NextGen Healthcare founder Sheldon Razin has nominated four new directors to the board in an effort to shake up the leadership, citing the company's poor financial performance under the direction of Chairman Jeffrey Margolis.
Razin, who sits on the board, and fellow director Lance Rosenzweig sent a letter Thursday to their fellow shareholders saying that they, along with the nominees, own approximately 15.2% of the outstanding common shares of NextGen Healthcare, an ambulatory technology company.
The annual meeting of shareholders is scheduled Oct. 13. Razin and Rosenzweig also are up for reelection to the board.
In the letter, they said they have no desire to obtain boardroom control or perpetually serve as directors. "To the contrary, we simply want to start installing a new generation of highly qualified board members that can help the business thrive when we depart and well into the future," Razin and Rosenzweig wrote in the letter to the board.
"We are consensus builders and entrepreneurs—not activist investors," the pair wrote.
"One of our primary goals has always been to leave the company with a foundation for sustained success and long-term value creation. We have no confidence that a Margolis-led board will be able to put the company on the right path towards operational excellence with appropriate oversight and accountability," they wrote in the letter, which has been made public.
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NextGen Healthcare issued a statement Friday in response to Razin’s recently announced attempt to elect a majority of the board.
"Over the past several years, we have been focused on evolving our board to include more diverse perspectives and experiences along with modern healthcare and technology expertise," the company said. "The board will consider Shelly’s nominations. In the meantime, shareholders are urged to refrain from taking any action at this time."
Shares in NextGen have fallen about 18% this year, Bloomberg reported. It had a market value of about $1 billion Thursday.
The pair accuses Margolis and his allies on the board of establishing an "imperial boardroom culture" that has effectively taken control of the board.
"Despite the company’s dramatic underperformance during Mr. Margolis’ tenure, he has consistently dismissed divergent viewpoints and focused instead on tightening his grip over corporate decision-making," the two wrote.
The pair said NextGen's board, under Margolis' direction, has been unwilling to take the steps necessary to reverse the company's "anemic growth, deteriorating margins, poor hiring and operational practices, and wasteful capital allocation policy," they wrote.
NextGen announced in June that Rusty Frantz, who served as president and CEO of the company for more than six years, was stepping down from those roles as well as from the NextGen board, effective immediately, as part of a "mutual separation."
The company formed an executive leadership committee to search for a new CEO.
The pair argued that the committee was an "insufficient substitute" for identifying an interim or permanent CEO and the result of "poor succession planning" that ignored recommendations to put a plan in place.
Last week, NextGen announced it was appointing two new members to its board: Geraldine McGinty, M.D., and Pamela Puryear, Ph.D., citing the healthcare leaders' experience in strategy and operations.
RELATED: NextGen Healthcare's Q3 results beat Wall Street forecasts with strong growth in bookings
Razin and Rosenzweig said this move appeared to be "reactionary" and a "self-serving attempt on the part of certain incumbents to further concentrate their control," according to the letter they sent to the board.
"We suspect that this announcement was timed to preempt our call for sorely-needed change. Nonetheless, we hope shareholders objectively assess all of the candidates in the weeks to come and ultimately support the individuals best equipped to pursue enduring value," they wrote.
The slate of candidates the pair is nominating comprises Kenneth Fearn, founder and current managing partner of Integrated Capital, a private equity real estate firm; Ramon Gregory, senior vice president of customer care at Samsung Electronics America; Julie Schoenfeld, entrepreneur in residence at the California Institute of Technology; and Ruby Sharma, managing partner of RNB Strategic Advisors.
They said these candidates possess "fresh perspectives and the proper experience to adequately refresh and reinvigorate the board and end years of stagnation and underperformance relative to peers."
NextGen Healthcare wrapped up its 2021 fiscal year with $557 million in revenue, up 3% from $540 million a year ago.
The company brought in profits of $9.5 million for the full year ending March 31, or 14 cents per share, compared to $7.5 million in profits in its 2020 fiscal year.
Fourth-quarter revenue grew 6% to $144 million compared to $136 million for the same period a year ago, the company reported in its full-year and fourth-quarter earnings report.
The company projected full-year revenue between $574 million and $584 million, or 3% to 5% growth over fiscal 2021, and non-GAAP earnings per share to range between 89 cents and 95 cents.