NextGen Healthcare (NASDAQ:NXGN) delivered a relatively meager 6% return in 2019, lagging well behind the S&P 500's 29% gain. But the healthcare technology company is off to a pretty good start in 2020. And it just added more good news.

The company announced its third-quarter results after the market closed on Thursday. Here are the highlights from NextGen's Q3 update.

Healthcare professional holding a touchscreen tablet with images of hearts and heart waves in the foreground.

Image source: Getty Images.

By the numbers

NextGen announced third-quarter revenue of $137.7 million, a 5% increase from the $130.9 million reported in the same quarter of the previous year. The average analysts' Q3 revenue estimate was $135.4 million.

The company posted net income in the third quarter of $4.4 million, or $0.07 per share, based on generally accepted accounting principles (GAAP). NextGen's bottom line reflected a decrease from the prior-year-period GAAP net income of $4.8 million, or $0.07 per share.

On a non-GAAP (adjusted) basis, NextGen's earnings per share (EPS) came in at $0.23. This reflected a nice jump from the $0.20 in adjusted EPS reported in the prior-year period. It also beat the consensus Wall Street earnings estimate of $0.20.

Behind the numbers

Perhaps the best news from NextGen's Q3 update was the solid growth in recurring revenue. The company's recurring revenue increased more than 6% year over year to $124.8 million. Recurring revenue now contributes 90.5% of NextGen's total revenue, with the remaining amount stemming primarily from hardware and software sales.

While the company's top line improved, NextGen held the line pretty well on controlling costs. Selling, general, and administrative expenses rose 3.7% year over year to $42.8 million, while research and development costs declined 3.2% to a little over $20 million.

The company did, however, record $1.9 million in asset impairments and $546,000 in restructuring charges that it didn't have in the prior-year period. But the main reason behind NextGen's slightly lower net income as compared with the result from the third quarter in 2018 was higher costs of revenue.

NextGen Healthcare CEO Rusty Frantz said that the company had "another solid operating quarter which saw further enhancements in client satisfaction, two significant and successful client events, and three acquisitions which position us well to own the patient experience and drive growth in behavioral health." The acquisitions that Frantz referred to were NextGen's purchases of Topaz Information Solutions, MedFusion, and Otto Health.

Looking ahead

The company narrowed its full-year 2020 guidance. NextGen now projects revenue to between $541 million and $547 million, compared to its previous forecast of a range of $540 million to $550 million. Non-GAAP EPS is expected to be between $0.80 and $0.84, from its previous guidance of $0.79 to $0.85.

Healthcare stocks might be more volatile than usual in 2020 with the U.S. presidential election on the way. But after its solid Q3 results, NextGen appears to be on the right track to deliver better returns for investors this year than it did in 2019.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.