Veradigm Inc (MDRX) 2006 Q4 法說會逐字稿

Good afternoon. My name is Lakisha, and I will be your conference operator today. At this time, I would like to welcome everyone to the Allscripts 2006 fourth quarter and year-end conference call. [OPERATOR INSTRUCTIONS] I would now like to turn the call over to Mr. Glen Tullman, Chairman and Chief Executive Officer of Allscripts. Sir, you may begin.

Thank you. Good afternoon and welcome to the Allscripts fourth quarter and 2006 year-end conference call. This is Glen Tullman, Chairman and Chief Executive Officer of Allscripts. Joining me on the call today is Bill Davis, our Chief Financial Officer. 2006 was a record year for Allscripts -- our best ever. And I'm excited to tell you about it. Before we get started, however, I'm going to ask Bill to read the Safe Harbor statement. Bill.

The statements made by Allscripts or its representatives in this conference call will include certain forward-looking statements that are based on the current beliefs of Allscripts management, as well as assumptions made by and information currently available to Allscripts management.

Wherever practical, Allscripts will identify these forward-looking statements by using words such as may, will, expects, anticipates, believes, intends, estimates, could, or similar expressions.

These forward-looking statements are subject to a variety of risks and uncertainties, including those listed in the earnings press release issued by Allscripts today, and in Allscripts filings with the Securities and Exchange Commission, which could cause Allscripts actual results, performance, prospects or opportunities in 2007 and beyond to differ materially from those expressed in, or implied by these statements. Except as required by the federal securities laws, Allscripts undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this release.

With that said, I would like to turn the call back over to our CEO, Glen Tullman.

Thanks, Bill. I want to begin today's call with a fun story.

In mid-November, Laurie McGraw, who runs our TouchWorks business unit asked me with some frustration in her voice if I would ever be satisfied with our results. I told her that if she delivered more than $40 million in fourth quarter sales, which we also refer to as bookings, I would be satisfied, at least for an hour. Well, the good news is Laurie and her sales team delivered, as did the rest of the organization, and today we'll recount some of their successes during the fourth quarter and during the year.

But before I get into the details about the fourth quarter or 2006, I want to talk about the state of the market.

Healthcare continues to be front page news, to occupy the attention of our politicians, and most important, to be vital to our nation's economic well being. This is a $2.2 trillion sector of the economy, where we can't effectively measure or manage quality or cost.

Every business, large and small, is taking action and every stakeholder is looking for a solution. The bottom line, we have a healthcare system under tremendous pressure. The one certainty in this picture is that healthcare information technology will be central to the solution, which we believe is an interoperable, connected, electronic healthcare system.

And therein lies the opportunity for Allscripts. Our focus is on more than just delivering great software. We believe we're in the information business, and the electronic health record is the most critical element.

It's the delivery platform for information and it's the connectivity platform for the many different stakeholders who want to and need to exchange information. This vision is fast becoming a reality, and it's clear from our results that our clients have embraced it.

So, with that as our grounding, let's begin with a review of 2006, which was, by all measures a breakthrough year for Allscripts.

We achieved record revenues of $228 million, record sales of $190.1 million, led by our TouchWorks business unit, and the largest profit in Allscripts history.

Bill Davis will provide a lot more detail on the financial metrics later in the call. However, it's important to note that our success during 2006 was based on more than numbers. Allscripts continued to extend our leadership through a combination of innovative solutions, world-class service, and delivering measurable and meaningful results for our clients.

As I look back on 2006, it's pretty clear that the most important decision we made was the acquisition of A4 Health Systems on March 2.

The A4 acquisition immediately gave us a leadership position with a combined electronic health record and practice management system for practices with 10 or fewer physicians, which accounted for approximately 90% of A4's business. And it enabled us to enter the practice management market for mid-sized and large physician groups, virtually doubling the size of the market that Allscripts now targets.

Under the able leadership of David Bond, who was President and COO of A4 previously, our HealthMatics unit stepped up to produce record sales. But the real story is how successfully the companies have come together.

We are now truly one organization, with nearly 1,000 employees, leadership in the large, mid-size and under 10 market segments and a practice management system that can accommodate practices of any size. At the same time, we were integrating the A4 acquisition, we successfully managed through GE's acquisition of IDX.

I'm pleased to report that during the year, we reported record sales into the IDX base with even more business in the second half of the year, post-acquisition, than during the first half. We expect to continue to see strong sales to clients with IDX practice management systems, including the largest IDX clients, where we have become the safe choice with better results and more reference sites than anyone else in the market. The key takeaway is that sales into the IDX base will continue to be strong, but they now represent a smaller percentage of our overall sales.

Moving forward, we are now less dependent on a single segment of the market which puts us in a much stronger position as a company.

While 2006 was a great year for Allscripts, our fourth quarter was truly remarkable. Every business unit set new records.

To begin, I was very pleased with the performance of our HealthMatics business unit, which sells our HealthMatics Electronic Health Record and Practice Management suite, and not just in terms of sales and revenue.

Even more important, with small practices it comes down to results and HealthMatics continues to deliver. Remember that, unlike our larger TouchWork sales, our HealthMatics sales are much quicker to implement and provide a balance to our overall revenue recognition and client mix. Some sales can be closed and installed in the same quarter.

Given the strength and success of HealthMatics we are now expanding -- we've now expanded the focus of our HealthMatics sales force to groups with up to 25 physicians. Amarillo Diagnostic Clinic, a HealthMatics office sale for 24 physicians, announced in January is a good example of the traction we are gaining in the mid market. At the same time, we're still having strong success with smaller practices, as evidenced by sales this quarter to more than 60 new clients, including many that we'll announce later this month.

What really sets HealthMatics apart from our competitors, besides being a great overall product, is a well-deserved reputation for service, support and quality. Healthmatics is a perfect compliment to our TouchWorks business unit, which targets groups with more than 25 physicians.

As I mentioned earlier, Laurie's team exceeded even my expectations with $43.2 million in sales during the fourth quarter. Included in that number were some very significant sales contracts.

For example, on February 1, we announced an agreement with UMass Memorial Health Care, one of the leading academic medical centers in the country, that will provide TouchWorks Electronic Health Record to at least 1,000 physicians, including 200 non-employee positions. UMass Memorial plans to roll out TouchWorks to hundreds more physicians in their community in the coming year. UMass is also a regional supporter in Massachusetts of our national electronic prescribing patient safety initiative, which I will say more about later.

Earlier today we announced another major agreement. This one with Sharp Community Medical Group, which purchased our Electronic Health Record and Practice Management solution for 300 physicians. As you may know, Sharp's other physician groups have been clients for sometime, but the independent practice association was a separate decision requiring a new agreement and marks a critical win for us in the IPA market.

The fact that a large physician group like Sharp bought our TouchWorks Practice Management solution is a trend you will see much more of. Sales of the combined EHR PM solution exceeded our expectations. We now have more than 20 clients who have purchased the combined solution and it's clear that TouchWorks Practice Management is ready for prime time.

On the subject of new opportunities, the quarter also included changes to Stark that relaxed restrictions on the financial relationships, hospitals and other healthcare entities can have with physicians and enabled these groups to provide funding for electronic prescribing and electronic health records. Many observers believe this change would advantage the traditional hospital IT vendors. The reality is that ambulatory physicians insist on systems that are easy to install and use and that have strong reference sites.

Consequentially, the changes have not only spurred interest in our systems, but have also increased the dollars available for purchasing our TouchWorks and HealthMatics offerings. One example is our recent sales in Northwest Hospital, which plans to provide our system to 250 nonaffiliated physicians across the Seattle area to improve connectivity and referrals from those physician groups.

You should expect to see more of these sales in the future quarters. The Stark Safe Harbor, paired with the acceleration in demand from some of the largest healthcare delivery networks led us to create an enterprise sales group to focus on the largest opportunities. Members of this team, which is already in place, carry a $9 million annual quota as compared to $4 million for our TouchWorks sales executives.

However, even with the increased focus, we believe we needed more bandwidth to address both the hospital and enterprise markets.

For that reason, we have established relationships to further accelerate our traction, including our recently announced partnership with Emageon, which provides radiology services to over 500 hospitals, as well as our ongoing partnership with AmerisourceBergen, who, with a sales force of several hundred, will also help get the word out and support our efforts to the 1,300-plus hospitals they serve.

And speaking of hospitals, you have heard me talk about the importance of ambulatory physicians connecting to hospitals in the acute care setting. Our vision of a connected healthcare system is one in which the appropriate patient information from entry into the hospital, the emergency department, to exit from the hospital, discharge, is available in real-time. It's important to remember that 80% of patients see their primary care physician within 10 days of visiting the ED, or being discharged.

Traditionally, those physicians have no records from the hospital, which explains why hospitals continue to purchase our HealthMatics ED and Canopy solutions to not only streamline their own processes, but to offer value to physicians in their communities. And the results demonstrate that strong demand.

Our emergency department information systems generated sales in the fourth quarter, including an agreement with one of the most prestigious medical systems in the country, Johns Hopkins. One key reason hospitals like Hopkins choose our ED system is that, as KLAS, the Consumer Reports of healthcare recently reported, our clients are using more of the modules on our product than any other EDIS vendor.

The other acute care solution we provide is our Canopy case management and discharge software.

This web-based solution streamlines and speeds the patient care management process by automating utilization, case management, discharge, and quality management processes relating to a patient's hospital visit. The Canopy team also had a very solid quarter, including new sales to Mount Sinai Hospital of Queens, New York, University of Pennsylvania Hospital, and an add-on sale to North Shore Long Island Jewish Health System, expanding our strong presence on the eastern seaboard.

I have to admit that I love the Canopy unit because the business model looks a lot like salesforce.com with recurring revenues, and its focus on care management and discharge, a growing area of concern for hospitals. The business is predictable and growing rapidly.

We also added some of the largest and most significant managed care players in the country. What? And the business fits nicely with our connect strategy. I'm pleased with Canopy's performance and excited about the business expanding.

I also want to spend a few minutes talking about our Physicians Interactive group, which produced record sales in the fourth quarter. On the call last quarter, I promised at least one sale in the $5 million range. I was conservative. We delivered two multi-million-dollar sales of our enterprise platform, part of a strategic shift which we executed last year that positioned us to begin to sell physician relationship management platforms. As our agreement with King Pharmaceuticals announced last week demonstrates, these contracts are much larger, more strategic, and executed at the highest levels of the companies we are dealing with.

We also signed a major strategic agreement with Novartis Pharmaceuticals in the quarter. For the year we had active agreements with 15 of the top 20 pharmas, providing a great relationship base to grow from.

In November, we also announced that Donato J. Tramuto had joined the company as President of PI, to lead the strategic expansion of the PI business. Donato brings 27 years of healthcare experience to the business, including his most recent position as Chief Executive of i3, a global pharmaceutical services company that is a part of UnitedHealth Group. We expect that under his leadership, we will introduce a number of new information products and services that are valuable to pharmaceutical companies, managed care providers and physicians alike.

Finally, in our medication solutions business, we continue to deliver on our plan in the fourth quarter, adding quality recurring revenues. And this business continues to be a solid contributor to our bottom line. The fourth quarter was truly a remarkable performance. And for the year, we delivered on our promise to make a real difference in healthcare, as well as on our financial commitments to the market. But we're not resting on our accomplishments.

In January, we launched a program that has captured the imagination of many of the key stakeholders in healthcare today, and positioned Allscripts in a leadership role across the entire healthcare continuum. I'm referring to the National Electronic Prescribing Patient Safety Initiative, or NEPSI. Before I turn the call over to Bill, I want to say a few words about the initiative.

First, why did we do it? In July, the Institute of Medicine issued a report on paper-based prescription process, detailing over 1.5 million injuries, and over 7,000 deaths each year due to preventable medication errors. At Allscripts we concluded, simply stated that we could do better, both as a country and as a healthcare system. So we acted.

Beginning in late 2006, we assembled a coalition of healthcare and technology companies to offer free electronic prescribing to every physician in America. The coalition includes a virtual who's who of technology companies, with Dell our national sponsor, Cisco, Fujitsu, Microsoft and Sprint Nextel as sponsors. We also added some of the largest and most significant managed care players in the country, including Aetna, Horizon BlueCross BlueShield of New Jersey and Wellpoint.

And to deliver real value, we knew that we needed connectivity to pharmacies, which SureScripts provides, critical information on medications and drug interactions from Wolters Kluwer Health, our information sponsor and healthcare specific search, which Google provides. Completing the picture and adding a local expertise are 12 of our regional healthcare clients, strategically located across the country.

You will find a complete list of sponsors and much more information on NEPSI at www.nationalerx.com, where we also sign up and ID physicians to allow them to begin using the product.

The initiative has received substantial coverage in major media outlets and we're already seeing very strong interest among physicians. We're also in active discussions with many organizations who want to either sponsor NEPSI, or get the word out to their members. What is in it for Allscripts? We believe NEPSI will accelerate the adoption of all electronic tools, increase our brand awareness with physicians and ease physicians' entry on to the electronic healthcare highway. Good for the industry, good for our partners, and good for Allscripts. So, an exciting year and a great start for 2007.

I'm now going to turn the call over to Bill to cover our financial results for the fourth quarter and for 2006. Bill.

Thanks, Glen, and hello everyone. As Glen indicated, we are very excited about our fourth quarter and full year results. I'm particularly proud of the fact that we had solid contributions from each of our businesses.

So, this afternoon, I will review our results and then provide some updated perspective regarding 2007.

Turning first to some key highlights of our fourth quarter. Total bookings again were $75.5 million. Our bookings were led by $61.4 million of clinical software bookings and represent a 111% increase over the fourth quarter of last year. Our clinical software bookings increase reflects 48% non-A4 or organic growth. We are also very excited about the $14.1 million of quarterly bookings contributed by Physicians Interactive business.

As Glen indicated, PI's bookings reflect two significant platform transactions that were closed in the quarter.

Our total revenue of $63.6 million represents an 86% increase over fourth quarter of last year. GAAP net income for the quarter was $4.5 million or $0.08 per diluted share, compared to $0.06 per share in the third quarter of this year. Non-GAAP adjusted, or what we previously referred to as cash earnings were $12.5 million or $0.21 per diluted share in the fourth quarter. This compares to $0.13 per share in the fourth quarter of last year, and $0.19 per share in the third quarter of this year.

We also generated approximately $11.6 million in cash flows from operations during the fourth quarter.

Turning now to a more detailed look at our fourth quarter performance. Again, our total bookings during the quarter were approximately $75.5 million. Consistent with prior quarters, bookings do not take into consideration the $11.2 million of sales and medications.

Our $75.5 million in bookings compares to $33.8 million of bookings in Q4 of last year, a 124% growth and 70% organic growth. Our clinical software businesses contributed $61.4 million in bookings during the quarter, and this excludes ongoing support. This compares to $29.2 million in the fourth quarter of last year, and $35.7 million in the third quarter of this year.

Our fourth quarter bookings included approximately $18.2 million from A4, which compares to $13.9 million in the third quarter. Taking that into consideration, our organic growth was approximately 48% when compared to our fourth quarter bookings the same period last year.

Our Physicians Interactive business also had record-setting bookings during the quarter, again of $14.1 million. Such amount represents 206% increase over the fourth quarter of last year, and 199% increase over the third quarter of this year.

Again, we are very encouraged by the level of interest in our platform offerings. Bookings for the entire year totaled $190.1 million. Our clinical software businesses contributed approximately $164.5 million of that annual amount, representing 123% year-over-year growth. Our organic clinical software bookings growth was approximately 48%, when compared to last year.

Physicians Interactive contributed the balance of our annual bookings of $25.7 million. The annual amount represents a 64% increase when compared to 2005.

Turning now to backlog. We ended the fourth quarter with $213 million in sold backlog.

The backlog breakout is as follows. License and service fees related to our clinical software businesses constituted $110.6 million of our backlog. Software subscriptions, which we expect to recognize over the next three to five years made up $28 million of the balance. Support and maintenance fees for the next 12 months is $49.6 million, and Physicians Interactive made up the balance of $24.8 million, again for a total of $213 million of sold backlog. As I've indicated before, our reported backlog does not include anything related to our medication distribution business, even though we view the medication revenue as reoccurring in nature.

Turning now to revenue. Our fourth quarter revenue of $63.6 million represented a $29.4 million or 86% increase over the same three month period last year. Our clinical software businesses contributed a majority of that increase, representing approximately 168% year-over-year growth.

A4 contributed approximately $23.3 million of revenue to the quarter. Thus the organic growth for our clinical software businesses was approximately 40% when compared to the fourth quarter of last year.

As both Glen and I have stated, we continue to be very encouraged by the increasing number of cross-selling opportunities amongst all of our clinical software businesses, including the increased number of practice management sales that we are seeing. Consequently, this will be the last quarter that we provide separate results for A4. And so we encourage you to think about our clinical software businesses on a combined basis.

Turning now to Physicians Interactive. PI had revenue of $3.4 million in the fourth quarter, and it compares to $2.2 million in the third quarter, and $3.2 million in the fourth quarter of last year. Both increases are primarily attributed to the launch of certain of those previously mentioned platform deals. We expect the full effect of our platform programs to be realized in 2007, as well as in future years.

Moving to our meds business. We saw another solid quarter with revenue of $11.2 million. This compares to $10.4 million in the third quarter of this year. The revenue increase is indicative of the seasonality that we normally see in the fourth quarter.

In terms of revenue mix, our software and related services segment represented approximately 77% of our total revenue in the fourth quarter. This is up from approximately 53% in the fourth quarter of last year.

Fourth quarter revenue by segment is as follows. Again, our medication business delivered 11.2% -- $11.2 million or 18% of our revenue. Clinical software, $48.9 million, and our information services delivered the balance of $3.4 million for a total of $63.6 million.

Total revenue for 2006 was $228 million. This compares to $120.6 million for 2005, and represents an 89% increase.

Our clinical software businesses increased to $173.5 million in 2006, from $65.2 million in 2005, a 166% increase and 45% organic growth.

Looking now to gross margins. Overall, our gross margin was approximately 54% in the fourth quarter, versus 46% in the fourth quarter of last year, and 49% in the third quarter.

Margins by segment are as follows. Our medication business delivered consistent gross margins of 16%. We saw a nice increase in our clinical software business, moving from 56% in the third quarter to 62% in the fourth quarter. And we also saw a nice improvement in our information services business from 46% up to 58% in the fourth quarter, bringing our total to 53.5%.

The sequential change in the clinical software segment can be attributed to approximately $3.3 million less hardware revenue being recognized when compared to the third quarter. Clinical software gross margins were also favorably impacted by the addition of certain add-on license sales to existing customers. Add-on license sales tend to contribute higher gross margins. Physicians Interactive sequential gross margin improvement was the result of the completion of certain e-Detailing projects at higher than expected gross margins.

Again, in the future, we continue to expect gross margins in this business to remain in the mid-to-high 40s.

Turning now to expenses. Operating expenses, excluding amortization from intangibles and stock-based compensation for the fourth quarter were $23.1 million. This compares to $21.3 million of expenses in the third quarter. The increase is attributed to higher compensation related to increased head count.

We also had certain marketing, or client-related events take place in the quarter that did not occur in the third quarter, as well as some additional bad debt expense in the fourth quarter.

With regards to capitalized software, we had $3 million in the quarter. This amount compares to $2.6 million we capitalized in the third quarter and is reflective of the investment we continue to make in the development of TouchWorks Version 11. As we have indicated in the past, this amount will, in fact, fluctuate quarter to quarter, depending on our product development cycle.

Stock-based compensation was approximately $900,000 for the quarter. And deal-related amortization, was approximately $2.6 million. The $300,000 increase in stock-based compensation was largely due to a true-up of our forfeiture rate assumption related to the accelerated vesting we did back in Q4 of 2005.

Net interest expense was approximately $100,000 in the quarter.

Net income for the quarter was $4.5 million or $0.08 per diluted share. This compares to $3.3 million or $0.06 per share in the third quarter of this year, and $3.4 million or $0.08 per share in Q4 of last year. Please note that the net income for 2006 reflects stock-based compensation resulting from the adoption of new accounting rules on January 1, as well as intangible amortization for 10 months related to our A4 acquisition that closed on March 2, and a full tax revision at approximately 38%.

As highlighted in prior quarters, we believe another important performance metric is non-GAAP adjusted earnings or non-GAAP adjusted earnings per share. We define non-GAAP adjusted earnings as net income, giving effect to the add back of depreciation and amortization, stock-based compensation and provision for income taxes, as well as A4-related transitional expenses in Q1 of this year. Our non-GAAP adjusted earnings in Q4 were $12.5 million or $0.21 per diluted share.

This compares to $10.4 million or $0.19 per share in Q3 and $5.7 million or $0.13 per share in Q4 of last year. Please note that our non-GAAP adjusted earnings per share computation relies on the same diluted share count as for GAAP purposes.

Basic shares outstanding for the quarter were 54 million and diluted shares were 64 million shares. The 7.3 million shares issuable under our convertible debt offering were in fact dilutive to our GAAP earnings per share for the first time in the fourth quarter, and therefore are included in both our GAAP and adjusted earnings diluted share count computations. It's important to remember to add back net interest expense related to the convertible debt to earnings when computing earnings per share, given than we added the debt -- underlying shares to our diluted share count.

Those amounts were approximately $540,000 net of tax for GAAP purposes and approximately $872,000 for adjusted earnings purposes. It's also important to note that the shares related to the convertible debt offering are anti-dilutive for the full year in 2006. As such, the 7.3 million shares issuable under the convertible debt offering were excluded for both GAAP and non-GAAP adjusted earnings purposes for the full year.

Our GAAP earnings for 2006 were $11.9 million or $0.22 per diluted share and our non-GAAP adjusted earnings were $39.2 million or $0.74 per share. The 2006 non-GAAP adjusted earnings amount compares to $16.8 million or $0.39 per share in 2005.

With regards to overall head count, we ended the quarter with approximately 914 employees. This compares to the 876 we reported in the third quarter.

Turning now to our balance sheet. We ended the quarter with $83 million in cash and marketable securities, which is reflective of us generating approximately $11.6 million in cash from operations in the quarter and $4.7 million of cash from option proceeds and other investing activities. The inflows of cash were offset by approximately $4.8 million of capital expenditures and capitalized software.

Accounts receivable at December 31 decreased to $55.6 million, which resulted in days sales outstanding of approximately 79 days.

Turning now to 2007, Allscripts continues to target total revenue to be in excess of $300 million.

We also anticipate GAAP earnings per share will be in the range of $0.42 to $0.44 per diluted share. Please keep in mind that the 7.3 million shares associated with our convertible debt offering are in fact expected to be dilutive next year and therefore are included in our estimated share count.

As it relates to our share count for 2007, I'm estimating that we will be closer to 65 million shares for the full year, due to the higher number of options being exercised than what was previously estimated. We also have done some more work on our estimated effective tax rate, and believe it's appropriate to model something closer to 40% rather than the previously communicated 38%.

This increase is due to higher forecasted taxable income levels, as well as A4's state tax rate considerations. The increased cost and the share count will be offset by slightly lower stock-based compensation expense for the year. Net/net, the aforementioned changes have been worked into our $0.42 to $0.44 per share guidance.

Finally, I also want to reiterate something else that I discussed last quarter. Management continues to believe that the longer term and more appropriate earnings metric is to evaluate the company using a non-GAAP adjusted earnings that gives effect to the add back of acquisition-related amortization and stock-based compensation, both on an after-tax basis. Such metric recognizes the fact that Allscripts will ultimately become a tax paying entity and will improve comparability amongst the analysts who follow the company.

Consequentially, it's our intention to report GAAP earnings and provide for the reconciling items to come up with non-GAAP adjusted earnings starting in 2007.

For comparability purposes, we had GAAP earnings in 2006 of $0.22 per share, which included $6.4 million or $0.12 per share of acquisition-related amortization net of tax, and $1.4 million or $0.03 per share of stock-based compensation, also net of tax.

In 2007, we have provided guidance of $0.42 to $0.44 per share on a GAAP basis, and we anticipate that that includes $6.2 million or $0.10 per share of acquisition-related amortization, as well as $3.5 million or $0.05 per share of stock-based compensation, both amounts being on an after-tax basis.

So, in closing, we could not have been more excited about our strong performance both in the fourth quarter, as well as for the entire year. For that, I would like to personally thank our employees, clients and investors for their respective commitment to the Allscripts, as well as their ongoing support. We are equally excited about our future prospects and look forward to another strong year in 2007.

With that, I will turn the call back over to Glen for some closing remarks.

Thanks, Bill. Let me close with just a few comments. By virtually every measure, 2006 was a record year for Allscripts.

In large part, our performance was driven by our dedicated employees committed to making a difference in healthcare. This couldn't happen without great execution, led in part by Joe Carey, our Chief Operating Officer. Over the last 13 years, across three businesses where I've had the pleasure of working with him, Joe has demonstrated an amazing commitment to our clients and sacrifice on behalf of the business. So, it is with mixed feelings that I'm announcing that Joe will be leaving Allscripts to spend more time with his family. With his first of three boys about to leave to college, Joe made a personal decision that I respect.

The good news is that we have built a strong management team that we feel confident will carry on without Joe, making this an easy transition. That said, we have a search for a new COO underway, and Joe is committed to staying to insure a smooth transition.

So, as we move into 2007, virtually every trend in healthcare supports adoption of the solutions that we provide. With that said, the most critical point is that we're just getting started in terms of penetration for each market we compete in. There's lots of runway ahead.

Two weeks from now, you will get a sense of the length of that runway at HIMS, the largest healthcare information technology conference in the world. Allscripts will have a significant presence at HIMS, including a number of important announcements around products and our connectivity initiatives.

We will also be announcing a number of major client agreements at HIMS, with a focus on improving healthcare for people throughout Louisiana, many of them in the areas hardest hit by Hurricane Katrina. I invite all of you who are coming to the conference, to see for yourself how Allscripts is making a difference in transforming healthcare, with solutions that are an indispensable part of the way physicians practice medicine, and with a group of people who are committed to make them work. Thank you for your time today and for your continued support. We will now open up the floor to take some questions.

[OPERATOR INSTRUCTIONS] Your first question comes from Corey Tobin with William Blair & Company.

Hi. Congratulations on a great quarter.

Thanks, Corey.

A couple of quick questions if I could, Bill. Specifically in the margin side. The margins in the software-related service segment -- the target I think you mentioned in the past is a mid-60s number there. I'm just curious, based on what we saw the last couple of quarter, should we be ratcheting our expectations down a little bit toward a low 60s number?

In conjunction with the A4 acquisition, we reached that expectation in and around gross margin, indicating that we expected it to be in the high 50s, low 60s. If you recall, the business prior to our A4 acquisition was, in fact, operating in the mid-60s but with the A4 addition, given their customer base that they are selling into, their margin profile is a tad bit lower. So, I continue to be comfortable with the business' ability to perform in that high 50s, low 60 range, which again is consistent with what I said in the past.

Great. Okay. Thanks. My apologies. I forgot about that.

Okay. And then two other quick ones. On the package medications business, this is a business that we talk about being roughly flat in the past and it was down slightly this year. Should we still expect roughly the same contribution from this business in 2007?

Yes, again, I actually think the meds business was very consistent with the expectation we set at the beginning of year. If you recall, literally going back a year ago, we said that there was a conscious decision on our part to move away from some wholesaler business and we had actually quantified that in the $1 million to $2 million range. And that, in fact, explains the difference from one year to the next. So, we continue to be very comfortable with the business' contribution and the job that Greg Cull and team are doing. I would expect that contribution to be similar next year, or in '07, rather.

Great. Finally, on the bookings, obviously balances a strong bookings quarter here. It seems like there doesn't seem to be any let up in the marketplace or at least within your sales force.

What sort of a bookings target should we be circling at this point for 2007? And then I understand you don't want to break it out between A4 and the base business. But, again in terms of total bookings, what should we be thinking about there?

Again, I gave guidance back as part of the investor day presentation that I would refer the group back to that was indicating total bookings in the neighborhood of $240 million or so. We have not updated that expectation as of yet. Just to clarify on that, the relative split of that $240 million was about $30 million off of -- $25 million to $30 million of that from our Physicians Interactive business and the balance coming from our clinical software businesses. We are going to continue to look at that as we progress over the quarter -- over the year, and then we'd update that as we have greater visibility as we move across the year.

Great. Congrats again. Thanks.

Thanks, Corey.

Your next question comes from Atif Rahim with JPMorgan.

Hi, thanks. Bill, could you perhaps review or reconcile what happened to the interest expense associated with the convert? I think what shows up on the income statement is $937,000 in your gross of pretax income tax interest expense, but it's something different you mentioned on the -- on your -- in your comments. And then secondary, Glen, too, if you could talk about the NEPSI initiative. I know that kind of became finalized on January 31. How many physicians you've seen registered. Perhaps how many downloads you've had. You know, what are your plans to monetize this over the longer term?

Yes, I will handle the financial question first. The delta from the $937,000 on the income statement to the $872,000 that I referred, is that the $872,000 is the interest expense related specifically to the convertible debt.

The delta is the fact that we have a $3.5 million note related to the building that we acquired through the A4 acquisition. So we do have some incremental interest expense running through related to that. So, that's the delta.

And relative to NEPSI, I think what we have seen is very strong demand and interest from physicians who are hitting the site. As we explained when we introduced it, we were doing kind of a slow rollout, so we are bringing on physicians as we speak. What we have also said is in terms of -- we are talking about pretty significant demand, but we are still in the rollout phase.

For example, we have, as I noted, a number of clients who are regional partners and they are all beginning their deployment, as are our large managed care partners. We don't expect to report separately on the numbers that are enrolled, but I would tell that you that there's significant interest. Relative to the benefit for Allscripts, and for our partners, what we see is NEPSI as being an on ramp to the electronic healthcare highway. And so we see physicians who are interested in using NEPSI, then moving to our other electronic products.

So, we expect that we'll monetize this by the more rapid adoption of our other products, as well as by transaction fees when we move information. For example when we route information to local pharmacies we receive a transaction fee. I have think what Bill would tell you is we had contemplated in the existing guidance, both the cost of NEPSI, as well as any of the potential revenues from the next 12 months.

So I don't think you'll see either a cost or a spike from that respect. One last point on NEPSI. And that is NEPSI has really elevated our status and we are engaged virtually with every major player in healthcare now in a variety of discussions, because it really has captured the imagination of the market.

Thanks for the color. I appreciate it.

Your next question comes from Larry Marsh with Lehman Brothers.

Thanks, and good afternoon. Maybe first, Glen, elaborate a little bit about Joe's departure. Obviously been with you for a good while here.

Just -- I know you talked a little bit about the catalyst. How quickly do you anticipate finding a replacement? And would you anticipate somebody from your existing team filling that role? And maybe also how important is the Chief Operating Officer role, given the growth of the company? Is it as important, more important, or are you moving to a more decentralized model?

Well, Larry, there's a lot of questions there. Joe is sitting next to me so if I said the COO role was not important, I would think that's not the appropriate way for him to leave the business. That said, we have developed a very strong team and you mentioned the fact that it's decentralized. We have a president of each of our respective business units and they have both authority over the P&L and expenditures.

So the COO role in our business is someone who kind of moves between the businesses, coordinates between the businesses and the like. Ultimately, those businesses do roll up to the COO.

In terms of timing, we are interviewing people as we speak. My expectation is we will likely fill that role from outside the business. That said, Joe is staying on and helping us in the transition until we determine how best to handle that.

We don't see this as us losing a step in any respect. We're comfortable with it.

We're comfortable with it. We're comfortable that we could operate without a COO if we needed to. But we also see it as an opportunity to bring on some new additional talent that has run a much larger organization, which is what we expect to become.

Okay and just one more personnel discussion. You mentioned your team focusing on the high end of the market, $9 million annual quota. That's under Dan and his group? Is that right or is there somebody else running that?

It's -- that's -- the team that is running that is under Scott Leisher. Scott previously ran the entire sales force. He then moved to focus on some of the larger deals that we have announced over the past year. And frankly, there was only one of Scott and we needed about five of Scott.

So we -- through a combination of internal and external hires, we have filled those roles, which meets the demand that we are seeing.

Okay and two other quick things. First of all, I think you described HealthMatics' success in the market place, I guess with David and such. And I think you said -- you expanded the definition of that business to up to 25 physicians. Now, I know in the past you've talked about the small end of the market being up to 10.

Is there something that we should read into that, and is that a message, especially as you are trying to go to market with a combined product of both practice management and EHR? Or is that just an evolution of the business, and what implications does that have, really when you go to market, given the way you sell HealthMatics versus TouchWorks?

Well, I think clearly there is a difference. As we look at the HealthMatics Group, they have expanded from 10 physicians and below now to 25 physicians and below. David has also been aggressively hiring.

I think we have about 40 sales professionals now working for him and he continues to hire.

That said, we saw opportunity to have our higher end TouchWorks sales folks focus both on the large-scale corporate opportunities, $3 million and above, as well as that mid-market, $25 million and above, and thought we could best manage that by expanding the HealthMatics solution. The HealthMatics solution is an integrated solution with both electronic health record and practice management, but keep in mind we also have that solution across all of our products today.

So, we really see this as just a realignment and frankly a lot of territory management. And that is it will give us more visibility, the more opportunities across each of these segments.

Okay. And finally, are you breaking out percentage of your clinical -- bookings that were IDX relationship, and is that something that you are going to continue to give us in the future?

I do tend to respond to the question. So I will now. In the fourth quarter, approximately $1 out of every $3, or it's about 35% of our bookings were into existing IDX customers. And I want to emphasize that that percentage is indicative of, again, where we sold those solutions into. It is not necessarily indicative of kind of lead generation or otherwise. These are sales that were led by Allscripts, but nevertheless that was the percentage as it pertained to the fourth quarter. It's also important to emphasize that that only pertains to the non-A4 clinical software portion. And obviously there's none of IDX within the A4 portion.

I think the real message here is that because of the strength of our reference sites in the IDX base, which includes many of their largest and most prestigious customers, what happens is when those clients go out, or those prospects go out to look for solutions, they look first and foremost to Allscripts because we've really become the safe solution there. So we expect to see continued vibrant sales in that marketplace.

The good news is that less of our overall business is dependent on that. So we expect to see increases there, but increases across all of our markets. And, of course, the success of the A4 acquisition was giving us a leading product in each of the market segments. Less than 10, where A4 traditionally operated and where you needed an integrated solution, the mid-market, the larger market above 25 and now what we see is the very large enterprise sales and we are leading in every one of those markets.

Very good. Thanks.

Your next question comes from Alex Alvarez with Goldman Sachs.

Hi, guys. Good evening. In the software business, this was, I think, the first time that we've seen a sequential decline in revenue for a long time. I'm just wondering if there were any factors in the quarter that impacted the ability to grow that sequentially or whether we should simply be prepared to perhaps not see that kind of improvement quarter to quarter or going forward?

No, again, Alex, I would call out in the third quarter we tried to sensitize the market to the fact that the third quarter was benefiting pretty meaningfully by the hardware revenue. And I tried to call that out again. It was $3.3 million. So, I would consider that in terms of thinking about the sequencing of our revenue, but in terms of the prospect for future growth, we absolutely believe that you are going to continue to see growth in that. We set the revenue growth expectations for the full year previously.

All right. Thanks, guys. That's helpful. And then, Bill, were there any changes to the adjusted EPS guidance for '07?

There were no changes relative to that, other than the fact that we continue to talk to you guys about the fact that we would like to see the analyst community moving towards adjusted earnings that give consideration to deal-related amortization and stock-based compensation on a fully taxed basis, again, recognizing that over time, we are going to become a tax paying entity. We believe that's the right way to think about our business longer term.

Okay. And then two questions on the Physicians Interactive. What is kind of run rate on these platform sales that you're now starting to win? And then secondly, is there a difference in the profitability of these, versus the smaller deals that have made up the business historically?

I will take the first part. I will let Bill take the second piece of the question.

These are multimillion-dollar, multi-year agreements. What we like about them is there's a bit a razor blade impact. Because the products that we traditionally have sold, that we continue to sell, like e-Detailing, fit into the overall platform that we are selling. So, it's likely that when an organization commits to our platform, they will also be purchasing many of the add-on products that we sell, like e-Detailing.

And, of course, the real trend here is you see it across every major pharmaceutical company, they are reducing the number of reps -- detailing reps. And that's good news for us, because it means they are going to move more and more toward electronic solutions. Bill?

Relative to your economic question, I would suggest to you that at least what we see over the next 9 to 12 months, is that there's a certain amount of investment that's going to be required as well as a certain level of scalability that we are growing to. And so, again, in our margin expectations that I conveyed in terms of the mid to high 40s, that was all baked into our thinking. I do believe longer term, i.e. when you get outside that 12 months, we absolutely are anticipating some level of scalability and economies of scale there. And so I would expect to see margin expansion over time.

And one last one. Will these also help reduce some of the quarter to quarter volatility in the margin, as you've historically seen that where projects come to an end?

Yes, we definitely are expecting much more stability coming from that segment, because, again, it's a very -- becomes a much more predictable model because these tend to be two to three year term arrangements for which we are recognizing the revenue ratably over that period. The fluctuation is again really going to come about in terms of us working towards appropriate critical mass, which I don't see being way off in the future.

Alright. Thank you, guys.

Your next question comes from Richard Close with Jefferies.

Great. Congratulations.

Bill, just a question on the bookings for '07, the fact that you have not moved that number from where you set it at the analyst day. Should we read anything into the fact that you haven't moved that number up, considering the strong fourth quarter, or is it just we are at the beginning of the year and a certain level of conservatism here?

I would categorize it as the latter. I think it's early in the year. We're very, very encouraged by not only our performance in '06, in the fourth quarter, but also the level of pipeline that we're seeing into '07.

And quite frankly, I wanted to up guidance. Glen wouldn't let me. That was a joke. But in all seriousness, our intention is to evaluate how the first quarter comes in and I would expect more guidance or more color around the full year expectation coming out of the first quarter.

And then maybe if you could give us an update, you typically do, on the number of sales people that you have in the company right now. I think it was 70 last time if I'm not mistaken.

Yes, Glen talked about -- and I will give this in terms of quota carrying individuals. He talked about the 40 individuals in the HealthMatics business. We have another eight individuals related to our acute care businesses, the ED and the Canopy.

So those two individuals -- or, I'm sorry, those two businesses. And then on the clinical software business, we are close to 30 -- actually, 39 individuals as it relates to that segment.

That's TouchWorks?

Yes.

Okay. If we were to look at the bookings number for HealthMatics, considering that is going away, I guess, next quarter, could you just give us, maybe, some details around the breakout between Electronic Health Record and Practice Management versus the acute business? Maybe not the specific numbers, but is it skewed towards the Electronic Health Record and Practice Management?

Yes, I would -- I don't know that I have actually the breakout in front of me. And I apologize for that. Just to give you a general sense even, as it pertained to the fourth quarter. But I would suggest to you in terms of the clinical software.

When you look at the $61 million or so that we did in the fourth quarter, a large percentage of that is coming from Electronic Health Record. I would suggest to you that, I'm guesstimating here, but it's going to be probably be, I don't know, 80%, 85% of that number is coming from our ambulatory side of the business.

And then the relative split between health record -- Electronic Health Record versus PM would suggest it's probably 70%, 30%, maybe as high as 65%, 35% split -- the lower number being the PM. ***Auditing stopped after 1 hour of audio.

Okay. And then just final question, and I will jump back in the queue, I guess. With respect to taxes, you bumped up your, I guess, rate from 38% to 40%, but you are not necessarily paying a significant amount of cash taxes. And could you refresh us, you know, when you expect to pay significant cash taxes?

Yes, so the guidance that I have given previously is the expectation that we will not start paying taxes prior to 2008. I continue to believe that that's the earliest that we will begin to pay taxes.

I'm increasingly of the view that it will be very late in 2008, in terms of we cross over that, in possibility of kind of early 2009. The key variable there really pertains to the movement in our stock price and that has a corresponding effect in terms of the deductible of future stock option exercises and the compensation benefit that we get from that. So, that's a variable that's somewhat difficult to predict.

If you just look at our NOLs, as I said at the end of the year, which is, again, around $160 million, my expectation is consistent with what I said in the past, and that's again, that's at the end of '08 with a possible that I could see that moving out into '09.

Thank you, congratulations.

Thanks.

Your next question comes from George Hill with Leerink Swann.

Hey, guys, I think most of my guys have been answered. I'll just hop on a couple of small things here.

Number one. Some of the other companies that have reported in this space during the quarter have had some R&D tax credits that are flowing through the income statement, or they're putting on the balance sheet. You guys are actually guiding to a higher tax rate. Are you guys not seeing the benefit of federal R&D tax credits?

We are and so, again, George, there's more work to be done there in terms of tax planning and strategies that we're acting upon, R&D credits being one of them. But we did a fair amount of work relative to the effective rates that at the state level and the amount of income and the various jurisdictions. Quite frankly, I think there's opportunity to improve upon that, but I didn't want to get too far into the year and then have to come to the market and indicate. So, I wanted to at least give you a heads up that that's what we are seeing today. So, rest assures that we are acting very aggressively in terms of doing what we can to bring that down.

You guys have given full year guidance. I was on and off the call. I apologize about this. Did you guys give any Q1 guidance?

No, we typically don't give quarterly guidance. So, we're consistent with prior years just focused on our annual guidance.

Okay. And then my last question.

I should assume that we should see the names normal seasonality pattern in 2007 that we normally see or that we normally saw with the business, I'll say plus the inclusion of A4, so Q1 on the top line, on the software side, could be down a little bit sequentially?

I think -- is your question specifically to bookings or revenue?

No, to revenue.

No I'm not -- again, I'm not prepared to give guidance.

I think the seasonality aspect that you're referring to I think is more pertinent to the bookings dynamics because, again, fourth quarter tends to be our strongest quarter of the four. And really at this juncture, I have no reason to believe that this will not be similar to 2007 as a whole. So, from that perspective would anticipate a decline in bookings relative to the fourth but that, quite frankly could be mitigated just based on the strength of the pipeline that we see there.

But from a revenue perspective, again, we do benefit from the fact that a strong fourth quarter booking sets up nicely the input method that we prize our revenue on TouchWorks side. There's some exposure to your point on the HealthMatics side, just in terms of their [tiger] correlation to revenue recognition, but I guess taking all of that into consideration, I wouldn't necessarily conclude that automatically that would result in a decline.

Good deal. Thanks a lot.

Our next question comes from Newton Juhng with BB&T.

Thanks, guys. Hi, thanks, guys. Just with regards to PI bookings expectations for 2007, with the extra deal that closed in the quarter, should we look at lowering our bookings expectations on that side of business?

Again, Newton, I think the $25 million to $30 million range I talked about before at this juncture and for the same reasons I talked about on the clinical offerings side, we continue to be comfortable with. And that would show sequentially in terms of what we expect in '07. And, again, the $240 million breakdown with $30 million PI and $210 million relative to the clinical software business. Again, I would expect more color around that coming out of the first quarter.

Okay. And, thanks, Bill.

And then just real quick, with regard to how you guys are approaching the mid-market sale. Is it still a situation where you could be pushing both HealthMatics and TouchWorks to the same client, or are you making a decision to -- or is the sales force making a decision to push one or the other at this point? I think we've -- you know, what we will have is one sales individual working with the account. Last year you saw some competition between the two sides of our sales force. That said, whatever makes the most sense for the client in terms of their needs and whatever they prefer is what we will sell to the individual clients.

Great. Thanks, Glen. Thank you.

Your next question comes from Steven Halper with Thomas Weisel Partners.

Hi, it's Julia Thies in for Steve. I just wanted to ask real quickly about the implements cycles that you guys are having now. I know historically it's been said, 9 to 12 month implementation cycle for TouchWorks. But if you've either seen any sort of shift in that timing, or if you see any opportunity to maybe shift to shorter cycles?

Do you want to take that?

Go ahead.

So, in terms of kind of what we have seen it's very much consistent with what we talked in the market about in the past. There is a difference between HealthMatics and that of TouchWorks. We do have concerted efforts underway.

I think we talked about this in the third quarter, as well as the investor day, in terms of evaluating ways in which we can further inject efficiencies in the TouchWorks implementation process. So, we absolutely see opportunities there. And we're doing, I think all of the right things in terms of trying to capitalize on that.

So, I absolutely expect that over time, you will see a convergence. They probably ultimately won't totally overlap, but a convergence in terms of what the expected implementations periods for both our product offerings.

I would say that our experience with NEPSI and the ability to both host and deploy with virtually no training, less than 15 minutes to get physicians up and using the systems, is going to very quickly be translated into the rest of our products. So, that serves as a great test lab to know how we can get very usable products deployed very quickly. There's also some other benefits of NEPSI that will come back in.

We have a specialized healthcare search engine from Google that will filter its way back into the rest of our products, our HealthMatics products and our TouchWorks products. And, again, the way we enroll people, ID people and register people for Sure Scripts, which is routing prescriptions and the like all are very automated in that product and all will filter back. Those will all serve to drive down, over a period of time, our implementation cycle.

Great. Thank you.

Your next question comes from Ashley Mlinac with JMP.

Hi. I think all of my questions have been answered.

Your next question comes from Len Podolsky with Piper Jaffray.

Hi, guys. Thanks for taking the question. Could you talk about any integration efforts between the TouchWorks product and clinical trial electronic data collection platforms, and what may be the opportunity there going forward?

Sure. As you may know, we already have a relationship with a clinical trial management company called ACS. And we expect to continue to work closely with both our physician partners, physician practices with pharmaceutical companies and the like. We are uniquely positioned in that respect, because we have regular contact through our PI division with pharmaceutical company, and, of course, we are every day with physician practices.

So, ACS is the first step in that direction, but I expect that you will see us moving very quickly into clinical trial identification and into the whole electronic data gathering world. What you see is most of what's gathered in the electronic health records is exactly the same kind of information that is being entered into a variety of systems. And a single office participating in clinical trials may have as many as four or five different systems that they have to enter into. Each one being different.

Put on top of that, the fact that a lot of these clinical trials are still using paper. So, there's a real opportunity for us and we have efforts underway in that area. I would also mention that in our new Version 11, one of the opportunities and it's kind of -- I use the analogy of Bloomberg.

What we are providing in Version 11 is all the information about the patient, all the information about the disease state courtesy of our partner, Wolters Kluwer Health and finally all the information about the medication. So, in that environment, we can also identify when a patient, who has a certain disease, or who's taking a certain medication, is a candidate for a clinical trial.

We can message the physician realtime that there's a clinical trial opportunity available and that patient can actually be alerted, provided with that information. That's better healthcare, makes the physician smarter, and finally it generates a revenue opportunity for us and for the physician. So, moving in that direction.

What kind of footprint does ACS have in terms of the number of physicians offices that use them, or the number of pharma companies where they do clinical trials?

I think the number is somewhere between 15,000 and 18,000 physicians. And I would have to direct you to their web site to get the exact number. I don't have that in front of me. But they are clearly the leading provider in terms of the largest academic medical centers and large practices who are aggressively conducting clinical trials. They are number one in the market.

Okay. Got it. That makes sense.

Why don't we take one more question. It's getting late. One or two more.

Your next question comes from Jackson Spears with Capstone Investments.

Gentlemen, congratulations. And Bill, gracias on the numbers. Could you give us an update on the competitive landscape? What's been the market response to Version 11? Has [Abbott and Carruthers] responded to that? And the same with HealthMatics.

I think that the competitive landscape depending on which market you are talking about is largely unchanged. At the highest end, we run into epic on a regular basis.

In the midmarket we have seen some change there, as we quality systems and their NextGen product moving down market a bit. So we are getting stronger in that midmarket. And then last, but not least, in the small market, that's still up for grabs. There's a significant amount of competition there.

The good news and part of the reason we have acquired A4 Health Systems was in that market you need a combined solution of electronic health records and practice management. And A4 clearly has the strongest practice management system in a combined offering that we see.

We're also benefiting in the smaller end of the market from the dislocation that's occurred through some of the potentially largest competitors that we have in practice management in that area. So competitive landscape, again we see that as something that we keep a close eye on.

But our real effort is focused on execution. And it's not focusing on competitors and that's a good lead in to two points. One, today we are the leading provider in each of the major segments. Less than 10 in terms of an integrated solution, the midmarket and high-end market.

In addition when you talk about Version 11, you see a lot about that coming out of the HIMS show, but we deployed that software to some of the initial users, and we haven't started real full rollout of that, but the reception has been very, very positive. Again I use the analogy of kind of the Bloomberg for healthcare. Again, it's going to provide physicians with all the information, the content and the connectivity that they need to go forward in healthcare the way we all want them to.

How many doctors now use TouchWorks and HealthMatics combined? Is it like 50,000, 60,000 now?

No, it's not quite that high. It's closer to about 30,000. It's closer to 30,000, maybe a little bit more.

Great. Thank you. And in the past calls you talked about a win ratio. IDX was about 50%. Is that still the about same rate?

I think that's about the same. We have see a strengthening of that in certain areas especially where HealthMatics is competing. They compete very aggressively and they have a high win ratio. I will tell you that when I talk to our sales force, one of the things I say is that while we have a high win ratio, my concern is that we may not be engaged in every deal. And that's why we are aggressively expanding the sales force across each of our business operating units.

Again, congratulations.

Thank you. Why done we take one last question and then we'll close.

Your last questions comes from Jeff Shmidt with Sidoti.

Hi, guys. You may have mentioned this, but regarding the $3 million decrease in hardware, is that -- can we attribute that to a forward spilling up market and if so, how should we look at gross margins going forward?

No, it was actually -- the vast majority of that was actually pertaining to one, maybe two enterprise, which would be TouchWorks related, deals and I called that out in the third quarter. So, I would refer you back to that. Again, from an ongoing margin expectation, I continue to be comfortable with high 50s, low 60s in that segment, and I think there's an opportunity again to improve upon that for the reasons we said earlier around the efficiency gains on the implementation side. Also I would remind you of the benefits that are still forthcoming in reduced IDX royalty payments that begin to go away towards the middle part of this year. So, we do see upside there.

Okay. Thanks, guys.

Great. Let me close by just thanking everyone for joining us, thanking our clients, our partners, employees and of course all of our investors. We are here to really transform healthcare and we see that happening right now. We have the right people. We have the right products and we're clearly in the right market, which is a great combination, a great place to be and a great opportunity. So, we continue to appreciate all of your support. We continue to see a market that is ripe and we continue to aggressively pursue it. So, thanks again for joining us. We look forward to talking with you next quarter and hopefully seeing some of you at HIMS. Thanks very much.

Thank you. That concludes today's Allscript's 2006 fourth quarter and year end conference call. You may now disconnect.