Computer Task Group Inc (CTG) 2011 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the CTG fourth-quarter 2011 earnings conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions) And as a reminder, this conference call is being recorded.

I'd like to turn the conference over to our first speaker, Investor Relations for CTG, Mr. Jim Culligan. Please go ahead, sir.

Thank you, Colin, 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 2011 and then update you on the Company's strategies and outlook. We'll 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 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, hopes, beliefs, expectations and predictions for the future are forward-looking statements. It's 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 sec.gov. Please review our forward-looking statements in conjunction with these precautionary factors.

With that, I'd like to turn it over to Jim to begin the discussion.

Thanks, Jim, 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 read in our earnings release, in the fourth quarter 2011, we were at our guidance for revenue and at the high end of our guidance for earnings per share. Revenue in 2011 increased over 2010 by 20% and our earnings per share increased 37%. Our revenue and earnings continue to grow as demand for our services expands, both as a result of the continued need in the United States for staffing services, and as the healthcare industry invests in electronic medical record and other initiatives requiring IT support.

I'm going to talk more about our results and what we see for the 2012 first quarter and the full year. But first I'm going to ask Brendan to start us off with a review of our financial results. Brendan?

Thanks, Jim. Good morning, everyone. For the fourth quarter of 2011, CTG's revenue was $100.9 million, an increase of $13.6 million or 16% compared with the fourth quarter of 2010. Q4 of 2011 had 63 billing days, which was one more than the fourth quarter of 2010. On a per billing day basis, revenue increased by 14%. Solutions revenue in the fourth quarter of 2011 was $40.5 million, an increase of $9.4 million or 30% compared with the fourth quarter of 2010. As a percentage of total revenue, Solutions revenue was 40% compared with 36% a year ago. The improvement in our business mix was mainly driven by revenue growth from more profitable healthcare projects.

Demand from our staffing clients increased Staffing revenue in the quarter by $4.2 million or 8% to $60.4 million. Fourth quarter revenue from IBM, our largest customer, was $27.4 million compared with $26.9 million in the fourth quarter of 2010. Although the total revenue from IBM increased, as a percent of total revenue it decreased to 27.2% in the 2011 fourth quarter, compared with 30.8% of total revenue in the fourth quarter of 2010. Revenue from our European operations was $16.5 million, a 3.8% increase from the $15.9 million recorded in last year's fourth quarter. The effect of foreign currency fluctuations during the fourth quarter of 2011 decreased the consolidated revenue by approximately $133,000.

The recovery in Europe continues to lag that of the United States, as indicated by the 4.5% increase in European revenue on a local currency basis as compared with the fourth quarter of 2010. Direct costs as a percentage of revenue were 77.4% in the fourth quarter, compared with 78.1% in the fourth quarter of 2010 and 79.3% in the trailing third quarter of 2011. SG&A expenses as a percent of revenue increased slightly to 17.2% from 17.1% in the fourth quarter of 2010. Fourth-quarter operating income expanded at a greater rate than revenue, and was $5.5 million, an increase of $1.2 million or 29% year over year. Reflecting the favorable effect of operating leverage and our higher-margin Solutions work. Compared with the trailing third quarter of 2011, fourth-quarter operating income increased by $882,000 or 19.3%.

Operating margin in the fourth quarter increased to 5.4% of revenue, a 50 basis point improvement from last year's 4.9% due primarily to an increase in the Solutions business in our sales mix and the additional operating leverage. 2011 fourth-quarter operating margin increased 90 basis points, compared to the third quarter 2011, primarily reflecting the change in the mix of the business. Net income was $3.3 million in the quarter, an increase of 24% from $2.7 million in the fourth quarter of 2010 and a 10% increase from the third quarter of 2011. On a per diluted share basis, net income was $0.20 for the quarter, a 25% increase from the $0.16 in the fourth quarter of 2010 and $0.02 higher or 11% as compared with the 2011 third quarter.

The 2011 fourth quarter results include equity compensation expense of approximately $0.02 per diluted share net of tax. The equity compensation expense in the fourth quarter of 2010 was $0.01 per diluted share net of tax. The tax rate for the 2011 fourth quarter was 38% compared with 37.3% in the 2010 fourth quarter. The full-year 2011 tax rate was 37.6%. We expect the tax rate for the full year of 2012 to be between 38% and 40%. Our head count at the end of the year was 3,700, the same as at the end of the third quarter 2011. Of the 3,700 employees at the end of the fourth quarter 2011, 90% were billable resources. Year over year, head count increased by 300 people or 9% from the 2010 year end.

At the end of 2011, we had no long-term debt and $22.4 million of cash on the balance sheet. Both the fourth quarter 2011 and 2010 ended between a US biweekly payroll date. Our day sales outstanding was 62 days at the end of 2011, up from 60 days at the end of 2010 and up 1 day compared to the end of the third quarter of 2011. Our cash provided from operations in the fourth quarter 2011 was approximately $10.2 million as compared with cash provided from operations of approximately $6.6 million in the fourth quarter of 2010. In the quarter, we had $288,000 in capital expenditures. And recorded depreciation expense of $644,000.

We repurchased approximately 27,000 shares of CTG common stock during the fourth quarter of 2011, bringing the total repurchases to approximately 308,000 shares for 2011. And during this most recent self-imposed blackout period prior to releasing earnings, we repurchased approximately 3,000 shares under our 10b5-1 plan. As of today our repurchase authorization is for approximately 850,000 shares. As it remains accretive to our earnings, we intend to continue our repurchase program during 2012. Jim?

Thanks, Brendan. In aggregate, our Solutions business, which is more profitable than our Staffing business, increased by 30% in the fourth quarter of 2011. The fourth quarter increase brought our Solutions business to 40% of our total revenue. The growth in Solutions work is primarily coming from EMR projects and is continuing to drive margin expansion. Overall, our healthcare business was up 33% over the fourth quarter of last year.

On our conference call at the end of October, we mentioned that we had bid on two RFPs for electronic medical record projects which the hospitals had not decided what IT services firms would be awarded those projects. One customer has still not selected an IT services firm to do their project. And we were notified by the other customer that we had not won that project. During the fourth quarter of 2011, we received five RFPs for new EMR projects. Of those five projects, we won two projects, lost one project, and two of the hospitals have not selected an IT services firm yet to do their project.

When we started the first quarter 2011, we had 17 active EMR projects. During the fourth quarter, we started one of the projects I just mentioned. And no projects came to an end. The other project that we won in the fourth quarter did not start until the first quarter 2012. That means that at the end of the fourth quarter of 2011, we had 18 active EMR projects. So far in the first quarter of 2012, we received four additional RFPs for EMR projects. And the hospitals have not selected an IT services firm for any of them. That means that today we have the 18 projects that were active at the end of 2011, we're starting up 1 additional project in the first quarter, and we're waiting to hear whether or not we've won 7 projects. Add to the proposed projects effect the sizes of the new projects we've been winning are significantly larger than the size of the engagements ending, and you see why we remain very optimistic about our EMR business.

We're currently marketing our ICD-10 conversion offering. The ICD-10 offering supports conversions in the United States from ICD-9, the current US standard for diagnostic code, to ICD-10, the international standard. CMS, the federal agency that regulates the ICD transition process, has recently indicated that it may push back the proposed date to implement the new codes to sometime after October 1, 2013. As very few hospitals have started their ICD-10 projects, we think that the delay may be inevitable as we're unsure that the industry could be ready for the new codes by October of 2013. We currently have one ICD-10 remediation project for a payer underway. And are working on two ICD-10 assessments for hospitals.

We anticipate that our EMR business will continue to grow in 2012. And expect to see revenues from ICD-10 conversion projects in 2012, even if the October 1, 2013 conversion date is delayed. Longer term, we believe healthcare informatics will be a major opportunity for growth in serving the healthcare industry. We have a solid head start on this opportunity, have already developed three solutions for the healthcare market that employ medical informatics to identify ways to improve the quality inefficiency of healthcare delivery. These offerings are now commercial and we're actively marketing them.

Having covered healthcare, I'd also like to talk about the over three vertical markets on which we focus. Demand from the technology service provider market was tepid during the fourth quarter of 2011. As to our financial services and energy verticals, we would depict those businesses as stable and improving. And we are optimistic that they'll continue to do so in the future. Turning to our Staffing business, which generates most of its revenue from the technology service provider market, it increased by 8% in the fourth quarter of 2011, compared with the fourth quarter of 2010. As our head count in the third and fourth quarters of 2011 for our staffing business was stable, the revenue growth in staffing that we saw in the fourth quarter was a result of the hiring that we did in the first half of 2011. Since the summer of 2011, demand in our staffing business has moderated, consistent with our expectations. But has slowed more than we expected due to some clients being concerned about the impact of the European financial crisis on continued US economic growth. We therefore are looking for a small increase in Staffing personnel in 2012.

As was mentioned in our press release, we signed the NTS agreement with IBM, which will allow us to continue to be a core supplier for IBM for the next three years. As previously announced, while there are changes under the new agreement, in aggregate, CTG expects the new agreement will put us in about the same position in terms of the IBM business as we were under the old agreement.

Looking to the first quarter of 2012, we're forecasting total revenues to be in the range of $102 million to $103 million, or a 7% increase in the mid-point of our guidance over last year's first quarter. We're forecasting earnings per share in the first quarter of 2012 in the range of $0.19 to $0.21 per diluted share, or an 18% increase in the mid-point of our guidance over the first quarter of last year. For the 2012 full year, we expect revenues to be in the range of $425 million to $435 million, or a 9% increase in the mid-point of our guidance over 2011. Based upon our revenue forecast and the anticipated mix of business, we expect income per diluted share in 2012 will be in the range of $0.81 to $0.91, or a 21% increase from 2011, at the mid point of our guidance.

We thought it would be helpful to briefly share our thinking on how we set our guidance for this year. We're currently seeing tremendous opportunities in the healthcare business, both from growth and EMR projects and from ICD-10 implementations. We think that our healthcare business will grow by approximately 25% in 2012. Given the opportunities in the market, we could grow faster than that. However, there are significant labor shortages in the market and our customers are not yet willing to accept recently-trained staff. We therefore believe resource availability will be the limiting factor in our healthcare business in 2012. For our non-healthcare solutions business, we're projecting a revenue increase of approximately 8% in 2012.

For the reasons I previously mentioned, we believe our Staffing customers' concern about economic growth will limit adding additional personnel to our Staffing business in 2012. For that reason we're forecasting a 2% increase in our Staffing business in 2012. The growth rates that I just mentioned assume no foreign exchange fluctuations in 2012. Another assumption we've made has to do with the foreign exchange rate. Given the fact that the Euro has dropped in relationship to the US dollar, we're assuming a 5% negative impact in our European revenue in US dollars when compared to 2011 due to foreign exchange fluctuation.

To sum it up, CTG had a great year in 2011. And given our strategy and position in the market, we expect another excellent year in 2012. 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) Bill Sutherland, Northland Capital Markets.

I wonder if you could give us a little more color on the ICD-10 situation. Just if the pipeline is building the way you guys expect it, and then the mix of payers and providers? I'm not sure who the assessments are with.

The assessments are both with hospitals. We're seeing a lot of opportunities for doing assessments with hospitals. What we're unsure of at the moment is this announcement by CMS, what that will do to hospitals' thinking. I was talking to a CEO of a hospital about two weeks ago, and asked him what he thought. And he said -- Look, they're going to change to ICD-10. They have to eventually. They can't just stop tracking diseases. Maybe they'll give us a little bit more time.

And his plan really was -- and you can do this in steps -- one was to remediate his major systems and get them ICD-10 compliant. So, you can do the remediation because the ICD-9 codes are shorter. They're five versus seven characters. They'll all work in the remediated system. And then hold off to do his training, probably until it gets closer to the implementation date. And the training in total is probably about 15% of the total project.

So, in his mind, at least, it's inevitable, go ahead and get most of the work done, and then do the training part as it gets closer to the date. So it will be interesting to see really what CMS comes out with. A lot of people came after them on this one. We don't think they'll back off on converting to ICD-10, it's just a matter of time.

And the issue, as I understood it, was a little more -- the payers have a bigger issue on their hands. Are you marketing aggressively to the payers?

We are in the process of helping one payer do their remediation. Our Healthcare business is far more skewed to the provider side. About a little over 70% actually comes from the Provider side, about 15% from Payers, and about 15% from Life Sciences, actually. So, our sales force is more concentrated on the Hospital side and that's why we're doing one payer. We're not pursuing as many payers.

Many people think that -- or it's even been suggested -- that CMS might get the payers to convert still by October of 2013 and the thinking is, that if they're ready to accept it, as hospitals convert over, they can start to use the new rates.

Just two more for me. One is in the rates for [abuse chromatic] product. You had a little bit of commercial revenue. Just if you could give us some color on how that is developing.

It is developing nicely. Unfortunately the payers and providers have a unique relationship. And it's not like a typical payer, perhaps, in a manufacturing environment. So, the process of them actually taking the adjustments they have -- payers have the right to offset the next payment, if they find something wrong, is longer than we anticipated. We expected it to happen in the fourth quarter. But they gave, and are giving the providers time if they like to try and argue whether the claim is right or not.

So, far nobody has been able to come up with a reason that the adjustment isn't warranted. What we originally expected that that process would be through, and had actually have deducted the money, we can't record the income until -- even though we know what the payer is going to deduct at the moment -- we can't record it until they actually deduct what the payer's at least paid. So we expect that to happen now in the first quarter of the year.

Okay. Do you have other projects developing in that pipeline?

Yes. That is one product line where we're getting an incredible amount of interest in. We have beta projects going. And we're actually in the process of looking to add to the team because we're going beyond the resources that we currently have.

Okay. I'll hop off. Thanks, Jim.

Okay. I'd just like, before the next question, to make one correction. Brendan just told me when I gave the revenue range for the first quarter, I said it's $102 million to $103 million. It's actually $102 million to $104 million.

Matt McCormack with BGB Securities.

First question on the EMR pipeline, is there any way you can talk about -- you referenced the sizes are much bigger than the ones that are rolling off. Is there any way to quantify that, first of all? And then, secondly, why are you seeing that trend?

And this is a guess, just looking at the numbers. I would guess that we're about double in size. And the project, if it's a 1,000-bed hospital, the project is $10 million, if it's a 2,000-bed hospital, the project is probably $20 million. So it's linear in terms of my fees. And I would guess the project size in 2010 was probably averaging just below 1,000 beds. Now, the new opportunities we're picking up are above that.

One of the reasons is, some of the largest hospitals in the United States didn't start the project. They're just doing that now. I know that seems unbelievable. But it is absolutely true. So, the sizes of the projects are just increasing. I think that our class ratings and the fact that we've done so well in class over a period of time, I think that we're getting better recognition, too, at the larger market, even though we might not have been deliberately marketing to them.

Okay. And then you referenced staffing shortages. How is that going to impact margins in this year? Are you able to increase your prices?

Clearly, both billing rates and pay rates and margins are all going up. It's not just up. There's a shortage for everyone. We honestly believe that any person who has any experience on an EMR project is already on a project. So, when we hire somebody, we're basically stealing someone from one of our competitors. And it just makes it a much tougher environment.

If we actually filled just the reqs we had in-house, we could fill all of them today, we would probably hit -- I know we would hit the 25% number for the year. We're just being held back by the number of resources. This is very much like Y2K. In the early days of Y2K, CIOs would absolutely not take anyone that was newly trained. And you can use certainly 25% to 50% of the people on a project could be newly trained. We've run them before without any problem.

But during Y2K in 1998, it got to the point that there just weren't any resources available. And then CIOs were willing to take newly-trained people. We think that's going to happen, but is that going to happen in 2012 or 2013, 2014, we can't tell you.

Okay. And then you mentioned on the Staffing side some of the technology providers have pulled back a little bit. As you said, expected. But you also mentioned Europe. Is that still deteriorating or has that remained fairly steady over the last few months?

No, I would depict it as more steady than deteriorating. The Staffing side of our Business -- I'll do maybe the US first and then I'll talk about Europe. The Staffing side of our Business is very dependent on economic growth. We usually are brought in if the client for some reason needs to increase their productivity, either in the plants or in a Services business.

And they're putting in some kind of a new application that will increase productivity and they don't have enough people to run an entire project. So, they'll use some of our people to help them. During periods of economic growth, they obviously need to do that more and more. If the client thinks that there's not going to be that much economic growth next year, they have less of those kind of projects. And I think that's probably what we're seeing.

And it's not just us. I read the Manpower, for instance, conference call script. And in there they disclosed that their revenue growth, if you will, in the Americas in the fourth quarter was minus 1%. So, I think across staffing you're beginning to see it in general. Even the people who follow the IT services industry, this would be both services and both the staffing and the solutions, have been lowering their growth models as they go along.

So if you look at Gartner or Forrester a year, year-and-a-half ago, their projections for the industry for 2012 would have been about 4.5% to 4.7%. The last estimate I saw is 3.1%. And they're putting the same thing in there, that even in the United States, where economic growth has been pretty good for a couple of quarters, people are concerned that the European price is going to back up and affect us.

In terms of Europe, the European economy is soft. We're still growing in Europe, even in constant dollars. And the reason is that we're located in Belgium. The EU is being formed in Belgium. It's like building Washington, DC 200 years later. And we're one of the largest IT services companies in Belgium.

So, we are getting more work from the government sector because of the European Union being formed there than we had in the past. And that's the reason that we've been able to post some positive results in 2011 in the European market, where I think most of IT services firms are seeing negative growth.

Okay. And then you reiterated your 50/50 mix target, 6% to 7% margins. What's the timing of that? Is that 2014, 2015 or could it be earlier?

No, it's actually probably earlier than that. Our actual target, the Company's goal is to get to 6% to 7%. As you know, Wall Street likes to have metrics to look at, so they asked initially how we were going to do that, where we're going to get to more of a 50/50 mix in our revenue. If the Staffing side of the Business was exactly 3% operating margins and the Solutions exactly 10%, it's 50/50, or at 6.5%, and what we've told people that we expect by the fourth quarter of 2013, we should be in the range, in the 6% to 7% range, which was our goal.

Now, we don't actually have to get to 50/50 to be able to do that. Actually, if the margins are 3% for Staffing and 10% for Solutions, we have to get to 43% Solutions and 57% Staffing to achieve that. And if you look at last quarter, we're up to 40% of the business as Solutions. So, we're certainly getting close to that.

Okay, understood. All right. Thank you.

(Operator Instructions) Vincent Colicchio, Noble Financial.

Jim, on your EMR business, I think you said you lost two deals since the last earnings call. Is that correct? And if you can characterize who you lost to, that would be helpful.

Certainly. We usually compete against six national firms. They're generally bigger than us. They're the people in class that are rated as having full services. There are a couple of boutique firms out there. And one of the engagements, which are much smaller, they may have an EMR offering, but nothing else, one of the engagements we lost to one of the smaller boutique firms.

They had gone in and they had done a strategy project for them earlier. And because of that relationship and having done the strategy, we think that they won. The other one was a unique RFP. We don't usually get them like this. There was an RFP where they wanted you to do the EMR and they also wanted a Lawson financial package implementation at the same time, which isn't one of our strong points, so we actually didn't bid on part of the project, and we lost it, we think, because of that.

And then SG&A expenses went up sequentially a bit more than I was expecting. Could you explain the variance there?

Yes, we had an unusual writeoff, a bad debt writeoff in the fourth quarter of the year. Probably the largest one in our history, or at least I've been here for 16 years. Certainly the largest one in 16 years. It was a little over $0.5 million. And that increased SG&A in the fourth quarter.

Okay. How are you feeling about bad debts? Are there other items out there we should be concerned about?

No. Most of our business, it's either with large hospitals, so they're $1 billion or $2 billion in revenue. I saw a report, the average cash that a 1,000-bed hospital had on their balance sheet last year was like $400 million. So, they may pay us a little slower, but they actually have the cash. And the rest of the Business is with Fortune 1,000 type companies. And in this case it was one of them that filed for bankruptcy.

And then your IBM revenue contribution declined year-over-year. Any thoughts to how that may play out in 2012?

It's hard to predict. I believe that IBM uses us, and actually any staffing company, to supplement the fact that they constantly have a lot of projects starting and ending. And particularly in the fourth quarter, I believe that they probably had a lot that were ending, which is why our revenues dropped from them.

They don't actually even plot out what they all are, they have so many of them. So, it's very difficult for us to tell whether they'll need a lot more people or not. It's just a cycle we go through on a regular basis.

And then Brendan, do you know what portion of revenue from Healthcare IT solutions in the quarter?

Total Healthcare in the quarter was 31% of revenue. And the vast majority of that is Solutions. There's probably 2% or so of that that's not Solutions, that's Staffing revenue.

Okay. Thanks. Nice quarter, guys.

Bill O'Laughlin with O'Laughlin Financial Group.

Jim, you said the guidance for this year 2012 on the revenue line is $430 million, up 8.5%. I was surprised at the number being only 8.5% or 9%. Can you comment on that?

Yes, as I mentioned in my introduction, it's not the Healthcare side of the Business, it's the Staffing side of the Business. The Staffing side is tied to the economy. And I think most staffing companies are seeing a reduction in demand as companies, even in the US, are concerned that the economic growth isn't going to continue. And they often cite the financial situation in Europe as the reason.

I had a question on electronic medical records, but it was answered by the analyst from Noble. Earnings projections for this year up 21%, that's a pretty good number. Not as good as last year. So, revenue up 8.5% and yet earnings guidance 21%. I was surprised at the spread there. I would have thought the earnings guidance would be lower given the lower revenue guidance. Can you comment there?

Yes. It's the mix of business. The Healthcare side of the Business, which is almost all Solutions, which yields about a 10% operating margin, is still growing at 25%. The Staffing side of the business, which has about a 3% operating margin, is growing at 2%. So, we're getting the mix change that we've been getting now for years, but it's happening more rapidly in 2012 because the Staffing side of the Business is growing at such a low rate. Jim, thank you.

Bill Sutherland with Northland Capital Markets.

Thanks. Brendan, what is going to be the billing day total for 2012? Is it 254?

No it's 255 because of Leap Year.

Yes, there's 64 days in the fourth quarter, Bill. I'll give it to you by quarter. Q1 is 64, Q2 is 64, Q3 is 63 and Q4 is 64.

Okay. And then you go back to probably 254 next year?

Correct.

Jim, I realize the hesitancy of some clients, EMR clients, to use newly-trained people. But are you anticipating that that is going to be a mind shift that changes eventually and therefore are you going to start some training classes?

We definitely have not seen that in the market so far, particularly as some of the largest hospital systems in the US start up, they're going to have to do that. But exactly when that's going to happen is the part that we haven't been able to determine. When we train people, particularly for the initial engagement, we usually try and train them.

We usually hire people from the city where we know we're going to use them to cut down on travel expenses in the first couple of years. So, at some point we think that it's definitely going to happen, but we just can't tell whether it's in '12 or '13. And as soon as it happens, though, yes, we are going to start training classes back up again.

And then one last one. On the EMR, as you look out at the projects underway this year, how many do you expect would likely be completed, say, by the end of the year?

That's a good question and it's been something that's very difficult for us to figure out. What's happened --

You get extensions, I know.

Yes, we get extensions. Two things have been happening to us. One, we'll be finishing the larger system and they'll buy another hospital. We've got a couple of situations where that's happened. And we've gone back in or switched the people over to do that.

The other thing that's happened in some hospitals is they've actually retained us to go back and improve the system. They basically go back and do enhancements. Many of the hospitals told us, because a 1,000-bed hospital was $1 million a month they were losing by not meeting meaningful use, that they absolutely wanted us to go in and just hit meaningful use.

So you might train 30% of the docs, for instance, on how to use computerized physician order entry for prescriptions. The hospital really wants 100% trained, but you only need to hit the 30% and you move on to something else. So, when we got to the end of some of the projects, the hospital said, Okay, now go back and do these things that we told you to skip, or only to meet the minimum requirement, because we want enhancements.

If you look at it, it should be what happened two years ago. They're two-year projects. In 2010 we started up six EMR projects. You'd expect them to come to an end this year. We probably have three other projects that were on these delays, where they've held us on the project because they're buying hospitals or doing further enhancements to the system. So those three, too, may end this year. So it could be half of the projects we have, maybe nine. It's probably something in the six to nine range.

I didn't follow how you just ended up with the math there. You said you had six --

Started in '10, that should end this year. But our experience is that most of them that should end usually get delayed for a while.

Right. So, you're saying that maybe half complete this year?

It's possible, yes. But I suspect it's something probably between six and nine. I think that we'll get some extensions on some of the projects that we're working on.

Six and nine complete in '12?

Six to nine, yes. Somewhere between six and nine projects will be completed this year. The six we started in 2010, obviously were in the pot, plus three additional that have been extended, that actually started in 2009.

I see. Okay. Thanks for the color.

Gentlemen, there are no further questions in queue. Please continue.

CTG is firmly established in healthcare, one of the fastest-growing major US industries. We have offerings for electronic medical records, ICD-10 conversions, accountable care organizations, and medical informatics, all of which are expected to be in strong demand for the next several years. We therefore remain very excited about CTG's future. I would like to thank you for your continued support and for joining us this morning. Have a great day.

Thank you, ladies and gentlemen. This conference will be available for replay after 11.30 AM Eastern. Today is February 21, 2012. And will end February 24 at midnight. You may access the AT&T replay service at any time by dialing 1-800-475-6701 and entering the access code of 221718. International participants please dial area code 320-365-3844. Those numbers once again are, 1-800-475-6701 and 320-365-3844 with the access code 221718. That does conclude our teleconference call for this morning. Thank you very much again for your participation and for using the AT&T executive teleconference service. You may now disconnect.