In this episode, Thoma Bravo Senior Partner A.J. Rohde sits down with Peter Hernandez, a Senior Vice President on our Discover team, to detail the strategic take-private of NextGen Healthcare, a leading provider of innovative, cloud-based healthcare technology solutions. They are joined in the studio by NextGen Healthcare CEO David Sides and discuss their bold vision for the future of healthcare IT. Hear perspectives on NextGen Healthcare’s exciting new chapter, marked by a recent investment by Madison Dearborn Partners, to further accelerate the company’s growth.
In this episode of Behind the Deal, Thoma Bravo Senior Partner A.J. Rohde sits down with SVP Peter Hernandez and NextGen Healthcare CEO David Sides.
July 3, 2025
27:49
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Welcome to Thoma Bravo's Behind the Deal. I'm Scott Crabill, managing partner at Thoma Bravo. And that was NextGen Healthcare CEO, David Sides, speaking with Thoma Bravo Senior Partner, A.J. Rodey, and Senior Vice President, Peter Hernandez, setting the stage for our discussion on NextGen healthcare. NextGen is a critical player in the healthcare IT space, offering electronic medical records and practice management software. Its platform supports over 100,000 providers representing nearly 10% of the ambulatory providers in North America and facilitates approximately 65 million patient interactions every year. Thoma Bravo initially took NextGen Healthcare Private in 2023, recognizing the scale and reach the company had. NextGen is a compelling case study in how a focused approach on customer centricity and operational improvements in tandem with clear partnership with strong management can lead to remarkable advancements in a short period of time.
In this episode, we're also going to touch on NextGen's exciting new chapter, marked by Madison Dearborn Partners recent investment into NextGen Healthcare, announced in May of 2025. This new partnership with Madison Dearborn is expected to further accelerate innovation and enable NextGen to continue building a modern AI-native platform for healthcare providers. So today, we'll uncover everything that went on behind the deal, with a conversation featuring Thoma Bravo Senior Partner, A.J. Rohde, Senior Vice President Peter Hernandez, and the CEO of NextGen Healthcare, David Sides.
MUSIC IN
Okay, Peter, great to have you on the show.
Great to be here.
Excited to have you as your first time on a Behind the Deal or Beyond the Deal podcast, so welcome to the circus. Peter, we've worked together a long time. You're building a really, really critical franchise for us here at Thoma Bravo. Talk about your background a little bit, if you don't mind, and what we have going on in healthcare IT.
For sure. Happy to. I'm Peter Hernandez. I am a senior vice president on the investment team at Thoma Bravo. I've been with the firm for seven years now. I actually started in San Francisco and was here for the first three and a half years. And then when we opened up a Miami office, I moved out to Miami along with about half the investment staff, actually. And that's where I currently am. Day to day, I lead our mid-market HDIT investing effort, so everything from $500 million to $2.5 billion, and NextGen is obviously a huge part of that. I also recently led the investment into Suvoda, and I help out with a handful of our other investments as well.
We're going to be talking about NextGen Healthcare today, an investment you and I worked on together, a kind of a seminal moment for us and a very long time coming —I like to say —for our business. Can you give us a little bit of a background on NextGen and, you know, for our listeners, how the opportunity came to pass?
Yeah, yeah, happy to. NextGen Healthcare —maybe I'll just talk a little bit about what the company does before we get into it — but NextGen is really an electronic medical records and practice management software company. So, if you think about what that means, really it's three things. NextGen is the system that helps store and capture the electronic medical record. So whenever you see a doctor and they're interfacing with that computer behind you at the visit, that is the electronic medical record. They're capturing and putting in all that data. NextGen helps with that. Second is actually the practice management suite of solutions around, you know, outside of that interaction with the doctor and the patient. So if you think about what powers the actual clinic to run, right? Collect your scheduling information, your insurance information, all of that. NextGen can also power that interaction. And then lastly, NextGen offers revenue cycle management capabilities, which is really important, because that's how doctors get paid, right? It's the actual collection of fees from the insurance companies, it’s collection of patient payments, et cetera.
So NextGen facilitates all of that within the ambulatory market, which what that really means is that's everything outside of the hospital. So if you think about NextGen's reach, this is one of the things that we got really excited about, is that NextGen has over 100,000 providers on its platform. That's over 10% of the ambulatory providers in North America. So we knew it's a really important company with really, really broad reach. I think there's something like 65 million patient interactions, you know, on the NextGen platform on an annual basis. So we loved the scale, we loved the reach. I personally had spent a lot of time in healthcare IT, so I really knew the company well, liked it a lot, and we started to get to know it a little bit. We had a broad history with the company as a firm. Maybe you talk a little about that, A.J., and then I'll talk about the deal and how we got—
Yeah, provider-side IT and SaaS has been an enormous investment area for us for a long time, very successfully, too. I met NextGen when it was called Quality Systems back in 2010. It had been founded by a gentleman named Shelly Razin, and back then he was still the CEO of the company – he’s since passed away – but 15 years ago, it was a much smaller business. It was not as different in its product suite as it is today, believe it or not, but it's grown along with its customer base. And the product back then was all on-premise software sold as a perpetual license and there was maintenance attached to it. There was not the revenue cycle management business that has existed today on top of it. There were really, really, really, really loyal long-term practice management anchored enterprise grade ambulatory customers on the system. And the company had been investing in those customers for a very long time.
We had the benefit, sometimes we don't get this, but at the time there was no investment, no deal to be made. Shelly wasn't really ready to give up control and the company was about to embark on, as most companies were during that time period, a transition from license to SaaS, which is very complex and very disruptive for the vendor because you're taking a upfront capital investment, heavy license, heavy earnings based cashflow stream and moving into a ratable recognition model with your cost base that is fixed as well, and so it can be very disruptive for the vendor, and Nextion was about to embark through that. We were fine with that, but it wasn't the right time for Shelly to want to do that.
So what ended up happening is Shelly actually took the company public. And then we had the benefit of being able to watch as a public company, quarter after quarter, after quarter after quarter. And what I noticed was that the company was building value, meaning it was growing well. There was a reasonably nice profit stream on the growth, but this ability to articulate why it was growing, in what segments it was growing, and the revenue, the multimodal revenue streams that were growing more than others, the visibility was poor. And so, as most public companies who suffer from that issue, right, it was a misunderstood public company. So fast forward to around the COVID timeframe, a little bit before that actually, there was an activist in the stock. And the activist was saying, you need to do all these things to deliver shareholder value. You need to be more profitable. You need to tell us how much SaaS you have in the business. You need to explain your recurring revenue growth versus your non-recurring revenue growth, and give us a vision for the company long term.
And that was really Shelly Razin. There's actually a great letter that he put out to the board talking about how they lost their way. You know, and it was really powerful. I mean, Shelly's really the founder, the executive chairman of the company, and he's the one saying, guys, we need to improve the growth rate of the company, we should be more profitable. We're investing in products that are non-core. We've lost sight of the customer. That was, I think, really the voice of Shelly coming through, and that's when, that's about the same time that David came on board.
A surprising amount of self-awareness for a founder, too, to do that publicly, which was, I think, emblematic of the culture of the company, very customer-centric. So the two best things that came out of that situation were Sri Velamoor and David Sides, who we're going to be on with today, that were able to then take Shelly's self-awareness, the market demand on transparency, and then put that into play as a public company. So, maybe talk a little bit about when you kind of re-engaged on it, and convinced me to take another look at it after that time, and what David had been doing, and then we can kind of go from there.
Yeah, happy to. And maybe just to set the stage, this was probably February or March of 2023. And there's not really a lot of deals getting done in the market. And this is one of the things that I love about Thoma Bravo is we, you know, don't sit on our laurels. We say, okay, how do we go catalyze a deal? How do we go create a deal in the market? And so we were looking at, the first thing you do in a market that's down is you go look at the public company spreadsheet, as you always encourage us to do, A.J. And so I spend a lot of time in healthcare IT and we're going through each one of the names, and NextGen is sitting right there in plain sight, trading at less than two times revenue, 14 times EBITDA. It was kind of the same talk track, you know, like, “yeah, but.” Everyone that looked at NextGen kind of had this “yeah, but” mentality.
I'm digging into the public company filings and the momentum of the company had started to inflect a little bit. They had strung together a couple quarters of 7% growth, a little bit more margin expansion. And as we're looking at this, I'm thinking to myself, if they can keep the growth going and continue to improve margin, this is going to be a phenomenal investment. And I suspected there were a lot of things that we could help along that journey as well. So then the next step of that was just to pick up the phone or type the cold email and send it to David. So that's what we did. We reached out to him.
We actually had not yet established contact with David, we knew Shelly really well, but we had never built a relationship with David. Part of that's probably because it was COVID. And I'll never forget, we get on a Zoom call with David and he starts to give us the perspective of his time there, talking about how since he came on, he really started taking the notes that Shelly put out there and implementing them at the company. So we refocused around a simple mission and that was to put the customer at the forefront of the mission, right? It has to be customer centric. It has to be, we have to be doing right by them. Second, we have to be building a good employee experience. And third, if we do those two things right, we'll create a ton of shareholder value. So we talk about a ton of things in that conversation with David, and then when we get to the shareholder value point, he says, we will create shareholder value if we grow 10% and we get to 25% margin.
And finish our platform modernization efforts.
Exactly, exactly. And so this, for me, I remember, and this is probably something that you taught us, A.J., I asked the question, David, why 2027? And I saw on his face, in that moment, he was so constrained by the, you know, he just starts going into this dialogue about how, well, there's only so much we can do as a public company. I have to manage the quarters. I want to do these things. But, you know, if I do that, it might affect my earnings in the short term. All these different things, and I could just tell he was so constrained
And so on that call, I just said, “David, what if we could do everything you wanted to do, but do it in 18 months instead of four to five years?” And immediately I saw his eyes just light up and I could tell that was a special moment for, he was a special person to want to understand what that meant. So he launched into this, a whole ton of questions for us and started asking us how would that work and what would we need? And then I called you, right after I hung up with David and maybe tell me what that was like from your perspective A.J., like what was that call like?
Yeah, when you have 13 years of history with a company, you have a very, as an investor, a very rooted view of that. And sometimes you need to open your mind a little bit to what's happening at the here and now. And you said, “I have an idea. I want to work with the CEO of NextGen to take the company private and accelerate their transformational initiatives in two years versus five years.” And I said, “NextGen, wow.” My first reaction was there's a lot of scar tissue there, meaning...
I think you actually said, “NextGen, what is that?” Because you knew it by Quality Systems.
Oh, that's true. That's true, good point. It was called Quality Systems. I had forgotten they had rebranded the company years before. And so I thought there would be some scar tissue on customer management over time. I thought a company like that in the public markets would have had a hard time recruiting exceptional executive talent. And that this market requires some innovation that it didn't in the past for provider side systems. And so I say, you know what? If you like the CEO and he's got a great plan, then I'm very interested in talking about that. And as usual with these things, then I got a chance to speak to David and I totally saw what you saw. And then I said, “If the data suggests the company has inflected and we can help them do everything you just said, I'm really interested.”
So then we went to embark on a journey to provide the company a letter saying, based on what we think we can pay a market premium. We sent it to the board. They had an investment banker, Morgan Stanley, engage to help them think through that, and we were very clear about what we needed to see to support that, because it was a very large, it was $2 billion deal at a time in the market where nobody had the capability or really the conviction to make investments like that, especially in public companies. And so you were so good and so targeted about those threshold questions that you needed to have answered. You know, as a young VP you really put your career on the line and had conviction around something that had a long institutional history here right and had a lot of things you had to believe that were going to go right so that we could make a great investment and deliver value for customers over five years and 10 years, and so you needed to have conviction to do that so then I set you off on that journey.
Yeah, and I mean first and foremost, I appreciate as a young VP that you were willing to embrace someone who had a contrarian view. I think there were so many people over the time that looked at NextGen and there were easy reasons to write it off, and from a market perspective, people had talked about how the company had missed earnings or that the market was perhaps fully penetrated.
Epic risk. All these things.
Yeah, so there were a million reasons to kill it, and you said, but I remember on that call, you said for a business transformation like this, it is all about management. And so exactly what you said. If you like David, if you like Sri, if you like the broader team and you believe that we can help them and the metrics are there, then you're right, it'll be a great investment. And so I felt really empowered to start down that diligence journey.
And the moment that really started to bring it together for us in terms of, at least the financial diligence, was two things. One – because of this business model transition that you were talking about from license to subscription, it was a huge headwind to their growth. So over the, from 2012 to 2025, NextGen was burning down about $150 million of perpetual license revenue. What I mean by that is that in 2012, they literally sold $150 million of perpetual license deals. That's all 100% margin. And when you shift to subscription, you start to spread that revenue out radically over several years. So as they're in this process of shifting slowly, they're, every year, kind of in a $20 million headwind both on revenue and on earnings.
So immediately, and I give a lot of credit to Noah Henderson and Matt Jacobs on our team who are incredible, and they stripped this out. And what we saw was the underlying business was always growing 6% to 10% without that. So really, really just, I mean, powerful piece of the platform that if you shipped out that business model transition, you could see that growth coming through, so that was one. Two – we really pride ourselves on our operational metrics and focus here at Thoma Bravo and one of the things that we do maniacally is track recurring software ARR, you know, we are very focused on this. And NextGen had a $400 million ARR business but no one tracked ARR. There was no visibility to it. I mean that was the first thing we asked for in diligence and they couldn't serve it up, and we said, “What do you mean? What do you mean you don't have the ARR queue?”
That's all in valuing the company
Yeah, so once we knew those two things, I knew we could help them. We got pretty far along in diligence, now to the point where it was time to have a conversation with David and Sri and James and the rest of the team and talk about what that would look like from a planned perspective. And we went to Montana to do that. Maybe talk a little bit about that, A.J., what that process was like.
We hosted them up there. It's always a little bit of a home court advantage. We have a place up there and I really enjoy spending my summers and winters up there quite a bit. And we have a lot of meetings up there, so team management teams love to come visit us up there so you flew up, whole team flew up. They flew out. And with a public company, you have to be very careful about building plans together. You know, really the objective of the board is to deliver the best deal for shareholders. And so we couldn't really get too detailed on what a plan would look like privately.
However, the moment we got to spend bonding with them and got to see a little bit of their operational and strategic plan and see the five year view of it, and then see their eyes light up when they were tasked with how would you do that in two years and how natural that felt. That to me felt really good. And we're really big investors on the personal. If management has the domain knowledge, has the energy, has the open-mindedness to do some of these accelerant things, then we're really excited. And that was all those things coalesced on that day and a half we spent together. And so then the question was, okay, these transformational efforts, from our standpoint, how comfortable are we that we can do them in the time frame that we're talking about, right? Sell more revenue cycle management on top of the core system. Get the company's multiple databases and multiple application layers into a central data structure and a central application platform. And those things are complicated projects. So that was our big value unlock. And when we set forth on that, maybe talk about some of the ways that plan came together. And then we can talk about how we were able to successfully win the investment and then kind of what happened afterwards.
While we were in Big Sky in Montana, the thing that, you know, you're watching David, you're watching him interact with his broader team, and one of the things that stuck out to me a lot was that we would be in the meeting, but David necessarily wouldn't lead the meeting. He wouldn't talk a lot. Actually, I think Sri kicked off the entire session.
It felt like a co-CEO kind of arrangement to me.
Exactly exactly. Yeah, and you could tell the broader team around him was strong. You know, we had like others Zoom in, Katie Shapey, our head of customer success, I mean, you could just tell everyone at the broader team here, to run a $700 million plus company, was really, really strong, and very capable of handling this. So that was probably, at least for me personally, and we look at a lot of these, I got a lot of comfort that this was the right team to back for that kind of journey. And from there it was all just, I mean, it sounds simple, but we would just talk through tactically, what does that look like? Okay, we are trying to get from A to Z, and to do that, whether that's a financial goal, whether that's the technological goal, you know, strategic goal, how do we do that? And we just charted that course with them. And what was so refreshing for, at least me, I'm curious to hear your take on this, A.J., is it was like they were an extension of us. When we'd sit down and we were talking to them, it didn't feel forced. It was very natural. And it's almost embodying of what the board meeting would be like after close. And so I just felt so confident that this is the team that could help us solve these complex problems. We could distill it down to simple steps that ultimately would lead to us achieving something really remarkable.
Yeah, and then we had to win it. And it was the largest investment at the time that we had made in the business that you and I run. And we had it over Labor Day, if you remember, 2023. And it was a very competitive situation. There were several PE firms that knew the company also for a long time. But this is an investment that needed conviction around team and plan, to be able to pull that off at that scale. So let's talk about how we won it, okay, at the end. And then let's talk about the next 18 months, or 15 months, I guess. What has come afterward, and how has that been
So the culmination of all that time that we spent together in Montana and then subsequent meetings is us aligning with David and Sri and saying, you know, this is the plan. This is what we want to do financially. This is what we want to do strategically. Are you on board with that? And I think we were all on a Zoom, including Mark Bishof, who's the chairman of NextGen, and we all said, with a ton of conviction, we can do this. Let's do this. And so from there, we delivered our final bid package to the bankers, and a little bit of back and forth between them over Labor Day weekend. But what was so powerful, is that we were in a position to sign. We were fully there on all of our work, and we told them, we showed up to the bankers and said we have a deal right now. We can sign, you know, imminently.
Fully equity guaranteed.
Exactly. Let's move forward and let's do it. And that's something that because of that work, because of the relationship that we built with David and Sri and the broader team, no one else was in the position to do that to have that conviction, to your point. And so that was a huge differentiator for us to be able to be, again, fully done with all of our work
All right, so then we close.
Then we close.
And now we gotta put all these ideas we have into action and do it quickly. So talk about how that's gone.
At least for me, personally, far exceeded our expectations. What is so great about the NextGen team is they're a lot like us in that they have an incredible bias to action. You know, things don't just, we don't talk about it in abstract, but as we leave board meetings, as we leave brainstorming sessions, they come back and they say, okay, the next steps are. I give a huge shout out to James Hammerschmidt because he always leaves the meeting and says, just so I'm clear, my to-do's are X, Y, Z, and he comes back and at the next meeting that we have, those are done or they're advanced. And so one of the things that was most powerful about that at the team level is that everything happened a lot faster than we thought. So we were planning on X revenue growth, Y margin, and all of that got accelerated because David and Sri and James had such a bias to action that it just got pulled forward in such a material way in our investment, which got us an incredible position to explore a whole host of things, right? Like we controlled our destiny. We could talk to companies about really interesting M&A acquisitions. We could talk about investments that we wanted to make a new product, which we've done, like ambient listening. And then it put us in a position where 18 months into the investment, we actually could generate liquidity for our LPs and maybe talk a little bit about that A.J. and where we are today.
Yeah. So obviously we've exceeded all of our goals in the short term, and there's still a lot of great business building we can do with this company. And so I was lucky enough to have done an investment years ago with a very good personal friend of mine, Jason Shideler at Madison Dearborn, who was one of the best healthcare investors on the planet. And we each own 50% of a company called Syntellis, which was big hospital system provider of decision support, cost accounting, departmental P&Ls, budgeting and planning for hospitals. And we had carved the business out of another consulting company that actually Jason owned. And we carved the software business out, we created a standalone company, we called it Synellis, we made a couple big acquisitions, and we ended up selling the company to Roper, who owns a business called Strata. And so Jason and I had a great success together, equal partnership, every decision was split down the middle. We kind of riffed on each other from time to time in a fun way, as you would with a friend who you also respect as an investor.
And so when the time came for us to think about delivering some capital back to our investors, for us to also know that we wanted to stay in the company for a very long time, it was a simple phone call for me. I said, “Jason, do you want to get the band back together and try this again? Here's the situation. I have an $800 million company. It's a market leader. Management's incredible. We've just gotten the plumbing in place for a lot of the telemetry data around how we manage the company. We have this enormous opportunity to continue to finish our work building a modern AI native platform for our customers that we're putting hundreds of millions of dollars of investment into. Do you want to be a part of that?” And Jason and his partner Elizabeth Betten, they know the market so well. They know this customer base so well. They're very strategic about how they think about solutions to providers. And they said, I think we can actually help a lot. And I said, I agree. You know, we tend to be very operational and they tend to be very strategic. So it's a very good compliment of the two skill sets.
And so recently we've endeavored down a journey to work with them on it. Basically the same construct that we had in Syntellis where we split every decision down the middle, you know, backing our existing team who's phenomenal. And again, even more of an accelerant. So we did our accelerant, now there's another accelerant, which is finishing our platform work and we're going to overcapitalize the company again to complete that work, or get that work in a really good spot. And that's what Madison Dearborn is here to help us do in the short term, and then in the long term, this is such an important category. We service 10% of the providers in the United States. We just think there's an unbelievable opportunity to help these practices modernize. And as their vendor of almost all solutions, like an ERP business, we have a really front row seat to do that. And that's what I think MDP appreciated. So we just announced it recently.
Yeah, I think it was May 4th.
May 4th.
May 5th maybe.
May 5th. Yep. And here we are. So we're going to have our first board meeting together, you know, very soon. And I can't wait to do this again. So with that, you know, we're gonna continue as major shareholders. It remains our largest investment. We return some capital back to our investors, which is something that's very critical for us as PE investors in this environment. We're very focused on, but we didn't give up any real upside we have in the company. And now we have a partner that can help us go do that.
Totally. No, we're really excited about this next chapter and you know what, again, I take it back to just the people behind both firms. And I think the relationship that you have with Jason, and we got to see this firsthand during the diligence that they did with us, I just think, I totally echo what you say, I think they'll add a ton of thought leadership to the boardroom. We'll keep it incredibly efficient, incredibly customer focused and so, likewise, we're really excited to…
Business is better when it's happy. Business is better when you're doing it with friends. And you have to have enough sense to know where the friendship line is drawn and where the business line is drawing. But I'm lucky I get to work with you.
No, likewise.
You’re not only my colleague, but you're my friend. Jason's my great friend. He's also one of the best investors in the planet. David and Sri and the whole team have become amazing friends. And it started out with a very simple mission of business and very transparent. And so this is just a perfect example of when we get it right. You know, it really starts with the people.
Up next, Peter and I sit down with David Sides, CEO of NextGen Healthcare.
MUSIC IN
Okay, guys, thanks for coming. Welcome. Thanks for making the trip out. David, pleasure to see you. Peter, good to see ya, bud. We're just going to have a fun discussion today. So, I want to kick off. David Sides to my left here, the illustrious David Sides, CEO of NextGen Healthcare. I like to call David a bit of an industry luminary, industry visionary, and we've been fortunate enough to work with you now for a few years. You've served in leadership roles at several healthcare IT organizations over the years, Teladoc most notably, and most recently. What do you think you learned from those roles that prepared you for your time here at NextGen? Now, Peter's gonna ask you a little bit, we're gonna talk a little about then when you came in, what that was like. So maybe start with your background, your history, and how that kind of set you up for where you ended up today.
Great. It’s great to be here, A.J. and Peter, thanks for having me out. The history, I think, sometimes when you're going through some of these roles, things happen that seem like they're really difficult at the time, and you're learning through those and you’re thinking, you know, gosh, I've gone through this one time, why did I have to go through this? And it comes up later in your career and it's like, oh, you know, that actually was a great learning moment for this thing that's coming up. So I was at Cerner for many years, learned a lot about fundamental health care IT, automating things, because at NextGen we automate the ambulatory practice of medicine. At Cerner, we had a really good data-driven process. We were a public company, so a lot of transparency. And just really taking those kinds of ideas forward on thinking through how to go from vision to mission to strategy to value to results. And those things have stuck with me. And then I had things like at Streamline Health, which was the first public company that I ran, we got into a little bit of a proxy fight. And so I met the different people that work around that, like Joel Frank. And we couldn't afford it. So we lost the proxy fight before it even started. We went around and we said, okay, what do we have to do to make this work? And they're like, yeah, it's gonna cost you $10 million. And we're like yeah, we can't afford $10 million. We'll have to have this person join the board.
David, thanks for taking us through that. Obviously, a ton of incredible public company experience with really important healthcare organizations. You got involved with NextGen in 2021 when it was in the middle of a proxy fight. Could you talk about you joining NextGen? What was the state of the company, the state of the board, other management team members? Just take us through that journey for you personally. And maybe why you got excited about the role, the opportunities that you saw and a little bit everything predating our interaction would be super helpful to go through.
Yeah, so NextGen has been in business for 50 years and had been a public company for 40 years. So a long history. It’s a older healthcare IT company than even Cerner or Epic. So it pre-dated both of those companies, which have been around for a long time. And you could look at the financials and see that the company just wanted to make money. Do you know what I mean? Like it was trying to make money, but something, you know, whatever it was on how it was being run or positioned in the market, it wasn't growing. And it was making money, but not like it could. And so in that I saw an opportunity to do, hey, how could we accelerate growth, and then be sure we're reorienting to the clients and the customers and really bring them a lot of value and modernize the technology and really get things going.
Now, the board approached me because the board was split. So it was a founder led business by Sheldon Razin and they fired the CEO in May. And so he wanted to go a different direction and be able to pick a CEO. And the other members of the board wanted to go another direction. And they were unable to work that out to the point that they got into a proxy fight with each other, and so the part of the board that was split needed to find a new CEO to have a new story to tell the Street to get people excited about it because Sheldon was such a majority shareholder that otherwise he could have potentially won the proxy contest.
And so I came on board as the CEO knowing that if we lost, it could be a short tenure, it would have been really short, but you know, we kind of worked through, here's what we're going to do with the business, and this is how we'll move forward. You know, we'll start modernizing the tech. We'll get back to clients and we'll start growing again. And we ended up winning the proxy contest through some really clever mechanisms too, where we reincorporated during the middle of the annual shareholder process in Delaware, and it worked out great. Because then I saw Shelly at his house and he was like this is fantastic. He's like, I got everything I wanted. We fixed all the governance issues that he'd complained about, and we now had a growth platform for the way forward. And so we started growing from there instead of growing like, you know, inflation or less. Now we're growing, you know, upper, upper teens to double digits.
You had an opportunity to take a lot of roles, right? You had a very good career. You took the role, proxy contest notwithstanding, you took the role at the company for a reason. You saw an unpolished gem, you saw an opportunity. Talk about that.
I mean, they have so many providers, right? So 100,000 providers in the U.S. Is something that is really difficult to create. I mean it just takes a long time to do that many contracts, especially if you're at the five to 20 doctor practices. You know, think about just canvassing Iowa, how much money and sales time that takes. So they have this great asset of the client base, right, I think is actually the best asset. And it's like, okay, how do we really delight that client base or start to, you know, give them better ways to automate and align with them.
So we changed the mission statement, which before it was something forgettable, for the most part, to better healthcare outcomes for all. And we were defining outcomes on the Quintuple Aim, just like our clients define it. So better clinical and financial outcomes, a better patient and provider experience, and better health equity and access. And the for all part is important for us because we serve a third of all the federally qualified health centers in the U.S. So the true underprivileged, nowhere else to go for their dental, behavioral, and medical care. And we want to be sure they get exactly the best care that they can on those same metrics. And it took us a couple of years, but now we're reporting those outcomes to our clients so that they can look at – how are they doing compared to other clients and where there's opportunities to improve.
David, I think one of the things that we've watched over the years is you've really put the customers back at the forefront of the mission here. And I know that was something that Shelly had in his letter, even, is that, he’s like, we have to put the customer forward. I feel like the old NextGen pre you maybe lost a little bit of that. Could you talk about how you've done that? You just hit on it a little bit but, you know, as you think about some of the conversations you had with customers early days versus where we are today, even post our investment. How have you changed the customer perception, or just shown them how we're there for them and we're a trusted partner to them?
Yeah, I mean, I think it starts with really easy things, like you need to be talking to many clients a week. And, you know, meeting with those clients, you see common threads on, how do we treat diabetes better? How do we get the outcomes that we need and different strategies for that? So I think, it starts with, you've got to meet your clients. You need to listen to your clients and then incorporate that back so that, you know, kind of the organization is, is kind of externally facing instead of inwardly facing. And then be able to, you know, set up metrics internally that align us with our client's strategies. So what strategies are they trying to accomplish? And that's where we need to focus.
So if they're trying to improve their physician attraction, right? Because they're competing with hospitals that pay higher salaries, but they maybe have a stronger mission, right. We're serving the underprivileged and really getting people who are in a healthcare desert, whether it's rural or inner city, access to care to improve their lives. And so things like our Ambient Assist, where we make it easier for them to practice, we help them with work-life balance. Those are big strategies for these organizations because they can't get there, you know, in the normal way of I'll pay you more. That's just not possible. And so aligning on those strategies then helps us focus, what do we work on when we're kind of together, and then what do we take out to the market to be sure that we're hitting the mark. But we've already pre- tested those ideas with the clients because we're meeting with them all the time.
And for those people that don't appreciate this, I have never ever seen a CEO out in the field, in the battle lines more than you. Every time I call you, you're at a different customer site, somewhere around the world, or somewhere mostly in the U.S., but your airline mile balance is as high as probably anyone I've ever seen. And I think you really enjoy that.
I don't know if that's a good thing.
I know, I know exactly for your family. But I think that customer centricity, that ethos, is very, very easy to spot when you look at the company. And I look at your team, right? I look at your President Sri Velamoor, James even, I look at Mitch, I look at Katie, all your great team members, Jacob even on CTO, you guys are frontline tested. As we think about transforming, you cannot do that kind of transformation unless you're out with customers all the time. And so, when I look at your team, it's a huge compliment to you, that is a team that is always on the front lines, always meeting with customers.
Yeah, to your point, I think it's especially important for Jake and Diane, who lead our engineering and product organization, to really be out there. And Sri and I, Sri's on the West Coast, I'm on the East Coast. We kind of split the country. So we're always, both of us are always seeing clients. It's just, ideally, I’m not flying to Vegas and he's flying to North Carolina. But that happens, that happened three weeks ago, we were crisscrossing each other in the air. Just the nature of it. But two weeks ago, we had our sales kickoff meeting in Dallas. And to your point, one of the things we did was we invited all of our clients, kind of by different segments of how they, you know, approach the business, in for a day. And so we had like 45 clients one day, 25 clients the next day. And since our whole leadership team was there, we just spent the day with them running through, here's, you know, the things that you've told us that we've internalized and we're going bring back to you later this year at our user group meeting. And here's the things that we're working on that are maybe future-leaning some of the AI initiatives, and we think these will be useful and really solve some of your efficiency problems. Which ones do you like better and how does that align with your strategy?
David, I think that customer point that you were mentioning is so important. I remember back to our first call, when you talked about putting that customer back at the forefront of the vision and the mission. That was so important to you. Could you talk a little bit about that first call from your perspective when we started to talk about accelerating everything you wanted to do, not by 2027, but in the next 18 months? You know, just relive that call with us for a little bit for our listeners and give them some insights into how this all started, really, like the take-private conversation and process. Let's go through that.
Yeah. Well, if we start at the real beginning, you guys called and said, “Hey, we'd like to have a conversation with you.” And I said, “We don't have anything to talk about.” Because it's like, you know, we're a public company, you know.
You get thick skin in this job, it wouldn't be the first time that I've been rejected.
Yeah, got rejected, and then like a couple weeks later you said, and I said, “If you're wanting to sell us a company We're always buying, right, we're always looking always looking to buy.” And so then I don't know how long ago –
I think that was in our cold email, actually, I said, “I think I have an M&A target to talk to you about.”
And it was like a month later, like you guys went away for a month, and I was like, oh, that was the right thing. And then you guys came back and said, “Hey, you're the target.” And so, took that to the board, and they said no the first time, too, right. Do you remember that? So you guys are persistent. And then they said, okay, you know, we'll start a process to look at that. So I think that one of the things that was exciting in that process was really thinking through accelerating both growth and how can we serve the customer more quickly. Instead of 2027, pulling that forward to, you know, 2024. And so that's a lot of pull forward, and it really caused us to speed up and think through, you know, our organization structure to be sure that we're really responsive to clients and there's really quick decision-making. So some of the things that we talked about when I first started at the company, we got all the top three levels together in Atlanta, and we went through this book that's called –
Oh, you recommend this to me, Turn The Ship Around. Yeah, this is great.
So Turn the Ship Around is about a captain taking over a submarine that wasn't performing. And how did he get them to perform? Because everything was going to the top. Like, captain had to make all the decisions. And it's this idea of first team. Your first team isn't like the managers and that team. It's your peers at that level. And how do you make quick decisions? And so we introduced that to speed up our decision-making process with clients and get everyone closer to the client. And so that really started speeding up the company and speeding up growth.
Totally, and I actually think that's a – quick aside here, for Thoma Bravo, A.J. – one of the things that, I've actually had a chance to read this book, Turn the Ship Around. It's all about decentralized decision-making. Hopefully, David, you feel that we've put that on steroids now, post the take-private, is that everyone can make decisions that, you know, has more autonomy, more ownership. But that's something, I think, at Thoma Bravo, is really special about our culture. Maybe, A.J., can you talk two minutes about that, or just a quick thing on that?
We try to empower young people. We try to empower people down in the organization to make decisions that would normally be made higher up in the organization. And we are able to do that because we have a lot of velocity. So there's always a lot decisions. We're very decisive. There's a lot activity. Activity breeds more activity. And agency is a really powerful thing. So when you have experience, you have autonomy, and you have support from your people above that are pulling you up, not pushing you down, incredible things can happen. And you're a shining example of that. And, I think, watching David's leadership style –. When we chose to buy the company, we had a meeting in Montana, right, with your whole entire team, where we really got to bond for like a day and a half, which is always, by the way, our home court advantage is come hang out with us in Montana and it's always an easy way to lull everyone into a false sense of security – but we got to see that team in action and that always, for me, is the most palpable diligence session, is watching how the CEO interacts with his or her team members. In your case, you actually spoke very little, right? It was not a command and control organization. It was a flat organization with really well-empowered team members below you. And I would just say how impressed we were and how critical that was into, I think, us understanding what the culture was of what you're developing.
Well, I think, I mean, for anyone who's a CEO or just a team leader or manager, once you speak, the problem-solving stops, right? So if you're like, “Hey, we've got this big problem. This client needs these things to happen.” And the CEO says, “I think we should do this.” Then everyone's like, “Okay.” And end of discussion. So, you really have to think through, you know, how to not set that culture and then just bring transparency so that everyone sees the same data. And you know we always say attack, attack the problem, not the people.
What's it been like working with us, David, on the other side of this take-private? Like how have we?
Well, it's been good, right? So I mean, we’ve sped things up. So you guys do make decisions quickly, and are always available anytime we need to catch up on something. You know, one of the things we've solved together, I think, is how do we do retention better. So you really brought a lot to the company to NextGen, from that perspective. So we were looking at the traditional way of, I need to grow faster, I'm going to grow sales more. So investing a lot in sales, tens of millions, right? And we were probably, you know, elementary school, like most companies, on retention – red, yellow, green, right? And the red, yellow, green is whatever client manager's perspective of how that client's doing. Now that's been transformed to we have a team of people who look at data running a system, and that system gathers data from our support tickets, from, distill the front line and everything else, and comes up with a score that's more objective. So it's not based on opinion where you have all this variability, but you see, kind of, in the data, here's a client that's trending the wrong way.
Real telemetry.
And Peter, you even recommended the leader there, Ben Perrino, who's done great for us.
Yeah, former at Intex. Yeah, of course. He's been incredible.
And we've got Mark as our chairman, who, you know, of course, Mark Bishof, the Bish, we think the world of Mark. You know, so we've really tried to build a little bit of a family kind of operation with you and Sri and the team and Mark and Tony Palladino and me and Peter. Maybe talk a little bit about just some of the fun we've had together as we've been flying the plane together for the last year and a half.
Yes, our last in-person board meeting was in January in Park City, Deer Valley, and so it's really fun that everyone skis. So, you and I, AJ, skied a year ago in Big Sky, deep in the trees, and that was fun being at the top, running down all these double blacks.
Yeah.
Because then you get a feel for, okay, how aggressive is this person?
It's a metaphor for business.
Yeah, yeah, it is. It's like you're skiing with each other like, okay, both high risk takers, very aggressive skiers, like that just doesn't happen. You can't teach aggression as I know from my four kids It's like, they're either an aggressive skier or they're not. Like you can say go faster, but if they don't want to, they're not going over. And I have a speed limit on my kids. It’s 60 miles an hour, right, and I'm tracking them all but –
Good reminder that we might need to take out an extra insurance policy every time you ski. It gets my chest tight.
Yeah, 60 miles an hour is the top. And then they go past it. I'm at the bottom. I'm like, look, I can see you went 63. Like that's, that's over the speed limit. Like 60 is a good number. So, you know, getting together in Deer Valley is really fun to socialize together, ski together, you know go through the problems. You may be talking things through on the ski lift, right, but really good interaction with each other. It makes it fun where you're not like, oh gosh, got to go to this board meeting and sit there for two days in a windowless room. Right. Not like that at all.
Maybe us compared to the old public company board, Thoma Bravo – give us your perspective on how focused those board meetings are. For our listeners, some insight into what that's like versus what maybe the public company dynamic was like when you were leaving.
Yeah, I mean, those board meetings are focused, but they're not as risk forward, right? Because you're trying to serve a diverse shareholder base as that board, right. So when you're both the shareholder and the owner, it's kind of like, you can risk on to a much greater degree than if I'm serving everyone from CalPERS to a hedge fund who's super aggressive. So you have a lot more regulatory burdens as well, right, because of that diversity of shareholder based. And so you tend to, I would say overindex on regulatory and compliance issues compared to now where we're like, what's just best for the clients? How do we run this faster and just deliver more and more value? It's a kind of crystallizing theme for going forward – let's just focus on the client as fast as we can, and then everything else, we'll obviously focus on employees a lot too, but then the shareholders will work out kind of third because the first two are happy and clicking along.
We agree. Having an opportunity with you and your team to build a modern AI forward business system for the providers was the reason we made the investment in the first place – team plus this transformation. As we got into it, I saw even more opportunity. We talked about revenue cycle management, we talked about ambient listening. And so the time came for us to say, wow, we actually want to be owners for this company for a lot longer than we ever thought with your team. In order to do that, why don't we bring in another thought partner who is strategic, who spends all their time in this market, who we've done something with before in the past. And now you've gotten to know Jason and Elizabeth and team at Madison Dearborn, who we think the world of. And I thought, wow, if we're going to do this for the next leg of the journey, let's have them come in. We get a little bit of capital back for our shareholders. Great. And now we can go, even accelerate further what we were talking about doing on the platform side, you know, even 18 months ago. So maybe talk a little about that and how you see that playing out and what your expectations are.
Yeah, I think, I mean, it's a good opportunity to kind of have another set of eyes and somebody who maybe has a slightly different thesis on how do you lead through growth. So I think we've gone through the first phase of transformation of a really efficient company now that's focused on clients with a lot of transparency and data measurement. Madison Dearborn and Jason Elizabeth and Jared kind of bring this view of what are we doing from a client satisfaction perspective? Like how do we not just deliver great products, but a great experience for services. A lot broader view – billing, everything. How does that work? So we're really, I'd say even more focused now, or going forward, on the client experience.
And then also thinking about revenue cycle. So we don't have as much revenue cycle management services with our clients as some of our competitors. So that is one to think through. And obviously continuing the tech transformation or accelerating that, that also goes back to keeping the clients, you know, delighted. When things just start to work better and better each time, because the system is they can't operate without it. Like there's no go back to paper for the things that we do, right? Like when you're checking 10 medications and somebody's dental record and their behavioral health and trying to see what's happening to that whole person's care, you have to have a multi-specialty system like NextGen. It's just the only option. If you're in a specialty only system, you'll miss that they have this behavioral health thing over here, because it's not over here, right. Like the behavioral health thing is front and center to, are you going to be in compliance on your medications, right? You got a diagnosis of cancer, are you depressed? Of course you are. If that record is separated from the record where you're in therapy or you're taking some antidepressants then you're going to miss something and maybe have a bad interaction or a bad outcome because you're not treating the whole person
David, now that we have Madison Dearborn as a partner with us in the deal, could you talk a little bit about this next phase of the journey with them? What gets you excited, both from a customer perspective and company perspective, but also from a team perspective, and who's going to be really important in that journey as well?
Yeah, so the next phase is gonna be kind of building on now that we have a really well-run business. How do we just bring our strategies to life at our clients? And so, Sri Velamoor, who's our president and COO, ex-McKinsey, right? He's got the strategy part down, right. It's like you read his CV and you're like, okay, he's got it, he got it. So really, a lot of his strategies that are things he's been thinking about doing, it's like, you have to first set the foundation of healthy great cash flow to be able to invest where you want. Now it's like, okay, now we get to the fun stuff. We've got a great business. How do we really move forward with clients and get the things going that we want to do there? So Sri’s leading all those efforts. And most of the company, kind of already, on how do we operate with clients and how do we do that well? And anything where it's cross-functional or difficult, Sri kind of leads those first team discussions on, all right, we got to get to a solution may not be optimal for sales, service, or product, but it's optimal for the client. And then, you know, you have to facilitate through that discussion on, alright, this is the way forward. And if you keep the client at the middle, then nobody feels like they're winning or losing.
What's your vision for the future of this company and the future of the market? What place do we serve in a future role of, you know, the way the healthcare industry is going to evolve?
I think that ambulatory is the best part of health care because it's like the closest to the patient, right? It's your doctor. And more and more things are coming out to your doctor's office, like, cataracts, like, even cardiac catheterization, which used to only be in the hospital, right, it's moving to the office. So I think as the technology in medicine improves, more and more things are happening right there at the edge with your doctor.
And we're trying to put all of the resources there for, not just the doctor, but the front desk staff, medical assistants, everyone in that ecosystem to be able to become, you know, kind of hyper-hyperly more efficient. So using AI to help them not take notes, not click through the system anymore. So a couple of years ago, we came out with our solution even before ChatGPT, where you could have a conversation with someone and it will document the note, start to do orders, do medications, do lab tests and billing codes. And so we trademarked and have a website called “The new UI is no UI.” So there's no more clicking and drop down boxes. That's a change of practice. And it's hard for people to do that. But now it's just, you're back to having a conversation with a client, just looking them in the eye. How are you doing?
And the accuracy is incredible too.
And the billing quality is higher because they're not billers, they're not coders, right? But the computer follows the rules perfectly every time, right, doesn't care. And we'll bring that to everyone else around that. So that, one, I think it's incredibly helpful for improving clinical outcomes because you're reminding those people through the journey, like, “Hey, don't forget this. Check, this is a diabetic person that hasn't been checked for their eye exam. Diabetic retinopathy, be sure that doesn't exist.” You could do those exams using AI, kick out the extra ones to someone to review, the ones that don't look as good, rather than just sending everyone out, right, that are normal. But, you know, that even, compared to no screening, you’d take the AI every day. And I think it'll really improve access to health care and the ability of people to be seen and hopefully change the cost curve over time because there's so much more capacity, just in the given capacity, we just don't have people wasting time on kind of toiling tasks, right? Just get rid of all the toil using automation and get them back to the human empathy side of delivering fantastic care.
Love it.
MUSIC IN
There's just so much to look forward to in this, not only in terms of what we've accomplished, David, but obviously just looking forward and what we're going to do together with MDP and the broader team. We're incredibly honored to be your partner. It's been an incredible journey to this point. We're so proud of what you've accomplished to this date in 18 months. And we just can't thank you enough for being here today, being our partner, and we look forward to all that's ahead.
Let's keep the fun going.
Totally.
Let’s keep rolling. This was fun
Yeah. Thank you, David. Appreciate it.
Thanks to David for coming on today. If you liked this episode, be sure to listen to next week's episode of Beyond the Deal, our mini-series where we get to ask him anything. I'm Peter Hernandez, thanks for joining us.
Behind the Deal is brought to you by Thoma Bravo in partnership with Audacy’s Pineapple Street Studios. Join us next week for more stories behind the deal. Thanks for listening.
Certain statements about Thoma Bravo made by portfolio company executives are intended to illustrate Thoma Bravo's business relationship with such persons rather than Thoma Bravo's capabilities or expertise with respect to investment advisory services. Portfolio company executives were not compensated in connection with their podcast participation, although they generally receive compensation and investment opportunities in connection with their portfolio company roles, and in certain cases are also owners of portfolio company securities and/or investors in Thoma Bravo funds. Such compensation and investments subject podcast participants to potential conflicts of interest.
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