Computer Task Group Inc (CTG) 2009 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the CTG fourth quarter conference call. (Operator Instructions). I will now turn the conference over to Debbie Powlowski, IR for CTG. Please go ahead.

Thank you, Kathy, and good morning, everyone. We certainly appreciate your time and your interest in CTG. On the call today we have CTG's Chief Executive Officer, Jim Boldt, and Brendan Harrington, Senior Vice President and Chief Financial Officer. Jim and Brendan are going to review the results for the fourth quarter of 2009 and update you on the Company's strategy and outlook. We will follow with an opportunity for Q&A. If you don't have the news release discussing our financial results, you can access it at the Company's website at www.ctg.com.

Before we begin, I want to mention that statements in the course of this conference call that state the Company's or management's intentions, hope, beliefs, expectations and predictions for the future are forward-looking statements. It is important to note that the Company's actual results could differ materially from those projected. Additional information concerning factors that could cause actual results to differ from those in the forward-looking statements is contained in our earnings release, as well as in the Company's SEC filings. You can find these at our website or the SEC's website at www.sec.gov. So please review our forward-looking statements in conjunction with these precautionary factors. With that, I would like to turn it over to Jim to begin the discussion. Jim?

Thanks, Debbie, and good morning, everyone. This is Jim Boldt. I want to thank you for joining us this morning for our fourth quarter earnings conference call. As you saw in our earnings release, in the fourth quarter of 2009 we were close to the midpoint of our guidance for revenue, and we were at the midpoint of our guidance for earnings per share. For the second consecutive quarter, we added 100 staff to our total headcount, and the strong demand that we experienced in the second half of 2009 has continued into the first quarter of 2010. Most of that increase in demand is coming from electronic medical record projects and our US staffing business. All indications are that CTG is going to have a good year in 2010. I'm going to talk more about our results and what we see for the first quarter and the year, but first I'm going to ask Brandon to start us off with a review of our financial results. Brendan?

Thanks, Jim. Good morning, everyone. For the fourth quarter of 2009, CTG's revenue was 67.7 million, a decrease of 15.7 million or 19% compared with the fourth quarter of 2008. Compared with the trailing third quarter of 2009, revenue increased 1.3% and was 4.6% higher on a per billing day basis. Fourth quarter operating income was 2.6 million, a decrease of .7 million or 21% year over year. Operating margin decreased to 3.8% of revenue, only a 10 basis point decline from last year's 3.9%, despite the decline in revenue from last year. Our operating margin benefited from an increase in the profitability of solutions projects and disciplined cost control. Compared with the trailing third quarter of 2009, fourth quarter operating income increased 82,000 or 3.3%. Net income was 1.6 million in the quarter, a decline of 29% from 2.3 million in the fourth quarter of 2008, and was unchanged from the third quarter of 2009 net income. On a per diluted share basis, net income was $0.10 for quarter, the same as the 2009 third quarter, and a 33% decrease over the 2008 fourth quarter.

The fourth quarter 2008 results included a $0.03 per share benefit from the currency exchange effect on inter-Company borrowings. Excluding this effect, 2009 fourth quarter net income per share was 17% lower than the 2008 fourth quarter. Solutions revenue in the fourth quarter of 2009 was 22.5 million, a 20% decline from last year's fourth quarter. Solutions represented 33% of total revenue in the quarter, a decrease from 34% a year ago. Staffing revenue was down 18% to 45.2 million in total revenue. Fourth quarter revenue from IBM, our largest customer, was 17.8 million, compared with 23 million in the fourth quarter of 2008. As a percent of total revenue, IBM was down to 26% in the 2009 fourth quarter compared with 28% of total revenue in the fourth quarter of last year.

Revenue from our European operations was 15.2 million, 20% decrease from the 19.1 million recorded in last year's fourth quarter. Excluding foreign exchange fluctuations, European revenue in the quarter would have decreased by 28% from last year. The effect of the fluctuations in the US dollar during the fourth quarter of 2009 increased our revenue by approximately 1.5 million as compared with the fourth quarter of 2008. We continue to manage costs very carefully, as reflected in the 19% decrease in operating expenses from last year's fourth quarter. SG&A expenses as a percent of revenue decreased to 18.4% from 18.5% in the fourth quarter of 2008, and from 19% in the trailing third quarter of 2009. Direct costs as a percentage of revenue were 77.8% in the fourth quarter, compared with 77.6% in the fourth quarter of 2008 and 77.2% in the trailing third quarter of 2009. The 2009 fourth quarter's results include equity compensation expense of approximately $0.02 per diluted share net of tax. The 2008 fourth quarter results included $0.01 per diluted share net of tax for equity compensation expense.

The tax rate for the 2009 fourth quarter was 36.5% compared with 37.2% in the 2008 fourth quarter. The full year tax rate was approximately 39% and was favorably impacted by certain Federal and state tax credits realized during 2009. We expect the tax rate for the full year of 2010 to be between 40 and 42%. As Jim noted, our headcount has been increasing. We had approximately 2,900 employees at the end of 2009, of which 88% were billable resources. On the balance sheet, our days sales outstanding was 60 days at the end of 2009, consistent with the 60 days at the end of third quarter of 2009, and slightly above the 57 days at the end of 2008. The year-over-year increase was primarily a result of the change in the revenue mix. Our cash provided from operations in the fourth quarter was approximately .3 million, as compared with cash provided from operations of 4.9 million in the fourth quarter of 2008.

The decrease in the comparative quarters is primarily attributed to the reduction in accounts receivable that occurred in the fourth quarter of 2008, and alternatively an increase in accounts receivable during the fourth quarter of 2009 due to the revenue growth in the quarter compared with the trailing third quarter. We had 741,000 in capital expenditures in the quarter, focused mostly on solutions development, and we recorded depreciation expense of 413,000 in the quarter. CTG's financial position remains very strong. At the end of 2009, we had approximately 10.4 million of cash on the balance sheet, and no debt outstanding on our $35 million revolving credit agreement, which is in place through April 2011. During the fourth quarter of 2009, we repurchased approximately 98,000 shares of CTG common stock. For the full year of 2009, we repurchased 739,000 shares.

During this most recent self-imposed blackout period prior to releasing our earnings, we repurchased approximately 100,000 shares under our 10b5-1 plan. As of February 23rd, 2010, our repurchase authorization is for approximately 450,000 remaining shares. And because it remains accretive to our earnings, we intend to continue our repurchase program during 2010. Jim?

Thanks, Brendan. In aggregate, our solutions business declined by 20% in fourth quarter of 2009 as compared with the fourth quarter of 2008. As we have reported on previous calls, tight credit markets have negatively impacted demand for our solutions business, particularly demand from the healthcare provider market. Without the necessary financing, hospitals have been deferring many of their IT capital projects, including investments on electronic medical record applications. These deferrals clearly affected our business in 2009. It is important to note, however, that in mid-2009, we started to see a change in that trend. In the third quarter of 2009, we started up six new electronic medical record projects, and in the fourth quarter we started the seventh new project.

At the end of 2009, we had a total of 11 electronic medical record projects underway; and for the 2009 full year, electronic medical record projects accounted for 9% of our total revenue. We are seeing more credit available for the financing of electronic medical record projects; and as a result, we expect to start up more of these projects as 2010 progresses. The challenge that the healthcare industry faces with implementing EMR is the lack of trained personnel, as most IT staff with experience in electronic medical records are already deployed on projects. Beginning this month, we will start to train IT graduates on electronic medical record packages and processes. We expect all of the students from this first class would be deployed on projects in the second quarter of 2010. We have three new solutions for the healthcare market that employ data analytics to identify the ways to improve the quality and efficiency of the healthcare delivery. The first offering is a medical care management model that improves patients' outcomes while lowering costs. The second offering is an actuarial tool for the more accurate underwriting of group medical plans resulting in more equitable pricing across their healthcare system, and the third is for the detection of fraud, waste and abuse, which is estimated to account for 3% to 10% of all healthcare expenditures annually. As the offerings are being sold as software of service, we will recognize the revenue as we deliver those services to customers over the term of the contracts.

But we have not yet closed on (inaudible) projects for the new offerings. We expect to report good news about them on our next conference call. Turning to our staffing business, it declined by 18% in the fourth quarter of 2009 when compared to the fourth quarter of 2008. The global recession began to have an impact on our staffing business in the fourth quarter of 2008. Starting in August of 2009, however, we began to see headcount grow again. That improved demand has continued into the first quarter of 2010. As you can tell from our income statement, starting in the fourth quarter of 2008, we were very aggressive in reducing our costs ahead of the expected revenue decline associated with the global recession.

Disciplined cost management is one of the key reasons that our operating margin in 2009 was 3.6%, virtually the same as it was in 2008 despite the revenue decline. In 2010, we are clearly going back on our growth mode, and therefore expect once again to realize improving margins. As we have stated before, clearly our largest opportunity going forward is in the $19 billion included in the stimulus package in the United States, as well as the estimated 40 to 45 billion of reimbursement to physicians and hospitals from the Medicare and Medicaid systems for implementing applications that meet the meaningful use criteria for electronic medical records. While in 2009 we did not see the stimulus monies being spent, we are expecting to see some of that money being spent in 2010. In addition, we expect as each month goes by, more and more credit will become available for starting electronic medical record projects. In 2010, we expect EMR will be the major driver of growth in our solutions business, and that EMR work as a percentage of our total revenue will continue to increase. Currently, we are forecasting revenue in the first quarter of 2010 be in the range of $74 million to $76 million. In the first quarter of 2010, we'll hit 65 billion days versus 66 billion days in the first quarter of 2009, and 62 in the fourth quarter of last year.

If you look at our projected daily sales in the first quarter of 2010, our daily sales are expected to increase at the mid-point of our guidance by 6% sequentially. Given the revenue forecast and expected mix of business, we are forecasting earning per share in the first quarter of 2010 to be in the range of $0.10 to $0.12 per diluted share, or an increase at the mid-point of our guidance of 22% over the first quarter of last year. As for 2010, we expect revenues for the year to be in the range of $301 million to $309 million, or an increase at the mid-point of our guidance of 11% over 2009. Due to the higher margins for new solutions projects and our strict financial discipline, we expect net income per diluted share in 2010 will be in the range of $0.46 to $0.54, or an increase at the midpoint of our guidance of 32%. At the mid-point of our guidance, we would expect our operating margins to increase from 3.6% in 2009 to 4.4% in 2010.

To recap, all indications are that CTG is going to have a good year in 2010 on the solutions side of the business, as we expect to start up new electronic medical records projects during the year, as our customers gain access to financing. In addition, in 2010 we with expect we will benefit from the initial sales of our new solutions, as these offerings continue to move from the pilot stage to full commercialization. We also anticipate strong demand in 2010 for staffing. With that, I'd like to open the call for questions if there are any. Operator, would you please manage our question and answer period?

(Operator Instructions). And our first question comes from Bill DiTullio with Boenning and Scattergood. Go ahead, please.

Good morning, Jim, how are you doing?

Good.

First question, I just wanted to talk -- I know you said you expect staffing to improve in 2010. I was wondering if you could give us a little more color as far as when we do you think we'll start to see a year-over-year increase?

In staffing?

Yes, or if any.

I think by first quarter, certainly the second quarter of the year, we will have increases in both our staffing and solutions business. We have been adding 100 people to our headcount in the first -- in the last two quarters -- in the third quarter of last year and the fourth quarter. The demand that we saw since last August is definitely still there. So we continue to add people -- we've continued to add people in the first part of 2010, and we don't really see that abating at all. We think it will be strong for all of 2010.

And as we look at 2010, I mean, could you give us a little more color as far as what your specific hiring plans are, I guess, between solutions and staffing or overall?

I wish I could be -- I wish I could break that a little bit better. It is difficult for us to tell, because our hiring plans just match up with what the demand is that we see out there. In a good market, we usually add about 100 people per quarter. In the first quarter of the year, based upon our guidance, I think we will add another 100 people, and I suspect we will continue to add people as the year goes on.

I'm assuming the bulk of that will be in the solutions for the MR work and healthcare solutions?

Not actually. Because of the difference in bill rates, the bulk of people in the last two quarters have probably been more on the staffing side of the business.

Okay.

It is kind of usual that one person on the solutions side of the business in terms of revenue equates to three people on the staffing side.

Okay. And then I guess turning to EMR, and specifically within the healthcare solutions, how should we look at that as a percentage of total for 2010? You said it was 9% for 2009. You said it would increase, but do you have a range that you'd give us?

No, we don't have a range. We believe that it will increase. As I am sure you know, our electronic medical records was 5% of our total revenue in 2007, 7% in 2008 and then 9% in 2009. So you can see it has been increasing a couple of percent a year. The reason for my hesitance is it depends on the credit markets. If the credit markets truly open up, it could be a significant increase this year. The credit markets are getting better, but they're certainly not where they were in beginning of 2008.

Do you think at the minimum it should probably follow that trend that it has been?

Yes. If things continue as they are now, it would.

Okay, and just want to clarify. You said you had started seven projects or completed seven projects in Q4?

No, we started seven.

Seven, okay. And then you're entering 2010 with 11 projects?

Yes. I'm sorry, we started six projects in 2003, and we started the -- I'm sorry, in Q3.

Right.

And we started the seventh project in --

Oh, okay.

-- in the fourth quarter. So in total last year, we started seven projects in total. And at the end of last year, we had 11 projects that were operational.

And do you have any idea how many you probably could add throughout this year to end in 2010?

No, it goes back to the credit markets.

Yes, okay. Could you also give us a little more color on the other healthcare solutions businesses you were talking about? I mean, you said you hadn't really started any; but again, maybe you don't know how many you should be able to do this year, but give us a little more color on that?

Yes. Of the offerings, I think that he one at the moment that is certainly going be the worst, but the first that has sold is going to be the medical care management model. We are very close to finalizing the papers on that to begin to put it into physicians' practice -- it has about 500 physicians. That will be the first use of it. The other two offerings also look very good -- the fraud, waste and abuse. That has the longest sales cycle. When we even evaluate claims from a relatively small hospital for six months, the application will flag 7,000 or 8,000 claims-- individual bills that have to be looked at to determine whether it was an incidence of fraud, waste and abuse and whether it could be recovered or not. I think that the underwriting implication probably has a shorter cycle. It will probably sell before the first fraud, waste and abuse.

Okay. Great. I'm sorry, I just want to turn back to MR. I actually had read somewhere where a panel was looking or suggesting that they reduce the meaningful use measures, believe they were looking to drop about six of them and there was still 25 that doctors had to meet. And I'm assuming that would benefit your clients, that they would be more apt to install these systems. But where do you see that going? Do you still think we still have more of these measures to drop, or?

We are hopeful, because obviously it would make it easier to qualify.

Right.

If you read -- and it's kind of funny, because the government calls them the "interim final meaningful use rules", they still haven't been finalized yet. And when they came out with them, they came out in stages; and one of the ones that we're somewhat concerned about is the computerized physician order entry, or CPOE. In very first definition that the government gave out, they said that 90% of physicians had to be entering the data themselves; and of course, everybody screamed because that would be impossible for just about anybody to have a meaningful use, and the government dropped the requirement to 10%. However, it's going to come out in stage one, which is effective now. By the end of 2010, it will come out with the rules for stage two, and we suspect that the CPOE will go up, and we think that the government's goal is still to get a CPOE probably by stage three of 90%. So what's going to happen is we are going to install these applications in hospitals, and we expect probably in another year, that we will get reengaged by the same hospitals to help them get CPOE up or whatever else the additional definitions are of the meaningful use. So even though a hospital is successful in saying we are up, we are running, we can get reimbursed this year, it doesn't mean that they're going to meet the stage two criteria.

Okay. And my final question is, you had just said that more stimulus money would be spent this year, but do you have any idea how much more will be released, or what the average physician office could capture from that?

No, and I don't think that that money will go towards the physicians' offices. I suspect that because of the Medicare and Medicaid reimbursement, or reimbursement of physicians, that that money will go more to the states so they can help where they see the needs, and also to centers. So it presents a real HIE that will put up an implication for the small doctors who are going to have a much more difficult time of doing this. We think that the initial money, which is really just for planning, may be available sometime in the March to June area. And of course, planning is a small percentage of the total. The big dollars are going to be when they actually start to do the implementations.

But it's going be to left up to the REOs to decide how they want to spend that money or allocate it?

Well, the first allocation, I think last summer, Vice President Biden announced that -- they announced that they were immediately, which is kind of ironic, going to spend $1.2 billion. They said that they were giving half of that to the states, so they gave each state between $2 million and $40 million so that they can pursue areas that they believe they should, and we think a lot of that money will end up with the REOs. And then they were going to give the other half of it, or $600 million, to the regional solutions centers -- and again, to try to help the small doctors get their implications up.

Okay. Good. Thanks very much, I'll get back in queue.

Okay, thank you.

(Operator Instructions). We will go to Rick D'Auteuil with Columbia Management.

Hi, Jim and Brendan.

Hey, good morning, Rick.

Just a -- if you'd give us some sense on the bill rate, pay rate trends that you are seeing, and whether there's any kind of margin pressure on the staffing side of the business due to a lag?

Okay. Let me do it separately, because they're very different.

Sure.

But the US staffing business, I would say there's not really any substantial margin pressure. I would guess within the last year -- we always have some pressure because of particular market, maybe it will be in excess of a certain skill set and it will decline. But my guess is in the US market, that if we had to lower our prices last year, it was probably between 1/10th of 1% and 2/10ths of 1%. So almost nothing, just a kind of normal year that does happen market to market. Europe has kind of been dead flat, and then on the healthcare side of the business, we are actually starting to see bill rates nudge up a little bit. We suspect they will continue to do that as the year progresses because there is going to be a shortage of certain skill sets in healthcare.

So as you looked at your guidance for this year, were you assuming continued flat margins, or you were looking for some margin expansion? I am not talking just talking mix, so the overall margins within each segment.

Actually, in our projection, we assume that from bill rates, that the margins would remain in same in to 2010 as we currently have. So we weren't looking for any increase in profitability because we are raising rates. Though as I said, we suspect as the year goes on that that may change in the healthcare arena.

Okay. In your guidance, what is the -- so last year you were 33% solution, 67 the balance in staffing. What are you implying for --I know you are looking for staffing growth and solution growth greater than that, but does it -- should solutions be, what, 5% higher this year, or --

No, I think it will only be a couple of percent at the moment -- at least in the current guidance, it will probably be more like 35% to 36% of the total.

Okay.

And the reason really is a credit crunch. I mean, it should just take off. But because hospitals are still having a hard time borrowing money, we don't see that happening in 2010. We think we will add more projects than we have now, but we actually think 2011 and 2012 will be the better years in terms of EMR projects.

Okay. Going back to your largest customer, do you expect them to grow consistent with the staffing side of the business?

Yes, we would expect them to grow consistent with the US staffing side of the business, definitely.

And then Europe, what are your prospects? I know it is lagging on our growth, but do you expect a flat year, or are you seeing some growth there, too?

I think Europe will be pretty flat. It there's any growth, it's going to be in the second six months.

Okay. As you look at some of your software as a service offerings -- I don't know if you've locked in on pricing yet -- that was still an open issue not too long ago; but how are you reaching the potential customer base there, or prospect base? And do you need to partner with somebody to -- for the selling side of the equation?

We don't think that we need to partner with anyone. We -- and let me take the offerings differently, because they definitely are different. So the medical model we imagine will be sold to payors and also to hospitals and physicians' practices. So we already have a national salesforce that calls on those -- there are only 240 payors, for instance, in the United States. Obviously a lot more hospitals, but our target is kind of the 1,000-bed hospital chain, so the larger chains. And once we are able to sell it to all of those customers that we could, I think that then we would begin to look at maybe a partnership to go to the smaller hospitals that we really don't reach currently. Again, on the actuarial tool, there's only 240 customers in the United States that are payors, so we have those identified and we have salesmen that call on them. The fraud, waste and abuse, the sold book, the payer and the provider market. So in the provider market, again, we are starting with a 1,000-bed hospitals -- the ones that we currently already have relationships with; and on the payer market, it is the 240 payors, so I don't really think we are going to need a partner.

Okay. Is there a pipeline that you can talk about as it relates to each of those potential businesses? Or is it -- I mean, I know you had a beta test with the fraud, waste and abuse that went well. Is that customer likely to do something more significant in the first half of this year?

We think that we probably will have the first sale in the first six months of the year. The fraud, waste and abuse, as I mentioned, is the longest sales cycle refining a very small hospital. So a 200-bed hospital, if you run it against their claims for six months -- against their invoices for six months -- you might get 8,000 hits, and then their compliance people have to go through and check each one out. When you run it against the payer system, the number of claims that it identifies is tremendous. So you actually have to categorize them into larger and the smaller ones. So I think from a sales standpoint, that is going to be the longest sales cycle. I would be surprised in the first six months of the year if we don't have at least one or even multiple sales of the patient management tool and at least one of the actuarial tool.

So there's -- I know Buffalo with the paper up there, it sounded like they were going to go forward with something on the medical management bottle. The -- and they are refunding for that is my understanding, is that right, or -- ?

Yes. Just so everyone is aware of that -- and we haven't announced this because we don't have all of the contracts signed yet. It is a little bit more complex because a physicians' practice that's associated with the University of Buffalo received a HEAL grant, which is a New York state HEAL grant, for $7 million to put in our application in their physicians' practice, and they have about 500 physicians in that practice. So because it is a HEAL grant, it takes a lot more time of getting all the paperwork through the system, because it is not just the entity that has to approve it. In some cases, the state also has to approve everything that happens. But that -- and the University announced that in the fourth quarter of last year when they won the HEAL grant, that will undoubtedly be the first application of the patient management tool, and we have already started to contact others and run the sales cycle of selling others that tool as well.

Okay, so there is a pipeline of other potential interested parties for that application?

Yes, actually for all of the new offerings, we have a pipeline beyond the betas, yes.

Okay, okay. I appreciate it. Thank you.

Okay.

Thank you. And our final question will come from Bill Sutherland with Boenning. Go ahead, please.

Thanks. Hey, Jim and Brendan.

Hey, good morning, Bill.

The first training class is going to be about how big, Jim?

The first training class is actually smaller than we normally run. Usually, they run 20 to 25. The first class only has about ten; and it often -- most of the training materials we've used before, but some of it is actually new. A little bit different than in the past, we tended to train ,people who had a medical background in the software and now we are training people with IT background in how hospitals and physician practices work. So we decided to go with a smaller class of ten for the first class to make sure that everything was in place before we tried a larger class.

Why are you flipping the students' profile from -- ?

Okay. We still plan on training people with backgrounds; but the US Federal Government's estimate is that there's 212,000 people required to put electronic medical records up for everyone in the United States for a ten-year period of time. And in past, we have often used people who were nurses, for instance, and there are only about probably 1,000 people with EMR backgrounds and maybe 10,000 IT consultants in every hospital in the United States today. If the industry decides they're going to use nurses we could strip every nurse out of every hospital. Our clients wouldn't be happy with this. So we think that we've got to have kind of a spread of people. We need experienced people -- so project manager and some high end consultants on a project. We probably also on that project would put some people with a medical background who have been trained in the software, and then some people who have an IT background have been trained in the medical environment. So the training course for these -- for students, for instance, it's four weeks in classrooms learning the software, because they all have IT degrees, so it's not difficult to learn software, obviously, if you can already program code; and then they spend five weeks -- in this case in a physician's practice -- not billable, just learning how the physician's practice works, and then they go bill them.

So you're going to start to sequence these, and the average class will be 20 to 25?

Yes, that has been our track record in the past, yes.

So you can do a couple of hundred a year?

That's possible, yes. Back in the Y2K days, you probably remember we did 300 to 600 people a year because we (inaudible) multiple classes.

Right.

And they will be deployed in Q2, okay.

We are going the train based upon demand. If the credit markets open up, we have got the training courses and we will train a loft people. But if the credit markets open slowly we will train so that the people pretty much go to an engagement once they get out of training.

So from a capacity -- that leads to my last question -- so from a capacity perspective, you could take on the same number of new deals this year as you did last year -- the seven?

Yes.

Okay.

Yes, that's possible.

That's it for me. Thanks, Jim.

Okay. Thank you.

Thank you, and we do have a follow-up from Rick D'Auteuil. Go ahead, please.

Yes, just a follow-up on some of Bill's comment there and your answers. So if financing wasn't an issue -- and I realize it is today -- but you would then become talent-constrained, and/or personnel-constrained. How many assignments do you think you could handle -- incremental new assignments on top of the ones you have already, with that constraint the only constraint in place and not financing as a negating factor?

Well, probably a third of the people on of the projects would have to have experience. So let's assume that we couldn't get anymore people in the market, and what would happen would be everybody would be stealing people from everybody else. But we could take on three times as many, most likely, as we currently have by training people. What -- I don't think that's going happen though. I don't think the credit markets are going to open up. What will more likely happen will be the -- like the students that are in class today, a year from now will have a year's experience in putting them in. So they will be the experienced people we would put on projects in 2011, so it will kind of build up like that.

Right.

Does that make sense?

Yes, and I realize that's not a realistic -- I am just wondering what the capacity would be on training up new people. So say we were a year from now, and we -- all the sudden the flood gates opened. Could you do 15 new hospitals a year or 20 new hospitals a year? What is realistic?

It is possible. If a third of the people have to be -- have experience. So we would take the existing people that we have, and we should be able to do three times as much. So we could do 20 to 30 projects by taking the existing people that we have and spreading them out so they're only a third of each projects and putting new people on. The other thing that I think that we would likely do -- and I am somewhat happy that the credit markets aren't totally opened up -- I wish they would open up quicker than they are -- but because it would be kind of a mess, I suspect that we would begin to sub new people we trained to hospital -- well, just put them in hospitals on staffing engagements, sub them to other people in the industry that we might not compete against, et cetera, because the shortage was so acute.

Okay. All right, I appreciate it. Thanks.

Okay.

Thank you, and we also have a follow-up from Bill Sutherland. Go ahead, please.

Yes, I meant to ask you, Jim, in your assumptions for the 2010 model, have you assumed anything from the data analytic solutions?

We have a little. We have assumed that for those three offerings, that we would have one to two new engagements this year. Obviously, the upside could be a lot more as they roll out; but I think we have a fairly conservative assumption in our projections currently.

And there's -- you are still not ready to kind of get into how it impacts the model, are you?

No, not really.

Okay, yes.

I mean, it is a little early.

Yes, I'm fine. I just -- just because the fast model will be a different beast, of course. Okay. Thank you, Jim.

Thank you, and we have no further questions. Mr. Boldt, please go ahead with your closing remarks.

Clearly, due to the impact of the global recession, 2009 was a year that we are happy to leave behind us. Having said that, by taking quick actions to contain our costs and by focusing on our healthcare solutions, earnings per share in 2009 were the second best for CTG in a decade. Looking forward, we expect that the strong demand we saw in the second half of 2009 for our staffing business in the US will continue throughout 2010. On the solutions side of business, clearly the largest opportunity for us will be in the electronic medical record work. We think our electronic medical record business will continue to grow throughout 2010 as the US Federal Government releases some of the $19 billion in the stimulus package for EMR projects, and as the credit crunch abates and financial institutions lend more money and hospitals and physicians' practices so that they can start their electronic medical record projects.

Given the magnitude of grading electronic medical records for everyone in the US, we believe the electronic medical record work will most likely drive our solutions business for the next three to five years. Coupled EMR work, with the additional profitability from our new offerings, you can see why we have every expectation of meeting our goal to have operating margins in the 6% to 7% range within the next three years. As I said at the beginning of this call, all indications are that CTG is going to have a good year in 2010. Given our position in the healthcare IT services market, I think the same can be said of 2011 and 2012 as well. I would like to thank you for your continued support and for joining us this morning. Have a great day.

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