NextGen Healthcare Inc (NXGN) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Quality Systems Incorporated fiscal 2013 fourth-quarter and year-end results conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions.

(Operator Instructions)

This conference is being recorded today, May 23, 2013. I would like to turn the conference over to Steve Plochocki, CEO. Please go ahead.

Thank you Ian, and welcome, everyone, to the Quality Systems 2013 fiscal fourth-quarter and year-end results call. With me this morning are Paul Holt, our CFO; Dan Morefield, our Chief Operating Officer; Monte Sandler, Executive Vice President of our RCM Services; and Gary Voydanoff, Executive Vice President of Sales and Marketing. Please note that the comments made on this call may include statements that are forward-looking within the meaning of securities laws, including without limitation statements related to anticipated industry trends, the Company's plans, products, perspective and strategies, preliminary and projected, and capital equity initiatives to the implementation of potential impacts of legal, regulatory, or accounting principal.

I will provide some opening comments and then turn it over to the team. The Company reported revenues of $460.2 million for the fiscal year ended March 31, 2013, an increase of 7% versus $429.8 million for the 2012 fiscal year ended March 31, 2012. Net income for fiscal 2013 was $42.7 million, a decrease of 44% when compared with net income of $75.7 million for fiscal 2012. Fully diluted earnings per share for the fiscal 2013 year was $0.72, down 44% from $1.28 for 2012 fiscal year. Revenues for the fiscal 2013 fourth quarter reached $111.3 million, up 2% when compared with $109 million for the fourth quarter of the previous fiscal year. In light of recent operating results of the Company's Hospital Division, we performed a comprehensive operational review of that business unit in the latter part of the fourth quarter, and accordingly revised its operating plans to incorporate additional investment in development, implementation, and support.

This investment will initially impact near-term profitability of the unit. We are committed to realizing the substantial opportunity we perceive exists in the small hospital market, and are confident in the strength its products and service offerings bring to the sector. As a result of this operational review, and an updated assessment to the fair value of the business unit's good will, the Company recorded a good will impairment charge to income of $17.4 million for the fiscal 2013 fourth quarter. Net loss for the fiscal 2013 fourth quarter was $4.1 million versus net income of $15.1 million for the comparable period a year ago. Fully diluted loss per share was $0.07 in the fourth quarter of fiscal 2013 versus earnings per share of $0.25 for the fourth quarter fiscal 2012.

Excluding the impairment charge, pro forma net income for fiscal 2013 was $59.1 million, with fully diluted earnings per share of $0.99. Pro forma net income for fourth quarter of fiscal 2013 was $12.3 million, with fully diluted earnings per share of $0.21. We are moving forward with the organizational plan we put in place during the latter part of fiscal 2013, and are increasing our opportunities to leverage cross-selling, especially on the RCM Services side. We saw positive momentum in our bookings of products and services during the fourth quarter, including record RCM bookings, which is affording us a great start to our new fiscal year. While this takes time, we are confident in our growth strategy and our ancillary products and services that cater to today's changing health care model.

We are pleased also to report that Michael Aghajanian was appointed to our Board of Directors effective May 22, 2013. Michael fills one of the two vacancies on the Board after recent resignations of two Board members. He was also appointed to serve on the Board's Transaction Committee. Michael, age 55, brings more than 30 years of engineering and operational experience to the Company. He is an adjunct professor in the engineering department at Wooster Polytechnic Institute, and a frequent lecturer and supporter of the Office of the Executive of Education at the Paul Merage School of Business at the University of California Irvine. Previously he held a variety of roles of increasing responsibility at Pittiglio, Rabin, Todd & Mcgrath, PRTM, a management consulting company providing services in the areas of operational strategy, supply chain management, product innovation, customer experience excellence, all culminating in his role as President and Chief Executive Officer.

In addition to his educational work with WPI and UCI, since his retirement from PRTM he has served on the board of directors for several for-profit and charitable organizations, including serving as the Chairman of Cimtek, a provider of functional testing of electronics, and a boards of directors of Nexiant, Incorporated, a provider of MRO inventory solutions, and the Orange County Technology Action Network, an organization devoted to fueling technology growth in Orange County, California. Michael earned a Master's degree in business administration with a concentration in technology management from the University of California Irvine, and a Bachelor of Science in engineering from Wooster Polytechnic Institute in Massachusetts. We welcome Michael to our Board. His operational and leadership experience, as well as his expertise in strategic direction, will prove beneficial, particularly during a time of refocus, as we reorganize the Company to take better advantage of opportunities within the changing healthcare landscape. We look forward to Michael's contributions, and welcome him to our organization.

Quality Systems also announced that its Board of Directors declared a quarterly cash dividend of $0.175 per share on the Company's outstanding shares of common stock, payable to shareholders of record as of June 14, 2013, with an anticipated distribution date of July 5, 2013. The $0.175 per share cash dividend is pursuant to the Company's current policy to pay a regular quarterly dividend on the Company's outstanding shares of common stock, subject to further Board review and approval, and establishment of record and distribution dates by the Board prior to the declaration and payment of each such quarterly dividend. The Company will also hold its 2013 annual shareholders' meeting on August 15, it's a Thursday, at 1.00 PM local time California. The meeting will be held at the Irvine Marriott at 18000 von Carmen Avenue, Irvine, California, and holders of record as of June 17, 2013 are eligible to vote and attend. Proxy materials and the 2013 annual report will be made available to shareholders of record, and will be posted on the Company's website.

Our strategy to capture market opportunities for continued revenue and earnings growth in our market place is sound. We will continue to pursue significant opportunities to sell our electronic health record and complimentary solutions. Industry estimates indicate that the addressable market for EHR solutions is 35% for physicians and hospitals on a Greenfield basis. We are in the third year of government incentive payments to physicians and hospitals, and we anticipate continued opportunity in this market, as incentive payments drive further adoption. NextGen's ambulatory EHR currently is fourth out of 500 competitors and -- for Medicare [at the stations], showing its strength in enabling our customers to demonstrate meaningful use.

As the government requirements for achieving meaningful use and receiving incentive payments become ever more stringent with stage two certification, ICD-10 coding compliance, we believe proven vendors like NextGen will separate from the pack as physician groups replace systems by vendors that simply cannot meet these requirements. We are already seeing signs of that. We announced during the quarter that we met stage two certification for our ambulatory and inpatient product, making us only one of two companies to be certified in both as of this date. And of course as we indicated to you at our analysts' day earlier this month, we see significant potential for cross-selling new solutions to our existing customer base, building multi-product solutions for sale to new customers, and this will continue to be a major emphasis for our Company as we progress through our upcoming fiscal year.

I will now turn it over to Paul Holt.

Thanks Steve, and hello, everyone. Our fiscal 2013 consolidated revenue growth of 7% was the result of combined revenue of $460.2 million versus $429.8 million a year ago. Organic revenue growth was approximately 4%, factoring in the $12.5 million in revenue from our Matrix acquisition. Earnings per share on a GAAP basis declined 44% to $0.72 versus $1.28 in our prior year. Excluding the goodwill impairment charge we recorded this quarter, our pro forma EPS was $0.99, a decline of 23% compared to the prior year. Our fiscal 2013 revenue results reflect continued growth in our recurring services revenue, including maintenance, RCM, EDI, and other services, offset by our decline in systems sales. Total systems sales decline by 17% to $123.6 million versus $148.8 million a year ago.

Our recurring services revenue has benefited from our continued growth in our customer base, as well as our success in cross-selling services such as RCM, EDI, and other services to our customers. We see significant opportunity in being able to continue to cross-sell these services into our customer base. Our total services revenue grew 20% on a year-over-year basis to $336.6 million this fiscal year versus $281 million in our prior year. Our services revenue is almost entirely recurring, and represented about 73% of total revenue in fiscal 2013 versus 65% in fiscal 2012. Earnings in fiscal 2013 were negatively impacted by our shift in revenue mix towards lower margin recurring services, higher SG&A expenses compared to the prior year, and the goodwill impairment charge we recorded in the fourth quarter.

Our income tax provision for the year reflects an effective tax rate of 38% versus 35% in the prior year. The current rate reflects the impact of the impairment charge, which was for the most part not deductible for tax purposes. Excluding the impairment charge, our current year effective tax rate would have been approximately 31.5%, reflecting the reinstatement of the R&D tax credit in the fourth quarter, which allowed us to retroactively claim approximately $1.5 million in R&D tax credits. Note that this R&D tax credit has been extended through the end of calendar 2013. We ended the year with $118 million in cash and marketable securities, or $1.98 per share. This is up from $106.7 million, or $1.80 per share at the end of the prior quarter, but down $21.4 million compared to the prior year cash of $139.4 million.

Our cash flows from operations totaled $68.3 million in fiscal 2013 versus $78.1 million in fiscal 2012. We have increased our investments in software development in fiscal 2013, including $29.5 million of capitalized software development versus $13.1 million in 2012. Other uses of cash in fiscal 2013 included $7.1 million related to acquisitions and $41.5 million in dividends paid back to shareholders. Our turnover of accounts receivable as of March 31 held steady at 122 days, which is the same as last year. Our current deferred revenue declined on a year-over-year basis to $65.2 million compared to $83.1 million at the start of the year. This decline reflects the decline in system sales we experienced during the year, as well as a larger amount of implementation services being billed as incurred and not recorded upfront and deferred revenue. I would note that our deferred revenue balance increased in the March 31 quarter for the first time since December 2011 as a result of a higher amount of bookings we recorded there in the quarter.

Moving on to the impairment of goodwill. As Steve mentioned, during the latter part of the quarter, we performed a comprehensive review of the Division, and as a result, reassessed the short-term/long-term strategies and related operating expectation. This reassessment resulted in a determination that additional investments and time would be required to achieve our goal of capitalizing on the opportunities in the small hospital market. As a result, management concluded it was necessary to reevaluate the Hospital Division's goodwill, and that goodwill impairment test determined that the current value of that goodwill exceeded its implied fair value, resulting in a charge to income of $17.4 million. We continue to believe in the strength of our products and solutions and the tremendous potential of the small hospital market.

Finally, moving onto our fourth quarter results, our consolidated March quarter revenue of $111.3 million was up 2% over the prior year quarter $109 million. System sales revenue was $24.3 million, beyond 30% compared to the prior year of $34.8 million. While we're disappointed in our system sales revenue result this quarter, our total bookings representing the total value of products and services sold in the quarter, grew to $40.6 million from $35.8 million last quarter. Keep in mind this booking number I just quoted does not include RCM. Consolidated maintenance, RCM, EDI, and other services revenue grew 17% to $87 million, compared to $74.2 million in the prior year quarter. Our EDI revenue category continued to perform well, growing 20% on a year-over-year basis.

We continue to see solid growth in several revenue categories grouped in other revenue, including annual license fees, hosting services, patient portal subscription revenue, and SaaS. This revenue category called other grew 16% on a year-over-year basis, $16 million verses $13.8 million a year ago. The consolidated gross profit margin this quarter came in at $56.6 million. That's down from the year ago quarter 61.5%. This gross margin was down primarily due to the decline in high margin system sales versus the prior year. SG&A, excluding amortization expense, increased approximately $4.1 million to $38.3 million in the fourth quarter, and -- compared to $34.2 million a year ago. This increase was primarily driven by increased headcount, [some] related expenses, including commissions, and bad debt expense.

R&D expense declined slightly for up to $8.2 million this quarter versus $8.9 million a year ago. The decline in net expense reflects a larger portion of our development investments in capitalized compared to the prior year. Development spend reflect our commitment to continue invest in products and stay ahead of the requirements of meaningful use in the upcoming ICD-10 requirement. On a GAAP basis, our effective tax rate for the March quarter, including the impairment charge, was actually negative, as the impairment charge was largely a nondeductible expense. Excluding the impact of the impairment, the estimated pro forma effective tax rate for the current quarter would have been approximately 19.1% versus 36.1% a year ago. Again, as I mentioned earlier, contributing to the low pro forma rate for the current period was the reinstatement of the R&D credit, which resulted in the recording of a $1.5 million credit during the quarter.

We are now going to move to our business unit numbers, as I typically do at this portion of the call. NextGen Ambulatory revenue, $85 million. That's up 3% over the prior year. NextGen Ambulatory operating income, $27.3 million. That's down slightly at 3% over the prior year. Dental, $5.1 million. That's flat with the prior year. Operating income, $0.6 million. That's down 27% from the prior year. Possible Solutions revenue, $4.5 million, and Possible Solutions operating loss, $4.2 million. RCM Services revenue, $16.1 million. That's up 32% over the prior year, and RCM operating income, $2.5 million. That's up 68% over the prior year.

Again, for those of you who are tracking, that's our noncash expenses for the quarter breakdown as follows -- total amortization of capitalized software, $2.4 million; amortization of intangible assets, $1.9 million; total depreciation expense, $1.9 million; stock compensation expense, $0.4 million; investing activities for the quarter, capitalized software, $9.3 million; and fixed assets, $2.8 million.

I would like to thank you all for being on our call and your interest in our Company. I'll turn things over to Dan Morefield, COO of Quality Systems.

Thanks Paul, and, hello, everybody. As discussed previously, we continue to execute the restructuring of the Company as announced last fall. We have had success in reducing expenses in a number of areas that gives us more opportunity to invest in our products and our growth initiatives, which Gary and Monty will speak to later. As part of Gary's remarks, he will include the operating metrics that I have provided these last two quarters. Now I want to take just a few moments and talk about the Hospital Solutions division. As outlined in our press release, we performed a comprehensive review of the business unit. From the review, we made the decision to increase our investment in this important line of business that has resulted in short-term operating losses and the need to take an impairment charge.

While our operating results have reflected our growing pains, we continue to add customers and cross-sell to our existing customers. The small hospital market is strategically important to us, as about 60% of our clients also have installed ambulatory products. We made the decision early this year that our overall Company technology initiatives were so important that we had to find a way to allow Steve Puckett to focus exclusively on his CTO roles. Accordingly, and in connection with that plan, at the beginning of this quarter we shifted his responsibilities away from the Hospital Solutions Division to allow him to be a fulltime CTO. I have assumed day-to-day operating responsibilities of the Hospital Solutions Division and led the review discussed earlier. Last quarter we closed multiple new deals. In all cases we were replacing existing systems by other providers. In closing, we believe in this business unit, and are taking the steps necessary to ensure we have a growing and profitable division.

With that, I'm going to turn the call over to Monte Sandler.

Thanks, Dan. Good morning, everyone. RCM Services had a busy fourth quarter with many things to report. We had our strongest quarter to date of booking new contracts, and I'm pleased that we are seeing significant progress as it relates to our sales and marketing restructure over the past two quarters. To that end, we have recently added two new RCM sales directors in an effort to drive continued growth to our business unit. As a reminder, the RCM sales directors are part of and support the 112 order carrying reps that Gary will report shortly. For the fiscal year, revenue and operating income grew 28% and 40%, respectively. We have seen continued operating margin expansion over the past three fiscal years by scaling the business and finding ways to be better, smarter, and faster in our services delivery.

Our backlog of signed deals not fully Implemented remains strong as a result of strong sales, and our sales pipeline continues to grow at record levels. We signed a record number of deals in the fourth quarter, all of whom selected RCM Services to help them reduce cost, optimize revenue, and maximize the use of the NextGen product suite. Of particular note, Physical Rehabilitation Network was a multiple product sale, including NextGen EHR, EPM, NextPen, and consulting services, all delivered as part of our RCM service offering. It's a five-year contract that is 100% recurring revenue. We expect PRN to double in size in the next three to five years.

We also announced a T-Systems contract in the fourth quarter. T-Systems selected NextGen EPM for their emergency department RCM Division in large part because of the NextGen RCM services best practice methodology and implementation support. This is another 100% recurring revenue contract that we expect will grow in the future as the P System RCM business expands its footprint in the emergency department RCM space. As reported at our recent analyst day, we expect to see many more deals like these in the future as we continue to grow our recurring revenue concentration beyond the 73% of total revenue reported earlier by Paul. We continue to see that practices are concerned about their financial future as a result of pressures from ACA reforms, declining reimbursement, and risk contracting.

Our tailored RCM services driven by people, process, and technology make us a great solution to help providers position themselves successfully for future healthcare reimbursement models. In anticipation of the adoption of ICD-10, we believe that providers will require solutions to assist them with proper coding of their medical services. As a result, we also recently announced our partnership with Aviacode, a leader in quality focused cloud delivered medical coding services, to assist our providers with outsourced coding services similar to our revenue cycle outsourcing model. I am confident that we remain well-positioned to help our providers navigate the changing environment and optimize their revenue cycle with our full service, all-payer best practice solution that is built on NextGen's industry leading software platform.

Thank you for your time and interest in our Company. I will now turn things over to Gary Voydanoff, EVP Sales and Marketing.

Thanks, Monte. Good morning, everyone. As discussed at our analyst day in May, the focus has been on using our entire sales force to cross-sell our complete product suite into our client base. We seek out multi-product new sales to aggressively sell and market both RCM and professional consulting services. We have aligned our marketing team with our overall revenue objectives and shift in focus to increasing product demand and lead creation, as well as positioning NextGen Healthcare as an industry thought leader, with client success stories that demonstrate our position. As a result of the sales and marketing changes that we have put in place over the last two quarters, our short-term pipeline has shown a modest increase.

In addition, we've seen a slightly larger increase in our long-term sales funnel. We increased our lead count in Q4, up 110% year-over-year. The RCM Services pipeline in Q4 was up 139% year-over-year. RCM sales increased 130% year-over-year, and our professional services sales increased 1200% year over year. Examples of our success in areas last quarter are our multi-product RCM sales to Physician Rehabilitation Network, our cross-sell of additional products into clients like UT Medical Group Shelby County, and the Watson Clinic, a very significant sale of professional consulting services to Grant Riverside Medical Care Foundation, and net new ambulatory software clients like Mobile Doctors and Packed MSO.

We have repositioned our sales and marketing team to take advantage of the growing trend toward services versus software sale. The RCM market is projected to be 75 times larger than the EHR market, and the health IT outsourcing market is growing at a 28% rate, 3.5 times as fast as the EHR market. We will continue to expand in those areas with our existing sales team and our [var] channel in fiscal year '14. There remains significant Greenfield opportunity selling our ancillary products required for meaningful use II into our client base for fiscal year '14. Products like Patient Portal, Dashboard, and EHR Connect. The pipeline for our new population health product is beginning to build as our client base begins to understand how it will position them to be more successful as they move towards more value-based reimbursement models.

I'd like to wrap up our call with our quarterly operating metrics that we normally report on. The Company executed 118 arrangements on a consolidated basis verses 131 last quarter. Of the new arrangements, 71% were Greenfield and the rest were replacements. We executed 50 FAS agreements during the quarter, which are included in the 118 arrangements. Discounting did not materially change in the quarter. As of 3/31/13 there are 112 quota carrying sales and management positions, slightly higher than the previous quarter, and we intend to continue to add to our sales team in fiscal year '14. The current pipeline is approximately $142 million, up from last quarter's $139 million. That pipeline number includes ambulatory, RCM, and hospital.

Thanks for joining our call today. Ian, we're now ready to open up the call for questions.

Thank you.

(Operator Instructions)

Our first question is from the line Michael Cherny with ISI. Please go ahead.

Good morning guys.

Good morning, Michael.

I want to dig in a little bit in terms of going back and forth with the commentary. You talked about leads being up. You talked about the pipeline strength, particularly in revenue cycle. You talked about booking strength. Then again, the software line continues to show signs of weakness. What are the key metrics that you are looking for to try and drive the conversion of this lead generation and this front end interest you are generating in terms of actual system sales revenue?

Michael, I guess the key things that we are looking at from a marketing standpoint is we really try to drive our position here and increase those sales. The lead traffic that I mentioned, number one, we have seen a significant increase in that. We have increased our spend in the marketing area towards that lead generation, and in fact those are the things we are starting to see on the back end of the pipeline.

Now, obviously those things aren't going to translate immediately into the short-term pipeline, but the longer term pipeline is growing at a faster rate than the short-term pipeline. All things like lead generation, the amount of web traffic we are seeing, and the number of just NextGen kind of product placements that we are seeing around the web are increasing dramatically.

Then you talked about some of the wins in the quarter and some of them being displacements. When you have, particularly on the displacement side, some of these newer contracts, is it typically around just core NextGen? Are these typically joint offerings? I know you're focused on the cross-sell. You talked a lot about cross-sell in terms of the existing base. I'm trying to figure out what some of the newer customers that you are winning. How much of that is a one-product sale verses a multi-product sale?

Well, again this is Gary Voydanoff, Michael. I would say that on the ambulatory side, where most of the -- where about 29% of our sales are replacement over the last, really the four quarters, it's really a complete replacement. Our practice management system, our electronic health record. In many of those cases we are seeing RCM included, and then a lot of ancillary products that are required for meaningful use, too. So patient population, health, HER Connect, several of those other products. NextPen is clearly a differentiator in many of these new sales as well. On the hospital side, a higher percentage of those sales are indeed replacement sales, and they include in most cases the ambulatory product as well. Typically we're going into a rural hospital that's looking for the inpatient solution as well as a solution for their ambulatory physicians, and we're a great fit for that.

Okay. Thanks.

Thank you Michael.

Thank you. Our next question is from the line of Gavin Weiss with JPMorgan. Please go ahead.

Thank you for taking my question. You are obviously not going to be giving formal guidance for fiscal '14 at this time, but could you at least give us some more granularity on your internal expectations for the business this year? I am just trying to figure out what sort of revenue trends you are expecting in each one of the different business segments.

Gavin, this is Steve. No, we're not going to provide guidance. You are correct. But in terms of providing the type of answer to the question you are asking on business units, we're also not going to give you that. I think what's more important is to understand that the activities that we have embarked upon are starting to fill the funnel at the top. It takes six to eight months for that funnel to work its way down into an increasingly growing pipeline activity level for us. And so if I were to characterize our fiscal year, it's our hope and desire and expectation that by the time we hit two quarters to three quarters into this fiscal year, we'll see significant improvement in all of our operating metrics.

Okay. Well, that's certainly helpful. In terms of the quarter on the expense side, SG&A was up about 12%, and I think Paul mentioned an increase in bad debt in his prepared remarks. What's driving that increase? Can you at least talk about the trends for that line going forward?

Yes. That was part of what was going on, but I wouldn't characterize it as any particular prevailing -- I can't make a generalization, really. I mean, that expense line, it will vary from quarter to quarter. It gets into -- sometimes it's just certain specific situations that call for reserves, and so, I mean, I wouldn't try to generalize it. It's just sometimes that line moves up and sometimes it moves down. It was just part of the picture there of what drove that line this quarter.

Okay. So you're not seeing a general increase in bad debt as a result of hospital budget or physician budgets, et cetera?

Hospital or -- no. I wouldn't make any particular generalization there on that particular item.

Okay. Great. Thank you very much.

Thank you, Gavin.

Thank you. Our next question is from the line of George Hill with Citigroup. Please go ahead.

Good morning, guys. Thanks for taking the question. Steve, I know you are not giving guidance, but can you talk a little bit about the level of IT investment, or the step-up in IT investment that you guys are talking about with respect to new product development?

I'll turn that over to Paul, and then maybe Dan, you might want to chime in as well.

Yes. So just like I think the other folks in our space are busy, that we've got Meaningful Use II that's been out there. I think we're very -- we're proud of the fact that we're one of the few that have already been certified on Stage 2, and have done it for both -- actually both of our ambulatory and hospital sides. Kudos to our development teams on that accomplishment. We also have ICD-10 that's coming down the pike that's -- we're very focused on that. That's not optional. You've got to have that if you want to be able to build. That's coming up in October of 2014. So we're paying close attention to that.

There is just a lot of projects that we have going to -- and we talk about a (inaudible) key organization for performance. There is a lot of demands on us, and we're not the only ones, but we're staying ahead of this thing. I know, I think Dan's going to have a few more -- a bit more color to add to that, too.

Yes. As part of our strategic initiatives, it's clear that we have in our executing against the intent to increase in R&D expense. This is a continuation of what we embarked previously. We've got a significant investment in our Indie operations, that includes well over 200 engineers in that location. I go back to the comments about restructuring the Company. One of the reasons that we did that is specifically to give us the capability to invest more into our products and services.

We also restructured the Company to put all of the technology organizations under Steve Puckett to not only gain efficiencies across those divisions, but also look at those areas and enhance those areas that really would drive our future growth. Again, this is an execution of a strategy that we have outlined before. It's one we are certainly committed to continuing.

Okay, and maybe -- I mean, I get what you guys are spending money on. I was really trying to get you to quantify, and I guess Steve, I'll turn this question to you. I want to ask how you think about something philosophically. I guess kind of, the Company needs to reinvest in the product software sales tend to be falling at a pretty good clip. Other segments of the business are growing, but they're lower margin. At a normalized tax rate, your payout ratio is pushing 100%.

How comfortable do you guys feel with the dividend? Are you willing to burn through some of the cash balance to continue to fund the dividend until the Company can return to growth? The cash balance is starting to slowly erode too, if you normalize some of the other balance sheet metrics in the quarter. The cash -- if payables don't go up and if receivables should have been trending up as opposed to flat, the cash balance would have fallen. How are we thinking about the dividends here?

George, first Paul, why don't you give us the platform on the cash, just so everybody understands what that is, and then I will chime in.

This past quarter we, as you know, we have paid two dividends back in the December quarter. So we sped up the payment of the timetable there. So we ended up not paying a dividend this quarter, and our cash was up by about $11 million. Had we paid a dividend, we would have been about even this quarter. I think certainly we're going to be -- spend a lot more attention to cash than we used to in the past to make sure that we are doing all the right things, managing the working capital and all those sorts of things, but I think at this point I don't see any change in that policy. But we'll keep you updated.

Okay, and just will you continue to pay the dividend if earnings continue to fall and your payout ratio exceeds 100%?

As we made in our statement this morning, the Board assesses that every quarter, and I think the Board will make the prudent choice and decision if that occasion occurs.

Right.

As of right now, there is no desire, nor is there any expectation, to stop paying the dividend.

Okay, all right. Appreciate the color. Thank you.

Thank you George.

Thank you. Our next question is from the line of Jamie Stockton with Wells Fargo. Please go ahead.

Good morning. Thanks for taking my questions. (Multiple speakers) morning. The first one, the NextGen pipeline has stabilized here, which seems like a positive. I was wondering if you could give us any incremental color on how that breaks down between ambulatory, in-patient, or revenue cycle management?

Again, this is Gary Voydanoff. While I can't give you a breakdown specifically on the different areas, I can tell you that I think it's fairly even across all of those. It's a positive sign. That's a positive impact of the marketing on really what we are doing across all of our divisions.

You think that when you say it's even, that the dollar amount is even, or the sequentially flat trends are even?

Again, I would say that it's fairly even across all in terms of the amount of the growth and the flattening out. It's positive. We are more focused on that lead generation that's going to fuel the back end and continue to grow across all those areas.

Okay. Then, I think Dan made reference to a 1200% increase in professional service sales. It seems like you guys also touched on IT outsourcing, which seems a newer theme that you are talking about. Is there a direct correlation between those two items? Or if you could just give us some color on what would have driven that massive increase in professional service sales?

I think it's been a combination of things. It's been some of our traditional services that are rendered by our physician consultants, it's been services that have been rendered around Meaningful Use II preparation, ICD-10 preparation, areas like that that have been very successful for us, and how we expect those areas to grow.

Then it has been around areas such as just traditional IT outsourcing, where we have been asked to bring in staffing to help assist with some of our larger clients where they have staffing requirement positions they haven't been able to fill with subject matter experts that we have been able to fill. So, it's been a very successful area for us in a number of different types of engagements.

All of that, Paul, is that showing up in the Other Dervices line?

Yes. Most of that would show up in the Other Dervices.

Thank you.

Thank you Jamie.

Thank you. Our next question is from the line the Richard Close with Avondale Partners. Please go ahead.

Yes. First question is on the goodwill writedown for the hospital segment, $17.4 million. I think you had $21.7 million on the balance sheet. Any thoughts in terms of whether this is -- will be the final writedown in that division, or how do you compare the $17.4 to the $21.7 that was on the balance sheet?

Hi Richard, this is Dan. Let me take a little bit shot at that since I led most of that review, along with Paul. The question is a forward-looking question, so it's difficult to answer, but I think we did a very comprehensive review this go around, and I think we were -- the extent of that review would give us comfort level that we know much more about the operating metrics of that division that we did before that would give us more of a comfort that this would not be repeated.

That being said, the accounting rules on this is pretty straightforward. If there are material changes of events, we'll take another look at it. But I can tell you at this point, neither Paul nor I have that in our short-term radar.

Okay. So when we think about, obviously it will be a drag on earnings in the coming fiscal year because of the investments you are making in that unit. Is it mostly the investments that are resulting in the operating losses there, or is it just overall the business is, because you are having to staff up implementations, or having implementation issues, that is causing the, I guess losses in that?

Again, as we reported before, the analogy, I think, that we've used is that we had this huge early success in the number of sales, and we have been struggling with our capability to actually implement them, and the bottom line is that we hadn't invested enough to be able to handle that as well as we'd like to. So we're basically going back, and have been in the process, and continue the process, to continue the investment to not only take care of the clients that we have today, but to capitalize on the material opportunities that we still see.

The pipeline here is strong. The opportunity is strong. And this is one where those investments have very specific return and accretive returns to the Company as a whole. We have more training implementation work available for us today than we have people. And so therefore every person I add in the training implementation world today is actually a net positive return for the Company. So again, it comes back to we're dealing with some of the issues of the past, but we're really focused on investments in the future to make -- to continue to grow where we think is a great growth area for us.

Okay. And a final question here, Steve. Just a clarification in your comments with respect to obviously not providing formal guidance. But I want to make sure I am clear here. Did you say you hope to see some improvement one to two quarters out in the current fiscal year that we're entering now?

I think by the time -- it will take us a few quarters to get the front end portion of the leads that are pouring in, as Gary indicated, our lead generation is up 110% versus a year ago. It takes six to eight months for that lead flow to materialize down into our pipeline. So we are taking a conservative view that it will take at least two quarters before we can actually show the type of positive improvements that we think will put us on a track from that point forward.

Okay. Thank you.

Thank you.

Thank you. Our next question is from the line of Bret Jones with Oppenheimer. Please go ahead.

Good morning. Thank you for the taking questions. I wanted to touch base on the implementation margins. I'm just trying to make sure I understand this correctly. They're running at about 0%. Is this all a reflection of what's going on in the Hospital Solutions business, or this -- are you using third party consultants? Are you having to give away man hours, or have you just not gotten a chance to right-size the ambulatory implementation side?

There is a number of factors, but I think hospital certainly is, I think we have already been talking about some of the challenges that we have had there, and that's certainly impacted profitability on that particular revenue category. I think it gets a little hard to generalize on the ambulatory side, we've got -- but I'll let you -- you ought to know, though, that certainly it's not something -- we are paying attention to it, and we do intend to drive higher margin there in that space.

We are in some -- having some transition in the ambulatory world. You have seen what's been going on with our systems sales. But we're also seeing that direction start to turn around. So I think the full expectation has, for us it's going forward is to drive a higher level of profitability on that revenue category.

So, I guess the question is, do you feel like the ambulatory implementation capacity or head count is right-sized for the level of business you are seeing going forward, or do you think -- you have talked about the funnel improving. I didn't know if you were going to have to add people, if we should expect some reductions in head count?

Let me respond to that a little bit. Again, part of the restructuring that we have done has resulted in the ability to shift headcount into areas that we have a greater level of return. And while I am not as intimate with the financials of this particular one question that Paul is, I will tell you that that is an area where we continue to invest, because at the end of the day, that drives such a greater degree of customer satisfaction. Today I am willing to make a greater investment into training implementation, even if it results in a slightly lower margin for the purpose of greater client satisfaction in the implementation process of our Business, both on the ambulatory space, as well as hospital solution space.

We have been using less outsourcing. I am not sure how that reflects on our balance sheet, but we have been able to do more and more internally, and in some cases we have diverted resources into other investments, as we've talked about before, such as some of the services and consulting opportunities we've had where we've, in essence, moved resources. Again, part of it's the accounting, but a good part goes back to where we're investing.

One more question, I'll jump back into queue. Paul, can you talk about, were there one-time costs related to the restructuring in the quarter?

Well, there was some modest amount of costs that we did do -- that we did have this quarter, but it wasn't hugely material. It was less than $1 million, but there was some amount of that that we did have.

All right thank you.

Thank you. Our next question comes from the line of Dave Windley with Jefferies. Please go ahead.

On the hospital division investment, I wanted to come back to the question of quantification of that. Would you be able to quantify how much you're planning to invest. and perhaps how much of that is going to hit fiscal '14?

Again, I am going to respond to that. This is Dan. The short answer is no, but let me give you a little bit of color that. I outlined earlier as an example that investments in training implementation become critical because of all that because we have such an amount of billable work that is pending. So the one thing I will tell you is that our investments that we are making will be highly focused on areas where there will be accretiveness to the Company. Again, it goes back to those areas where we haven't quantified that. We don't intend to quantify that. Again, the focus will be on areas that will give us the greatest level of return, really, in the next fiscal year.

So if I then think about the impairment, I guess I am trying to understand if the investments are accretive and improve the profitability of the Business, what element of the picture leads to a lower level of future cash flows that would result in a reduction in the value of the goodwill?

Yes, what Dan is talking about is long-term ROI. The reason for the impairment is because there is an acceptance or acknowledgment that while we're in this phase of additional investment that we are going to have to accept a lower amount of profitability than what we had been planning for previously.

Okay. Okay, I understand that. Thank you. On the RCM business, it seems like you're getting good traction there. I suppose I want to make sure I understand how much of the improvement in demand and bookings that you are seeing is kind of all organic, or how much -- I mean, should we be thinking about any of that being related to the Matrix acquisition? How should I frame that so that I can think about 2014 correctly?

This is Monte. Our growth now is organic.

Now organic, okay.

Yes, And so we're continuing to look for opportunities to cross-sell and package sell, and as we have explained at the analyst day and more today, we are continuing to find ways to be more creative in the way that we're structuring deals. There is a lot of value in the RCM service offering. I will use T-Systems again as an example. The best practice methodology, the implementation expertise was all a positive thing for them in selecting us as their platform going forward.

So, I think you will continue to see organic growth by being more and more creative and more demand for the RCM services. The thing you just have to understand with RCM is we tend to be like a freight train. While our bookings were really strong in the fourth quarter, it takes us awhile to get that train loaded and implemented and down the tracks.

Long-term, it's 100% recurring revenue business. Once it's going full steam, it's a powerful engine, but it takes some time. So don't expect to see significant change immediately when we report bookings, because there is an implementation process that has to happen.

Got it, Monte. While you are talking about that, would you be willing to comment on what the pricing environment is like in RCM?

Yes, I mean, I would tell you that pricing is staying pretty constant for us. I have told you for many quarters now that we have been very focused on margin expansion, and we're really achieving that through back end efficiencies, leveraging offshore labor, leveraging automation. From a pricing perspective, I would tell you that it's kind of the same that it always has been.

We continue to get better and more competitive in a way that we are structuring and pricing deals. The value proposition that we bring to the table with our full service offering is really second to none. Our solution is tailored. It's full service, it's all payer. It's not a cookie cutter model. So we really differentiate ourselves with that service offering and value, and it's less about drastic change in the pricing.

A last question, should be short for Gary. You mentioned earlier that the longer term pipeline is up more than the shorter term pipeline. Is the short-term pipeline actually up, or is it more flat to down?

As I mentioned earlier, it's a modest increase. You know, we were at $139 million last time we reported the pipeline, and we're at $142 million now. So I'd say I'm happy that I've seen it flatten out and now start to begin to inch up. As Steve mentioned before, it's going to take a little bit of time, a couple quarters, to convert those leads down into actual opportunities that are being worked. And so over the next couple of quarters that's what we would expect to see, those move down, and us be able to continue to grow the short-term pipeline.

Okay. Thank you.

Thank you.

Just a little more color on that. Dave, you asked a great question. What we would like to do is characterize the deals a little bit for you. I mean, you heard Monte say earlier, talked about a deal that we closed recently that actually we announced it the day of our analysts day. The nature of that deal was a multi-product deal that included revenue cycle management services, which took it from a -- not just a pure license sell, but took it from a one-year deal to a five-year deal. So in essence, if we package and bundle correctly, we incorporate RCM and product.

We can take the nature of our relationship with a customer from a basis of an upfront sell on license implementation training and maintenance to a five-year relationship that incorporates a number of different products and services built around the service lead, which makes it a much more lucrative opportunity for us, and that's the nature of what we're trying do.

When people talk about pricing, I think the more important thing to look at is deal value. And the deal value component is the key. For companies like us that have multiple products, we have invested in those products over the years, we've invested in RCM services, we have been molding and positioning and packaging the Company over the last five years to be in a position today to satisfy these multiple needs of these entities. And we think that's where we have a distinct advantage as we roll forward into this modern era of healthcare.

Thank you. Our next question is from the line of Sean Wieland with Piper Jaffray. Please go ahead.

Hi. Thanks. My question is on the developing SaaS platform. What's the time frame for the release? How much more do you have in front of you in terms of expenses to develop the platform? How much has been spent so far?

I'll give you a little bit of that. Then I'll give Paul a moment to think about the expense side of that question. As part of any technology organization, you're always building your next generation platforms. And so, we've had a couple of conversations on these calls in the past that we have a technology that we're building, which is really a platform upon which we can build products and services.

We have not as of today announced the timing of which products we intend to deliver on that platform and when we will deliver them. Part of that is that the fluid pieces we're continuing to study the market, as well as understand capabilities, and realizing that the majority of our focus and effort is really on our existing platform, which is really intended to protect the investment our customers have made. It's also a critical component for our future.

So yes, we have a platform that can provide SaaS capabilities. We have one in the dental world today that we're actively selling against, and we'll see more and more SaaS models in the future. But as far as a platform, the timing of when we intend to release more of a SaaS offering, to date we haven't announced that.

From an investment into technology, clearly we've highlighted before and we highlight today a greater amount of software capitalization, and certainly that's a reflective of investment in the future of our technology and our products. Paul, would you add anything to that?

Yes. Hey Sean. I'd really, given that, that we have not really -- we are trying to stay away from any hard and fast dates, it's a little harder for me to give you some kind of quantification of any particular number. But just suffice it to say that the investment that you're seeing that we reported this past quarter, that's not going to go down. It's likely to actually continue to be higher, and then because we are investing, we intend to invest in lots of different areas of development, including the platform that you're asking about.

Okay. Thanks very much.

Thank you Sean.

Thank you. Our next question is from the line of Glen Santangelo with Credit Suisse.

Just two quick questions, if I could. Clearly obviously we're painting the picture here that we're on sort of the back end of the bell curve in terms of physicians purchasing HER systems. At least it's obviously, I think the case you're trying to make. More recently we have seen several small HER vendors seem to shut down. I am kind of curious as you think about the replacement market opportunity. This quarter 71% were from Greenfield and the rest from replacements. Are you seeing that market start to accelerate? Are you repositioning for that opportunity in any way?

Glen, I think you are hitting on a real key issue. It's long been cited that the government, which has certified, stage 1 certified software amongst almost 500 companies, is now starting to realize, as the market is realizing, that the movement to stage 2, and then yet future stage 3, and then the movement from ICD-9 to ICD-10 to ICD-11 required some pretty good infrastructure on software development. So yes, we anticipate, as the market anticipates, as class has indicated, that there is as much as 25% to 35% of the adopted market that is adopted from small players who are going to have very difficult time achieving stage 2 or ICD-10, or certainly stage 3 or ICD-11. We believe that there will be a gravitational pull back up into the top vendors like us when that replacement market starts unfolding.

I think that's going to unfold probably -- start unfolding later this calendar year into 2014, but it's going to happen and it's real. I'm glad you asked that question, because as a matter of fact, one of the studies that just came out recently cited that today there is about 35% of the adopters who have purchased outside of the top 10 vendors. Their view is as much as 80% to 90% of that 35% will have to repurchase back up into the top vendors.

So that's a real scenario, and we anticipate that that will be a contribution to us as well. It will start occurring more later this year, once people realize, as Paul indicated, once we start rolling into that October period, and people realize that the vendor they have isn't going to be able to meet those standards. We'll see some of the beginning of a replacement market.

Thanks for that commentary. Maybe if I could just ask one follow-up question regarding your margins. Obviously you reposition the Company to some degree to focus on ACOs and the value-based purchasing, but as the Company evolves more towards RCM and some of these SasS arrangements, it obviously has a negative impact on your margins.

So Paul, I was wondering if you could maybe just elaborate a little bit on some of the margin profiles of these different businesses? And then, if -- I understand you don't want to provide any guidance, but if we assume this evolutionary trend continues, is it reasonable to think that the margins should continue to erode, just based on the mix change?

Yes. Well, you've got two factors here. Mix is a big deal for our gross margin percentage, because obviously you've got two revenue categories that have very high margins, your software and your maintenance. You've got other revenue categories that have dramatically different kinds of profit margins. And so, certainly I think we are driving for better margins in those service lines, and to the extent that we are successful in that, as well as -- let's just put it this way. If our mix is to remain constant from here on out, and we can work on the margins and the service lines, that will have a positive impact.

But I can't tell you for sure, and we are not giving guidance either, but I can't necessarily tell you for sure exactly what our mix is going to be a year from now or two years from now. So there are pros and cons. Certainly, the good news on these recurring line items is that we are increasingly becoming more and more recurring in nature, and there is a lot of benefit to the predictability and visibility that you get from those kinds of revenue streams.

And as you have seen this quarter, and it's been very consistent, we have a lot of consistency in those, there's a long history of consistency in the growth of those service revenue categories. So, we're just going to work on all fronts here, and I think Monte's got something to add on that.

Yes, this is Monte. I just counted, this is my 13th earnings call. I am very confident that in all 13 of those calls when we speak about RCM, we have talked about margin expansion and the efforts that we have put on that as an organization into -- in anticipation of the transition that we're heading into. We, within our RCM services business, have expanded margin considerably. We compare and benchmark to our competitors. I can tell you with great confidence that we continue to see significant margin expansion in the business on an ongoing basis.

Many of our competitors are going the other way. They're seeing margin contraction. And so, we remain diligently focused on expanding the margins, and as I said earlier, we do that through labor efficiencies. We do it through automation and technology, and just continuing to refine our best practices and our service delivery. So, expect to continue to hear that from me and to see that in our results as we continue to scale the business.

Okay. Thank you very much.

Thank you.

Thank you. Our next question is from the line of Evan Stover with RW Baird. Please go ahead.

Hi. I wanted to go back to the pipeline. I think it grew modestly from $138 million to $142 million. Obviously a big component of that seems to be RCM services hitting another all time high, up 139%. How do I -- that would kind of lead me to believe that there has to be some sort of offset there in the form of weaker ambulatory, but you did say that the growth was fairly even across inpatient, ambulatory, and RCM. Can you help me -- how am I thinking about that incorrectly? The ambulatory component potentially being down.

Evan, this is Gary Voydanoff. Again, I would say all of the areas are slightly up. So ambulatory is not down. It's continuing to grow slightly. It's a much greater percentage of the overall pipeline. But I'm happy with what I have started to see in terms of it bottoming out and then starting to slightly move up.

Okay. Then just a quick housekeeping one. Tax rate was obviously low because of the R&D tax credit. I think it even showed more upside than I would have thought with that item. Should we still be thinking about where you have been historically 35% as a go-forward rate, or is there some sort of upside to that, that there wasn't in the past couple of years?

Yes, so the R&D tax credit ended up to be even a bigger impact because of the fact that our income was lower than it was last year or in prior years. So you had a bigger impact from the R&D tax credit, as well as a little bit catch up. Not anyone's fault, other than (inaudible) I guess. But going forward, I think historically we have been around a 30%, 34%, 35%, I think, barring any other changes.

I can't tell you what they're going to do with the R&D tax credit. Typically what's happened in the past is they dilly-dally around with it and they -- sometime in the following year, they finally get around to doing it, and then everybody that has R&D tax credits, and we are not the only company that experiences this, then ends up playing catch-up on tax rate.

So, I wouldn't necessarily take much of a huge change going forward. I can't tell you what they're going to do with the tax rate. Certainly if Congress ever decided to lower the effective tax rate for corporations, since we're definitely one of the -- on the higher end of effective tax rates, that would clearly benefit this Company, if they ever rationalized or decided to lower the tax rate in this country. But stay tuned, write our congressmen, I guess. I don't know.

All right. Thanks guys.

Ian, we'll take one more question, please.

Okay. That question is from Jeff Garro with William Blair & Company. Please go ahead.

Good morning, guys. Thanks for taking the question. I want to ask about the RCM strength, and just try and think about the sustainability of this growth trajectory. And really more specific, I would like you guys to get into how much of the strength in this area is being driven by ICD-10 with that deadline looming towards the second half of 2014, and also if there is any particular kind of pent-up demand from your customer base to have a singular clinical and revenue cycle vendor?

This is Monte. As Gary reported, there is tremendous opportunity in the RCM space, multiples of what the opportunity is for the HR market today. I think ICB-10 certainly weighs in. I think the value proposition really comes down to providers are being asked to do a lot of things today. Adopt EHR, achieve meaningful use, get ready for ICB-10. Reimbursement on average is declining. So because they're reimbursed on a volume basis, they're having to see more patients. There is a lot of things. Quality is certainly in there. A lot of things that providers are being tasked with today. It really comes down to identifying where core competencies exist.

Our focus in RCM, this is what we do all day everyday. And it's absolutely our core competency. So providers, I think, are continuing to understand that they need to focus on patient care, and the critical items to manage their business and their success, and allow the experts to really manage the rev cycle.

So I think we will continue to see those opportunities. Again, I would remind you that we're really like a freight train, and this strong bookings is tremendous, and I think we are seeing a lot of results, with Gary's help and support. Don't expect to see that overnight, because it takes time to get that train going to full speed.

Thanks. I understand the revenue model, but I guess in terms of bookings, do you continue to see the strong momentum, or has there been any aspect of just kind of a strong appetite from your existing clients looking to just maintain a single vendor on the clinical and rev cycle side?

Jeff, this is Gary. I'll, I guess, maybe speak to what I see is the appetite out there. So I see a huge opportunity in our own client base, still. We're only probably 5% of our existing client base has RCM services. There is definitely an appetite there. As Monte said, there is margin pressure throughout healthcare right now to -- and it's growing fast.

We are seeing clients having to make cutbacks in key areas. So it's just natural that they want to have a vendor that can come in and maximize their revenue. That's what many of our clients are asking for. They love the idea of being able to get everything from one vendor, their RCM services, as well as our core software and our ancillary products.

What's exciting about the net new opportunities we're bringing in as well, is they're very excited that we're including all those services from one vendor. Our core practice management, enterprise practice management application is really second to none. We enjoy the opportunity to really get down in the weeds and go head to head and talk about the advantages that platform can provide, and then layered on top of that is the prescriptive model that Monte's team has put in place that's tried and true.

We are seeing very strong results, and many of our clients, we're going to leverage that this year, as I mentioned very early on in my statement. We're going to leverage those kind of positive results to show what's going on with that success story. We're going to do a lot of that this year.

Great. That's very helpful. One last point of clarification, that 5% metric that you just gave, is that 5% of your client bas is using your RCM services, or only 5% is using any kind of outsource revenue cycle service?

That's our revenue cycle services. That 5% represents customers that are using our revenue cycle service.

Great. Thanks again guys.

Thank you.

Thank you all for joining us today. Again, just to go over some of the key features that we want you to stay focused on. One, we are deeply engaged in the restructuring of our organization, which we started last fall. It continues to be a work-in-progress and ongoing. That restructuring is leading us towards a repositioning of the Company that we have been talking to you about for several quarters now.

So we are pleased with some of the positions we're in today. We believe that we'll be able to show enhanced improvements in all of our areas over the next several quarters. Again, don't lose sight of the fact that the sector and healthcare in general is quite volatile these days. The investments that a company like us needs to make to stay at the forefront are paramount.

I'll just give you some examples. We talked about them during the call, but I will just reiterate them. On March 1, we received stage 2 certification for ambulatory. On May 3, we received stage 2 certification for inpatient. We're only one of two companies that is certified in both. We're in the top four for attestations for physicians, and we are one of 3 companies in the top 12, that rank in the top 12 for attestations for inpatient and ambulatory. So we have a large installed base, and an installed base that is reaching attestation levels on a progressive basis. Matter of fact, over the last two months, in the top 10 companies for attestations, NextGen ranked number 1 in terms of the improvement over the last two months of new physicians reaching attestation stages.

Another thing to keep in mind, the investments you make to try to be progressive. We received our GSA, General Services Administration, approval earlier this month. We went through an extensive process. The GSA approval essentially is to give you the opportunity to gain government-based contracting, and through government facilities and government departments. I'm sure most of you, if you pinged the internet in the last day or two, you know that our Defense Secretary Chuck Hagel, has just indicated that he is going to procure for commercial electronic health records for the Department of Defense. They're not going to use the government program any longer. We believe you are going to see more and more government departments opting to go out to the market.

In order for you to have an opportunity to bid on these you, must have your GSA status. My guess is there's a lot of our competitors out there right now scrambling to get to this status. It takes a while to get it. The two areas that the DOD cited were of major importance for them were areas of ophthalmology and cardiology. NextGen ranks in physician attestation number one in ophthalmology, and we rank number two in physician attestation for cardiology. So we have a very deep marked presence in those areas.

So the investments we make translate for us as the market continues to evolve. We'll always be progressive in that way. Thank you again for joining us today, and look forward to seeing you in our travels. Take care.

Ladies and gentlemen, this concludes the Quality Service Incorporated fiscal 2013 fourth quarter and year end results conference call. AT&T would like to thank you for your participation. You may now disconnect.