NextGen Healthcare Inc (NXGN) 2015 Q1 法說會逐字稿

Welcome to the Quality Systems, Inc. Fiscal 2015 First Quarter Results conference call. Hosting the call today from Quality Systems is Steven T. Plochocki, President and Chief Executive Officer. Today's call is being recorded. (Operator Instructions) It is now my pleasure to turn the floor over to Steven T. Plochocki, President and Chief Executive Officer. You may begin.

Thank you, Lori, and welcome, everyone, to Quality Systems Fiscal 2015 First Quarter Results call. With me this morning are Paul Holt, our CFO; Dan Morefield, our chief operating officer; Monte Sandler, the executive vice president of RCM Services; and Gary Voydanoff, the 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 principles. I will provide opening comments and then turn it over to the team.

Revenue for the fiscal 2015 first quarter reached $117.9 million, an increase of 8% when compared with $109.5 million for fiscal 2014 first quarter. Net income for 2015 first quarter was $5.2 million, down from $12.9 million reported in the comparable period a year ago.

On a GAAP basis, fully diluted earnings per share was $0.08 in fiscal 2015 first quarter versus fully diluted earnings per share of $0.22 for the same period last year. On a non-GAAP basis, fully diluted earnings per share for the fiscal 2015 first quarter was $0.13, a decline from $0.24 reported in first quarter a year ago. At quarter-end, the Company held a strong liquidity position with $116.4 million of cash and investments.

As we kick off fiscal 2015, we are pleased that the Company is demonstrating significant progress this quarter. We are beginning to realize results from all the initiatives that we have employed over the past year, including the restructuring of our functional organization, cross-selling of our products and services, and the release of new solutions that cater to the changing healthcare marketplace. Areas such as revenue cycle management, population health, interoperability are positively impacting sales and marketing as it relates to both new net deals and cross-selling into our growing client base.

During the first quarter our pipeline hit the highest level we have seen in the past two years, representing the fact that these changes are now coming to fruition. We are pleased to begin the new fiscal year with a positive start, and as the healthcare information technology industry continues to evolve, Quality Systems/NextGen remains front and center in helping our clients meet necessary criteria for meaningful use qualifications in healthcare reform.

We also announced that our 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 September 12, 2014, with an anticipated distribution date of October 3, 2014. The $0.175 per share cash dividend is pursuant to the Company's current practice to pay a regular quarterly dividend on the Company's outstanding shares of common stock subject to the board's review and approval and establishment of record and distribution dates by the board prior to the declaration of payment of each such quarterly dividend.

The Company will also hold its 2014 annual shareholders' meeting on Monday, August 11, at 1 p.m. local time. The meeting will be held at the Irvine Marriott, 18000 Von Karman Avenue, Irvine, California. Holders of record as of June 16, 2014 are eligible to vote and attend. Our proxy materials and the 2014 annual report will be made available to shareholders of record and will also be posted on the Company's website.

We are very positive with the progress that we've made to date, and now I'll turn it over to Paul, who will take you through a deeper dive into the financials, and then he'll turn it on to the rest of the team, where they will give you more color on the progress that we've been making. Paul?

Thanks, Steve. I am happy to report our consolidated first quarter revenue of $117.9 million reflects a growth of 8% over last year. Principal driver of our revenue increases came primarily from recurring service revenue streams. This category as a whole grew 11% to $96.9 million from $87 million in the year-ago period. The largest contributors within this total were EDI, maintenance, revenue cycle, consulting services and SaaS, or subscription-based revenue streams. Our subscription revenue benefited from the growth of our NextGen Patient Portal product and other SaaS offerings. We also continue to see momentum in our suite of interoperability solutions provided by our Mirth acquisition, which both have licensed-based and SaaS-based product offerings.

Total bookings of software and services including RCM was $36.6 million. That is down from $42 million last quarter, but up from $29.3 million a year ago. I want to note that on a go-forward basis we will be refining our definition of bookings to include the full contract value of our arrangements as opposed to just the annual run rate, which will impact reported bookings for things like RCM, SaaS, etc. This updated definition will reflect a trend towards longer term contracts around our recurring revenue streams, such as RCM and SaaS.

Overall, our gross profit in terms of dollars was relatively flat in comparison to the prior year period. Our consolidated gross profit margin this quarter came in at 52% versus 56% a year ago, reflecting a continued shift in our revenue mix toward recurring revenue streams, including EDI and RCM, which have lower margins compared to software revenues.

Our SG&A expense increased by approximately $1.6 million to $36.7 million this quarter compared to $35.1 million a year ago. This increase is primarily driven by the inclusion of Mirth related SG&A expense, salaries and benefits, marketing expenses, and other expenses offset by reduction in bad debt expense. Contributing to our lower bad debt expenses was a significant improvement in the turnover of our accounts receivable. Our turnover of accounts receivable by days outstanding declined to 87 days compared to 116 days a year ago, reflecting our continued focus on working capital management.

Moving now to R&D expense, R&D expense increased to $16.2 million versus $5.6 million a year ago, reflecting both increased investment as well as a small percentage of our expenses being capitalized. R&D expense as a percentage of total revenue was 13.8% versus 5.1% a year ago. Our total R&D investments for the quarter increased to $19.1 million versus $12.9 million a year ago. We capitalized approximately $2.9 million in development costs this quarter versus $7.3 million a year ago. As I mentioned in prior quarters, the decline in our capitalized software cost was driven by several factors including the timing of projects reaching technological feasibility and the cessation of capitalization in the hospital business due to the impairment of our intangible assets we recorded last fiscal year.

The increase in R&D expenditures and investment reflects our continued commitment toward our product offerings both new and existing. We are excited about the opportunities to continue to leverage the Mirth interoperability platform into our product roadmap moving forward.

Our effective tax rate for this June quarter was 34% compared to 33% in the prior year. The increase in our effective tax rate reflects the fact that the R&D tax credit statute has expired as of December 31, 2013, and has yet to be extended. Please write your congressman. That's just an editorial.

On a GAAP basis, our fully diluted earnings per share for fiscal 2015 was $0.08, a decrease from $0.22 per share reported in the year-ago quarter. Our year-over-year decrease in GAAP earnings, as well as our non-GAAP earnings, was driven primarily by the increase in reported R&D expenses combined with a shift in our revenue mix toward lower gross margin categories of revenue.

Our cash and cash equivalents plus marketable securities ended the quarter at $116.4 million. That is up $2.6 million from $113.8 million at the start of the quarter. This reflects our continued strong performance in cash collections. As I mentioned prior, our turnover of receivables is 87 days compared to 116 days a year ago.

Moving on to segment results. I am going to start with Ambulatory, $91.7 million; Dental, $4.2 million -- now, I'm giving you revenue numbers; Hospital, $4.2 million revenue; and RCM, $17.8 million. That equates to $117.9 million of consolidated revenue.

Prior to this current quarter, we have been reflecting R&D and marketing costs at the business unit level. Internally, we are, starting with this fiscal year, we are going to provide internal management reports that include operating results with and without R&D and marketing expenses. So, I'm going to provide you with operating results at the segment level, both from the vantage point of our historical approach as well as this approach that excludes R&D and marketing. So, let me give you the operating results that reflect the historical way we have been reporting this externally.

NextGen Ambulatory operating profit of $26.2 million; our Hospital unit, an operating loss of $3.5 million; our Dental unit loss of $0.1 million; and RCM operating profit of $1.6 million. Now, moving on to operating results that reflect the R&D and marketing being a part of corporate unallocated would give the Ambulatory unit operating profit of $40.6 million; the Hospital division operating loss of $1.1 million; Dental operating profit of $0.7 million, and our RCM unit operating profit of $1.8 million.

And, finally, as I often provide, I'm going to give to those who are tracking this some of our noncash expenses. So, as I mentioned, amortization of capitalized software $3.6 million; amortization of tangible assets, $1.8 million; total depreciation expense $2.1 million; stock op expense $0.8 million. And our investing activities for the quarter, capitalized software $2.9 million, fixed assets $2.3 million. Again, I'm going to thank you for your interest in our Company. I'll turn things over to Dan Morefield.

Thanks, Paul, and hello, everybody. I am pleased to report that the flagship Ambulatory division, even excluding revenue from our Mirth acquisition, finished Q1 by posting the highest quarterly revenue in its history. The increased revenue was primarily driven by higher services revenue such as implementation, consulting, SaaS, and EDI revenues. As previewed on the last quarter earnings call, increased consulting bookings led to higher revenue. This trend continues as the professional consulting group continues with strong bookings of $1.8 million this last quarter.

In June we announced the successful implementation of another interoperability offering. Through our partnership with Surescripts, we demonstrated the ability to share critical healthcare information between NextGen systems and, in this case, Epic. This along with our previously announced Cerner bi-directional certification exemplifies our continued effort to create solutions that overcome the various roadblocks to true interoperability.

We also announced that Mirth Connect version 3.0.1 is compliant with ONC 2014 edition criteria and was certified as an electronic health record, EHR module on May 1, 2014, by the Certification Commission for Health Information Technology in accordance with the applicable Eligible Provider Certification criteria adopted by the secretary of Health and Human Services. Gary Voydanoff will have additional comments about Mirth sales during his segment of the call.

Mirth integration within QSI continues to go as planned, including meeting core financial and nonfinancial objectives. This includes the recent launch of NextGen Share, a national health information service provider, or HISP, enabling our clients and NextGen healthcare providers to exchange secure clinical data. NextGen Share is the first joint solution from NextGen Healthcare and Mirth since its acquisition by QSI last fall.

Moving to Hospital Solutions. The Hospital Solutions division continues to deliver on commitments to its customer base with further progress and recovery of both top and bottom lines. There are three areas of note regarding operations in the first quarter. First, the division successfully completed the upgrade process for the vast majority of its installed base with NextGen Inpatient Clinicals version 2.6. This upgrade allows for our Hospital customers to continue in their participation of the attestation process per meaningful use Stage 2, as well as take advantage of new and enhanced workflow functionality to drive additional clinical efficiency.

Secondly, we saw material growth in Hospital revenues this quarter anchored by a large deal with HMC/CAH Consolidated to install NextGen Inpatient Clinicals in five of their wholly-owned critical access hospitals. The HMC opportunity is significant in that it focuses on their business models. The focus of their business model is to acquire and operate acute care hospitals in rural communities, including the replacement of technology out-of-date and operational inefficient facilities and systems. This partnership represents an opportunity for both organizations to grow.

Third, the operating expenses have materially declined quarter-over-quarter reflecting the continued redeployment of staff as implementation obligations are completed, as well as a level of reduction of headcount related to now completed upgrade processes with our customers. We believe these lower levels of expenses are sustainable without sacrificing our ability to support our client base, and in many cases should actually lead to an improved customer experience based on improved process focus on automation in key areas of technology. Overall, I am pleased with the progress of the Hospital Solutions Division.

Switching for a moment to our Dental Division. I am pleased to state that we continue to see our QSI Dental Web SaaS product mature and start to be adopted by our larger enterprise clients. For example, our long-term client, Park Dental, has begun implementation of QSI Dental Web. Park Dental has over 40 locations with approximately 140 dentists and 200 hygienists. We maintain a robust sales pipeline and product roadmap containing continued enhancements. With that, I will turn the call over to Monte Sandler.

Thanks, Dan. Good morning, everyone. Well, I have some exciting things to report to you this quarter from RCM, but before I get to them I will share that RCM Services revenue for the first quarter was $17.8 million, resulting in a 7% increase over last quarter and 2% over the prior year quarter. As we previously discussed, we managed through the loss of HMA, an historically large RCM client this past year and have successfully replaced the revenue gap from this loss. While bookings for the quarter were below expectations, we have already closed some of the deals in Q2 that pushed from Q1 and have others positioned well.

To that end, I am thrilled to report that we have recently signed our largest RCM customer to a 10-year contract extension, and could not be happier to partner with them for the foreseeable future. Over the course of the next 10 years, we will no doubt see significant changes in the revenue cycle from ICD and CBT coding to risk contracting and value-based reimbursement. We are proud of the fact that they have placed their confidence in us to help them navigate these changing tides successfully.

Our backlog of signed deals not implemented remain strong, giving me continue confidence in the direction of the business. And our RCM pipeline continues to grow as our customers and the overall market learn more about our comprehensive service offering. While we saw a decline in booking margin in recent quarters, we are seeing the margin on recent bookings tick back up. We continue to invest in the marketing of [RSM] Services both to our existing Ambulatory customer base and the market at large, and our overall Company messaging now includes RCM as a key component of our products and services.

Finally, as I indicated last quarter in my prepared comments and you no doubt saw in our recent press release, we have executed our first Hospital RCM contract where we will be providing revenue cycle outsourcing services to our Hospital customer base. We went live with a customer on July 1, and have already made a huge impact on their use of our Hospital technology in optimizing their revenue cycle. Expect us to continue to pursue these opportunities within our existing NextGen Hospital customer base and the small rural market at large.

I remain excited to bring this service to market with a focus on helping our Hospital customers optimize their revenue and maximize the use of our Hospital software similar to what we have accomplished on the Ambulatory side.

We have some exciting new service offerings that we will be bringing to market over the course of the year that will no doubt help our existing customers and create new leads within the NextGen customer base and the overall market.

I remain optimistic about the direction of the RCM business. I continue to feel confident that our tailored RCM services driven by people, process and technology make us a great solution to help our customers successfully navigate the complex and ever-changing healthcare environment. Thank you for your time and interest in our Company. I will now turn it over to Gary.

Thank you, Monte. Good morning, everyone. We kicked off our fiscal year with a continued focus on leveraging our multiproduct strength, cross-selling to both new and existing clients our solutions for EHR, EPM, RCM, EDI, Population Health, Mirth and Dental. We have increased our marketing effort to support lead generation for the existing products as well as an additional focus on campaigns for RCM Services, Mirth products and our Population Health platform, campaigns to attract net new business as well as aggressive client cross-selling.

It was less than a year ago that we announced the development of our first joint NextGen/Mirth effort, NextGen Share, with the ambitious goal of connecting every NextGen client via nationwide network to facilitate the secure exchange of meaningful clinical data in support of coordinated patient care and meaningful use requirements. The product has come to fruition with a general release July 1, and in the first few days several dozen sites have signed up to deploy the product.

NextGen Share puts us on the leading edge of innovation with its low cost interoperability solution that is the backbone of true collaborative care in our ACO strategy. We look forward to taking advantage of this interoperability platform to provide even more robust capabilities within and outside of our client base to support data strategies that can add value for our clients and drive revenue growth within our organization. With NextGen Share we are well positioned to continue to innovate with connectivity solutions to support remote patient monitoring, fitness and wellness wearables, all of which fit into the goal of Patient Population Health Management.

Mirth continues to see pipeline growth as our combined development teams work on new products, such as NG7, our expanded Population Health tools, NextGen Share, our iPad and mobile solutions. As our Ambulatory sales team has become more fluent in the Mirth Solutions set, we continue to find and execute on cross-selling opportunities. Mirth has had a very positive impact on the NextGen clients with many reported use cases that we will be publishing to support our Mirth marketing strategy.

As I mentioned on our previous call, the interest in Population Health continues to growth within our client base. The interest has resulted in our continued pipeline growth of this product line and increasing revenue contribution, with sales across multiple specialties and all client sizes. We are pleased that our enterprise clients, such as Trinity Health and United Health Services are deploying the product as part of their meaningful use and ACO strategy.

We are excited about the client partner sites that are working with us to bring to market an expanded set of feature to support the broader population health and ACO market. Crystal Run Healthcare, for example, is deploying the full suite of NextGen Population Health, Mirth Results and Mirth Care products to support their aggressive ACO strategy. And we will be a flagship for the use of technology to support excellent patient care in a value-based environment.

Our core business, solid EPM and EHR license sales to both new and existing clients in growth mode. Sales and services, Patient Portal, Connectivity Solutions and Population Health driven by meaningful use and value-based care models contributed to our Q1 success. Of note, on our RCM win, we have recently incented the sales team to sell longer term contracts and it has paid off with several new contracts of five years or longer. Our marketing team continues to do an excellent job and lead generation continues to be positive quarter-over-quarter and year-over-year. The combined division pipeline sits at $158 million today, an increase over Q4 of fiscal year '14.

We kicked off our fiscal year '15 with some positive success stories that I would like to point out to you this morning. Our RCM growth continues to be fueled with clients of all sizes and specialties. Notably, this past quarter we added University Orthopedic Center in State College, Pennsylvania. On the Ambulatory front, we note the addition of Laser Spine Institute; in North Carolina, Pediatric Associates. Along with the expansion of our relationship with our partner, TSI Healthcare, is doing a wonderful job providing NextGen Healthcare to the marketplace, and United Health Services was a significant investment in our Population Health products. The Laser Spine Institute is a national leader in advanced minimally invasive spine care with state-of-the-art facilities around the country. LSI is an example of our ability to cross-sell multiple products and services such as EPM, EHR, Dashboard, Patient Portal, and NextPen, with professional consulting services to optimize the deployment.

The Mirth success continues by adding one of the premier HIEs in the country, the Rochester RHIO, located in Rochester, New York, with some 70 healthcare organizations participating in the exchange of data to support collaborative care. Also of note was the cross-selling of Mirth tools into the NextGen Ambulatory base at Tenet Healthcare and Trinity Health.

Finally, the Company executed 95 new arrangements on a consolidated basis versus 102 last quarter, 75% of the new arrangements are green field, 25% are replacements. Discounting did not materially change in the quarter, and as of June 30, 2014, there are 136 quota carrying sales and management positions. There is no material increase in the sales staff over Q4 of fiscal year 2014. With that, I'd like to thank you for your time and continued interest and, Lori, I'd like to turn it over to you for questions now.

(Operator Instructions) Your first question comes from the line of David Larsen of Leerink Partners.

Dan, can you maybe just touch on the Hospital Division? You showed, I think, really good revenue this quarter. Can you just talk about the process, that win process for that Hospital client, sort of the momentum you may have in that division? Thanks.

Sure. The couple key components on the recognition of revenue associated with the Hospital Division, first of all, that division is on a cash basis, and so expect a little bit of a lumpy, you know, top line kind of number, simply because of the accounting treatment that we have. But focusing specifically on the win, this is an existing customer upon which we have existing installations in a different place. What is material about it is, this was a customer that even during a difficult period of time, we were able to win both from a product perspective and from a services and a mind share perspective. So, the real win or the piece that is most important here was the relationship we were able to build, the expanded opportunity that it provided. And we see that as a benchmark as other things we can do with our existing client base, consistent with our overall practice of cross-selling to our existing client base as one of our key methodologies of growth.

That's great. Thanks a lot.

Your next question comes from the line of Jamie Stockton of Wells Fargo.

I guess the other services line I think was fairly strong in the quarter. Would it be accurate to say that that was a combination of the subscription revenue coming online and consulting business that flowed through?

This is Paul. Yes, that would be correct. So, we have included in that other category a number of things, the majority of which is subscription and SaaS-based kinds of revenue streams, but consulting is one of those revenue streams that is included, so you are correct.

Okay, that's great. And then I just had two other questions. I'll fire them both so you guys can think about them. One is, stage 2, the numbers thus far have not been that great. What do you think is going on with physicians? How do you think they will fare in stage 2 based on the feedback that you've been getting from clients? Are we going to see a lot of physicians dropping out of the program in stage 2? And then my other question is on the Health Information Exchange landscape, you guys have talked about your partnership with Surescripts. You have the Mirth business that you bought. How does all of this fit together? How will providers ultimately be exchanging records with each other and what will that network landscape look like? And I'll stop there, thank you.

Sure. Jamie, this is Steve. I'll take the Stage 2 portion of your question and then hand the ball off to Gary to follow-up on the HIE component. As we all know, Stage 2 was delayed. I think the government saw that come March or April, when they issued the delay, that there were only about 35 or 40 of us that had Stage 2 certified products out of 300-plus Stage 1 certified products. And, of course, as you know, we were Stage 2 certified and ICD-10 compliant last November. I think it was just a matter of giving them a little bit more time. If you follow the program, and I know you have from the very beginning, ever since the HITECH Act was announced in 2009. Every time the government senses that they need more time so that they don't discourage adoption or further movement towards automation, they have taken the opportunity to give the extra time.

So, all I basically see this for, this delay, is companies like us that have the large installed bases with the R&D capabilities will continue to be at the forefront. And there is probably going to be as many of our third-party assessors in the sector indicate, there is going to be a washing out of smaller players who will not be able to meet Stage 2 or ICD-10 compliance. And that that will create the front end of the replacement market. It is actually a replacement market we are starting to see pieces of already. And, Gary, you want to pick up the HIE piece?

Yes. It's an interesting question, Jamie, so let me take a stab at it. So, on the Mirth front we see activity in kind of both the public HIE sector, in that there are still some technologies that we are engaged in replacing. So, some of the original products that were invested in kind of aren't living up to what the expectations were, so we've got activity there.

One of the interesting areas where I think we'll see future growth is in kind of this area of, you could call it a private HIE, but local or regional physician networks that need to collaborate in care. And so there is a need to have an engine that supports that kind of collaborative care that can store and forward information and allow that to happen, and that's where the Mirth toolset fits in very nicely, and it's where we do see some activity there as well.

And then there is the NextGen Share network. So, our idea there has always been that before you can really have collaborative care, we've got to get widespread connectivity, and we had to do that in such a way that it wasn't going to be a burden from a financial standpoint on all of our clients and the folks that they connect to. So, we kind of laid that fiber-optic network of NextGen Share, if you will.

And then the next step is now there are many different opportunities where folks are engaging us to say can you provide this additional set of data? Or can you gather and do benchmarking across this kind of data? So, there is going to be a lot of opportunity, we think, to drive revenue and monetize the network going forward in the future. So, we are excited about that. So, I think that the landscape is going to just be more and more opportunity to connect HIE to HIE, to physician organization to hospital, and so forth. We see a lot of possibilities there.

Okay, thank you.

Your next question comes from the line of Charles Rhyee of Cowen and Company.

I had just one quick follow-up from an earlier question about, Paul, on the other revenue you've listed as a subscription SaaS, some consulting. Does any of the Mirth sales go into that as well, or is that captured elsewhere?

No, pretty good piece of Mirth products are included there. As I mentioned, Mirth product suite is offered both on a SaaS basis and on a license basis. They have a fairly high percentage of products that are being done on a SaaS basis. So, you have -- Mirth is definitely included in -- a good part of Mirth is included in that other revenue category.

Okay, thanks. I just wanted to clarify that. As we think about -- can we talk about the type one again, sort of -- if I'm not mistaken, you said it was $158 million. Can we talk about how the mix looks here now? You know, you talked about a number of areas that you're seeing interest in clients, particularly in Collaborative Care, Population Health. Can you maybe give a sense on the relative growth rates within the pipeline mix that you're seeing between some of your product lines? Thanks.

This is Gary. So, while we don't get into the details of the pipeline, I'll say it's across-the-board increases. We've got a very diverse product line now, and that has been one of the goals that the management team is trying to establish over the last eight quarters. So, I think we're seeing the fruition of that.

I guess just to clarify that, I mean, can you give a sense on, is there a couple areas that you'd say in the last quarter or two have been really growing faster than others, or is it just basically even across-the-board? Any sort of qualitative comments would be helpful, thanks.

Hey, Charles, this is Steve. You know, we've long engineered a product and service offering to cater to not only the current needs of the market but what we're seeing is the emerging and future needs of the market. We have over 32 now product and service offerings. And I think because we've made good choices in terms of the areas that we wanted to invest in, whether it be an acquisition or R&D, those products and service offerings are now gelling nicely into the emerging trends of the sector. So, it is an across-the-board piece. That to me is very encouraging because we're not relying on any one area. We're not relying on any one product or service line. We're starting to see that all the things we've invested in are now being needed and wanted by our group practices and the healthcare market in general, as Gary cited, as we start moving healthcare as a sector from a fee-for-service world into a value-based accountable care world.

Great. Thanks, Steve.

Your next question comes from the line of Jeff Garro of William Blair.

I want to ask with the pipeline relatively steady for a few quarters now, what kind of additional visibility or maybe confidence in your close rates do you need to return to providing forward guidance?

Well, we have long said that we wanted to make sure that we could get on some basis of predictability and consistency in our forward view. We are starting to get pretty close to that point. Now that we're starting to see revenue grow that we anticipated, now that we are starting to see the pipeline grow because of the diversified product and service offering -- I'm not saying that we're going to provide forward guidance, but we have provided some directional guidance certainly at our last analyst day at the beginning of June. And we're still pretty much in concert with that. My guess would be, though, in terms of just pure straightforward guidance, you won't be seeing that this fiscal year.

Fair enough. And then just a follow-up on the close rates. Are you seeing those improve or kind of reach more of a stable metric, stable rate?

This is Gary. I would say they are stable, they are about the same as they have been. And, again, that's really across all of those various product lines.

Great. And then one last one kind of on the financials. Can you guys comment on the sequential decline we saw in maintenance? After the uptick last quarter we were expecting a little steadier pattern for that revenue line. So, is there any particular source for that sequential decline?

Yes, this is Paul. So, we had a couple of credits that we had this quarter relative, I would say, one time. So, not a huge deal, but occasionally you have some credits that happen, and that's what happened.

Great. Thanks for taking the questions.

Your next question comes from the line of Michael Cherny of ISI Group.

Essentially I want to dive into the competitive environment a little bit. You talked, if I remember correctly, about 25% of your deals this quarter are from replacement. When you're through replacement market, how much of the newer or, I guess, more focused sale strategy on the integrated offering is really helping as you go out and try to win deals? And I guess are you seeing any shifts or changes in who you are going up against from a head-to-head basis?

Michael, this is Gary. I guess the latter part of the question first. I don't think we're seeing a material change in who we are competing with. Several, probably, calls back, we started talking about some of the efforts we've had in more niche markets around behavioral health and PT, and areas like that, so we might compete with some different players in those markets. But in general it's the same competitive landscape that we slug it out with every day.

To the first part, the replacement market, again, has been fairly steady and as we look across those systems that we have replaced, there is no particular pattern right now. It is really across-the-board, but in general it's, as we've predicted, kind of those smaller players that I think people don't have confidence in as much, and those are the ones generally that we're replacing right now.

Great. And then when you think about the long-term inpatient strategy, I guess how expansive do you want to get? Is your goal in five years to be inpatient provider to the entire inpatient market? Or is it going to be a slow and steady build in your core market now and see where that develops over the next couple of years?

This is Dan. I think there are two ways to think about that, or how we think about it today. We have both a short-term focus on return to profitability, stabilizing the customer base, and continuing to focus on what we have. And then the second component is how it interrelates to our overall Ambulatory base and what's important to that base and how it looks in -- you know, how the importance of that is from a strategic basis over time. We'll think more and more over time of the Hospital Solutions, more of sort of a facility-based businesses that expand beyond just critical hospitals, that include things like standalone emergency departments and surgical centers, and such components that are very consistent with the strategic direction of our core base.

Okay, thanks.

Your next question comes from the line of Ricky Goldwasser of Morgan Stanley.

Hi. This is [Serv] sitting in for Ricky. I was wondering if you could give us the contribution of Mirth revenues to the quarter. And also any color on how the performance of Mirth compares to its standalone performance prior to the acquisition? Are you seeing any benefits from the NextGen salesforce getting behind it?

Yes, this is Paul. I'm going to take the first part of that question and I think we're going to have Gary take the second part. So, Mirth is becoming blended and mixed and, as I think we've said in a prior. If we haven't, we're going to say it now, that we're not going to get into breaking out that level of detail of what's Mirth, what's not. We have so many different product lines that we have. And I think just directionally, though, it is safe to say that we're enjoying growth there in that particular revenue category.

Yes, this is Gary. I guess in terms of the second half of that question, to echo Paul, it's having clearly a positive impact from a pipeline standpoint and from a revenue growth standpoint, and what we're really seeing, and I think it's in our infancy, is that cross-selling starting to take off. We spent the first part of the acquisition beginning to train our team on the Mirth products, and that takes a little bit of some mindset shift from selling pure electronic health records and practice management financial systems to really understanding interoperability. And as I mentioned in my statement, we've been collecting a lot of the various use cases across our client base to then use in sales and marketing campaigns. So, that is just now beginning to really come to fruition. And as I mentioned, too, in my statement, we had a couple of really nice cross-sell wins with some very large clients that we are pretty pleased with.

Thank you. And could you maybe just give us like a big picture mix between license and SaaS sales for Mirth? Like, how should we think of it, as like 50/50, or is it more towards the SaaS side?

This is Paul again. I'll say it's the majority on the SaaS side, but we do have licensed-based sales from Mirth as well.

All right. And one last question, if I can get that in. The RCM gross margins the last couple of quarters have been below historical norms. I don't know if that is related to entering the Hospital RCM market. Could you give us some sense of the (inaudible) there? And what do you see as a reasonable long-term target for both the gross margins and operating margins for that business?

So, this is Monte. I think we've reported last quarter and we saw again this quarter, we have some deferred revenue that isn't hitting the revenue line on P&L, and so the expense is fully loaded. So, that is weighing on some of the gross margin. As those deferred revenue items are recognized, I think you'll see that tick back up. Our run rate for the most part is in line with historical, if you factor that deferred revenue in. There is some slight tweaking just based on margin on bookings, but, as I mentioned in my prepared statements, we've seen an uptick in margin on recent bookings. So, I think, aside from the deferred revenue we're really in line with the historical gross margin rates.

All right, thank you.

(Operator Instructions) Your next question comes from the line of George Hill of Deutsche Bank.

Paul, I guess the first one is for you. You talked about the, I guess, the credits that occur in the maintenance line. It seems a little bit -- I don't remember hearing a lot about that before. I guess, could you give us just some examples of what drives a credit in the maintenance line and maybe just some of the moving parts behind that?

Well, George, if you look at -- credits are a part of the business. It's not anything new. We have had this in our history that you have various issues that may come up that result in credits. We've talked a lot about that in the Hospital division of late, but those things have been improving, to be sure, on the side of Hospital. But I really think I'm just going to leave it at that, that we had some credits that they did not reflect the underlying run rate of maintenance. I think that's what I would point you to, that these were some credits that were issued, and that's what happened on a sequential basis. If you look on a year-over-year basis, it clearly continues to show a growth trend there, and I think that's about the extent that I'll comment on that.

Okay. I guess that's helpful. One of the things I was trying to get to is this, like, you know, we had a service issue, so you get a maintenance credit, or sign up for four years of maintenance -- you know, renew for four years of maintenance and get the first six months free type. Like, I guess I was trying to figure out of these are promotional credits or service credits, or kind of which driving the credits to the customers. But it sounds like it's the former as opposed to the latter. Am I thinking about that the right way?

Yes.

Okay. And then maybe just kind of a quick follow-up. I know -- I'm hoping we're still going to see the Mirth information in the queue, but I guess was the business up ex-Mirth this quarter? And maybe then just a quick comment for Steve. Can you talk about the Ambulatory EMR footprint, just because we noticed that the class scores kind of continue to slide. Maybe talk a little bit about churn and I'll back in the queue. Thanks.

This is Paul. If I'm understanding your question right, you are asking was the business up excluding Mirth?

Correct.

So, just qualitatively we said we weren't going to get into breaking out that level of detail around Mirth. You also heard a comment earlier from Dan about having record revenue in the Ambulatory unit, which excludes Mirth. So, I think it's safe to say that directionally we were higher, even excluding Mirth, on that basis. But I think, then, I'll finish with that and we can get to the next piece of the question.

Yes, George, this is Steve. In terms of the areas of the class scores, I think what you see in class scores and what we see in class scores, if you take a look at those companies like us, who have been handling the software for a better part of 15 years now, we've got a lot of software out there in the market. A lot of that software had been customized over the years. Hence, when we started moving to more standardization through Stages 1 and 2, those software required a lot more work to meet those standards. So, we are Stage 2 certified, we're ICD-10 compliant. We're right in the throes of the processes of getting our customers upgraded to those respective areas. And we are going through some difficult periods for sure. However, we are working through them and we're getting our customers up to speed and employing those standards for Stage 2 and ICD-10.

I think what you're going to see on a going forward basis in our sector is that where there are companies like us -- and, like I said earlier, there are about 35 or 40 of us that are Stage 2 certified out of 300. You're going to find that as we start rolling through the next year or so, we're going to continue to see that there is going to be areas of replacement that are going to surface in a very dramatic fashion as a result of people not being able to meet those standards. On top of all that, we continue to grow our Ambulatory business. Gary cited a whole series of new deals that we brought in last quarter. We have a pipeline full of additional deals coming up. Our existing customers in Ambulatory by additional products and services, we have 32 different products and services that we have established in preparation for the current and emerging markets. So, it's not hurting us in that sense, but nonetheless we are working diligently to get all our customers up to speed under the new certification and ICD standards.

Thanks, Steve. That's helpful.

Your next question comes from the line of Garen Sarafian of Citigroup.

My main question, I have a couple of follow-ups, was actually just a different way of asking the question just prior regarding satisfaction scores. I know earlier on this year you guys had some programs in place to improve the scores you were receiving in the external surveys, but it hasn't come to fruition yet. So, do you guys have any update as to the progress on those programs and what the lag time is between what you guys are seeing and what we're seeing externally? Because I would think that customers might also see this, too, so I'm just trying to figure out, how do you guys counter that if somebody brings that up?

Hi, this is Dan. So, let me address those. This is something that I discussed at the analyst day meeting in New York earlier this year. A couple things just to remind the group, we've put in place -- first of all, we measure everything both internally and through external partners, such as class. The kind of things that we had done as an example are restructuring our implementation team to better address the concerns our clients and not treat all the clients the same. For instance, our large, complicated client installations have a different methodology today than they had in the past to drive and ensure success and satisfaction. That is an example where we are beginning to see an uptick in scores from our clients on recent surveys associated with that.

We also know that improvement of our product is a key component. And as we have announced before, we have continued to invest and accelerate the investment into our existing NextGen product base as well as continue the investment into the NG7 platform for material future improvements as well. So, we're seeing the combination of both these things. We also spend a lot of time looking at things like our contracting process and modifying our contracting process that have a component in this. Paul will tell you that we have had conversations with him and his team about how we bill clients, and the interaction with clients from a satisfaction standpoint.

So, we have touched basically every place that a client touches the organization. We have product or we have practices and programs in place to improve those touch points, and we're beginning to see some early responses on that. We know that it takes time to move the needle on a macro basis, but we're comfortable we're doing the right things to address that today.

Okay. And then just moving on a couple tactical questions. On NG7, could you just update us on the timing for GA availability? I thought it was for this fall time period?

Sure. So, again, restating what we said before, we will bring the first product off of our NG7 platform. It will be a full EHR physicians for the small doctor practice, cloud-enabled, SaaS pricing, and we expect a demo of the product at our user group in November. It is powered by a combination of NextGen and Mirth technologies. We expect to be in beta later this year. We expect to have limited availability in early 2015, and we still expect to have full general release in 2015. Reminder that the full general release is expected to be meaningful use compliant and ICD-10 ready and will support our RCM capabilities and services.

I'll just stop there, then. Thank you very much, Dan.

Your next question comes from the line of Greg Bolan of Sterne, Agee.

A couple questions real quick. I know you guys obviously haven't talked about this in many moons and probably not very meaningful to you anymore, but just as relation to your kind of older partnerships with Siemens, whatever is left, is that partnership contributing any meaningful amount of newer bookings to the platform?

This is Gary, Greg. Meaningful in terms of what it used to contribute, no; does it still have an effect? Do we still have opportunities? Yes. I think there are some things probably that we will announce in the next few weeks with some recent wins. So, is it material like it was in the old days? No, but we continue to see opportunities right now and continue to work with the Siemens teams on opportunities.

Okay, that's great. And then just as I think about operating margin, Paul, Steve, Gary, I mean, and Dan, kind of rounding out, if you will, it seems like it's kind of finding an inflection point, as is revenues, as is pipeline. What's the end goal here as you think about your revenue mix? Obviously, a higher proportion of recurring revenues, less proportion of nonrecurring is kind of, I think, the goal here. But as you think about kind of your goal, without getting into guidance, do you feel it possible at all that you can kind of drive operating margin, assuming revenues kind of continue to improve, anywhere close to where they were in previous years? Or is there kind of a new normal, if you will, in terms of where the longer term operating margin should be given kind of the change in revenue mix?

Yes, this is Paul. So, you're kind of dancing on some forward guidance there slightly. As we've mentioned and as you stated in your question that operating margin percentage can be impacted quite a bit by the revenue mix. And as we've been talking about for some time and as you've seen in recent quarters, a gradual shift towards concentration around recurring service revenue lines that have lower margins, and that has had an impact on the gross margin line. And when combine that with the fact that we are investing heavily in R&D and have been capitalizing less, that has also had an impact on our operating percentages. However, R&D is investment in the future, and to the extent that those expenses, those investments are creating value, that is future value for the long-term business.

When it comes to expectations around future profitability, I think we've stated in the past, on our analyst day we talked about the opportunities that we have through Mirth, as well as in RCM. I think from our point of view, we'd like to see growth in all of the above. We've got quite a diversified line of products and services. They come with a variety of profit margins. However, at the end of the day, if you're a shareholder, I think what's going to count in the long run is bottom line profitability and returns to shareholders.

So, I think this is a long-winded answer here to your question, but to the extent that we can drive leverage of our R&D investment in the future through continued revenue growth, we would certainly love to see some improvement in the operating percentages, and I think that would be a goal of the entire management team. However, we've also stated we're not going to give forward guidance, so I think you got -- there are still a few variables out there in terms of mix and our ability to leverage the investments that we're making in R&D for the long run. But certainly I think everybody here is certainly working towards greater profitability and greater operating margins in the long run.

That's great. Thanks so much, Paul.

Your next question comes from the line of Bret Jones of Oppenheimer.

Good morning. Thank you for taking the questions. I just wanted to circle back. Greg actually hit on my main question, and I think it's a fair question to talk about given the new mix that you have of revenues, what do you think the operating margins can go to? And I know you're not going to answer that question directly, but when we think about subscription in SaaS, when that matures, what type of operating margin should that business be?

Okay, this is Paul. I'll answer that. Look, I think what's -- we're seeing a couple of trends that I think you're all aware of, which is we've been watching this change in mix away from very high profit margin software, upfront software license revenues towards lower margin recurring revenues. However, you are also seeing growth in subscription and SaaS revenue lines, which we have been including in the other revenue category.

Now, to the extent that we continue to see success there in the long run, we can see progressively higher profitability and higher margins. However, your SaaS revenue streams are like -- I know Monte has had a great analogy, which is SaaS is like a freight train and software license revenues are like Ferraris. You can go real fast in a Ferrari in terms of selling upfront license fees, but the SaaS and subscription kinds of revenue streams are more like freight trains. It takes a while to get them moving, but we are pushing the engine. The engine is on and we are pushing the freight train down the track, and as we can continue to see that success there, I think in the longer run we can see some better profitability.

All right, thank you. I wanted to also beat the Mirth horse yet again. Can you give us a sense -- and you touched on it a little bit -- can you give us a better sense for the percentage of revenue that is coming from, you know, your QSII base versus what was legacy Mirth or maybe new HIE type of opportunity?

Repeat the question, please?

Well, I'm trying to figure out in terms of Mirth where your sales are coming from? How much of this is -- you know, when we look at the revenue of Mirth, how much of that is of legacy Mirth versus how much of it is new HIE that would be outside the QSI base, and how much of it would be cross-sell?

This is Gary. I would say the cross-sell opportunities are growing. So, as I mentioned earlier, we're just now starting to get the teams up to speed and starting to build that pipeline within the NextGen base, try to understand what are the real use cases that we can bring, because it's a different type of technology sales. So, that is small and still growing. But the Mirth team themselves and they also have their own sales team that we still have out there, they are doing all types of deals across-the-board. They've got HIE business that we mentioned, like the Rochester RHIO, they have smaller interoperability engagements, they have sales to other reseller partners that they have. So, I think they have a broad mix just today as they have in the past, and we're just starting to ramp up the sales within the NextGen base.

Okay, great. And then just lastly, I was just wondering in terms of Mirth, would all of your customers be appropriate for Mirth? Are you targeting your inpatient customers and your large group practices, or would even small physician practices be buyers of Mirth?

This is Gary again, Bret. I think pretty much everybody is a target in one way or another, and so let me kind of couch that. First you've got larger enterprise clients that have needs for connectivity to various types of systems. They have needs for, again, HIE capabilities, so very strong opportunity there. We start moving down into kind of the, what has been traditionally our sweet spot, that 25 to 100 doctor kind of organization, there is great opportunity there for just basic tools, like Mirth Connect. And then also the Mirth Results, the CDR, we're seeing more and more activity there, so that's a sweet spot. And at the lower end of the market, it's where we start to see opportunity to implement like our Share platform, and once that's in place I think we'll see some additional opportunities to help those small practices with other kind of connectivity solutions.

Great. Thank you very much.

Your next question comes from the line of Dave Francis of RBC Capital Markets.

Two quick questions. First, can you tell us where you guys are in the outpatient upgrade process on the 5.8/8.3 releases and kind of how that or if that is playing in at all, Gary, to new sales opportunities as you're going out and touching those customers a little bit more directly?

I can tell you where we're at in the process. So, I think we're up to around 1,700 clients have gone through the 5.8 process, probably about 500 or so on the 8.3 platform. So, we've still got a little ways to go, but it has been moving along nicely. The 8.3, which is the clinical content, kind of follows a little bit slower because it requires some training of the new platform and the new clinical content to physicians, so we still have a ways to go to catch the base up there.

I think it's been going well in terms of bringing physicians along slowly. But how it affects us in the market right now, the platform has been well received in terms of the new look and feel, the user interface. That is helping us on the sales front competitively out in the field. So, that's kind of my basic feedback on the platform where we're at internally and then how it's helping us in the field.

And then an interrelated question. Can you talk about, Gary or Steve, kind of where are you in terms of the customer base, the net adds or attrition? Are you flat? Are we up? Are we down? Kind of how does the customer base look today relative to when we last talked three months ago? Thanks.

Hi, this is Dan. In response to that, I know this question has come up in the past and what we have said is that we continue to see the expansion of the Ambulatory footprint. We do internally measure but don't report to the Street sort of the attrition numbers, and we remain in the same position we have been in the past with very low attrition and continued expansion of our Ambulatory footprint.

And on the Inpatient side?

Inpatient side has been very stable and we have talked about sort of the lack of a great number of new sales. But at the same time we have had very little turnover on that as we have stabilized that client base. That is also one where the cost of moving is relatively large, and so there is very -- there is actually quite little attrition associated with that base today.

Thank you.

Operator: Your next question comes from the line of Gene Mannheimer of Topeka.

I'd like to hit you again on Mirth, if I could. I know that when acquired the Company last September the deferred revenue went away under purchase accounting rules. And can you tell us at least today, is that revenue tracking at or better than the level at which it was when you first acquired the Company?

Interesting question, Gene. This is Paul. So, I would say that that level is tracking at least at or above. I can't -- I don't have the specifics of details sitting right here in front of me, but I would say at minimum that we're tracking there, as expected.

Okay, great. And with respect to RCM, you used to provide statistics about the current penetration of RCM into your installed base. I think it was about 6% at you analyst day. Has that changed at all with the new wins? And that if we back out the headwind from HMA, what does organic growth look like for RCM this year? I know it was about 20% for you fiscal '13. Thank you.

Yes, Gene, this is Monte. So, as far as penetration into the base, you referenced the headwinds. I reported in my prepared comments that we have made up that loss, and so I would tell you that we're trending about in the same place when you net it all out from a penetration perspective. We certainly see significant opportunity both in the base as well as net new, and our goals for this coming year would be to exceed that rate that you mentioned of 20%.

Thank you.

Your next question comes from the line of Sean Wieland of Piper.

Hi. Thanks. So, why the new presentation of the operating income at the segment level and the definition of bookings?

Yes, this is Paul. Look, we have more of a matrix organization. We have centralized the function of R&D around a CTO, and so to that extent we wanted -- what we're doing internally is to show that development organization on a consolidated basis and at a business unit level. And so our ability to do that internally, our decision to do that internally meant that we needed to do that externally as well.

And on the booking side?

Well, on the booking side, I think the thought is to capture more of the trend around longer term arrangements that we are making with our customers to be able to reflect that externally to give you guys just a better view of our overall bookings activity that would reflect the full value of those bookings.

And do you have what that number would be this quarter?

No, we're not going to provide that at this juncture, but we're going to do that -- you can expect to see that going forward in our next call.

Okay. And then one last thing. I heard, the question was asked but I didn't hear the answer. Was there a churn rate or a customer retention rate in the quarter?

This is Dan. As I have said before, we track churn rates internally, but we don't report them externally, and the commentary we've made before applies today, is that we continue to see very low churn rate.

Okay, super. Thanks so much.

Your next question comes from the line of Dave Windley of Jefferies.

So, on the, I guess starting with pipeline, I think with this next quarter you will lap your last year change and what you were including in pipeline, adding in Dental and Mirth. Is it right to think that if I were to normalize for those items and look at this prior quarter, the one you just reported year-over-year, that the apples-to-apples compare would be about flat; is that the right approximation?

I think we'll let Gary answer this as well. I think we've stated that we are going to continue to discuss the pipeline as a whole. We've got a very broad-based suite of products.

Yes, Dave, this is Steve. Our pipeline at $158.6 million that we reported today is the highest pipeline we have had had in, I think, eight or nine quarters. And it is a combination of all the different product and service offerings we've brought into our organization. But we started reporting that combo some time ago. So, it is a good indicator of the fact that as we've entered this quarter with the best revenue number we've had in seven quarters and now the best pipeline number we've had in eight or nine quarters, we think that the trends are pretty clear, and we're feeling very confident about those trends.

And, again, just to drift a little bit further back into Paul's component on bookings, we have transitioning, as most of our sector is. You know, in the early heyday of licensed based sales, where there was a lot of upfront revenue, the idea of bookings was basically -- I remember we used to say in the early days that our bookings number is our revenue number, because we used to sell licenses and that was that.

But as we've been transitioning as a company and as the sector has been transitioning more into SaaS-based modeling, recurring based modeling, RCM and other product and service offerings that are recurring based, we felt that there is great value to portray our bookings number on a going forward basis into contract value. Because Gary has his organization highly motivated into doing deals that have duration attached to them, 3-, 5-, and you heard Monte speak earlier of a 10-year contract. We think that that's an important component for us to start addressing with you on a going forward basis, and I think you are going to be pretty impressed with what you hear.

Appreciate that, Steve. Thank you. And the point on my earlier question is try to get comparabilities. So, I guess in the transition of bookings, my question there would be, will you be -- it sounds like you will provide us with a new measure of bookings. Will you either give us the old measure as well, or will you give us last year's number as measured by the new way so that we can understand comparability?

This is Paul. Yes, I think it's fair. We'll need to provide comparability, and so we'll be providing the prior year comparison so you've got apples-to-apples way to look at it.

And the ability to bridge it.

Okay, that would be great. And then you mentioned the 10-year extension that Monte referred to in his remarks, I missed the timing on that and I'm wondering where that will fall in terms of, is it in this pipeline number or was it in this quarter's bookings, or will it be in next quarter's bookings? Could you clarify on that?

This is Gary. I would just say that it falls into the pipeline that we just discussed, the $158.6 million. The bookings number will show up in the next quarter as we report that.

Got it, great. And then my last question is around kind of DSO and cash flow. Your DSO improvement has been certainly very positive. I'm wondering if you have any thoughts about how low that can go as it obviously has been a helper to cash flow last couple of quarters, I think. Thank you.

Certainly. This is Paul. My answer to that is lower, lower than it is today. We are going to continue to work on that and let's see how that goes. But we've been very happy on the achievements there and we would like to keep that forward momentum.

Okay, thank you. Appreciate your taking the questions.

Thank you, Dave. Operator, we'll take one more question, please.

Your final question comes from the line of Gavin Weiss of JPMorgan.

I wanted to follow-up with something that George mentioned earlier and kind of look at it from a different angle. In terms of the Hospital revenues, Dan, you mentioned these are recognized on a cash basis and we've seen sales credits in that segment in the past. So, revenues are better in the quarter but is there any risk to that revenue going forward if you don't meet certain metrics for your clients?

Because of the methodology -- and then Paul can provide greater articulation if needed -- we see much less risk associated with that revenue than we did in prior quarters, as much of the revenue today is recorded as the cash is received. We have also, as we have stated in the past, taken significant reserves as we felt were necessary to accommodate and deal with expected future credits and so forth. So, we think we are in a pretty good position on that today.

Okay. And then just one last quick one. Gary and Steve, you talked about selling more longer term contracts, particularly on the RCM side and how that has paid off. Can you walk me through why that is paying off? Have you made some concessions to clients on price to secure longer term contracts?

This is Gary, Gavin, I'll take that. So, I think the biggest change is that the incentive to the sales team. We sat down with Monte and came up with some new things that we could do to incent the sales team to do longer term contracts, and that's been very successful. And what is interesting, I think Monte mentioned, there has been that uptick we've noticed in margin, so I think it's been positive all around. Longer term contracts and we're just -- we're able, I think, to add more value and the team understands that now, and so we don't have to drop the percent of collections as a result of a longer term deal.

Okay, got it. Thank you very much.

Thank you, Gavin. Okay, well, thank you, everyone, for joining us today. We really appreciate it. It is hopeful you have picked up the management team is highly enthusiastic about where we're at. We have growing revenue, a growing pipeline. The product and service offerings that we have brought into the organization over the past year or so are the right products catering to the emerging and the current market needs, and we are very enthusiastic about entering the first quarter of this fiscal year on a positive note, and we anticipate improving upon that as the year goes on. So, again, thank you all for joining us and we'll see you in future travels.

Thank you. This does conclude today's teleconference. If you would like to listen to a replay of today's conference, please dial 800-585-8367, and refer to conference ID No. 73683318. A webcast archive of this call can also be found at www.qsii.com. Please disconnect your lines at this time and have a wonderful day.