Koninklijke Philips NV (PHG) 2005 Q2 法說會逐字稿

Good day and welcome, everyone, to the Lifeline Systems Incorporated second-quarter 2005 results conference call. Today's call is being recorded. With us is the President and Chief Executive Officer, Mr. Ronald Feinstein, and Vice President Finance, Chief Financial Officer and Treasurer, Mr. Mark Beucler. At this time, I would like to turn the call over to Mark Beucler. Please go ahead, sir.

Thanks, Laurie (ph), and thank you everyone for joining us this morning. I will begin by reviewing our second-quarter financial results and Ron will follow with a business update. Then we will be happy to take your questions.

I would like to remind everyone that the matters we are discussing include predictions, estimates, expectations and other forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially. You should refer to our recent SEC filings and public announcements for a detailed list of risk factors.

In terms of our financial results, this was another strong quarter for Lifeline. Total revenue for the second quarter grew 17% to $36.9 million, from 31.5 million a year ago. Net income grew $3.4 million from 2.6 million in Q2 last year. On a per diluted share basis, we posted net income of $0.23, up 28% from the $0.18 per diluted share we reported for the second quarter last year.

We continue to see solid growth in our subscriber base and consistent gains in our revenue per subscriber. As a result, our recurring service revenue grew 15% to $29.2 million, up from 25.3 million for the second quarter of 2004. Our subscriber base grew 10% year-over-year, to more than 444,000, and more than half of our new subscribers in Q2 were in Lifeline OneSource programs. Compared with centrally monitored Lifeline programs, with OneSource, we capture three times the revenue. As a result, average revenue per subscriber grew in Q2 to approximately $22 per month.

Product revenue grew 27% in Q2, to $7.6 million, driven largely by stronger sales in our Senior Living business, coupled with our success in selling equipment related to upgrades and growth to our health care programs. Total gross margin was 57% in Q2 compared with 55% a year ago. Service gross margin, one of our key profitability drivers, improved by approximately 300 basis points to 54%, from 51% in Q2 last year. This reflects leveraging of our fixed cost base, plus the continuous improvement processes we have developed within the Company. On the product side of the business, gross margin declined to 65% from 66% in Q2 last year, reflecting the continuing increase in Senior Living products, with a higher cost as a percentage of the revenue within the overall mix.

Turning now to expenses, SG&A increased to $15 million from 12.3 million in the second quarter of 2004. As a percentage of total revenue, SG&A expenses increased 200 basis points to 41% from a year ago, as a result of our business and marketing initiatives focused on driving future revenue growth. These initiatives relate to direct marketing to healthcare referral sources, Internet marketing, and referral marketing activities, such as our Lifeline Academy Program. Also, we have continued investing in our Senior Living sales, marketing and customer support areas. Our SG&A percentage will fluctuate from quarter-to-quarter, largely depending on the timing of our spending on these activities.

The Company's liquidity continued to improve in the second quarter. Our working capital initiatives are producing good results. We're effectively managing our inventory, and we're seeing continued improvement in the quality of our revenues and our accounts receivable. More subscribers are beginning to make their payments by credit card, and as we help our health care programs improve their operating efficiency, their cash flow and our payment profile both improve. As a result, DSOs fell to 31 days in Q2, from 32 days a year ago.

Turning to the balance sheet, we ended the second quarter with cash and investments of $53 million and no debt as compared to $32 million and no debt last year.

This concludes the financial review. I will now turn the call over to Ron.

Thank you, Mark. As you have heard for more than two years now, Lifeline's long-term strategy is threefold. First, to improve service profitability; second, to accelerate organic subscriber growth; and third, to extend the breadth of our distribution and the scope of our services. The results that Mark just reported demonstrate that we're achieving what we set out to do, namely, coupling innovative marketing with a focus on service efficiency and quality across the organization, and taking advantage of the scalability of the monitoring and billing platforms that we have. The resulting growth in Service gross margin has allowed us to reinvest in expanding the business, while still producing good earnings growth.

Looking at the first part of our strategy, service profitability, we have two main objectives. We are working to enhance the lifetime value of our subscribers by extending the length of time they remain on our service and by increasing the average monthly revenue per subscriber. At the same time, we're improving our productivity and business processes.

We continued to reduce our subscriber churn rate in Q2. At the front end, our customer care group is shortening the time it takes to close orders and activate new subscribers. At the other end of the process, we're doing a better job in postponing deactivations -- for example, by reminding callers that Lifeline service can be transferred to a new location or passed along to a surviving family number without paying an enrollment fee.

Our primary plan for growing average monthly revenue per subscriber centers on Lifeline OneSource, which is a service option to make life much simpler for the program manager in the healthcare organization. When a program chooses Lifeline OneSource, we handle everything from the initial subscriber inquiry to installation, billing and collections. Although the hospital continues to provide local marketing support, this allows the program to significantly reduce its overhead and operating expenses.

Our second profitability objective is continuous improvement, enhancing process efficiency and delivering even better service to our subscribers and partners at lower cost. We take pride in the continuous improvement culture we have developed at Lifeline, and we have made good progress on a variety of recent process initiatives.

For example, late last year we launched an initiative to reduce the number of accidental signals. This can happen when a subscriber rolls over on the personal help button in bed or gives somebody a hug. By simply redesigning the button, we have been able to avoid several hundred thousand inbound telephone calls on an annualized basis. As a result, we're continuing to improve the ratio of subscribers to monitors in our call centers and enhance customer satisfaction at the same time.

The focus on efficiency and quality extends beyond our internal operations and benefits our healthcare program partners as well. Our focus in this area is Care Partners Connect, or CPC. The partner relationship management platform we make available to all our programs are centrally monitored. CPC gives the program manager secure Web-based access to the Lifeline database so they can do their subscriber account management and data entry tasks online. CPC continues to penetrate more deeply into the channel as we add functionality and provide a wider range of program performance metrics. As program managers use CPC, they improve the efficiency of their operations, which liberates resources that can be used for marketing and expanding their Lifeline subscriber base.

We have also added features and functionality to CPC that can help program managers improve their marketing reach and productivity. Going beyond CPC in process automation, we are exposing our program partners to best practices and encouraging the continuous improvement mindset that they need to manage their programs more efficiently, while still providing subscribers with traditionally higher quality Lifeline service.

This is why we hold our Lifeline Academy training seminars. During the second quarter, for example, we conducted our Academy Programs for 2005, which attracted the leaders from approximately 200 of our top health care programs. We offered some great learning opportunities on topics such as do-it-yourself direct mail, tapping into referral sources outside of their local hospitals, how to use of the new features of CPC to better manage program growth.

Meanwhile, a large number of the program managers who were not able to attend the year's Academy have been targeted for outreach by the field sales force. The goal is to take the essence of the Academy out to the field so we can cover more programs and provide improved service across the marketplace.

When partners attend the Academy, they walk away with practical knowledge they can use to immediately begin improving their marketing performance. Generating growth through the channel is tremendously important, because we add the vast majority of Lifeline subscribers through our health care programs, typically when patients are being discharged from the hospital or maintained by local home care agencies. This remains true today, and our traditional healthcare referral marketing continues to produce good results.

While working on subscriber growth directly with the channel, we're continuing to expand our direct marketing, essentially direct mail to healthcare professionals, as a means of stimulating Lifeline subscriber referrals. We estimate that more than 9000 of the subscribers we added during the quarter were attributable to direct mail, and that 60 to 70% of them were truly incremental. This compares with an estimated 4000 subscribers added in Q2 of last year.

We have made steady progress in expanding and refining our database of potential healthcare referral sources and improving our response rates as we execute the campaigns. Our direct marketing goal is to generate approximately 30,000 new healthcare subscribers for the year, an increase of at least 35% from 2004.

Our newest growth initiatives are focused on consumer marketing. We're continuing to add caregiver information and E-commerce features to the Lifeline website. In addition, we have begun marketing on the Internet and we are optimistic about the opportunities for using the Web to attract consumers who are looking for elder care solutions.

Beyond the Internet, we will be moving ahead on new approaches for connecting with consumers, whether the consumer is an elder or a baby boomer caregiver. This begins with recruiting the necessary senior executive leadership, and as we announced earlier this month, Mark Rutherford has joined us as Vice President of Consumer Marketing to provide leadership for these initiatives at Lifeline. Mark comes to us from Bose Corporation, the audio-electronics company, where he led all the Company's direct-to-consumer marketing activities.

Mark arrives at Lifeline with extensive experience in consumer marketing, advertising, direct mail, and an outstanding track record in generating sales through a variety of distribution channels, including call centers and Websites. I am looking forward to having him apply this experience as part of our team. I expect that under Mark's direction, we will be able to begin pilot testing later this year and into early '06, with a goal of beginning to develop accurate, segmented consumer marketing sometime later next year.

This covers the first two parts of our long-term strategy, service profitability and subscriber growth. Rounding out the strategy are the Company's new product and service initiatives, chief among them, our Senior Living equipment business. Our goal is to make Lifeline the leading provider of emergency call systems for senior living facilities by offering the best suite of both retrofit and new construction solutions in this segment. We're making progress on this goal and we're looking at a run rate of more than $10 million for this year.

It's a learning process for us, and I think we will catch on to the kind of value proposition that senior living facility managers are looking for when they consider installing an emergency response system. As Lifeline involvement in the senior living business expands, we expect to uncover additional opportunities to broaden our service footprint.

If you step back and ask, what is it that distinguishes Lifeline and makes us successful, our ventures into Senior Living, into direct mail, into partnership relationship technologies, suggest a simple answer. Lifeline is an organization that is truly dedicated to learning, caring and respect at the individual, corporate and customer level. We're committed to understanding the factors that are driving changes in society's relationships with the elderly and then building a growing, profitable business around this understanding and around the total commitment to very fast, very accurate, and very caring service.

With that, Mark and I will take your questions. I would like to note that we will be presenting at the Adams Harkness Annual Growth Conference in Boston on August 2, so perhaps we will see some of you there.

Laurie, please go ahead with the Q&A session.

Certainly. Today's question-and-answer session will be conducted electronically. (OPERATOR INSTRUCTIONS) Ryan Daniels with William Blair.

A couple quick housekeeping questions up front. Mark, I noticed the tax rate during the quarter about 38.5%. Is that a stabilized number that we should use going forward or will that continue to fluctuate a little bit quarter-to-quarter, given the new corporate structure?

That is our normalized effective tax rate, as we've disclosed in the footnotes, Ryan. And from time to time, we will have changes to the effective tax rate as a result of certain statutes expiring or settlements from audits and things.

Okay. On the SG&A spend, I understand the investment and it came in towards the high end. Did part of the reason that came in more towards the 41% range have to do with the Lifeline Academy and might we see that taper off as a percent of sales in the back half of the year or will that stay at the 40 plus percent, given the new direct-to-consumer marketing?

As you know, we really don't give the line item guidance, but the activities that we described within SG&A in the quarter involve the Lifeline Academies, direct mail, Internet marketing, lots of different items where we have invested in the quarter. It doesn't include any consumer marketing investment yet.

Okay.

Ryan, if I can just add one comment to that. We have accelerated our direct marketing and healthcare above planned budgets this year because of some of the encouraging signs we are seeing in the campaigns. And while we don't quantify how much incrementally, we are probably running at $3 million or excess of $3 million run rate on direct mail right now, which has a component to it which is both above plan and will probably have a minimum of a three- to six-month lead time for payback as we refine the database mining.

I guess to follow up on that, you mentioned, Ron, a goal for the direct marketing generating about 30,000 subs for the year. If I'm doing my math correct, it looks like you are already at 17,000 year-to-date. Is there any reason, outside of conservatism, to assume that that will drop off in the back half of the year?

No, we are actually hoping that we will comfortably exceed it, and that is really why we have stepped up our spending. We are seeing some very encouraging signs. So we hope to be on the north side of that 30,000.

Great. Two quick broader questions, and I will hop off. In the Senior Living segment, now that you guys are getting a little more experience there, you've integrated the acquisitions, have you found that there is anything missing from the product lines that clients are demanding? And if so, is that something you would build or potentially look to acquire?

I think the answer is yes. There is a broad range of products and services that the assisted living facilities would like to have. Some of them are outside of our offering that might involve either acquisition strategies on our part or joint venture strategies, or perhaps maybe even just becoming what I would call in generic terms a systems integrator. I think that '05 is going to be a year where we not only stabilize the acquisitions that we make in this niche, but also define how we will resolve some of the breadth issues in the '06/'07 time frame. But clearly, whether it is wandering or fall detection or a little bit of perimeter or maybe even some systems integration with some of their E-call systems, like smoke and fire and things of that sort, are definitely going to need some work.

Okay, great. The last question I had and I'll jump off. You guys have probably seen some of the Medicaid HMOs have had some stumbles and are trying to manage costs a little more effectively. Given that you already participate in that market on the state level, have you ever thought about or entertained conversations with the Medicaid HMOs about providing your service to their customer base, given the proven increased health outcomes and lower cost that a PERS can bring to elderly at-risk individuals?

We haven't, and we probably should. Our Company has been -- we have grown up as a one subscriber at a time model. So we don't really have what I would describe as aggregator experience. And we recognize that whether it be the HMOs or the insurance companies or some of the -- even employers are going to be an opportunity at some point in time. Whether we should be camped at a Kaiser doorstep or somewhere else at this point in time, we don't have enough knowledge to answer that accurately.

Okay, fair enough. Good quarter. Thanks, guys.

Jim Bartlett with Bartlett Investors.

Just a follow-up on the subscribers, which is was there any acquired subscribers in the base? I know there was like 1000, I guess, in the first quarter.

This is Mark. No, we had no sizable acquisitions at all in the quarter.

In the SG&A, you said in the first quarter that the additional spend was about 1.4 million. How would you compare that with the second quarter?

Many of those referral marketing activities I had described are investments to drive future revenue growth. And we have a strategy to continue to invest through the availability of earnings as a result of the gross margin expansion. So you could view most of the increase in SG&A year-over-year as the reinvestment.

So it would actually be more than the million four probably?

In the quarter, yes.

On the product side, the Senior Living versus the traditional. How much was the Senior Living in the quarter? What was that number there?

The run rate for the year would be about $10 million in product revenue, and it is growing at about 35% over last year.

About 2.5 in the quarter, then?

Yes -- closer to 3.

Closer to 3 in the quarter?

Yes.

That's it for the time being. Thank you.

Mitra Ramgopal with Sidoti.

Good morning guys, a few questions. In terms of this sub growth, is it fair to assume that most of new subs are on the OneSource model?

I think that the majority would be OneSource, but I think we are experiencing some encouraging organic growth right across all categories.

I don't know if you could comment a little in terms of the length of stay. I think you're trying to extend that. If you can give us a sense of how that is going.

I think that we are still slightly under a 40% turnover or churn rate. And if you calculate that in time, it is probably something over 28 months right now. So the improvements are occurring. They are measured in days and not even in weeks and months in terms of the progress, and that is just the nature of the breadth of our base and what it takes to move that.

Okay. Finally, you ended the quarter with about 53 million, I believe, in cash and long-term investments, and I know you mentioned potential acquisitions. Do you get a sense in terms of the strengths you have with your cash in terms of investing more in R&D or feeling any pressure from a competitive standpoint to be aggressive on some fronts in terms of spending?

No I don't think so. I think that we're adequately funding our R&D at the moment. There are potential candidates that could arise in the acquisition area that could be utilization for the assets. We haven't felt any compelling pressure to accelerate our acquisition strategy in some segments because we might be bidding against ourselves.

Okay, thanks.

Marvin Loh with DE Investment Research.

Good morning, guys. Could you provide a little more detail on your consumer initiatives, direct-to-consumer initiatives, maybe what some of the results have been on some of the investments that you have made to date, which you have mentioned, as well as some additional detail on what you plan for the remainder of this year into next year and maybe some of the targets that you might have established for that group with Mr. Rutherford joining?

The one thing that we have made some progress on is the E-commerce strategy, and again, we're just getting started there, and our run rate is probably in the 3 to 4 to 5000 subscriber annual number. And as we get more proficient at the mechanics and the technical competency of that channel of distribution, we are encouraged that that will grow. There is a host of different new competitors in that channel. The cost of acquisition is significantly lower than in our core business. It might be in the range of around 100 hours per subscriber. And we think over a period of the next two or three years that we will take what is probably in the half-million dollar to million dollar range investment and accelerate that on the consumer marketing side

Associated with the new Vice President that we have hired, it is premature to say anything about either the timetable or the components of the strategy, other than to say that, in generic terms, there is obviously going to be some market segmentation, some research, some test pilots, things that generically one would traditionally go through as one begins to examine these opportunities. And Rutherford has had a pretty long career of experience, so I think he is going to be a quick study.

With regard to the subs that you have seen come in through the E-commerce site, is there any noticeable difference in the profile of that client or do they fit right in with the existing customers that come in through the healthcare channels? I guess I am getting at does ultimately length of stay vary with this new customer group?

That is a good question, and it is too early for us to know that. I think the most significant thing we can probably say is that it is the children and not the parent that we are dealing with. And their approach towards payment terms, their decision-making process, their enrollment process, their speed of entry, I think, is faster. Since the market is already crowded with a variety of brands that have the name "life" in them, we obviously have some work to do in terms of our own brand strategy and our own spending in order to make sure that we have the lead position in this niche as well.

Okay. Thank you very much, guys.

Greg Taylor with EGM Capital.

You had a question -- you said there was 9000 new subs from the direct-mail marketing channel, so that the difference between that and the 11,000 you had in the quarter, is that just coming from general referral sources maybe through the legacy LMS program?

Well, the 9000, we believe 60 to 70% of that 9000 are truly incremental. That is because it's an integrated marketing strategy with our field sales force and other touch points. So yes, the difference would be as a result of other marketing spend.

So over the last three quarters, the number of subs through direct-mail marketing that you guys have identified, 6.9, 8 and now 9, so as a percentage of the total net adds, the direct-mail marketing is a greater percent. So are you seeing kind of less emphasis on the non-direct-mail marketing channels or how do I think about that, if directionally churn is kind of still trending lower?

I think the way you need to look at the direct mail, since it is aimed at healthcare referral sources, is that it is actively integrated with the hospitals and the core channel of distribution and all of the core programs. So then in effect what it is is it's an increased frequency and consistency of stimulation around the core business. So very gradually, the halo effect is spreading and having a positive impact everywhere in the core business. And as I've said in previous calls, we're still in what I would still describe as the get-started stage of our channel of distribution truly embracing their database of referral sources into our direct marketing, because they are very cautious about sharing their source of patients from the hospital with a company that doesn't offer exclusivity.

So a referral through the LMS channel, some of that would still be considered maybe come through the direct-mail marketing, the 9000?

Absolutely.

And it would be the 40% that weren't incremental?

Absolutely. And of course, you also are seeing increased equipment sales in the business, other than the Senior Living side, and that is partially the halo effect of the direct marketing, because if you have a hospital program with 400 subscribers that goes to 450 through direct-mail campaigns, they are going to need inventory in order to fulfill those requirements. So we're seeing a stimulus on the equipment side as well.

Okay. Last question. You mentioned a $3 million run rate for direct marketing spend. Just so I'm clear, is that a quarterly run rate?

That is annually.

Annual?

They might like it to be a quarterly (multiple speakers).

I just wanted to make sure I am clear. Okay, thank you.

(OPERATOR INSTRUCTIONS) Randy Horzman(ph) with Baron Capital.

Good morning, guys. Just a little color on what you might do with some of the cash on the balance sheet. Are share buybacks something that might make sense? It doesn't seem like there are acquisitions that would task so much of the cash.

Mark can add to it if you'd like, but we are not having any discussions at the moment about buybacks or dividends or anything else. We are in the traditional, kind of New England Yankee cliché, we're keeping our powder dry as we think that 50 or $55 million is something that as the industry consolidates and as our growth strategy accelerates in Senior Living probably isn't a huge amount of money.

Okay. Just the other question is to add a little more color on what you might be doing with Mr. Rutherford. Clearly, he has got some great marketing experience. Do you have any specific projects, programs that you are thinking of doing right now or is it just too early because he's just been hired?

It is definitely too early, but I have a bias that I would share, and that is that I think that when the subscriber thinks about what it is they want to have accomplished when they make a decision to acquire our service -- or in, again, simplistic terms what jobs do the at-risk seniors want done when they subscribe to Lifeline. We're pretty good at that, and we have three decades of experience at it.

If you take that same question and you ask it what jobs do the children want done, they may be different answers. And that will have something to do with the marketing and the messaging and the content and the market segmentation and even the channel strategies. So I think one of the first things we're going to need to do is to get a little bit more clear on what it is that the caregiver wants accomplished, if they are going to be a buyer or a decision-maker in this process.

It really does sound like the direct marketing might be much more towards the younger caregivers, as you're saying.

I think it is going to be both, but I think the new frontier will be the baby boomers.

Right. Sounds good. It's very exciting and I was glad to see the announcement of the hiring.

Will Wetherich (ph) with Wetherich and Company.

Just to get a better handle on the SG&A spend -- the run rate we're seeing now, does that include or not yet include the full impact of your consumer marketing initiative?

Will, it's Mark. It does not include the impact of our consumer investments. What it does include, though, is some stepped-up investments in our traditional healthcare marketing activities.

So are we going to look for a greater percentage of revenue spend as the full impact consumer marketing comes in?

What we have always told the investment community is we will reinvest in SG&A as much as we can to deliver future revenue growth without hampering EPS growth.

Thank you. On the products revenue side, when I first invested in this Company 2.5 or 3 years ago, my understanding was that product revenues would either stay flat or perhaps even decline. It sounds like what has happened is, amongst other things, is the Senior Living initiative has taken off, so we're seeing product revenue in fact growing now. What kind of growth rate could we see attached to the product revenue side?

I guess what I would say is that the Company you knew when you started to invest in it is still going to have a declining equipment revenue on the healthcare side, because fundamentally, hospitals have less disposable money for capital investment, and therefore, the OneSource offering as an example has time on its side in terms of more active penetration in that channel of distribution. So we will go to a continuously declining model. That is getting, to a minor extent, interrupted by the halo effect of the direct marketing on the core hospitals that are still buying equipment and have money to grow.

But fundamentally, the Senior Living niche that involves the retirement communities and the assisted living industry and a variety of non-regulated areas excluding nursing homes, for example, that, depending upon whether you look at retrofit or new construction, and then you look at the condition of the new construction industry, could be a 100 to $200 million niche that we're just beginning to participate in.

So it is possible that we may see a growing equipment revenue base. And then it is even possible later that it will behave a little bit like the hospital channel did, where we may even get some recurring revenue from it as they begin to outsource monitoring because they are of a mindset that they are needing to monitor themselves, but that is the same thing the hospital told us. So we're just going to have to let this thing play out for a couple of years, expand the breadth of the product line and then begin to get a little bit more accurate with you on the forecasting of equipment revenue. It is just too early to do it at this stage.

Is your best guess, though, for now that we should continue to see growth on the product revenue front?

Yes, but it won't be consistent quarter-to-quarter because our initial customer base is focused a little bit more on the national accounts. And therefore, the predictability of the timing of new construction or of installations or retrofits is not -- there is not a broad enough base yet to be accurate in the forecasting. We're going to just need to make the business a little bit larger for that to be stable. But yes, it will be growing.

Okay, thank you. Mark, you've talked in the past about sort of your marginal gross margin -- in other words the most recent adds on the service side have substantially higher gross margins attached to them than the body of your subscriber base. Could you remind me again of what that sort of marginal gross margin is and how do you see the overall subscriber base migrating up towards that over time?

We refer to it as our growth margin, and it's the incremental gross margin we achieve when we grow the subscriber base, and in the second quarter it was around 74%. You can calculate that right from the financials.

And as we talked about in the script, that comes from a couple of different places. One is this continuous improvement in the culture that we have developed here, and there is lots of activities and resources thrown at projects to reduce the cost to deliver the service and increase the quality. And at the same time, it is just leveraging the fixed cost base of the Company.

But that is again what is driving up the overall gross margin average for the service side?

Yes, we haven't ruled out any price increases or anything like that.

Thank you very much.

(OPERATOR INSTRUCTIONS) Ryan Daniels with William Blair.

Mark, I apologize if you were asked this already; I got dropped off the call for a few minutes. But I was hoping you could give me CapEx during the quarter. And then if you could break that down to OneSource conversions and other CapEx?

Sure, Ryan. CapEx was 2.6 million for the quarter, and a little bit more than half of that was for OneSource equipment. Okay? OneSource transitions are included within a $1.4 million separate CapEx number that is called business purchases and other on our cash flows. So it is 1.4 million for business purchases and 2.6 million almost for normal business CapEx.

Perfect. And then the 1.4, were there any acquisitions in there of competitors or is that purely OneSource?

For the quarter, I don't think we acquired any competitors, so it would be primarily OneSource transitions, along with any earnout payments associated with our Senior Living prior acquisitions.

Right. I guess last question and I will hop off again. The pipeline for OneSource conversions, does that remain strong or has there been any difference, kind of sequentially or year-over-year in that?

I don't think the pipeline, if you describe it that way, is very robust. The circumstances that generate a conversion vary from hospital to hospital, and it is all about being in the right place at the right time. We have a hospital today that is celebrating its 20th anniversary in upstate New York, and they told us they are moving the call center from the emergency room to the pediatric department. Well, that is an indicator that we need to talk to them about outsourcing monitoring. Every circumstance can be the catalyst to change that -- and of course this is why you use a field and inside sales force to stay focused on that. But as far as the queue is concerned, I would say that a queue doesn't really exist. As soon as we get the green light, it is go, and getting them to yes is a very laborious process because they love the model they have.

Sure. Okay, great. Thanks.

We have no further questions at this time. I will turn the call back over to our speakers for any additional or closing remarks.

Thank you, Laurie, and thank you very much for joining us today. That does conclude our call.