the awards was $17.84 per share, which was estimated using a Monte Carlo-based valuation model for the awards based on total shareholder return and using a probability-adjusted achievement rate combined with the market price of the common stock on the date of grant for the awards based on revenue and earnings per share targets. Share-based compensation expense related to the performance stock unit awards was not significant.  

Employee Share Purchase Plan

On August 11, 2014, our shareholders approved an Employee Share Purchase Plan (the “Purchase Plan”) under which 4,000,000 shares of common stock were reserved for future grant.  The Purchase Plan allows eligible employees to purchase shares through payroll deductions of up to 15% of total base salary at a price equal to 90% of the lower of the fair market values of the shares as of the beginning or the end of the corresponding offering period.  Any shares purchased under the Purchase Plan are subject to a six-month holding period.  Employees are limited to purchasing no more than 1,500 shares on any single purchase date and no more than $25 in total fair market value of shares during any one calendar year. As of September 30, 2019, we have issued 521,975 shares under the Purchase Plan and 3,478,025 shares are available for future issuance.

Share-based compensation expense recorded for the employee share purchase plan was $109 and $100 for the three months ended September 30, 2019 and 2018, respectively. Share-based compensation expense recorded for the employee share purchase plan was $231 and $232 for the six months ended September 30, 2019 and 2018, respectively.

13. Concentration of Credit Risk

We had cash deposits at United States banks and financial institutions which exceeded federally insured limits at September 30, 2019.  We are exposed to credit loss for amounts in excess of insured limits in the event of non-performance by the institutions; however, we do not anticipate non-performance by these institutions.

14. Commitments, Guarantees and Contingencies

Commitments and Guarantees

Our software license agreements include a performance guarantee that our software products will substantially operate as described in the applicable program documentation for a period of 365 days after delivery. To date, we have not incurred any significant costs associated with our performance guarantee or other related warranties and do not expect to incur significant warranty costs in the future. Therefore, no accrual has been made for potential costs associated with these warranties. Certain arrangements also include performance guarantees related to response time, availability for operational use, and other performance-related guarantees. Certain arrangements also include penalties in the form of maintenance credits should the performance of the software fail to meet the performance guarantees. To date, we have not incurred any significant costs associated with these warranties and do not expect to incur significant warranty costs in the future. Therefore, no accrual has been made for potential costs associated with these warranties.

We historically have accepted sales returns under limited circumstances. We estimate expected sales returns and other forms of variable consideration considering our customary business practice and contract-specific facts and circumstances, and we consider such estimated potential returns as variable consideration when allocating the transaction price to the extent it is probable that there will not be a significant reversal of cumulative revenue recognized.

Our standard sales agreements contain an indemnification provision pursuant to which we shall indemnify, hold harmless, and reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with any United States patent, any copyright or other intellectual property infringement claim by any third-party with respect to our software. As we have not incurred any significant costs to defend lawsuits or settle claims related to these indemnification agreements, we believe that our estimated exposure on these agreements is currently minimal. Accordingly, we have no liabilities recorded for these indemnification obligations.

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Hussein Litigation

On October 7, 2013, a complaint was filed against our Company and certain of our officers and directors in the Superior Court of the State of California for the County of Orange, captioned Ahmed D. Hussein v. Sheldon Razin, Steven Plochocki, Quality Systems, Inc. and Does 1-10, inclusive, No. 30-2013-00679600-CU-NP-CJC, by Ahmed Hussein, a former director and significant shareholder of our Company. We filed a demurrer to the complaint, which the Court granted on April 10, 2014. An amended complaint was filed on April 25, 2014. The amended complaint generally alleges fraud and deceit, constructive fraud, negligent misrepresentation and breach of fiduciary duty in connection with statements made to our shareholders regarding our financial condition and projected future performance. The amended complaint seeks actual damages, exemplary and punitive damages and costs. We filed a demurrer to the amended complaint. On July 29, 2014, the Court sustained the demurrer with respect to the breach of fiduciary duty claim, and overruled the demurrer with respect to the fraud and deceit claims. On August 28, 2014, we filed an answer and also filed a cross-complaint against Hussein, alleging that he breached fiduciary duties owed to the Company, Mr. Razin and Mr. Plochocki. Mr. Razin and Mr. Plochocki have dismissed their claims against Hussein, leaving QSI as the sole plaintiff in the cross-complaint. On June 26, 2015, we filed a motion for summary judgment with respect to Hussein’s claims, which the Court granted on September 16, 2015, dismissing all of Hussein’s claims against us. On September 23, 2015, Hussein filed an application for reconsideration of the Court's summary judgment order, which the Court denied. Hussein filed a renewed application for reconsideration of the Court’s summary judgment order on August 3, 2017. The Court again denied Hussein’s application. On October 28, 2015, May 9, 2016, and August 5, 2016, Hussein filed a motion for summary judgment, motion for summary adjudication, and motion for judgment on the pleadings, respectively, seeking to dismiss our cross-complaint. The Court denied each motion. Trial on our cross-complaint began June 12, 2017. On July 26, 2017, the Court issued a statement of decision granting Hussein’s motion for judgment on our cross-complaint. Final judgment over Hussein’s claims and our cross-claims was entered on January 9, 2018. Hussein has noticed his appeal of the order granting summary judgment over his claims, and we noticed a cross-appeal on the court’s statement of decision granting Hussein’s motion for judgment on our cross-complaint. On October 8, 2019, the California State Court of Appeal for the Fourth Appellate District, Division Three, reversed the Superior Court’s grant of summary judgment against Hussein’s affirmative claims and affirmed the trial court’s judgement after a bench trial against the Company on its breach of fiduciary duty claims against Hussein. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this claim.

Shareholder Derivative Litigation

On September 28, 2017, a complaint was filed against our Company and certain of our current and former officers and directors in the United States District Court for the Central District of California, captioned Kusumam Koshy, derivatively on behalf of Quality Systems Inc. vs. Craig Barbarosh, George H. Bristol, James C. Malone, Peter M. Neupert, Morris Panner, D. Russell Pflueger, Steven T. Plochocki, Sheldon Razin, Lance E. Rosenzweig, Paul A. Holt, and Quality Systems, Inc., No. 8:17-cv-01694, by Kusumam Koshy, a purported shareholder of ours. The complaint alleges breach of fiduciary duties and abuse of control, as well as unjust enrichment and insider selling by individual directors arising out of the allegations described above under the caption “Hussein Litigation” and a related, now-settled, federal securities class action, as well as the Company’s adoption of revised indemnification agreements, and the resignation of certain officers of the Company. The complaint seeks restitution and disgorgement, court costs and attorneys’ fees, and enhanced corporate governance reforms and internal control procedures. On January 12, 2018, Defendants filed a motion to dismiss the derivative complaint.  On July 25, 2018, the Court dismissed the complaint with prejudice. On August 24, 2018, the plaintiff filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit. Briefing was completed in May 2019 and a hearing on the appeal will be held on December 12, 2019. We believe that the plaintiff’s appeal is without merit and intend to defend against it vigorously. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this claim.

Other Regulatory Matters

Commencing in April 2017, we have received a request for documents and information from the United States Attorney's Office for the District of Vermont and other government agencies in connection with an investigation concerning the certification we obtained for our software under the United States Department of Health and Human Services' Electronic Health Record (EHR) Incentive Program. The requests for information relate to, among other things: (a) data used to determine objectives and measures under the Meaningful Use (MU) and the Physician Quality Reporting System (PQRS) programs, (b) EHR software code used in certifying our software and information, and (c) payments provided for the referral of EHR business. We continue to cooperate in this investigation. Requests and investigations of this nature may lead to future requests for information and ultimately the assertion of claims or the commencement of legal proceedings against us, as well as other material liabilities.  In addition, our responses to these and any future requests require time and effort, which can result in additional cost to us. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this matter.  Given the highly-regulated nature of our industry, we may, from time to time, be subject to subpoenas, requests for information, or investigations from various government agencies. It is our practice to respond to such matters in a cooperative, thorough and timely manner.

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15. Restructuring Plan

In June 2019, we implemented a business restructuring plan as part of our continued efforts to preserve and grow the value of the Company through client-focused innovations while reducing our cost structure. As part of the restructuring, we reduced our total workforce by approximately 4% primarily within the research and development function and intend to expand on our research and development resources in India. We recorded $175 and $1,882 of restructuring costs in the three and six months ended September 30, 2019, respectively, within operating expenses in our condensed consolidated statements of comprehensive income. The restructuring costs consisted primarily of payroll-related costs, such as severance, outplacement costs, and continuing healthcare coverage, associated with the involuntary separation of employees pursuant to a one-time benefit arrangement. These amounts were accrued when it was probable that the benefits would be paid, and the amounts were reasonably estimable. The restructuring costs were substantially paid as of September 30, 2019.  

In connection with the restructuring plan, we also vacated portions of certain leased locations and recorded impairments of $1,916 and $2,405 in the three and six months ended September 30, 2019, respectively, to our operating right-of-use assets and certain related fixed assets associated with the vacated locations, or portions thereof, in Horsham, St. Louis, Irvine, and Atlanta, based on projected sublease rental income and estimated sublease commencement dates.   We are actively marketing each of these vacated locations for sublease. The impairment analysis was performed at the asset group level and the impairment charge was estimated by comparing the fair value of each asset group based on the expected cash flows to its respective book value. We determined the discount rate for each asset group based on the approximate interest rate on a collateralized basis with similar remaining terms and payments as of the impairment date. Significant judgment was required to estimate the fair value of each asset group and actual results could vary from the estimates, resulting in potential future adjustments to amounts previously recorded.

16. Subsequent Events

On October 4, 2019, we completed our acquisition of Topaz Information, L.L.C. (“Topaz”) pursuant to the terms of the Purchase Agreement, dated October 4, 2019 (the "Agreement"). Topaz is based in Phoenix, AZ and provides healthcare solutions to behavioral health and social services organizations that utilize the NextGen platform. Its extensive clinical content and domain expertise has been instrumental in our ability to compete and win. By combining our companies, we will be positioned to provide the platform and domain expertise to deliver integrated and collaborative care in a re-energized behavioral health market. Total cash consideration paid was $8,000, subject to certain adjustments in accordance with the terms of the Agreement. In addition, we may pay up to an additional $2,000 cash in the form of an earnout, subject to the achievement of certain operational targets over an approximately eighteen-month period. The acquisition was funded by cash flows from operations. We are in the process of determining the purchase price allocation for this acquisition.

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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q ("Report") and certain information incorporated herein by reference contain forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Report, other than statements that are purely historical, are forward-looking statements.  Words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,” “should,” “would,” “could,” “may,” and similar expressions also identify forward-looking statements. These forward-looking statements include, without limitation, discussions of our product development plans, business strategies, future operations, financial condition and prospects, developments in and the impacts of government regulation and legislation, including, without limitation, The American Recovery and Reinvestment Act, the Patient Protection and Affordable Care Act, and the Medicare Access and CHIP Reauthorization Act of 2015, uncertainties related to the future impact of United States tax reform, and market factors influencing our results. Our expectations, beliefs, objectives, intentions and strategies regarding our future results are not guarantees of future performance and are subject to risks and uncertainties, both foreseen and unforeseen, that could cause actual results to differ materially from results contemplated in our forward-looking statements. These risks and uncertainties include, but are not limited to, our ability to continue to develop new products and increase systems sales in markets characterized by rapid technological evolution, consolidation, and competition from larger, better-capitalized competitors. Many other economic, competitive, governmental and technological factors could affect our ability to achieve our goals, and interested persons are urged to review any risks that may be described in “Item 1A. Risk Factors” as set forth herein and other risk factors appearing in our most recent Annual Report on Form 10-K for the fiscal year ended March 31, 2019 (“Annual Report”), as supplemented by additional risk factors, if any, in our interim filings on our Quarterly Reports on Form 10-Q, as well as in our other public disclosures and filings with the Securities and Exchange Commission ("SEC"). Because of these risk factors, as well as other variables affecting our financial condition and results of operations, past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.  We assume no obligation to update any forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of the filing of this Report.  

This management's discussion and analysis of financial condition and results of operations ("MD&A") is provided as a supplement to the condensed consolidated financial statements and notes thereto included elsewhere in this Report in order to enhance your understanding of our results of operations and financial condition and should be read in conjunction with, and is qualified in its entirety by, the condensed consolidated financial statements and related notes thereto included elsewhere in this Report. Historical results of operations, percentage margin fluctuations and any trends that may be inferred from the discussion below are not necessarily indicative of the operating results for any future period.

Company Overview

NextGen Healthcare is a leading provider of ambulatory-focused healthcare software and services solutions. In pursuit of our mission to empower the transformation of ambulatory care, we provide innovative technology-based solutions that help our clients succeed while they are managing more complexity and assuming greater financial risk.

Our clients span the ambulatory care market from small single specialty practices to larger multi-specialty organizations. We have fully integrated our solutions so that our clients are able to provide their patients with comprehensive services utilizing a single platform. Our highly interoperable platform allows ambulatory practices to thrive especially in complex, heterogeneous healthcare communities where frictionless clinical data exchange is required to coordinate and optimize patient care.  

NextGen Healthcare has historically enhanced our solutions through both organic and inorganic activities. In October 2015, we divested our former Hospital Solutions division to focus exclusively on the ambulatory marketplace. In January 2016, we acquired HealthFusion Holdings, Inc. and its cloud-based electronic health record and practice management solution. In April 2017, we acquired Entrada, Inc. and its cloud-based, mobile platform for clinical documentation and collaboration. In August 2017, we acquired EagleDream Health, Inc. and its cloud-based population health analytics solution. In January 2018, we acquired Inforth Technologies for its specialty-focused clinical content. The integration of these acquired technologies have made NextGen Healthcare’s solutions among the most comprehensive and powerful in the market.  

The Company was incorporated in California in 1974. Previously named Quality Systems, Inc., the Company changed its corporate name to NextGen Healthcare, Inc. in September 2018. Our principal offices are located at 18111 Von Karman Ave., Suite 800, Irvine, California, 92612, and our principal website is www.nextgen.com. We operate on a fiscal year ending on March 31.

Trends and Events in Our Business

We believe that the trends and events described below have contributed to our consolidated results of operations and may continue to impact our future results.

Over the last decade, the ambulatory healthcare market has experienced significant regulatory change, which has driven practice transformation and technology advancements. Recognizing that it was imperative to digitize the American health system to stem the escalating cost of healthcare and improve the quality of care being delivered, Congress enacted the Health Information Technology for Economic and Clinical Health Act in 2009 (“HITECH Act”). The legislation stimulated healthcare organizations to not only adopt electronic health records, but to use them to collect discrete data that could be used to drive quality care. This standardization supported early pay for reporting and pay-for-performance programs.

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In 2010, the Affordable Care Act (“ACA”) established the roadmap for shifting American healthcare from volume (fee-for-service) to a value-based care (“VBC”) system that rewards improved outcomes at lower costs (fee-for-value). This was followed by the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), bipartisan legislation that further changed the way Medicare rewards clinicians for value vs. volume. Initially focused on government-funded care, the domain of the Centers for Medicare & Medicaid Services (“CMS”), these programs are now firmly established on the commercial insurance side of the industry as well.

VBC created the need for a new category of healthcare information technology (“HIT”) tools that could be used to identify and treat groups of patients, or cohorts, based on risk.  Population Health Management (“PHM”) tools support these needs by identifying patient risk, engaging patients, coordinating care, and determining when interventions are needed to improve clinical and financial outcomes. The United States PHM market was estimated at $3.1 billion in 2018 and is expected to more than double by 2022.

Importantly, the introduction of VBC programs was only an element of the broader approach to reducing healthcare expenditure. It was also accompanied by significant reductions in Medicare spending with a projected reduction of $218 billion in payments by 2028, as reported by RevCycle Intelligence. The drive to reduce costs initially led to consolidation in the healthcare system that was followed by a significant shift of care from the inpatient to the outpatient setting as more care is being moved to this lower cost environment. Ambulatory care settings have become an essential component of comprehensive, low cost distributed care. In 2018, outpatient volumes reached over 3.5 billion encounters and are forecasted to grow 15% by 2028, as reported by Becker’s Health IT and CIO Report. The independent physicians’ practices segment is expected to generate more revenue than non-affiliated hospitals as it accepts electronic health records integrated PHM programs for better primary and follow-up care, as reported by Frost & Sullivan. The need to sustain revenue has made it extremely important for practices to secure their patient market share, elevating patient loyalty to be a significant determinant of provider success. Capturing patient market share and thriving in a market driven by VBC requires both an integrated platform and a full view of the patient population’s clinical and cost data neither of which could be accomplished without new technologies to collect and analyze multi-sourced patient data. Effectively implemented, these new technologies allow organizations to enhance financial viability while exercising the freedom to join, affiliate, integrate or interoperate in ways that maximize strategic control.

In order to maintain financial success with shifting reimbursement rules and shrinking reimbursement, we believe demand for managed services, including revenue cycle management (“RCM”) services, hosting, transcription and scribe services, aligned and integrated with clinical technology solutions, will increase in the coming years.

Based on these trends, successful clients must undertake the following imperatives: 1) ensure healthy predictable financial outcomes, 2) provide high quality care at a lower cost in a risk-bearing environment, 3) ensure engaged and loyal patients, and 4) optimize clinician productivity while deploying HIT solutions, 5) support frictionless interoperability.  

Our Strategy

We strive to be the trusted partner for clients of all sizes, integrating services and software into a consolidated solution that enables an efficient and effective caregiver and patient experience while driving positive financial outcomes.  As a healthcare information technology and services company, we plan to continue investing in our current capabilities as well as building and/or acquiring new capabilities as we guide our clients through an evolving healthcare marketplace that is transitioning from fee-for-service to fee-for-value reimbursement models. With approximately 90,000 providers using our solutions, we are enabling care and believe we can truly transform the delivery of care through the following strategic priorities:

• Focus on the ambulatory client segment. In October 2015, we sold our former Hospital Solutions division to focus on our core ambulatory clients. Further, a recent operational reorganization better allows us to serve the needs of our ambulatory clients through a simpler, more nimble, and focused organization. We believe it is essential to protect, build and sell new capabilities within our ambulatory client segment. We are focused on our core by increasing quality and the serviceability of our solutions. We intend to continue to enhance the capabilities of our NextGen Ambulatory flagship product. At the same time, we intend to expand the capability of the highly scalable, pure cloud-based and mobile-enabled NextGen® Office platform.

• Platform as a service.  With the introduction of our API 2.0 framework and our continued leverage of the Mirth interoperability platform, we will continue our evolution to plug and play extensibility and information sharing that allows our customers to innovate and deploy high-fidelity extensions to our core applications without the costs, risks (security, performance, etc.) or complexity commonly associated with direct binding. We have also introduced platform-enabled automation capabilities to empower our clients to drive cost out of their processes while supporting their needs to implement the highly personalized workflows that are required to support value based care. Our acquisition of Entrada and its cloud-based, mobile application in April 2017 demonstrates our commitment to innovation that becomes essential for practitioners by improving their clinical productivity with documentation support services that seamlessly integrate into their electronic health record. We believe there is significant opportunity to extend the solutions we offer existing and new clients through value-added services such as RCM and EDI.

• Population health software and services. We are migrating into applications, analytics and services that will enable our clients to proactively manage the health of patient populations. We are establishing strong development partnerships with our most innovative customers who are actively participating in shared-risk contracts, and working together with them to create progressive population health capabilities. We support extraordinary information sharing capabilities vital to managing patient populations through our interoperability offerings.

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Critical Accounting Policies and Estimates

The discussion and analysis of our condensed consolidated financial statements and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenue and expenses, and related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends, and other factors we believe to be reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. On a regular basis, we review the accounting policies and update our assumptions, estimates, and judgments, as needed, to ensure that our condensed consolidated financial statements are presented fairly and in accordance with GAAP. Actual results could differ materially from our estimates under different assumptions or conditions. To the extent that there are material differences between our estimates and actual results, our financial condition or results of operations will be affected.

We describe our significant accounting policies in Note 1, “Summary of Significant Accounting Policies,” of our notes to consolidated financial statements included in our Annual Report. We discuss our critical accounting policies and estimates in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report.

We adopted Accounting Standards Update No. 2016-02, Leases (Topic 842) and its subsequent amendments (together “ASC 842”) during the quarter ended June 30, 2019 using the transition approach provided for under ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which allowed us to apply the new lease standard as of April 1, 2019, rather than the beginning of the earliest period presented. ASC 842 supersedes ASC 840 and requires the recognition of leased arrangements on the balance sheet as right-of-use assets and liabilities pertaining to the rights and obligations created by the leased assets. Refer to Note 4, "Leases" of our notes to condensed consolidated financial statements included elsewhere in this Report for additional information regarding our adoption of ASC 842.

There have been no other material changes in our significant accounting policies or critical accounting policies and estimates since the fiscal year ended March 31, 2019.

Results of Operations

The following table sets forth the percentage of revenue represented by each item in our condensed consolidated statements of comprehensive income for the three and six months ended September 30, 2019 and 2018 (certain percentages below may not sum due to rounding):

	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Recurring		89.8	%		89.3	%		90.2	%		89.7	%
Software, hardware, and other non-recurring		10.2			10.7			9.8			10.3
Total revenues		100.0			100.0			100.0			100.0
Cost of revenue:
Recurring		37.5			36.2			37.9			36.2
Software, hardware, and other non-recurring		4.9			5.4			4.8			5.4
Amortization of capitalized software costs and acquired intangible assets		6.6			5.3			6.5			5.1
Total cost of revenue		49.0			46.9			49.2			46.7
Gross profit		51.0			53.1			50.8			53.3
Operating expenses:
Selling, general and administrative		29.1			26.3			29.8			29.9
Research and development costs, net		14.7			14.1			15.7			15.4
Amortization of acquired intangible assets		0.6			0.9			0.7			0.9
Impairment of assets		1.4			0.0			0.9			0.0
Restructuring costs		0.1			0.0			0.7			0.0
Total operating expenses		46.0			41.2			47.7			46.2
Income from operations		5.0			11.9			3.1			7.2
Interest income		0.0			0.0			0.0			0.0
Interest expense		(0.3	)		(0.6	)		(0.3	)		(0.6	)
Other income, net		0.2			0.2			0.0			0.2
Income before provision for income taxes		4.9			11.5			2.8			6.9
Provision for income taxes		0.4			1.5			0.0			0.9
Net income		4.5	%		10.0	%		2.8	%		6.0	%

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Revenues

The following table presents our disaggregated revenues for the three and six months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
Recurring revenues:
Subscription services	$	31,411		$	29,255		$	61,555		$	57,583
Support and maintenance		39,360			39,594			79,012			80,842
Managed services		25,219			23,527			50,900			49,797
Electronic data interchange and data services		24,599			23,941			48,569			48,102
Total recurring revenues		120,589			116,317			240,036			236,324
Software, hardware, and other non-recurring revenues:
Software license and hardware		8,258			9,353			15,353			16,796
Other non-recurring services		5,409			4,651			10,728			10,401
Total software, hardware and other non-recurring revenues		13,667			14,004			26,081			27,197
Total revenues	$	134,256		$	130,321		$	266,117		$	263,521
Recurring revenues as a percentage of total revenues		89.8	%		89.3	%		90.2	%		89.7	%

We generate revenue from sales of licensing rights and subscriptions to our software solutions, hardware and third-party software products, support and maintenance, managed services, electronic data interchange (“EDI”) and data services, and other non-recurring services, including implementation, training, and consulting services performed for clients who use our products.

Consolidated revenue for the three months ended September 30, 2019 increased $3.9 million compared to the prior year period due to a $4.3 million increase in recurring revenues, partially offset by a $0.3 million decrease in software, hardware and other non-recurring revenues. The increase in recurring revenues was driven by higher subscription services revenue associated with our population health and analytics and NextGen Office cloud-based solutions, as well as higher revenues from our managed cloud services. The decrease in software, hardware, and other non-recurring revenues was primarily due to lower software bookings, partially offset by an increase in professional services revenue.

Consolidated revenue for the six months ended September 30, 2019 increased $2.6 million compared to the prior year period due to a $3.7 million increase in recurring revenues, partially offset by a $1.1 million decrease in software, hardware and other non-recurring revenues. The increase in recurring revenues was primarily driven by higher subscription services revenue associated with our population health and analytics and NextGen Office cloud-based solutions, as well as higher revenues from our managed cloud services, partially offset by lower support and maintenance revenue resulting from client attrition. The decrease in software, hardware, and other non-recurring revenues was primarily due to lower software bookings.

Bookings reflect the estimated annual value of our executed contracts and are believed to provide a broad indicator of the general direction and progress of the business. Total bookings increased to $36.6 million for the three months ended September 30, 2019 compared to $36.1 million in the prior year primarily due to an increase in our mobile and population health subscription services.

Total bookings were $68.4 million for the six months ended September 30, 2019 compared to $65.3 million in the prior year. The increase in total bookings from prior year primarily reflects the larger size and volume of managed cloud services contracts signed during the fiscal year.

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Cost of Revenue and Gross Profit

The following table presents our consolidated cost of revenue and gross profit for the three and six months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
Cost of revenue:
Recurring	$	50,328		$	47,172		$	100,868		$	95,325
Software, hardware, and other non-recurring		6,563			7,022			12,841			14,176
Amortization of capitalized software costs and acquired intangible assets		8,843			6,924			17,256			13,468
Total cost of revenue	$	65,734		$	61,118		$	130,965		$	122,969
Gross profit	$	68,522		$	69,203		$	135,152		$	140,552
Gross margin %		51.0	%		53.1	%		50.8	%		53.3	%

Cost of revenue consists primarily of compensation expense, including share-based compensation, for personnel that deliver our products and services. Cost of revenue also includes amortization of capitalized software costs and acquired technology, third party consultant and outsourcing costs, costs associated with our EDI business partners and clearinghouses, hosting service costs, third party software costs and royalties, and other costs directly associated with delivering our products and services. Refer to Note 6, "Intangible Assets" and Note 7, "Capitalized Software Costs" of our notes to condensed consolidated financial statements included elsewhere in this Report for additional information on current period amortization of capitalized software costs and acquired technology and an estimate of future expected amortization.

Share-based compensation expense included in cost of revenue was $0.5 million and $0.3 million for the three months ended September 30, 2019 and 2018, and is included in the amounts in the table above. Share-based compensation expense included in cost of revenue was $1.0 and $0.6 million for the six months ended September 30, 2019 and 2018, and is included in the amounts in the table above.

Gross profit for the three months ended September 30, 2019 decreased $0.7 million compared to the prior year period due to a $4.6 million increase in cost of revenue, offset by a $3.9 million increase in revenues as discussed above. Our gross margin decreased to 51.0% for the three months ended September 30, 2019 compared to 53.1% in the prior year.

Gross profit for the six months ended September 30, 2019 decreased $5.4 million compared to the prior year period due to a $8.0 million increase in cost of revenue, partially offset by a $2.6 million increase in revenues as discussed above. Our gross margin decreased to 50.8% for the six months ended September 30, 2019 compared to 53.3% in the prior year.

The increase in cost of revenue for the three and six months ended September 30, 2019 compared to the prior year period is primarily due to higher amortization of previously capitalized software costs combined with an increase in cost of subscription services associated with higher related subscription services revenues, higher third party outsourcing costs and personnel costs related to our delivering our managed services, and higher hosting services costs, partially offset by lower personnel costs related to delivering our support and maintenance services. The decline in gross margin was primarily driven by the higher amortization of previously capitalized software costs.

Selling, General and Administrative Expense

The following table presents our consolidated selling, general and administrative expense for the three and six months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
Selling, general and administrative	$	39,046		$	34,229		$	79,174		$	78,865
Selling, general and administrative, as a percentage of revenue		29.1	%		26.3	%		29.8	%		29.9	%

Selling, general and administrative expense consists of compensation expense, including share-based compensation, for management and administrative personnel, selling and marketing expense, facilities costs, depreciation, professional service fees, including legal, consulting, and accounting services, acquisition and transaction-related costs, and other general corporate and administrative expenses.

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Share-based compensation expense included in selling, general and administrative expenses was $3.0 million and $3.1 million for the three months ended September 30, 2019 and 2018, respectively, and is included in the amounts in the table above. Share-based compensation expense included in selling, general and administrative expenses was $6.4 million and $5.3 million for the six months ended September 30, 2019 and 2018, respectively, and is included in the amounts in the table above. The increase in share-based compensation for the six months ended September 30, 2019 compared to the same prior year periods is due to increased utilization of share-based awards to incentivize our executives and employees. Refer to Note 12, "Share-Based Awards" of our notes to condensed consolidated financial statements included elsewhere in this Report for additional information of our share-based awards and related incentive plans.

Selling, general and administrative expenses increased $4.8 million for the three months ended September 30, 2019 compared to the prior year period primarily due to a $5.7 million net benefit recorded in the prior year quarter from insurance recoveries related to the settlement of the Federal Securities Class Action complaint, partially offset by lower salaries and benefits due to a reduction in employee headcount as a result of our business restructuring plan announced last quarter.

Selling, general and administrative expenses increased $0.3 million for the six months ended September 30, 2019 compared to the prior year period due to the $5.7 million net benefit recorded in the prior year as noted above, offset by lower employee severance and exit costs and lower salaries and benefits due to a reduction in employee headcount as a result of our business restructuring plan announced last quarter.

Research and Development Costs, net

The following table presents our consolidated net research and development costs, capitalized software costs, and gross expenditures prior to capitalization, for the three and six months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
Gross expenditures	$	24,955		$	23,965		$	51,741		$	50,878
Capitalized software costs		(5,166	)		(5,594	)		(9,901	)		(10,379	)
Research and development costs, net	$	19,789		$	18,371		$	41,840		$	40,499
Research and development costs, as a percentage of revenue		14.7	%		14.1	%		15.7	%		15.4	%
Capitalized software costs as a percentage of gross expenditures		20.7	%		23.3	%		19.1	%		20.4	%

Gross research and development expenditures, including costs expensed and costs capitalized, consist of compensation expense, including share-based compensation for research and development personnel, certain third-party consultant fees, software maintenance costs, and other costs related to new product development and enhancement to our existing products.  We intend to continue to invest heavily in research and development expenses as we continue to bring additional functionality and features to the medical community and develop a new integrated inpatient and outpatient, web-based software platform.

The capitalization of software development costs results in a reduction to our reported net research and development costs. Our software capitalization rate, or capitalized software costs as a percentage of gross expenditures, has varied historically and may continue to vary based on the nature and status of specific projects and initiatives in progress. Although changes in software capitalization rates have no impact on our overall cash flows, it results in fluctuations in the amount of software development costs being expensed up front and the amount of net research and development costs reported in our condensed consolidated statement of net income and comprehensive income.

Share-based compensation expense included in research and development costs was $0.8 million and $0.7 million for the three months ended September 30, 2019 and 2018, respectively, and is included in the amounts in the table above. Share-based compensation expense included in research and development costs was $1.8 million and $1.3 million for the six months ended September 30, 2019 and 2018, respectively, and is included in the amounts in the table above.

Net research and development costs for the three months ended September 30, 2019 increased $1.4 million compared to the prior year period due to $1.0 million higher gross expenditures and $0.4 million lower capitalization of software costs. Net research and development costs for the six months ended September 30, 2019 increased $1.3 million compared to the prior year period due to a $0.8 million increase in gross expenditures and $0.5 million lower capitalization of software costs. The increases in gross expenditures for the three and six months ended September 30, 2019 compared to the prior year periods were primarily due to higher utilization of our Bangalore development center resources and increased hosting costs, partially offset by lower salaries and benefits due to a reduction in employee headcount as a result of our business restructuring plan announced last quarter. Our software capitalization rate fluctuates due to differences in the nature and status of our projects and initiatives during a given year, which affects the amount of development costs that may be capitalized.

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Amortization of Acquired Intangible Assets

The following table presents our amortization of acquired intangible assets for the three and six months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,
	2019		2018		2019		2018
Amortization of acquired intangible assets	$	865	$	1,121	$	1,730	$	2,289

Amortization of acquired intangible assets included in operating expense consist of the amortization related to our customer relationships, trade names, and contracts intangible assets acquired as part of our business combinations. Refer to Note 6, "Intangible Assets" of our notes to condensed consolidated financial statements included elsewhere in this Report for an estimate of future expected amortization.

Amortization of acquired intangible assets for the three and six months ended September 30, 2019 decreased $0.3 million and $0.6 million, respectively compared to the prior year periods due to certain acquired intangible assets being fully amortized in the prior fiscal year.

Restructuring Costs and Impairment of Assets

In June 2019, we implemented a business restructuring plan as part of our continued efforts to preserve and grow the value of the Company through client-focused innovations while reducing our cost structure. As part of the restructuring, we reduced our total workforce by approximately 4% primarily within the research and development function and intend to expand on our research and development resources in India. We recorded $0.2 million and $1.9 million of restructuring costs in the three and six months ended September 30, 2019, respectively, within operating expenses in our condensed consolidated statements of comprehensive income. The restructuring costs consisted primarily of payroll-related costs, such as severance, outplacement costs, and continuing healthcare coverage, associated with the involuntary separation of employees pursuant to a one-time benefit arrangement. These amounts were accrued when it was probable that the benefits would be paid, and the amounts were reasonably estimable. The restructuring costs were substantially paid as of September 30, 2019.

In connection with the restructuring plan, we also vacated portions of certain leased locations and recorded impairments of $1.9 million and $2.4 million in the three and six months ended September 30, 2019, respectively, to our operating right-of-use assets and certain related fixed assets associated with the vacated locations, or portions thereof, in Horsham, St. Louis, Irvine, and Atlanta based on projected sublease rental income and estimated sublease commencement dates. Significant judgment was required to estimate the fair value of each asset group and actual results could vary from the estimates, resulting in potential future adjustments to amounts previously recorded. Refer to Note 15, “Restructuring Plan” of our notes to condensed consolidated financial statements included elsewhere in this Report for further details.

Interest and Other Income and Expense

The following table presents our interest expense for the three and six months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
Interest income	$	36		$	40		$	115		$	69
Interest expense		(387	)		(769	)		(859	)		(1,499	)
Other income, net		210			237			77			611

Interest expense relates to our revolving credit agreement and the related amortization of deferred debt issuance costs. Refer to Note 8, “Line of Credit” of our notes to condensed consolidated financial statements included elsewhere in this Report for additional information.

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The changes in interest expense is primarily caused by fluctuations in outstanding balances under our revolving credit agreement and the related amortization of debt issuance costs. As of September 30, 2019, we had no outstanding balances under the revolving credit agreement, compared to an outstanding balance of $11.0 million as of March 31, 2019 and $42.0 million as of September 30, 2018. The fluctuations of other income and expense compared to the prior year periods are primarily due to changes to the India foreign exchange rates.

Provision for Income Taxes

The following table presents our provision for income taxes for the three and six months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
Provision for income taxes	$	509		$	1,896		$	129		$	2,338
Effective tax rate		7.7	%		12.6	%		1.7	%		12.9	%

The decrease in the effective tax rate for the three and six months ended September 30, 2019 compared to the prior year periods was primarily due to the increased net benefit of the research and development credits, partially offset by nondeductible stock option expense, nondeductible officer’s compensation, and reserves for uncertain tax position.

Net Income

The following table presents our net income (in thousands) and net income per share and for the three months ended September 30, 2019 and 2018:

	Three Months Ended September 30,				Six Months Ended September 30,
	2019		2018		2019		2018
Net income	$	6,081	$	13,094	$	7,325	$	15,742
Net income per share:
Basic	$	0.09	$	0.20	$	0.11	$	0.25
Diluted	$	0.09	$	0.20	$	0.11	$	0.24

As a result of the foregoing changes in revenue and expense, net income for the three months ended September 30, 2019 decreased $7.0 million compared to the prior year period.

As a result of the foregoing changes in revenue and expense, net income for the six months ended September 30, 2019 decreased $8.4 million compared to the prior period.

Liquidity and Capital Resources

The following table presents selected financial statistics and information for the six months ended September 30, 2019 and 2018 (in thousands): 

	Six Months Ended September 30,
	2019		2018
Cash and cash equivalents	$	42,930	$	32,387
Unused portion of revolving credit agreement (1)		300,000		258,000
Total liquidity	$	342,930	$	290,387
Net income	$	7,325	$	15,742
Net cash provided by operating activities	$	40,764	$	14,916

⁽¹⁾ As of September 30, 2019, we had no outstanding loans under our $300.0 million revolving credit agreement.

Our principal sources of liquidity are our cash generated from operations, driven mostly by our net income and working capital management, our cash and cash equivalents, and our revolving credit agreement.

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Cash and Cash Equivalents

As of September 30, 2019, our cash and cash equivalents balance of $42.9 million reflects a $9.9 million increase compared to $33.1 million as of March 31, 2019. We had no outstanding loans under our revolving credit agreement as of September 30, 2019.

We may continue to use a portion of our funds as well as available financing from our revolving credit agreement for future acquisitions or other similar business activities, although the specific timing and amount of funds to be used is not currently determinable. We intend to expend some of our available funds for the development of products complementary to our existing product line as well as new versions of certain of our products. These developments are intended to take advantage of more powerful technologies and to increase the integration of our products.

Our investment policy is determined by our Board of Directors. Excess cash, if any, may be invested in very liquid short term assets including tax exempt and taxable money market funds, certificates of deposit and short term municipal bonds with average maturities of 365 days or less at the time of purchase. Our Board of Directors continues to review alternate uses for our cash including an expansion of our investment policy and other items. Any or all of these programs could significantly impact our investment income in future periods.

We believe that our cash and cash equivalents on hand at September 30, 2019, together with our cash flows from operations and liquidity provided by our revolving credit agreement, will be sufficient to meet our working capital and capital expenditure requirements for the next twelve months.

On October 4, 2019, we completed our acquisition of Topaz Information, L.L.C. pursuant to the terms of the Purchase Agreement, dated October 4, 2019 (the "Agreement"). Total cash consideration paid was $8.0 million, subject to certain adjustments in accordance with the terms of the Agreement. In addition, we may pay up to an additional $2.0 million cash in the form of an earnout, subject to the achievement of certain operational targets over an approximately eighteen-month period. The acquisition was funded by cash flows from operations.

Cash Flows from Operating Activities

The following table summarizes our condensed consolidated statements of cash flows for the six months ended September 30, 2019 and 2018 (in thousands):

	Six Months Ended September 30,
	2019			2018
Net income	$	7,325		$	15,742
Non-cash expenses		40,956			29,775
Cash from net income, as adjusted	$	48,281		$	45,517
Change in contract assets and liabilities, net		(67	)		(5,248	)
Change in accounts receivable		2,116			409
Change in other assets and liabilities		(9,566	)		(25,762	)
Net cash provided by operating activities	$	40,764		$	14,916

For the six months ended September 30, 2019, cash provided by operating activities increased $25.8 million compared to the prior year period, of which $16.2 million is due to changes in other assets and liabilities, $5.2 million from net changes in contract assets and liabilities, $2.8 million due to higher cash from net income, as adjusted for non-cash expenses, and $1.7 million from decreases in accounts receivable. The increase in cash from net changes in other assets and liabilities is primarily due to payments in the prior year related to the $19.0 million settlement of the Federal Securities Class Action complaint. The increase in cash associated with net changes in contract assets and liabilities is primarily due to a lower level of maintenance invoicing as a result of client attrition and a higher amount of invoices issued in the fourth quarter of fiscal year 2019. Accounts receivable balances decreased due to continued efforts to collect and resolve aged balances, resulting in a corresponding increase in cash from collections in the six months ended September 30, 2019. Non-cash expenses increase primarily due to higher amortization of operating lease assets, higher amortization of previously capitalized software costs, impairment charges related to our vacated lease locations, and higher share-based compensation expenses while net income for the six months ended September 30, 2019 decreased $8.4 million compared to the prior year period, as described in the "Net Income" section above.

Cash Flows from Investing Activities

Net cash used in investing activities for the six months ended September 30, 2019 was $12.6 million compared with $13.3 million in the prior year period. The decrease in net cash used in investing activities is primarily due to $2.5 million of distributions from our corporate-owned life insurance policies, offset by higher additions to equipment and improvements in the current year.

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Cash Flows from Financing Activities

Net cash used in financing activities for the six months ended September 30, 2019 was $12.3 million compared with $6.9 million cash provided by financing activities in the prior year period. The increase in cash used in financing activities is primarily due to $11.0 million in principal repayments on our line of credit in the current year compared to net borrowings of $5.0 million in the prior year, partially offset by $2.5 million lower proceeds from the issuance of shares under employee plans.

Contractual Obligations

We have minimum purchase commitments of $25.1 million related to payments due under certain non-cancelable agreements to purchase goods and services.

The following table summarizes our significant contractual obligations at September 30, 2019 and the effect that such obligations are expected to have on our liquidity and cash in future periods (in thousands):

			For the year ended March 31,
Contractual Obligations	Total		2020 (remaining six months)		2021		2022		2023		2024		2025 and beyond
Operating lease obligations	$	50,682	$	5,075	$	10,195	$	9,838	$	9,638	$	8,165	$	7,771
Remaining lease obligations for vacated properties (1)		6,796		846		1,724		1,485		1,316		880		545
Total	$	57,478	$	5,921	$	11,919	$	11,323	$	10,954	$	9,045	$	8,316

⁽¹⁾ Remaining lease obligations for vacated properties relates to remaining lease obligations at certain locations, including Solana Beach and portions of Atlanta, Irvine, Horsham and St. Louis, that we have vacated and are actively marketing the locations for sublease as part of our reorganization efforts. Total obligations have not been reduced by projected sublease rentals or by minimum sublease rentals of $0.4 million due in future periods under non-cancelable subleases.

The deferred compensation liability as of September 30, 2019 was $5.9 million, which is not included in the table above as the timing of future benefit payments to employees is not determinable.

New Accounting Pronouncements

Refer to Note 1, “Summary of Significant Accounting Policies” of our notes to condensed consolidated financial statements included elsewhere in this Report for a discussion of new accounting standards.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As of September 30, 2019, we were subject to minimal market risk on our cash and cash equivalents as we maintained our balances in very liquid funds with maturities of 90 days or less at the time of purchase.

As of September 30, 2019, we had no outstanding loans under our revolving credit agreement. The revolving borrowings under our revolving credit agreement bear interest at our option of either, (a) for base rate loans, a base rate based on the highest of (i) 0%, (ii) the rate of interest publicly announced by the administrative agent as its prime rate in effect at its principal office in New York City, (iii) the overnight bank funding rate (not to be less than zero) as determined by the Federal Reserve Bank of New York plus 0.50% or (iv) the LIBOR-based rate for one, two, three or six months Eurodollar deposits plus 1%, and (b) for Eurodollar loans, the LIBOR-based rate for one, two, three or six months (as selected by us) Eurodollar deposits plus 1.00%, plus, in each case, an applicable margin based on our total leverage ratio from time to time, ranging from 0.50% to 1.50% for base rate loans, and from 1.50% to 2.50% for Eurodollar loans. Accordingly, we are exposed to interest rate risk, primarily changes in LIBOR, due to our loans under the revolving credit agreement. A one hundred basis point (1.00%) change in the interest rate on our outstanding loans as of September 30, 2019 would have no impact on our annual interest expense. Refer to Note 8, “Line of Credit” of our notes to condensed consolidated financial statements included elsewhere in this Report for additional information.

As of September 30, 2019, we had international operations that exposed us to the risk of fluctuations in foreign currency exchange rates against the United States dollar. However, the impact of foreign currency fluctuations has not been material to our financial position or operating results.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively) have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Security Exchange Act of 1934, as amended, the "Exchange Act") as of September 30, 2019, the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). They have concluded that, as of the Evaluation Date, these disclosure controls and procedures were effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities and would be disclosed on a timely basis. The Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the rules and forms of the Securities and Exchange Commission. They have also concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act are accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the quarter ended September 30, 2019, there were no changes in our “internal control over financial reporting” (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Hussein Litigation

On October 7, 2013, a complaint was filed against our Company and certain of our officers and directors in the Superior Court of the State of California for the County of Orange, captioned Ahmed D. Hussein v. Sheldon Razin, Steven Plochocki, Quality Systems, Inc. and Does 1-10, inclusive, No. 30-2013-00679600-CU-NP-CJC, by Ahmed Hussein, a former director and significant shareholder of our Company. We filed a demurrer to the complaint, which the Court granted on April 10, 2014. An amended complaint was filed on April 25, 2014. The amended complaint generally alleges fraud and deceit, constructive fraud, negligent misrepresentation and breach of fiduciary duty in connection with statements made to our shareholders regarding our financial condition and projected future performance. The amended complaint seeks actual damages, exemplary and punitive damages and costs. We filed a demurrer to the amended complaint. On July 29, 2014, the Court sustained the demurrer with respect to the breach of fiduciary duty claim, and overruled the demurrer with respect to the fraud and deceit claims. On August 28, 2014, we filed an answer and also filed a cross-complaint against Hussein, alleging that he breached fiduciary duties owed to the Company, Mr. Razin and Mr. Plochocki. Mr. Razin and Mr. Plochocki have dismissed their claims against Hussein, leaving QSI as the sole plaintiff in the cross-complaint. On June 26, 2015, we filed a motion for summary judgment with respect to Hussein’s claims, which the Court granted on September 16, 2015, dismissing all of Hussein’s claims against us. On September 23, 2015, Hussein filed an application for reconsideration of the Court's summary judgment order, which the Court denied. Hussein filed a renewed application for reconsideration of the Court’s summary judgment order on August 3, 2017. The Court again denied Hussein’s application. On October 28, 2015, May 9, 2016, and August 5, 2016, Hussein filed a motion for summary judgment, motion for summary adjudication, and motion for judgment on the pleadings, respectively, seeking to dismiss our cross-complaint. The Court denied each motion. Trial on our cross-complaint began June 12, 2017. On July 26, 2017, the Court issued a statement of decision granting Hussein’s motion for judgment on our cross-complaint. Final judgment over Hussein’s claims and our cross-claims was entered on January 9, 2018. Hussein has noticed his appeal of the order granting summary judgment over his claims, and we noticed a cross-appeal on the court’s statement of decision granting Hussein’s motion for judgment on our cross-complaint. On October 8, 2019, the California State Court of Appeal for the Fourth Appellate District, Division Three, reversed the Superior Court’s grant of summary judgment against Hussein’s affirmative claims and affirmed the trial court’s judgement after a bench trial against the Company on its breach of fiduciary duty claims against Hussein. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this claim.

Shareholder Derivative Litigation

On September 28, 2017, a complaint was filed against our Company and certain of our current and former officers and directors in the United States District Court for the Central District of California, captioned Kusumam Koshy, derivatively on behalf of Quality Systems Inc. vs. Craig Barbarosh, George H. Bristol, James C. Malone, Peter M. Neupert, Morris Panner, D. Russell Pflueger, Steven T. Plochocki, Sheldon Razin, Lance E. Rosenzweig, Paul A. Holt, and Quality Systems, Inc., No. 8:17-cv-01694, by Kusumam Koshy, a purported shareholder of ours. The complaint alleges breach of fiduciary duties and abuse of control, as well as unjust enrichment and insider selling by individual directors arising out of the allegations described above under the caption “Hussein Litigation” and a related, now-settled, federal securities class action, as well as the Company’s adoption of revised indemnification agreements, and the resignation of certain officers of the Company. The complaint seeks restitution and disgorgement, court costs and attorneys’ fees, and enhanced corporate governance reforms and internal control procedures. On January 12, 2018, Defendants filed a motion to dismiss the derivative complaint.  On July 25, 2018, the Court dismissed the complaint with prejudice. On August 24, 2018, the plaintiff filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit. Briefing was completed in May 2019 and a hearing on the appeal will be held on December 12, 2019. We believe that the plaintiff’s appeal is without merit and intend to defend against it vigorously. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this claim.

Other Regulatory Matters

Commencing in April 2017, we have received a request for documents and information from the United States Attorney's Office for the District of Vermont and other government agencies in connection with an investigation concerning the certification we obtained for our software under the United States Department of Health and Human Services' Electronic Health Record (EHR) Incentive Program. The requests for information relate to, among other things: (a) data used to determine objectives and measures under the Meaningful Use (MU) and the Physician Quality Reporting System (PQRS) programs, (b) EHR software code used in certifying our software and information, and (c) payments provided for the referral of EHR business. We continue to cooperate in this investigation. Requests and investigations of this nature may lead to future requests for information and ultimately the assertion of claims or the commencement of legal proceedings against us, as well as other material liabilities.  In addition, our responses to these and any future requests require time and effort, which can result in additional cost to us. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this matter.  Given the highly-regulated nature of our industry, we may, from time to time, be subject to subpoenas, requests for information, or investigations from various government agencies. It is our practice to respond to such matters in a cooperative, thorough and timely manner.

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ITEM 1A. RISK FACTORS.

Our business is subject to many risks and uncertainties, which may materially and adversely affect our future business, prospects, financial condition and results of operations. These risk factors are disclosed in “Item 1A. Risk Factors” in our Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5. OTHER INFORMATION.

None.

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ITEM 6. EXHIBITS.

				Incorporated by Reference
Exhibit Number	Exhibit Description	Filed Herewith		Form	Exhibit		Filing Date
10.1	Description of 2020 Director Compensation Program		8-K			10.1	16-Aug-19
10.2	NextGen Healthcare, Inc. 2015 Equity Incentive Plan, as amended.		8-K			10.2	16-Aug-19
10.3	Form of Employee Restricted Stock Award Grant Notice and Restricted Stock Award Agreement for 2015 Equity Incentive Plan, as amended.		8-K			10.3	16-Aug-19
10.4	Form of Outside Director Restricted Stock Award Grant Notice and Restricted Stock Award Agreement for 2015 Equity Incentive Plan, as amended.		8-K			10.4	16-Aug-19
10.5	Form of Stock Option Grant Notice, Option Agreement and Notice of Exercise for 2015 Equity Incentive Plan, as amended.		8-K			10.5	16-Aug-19
31.1	Certification of Principal Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
31.2	Certification of Principal Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X
101.INS**	XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH**	XBRL Taxonomy Extension Schema
101.CAL**	XBRL Taxonomy Extension Calculation
101.DEF**	XBRL Taxonomy Extension Definition
101.LAB**	XBRL Taxonomy Extension Label
101.PRE**	XBRL Taxonomy Extension Presentation
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of section 11 or 12 of the Securities and Exchange Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

36

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		NEXTGEN HEALTHCARE, INC.
Date: October 23, 2019	By:	/s/ John R. Frantz
		John R. Frantz
		Chief Executive Officer (Principal Executive Officer)
Date: October 23, 2019	By:	/s/ James R. Arnold, Jr.
		James R. Arnold, Jr.
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

37

EX-31.1

EXHIBIT 31.1

Certification of Principal Executive Officer Required by

Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended,

as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John R. Frantz, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NextGen Healthcare, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	October 23, 2019	By:	/s/ John R. Frantz
			John R. Frantz
			Chief Executive Officer
			(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

Certification of Principal Financial Officer Required by

Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended,

as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, James R. Arnold, Jr., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NextGen Healthcare, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	October 23, 2019	By:	/s/ James R. Arnold, Jr.
			James R. Arnold, Jr.
			Chief Financial Officer
			(Principal Financial Officer and Principal Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of NextGen Healthcare, Inc. (the “Company”) for the quarterly period ended September 30, 2019 (the “Report”), the undersigned hereby certify in their capacities as Chief Executive Officer and Chief Financial Officer of the Company, respectively, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	October 23, 2019	By:	/s/ John R. Frantz
			John R. Frantz
			Chief Executive Officer
			(Principal Executive Officer)
Date:	October 23, 2019	By:	/s/ James R. Arnold, Jr.
			James R. Arnold, Jr.
			Chief Financial Officer
			(Principal Financial Officer and Principal Accounting Officer)

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation. The condensed consolidated financial statements include the accounts of NextGen Healthcare, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). Each of the terms “we,” “us,” or “our” as used herein refers collectively to the Company, unless otherwise stated. All intercompany accounts and transactions have been eliminated.

Basis of Presentation

Basis of Presentation.  The accompanying unaudited condensed consolidated financial statements as of September 30, 2019 and for the three and six months ended September 30, 2019 have been prepared in accordance with the requirements of Quarterly Report on Form 10-Q and Article 10 of the Securities and Exchange Commission Regulation S-X and therefore do not include all information and notes which would be presented were such condensed consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements presented in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments which are necessary for a fair statement of the results of operations and cash flows for the periods presented. The results of operations for such interim periods are not necessarily indicative of results of operations to be expected for the full year.

References to amounts in the condensed consolidated financial statement sections are in thousands, except shares and per share data, unless otherwise specified.

Share-Based Compensation

Share-Based Compensation. The following table summarizes total share-based compensation expense included in the condensed consolidated statements of comprehensive income for the three and six months ended September 30, 2019 and 2018:

	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
Costs and expenses:
Cost of revenue	$	536		$	348		$	999		$	581
Research and development costs		817			726			1,845			1,336
Selling, general and administrative		2,963			3,061			6,363			5,334
Total share-based compensation		4,316			4,135			9,207			7,251
Income tax benefit		(1,102	)		(1,016	)		(2,317	)		(1,769	)
Decrease in net income	$	3,214		$	3,119		$	6,890		$	5,482

Recent Accounting Standards

Recently Adopted Accounting Pronouncements.  Recently adopted accounting pronouncements are discussed below or in the notes, where applicable.

In July 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-07, Codification Updates to SEC Sections—Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33- 10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates (SEC Update), to amend SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC final rules on Disclosure Update and Simplification and Investment Company Reporting Modernization, and make other updates. ASU 2019-07 was effective upon issuance. The requirements of ASU 2019-07 have been implemented and did not have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which was intended to improve financial reporting about leasing transactions. The new guidance requires lessees to recognize on their balance sheets the assets and liabilities for the rights and obligations created by leases and to disclose key information about the leasing arrangements. We have implemented the necessary changes to our policies, processes, and internal controls over financial reporting to meet the requirements under the new guidance related to identifying and measuring right-of-use assets and lease liabilities, including related disclosures.

We adopted ASU 2016-02 and its subsequent amendments (together “ASC 842”) using the cumulative-effect adjustment transition method, which is the additional transition method described within ASU 2018-11, Leases (Topic 842): Targeted Improvements, issued by the FASB in July 2018, which allowed us to apply the new lease standard as of April 1, 2019, rather than the beginning of the earliest period presented. We elected the package of practical expedients that permitted us to not reassess: (1) whether any expired contracts are or contain leases; (2) the lease classification for any existing or expired leases, and (3) the initial direct costs for our existing leases.

Upon adoption of ASC 842, we recognized operating lease right-of-use assets of $38,784, operating lease liabilities of $8,873, and long-term operating lease liabilities of $42,114 on our condensed consolidated balance sheet as of April 1, 2019, and corresponding reductions to other current liabilities of $2,342 and other noncurrent liabilities of $9,861 associated with previously recognized deferred rent and remaining lease obligations. There was no cumulative-effect adjustment required to retained earnings. The adoption of ASC 842 did not have a significant effect on our condensed consolidated results of operations or cash flows. Comparative information in this Report has not been adjusted and continues to be reported under the previous lease accounting rules. Refer to Note 4 for additional details.

Recent Accounting Standards Not Yet Adopted.   Recent accounting pronouncements requiring implementation in current or future periods are discussed below or in the notes, where applicable.

In August 2018, the FASB issued ASU 2018-15, Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. ASU 2018-15 is effective for us in the first quarter of fiscal 2021. We are currently in the process of evaluating the potential impact of adoption of this updated authoritative guidance on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 modifies certain disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. ASU 2018-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. ASU 2018-13 is effective for us in the first quarter of fiscal 2021, and we currently do not expect the adoption of this new standard to have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of Step two of the goodwill impairment test. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. ASU 2017-04 is effective prospectively for annual and interim periods beginning after December 15, 2019, and early adoption is permitted on goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 is effective for us in the first quarter of fiscal 2021, and we currently do not expect the adoption of this new standard to have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides new guidance regarding the measurement and recognition of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. ASU 2016-13 is effective for us in the first quarter of fiscal 2021, and we currently do not expect the adoption of this new standard to have a material impact on our consolidated financial statements.

We do not believe that any other recently issued, but not yet effective accounting standards, if adopted, would have a material impact on our consolidated financial statements.

Revenue Recognition and Performance Obligations

Revenue Recognition and Performance Obligations

We generate revenue from sales of licensing rights and subscriptions to our software solutions, hardware and third-party software products, support and maintenance, managed services (formerly referred to as revenue cycle management and related services), EDI, and other non-recurring services, including implementation, training, and consulting services. Our contracts with customers may include multiple performance obligations that consist of various combinations of our software solutions and related services, which are generally capable of being distinct and accounted for as separate performance obligations.

The total transaction price is allocated to each performance obligation within an arrangement based on estimated standalone selling prices. We generally determine standalone selling prices based on the prices charged to customers, except for certain software licenses that are based on the residual approach because their standalone selling prices are highly variable and certain maintenance customers that are based on substantive renewal rates. In instances where standalone selling price is not observable, such as software licenses included in our RCM arrangements, we estimate standalone selling price utilizing an expected cost plus a margin approach. When standalone selling prices are not observable, significant judgment is required in estimating the standalone selling price for each performance obligation.

Revenue is recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration that we expect to be entitled to in exchange for those goods or services.

We exclude sales tax from the measurement of the transaction price and record revenue net of taxes collected from customers and subsequently remitted to governmental authorities.

Revenue Recognition

Recurring revenues consist of subscription services, support and maintenance, managed services, and EDI and data services. Software, hardware, and other non-recurring revenues consist of sales of software licenses and hardware and certain non-recurring services, such as implementation, training, and consulting performed for clients who use our products.

Generally, we recognize revenue for our most significant performance obligations as follows:

Subscription services. Performance obligations involving subscription services, which include annual libraries, are satisfied over time as the customer simultaneously receives and consumes the benefits of the services throughout the contract period. Our subscription services primarily include our hosting services, which we refer to as managed cloud services and our software-as-a-service (“SaaS”) based offerings, such as our electronic health records and practice management, mobile, patient portal, and population health management solutions. Our managed cloud services represent a single performance obligation to provide cloud hosting services to our customers. Our SaaS-based offerings may include multiple goods and services, such as providing access to our technology-based solutions together with our managed cloud services. These offerings are concurrently delivered with the same pattern of transfer to our customers and are accounted for as a single performance obligation because the technology-based solutions and other goods and services included within our overall SaaS-based offerings are each individually not capable of being distinct as the customer receives benefits based on the combined offering. Our annual libraries primarily consist of providing stand-ready access to certain content, knowledgebase, databases, and SaaS-based educational tools, which are frequently updated to meet the most current standards and requirements, to be utilized in conjunction with our core solutions. We recognize revenue related to these subscription services, including annual libraries, ratably over the respective noncancelable contract term.

Support and maintenance. Performance obligations involving support and maintenance are satisfied over time as the customer simultaneously receives and consumes the benefits of the maintenance services provided. Our support and maintenance services may consist of separate performance obligations, such as unspecified upgrades or enhancements and technical support, which are considered stand-ready in nature and can be offered at various points during the service period. Since the efforts associated with the combined support and maintenance services are rendered concurrently and provided evenly throughout the service period, we consider the series of support and maintenance services to be a single performance obligation. Therefore, we recognize revenue related to these services ratably over the respective noncancelable contract term.

Managed services. Managed services consist primarily of RCM and related services, but also includes transcription services and certain other recurring services. Performance obligations associated with RCM services are satisfied over time as the customer simultaneously receives and consumes the benefits of the services executed throughout the contract period. The majority of service fees under our RCM arrangements are variable consideration contingent upon collections by our clients. We estimate the variable consideration which we expect to be entitled to over the noncancelable contract term associated with our RCM service arrangements. The estimate of variable consideration included in the transaction price typically involves estimating the amounts we will ultimately collect on behalf of our clients and the relative fee we charge that is generally calculated as a percentage of those collections. Inputs to these estimates include, but are not limited to, historical service fees and collections amounts, timing of historical collections relative to the timing of when claims are submitted by our clients to their respective payers, macroeconomic trends, and anticipated changes in the number of providers. Significant judgement is required when estimating the total transaction price based on the variable consideration. We may apply certain constraints when appropriate whereby we include in the transaction price estimated variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Such estimates are assessed at the contract level. RCM and related services may not be rendered evenly over the contract period as the timing of services are based on customer collections, which may vary throughout the service period. We recognize revenue for RCM based on the amount of collections received throughout the contract term as it most closely depicts our efforts to transfer our service obligations to the customer. Performance obligations related to the transcription services and other recurring services are generally satisfied as the corresponding services are provided and revenue is recognized as such services are rendered.

Electronic data interchange and data services. Performance obligations related to EDI and other transaction processing services are satisfied at the point in time the services are rendered. The transfer of control occurs when the transaction processing services are delivered and the customer receives the benefits from the services provided.

Software license and hardware. Software license and hardware are considered point-in-time performance obligations as control is transferred to customers upon the delivery of the software license and hardware. Our software licenses are considered functional licenses, and revenue recognition generally occurs on the date of contract execution as the customer is provided with immediate access to the license. We generally determine the amount of consideration allocated to the software license performance obligation using the residual approach, except for certain RCM arrangements where the amount allocated to the software license performance obligation is determined based on estimated relative standalone selling prices. For hardware, we recognize revenue upon transfer of such hardware or devices to the customer.

Other non-recurring services. Performance obligations related to other non-recurring services, including implementation, training, and consulting services, are generally satisfied as the corresponding services are provided. Once the services have been provided to the customer, the transfer of control has occurred. Therefore, we recognize revenue as such services are rendered.

Non-Recurring Fair Value Measurements

Non-Recurring Fair Value Measurements

We have certain assets, including goodwill and other intangible assets, which are measured at fair value on a non-recurring basis and are adjusted to fair value only if an impairment charge is recognized. The categorization of the framework used to measure fair value of the assets is considered to be within the Level 3 valuation hierarchy due to the subjective nature of the unobservable inputs used. During the three and six months ended September 30, 2019, we recorded certain impairments to our operating lease assets and equipment and improvements (see Note 15).

XML

Leases (Tables)

6 Months Ended

Sep. 30, 2019

Leases [Abstract]

Summary of Components of Operating Lease Costs

Components of operating lease costs are summarized as follows:

	Three Months Ended			Six Months Ended
	September 30, 2019			September 30, 2019
Operating lease costs	$	2,514		$	4,677
Short-term lease costs		67			93
Variable lease costs		198			337
Less: Sublease income		(28	)		(56	)
Total operating lease costs	$	2,751		$	5,051

Supplemental Cash Flow Information Related to Operating Leases

Supplemental cash flow information related to operating leases is summarized as follows:

	Three Months Ended		Six Months Ended
	September 30, 2019		September 30, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	2,864	$	5,480
Operating lease assets obtained in exchange for operating lease liabilities		—		5,324

Summary of Future Minimum Aggregate Lease Payments Operating Leases

Future minimum aggregate lease payments under operating leases as of September 30, 2019 are summarized as follows:

For the year ended March 31,
2020 (remaining six months)	$	5,921
2021		11,919
2022		11,323
2023		10,954
2024		9,045
Thereafter		8,316
Total future lease payments		57,478
Less interest		(5,909	)
Total lease liabilities	$	51,569

Summary of Future Minimum Lease Payments Under Non-cancelable Operating Leases

Future minimum lease payments (including interest) under non-cancelable operating leases as of March 31, 2019 are summarized as follows:

For the year ended March 31,
2020	$	10,511
2021		10,701
2022		10,161
2023		9,660
2024		7,730
Thereafter		8,097
Total obligations and commitments	$	56,860

XML

Intangible Assets - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Finite Lived Intangible Assets [Line Items]
Amortization of other intangibles			$ 10,305	$ 10,864
Customer Relations and Contracts | Operating Expense
Finite Lived Intangible Assets [Line Items]
Amortization of other intangibles	$ 864	$ 1,121	1,729	2,289
Computer Software, Intangible Asset | Cost of Revenue
Finite Lived Intangible Assets [Line Items]
Amortization of other intangibles	$ 4,288	$ 4,288	$ 8,576	$ 8,575

XML

Leases - Summary of Future Minimum Aggregate Lease Payments Operating Leases (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Leases [Abstract]
2020 (remaining six months)	$ 5,921
2021	11,919
2022	11,323
2023	10,954
2024	9,045
Thereafter	8,316
Total future lease payments	57,478
Less interest	(5,909)
Total lease liabilities	$ 51,569

XML

Share Based Awards - Additional Information (Details) - USD ($)				3 Months Ended		6 Months Ended
	Oct. 23, 2018	Dec. 29, 2016	Aug. 11, 2014	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Aug. 31, 2019	Mar. 31, 2019	Aug. 31, 2017	Aug. 31, 2015	Oct. 31, 2005
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Outstanding stock options				3,037,650		3,037,650			3,166,525
Fair value of options vested						$ 1,886,000	$ 1,718,000
Total share-based compensation				$ 4,316,000	$ 4,135,000	$ 9,207,000	7,251,000
Percentage of performance stock units tied to 3-year total shareholder return						34.00%
Percentage of performance stock units tied to fiscal year 2021 revenue						33.00%
Percentage performance stock units tied to fiscal year 2021 adjusted earnings per share goals						33.00%
Employee Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Outstanding stock options				2,782,330		2,782,330
Total unrecognized compensation costs				$ 6,069,000		$ 6,069,000
Stock option recognized over weighted average period (in years)						1 year 10 months 24 days
Restricted Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, non-option equity instruments, outstanding, number				1,849,438		1,849,438			1,715,958
Stock option recognized over weighted average period (in years)						1 year 10 months 24 days
Total share-based compensation				$ 3,713,000	2,833,000	$ 7,009,000	4,753,000
Total unrecognized compensation costs				25,123,000		$ 25,123,000
Share-based compensation arrangement by share-based payment award, options, grants in period, net of forfeitures						723,361
Restricted Stock | Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period						1 year
Restricted Stock | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period						3 years
Performance Shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total share-based compensation				$ 62,000	68,000	$ 123,000	141,000
Vesting period						4 years
Number of shares granted		123,082
Performance Stock Unit Awards
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, options, grants in period, net of forfeitures	248,140
Percentage of shares issued, minimum	50.00%
Percentage of shares issued, maximum	200.00%
Weighted-average grant date fair value	$ 17.84
2005 Employee Stock Option and Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock reserved for issuance												4,800,000
Outstanding stock options				255,320		255,320
2005 Employee Stock Option and Incentive Plan | Employee Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expiration period (in years)						10 years
Share-based compensation award plan , expiration date						May 25, 2015
2015 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock reserved for issuance								3,575,000		6,000,000
Common stock reserved											11,500,000
Shares available for future grant				8,800,491		8,800,491
2015 Plan | Employee Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expiration period (in years)						10 years
2015 Plan | Performance Shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, non-option equity instruments, outstanding, number				46,375		46,375
Share-based compensation arrangement by share-based payment award, non-option equity instruments, outstanding, number				46,375		46,375
Employee Share Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock reserved for issuance			4,000,000	3,478,025		3,478,025
Total share-based compensation				$ 109,000	$ 100,000	$ 231,000	$ 232,000
Maximum percentage of gross payroll deduction			15.00%
Purchase price as a percentage of fair market value			90.00%
Maximum shares purchase in a single transaction			1,500
Maximum amount purchased in a calendar year			$ 25,000
Shares issued				521,975		521,975

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Commitments, Guarantees and Contingencies - Additional Information (Details)	6 Months Ended
	Sep. 30, 2019
Commitments And Contingencies Disclosure [Abstract]
Applicable program documentation period	365 days

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Composition of Certain Financial Statement Captions - Summary of Prepaid Expense and Other Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Mar. 31, 2019
Prepaid Expense And Other Assets Current [Abstract]
Prepaid expenses	$ 13,868	$ 15,548
Capitalized commissions costs	5,989	4,816
Other current assets	755	462
Prepaid expenses and other current assets	$ 20,612	$ 20,826

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Composition of Certain Financial Statement Captions - Summary of Other Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Mar. 31, 2019
Other Liabilities Current [Abstract]
Care services liabilities	$ 7,501	$ 1,443
Sales returns reserves and other customer liabilities	6,743	7,838
Customer credit balances and deposits	4,358	3,988
Accrued hosting costs	3,440	4,674
Accrued self insurance expense	2,616	2,225
Accrued employee benefits and withholdings	2,407	2,426
Accrued outsourcing costs	2,328	2,128
Accrued EDI expense	2,061	2,037
User group meeting deposits	1,813
Accrued consulting and outside services	1,732	3,874
Contingent consideration related to acquisitions	1,400	1,000
Accrued legal expense	895	699
Sales tax payable	599	509
Accrued royalties	587	3,090
Deferred rent and related lease obligations		2,196
Other accrued expenses	3,065	2,937
Other current liabilities	$ 41,545	$ 41,064

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities:
Net income	$ 7,325	$ 15,742
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of capitalized software costs	8,680	4,892
Amortization of debt issuance costs	355	355
Amortization of other intangibles	10,305	10,864
Change in fair value of contingent consideration	400
Deferred income taxes	28	175
Depreciation	4,102	4,996
Excess tax benefit from share-based compensation	(50)	(260)
Impairment of assets	2,405
Loss on disposal of equipment and improvements	41	106
Non-cash operating lease costs	3,842
Provision for bad debts	1,635	1,385
Provision for inventory obsolescence	6	11
Share-based compensation	9,207	7,251
Changes in assets and liabilities:
Accounts receivable	2,116	409
Contract assets	1,841	2,982
Inventory	56	16
Accounts payable	(638)	1,843
Contract liabilities	(1,908)	(8,230)
Accrued compensation and related benefits	(3,838)	(9,770)
Income taxes	396	2,459
Deferred compensation	28	(135)
Operating lease liabilities	(4,657)
Other assets and liabilities	(913)	(20,175)
Net cash provided by operating activities	40,764	14,916
Cash flows from investing activities:
Additions to capitalized software costs	(9,901)	(10,379)
Additions to equipment and improvements	(5,193)	(2,941)
Proceeds from corporate-owned life insurance policies	2,500
Net cash used in investing activities	(12,594)	(13,320)
Cash flows from financing activities:
Proceeds from line of credit		26,000
Repayments on line of credit	(11,000)	(21,000)
Proceeds from issuance of shares under employee plans	1,582	4,108
Payments for taxes related to net share settlement of equity awards	(2,843)	(2,204)
Net cash provided by (used in) financing activities	(12,261)	6,904
Net increase in cash, cash equivalents, and restricted cash	15,909	8,500
Cash, cash equivalents, and restricted cash at beginning of period	34,522	31,218
Cash, cash equivalents, and restricted cash at end of period	50,431	39,718
Supplemental disclosures of cash flow information:
Cash paid for income taxes	1,362	486
Cash refunds from income taxes	1,576	373
Cash paid for interest	552	975
Cash paid for amounts included in the measurement of operating lease liabilities	5,480
Operating lease assets obtained in exchange for operating lease liabilities	5,324
Accrued purchases of equipment and improvements	$ 43	$ 181

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Concentration of Credit Risk

6 Months Ended

Sep. 30, 2019

Risks And Uncertainties [Abstract]

Concentration of Credit Risk

13. Concentration of Credit Risk

We had cash deposits at United States banks and financial institutions which exceeded federally insured limits at September 30, 2019.  We are exposed to credit loss for amounts in excess of insured limits in the event of non-performance by the institutions; however, we do not anticipate non-performance by these institutions.

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2019	Mar. 31, 2019
Current assets:
Cash and cash equivalents	$ 42,930,000	$ 33,079,000
Restricted cash and cash equivalents	7,501,000	1,443,000
Accounts receivable, net	83,708,000	87,459,000
Contract assets	11,973,000	13,242,000
Inventory	58,000	120,000
Income taxes receivable	3,272,000	3,682,000
Prepaid expenses and other current assets	20,612,000	20,826,000
Total current assets	170,054,000	159,851,000
Equipment and improvements, net	22,049,000	21,404,000
Capitalized software costs, net	39,076,000	37,855,000
Operating lease assets	38,230,000
Deferred income taxes, net	6,166,000	6,194,000
Contract assets, net of current	3,175,000	3,747,000
Intangibles, net	42,290,000	52,595,000
Goodwill	218,771,000	218,771,000
Other assets	33,017,000	32,478,000
Total assets	572,828,000	532,895,000
Current liabilities:
Accounts payable	4,837,000	5,432,000
Contract liabilities	54,101,000	56,009,000
Accrued compensation and related benefits	21,825,000	25,663,000
Income taxes payable		64,000
Operating lease liabilities	9,947,000
Other current liabilities	41,545,000	41,064,000
Total current liabilities	132,255,000	128,232,000
Deferred compensation	5,933,000	5,905,000
Line of credit	0	11,000,000
Operating lease liabilities, net of current	41,622,000
Other noncurrent liabilities	1,890,000	11,812,000
Total liabilities	181,700,000	156,949,000
Commitments and contingencies (Note 14)
Shareholders' equity:
Common stock, $0.01 par value; authorized 100,000 shares; issued and outstanding 65,436 and 64,838 shares at September 30, 2019 and March 31, 2019, respectively	654,000	648,000
Additional paid-in capital	272,848,000	264,908,000
Accumulated other comprehensive loss	(1,320,000)	(1,231,000)
Retained earnings	118,946,000	111,621,000
Total shareholders' equity	391,128,000	375,946,000
Total liabilities and shareholders' equity	$ 572,828,000	$ 532,895,000

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Goodwill

6 Months Ended

Sep. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill

5. Goodwill

We test goodwill for impairment annually during our first fiscal quarter, referred to as the annual test date.  We will also test for impairment between annual test dates if an event occurs or circumstances change that would indicate the carrying amount may be impaired. We have not identified any events or circumstances as of September 30, 2019 that would require an interim goodwill impairment test.

We do not amortize goodwill as it has been determined to have an indefinite useful life. The carrying amount of goodwill as of September 30, 2019 and March 31, 2019 was $218,771.

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Composition of Certain Financial Statement Captions

6 Months Ended

Sep. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Composition of Certain Financial Statement Captions

9. Composition of Certain Financial Statement Captions

Accounts receivable includes billed amounts where the right to receive payment is unconditional and only subject to the passage of time. Undelivered products and services are included as a component of the contract liabilities balance on the accompanying condensed consolidated balance sheets.

	September 30, 2019			March 31, 2019
Accounts receivable, gross	$	87,258		$	93,513
Allowance for doubtful accounts		(3,550	)		(6,054	)
Accounts receivable, net	$	83,708		$	87,459

Inventory is comprised of computer systems and components.

Prepaid expenses and other current assets are summarized as follows:

	September 30, 2019		March 31, 2019
Prepaid expenses	$	13,868	$	15,548
Capitalized commissions costs		5,989		4,816
Other current assets		755		462
Prepaid expenses and other current assets	$	20,612	$	20,826

Equipment and improvements are summarized as follows:

	September 30, 2019			March 31, 2019
Computer equipment	$	31,908		$	28,923
Internal-use software		17,426			17,084
Furniture and fixtures		12,075			11,660
Leasehold improvements		15,656			15,150
Equipment and improvements, gross		77,065			72,817
Accumulated depreciation and amortization		(55,016	)		(51,413	)
Equipment and improvements, net	$	22,049		$	21,404

Other assets are summarized as follows:

	September 30, 2019		March 31, 2019
Capitalized commission costs	$	16,981	$	14,781
Deposits		5,747		5,318
Debt issuance costs		2,479		2,834
Other noncurrent assets		7,810		9,545
Other assets	$	33,017	$	32,478

Accrued compensation and related benefits are summarized as follows:

	September 30, 2019		March 31, 2019
Accrued vacation	$	9,323	$	9,893
Accrued bonus		8,063		11,598
Accrued commissions		3,628		3,418
Accrued payroll		811		754
Accrued compensation and related benefits	$	21,825	$	25,663

Other current liabilities are summarized as follows:

	September 30, 2019		March 31, 2019
Care services liabilities	$	7,501		1,443
Sales returns reserves and other customer liabilities		6,743		7,838
Customer credit balances and deposits		4,358		3,988
Accrued hosting costs		3,440		4,674
Accrued self insurance expense		2,616		2,225
Accrued employee benefits and withholdings		2,407		2,426
Accrued outsourcing costs		2,328		2,128
Accrued EDI expense		2,061		2,037
User group meeting deposits		1,813		—
Accrued consulting and outside services		1,732		3,874
Contingent consideration related to acquisitions		1,400		1,000
Accrued legal expense		895		699
Sales tax payable		599		509
Accrued royalties		587		3,090
Deferred rent and related lease obligations		—		2,196
Other accrued expenses		3,065		2,937
Other current liabilities	$	41,545	$	41,064

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Revenue from Contracts with Customers - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenue From Contract With Customer [Line Items]
Revenue, Remaining Performance Obligation, Amount	$ 492,700		$ 492,700
Percentage of revenue expected to recognize as services rendered and goods delivered	9.00%		9.00%
Percentage of revenue expected to recognize over next 12 months	47.00%		47.00%
Contract liability, revenue recognized	$ 16,188	$ 15,909	$ 36,147	$ 36,086
Capitalized commission costs			22,970
Commission expenses	$ 1,791	$ 1,275	3,453	$ 2,864
Prepaid Expenses And Other Current Assets
Revenue From Contract With Customer [Line Items]
Capitalized commission costs			5,989
Other Noncurrent Assets
Revenue From Contract With Customer [Line Items]
Capitalized commission costs			$ 16,981

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Share Based Awards (Tables)

6 Months Ended

Sep. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock Option Activity

The following table summarizes the stock option transactions during the six months ended September 30, 2019:

				Weighted-		Weighted-
				Average		Average		Aggregate
				Exercise		Remaining		Intrinsic
Employee Stock Options Summary	Number of			Price		Contractual		Value
	Shares			per Share		Life (years)		(in thousands)
Outstanding, March 31, 2019		3,166,525		$	15.36		5.5	$	7,040
Exercised		(45,925	)		15.75		4.7	$	131
Forfeited/Canceled		(48,550	)		25.41		2.0
Expired		(34,400	)		43.04
Outstanding, September 30, 2019		3,037,650		$	14.88		5.1	$	4,134
Vested and expected to vest, September 30, 2019		2,796,120		$	14.89		5.1	$	3,826
Exercisable, September 30, 2019		1,559,428		$	15.02		4.5	$	2,247

Schedule of Employee Stock Options and Performance Based Awards by Non-vested Stock Options

Non-vested stock option award activity during the six months ended September 30, 2019 is summarized as follows:

				Weighted-
				Average
				Grant-Date
Non-Vested Stock Option Award Summary	Number of			Fair Value
	Shares			per Share
Outstanding, March 31, 2019		1,845,855		$	5.52
Vested		(358,783	)		5.26
Forfeited/Canceled		(8,850	)		6.51
Outstanding, September 30, 2019		1,478,222		$	5.58

Summary of Restricted Stock Awards Activity

Restricted stock awards activity during the six months ended September 30, 2019 is summarized as follows:

				Weighted-
				Average
				Grant-Date
Restricted Stock	Number of			Fair Value
	Shares			per Share
Outstanding, March 31, 2019		1,715,958		$	16.29
Granted		723,361			18.59
Vested		(517,528	)		16.56
Canceled		(72,353	)		17.13
Outstanding, September 30, 2019		1,849,438		$	17.08

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Composition of Certain Financial Statement Captions - Summary of Accounts Receivable (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Mar. 31, 2019
Accounts Receivable Net Current [Abstract]
Accounts receivable, gross	$ 87,258	$ 93,513
Allowance for doubtful accounts	(3,550)	(6,054)
Accounts receivable, net	$ 83,708	$ 87,459

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Composition of Certain Financial Statement Captions - Summary of Accrued Compensation and Related Benefits (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Mar. 31, 2019
Employee Related Liabilities Current [Abstract]
Accrued vacation	$ 9,323	$ 9,893
Accrued bonus	8,063	11,598
Accrued commissions	3,628	3,418
Accrued payroll	811	754
Accrued compensation and related benefits	$ 21,825	$ 25,663

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Leases

6 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

4. Leases

We have operating lease agreements for our offices in the United States and India with lease periods expiring between 2020 and 2026. ASC 842 requires the recognition of leasing arrangements on the balance sheet as right-of-use assets and liabilities pertaining to the rights and obligations created by the leased assets. We determine whether an arrangement is a lease at inception and classify it as finance or operating. All of our existing material leases are classified as operating leases. Our leases do not contain any residual value guarantees.

Right-of-use lease assets and corresponding lease liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Since the interest rate implicit in our lease arrangements is not readily determinable, we determine an incremental borrowing rate for each lease based on the approximate interest rate on a collateralized basis with similar remaining terms and payments as of the lease commencement date to determine the present value of future lease payments. Our lease terms may include options to extend or terminate the lease. Currently, it is not reasonably certain that we will exercise those options and therefore, we utilize the initial, noncancelable, lease term to calculate the lease assets and corresponding liabilities for all our leases. We have certain insignificant short-term leases with an initial term of twelve months or less that are not recorded in our condensed consolidated balance sheets. Operating right-of-use lease assets are classified as operating lease assets on our condensed consolidated balance sheets.

Our lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. We have applied the practical expedient to combine fixed payments for non-lease components with our lease payments for all of our leases and account for them together as a single lease component, which increases the amount of our lease assets and corresponding liabilities. Payments under our lease arrangements are primarily fixed, however, certain lease agreements contain variable payments, which are expensed as incurred and not included in the operating lease assets and liabilities.

Operating lease costs are recognized on a straight-line basis over the lease term and included as a selling, general and administrative expense in the condensed consolidated statements of comprehensive income. Total operating lease costs were $2,751 and $2,027 for the three months ended September 30, 2019 and 2018, respectively. Total operating lease costs were $5,051 and $4,055 for the six months ended September 30, 2019 and 2018, respectively.

Components of operating lease costs are summarized as follows:

	Three Months Ended			Six Months Ended
	September 30, 2019			September 30, 2019
Operating lease costs	$	2,514		$	4,677
Short-term lease costs		67			93
Variable lease costs		198			337
Less: Sublease income		(28	)		(56	)
Total operating lease costs	$	2,751		$	5,051

Supplemental cash flow information related to operating leases is summarized as follows:

	Three Months Ended		Six Months Ended
	September 30, 2019		September 30, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	2,864	$	5,480
Operating lease assets obtained in exchange for operating lease liabilities		—		5,324

As of September 30, 2019, our operating leases had a weighted average remaining lease term of 5.0 years and a weighted average discount rate of 4.2%. Future minimum aggregate lease payments under operating leases as of September 30, 2019 are summarized as follows:

For the year ended March 31,
2020 (remaining six months)	$	5,921
2021		11,919
2022		11,323
2023		10,954
2024		9,045
Thereafter		8,316
Total future lease payments		57,478
Less interest		(5,909	)
Total lease liabilities	$	51,569

Future minimum lease payments (including interest) under non-cancelable operating leases as of March 31, 2019 are summarized as follows:

For the year ended March 31,
2020	$	10,511
2021		10,701
2022		10,161
2023		9,660
2024		7,730
Thereafter		8,097
Total obligations and commitments	$	56,860

As of September 30, 2019, we have not entered any material leases, which are not reflected in the table above.

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Line of Credit

6 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Line of Credit

8. Line of Credit

On March 29, 2018, we entered into a $300,000 amended and restated revolving credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, U.S. Bank National Association, as syndication agent, and certain other agents and lenders. The Credit Agreement replaces our prior $250,000 revolving credit agreement originally entered into on January 4, 2016 (“Original Credit Agreement”). The Credit Agreement provides a subfacility of up to $10,000 for letters of credit and a subfacility of up to $10,000 for swing-line loans and also includes a $100,000 accordion feature that provides us with the ability to obtain up to $400,000 in the aggregate of revolving credit commitments and/or term loans upon satisfaction of certain conditions.

The Credit Agreement matures on March 29, 2023 and the full balance of the revolving loans and all other obligations under the agreement must be paid at that time. In addition, we are required to prepay the revolving loan balance if at any time the aggregate principal amount outstanding under the Credit Agreement exceeds the aggregate commitments thereunder. The Credit Agreement is secured by substantially all of our existing and future property. The revolving loans under the Credit Agreement will be available for letters of credit, permitted acquisitions, working capital and general corporate purposes. We were in compliance with all financial and non-financial covenants under the Credit Agreement as of September 30, 2019.

As of September 30, 2019, we had no outstanding loans and $300,000 of unused credit under the Credit Agreement. As of March 31, 2019, we had $11,000 in outstanding loans under the Credit Agreement.

Interest expense related to the Credit Agreement was $211 and $591 for the three months ended September 30, 2019 and 2018, respectively. Amortization of deferred debt issuance costs was $178 and $178 for the three months ended September 30, 2019 and 2018, respectively.

Interest expense related to the Credit Agreement was $505 and $1,141 for the six months ended September 30, 2019 and 2018, respectively. Amortization of deferred debt issuance costs was $355 and $355 for the six months ended September 30, 2019 and 2018, respectively.

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Summary of Significant Accounting Policies

6 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

Principles of Consolidation. The condensed consolidated financial statements include the accounts of NextGen Healthcare, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). Each of the terms “we,” “us,” or “our” as used herein refers collectively to the Company, unless otherwise stated. All intercompany accounts and transactions have been eliminated.

Basis of Presentation.  The accompanying unaudited condensed consolidated financial statements as of September 30, 2019 and for the three and six months ended September 30, 2019 have been prepared in accordance with the requirements of Quarterly Report on Form 10-Q and Article 10 of the Securities and Exchange Commission Regulation S-X and therefore do not include all information and notes which would be presented were such condensed consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements presented in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments which are necessary for a fair statement of the results of operations and cash flows for the periods presented. The results of operations for such interim periods are not necessarily indicative of results of operations to be expected for the full year.

References to amounts in the condensed consolidated financial statement sections are in thousands, except shares and per share data, unless otherwise specified.

Significant Accounting Policies. We adopted Accounting Standards Update No. 2016-02, Leases (Topic 842), effective on April 1, 2019 using the cumulative-effect adjustment transition method, as described further below. There have been no other material changes to our significant accounting policies from those disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019.

Share-Based Compensation. The following table summarizes total share-based compensation expense included in the condensed consolidated statements of comprehensive income for the three and six months ended September 30, 2019 and 2018:

	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
Costs and expenses:
Cost of revenue	$	536		$	348		$	999		$	581
Research and development costs		817			726			1,845			1,336
Selling, general and administrative		2,963			3,061			6,363			5,334
Total share-based compensation		4,316			4,135			9,207			7,251
Income tax benefit		(1,102	)		(1,016	)		(2,317	)		(1,769	)
Decrease in net income	$	3,214		$	3,119		$	6,890		$	5,482

Recently Adopted Accounting Pronouncements.  Recently adopted accounting pronouncements are discussed below or in the notes, where applicable.

In July 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-07, Codification Updates to SEC Sections—Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33- 10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates (SEC Update), to amend SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC final rules on Disclosure Update and Simplification and Investment Company Reporting Modernization, and make other updates. ASU 2019-07 was effective upon issuance. The requirements of ASU 2019-07 have been implemented and did not have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which was intended to improve financial reporting about leasing transactions. The new guidance requires lessees to recognize on their balance sheets the assets and liabilities for the rights and obligations created by leases and to disclose key information about the leasing arrangements. We have implemented the necessary changes to our policies, processes, and internal controls over financial reporting to meet the requirements under the new guidance related to identifying and measuring right-of-use assets and lease liabilities, including related disclosures.

We adopted ASU 2016-02 and its subsequent amendments (together “ASC 842”) using the cumulative-effect adjustment transition method, which is the additional transition method described within ASU 2018-11, Leases (Topic 842): Targeted Improvements, issued by the FASB in July 2018, which allowed us to apply the new lease standard as of April 1, 2019, rather than the beginning of the earliest period presented. We elected the package of practical expedients that permitted us to not reassess: (1) whether any expired contracts are or contain leases; (2) the lease classification for any existing or expired leases, and (3) the initial direct costs for our existing leases.

Upon adoption of ASC 842, we recognized operating lease right-of-use assets of $38,784, operating lease liabilities of $8,873, and long-term operating lease liabilities of $42,114 on our condensed consolidated balance sheet as of April 1, 2019, and corresponding reductions to other current liabilities of $2,342 and other noncurrent liabilities of $9,861 associated with previously recognized deferred rent and remaining lease obligations. There was no cumulative-effect adjustment required to retained earnings. The adoption of ASC 842 did not have a significant effect on our condensed consolidated results of operations or cash flows. Comparative information in this Report has not been adjusted and continues to be reported under the previous lease accounting rules. Refer to Note 4 for additional details.

Recent Accounting Standards Not Yet Adopted.   Recent accounting pronouncements requiring implementation in current or future periods are discussed below or in the notes, where applicable.

In August 2018, the FASB issued ASU 2018-15, Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. ASU 2018-15 is effective for us in the first quarter of fiscal 2021. We are currently in the process of evaluating the potential impact of adoption of this updated authoritative guidance on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 modifies certain disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. ASU 2018-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. ASU 2018-13 is effective for us in the first quarter of fiscal 2021, and we currently do not expect the adoption of this new standard to have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of Step two of the goodwill impairment test. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. ASU 2017-04 is effective prospectively for annual and interim periods beginning after December 15, 2019, and early adoption is permitted on goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 is effective for us in the first quarter of fiscal 2021, and we currently do not expect the adoption of this new standard to have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides new guidance regarding the measurement and recognition of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. ASU 2016-13 is effective for us in the first quarter of fiscal 2021, and we currently do not expect the adoption of this new standard to have a material impact on our consolidated financial statements.

We do not believe that any other recently issued, but not yet effective accounting standards, if adopted, would have a material impact on our consolidated financial statements.

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2019	Mar. 31, 2019
Statement Of Financial Position [Abstract]
Common stock, par value (in USD per share)	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	65,436,000	64,838,000
Common stock, shares outstanding	65,436,000	64,838,000

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Share-Based Awards

6 Months Ended

Sep. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share-Based Awards

12. Share-Based Awards

Employee Stock Option and Incentive Plans

In October 2005, our shareholders approved a stock option and incentive plan (the “2005 Plan”) under which 4,800,000 shares of common stock were reserved for the issuance of awards, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock units, performance shares, performance units (including performance options) and other share-based awards. The 2005 Plan provides that our employees and directors may, at the discretion of the Board of Directors ("Board") or a duly designated compensation committee, be granted certain share-based awards. In the case of option awards granted under the 2005 Plan, the exercise price of each option is determined based on the date of grant and expire no later than 10 years from the date of grant. Awards granted pursuant to the 2005 Plan are subject to the vesting schedule or performance metrics set forth in the agreements pursuant to which they are granted. Upon a change of control of our Company, as such term is defined in the 2005 Plan, awards under the 2005 Plan will fully vest under certain circumstances. The 2005 Plan expired on May 25, 2015. As of September 30, 2019, there were 255,320 outstanding options under the 2005 Plan.

In August 2015, our shareholders approved a stock option and incentive plan (the “2015 Plan”) under which 11,500,000 shares of common stock were reserved for the issuance of awards, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock awards and restricted stock unit awards, performance stock awards and other share-based awards. In August 2017, our shareholders approved an amendment to our 2015 Equity Incentive Plan, (the “Amended 2015 Plan”), to, among other items, increase the number of shares of common stock reserved for issuance thereunder by 6,000,000, which was further amended in August 2019 as approved by our shareholders, to, among other items, increase the number of shares of common stock reserved for issuance thereunder by an additional 3,575,000. The Amended 2015 Plan provides that our employees and directors may, at the discretion of the Board or a duly designated compensation committee, be granted certain share-based awards. In the case of option awards granted under the Amended 2015 Plan, the exercise price of each option is determined based on the date of grant and expire no later than 10 years from the date of grant. Awards granted pursuant to the Amended 2015 Plan are subject to the vesting schedule or performance metrics set forth in the agreements pursuant to which they are granted. Upon a change of control of our Company, as such term is defined in the Amended 2015 Plan, awards under the Amended 2015 Plan will fully vest under certain circumstances. As of September 30, 2019, there were 2,782,330 outstanding options, 1,849,438 outstanding shares of restricted stock awards, 46,375 outstanding shares of performance stock awards, and 8,800,491 shares available for future grant under the Amended 2015 Plan.

The following table summarizes the stock option transactions during the six months ended September 30, 2019:

				Weighted-		Weighted-
				Average		Average		Aggregate
				Exercise		Remaining		Intrinsic
Employee Stock Options Summary	Number of			Price		Contractual		Value
	Shares			per Share		Life (years)		(in thousands)
Outstanding, March 31, 2019		3,166,525		$	15.36		5.5	$	7,040
Exercised		(45,925	)		15.75		4.7	$	131
Forfeited/Canceled		(48,550	)		25.41		2.0
Expired		(34,400	)		43.04
Outstanding, September 30, 2019		3,037,650		$	14.88		5.1	$	4,134
Vested and expected to vest, September 30, 2019		2,796,120		$	14.89		5.1	$	3,826
Exercisable, September 30, 2019		1,559,428		$	15.02		4.5	$	2,247

Non-vested stock option award activity during the six months ended September 30, 2019 is summarized as follows:

				Weighted-
				Average
				Grant-Date
Non-Vested Stock Option Award Summary	Number of			Fair Value
	Shares			per Share
Outstanding, March 31, 2019		1,845,855		$	5.52
Vested		(358,783	)		5.26
Forfeited/Canceled		(8,850	)		6.51
Outstanding, September 30, 2019		1,478,222		$	5.58

As of September 30, 2019, $6,069 of total unrecognized compensation costs related to stock options is expected to be recognized over a weighted-average period of 1.9 years. This amount does not include the cost of new options that may be granted in future periods or any changes in our forfeiture percentage. The total fair value of options vested during the six months ended September 30, 2019 and 2018 was $1,886 and $1,718, respectively.

Restricted stock awards activity during the six months ended September 30, 2019 is summarized as follows:

				Weighted-
				Average
				Grant-Date
Restricted Stock	Number of			Fair Value
	Shares			per Share
Outstanding, March 31, 2019		1,715,958		$	16.29
Granted		723,361			18.59
Vested		(517,528	)		16.56
Canceled		(72,353	)		17.13
Outstanding, September 30, 2019		1,849,438		$	17.08

Share-based compensation expense related to restricted stock awards was $3,713 and $2,833 for the three months ended September 30, 2019 and 2018, respectively. Share-based compensation expense related to restricted stock awards was $7,009 and $4,753 for the six months ended September 30, 2019 and 2018, respectively.

The weighted-average grant date fair value for the restricted stock awards was estimated using the market price of the common stock on the date of grant. The fair value of the restricted stock awards is amortized on a straight-line basis over the vesting period, which is generally between one to three years.

As of September 30, 2019, $25,123 of total unrecognized compensation costs related to restricted stock awards is expected to be recognized over a weighted-average period of 1.9 years. This amount does not include the cost of new restricted stock awards that may be granted in future periods.  

On December 29, 2016, the Compensation Committee of the Board granted 123,082 performance stock awards to certain executive officers, of which 46,375 shares are currently outstanding. The performance stock awards vest in four equal increments on each of the first four anniversaries of the grant date, subject in each case to the executive officer’s continued service and achievement of certain Company performance goals, including strong Company stock price performance. Share-based compensation expense related to the performance stock awards was $62 and $123 for the three and six months ended September 30, 2019, respectively.  Share-based compensation expense related to the performance stock awards was $68 and $141 for the three and six months ended September 30, 2018, respectively.

On October 23, 2018, the Compensation Committee of the Board approved 248,140 performance stock unit awards to be granted to certain executives and non-executive members of the executive leadership team, which vest only in the event certain performance goals are achieved and with continuous service through the date the goals are certified. Approximately 34% of the performance stock units are tied to our cumulative 3-year total shareholder return, 33% are tied to our fiscal year 2021 revenue, and 33% are tied to our fiscal year 2021 adjusted earnings per share goals, each as specifically defined in the equity award agreements. The number of shares to be issued may vary between 50% and 200% of the number of performance stock units depending on performance, and no such shares will be issued if threshold performance is not achieved. The weighted-average grant date fair value of the awards was $17.84 per share, which was estimated using a Monte Carlo-based valuation model for the awards based on total shareholder return and using a probability-adjusted achievement rate combined with the market price of the common stock on the date of grant for the awards based on revenue and earnings per share targets. Share-based compensation expense related to the performance stock unit awards was not significant.  

Employee Share Purchase Plan

On August 11, 2014, our shareholders approved an Employee Share Purchase Plan (the “Purchase Plan”) under which 4,000,000 shares of common stock were reserved for future grant.  The Purchase Plan allows eligible employees to purchase shares through payroll deductions of up to 15% of total base salary at a price equal to 90% of the lower of the fair market values of the shares as of the beginning or the end of the corresponding offering period.  Any shares purchased under the Purchase Plan are subject to a six-month holding period.  Employees are limited to purchasing no more than 1,500 shares on any single purchase date and no more than $25 in total fair market value of shares during any one calendar year. As of September 30, 2019, we have issued 521,975 shares under the Purchase Plan and 3,478,025 shares are available for future issuance.

Share-based compensation expense recorded for the employee share purchase plan was $109 and $100 for the three months ended September 30, 2019 and 2018, respectively. Share-based compensation expense recorded for the employee share purchase plan was $231 and $232 for the six months ended September 30, 2019 and 2018, respectively.

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Fair Value Measurements - Fair Value of Assets and Liabilities on a Recurring Basis (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands		Sep. 30, 2019	Mar. 31, 2019
Carrying Value
ASSETS
Cash and cash equivalents	[1]	$ 42,930	$ 33,079
Restricted cash and cash equivalents		7,501	1,443
Total		50,431	34,522
LIABILITIES
Contingent consideration related to acquisitions		1,400	1,000
Total		1,400	1,000
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value
ASSETS
Cash and cash equivalents	[1]	42,930	33,079
Restricted cash and cash equivalents		7,501	1,443
Total		50,431	34,522
LIABILITIES
Contingent consideration related to acquisitions		0	0
Total		0	0
Significant Other Observable Inputs (Level 2) | Fair Value
ASSETS
Cash and cash equivalents	[1]	0	0
Restricted cash and cash equivalents		0	0
Total		0	0
LIABILITIES
Contingent consideration related to acquisitions		0	0
Total		0	0
Unobservable Inputs (Level 3) | Fair Value
ASSETS
Cash and cash equivalents	[1]	0	0
Restricted cash and cash equivalents		0	0
Total		0	0
LIABILITIES
Contingent consideration related to acquisitions		1,400	1,000
Total		$ 1,400	$ 1,000

[1] Cash equivalents consist primarily of money market funds.

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Summary of Significant Accounting Policies - Schedule of Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Costs and expenses:
Total share-based compensation	$ 4,316	$ 4,135	$ 9,207	$ 7,251
Income tax benefit	(1,102)	(1,016)	(2,317)	(1,769)
Decrease in net income	3,214	3,119	6,890	5,482
Cost of Revenue
Costs and expenses:
Total share-based compensation	536	348	999	581
Research and Development Costs
Costs and expenses:
Total share-based compensation	817	726	1,845	1,336
Selling, General and Administrative
Costs and expenses:
Total share-based compensation	$ 2,963	$ 3,061	$ 6,363	$ 5,334

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Subsequent Events

6 Months Ended

Sep. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

16. Subsequent Events

On October 4, 2019, we completed our acquisition of Topaz Information, L.L.C. (“Topaz”) pursuant to the terms of the Purchase Agreement, dated October 4, 2019 (the "Agreement"). Topaz is based in Phoenix, AZ and provides healthcare solutions to behavioral health and social services organizations that utilize the NextGen platform. Its extensive clinical content and domain expertise has been instrumental in our ability to compete and win. By combining our companies, we will be positioned to provide the platform and domain expertise to deliver integrated and collaborative care in a re-energized behavioral health market. Total cash consideration paid was $8,000, subject to certain adjustments in accordance with the terms of the Agreement. In addition, we may pay up to an additional $2,000 cash in the form of an earnout, subject to the achievement of certain operational targets over an approximately eighteen-month period. The acquisition was funded by cash flows from operations. We are in the process of determining the purchase price allocation for this acquisition.

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Fair Value Measurements (Tables)

6 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value of Assets and Liabilities on a Recurring Basis

The following tables set forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis at September 30, 2019 and March 31, 2019:

	Balance At		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Unobservable Inputs
	September 30, 2019		(Level 1)		(Level 2)		(Level 3)
ASSETS
Cash and cash equivalents (1)	$	42,930	$	42,930	$	—	$	—
Restricted cash and cash equivalents		7,501		7,501		—		—
	$	50,431	$	50,431	$	—	$	—
LIABILITIES
Contingent consideration related to acquisitions	$	1,400	$	—	$	—	$	1,400
	$	1,400	$	—	$	—	$	1,400

	Balance At		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Unobservable Inputs
	March 31, 2019		(Level 1)		(Level 2)		(Level 3)
ASSETS
Cash and cash equivalents (1)	$	33,079	$	33,079	$	—	$	—
Restricted cash and cash equivalents		1,443		1,443		—		—
	$	34,522	$	34,522	$	—	$	—
LIABILITIES
Contingent consideration related to acquisitions	$	1,000	$	—	$	—	$	1,000
	$	1,000	$	—	$	—	$	1,000

⁽¹⁾ Cash equivalents consist primarily of money market funds.

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Intangible Assets - Estimated Amortization of Intangible Assets with Determinable Lives (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Mar. 31, 2019
Finite Lived Intangible Assets [Line Items]
2020 (remaining six months)	$ 10,306
2021	16,071
2022	7,753
2023	3,626
2024	1,728
2025 and beyond	2,806
Net intangible assets	42,290	$ 52,595
Operating Expense
Finite Lived Intangible Assets [Line Items]
2020 (remaining six months)	1,730
2021	2,803
2022	2,273
2023	1,866
2024	1,548
2025 and beyond	2,626
Net intangible assets	12,846
Cost of Revenue
Finite Lived Intangible Assets [Line Items]
2020 (remaining six months)	8,576
2021	13,268
2022	5,480
2023	1,760
2024	180
2025 and beyond	180
Net intangible assets	$ 29,444

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Leases - Summary of Future Minimum Lease Payments Under Non-cancelable Operating Leases (Details) $ in Thousands	Mar. 31, 2019 USD ($)
Leases [Abstract]
2020	$ 10,511
2021	10,701
2022	10,161
2023	9,660
2024	7,730
Thereafter	8,097
Total obligations and commitments	$ 56,860

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Earnings Per Share - Additional Information (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Employee Stock Options
Options excluded from the computation of diluted net income per share	1,794	411	894	1,895

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Share Based Awards - Summary of Restricted Stock Awards Activity (Details) - Restricted Stock	6 Months Ended
	Sep. 30, 2019 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of Shares Outstanding Beginning Balance | shares	1,715,958
Granted | shares	723,361
Vested | shares	(517,528)
Canceled | shares	(72,353)
Number of Shares Outstanding Ending Balance | shares	1,849,438
Weighted Average Grant-Date Fair Value per Share, Beginning of Period | $ / shares	$ 16.29
Weighted Average Grant-Date Fair Value per Share, Granted | $ / shares	18.59
Weighted Average Grant-Date Fair Value per Share, Vested | $ / shares	16.56
Weighted Average Grant-Date Fair Value per Share, Canceled | $ / shares	17.13
Weighted Average Grant-Date Fair Value per Share, End of Period | $ / shares	$ 17.08

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Income Taxes - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Mar. 31, 2019
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 509	$ 1,896	$ 129	$ 2,338
Effective tax rate (benefit) and expenses (as a percentage)	7.70%	12.60%	1.70%	12.90%
Liability for unrecognized tax benefits	$ 3,206		$ 3,206		$ 2,894
Period within which the company does not anticipate total unrecognized tax benefits to change			within the next twelve months

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Capitalized Software Costs - Estimated Amortization of Capitalized Software Costs (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Mar. 31, 2019
Finite Lived Intangible Assets [Line Items]
2020 (remaining six months)	$ 10,306
2021	16,071
2022	7,753
2023	3,626
Net intangible assets	42,290	$ 52,595
Capitalized Software Costs
Finite Lived Intangible Assets [Line Items]
2020 (remaining six months)	11,100
2021	16,900
2022	8,400
2023	2,676
Net intangible assets	$ 39,076

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Composition of Certain Financial Statement Captions - Summary of Equipment and Improvements (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Mar. 31, 2019
Property Plant And Equipment [Line Items]
Equipment and improvements, gross	$ 77,065	$ 72,817
Accumulated depreciation and amortization	(55,016)	(51,413)
Equipment and improvements, net	22,049	21,404
Computer Equipment
Property Plant And Equipment [Line Items]
Equipment and improvements, gross	31,908	28,923
Internal-Use Software
Property Plant And Equipment [Line Items]
Equipment and improvements, gross	17,426	17,084
Furniture and Fixtures
Property Plant And Equipment [Line Items]
Equipment and improvements, gross	12,075	11,660
Leasehold Improvements
Property Plant And Equipment [Line Items]
Equipment and improvements, gross	$ 15,656	$ 15,150

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Revenue from Contracts with Customers - Schedule of Revenues Disaggregated by Major Revenue Categories and by Occurrence (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation Of Revenue [Line Items]
Total revenues	$ 134,256	$ 130,321	$ 266,117	$ 263,521
Subscription Services
Disaggregation Of Revenue [Line Items]
Total revenues	31,411	29,255	61,555	57,583
Support And Maintenance
Disaggregation Of Revenue [Line Items]
Total revenues	39,360	39,594	79,012	80,842
Managed Services
Disaggregation Of Revenue [Line Items]
Total revenues	25,219	23,527	50,900	49,797
Electronic Data Interchange And Data Services
Disaggregation Of Revenue [Line Items]
Total revenues	24,599	23,941	48,569	48,102
Recurring
Disaggregation Of Revenue [Line Items]
Total revenues	120,589	116,317	240,036	236,324
Software License and Hardware
Disaggregation Of Revenue [Line Items]
Total revenues	8,258	9,353	15,353	16,796
Other Non-recurring Services
Disaggregation Of Revenue [Line Items]
Total revenues	5,409	4,651	10,728	10,401
Software, Hardware, and Other Non-recurring
Disaggregation Of Revenue [Line Items]
Total revenues	$ 13,667	$ 14,004	$ 26,081	$ 27,197

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Earnings Per Share (Tables)

6 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Weighted Average Shares Outstanding for Basic and Diluted Net Income Per Share

The dual presentation of “basic” and “diluted” earnings per share is provided below. Share amounts below are in thousands.

	Three Months Ended September 30,				Six Months Ended September 30,
	2019		2018		2019		2018
Earnings per share — Basic:
Net income	$	6,081	$	13,094	$	7,325	$	15,742
Weighted-average shares outstanding — Basic		65,401		64,265		65,209		64,143
Net income per common share — Basic	$	0.09	$	0.20	$	0.11	$	0.25
Earnings per share — Diluted:
Net income	$	6,081	$	13,094	$	7,325	$	15,742
Weighted-average shares outstanding		65,401		64,265		65,209		64,143
Effect of potentially dilutive securities		159		592		236		219
Weighted-average shares outstanding — Diluted		65,560		64,857		65,445		64,362
Net income per common share — Diluted	$	0.09	$	0.20	$	0.11	$	0.24

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Leases - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Lessee Lease Description [Line Items]
Total operating lease costs	$ 2,751	$ 2,027	$ 5,051	$ 4,055
Operating lease, weighted average remaining lease term	5 years		5 years
Operating lease, weighted average discount rate, percent	4.20%		4.20%
Minimum
Lessee Lease Description [Line Items]
Lease expiration year			2020
Maximum
Lessee Lease Description [Line Items]
Lease expiration year			2026

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Fair Value Measurements

6 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The following tables set forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis at September 30, 2019 and March 31, 2019:

	Balance At		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Unobservable Inputs
	September 30, 2019		(Level 1)		(Level 2)		(Level 3)
ASSETS
Cash and cash equivalents (1)	$	42,930	$	42,930	$	—	$	—
Restricted cash and cash equivalents		7,501		7,501		—		—
	$	50,431	$	50,431	$	—	$	—
LIABILITIES
Contingent consideration related to acquisitions	$	1,400	$	—	$	—	$	1,400
	$	1,400	$	—	$	—	$	1,400

	Balance At		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Unobservable Inputs
	March 31, 2019		(Level 1)		(Level 2)		(Level 3)
ASSETS
Cash and cash equivalents (1)	$	33,079	$	33,079	$	—	$	—
Restricted cash and cash equivalents		1,443		1,443		—		—
	$	34,522	$	34,522	$	—	$	—
LIABILITIES
Contingent consideration related to acquisitions	$	1,000	$	—	$	—	$	1,000
	$	1,000	$	—	$	—	$	1,000

⁽¹⁾ Cash equivalents consist primarily of money market funds.

The contingent liability balance relates to the acquisition of Inforth Technologies in which up to an additional $4,000 of cash is payable in the form of an earnout subject to the achievement of certain bookings targets through March 31, 2020. The categorization of the framework used to measure fair value of the contingent consideration liability was considered to be within the Level 3 valuation hierarchy due to the subjective nature of the unobservable inputs used. We assess the fair value of the contingent consideration liability on a recurring basis and any adjustments to fair value subsequent to the initial measurement period are reflected in the condensed consolidated statements of net income and comprehensive income. Key assumptions included probability-adjusted achievement estimates of applicable bookings targets that were not observable in the market. During the three and six months ended September 30, 2019, we recorded $400 in fair value adjustments to the contingent consideration liability, which is included as a component of selling, general and administrative expense in the condensed consolidated statements of net income and comprehensive income.

We believe that the fair value of other financial assets and liabilities, including accounts receivable, accounts payable, and line of credit, approximate their respective carrying values due to their nominal credit risk.

Non-Recurring Fair Value Measurements

We have certain assets, including goodwill and other intangible assets, which are measured at fair value on a non-recurring basis and are adjusted to fair value only if an impairment charge is recognized. The categorization of the framework used to measure fair value of the assets is considered to be within the Level 3 valuation hierarchy due to the subjective nature of the unobservable inputs used. During the three and six months ended September 30, 2019, we recorded certain impairments to our operating lease assets and equipment and improvements (see Note 15).

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Intangible Assets

6 Months Ended

Sep. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets

6. Intangible Assets

Our definite-lived intangible assets, other than capitalized software development costs, are summarized as follows:

	September 30, 2019
	Customer			Software
	Relationships			Technology			Total
Gross carrying amount	$	32,400		$	93,000		$	125,400
Accumulated amortization		(19,554	)		(63,556	)		(83,110	)
Net intangible assets	$	12,846		$	29,444		$	42,290

	March 31, 2019
	Customer			Software
	Relationships			Technology			Total
Gross carrying amount	$	54,450		$	94,310		$	148,760
Accumulated amortization		(39,875	)		(56,290	)		(96,165	)
Net intangible assets	$	14,575		$	38,020		$	52,595

Amortization expense related to customer relationships and contracts recorded as operating expenses in the condensed consolidated statements of comprehensive income was $864 and $1,121 for the three months ended September 30, 2019 and 2018, respectively. Amortization expense related to software technology recorded as cost of revenue was $4,288 and $4,288 for the three months ended September 30, 2019 and 2018, respectively.

Amortization expense related to customer relationships and contracts recorded as operating expenses in the condensed consolidated statements of comprehensive income was $1,729 and $2,289 for the six months ended September 30, 2019 and 2018, respectively. Amortization expense related to software technology recorded as cost of revenue was $8,576 and $8,575 for the six months ended September 30, 2019 and 2018, respectively.

The following table summarizes the remaining estimated amortization of definite-lived intangible assets as of September 30, 2019:

	Estimated Remaining Amortization Expense
	Operating Expense		Cost of Revenue		Total
For the year ended March 31,
2020 (remaining six months)	$	1,730	$	8,576	$	10,306
2021		2,803		13,268		16,071
2022		2,273		5,480		7,753
2023		1,866		1,760		3,626
2024		1,548		180		1,728
2025 and beyond		2,626		180		2,806
Total	$	12,846	$	29,444	$	42,290

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Income Taxes

6 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

The provision for income taxes in the three months ended September 30, 2019 and 2018 was $509 and $1,896, respectively. The effective tax rates were 7.7% and 12.6% for the three months ended September 30, 2019 and 2018, respectively. The decrease in the effective tax rate for the three months ended September 30, 2019 compared to the prior year period was primarily due to the increased net benefit of the research and development credits, partially offset by nondeductible stock option related expenses, nondeductible officer’s compensation, and reserves for uncertain tax position.

The provision for income taxes in the six months ended September 30, 2019 and 2018 was $129 and $2,338, respectively. The effective tax rates were 1.7% and 12.9% for the six months ended September 30, 2019 and 2018, respectively. The decrease in the effective tax rate for the six months ended September 30, 2019 compared to the prior year period was primarily due to the increased net benefit of the research and development credits and other one-time discrete benefits, partially offset by nondeductible stock option related expenses.

The deferred tax assets and liabilities are presented net in the accompanying condensed consolidated balance sheets as noncurrent. We expect to receive the full benefit of the deferred tax assets recorded, with the exception of certain state credits, and state net operating loss carryforwards, for which we have recorded a valuation allowance.

Uncertain tax positions

We had liabilities of $3,206 and $2,894 for unrecognized tax benefits related to various federal, state and local income tax matters as of September 30, 2019 and March 31, 2019, respectively. If recognized, this amount would reduce our effective tax rate.

We are no longer subject to United States federal income tax examinations for tax years before fiscal year ended 2015. With a few exceptions, we are no longer subject to state or local income tax examinations for tax years before fiscal year ended 2014. We do not anticipate the total unrecognized tax benefits to significantly change due to the settlement of audits or the expiration of statute of limitations within the next twelve months.

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Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss
Balance at Mar. 31, 2018	$ 323,410	$ 640	$ 244,462	$ 78,708	$ (400)
Balance, Shares at Mar. 31, 2018		63,995
Common stock issued under stock plans, net of shares withheld for taxes	(202)	$ 2	(204)
Common stock issued under stock plans, net of shares withheld for taxes, Shares		225
Stock-based compensation	3,116		3,116
Cumulative effect adjustment related to the adoption of ASC 606	8,419			8,419
Other comprehensive income:
Translation adjustments	(499)				(499)
Net income	2,648			2,648
Balance at Jun. 30, 2018	336,892	$ 642	247,374	89,775	(899)
Balance, Shares at Jun. 30, 2018		64,220
Balance at Mar. 31, 2018	323,410	$ 640	244,462	78,708	(400)
Balance, Shares at Mar. 31, 2018		63,995
Other comprehensive income:
Translation adjustments	(1,292)
Net income	15,742
Balance at Sep. 30, 2018	355,434	$ 644	253,613	102,869	(1,692)
Balance, Shares at Sep. 30, 2018		64,382
Balance at Jun. 30, 2018	336,892	$ 642	247,374	89,775	(899)
Balance, Shares at Jun. 30, 2018		64,220
Common stock issued under stock plans, net of shares withheld for taxes	2,106	$ 2	2,104
Common stock issued under stock plans, net of shares withheld for taxes, Shares		162
Stock-based compensation	4,135		4,135
Other comprehensive income:
Translation adjustments	(793)				(793)
Net income	13,094			13,094
Balance at Sep. 30, 2018	355,434	$ 644	253,613	102,869	(1,692)
Balance, Shares at Sep. 30, 2018		64,382
Balance at Mar. 31, 2019	375,946	$ 648	264,908	111,621	(1,231)
Balance, Shares at Mar. 31, 2019		64,838
Common stock issued under stock plans, net of shares withheld for taxes	(1,305)	$ 6	(1,311)
Common stock issued under stock plans, net of shares withheld for taxes, Shares		545
Stock-based compensation	4,891		4,891
Other comprehensive income:
Translation adjustments	54				54
Net income	1,244			1,244
Balance at Jun. 30, 2019	380,830	$ 654	268,488	112,865	(1,177)
Balance, Shares at Jun. 30, 2019		65,383
Balance at Mar. 31, 2019	375,946	$ 648	264,908	111,621	(1,231)
Balance, Shares at Mar. 31, 2019		64,838
Other comprehensive income:
Translation adjustments	(89)
Net income	7,325
Balance at Sep. 30, 2019	391,128	$ 654	272,848	118,946	(1,320)
Balance, Shares at Sep. 30, 2019		65,436
Balance at Jun. 30, 2019	380,830	$ 654	268,488	112,865	(1,177)
Balance, Shares at Jun. 30, 2019		65,383
Common stock issued under stock plans, net of shares withheld for taxes	44		44
Common stock issued under stock plans, net of shares withheld for taxes, Shares		53
Stock-based compensation	4,316		4,316
Other comprehensive income:
Translation adjustments	(143)				(143)
Net income	6,081			6,081
Balance at Sep. 30, 2019	$ 391,128	$ 654	$ 272,848	$ 118,946	$ (1,320)
Balance, Shares at Sep. 30, 2019		65,436

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Document and Entity Information - shares	6 Months Ended
	Sep. 30, 2019	Oct. 21, 2019
Cover [Abstract]
Entity Registrant Name	NEXTGEN HEALTHCARE, INC.
Trading Symbol	NXGN
Entity Central Index Key	0000708818
Document Type	10-Q
Document Period End Date	Sep. 30, 2019
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--03-31
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Entity File Number	001-12537
Entity Tax Identification Number	95-2888568
Entity Address, Address Line One	18111 Von Karman Avenue
Entity Address, Address Line Two	Suite 800
Entity Address, City or Town	Irvine
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92612
City Area Code	(949)
Local Phone Number	255-2600
Entity Interactive Data Current	Yes
Title of 12(b) Security	Common Stock, $0.01 Par Value
Security Exchange Name	NASDAQ
Entity Incorporation, State or Country Code	CA
Document Quarterly Report	true
Document Transition Report	false
Entity Common Stock, Shares Outstanding		65,433,363

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Intangible Assets (Tables)

6 Months Ended

Sep. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets, Other than Capitalized Software Development Costs

Our definite-lived intangible assets, other than capitalized software development costs, are summarized as follows:

	September 30, 2019
	Customer			Software
	Relationships			Technology			Total
Gross carrying amount	$	32,400		$	93,000		$	125,400
Accumulated amortization		(19,554	)		(63,556	)		(83,110	)
Net intangible assets	$	12,846		$	29,444		$	42,290

	March 31, 2019
	Customer			Software
	Relationships			Technology			Total
Gross carrying amount	$	54,450		$	94,310		$	148,760
Accumulated amortization		(39,875	)		(56,290	)		(96,165	)
Net intangible assets	$	14,575		$	38,020		$	52,595

Estimated Amortization of Intangible Assets with Determinable Lives

The following table summarizes the remaining estimated amortization of definite-lived intangible assets as of September 30, 2019:

	Estimated Remaining Amortization Expense
	Operating Expense		Cost of Revenue		Total
For the year ended March 31,
2020 (remaining six months)	$	1,730	$	8,576	$	10,306
2021		2,803		13,268		16,071
2022		2,273		5,480		7,753
2023		1,866		1,760		3,626
2024		1,548		180		1,728
2025 and beyond		2,626		180		2,806
Total	$	12,846	$	29,444	$	42,290

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Commitments, Guarantees and Contingencies

6 Months Ended

Sep. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments, Guarantees and Contingencies

14. Commitments, Guarantees and Contingencies

Commitments and Guarantees

Our software license agreements include a performance guarantee that our software products will substantially operate as described in the applicable program documentation for a period of 365 days after delivery. To date, we have not incurred any significant costs associated with our performance guarantee or other related warranties and do not expect to incur significant warranty costs in the future. Therefore, no accrual has been made for potential costs associated with these warranties. Certain arrangements also include performance guarantees related to response time, availability for operational use, and other performance-related guarantees. Certain arrangements also include penalties in the form of maintenance credits should the performance of the software fail to meet the performance guarantees. To date, we have not incurred any significant costs associated with these warranties and do not expect to incur significant warranty costs in the future. Therefore, no accrual has been made for potential costs associated with these warranties.

We historically have accepted sales returns under limited circumstances. We estimate expected sales returns and other forms of variable consideration considering our customary business practice and contract-specific facts and circumstances, and we consider such estimated potential returns as variable consideration when allocating the transaction price to the extent it is probable that there will not be a significant reversal of cumulative revenue recognized.

Our standard sales agreements contain an indemnification provision pursuant to which we shall indemnify, hold harmless, and reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with any United States patent, any copyright or other intellectual property infringement claim by any third-party with respect to our software. As we have not incurred any significant costs to defend lawsuits or settle claims related to these indemnification agreements, we believe that our estimated exposure on these agreements is currently minimal. Accordingly, we have no liabilities recorded for these indemnification obligations.

Hussein Litigation

On October 7, 2013, a complaint was filed against our Company and certain of our officers and directors in the Superior Court of the State of California for the County of Orange, captioned Ahmed D. Hussein v. Sheldon Razin, Steven Plochocki, Quality Systems, Inc. and Does 1-10, inclusive, No. 30-2013-00679600-CU-NP-CJC, by Ahmed Hussein, a former director and significant shareholder of our Company. We filed a demurrer to the complaint, which the Court granted on April 10, 2014. An amended complaint was filed on April 25, 2014. The amended complaint generally alleges fraud and deceit, constructive fraud, negligent misrepresentation and breach of fiduciary duty in connection with statements made to our shareholders regarding our financial condition and projected future performance. The amended complaint seeks actual damages, exemplary and punitive damages and costs. We filed a demurrer to the amended complaint. On July 29, 2014, the Court sustained the demurrer with respect to the breach of fiduciary duty claim, and overruled the demurrer with respect to the fraud and deceit claims. On August 28, 2014, we filed an answer and also filed a cross-complaint against Hussein, alleging that he breached fiduciary duties owed to the Company, Mr. Razin and Mr. Plochocki. Mr. Razin and Mr. Plochocki have dismissed their claims against Hussein, leaving QSI as the sole plaintiff in the cross-complaint. On June 26, 2015, we filed a motion for summary judgment with respect to Hussein’s claims, which the Court granted on September 16, 2015, dismissing all of Hussein’s claims against us. On September 23, 2015, Hussein filed an application for reconsideration of the Court's summary judgment order, which the Court denied. Hussein filed a renewed application for reconsideration of the Court’s summary judgment order on August 3, 2017. The Court again denied Hussein’s application. On October 28, 2015, May 9, 2016, and August 5, 2016, Hussein filed a motion for summary judgment, motion for summary adjudication, and motion for judgment on the pleadings, respectively, seeking to dismiss our cross-complaint. The Court denied each motion. Trial on our cross-complaint began June 12, 2017. On July 26, 2017, the Court issued a statement of decision granting Hussein’s motion for judgment on our cross-complaint. Final judgment over Hussein’s claims and our cross-claims was entered on January 9, 2018. Hussein has noticed his appeal of the order granting summary judgment over his claims, and we noticed a cross-appeal on the court’s statement of decision granting Hussein’s motion for judgment on our cross-complaint. On October 8, 2019, the California State Court of Appeal for the Fourth Appellate District, Division Three, reversed the Superior Court’s grant of summary judgment against Hussein’s affirmative claims and affirmed the trial court’s judgement after a bench trial against the Company on its breach of fiduciary duty claims against Hussein. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this claim.

Shareholder Derivative Litigation

On September 28, 2017, a complaint was filed against our Company and certain of our current and former officers and directors in the United States District Court for the Central District of California, captioned Kusumam Koshy, derivatively on behalf of Quality Systems Inc. vs. Craig Barbarosh, George H. Bristol, James C. Malone, Peter M. Neupert, Morris Panner, D. Russell Pflueger, Steven T. Plochocki, Sheldon Razin, Lance E. Rosenzweig, Paul A. Holt, and Quality Systems, Inc., No. 8:17-cv-01694, by Kusumam Koshy, a purported shareholder of ours. The complaint alleges breach of fiduciary duties and abuse of control, as well as unjust enrichment and insider selling by individual directors arising out of the allegations described above under the caption “Hussein Litigation” and a related, now-settled, federal securities class action, as well as the Company’s adoption of revised indemnification agreements, and the resignation of certain officers of the Company. The complaint seeks restitution and disgorgement, court costs and attorneys’ fees, and enhanced corporate governance reforms and internal control procedures. On January 12, 2018, Defendants filed a motion to dismiss the derivative complaint.  On July 25, 2018, the Court dismissed the complaint with prejudice. On August 24, 2018, the plaintiff filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit. Briefing was completed in May 2019 and a hearing on the appeal will be held on December 12, 2019. We believe that the plaintiff’s appeal is without merit and intend to defend against it vigorously. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this claim.

Other Regulatory Matters

Commencing in April 2017, we have received a request for documents and information from the United States Attorney's Office for the District of Vermont and other government agencies in connection with an investigation concerning the certification we obtained for our software under the United States Department of Health and Human Services' Electronic Health Record (EHR) Incentive Program. The requests for information relate to, among other things: (a) data used to determine objectives and measures under the Meaningful Use (MU) and the Physician Quality Reporting System (PQRS) programs, (b) EHR software code used in certifying our software and information, and (c) payments provided for the referral of EHR business. We continue to cooperate in this investigation. Requests and investigations of this nature may lead to future requests for information and ultimately the assertion of claims or the commencement of legal proceedings against us, as well as other material liabilities.  In addition, our responses to these and any future requests require time and effort, which can result in additional cost to us. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this matter.  Given the highly-regulated nature of our industry, we may, from time to time, be subject to subpoenas, requests for information, or investigations from various government agencies. It is our practice to respond to such matters in a cooperative, thorough and timely manner.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Schedule of Stock-Based Compensation Expense

The following table summarizes total share-based compensation expense included in the condensed consolidated statements of comprehensive income for the three and six months ended September 30, 2019 and 2018:

	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
Costs and expenses:
Cost of revenue	$	536		$	348		$	999		$	581
Research and development costs		817			726			1,845			1,336
Selling, general and administrative		2,963			3,061			6,363			5,334
Total share-based compensation		4,316			4,135			9,207			7,251
Income tax benefit		(1,102	)		(1,016	)		(2,317	)		(1,769	)
Decrease in net income	$	3,214		$	3,119		$	6,890		$	5,482

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Share Based Awards - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Sep. 30, 2019	Mar. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of Shares, Outstanding, Beginning	3,166,525
Number of Shares, Exercised	(45,925)
Number of Shares, Forfeited/Canceled	(48,550)
Number of Shares, Expired	(34,400)
Number of Shares, Outstanding, Ending	3,037,650	3,166,525
Vested and expected to vest, September 30, 2019	2,796,120
Exercisable, September 30, 2019	1,559,428
Weighted- Average Exercise Price per Share
Weighted-Average Exercise Price per Share, Outstanding, Beginning	$ 15.36
Weighted-Average Exercise Price per Share, Exercised	15.75
Weighted-Average Exercise Price per Share, Forfeited/Cancelled	25.41
Weighted-Average Exercise Price per Share, Expired	43.04
Weighted-Average Exercise Price per Share, Outstanding, Ending	14.88	$ 15.36
Vested and expected to vest, September 30, 2019 (in dollars per share)	14.89
Exercisable, September 30, 2019 (in dollars per share)	$ 15.02
Weighted- Average Remaining Contractual Life (years)
Outstanding	5 years 1 month 6 days	5 years 6 months
Exercised	4 years 8 months 12 days
Forfeited/Canceled	2 years
Vested and expected to vest, September 30, 2019	5 years 1 month 6 days
Exercisable, September 30, 2019	4 years 6 months
Aggregate Intrinsic Value
Outstanding	$ 4,134	$ 7,040
Exercised	131
Vested and expected to vest, September 30, 2019	3,826
Exercisable, September 30, 2019	$ 2,247

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Restructuring Plan - Additional Information (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Sep. 30, 2019	Sep. 30, 2019
Restructuring Cost And Reserve [Line Items]
Restructuring costs		$ 175	$ 1,882
Lease Right of Use Assets and Property Plant and Equipment
Restructuring Cost And Reserve [Line Items]
Other asset impairment charges		$ 1,916	$ 2,405
Research and Development Costs
Restructuring Cost And Reserve [Line Items]
Restructuring plan, percentage of number of positions eliminated	4.00%

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Intangible Assets - Intangible Assets, Other than Capitalized Software Development Costs (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Mar. 31, 2019
Finite Lived Intangible Assets [Line Items]
Gross carrying amount	$ 125,400	$ 148,760
Accumulated amortization	(83,110)	(96,165)
Net intangible assets	42,290	52,595
Customer Relationships
Finite Lived Intangible Assets [Line Items]
Gross carrying amount	32,400	54,450
Accumulated amortization	(19,554)	(39,875)
Net intangible assets	12,846	14,575
Computer Software, Intangible Asset
Finite Lived Intangible Assets [Line Items]
Gross carrying amount	93,000	94,310
Accumulated amortization	(63,556)	(56,290)
Net intangible assets	$ 29,444	$ 38,020

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Leases - Supplemental Cash Flow Information Related to Operating Leases (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Leases [Abstract]
Cash paid for amounts included in the measurement of operating lease liabilities	$ 2,864	$ 5,480
Operating lease assets obtained in exchange for operating lease liabilities		$ 5,324

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Capitalized Software Costs - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Research And Development [Abstract]
Amortization of capitalized software costs	$ 4,555	$ 2,635	$ 8,680	$ 4,892

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Restructuring Plan

6 Months Ended

Sep. 30, 2019

Restructuring Costs [Abstract]

Restructuring Plan

15. Restructuring Plan

In June 2019, we implemented a business restructuring plan as part of our continued efforts to preserve and grow the value of the Company through client-focused innovations while reducing our cost structure. As part of the restructuring, we reduced our total workforce by approximately 4% primarily within the research and development function and intend to expand on our research and development resources in India. We recorded $175 and $1,882 of restructuring costs in the three and six months ended September 30, 2019, respectively, within operating expenses in our condensed consolidated statements of comprehensive income. The restructuring costs consisted primarily of payroll-related costs, such as severance, outplacement costs, and continuing healthcare coverage, associated with the involuntary separation of employees pursuant to a one-time benefit arrangement. These amounts were accrued when it was probable that the benefits would be paid, and the amounts were reasonably estimable. The restructuring costs were substantially paid as of September 30, 2019.  

In connection with the restructuring plan, we also vacated portions of certain leased locations and recorded impairments of $1,916 and $2,405 in the three and six months ended September 30, 2019, respectively, to our operating right-of-use assets and certain related fixed assets associated with the vacated locations, or portions thereof, in Horsham, St. Louis, Irvine, and Atlanta, based on projected sublease rental income and estimated sublease commencement dates.   We are actively marketing each of these vacated locations for sublease. The impairment analysis was performed at the asset group level and the impairment charge was estimated by comparing the fair value of each asset group based on the expected cash flows to its respective book value. We determined the discount rate for each asset group based on the approximate interest rate on a collateralized basis with similar remaining terms and payments as of the impairment date. Significant judgment was required to estimate the fair value of each asset group and actual results could vary from the estimates, resulting in potential future adjustments to amounts previously recorded.

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Revenue from Contracts with Customers (Tables)

6 Months Ended

Sep. 30, 2019

Revenue From Contract With Customer [Abstract]

Schedule of Revenues Disaggregated by Major Revenue Categories and by Occurrence

The following table presents our revenues disaggregated by our major revenue categories and by occurrence:

	Three Months Ended September 30,				Six Months Ended September 30,
	2019		2018		2019		2018
Recurring revenues:
Subscription services	$	31,411	$	29,255	$	61,555	$	57,583
Support and maintenance		39,360		39,594		79,012		80,842
Managed services		25,219		23,527		50,900		49,797
Electronic data interchange and data services		24,599		23,941		48,569		48,102
Total recurring revenues		120,589		116,317		240,036		236,324
Software, hardware, and other non-recurring revenues:
Software license and hardware		8,258		9,353		15,353		16,796
Other non-recurring services		5,409		4,651		10,728		10,401
Total software, hardware and other non-recurring revenues		13,667		14,004		26,081		27,197
Total revenues	$	134,256	$	130,321	$	266,117	$	263,521

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Capitalized Software Costs (Tables)

6 Months Ended

Sep. 30, 2019

Research And Development [Abstract]

Capitalized Software Development Costs

Our capitalized software costs are summarized as follows:

	September 30, 2019			March 31, 2019
Gross carrying amount	$	68,879		$	59,782
Accumulated amortization		(29,803	)		(21,927	)
Net capitalized software costs	$	39,076		$	37,855

Estimated Amortization of Capitalized Software Costs

The following table presents the remaining estimated amortization of capitalized software costs as of September 30, 2019. The estimated amortization is comprised of (i) amortization of released products and (ii) the expected amortization for products that are not yet available for sale based on their estimated economic lives and projected general release dates.

For the year ended March 31,
2020 (remaining six months)	$	11,100
2021		16,900
2022		8,400
2023		2,676
Total	$	39,076

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Share Based Awards - Summary of Non-vested Stock Option (Details)	6 Months Ended
	Sep. 30, 2019 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward]
Non-Vested Number of Shares, Beginning Balance | shares	1,845,855
Non-Vested Number of Shares Vested | shares	(358,783)
Non-Vested Number of Shares Forfeited | shares	(8,850)
Non-Vested Number of Shares, Ending Balance | shares	1,478,222
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Weighted-Average Grant-Date Fair Value per Share, Nonvested, Beginning | $ / shares	$ 5.52
Weighted-Average Grant-Date Fair Value per Share, Vested | $ / shares	5.26
Weighted-Average Grant-Date Fair Value per Share, Forfeited | $ / shares	6.51
Weighted-Average Grant-Date Fair Value per Share, Nonvested, Ending | $ / shares	$ 5.58

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Subsequent Events - Additional Information (Details) - Topaz Information, L.L.C. - Subsequent Events $ in Thousands	Oct. 04, 2019 USD ($)
Subsequent Event [Line Items]
Business acquisition, effective date of acquisition	Oct. 04, 2019
Business acquisition, date of acquisition agreement	Oct. 04, 2019
Total cash consideration paid	$ 8,000
Business combination, additional cash in form of earnout	$ 2,000

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Capitalized Software Costs - Capitalized Software Development Costs (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Mar. 31, 2019
Research And Development [Abstract]
Gross carrying amount	$ 68,879	$ 59,782
Accumulated amortization	(29,803)	(21,927)
Net capitalized software costs	$ 39,076	$ 37,855

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Goodwill - Additional Information (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Mar. 31, 2019
Goodwill And Intangible Assets Disclosure [Abstract]
Goodwill	$ 218,771	$ 218,771

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Leases - Summary of Components of Operating Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Leases [Abstract]
Operating lease costs	$ 2,514		$ 4,677
Short-term lease costs	67		93
Variable lease costs	198		337
Less: Sublease income	(28)		(56)
Total operating lease costs	$ 2,751	$ 2,027	$ 5,051	$ 4,055

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Line of Credit - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Mar. 31, 2019	Mar. 29, 2018	Jan. 04, 2016
Line Of Credit Facility [Line Items]
Line of credit	$ 0		$ 0		$ 11,000,000
Remaining borrowing capacity	300,000,000		300,000,000
Interest expense	211,000	$ 591,000	505,000	$ 1,141,000
Amortization of debt issuance costs	178,000	$ 178,000	355,000	$ 355,000
Revolving Credit Facility
Line Of Credit Facility [Line Items]
Maximum borrowing capacity	$ 400,000,000		$ 400,000,000			$ 300,000,000	$ 250,000,000
Additional borrowing capacity						$ 100,000,000
Credit agreement maturity date			Mar. 29, 2023
Letter of Credit
Line Of Credit Facility [Line Items]
Maximum borrowing capacity							10,000,000
Swing-Line Loans
Line Of Credit Facility [Line Items]
Maximum borrowing capacity							$ 10,000,000

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Composition of Certain Financial Statement Captions - Summary of Other Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Mar. 31, 2019
Other Assets Noncurrent Disclosure [Abstract]
Capitalized commission costs	$ 16,981	$ 14,781
Deposits	5,747	5,318
Debt issuance costs	2,479	2,834
Other noncurrent assets	7,810	9,545
Other assets	$ 33,017	$ 32,478

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Earnings Per Share - Weighted Average Shares Outstanding for Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Sep. 30, 2018	Jun. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Earnings per share — Basic:
Net income	$ 6,081	$ 1,244	$ 13,094	$ 2,648	$ 7,325	$ 15,742
Weighted-average shares outstanding — Basic	65,401		64,265		65,209	64,143
Net income per common share — Basic	$ 0.09		$ 0.20		$ 0.11	$ 0.25
Earnings per share — Diluted:
Net income	$ 6,081	$ 1,244	$ 13,094	$ 2,648	$ 7,325	$ 15,742
Weighted-average shares outstanding — Basic	65,401		64,265		65,209	64,143
Effect of potentially dilutive securities	159		592		236	219
Weighted-average shares outstanding — Diluted	65,560		64,857		65,445	64,362
Net income per common share — Diluted	$ 0.09		$ 0.20		$ 0.11	$ 0.24

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Fair Value Measurements - Additional Information (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2019 USD ($)
Business Acquisition [Line Items]
Change in fair value of contingent consideration		$ 400
Inforth Technologies, LLC
Business Acquisition [Line Items]
Business combination, contingent consideration arrangements, change in range of outcomes, contingent consideration, liability, value, high	$ 4,000	4,000
Inforth Technologies, LLC | Selling, General and Administrative
Business Acquisition [Line Items]
Change in fair value of contingent consideration	$ 400	$ 400

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Summary of Significant Accounting Policies - Additional Information (Details) - USD ($)	Apr. 01, 2019	Sep. 30, 2019
Accounting Policies [Line Items]
Operating lease right-of-use assets		$ 38,230,000
Operating lease liabilities		51,569,000
Operating lease liabilities, net of current		$ 41,622,000
ASC 842
Accounting Policies [Line Items]
Operating lease right-of-use assets	$ 38,784,000
Operating lease liabilities	8,873,000
Operating lease liabilities, net of current	42,114,000
Reductions to other current liabilities	2,342,000
Reductions to other noncurrent liabilities	9,861,000
Cumulative-effect adjustment to retained earnings	$ 0

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Composition of Certain Financial Statement Captions (Tables)

6 Months Ended

Sep. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Summary of Accounts Receivable

Accounts receivable includes billed amounts where the right to receive payment is unconditional and only subject to the passage of time. Undelivered products and services are included as a component of the contract liabilities balance on the accompanying condensed consolidated balance sheets.

	September 30, 2019			March 31, 2019
Accounts receivable, gross	$	87,258		$	93,513
Allowance for doubtful accounts		(3,550	)		(6,054	)
Accounts receivable, net	$	83,708		$	87,459

Summary of Prepaid Expense and Other Current Assets

Prepaid expenses and other current assets are summarized as follows:

	September 30, 2019		March 31, 2019
Prepaid expenses	$	13,868	$	15,548
Capitalized commissions costs		5,989		4,816
Other current assets		755		462
Prepaid expenses and other current assets	$	20,612	$	20,826

Summary of Equipment and Improvements

Equipment and improvements are summarized as follows:

	September 30, 2019			March 31, 2019
Computer equipment	$	31,908		$	28,923
Internal-use software		17,426			17,084
Furniture and fixtures		12,075			11,660
Leasehold improvements		15,656			15,150
Equipment and improvements, gross		77,065			72,817
Accumulated depreciation and amortization		(55,016	)		(51,413	)
Equipment and improvements, net	$	22,049		$	21,404

Summary of Other Assets

Other assets are summarized as follows:

	September 30, 2019		March 31, 2019
Capitalized commission costs	$	16,981	$	14,781
Deposits		5,747		5,318
Debt issuance costs		2,479		2,834
Other noncurrent assets		7,810		9,545
Other assets	$	33,017	$	32,478

Summary of Accrued Compensation and Related Benefits

Accrued compensation and related benefits are summarized as follows:

	September 30, 2019		March 31, 2019
Accrued vacation	$	9,323	$	9,893
Accrued bonus		8,063		11,598
Accrued commissions		3,628		3,418
Accrued payroll		811		754
Accrued compensation and related benefits	$	21,825	$	25,663

Summary of Other Current Liabilities

Other current liabilities are summarized as follows:

	September 30, 2019		March 31, 2019
Care services liabilities	$	7,501		1,443
Sales returns reserves and other customer liabilities		6,743		7,838
Customer credit balances and deposits		4,358		3,988
Accrued hosting costs		3,440		4,674
Accrued self insurance expense		2,616		2,225
Accrued employee benefits and withholdings		2,407		2,426
Accrued outsourcing costs		2,328		2,128
Accrued EDI expense		2,061		2,037
User group meeting deposits		1,813		—
Accrued consulting and outside services		1,732		3,874
Contingent consideration related to acquisitions		1,400		1,000
Accrued legal expense		895		699
Sales tax payable		599		509
Accrued royalties		587		3,090
Deferred rent and related lease obligations		—		2,196
Other accrued expenses		3,065		2,937
Other current liabilities	$	41,545	$	41,064

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues:
Total revenues	$ 134,256	$ 130,321	$ 266,117	$ 263,521
Cost of revenue:
Total cost of revenue	65,734	61,118	130,965	122,969
Amortization of capitalized software costs and acquired intangible assets	8,843	6,924	17,256	13,468
Gross profit	68,522	69,203	135,152	140,552
Operating expenses:
Selling, general and administrative	39,046	34,229	79,174	78,865
Research and development costs, net	19,789	18,371	41,840	40,499
Amortization of acquired intangible assets	865	1,121	1,730	2,289
Impairment of assets	1,916		2,405
Restructuring costs	175		1,882
Total operating expenses	61,791	53,721	127,031	121,653
Income from operations	6,731	15,482	8,121	18,899
Interest income	36	40	115	69
Interest expense	(387)	(769)	(859)	(1,499)
Other income, net	210	237	77	611
Income before provision for income taxes	6,590	14,990	7,454	18,080
Provision for income taxes	509	1,896	129	2,338
Net income	6,081	13,094	7,325	15,742
Other comprehensive income:
Foreign currency translation, net of tax	(143)	(793)	(89)	(1,292)
Comprehensive income	$ 5,938	$ 12,301	$ 7,236	$ 14,450
Net income per share:
Basic	$ 0.09	$ 0.20	$ 0.11	$ 0.25
Diluted	$ 0.09	$ 0.20	$ 0.11	$ 0.24
Weighted-average shares outstanding:
Basic	65,401	64,265	65,209	64,143
Diluted	65,560	64,857	65,445	64,362
Recurring
Revenues:
Total revenues	$ 120,589	$ 116,317	$ 240,036	$ 236,324
Cost of revenue:
Total cost of revenue	50,328	47,172	100,868	95,325
Software, Hardware, and Other Non-recurring
Revenues:
Total revenues	13,667	14,004	26,081	27,197
Cost of revenue:
Total cost of revenue	$ 6,563	$ 7,022	$ 12,841	$ 14,176

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Capitalized Software Costs

6 Months Ended

Sep. 30, 2019

Research And Development [Abstract]

Capitalized Software Costs

7. Capitalized Software Costs

Our capitalized software costs are summarized as follows:

	September 30, 2019			March 31, 2019
Gross carrying amount	$	68,879		$	59,782
Accumulated amortization		(29,803	)		(21,927	)
Net capitalized software costs	$	39,076		$	37,855

Amortization expense related to capitalized software costs was $4,555 and $2,635 for the three months ended September 30, 2019 and 2018, respectively, and is recorded as cost of revenue in the condensed consolidated statements of comprehensive income.

Amortization expense related to capitalized software costs was $8,680 and $4,892 for the six months ended September 30, 2019 and 2018, respectively.

The following table presents the remaining estimated amortization of capitalized software costs as of September 30, 2019. The estimated amortization is comprised of (i) amortization of released products and (ii) the expected amortization for products that are not yet available for sale based on their estimated economic lives and projected general release dates.

For the year ended March 31,
2020 (remaining six months)	$	11,100
2021		16,900
2022		8,400
2023		2,676
Total	$	39,076

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Revenue from Contracts with Customers

6 Months Ended

Sep. 30, 2019

Revenue From Contract With Customer [Abstract]

Revenue from Contract with Customer

2. Revenue from Contracts with Customers

Revenue Recognition and Performance Obligations

We generate revenue from sales of licensing rights and subscriptions to our software solutions, hardware and third-party software products, support and maintenance, managed services (formerly referred to as revenue cycle management and related services), EDI, and other non-recurring services, including implementation, training, and consulting services. Our contracts with customers may include multiple performance obligations that consist of various combinations of our software solutions and related services, which are generally capable of being distinct and accounted for as separate performance obligations.

The total transaction price is allocated to each performance obligation within an arrangement based on estimated standalone selling prices. We generally determine standalone selling prices based on the prices charged to customers, except for certain software licenses that are based on the residual approach because their standalone selling prices are highly variable and certain maintenance customers that are based on substantive renewal rates. In instances where standalone selling price is not observable, such as software licenses included in our RCM arrangements, we estimate standalone selling price utilizing an expected cost plus a margin approach. When standalone selling prices are not observable, significant judgment is required in estimating the standalone selling price for each performance obligation.

Revenue is recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration that we expect to be entitled to in exchange for those goods or services.

We exclude sales tax from the measurement of the transaction price and record revenue net of taxes collected from customers and subsequently remitted to governmental authorities.

The following table presents our revenues disaggregated by our major revenue categories and by occurrence:

	Three Months Ended September 30,				Six Months Ended September 30,
	2019		2018		2019		2018
Recurring revenues:
Subscription services	$	31,411	$	29,255	$	61,555	$	57,583
Support and maintenance		39,360		39,594		79,012		80,842
Managed services		25,219		23,527		50,900		49,797
Electronic data interchange and data services		24,599		23,941		48,569		48,102
Total recurring revenues		120,589		116,317		240,036		236,324
Software, hardware, and other non-recurring revenues:
Software license and hardware		8,258		9,353		15,353		16,796
Other non-recurring services		5,409		4,651		10,728		10,401
Total software, hardware and other non-recurring revenues		13,667		14,004		26,081		27,197
Total revenues	$	134,256	$	130,321	$	266,117	$	263,521

Recurring revenues consist of subscription services, support and maintenance, managed services, and EDI and data services. Software, hardware, and other non-recurring revenues consist of sales of software licenses and hardware and certain non-recurring services, such as implementation, training, and consulting performed for clients who use our products.

Generally, we recognize revenue for our most significant performance obligations as follows:

Subscription services. Performance obligations involving subscription services, which include annual libraries, are satisfied over time as the customer simultaneously receives and consumes the benefits of the services throughout the contract period. Our subscription services primarily include our hosting services, which we refer to as managed cloud services and our software-as-a-service (“SaaS”) based offerings, such as our electronic health records and practice management, mobile, patient portal, and population health management solutions. Our managed cloud services represent a single performance obligation to provide cloud hosting services to our customers. Our SaaS-based offerings may include multiple goods and services, such as providing access to our technology-based solutions together with our managed cloud services. These offerings are concurrently delivered with the same pattern of transfer to our customers and are accounted for as a single performance obligation because the technology-based solutions and other goods and services included within our overall SaaS-based offerings are each individually not capable of being distinct as the customer receives benefits based on the combined offering. Our annual libraries primarily consist of providing stand-ready access to certain content, knowledgebase, databases, and SaaS-based educational tools, which are frequently updated to meet the most current standards and requirements, to be utilized in conjunction with our core solutions. We recognize revenue related to these subscription services, including annual libraries, ratably over the respective noncancelable contract term.

Support and maintenance. Performance obligations involving support and maintenance are satisfied over time as the customer simultaneously receives and consumes the benefits of the maintenance services provided. Our support and maintenance services may consist of separate performance obligations, such as unspecified upgrades or enhancements and technical support, which are considered stand-ready in nature and can be offered at various points during the service period. Since the efforts associated with the combined support and maintenance services are rendered concurrently and provided evenly throughout the service period, we consider the series of support and maintenance services to be a single performance obligation. Therefore, we recognize revenue related to these services ratably over the respective noncancelable contract term.

Managed services. Managed services consist primarily of RCM and related services, but also includes transcription services and certain other recurring services. Performance obligations associated with RCM services are satisfied over time as the customer simultaneously receives and consumes the benefits of the services executed throughout the contract period. The majority of service fees under our RCM arrangements are variable consideration contingent upon collections by our clients. We estimate the variable consideration which we expect to be entitled to over the noncancelable contract term associated with our RCM service arrangements. The estimate of variable consideration included in the transaction price typically involves estimating the amounts we will ultimately collect on behalf of our clients and the relative fee we charge that is generally calculated as a percentage of those collections. Inputs to these estimates include, but are not limited to, historical service fees and collections amounts, timing of historical collections relative to the timing of when claims are submitted by our clients to their respective payers, macroeconomic trends, and anticipated changes in the number of providers. Significant judgement is required when estimating the total transaction price based on the variable consideration. We may apply certain constraints when appropriate whereby we include in the transaction price estimated variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Such estimates are assessed at the contract level. RCM and related services may not be rendered evenly over the contract period as the timing of services are based on customer collections, which may vary throughout the service period. We recognize revenue for RCM based on the amount of collections received throughout the contract term as it most closely depicts our efforts to transfer our service obligations to the customer. Performance obligations related to the transcription services and other recurring services are generally satisfied as the corresponding services are provided and revenue is recognized as such services are rendered.

Electronic data interchange and data services. Performance obligations related to EDI and other transaction processing services are satisfied at the point in time the services are rendered. The transfer of control occurs when the transaction processing services are delivered and the customer receives the benefits from the services provided.

Software license and hardware. Software license and hardware are considered point-in-time performance obligations as control is transferred to customers upon the delivery of the software license and hardware. Our software licenses are considered functional licenses, and revenue recognition generally occurs on the date of contract execution as the customer is provided with immediate access to the license. We generally determine the amount of consideration allocated to the software license performance obligation using the residual approach, except for certain RCM arrangements where the amount allocated to the software license performance obligation is determined based on estimated relative standalone selling prices. For hardware, we recognize revenue upon transfer of such hardware or devices to the customer.

Other non-recurring services. Performance obligations related to other non-recurring services, including implementation, training, and consulting services, are generally satisfied as the corresponding services are provided. Once the services have been provided to the customer, the transfer of control has occurred. Therefore, we recognize revenue as such services are rendered.

Transaction Price Allocated to Remaining Performance Obligations

As of September 30, 2019, the aggregate amount of transaction price related to remaining unsatisfied or partially unsatisfied performance obligations over the respective noncancelable contract term was approximately $492,700, of which we expect to recognize approximately 9% as services are rendered or goods are delivered, 47% over the next 12 months, and the remainder thereafter.

Contract Balances

Contract balances result from the timing differences between our revenue recognition, invoicing, and cash collections. Such contract balances include accounts receivables, contract assets and liabilities, and other customer deposits and liabilities balances. Accounts receivable includes invoiced amounts where the right to receive payment is unconditional and only subject to the passage of time. Contract assets include amounts where revenue recognized exceeds the amount invoiced to the customer and the right to payment is not solely subject to the passage of time. Contract assets are generally associated with our sales of software licenses, but may also be associated with other performance obligations such as subscription services, support and maintenance, annual libraries, and professional services, where control has been transferred to our customers but the associated payments are based on future customer collections (in the case of our RCM service arrangements) or based on future milestone payment due dates. In such instances, the revenue recognized may exceed the amount invoiced to the customer and such balances are included in contract assets since our right to receive payment is not unconditional, but rather is conditional upon customer collections or the continued functionality of the software and our ongoing support and maintenance obligations. Contract liabilities consist mainly of fees invoiced or paid by our clients for which the associated services have not been performed and revenues have not been recognized. Contract assets and contract liabilities are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are classified as current or long-term on our condensed consolidated balance sheets based on the timing of when we expect to complete the related performance obligations and invoice the customer. Contract liabilities are classified as current on our condensed consolidated balance sheets since the revenue recognition associated with the related customer payments and invoicing is expected to occur within the next twelve months. During the three months ended September 30, 2019 and 2018, we recognized $16,188 and $15,909, respectively, of revenues that were included in the contract liability balance at the beginning of the corresponding periods. During the six months ended September 30, 2019 and 2018, we recognized $36,147 and $36,086, respectively, of revenues that were included in the contract liability balance at the beginning of the corresponding periods.

Our contracts with customers do not include any major financing components.

Costs to Obtain or Fulfill a Contract

We capitalize all incremental costs of obtaining a contract with a customer to the extent that such costs are directly related to a contract and expected to be recoverable. Our sales commissions and related sales incentives are considered incremental costs requiring capitalization. Capitalized contract costs are amortized to expense utilizing a method that is consistent with the transfer of the related goods or services to the customer. The amortization period ranges from less than one year up to eight years, based on the period over which the related goods and services are transferred, including consideration of the expected customer renewals and the related useful lives of the products.

Capitalized commissions costs were $22,970 as of September 30, 2019, of which $5,989 is current and included as prepaid expenses and other current assets and $16,981 is long-term and included within other assets on our consolidated balance sheets, based on the expected timing of expense recognition. During the three months ended September 30, 2019 and 2018, we recognized $1,791 and $1,275, respectively, of commissions expense. During the six months ended September 30, 2019 and 2018, we recognized $3,453 and $2,864, respectively, of commissions expense. Commissions expense primarily relate to the amortization of capitalized commissions costs, which is included as a selling, general and administrative expense in the condensed consolidated statement of comprehensive income.

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Earnings Per Share

6 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

11. Earnings per Share

The dual presentation of “basic” and “diluted” earnings per share is provided below. Share amounts below are in thousands.

	Three Months Ended September 30,				Six Months Ended September 30,
	2019		2018		2019		2018
Earnings per share — Basic:
Net income	$	6,081	$	13,094	$	7,325	$	15,742
Weighted-average shares outstanding — Basic		65,401		64,265		65,209		64,143
Net income per common share — Basic	$	0.09	$	0.20	$	0.11	$	0.25
Earnings per share — Diluted:
Net income	$	6,081	$	13,094	$	7,325	$	15,742
Weighted-average shares outstanding		65,401		64,265		65,209		64,143
Effect of potentially dilutive securities		159		592		236		219
Weighted-average shares outstanding — Diluted		65,560		64,857		65,445		64,362
Net income per common share — Diluted	$	0.09	$	0.20	$	0.11	$	0.24

The computation of diluted net income per share does not include 1,794 and 411 options to acquire shares of common stock for the three months ended September 30, 2019 and September 30, 2018, respectively, because their inclusion would have an anti-dilutive effect on net income per share.

The computation of diluted net income per share does not include 894 and 1,895 options to acquire shares of common stock for the six months ended September 30, 2019 and September 30, 2018, respectively, because their inclusion would have an anti-dilutive effect on net income per share.