Streamline Health Solutions Inc (STRM) 2007 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2007 Streamline Health Solutions, Inc. earnings conference call. My name is Serita and I'll be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS). I would now like to turn the presentation over to your host for today's call, Mr. Paul Bridge, Chief Financial Officer. You may proceed.

Thank you very much, operator, and good morning, everyone. I am Paul Bridge, the Chief Financial Officer of Streamline Health Solutions, Inc., and I want to thank you for joining us today.

With me today to discuss the fourth quarter and the fiscal year 2007 operating results are Brian Patsy, President and Chief Executive Officer; Joseph Brown, Vice President, Client Services and Chief Information Officer; and Gary Winzenread, our Vice President of Products and Strategy. Brian, Joe, Gary and I will be available to answer questions during the question-and-answer session.

We have arranged for the webcast of this conference call to be recorded and will be available at the web site listed in the quarterly press release for the next 30 days.

Before I begin our discussions, I would like to read the Safe Harbor statement. Statements made by Streamline Health that are not historical facts are forward-looking statements that are subject to risks and uncertainties. Future financial performance could differ materially from expectations of management and the results reported now or in the past. Factors that could cause the financial performance to so differ include but are not limited to the extended length of sales cycles, the timing of the signing and implementation of new agreements, the impact of revenue recognition rules, development of new channels of distribution, competitive products' pricing, product development, reliance on strategic alliances, availability of products procured from third-party vendors, and the healthcare regulatory environment. Fluctuations in our operating results and other risks are detailed from time to time in our filings with the U.S. Securities and Exchange Commission.

Yesterday, we released our fourth-quarter and fiscal-year 2007 financial results. This morning, I would like to highlight the more significant aspects of those results. Total revenues for the fourth quarter were $5.6 million compared with $3.8 million in the fourth quarter of last year. Total revenues for the fiscal year were $16.6 million compared with $15.5 million in the prior period.

Systems sales increased for the quarter compared to the comparable prior period because we signed two large delayed contracts in the quarter. Systems sales for the full fiscal year declined, primarily because of the inability to recognize during our second quarter approximately $1.1 million in software licensing revenue on the major contract until such time as the site-specific integration of our standard software required by the customer can be completed. Had we been able to recognize the revenue on this contract, year-over-year revenues would have increased 11% when compared to the prior fiscal year.

Both our service, maintenance and support revenues and application hosting revenues increased for the quarter and the fiscal year when compared to the comparable prior periods and continue to have strong operating margins. The fourth-quarter operating profit of $781,000 is more than double the comparable prior quarter as a result of the increased systems sales during the quarter. Had we been able to recognize in the second quarter the revenue on the contract previously discussed, our non-GAAP 2007 fiscal year operating results would have been approximately $396,000 compared to $182,000 for the 2006 fiscal year.

I would like to refer you to our press release for certain information relating to our nonfinancial results for the fiscal year. As you can see, this one contract had a dramatic effect on our reported results.

At January 31, our backlog was approximately $16 million compared with $15 million at the end of the prior fiscal year. We continue to be debt free and have not had to borrow at any time this year on the working capital facility and believe that you will not have to do so for the foreseeable future. We continue to monitor our expenses, cash balances and receivables carefully to ensure they are on plan.

Now I would like to turn the call over to Brian Patsy, who will discuss in greater detail some of the significant factors that affected the quarter and the prospects for the remainder of our current fiscal year.

Thank you, Paul and good morning, everybody. This morning, I will comment briefly on our financial results and then discuss our sales activities and expansion of our direct sales force, our business development activities, an update on our operating activities, including upcoming new product releases, and finally, I will comment on our business objectives for 2008. After my remarks, we will conduct our usual question-and-answer session.

Regarding our Q4 financial performance, our Q4 revenues of $5.6 million and net earnings of $776,000 were consistent with traditional operating patterns and in line with management's expectations. Q4 revenues were 47% ahead of last year's comparable quarter and near our all-time record Q4 performance of $6.1 million. Q4 earnings were 153% ahead of the prior comparable quarter.

For the year, our top-line revenues grew approximately 11% on a non-GAAP basis and 4.4% on a GAAP basis. However, our year-to-date revenues and operating performance were below management's expectations, both when measured on a non-GAAP and on a GAAP basis. As a reminder, we have provided supplemental financial information on a non-GAAP basis because the Company wasn't able to recognize approximately $1.1 million in software licensing revenues on a contract we did sign in the second quarter due to the provision of future site-specific integration of our standard software.

The provision of non-GAAP financial information is supplemental, information for your consideration and is not a substitute for GAAP financial information. We do anticipate recognizing the aforementioned $1.1 million in software licensing revenues in 2008, as well as associated professional services and third-party components. Since we do expect to recognize the additional licensing revenue in 2008, we will discontinue reporting revenues on a non-GAAP basis beginning in Q1 2008.

Although there may continue to be instances where we will not be able to recognize software licensing revenues on transactions due to potential provisions for future deliverables in those contracts, we believe we have now reached a point where there will be a relative balance between the benefit of prior year's revenue deferment and the deferment of revenue into future years.

Clearly, we have endured a very difficult and challenging period spanning the previous five quarters, beginning in Q3 2006 and continuing through Q3 2007. This period of underperformance has been due to several factors, some of which include protracted contract negotiations on large transactions, revenue recognition delays due to the provision of future product deliverables, certain products delays, challenges in hiring additional direct sales resources, and finally, underperformance by some of our reseller channels.

In spite of falling well short of expectations for an extended period, we have rebounded in Q4 and anticipate continued growth throughout at least the first half of 2008 based on the current pipeline of contracts in negotiation. Furthermore, we have made several staff changes and have added key personnel to sustain our growth objectives throughout the entire year and beyond. We continue to be debt free, as Paul mentioned, and we believe we will generate positive cash flow at least for the first half of the year.

At this point, I would like to briefly comment on our sales and business development activities. Regarding our sales activities, we announced the signing of two significant new customers in Q4. Combined, these two opportunities represent approximately $4 million in revenue, approximately half of which was recognized in Q4 and $400,000 in annual maintenance revenue. Our total qualified sales pipeline includes seven potential transactions of various sizes, where we are in contract negotiations as vendor of choice or co-vendor of choice. These seven transactions alone represent over $10 million in total revenue over the next 18 to 24 months. At least one of these transactions is a direct hosting opportunity, which, if consummated, represent a significant annual revenue opportunity over the life of the contract.

And finally, included in the seven potential transactions is an international opportunity through our international distribution partner, involving delivery of an integrated solution to one of our partner's largest health system customers. We have recently doubled our existing direct sales staff to assist us in growing our pipeline of qualified sales opportunities. We also intend to further expand our sales resources again this year.

Regarding our business development activities, we have sharpened the focus of our business development staff toward more near-term opportunities in order to optimize incremental new revenues in 2008. Of our two senior-level business development resources, one will focus on optimizing the incremental revenue from two primary distribution channels, GE Healthcare and Emergis.

Our second senior-level resource will focus on incremental revenue opportunities from four primary business channels, one Standard Register and new revenue contributions from our newly introduced stand-alone Workflow suite of solutions.

Two, our business partner, HERAE in establishing and growing revenue for our revenue process management solution, integrated with the HERAE electronic remittance reconciliation solution. Three, opportunities for sales and integration to Eclipsys Sunrise Clinical Manager within the Eclipsys installed base of customers. And finally, four, opportunities for sales and integration to the EPIC Systems installed base of customers.

At this point, I'd like to comment on our operating activities and plans for new product releases through the end of 2008. Over the past six months, we have made significant changes in our product development organization with an objective to more efficiently produce the next generation architectural platform in order to considerably reduce our time to market and to develop a multi-language platform to support international expansion.

This is a significant undertaking that will require a robust investment in research and development over the next 18 months. That will impact our earnings in 2008. However, once achieved, our new architecture will create significant value in terms of our ability to quickly introduce new workflows into the market while positioning us for potential incremental revenue growth through international distribution relationships.

Our 2008 product plan calls for the delivery of four to six new Workflow solutions by the end of our fiscal year, some of which include financial screening workflow, cash posting workflow, correspondence workflow, and preoperative preprocedure workflow. As mentioned in our previous earnings call, these new Workflow solutions are the result of our recent release of a new Workflow architecture, that incorporates common components that will enable us to accelerate the delivery of future Workflow solutions, thereby accelerating future revenue opportunities, as well as the recognition of those revenues.

In addition, we plan to releases several additional workflows they can interoperate with existing health care administrative information systems, such as those provided by Lawson. These new workflows are closely tied to the site-specific integration that created revenue deferral from last year, as mentioned earlier.

Let me conclude my remarks by stating that we anticipate a very strong first half of the year in terms of the number of contracts signed, based on current contract negotiation activity. And as a result, our business plan calls for returning to results for revenue performance more in line with our performance in 2005 rather than the past two years. We anticipate consummating at least two large transactions in our first quarter.

However, those transactions will not have a dramatic impact on Q1 revenues, as one is a large direct ASP opportunity and the other transaction may likely include future product deliverables, which will prevent us from recognizing the associated revenue until next year. Irrespective of our expectations, significant quarterly fluctuations in revenues and operating profit may still result from the timing of contract closings, as these contracts are often very complex, require extensive negotiation, and often are conducted through our remarketing partners.

Our reasons for optimism in 2008 are based on the following. One, we have a very good visibility regarding several large contracts under negotiation that are anticipated to close within the first half of the year, although, as stated earlier, at least two transactions may not have a near-term impact on revenues. We have significantly increased our direct sales resources in order to ensure continued growth in the second half of the year and beyond. We have turned our business development focus on optimizing near-term revenue through our existing remarketing and business partners.

And finally, we have made significant changes to our product development organization in order to deliver a next generation architecture that significantly reduces time to market for new Workflow solutions and opens up additional international opportunities through the provision of multi-language solutions.

We also anticipate the benefit of recognizing an additional $1.1 million in revenues in the midyear timeframe that we were unable to recognize last year due to a contract provision for site-specific integration as a future deliverable.

This concludes my formal remarks. I would like to turn the call over to Paul Bridge for the question-and-answer session. I have asked Gary Winzenread, Vice President of Product Development and Strategy, and Joe Brown, CIO and VP of Client Services to be available for this quarter's discussion should you wish to ask them any specific questions.

Thank you, Brian. Operator, may we have the first question please?

(OPERATOR INSTRUCTIONS). Tom Carpenter, Hilliard Lyons.

Good morning, everyone. Brian, you talked at -- I think you hired two new salespeople, so counting Dan, how many people on the sales team do you have now?

We have Dan as executive director of sales. We have four direct account executives. We describe them as hunters. So we doubled from two to four. And one is in Chicago, one new one in Chicago, one in the Atlanta area. We also have two client managers, which are what we would describe as farmers, who [saw] back into the installed base. We have a specific sales specialist that focuses on patient financial services, and we have several staff members that are sales support.

Okay. When you -- in your prepared remarks, you mentioned that you had two senior-level people. Is that the new people or with one of them focusing on the incremental revenue opportunity from GE and Emergis?

No, those are the business development resources that have been on our staff for well over the past year or two years (multiple speakers).

And what I'm doing there, Tom, is those two individuals were hired to go out and seek new business relationships for remarketing of our software. That's a very long and arduous process, as you can imagine. It's not -- the sales cycles to bring in a new partner are much longer than the sales cycles to sell our solution. Now I am at a point where we've been successful in adding partners, it's time to really get those existing partners producing. And so what I've done is sharpened the focus. One individual will be focused on growing the GE channel and growing the new Emergis channel. The other senior person will be focused on the other channels I mentioned.

Okay. Now are those the -- I just want to make sure I'm 100% clear. Are those going to be the new people, those two areas you talked about -- one being GE and Emergis, and the other the Standard Register HERAE? Those are the existing?

Those are existing resources that are being turned into revenue-generating resources for near-term opportunities.

And the newer people, their focus is going to be on new business development, with hospitals and other potential partners?

New business, new contracts with hospitals. Yes.

Yes.

There's a difference between direct sales and business development. And the two existing resources in business development are now being focused on incremental revenue within the distribution channels we already have as opposed to hunting for new channels. And then, the four account executives are focused on net new business.

I think I'm clear. You talked about this multi-language platform that may impact earnings in 2008. How many languages are you going to have outside of English built into the program?

All of them. We're going back and retooling our architecture to support numerous languages. I will let Gary Winzenread comment further.

Yes, from a clarification perspective, we will reference the language based on the user, so he's right. Essentially, we'll be able to do all of them. I think initial implementations will focus on those that use the same character set and that's left to right, top to bottom.

Okay. I didn't know if you might start slowly, just if your national partner might need one for their country you guys might be bidding on in addition to English or if you guys are -- it sounds like you guys are going to add quite a bit more. Are there opportunities near-term for you guys to sell with those various languages or are you guys maybe building it for future?

There's a couple of questions there. Again, this is Brian. We analyzed the opportunity for international expansion. There is a potential customer that does require a specific language other than English. In Gary's analysis of looking at our architecture, we decided rather than as I would describe it hard wire our solution to one specific language, we took the more expensive and longer step of rearchitecting the product from the ground up so that it would support multiple languages. It costs a little more but it has a much greater value proposition, as you can imagine, in terms of being able to move into many different opportunities for multiple languages in multiple countries. Having said that, the initial implementation will be in one language other than English.

And then, to answer your second question, once we have deployed that solution some time before the end of next year, then that creates tremendous incremental opportunities for us to expand into other markets, such as the Pacific Rim, et cetera, through our partner relationships, international partner relationships.

One other quick question and then I will drop back in the queue. Google and Microsoft over the last year have entered the medical records field, which might compete with the low end on some of your areas but it sounds like they're making noise about doing more. Where do you see them encroaching on your business and are there any partnership opportunities? If they decide to get into this in a big way, it seems like your all's platform could be a perfect opportunity for them to partner with down the road.

That's a two-part question. Part one is at least initially, we don't see them infringing on our sweet spot in terms of where we sell, which is the high end of the market down through the smaller hospital organizations and large physician practices, where they are going for a broad, general, electronic medical record for the masses. However, down the road, there may be opportunities for partnership as they move up the food chain. So, stay tuned.

(OPERATOR INSTRUCTIONS). Mark Cahill, Cahill, Inc.

I didn't hear a pipeline number. Did you have a pipeline?

The pipeline, Mark, has run pretty consistently between 70 and 80 million, and I need to say that the challenge that we've had in growing that pipeline is limited to sales resources. So, you know, we had two account executives plus the other specialists in support resources. It's very difficult to grow the pipeline substantially with a limited number of resources. So, that's why I think it's significant to note that we've doubled our resources to help grow that pipeline, and furthermore, we anticipate growing it even more this year.

Wouldn't the addition of Emergis have a significant impact, though?

It should, yes, indeed, it should.

I'm questioning whether -- why didn't it have more impact in the past -- since you signed them up?

Well, they haven't been a partner that long, and as I've indicated in my prepared remarks, we are in discussions for an opportunity through Emergis that will jump start the relationship in a big way.

I would imagine there's going to be quite a few other opportunities throughout the year, though.

That's correct, and that's all the more reason to add sales resources because our model in working with our partners is to provide them with account executives sales resources to assist them in their selling effort, since we know our product much better than they do.

Down the road how many more additional sales staff do you anticipate hiring?

This year, two; two more in addition to the two we just hired. So we should have six by the end of the year.

On the financials that were provided over yesterday, I saw interest expense on there. What was that all about?

We had capital leases.

All right, so it's not related to any debt?

No.

Okay, can you give us an update on the IBM relationship -- where that stands?

Yes. Very candidly, we have sharpened our focus in terms of our business partner relationships. As I mentioned in my prepared remarks, we've taken our business development resources and focused them on the existing partners that I mentioned. Conspicuous by their absence was IBM.

We have a relationship with IBM. However, that relationship involves a subset of their products having to do with some WebSphere software that's embedded in our solution.

I have mentioned in previous earnings calls that I had a grand vision of expanding our reach into two new areas. One of them was business process management and the other was portal. The challenge there is that those are long-term propositions, and I felt, and the Board agreed, that it was more prudent to focus on selling what's on the truck and we feel there's a lot of opportunities for significant revenue growth with the relationships we already have and with the products we already have, including the new workflows that Gary's organization will be introducing.

So, we basically have deferred the opportunity to expand our relationship with IBM until such time as we mine the opportunities for significant revenue growth within the solutions and partners we already have. Now, down the road, we would like to eventually move into the portal marketplace and the VPN marketplace. The revenues that would be created there would be probably a healthy mix of professional services. But, we felt that that was a long-term proposition. We wanted to get back on track for significant revenue growth in the near term.

With respect to Standard Register, how close are you to finalizing the education process and getting them started up?

We're well underway in terms of finalizing that relationship. And again, it's going to do a significant change in how we work together. We're both energized -- the real linchpin for getting that relationship jump started was the introduction of a new workflow architecture that allowed us to take this solution that's very complex and to chunk it down into a bite-sized chunk that could be installed as a stand-alone workflow solution in a department. That is exactly what Standard Register needed in order to digest and sell. We've accomplished that, and we're ready to get out there and work on those incremental stand-alone department opportunities. As I said earlier, one of our business development resources is focused on getting that channel jump started.

I read somewhere that Standard Register is working with Net Assets. Are you guys also working with them?

Not at this point. Although, certainly, they've crossed my radar screen. If we had any incremental new business partners, it will be tangential to the ones we already have, that would help us expand our reach. But as I said earlier, the senior-level resources in business development are focused on getting our existing channels to produce.

Okay. The last question and I will do a follow-up question later next week, if that's okay. The credit line -- did you guys nail down with Fifth Third?

No, we're still seeking proposals from multiple sources.

Is this all related to the credit crisis that Wall Street is experiencing?

No.

It's just a process we're going through.

It's just a process that the banks have to go through and other lenders; you know, we provide them with the -- most of them waited until they got our full-year financial statements. And then they proceeded to start developing their proposals.

Tom Carpenter, Hilliard Lyons.

Where's [Alan] and Bill? That's a statement, not a question. But actually I wanted to give Paul some props. Paul, you did a great job the past year or two managing the cash position given the debt you guys have and the slowdown in the business. So, that's very good you guys actually have 2.2 million in cash on the balance sheet and no debt right now.

Thank you. We watch it very closely.

That's good to see. I missed the last part. Is the audit finished?

Yes.

Okay, so that other stuff should wrap up soon. Brian, I couldn't write as fast as you were talking. Can you give the -- you mentioned four of the Workflows that are coming out this year. One was financial something and cash something. Can you go over those again?

Sure. I can do that. Financial Screening workflow is one that -- Gary help me. It -- is that imminent? I assume that's the first one that's going to come off the assembly line.

That's right.

Cash Posting Workflow, which assists in the revenue cycle management process; Correspondence Workflow, which is an exciting revenue opportunity. What it is, Tom -- I think the first two I mentioned kind of are self-explaining. But the Correspondence Workflow is you install that, for example, in the mailroom and it's designed to electronically handle outside correspondence, letters and shippers and invoices and whatever comes in. You scan it, index it, and route it through various departments.

And finally, Preoperative, Preprocedure Workflow, which is probably the most exciting in terms of upside opportunity, we have done a lot of homework in this area. And there's a great demand by our existing customers and potential new customers for a departmental solution that helps solve the significant problem of gathering all of the documents necessary to establish surgery or a procedure in an outpatient clinic. There's a lot of documents that need to come together, and so this has great value to our potential customers.

Did you say it's for surgery -- is it just for outpatient clinics or is it for full hospitals as well?

Both.

Are you guys going to sell that on more of a stand-alone basis or are you going to sell that for your partners as well?

Yes.

Good. In the last year or year and a half, I think you guys completed some integration products with EPIC and Eclipsys, and one or maybe both of them, you had I think won a deal with and I think Children's Medical was with Lawson's. Do you see any becoming integrated with any new software -- medical software IT vendors this year? I think at one time you guys may have talked about that Meditech or someone like that or another vendor.

Well, we do have the opportunity in 2008 through a potential new contract to have the opportunity to integrate with Meditech. We're very excited about that. As you know, it's a reference business and having a Meditech site would be marvelous. So, that opportunity exists. Frankly, we've already integrated to most of the other players. So, that is an opportunity, as you heard in my remarks, we're focusing on EPIC and Eclipsys opportunities in addition to our existing partners, which we certainly can't forget, because we have very tight relationships with GE Health Care and Emergis.

Did you say you are now integrating with Meditech or it's on track for later in '08?

We have the capability to integrate with Meditech; we have the technology to do so. We need a live one. And again, we're in contract negotiations, which will present the opportunity to potentially implement a Meditech site. What I'm saying here is we need to get this into production so we can reference it. Excuse me a minute. Gary wanted to add a comment.

I'm sorry. The integrations that we do right now, we have a product that allows us to that with the current product. And the architecture that we're pursuing that will include multi-language will allow us to integrate with all external partners with much greater ease. So, the only caveat I would have is that the opportunities that we have to do that we need to look at those of course, and then the timing of that might be affected by where we are with the architecture. But in the future, I think that the answer is integration is something we're very focused on and trying to make sure that we are set up to deliver as quickly as possible.

It's with new partners or with new players I should say, not necessarily partners.

Got it. And it's somewhat -- looking at your all's R&D it's somewhat tricky because you guys capitalize and stuff. But last year, R&D went up 15% year-over-year, which you guys introduced a lot of new workflow, so that's understandable. This year, with some of the language and other enhancements you're making architecturally, what type of difference, order of magnitude, do you see R&D growing?

Well, our R&D expense will grow but we will also probably capitalize more because of all of the new products that we are developing.

Okay. I just wanted to reconcile with what Brian set about the [MP] said that that would add -- would impact earnings this year. So I just wanted to see if the growth would be similar to last year, or if we were going to see a much bigger number. It sounds like you are saying you're going to capitalize a fair bit of it.

Yes, we will.

Alan Shorr, AFA Financial.

A lot of good questions were asked and I have a very simple question. Was there something that should've been asked that wasn't?

Wow, that's an interesting question. I think really I can't think of anything other than maybe a little more colored commentary on our sales opportunities.

Well, I mean you mentioned that you had pretty good vision for the next six months and you said at least, which kind of cut my ear. If you could kind of go through that and explain why you feel so confident about that, number one. And number two, what you may see for the last half of the year and why you can't give much clarity on that or maybe you can.

Well, I will answer your last question first, Alan. As we look at our business over a four quarter or an annual period, the looking glass gets foggier the further out we go. And, so therefore, I am not comfortable with being -- providing too much specificity out three to four quarters. Certainly, I'm optimistic about the year but the further out you go, the less visible it becomes, which is not a reflection of our optimism at all. It's just a reflection of our visibility.

Regarding the opportunities -- the seven opportunities, where we are vendor of choice or co-vendor of choice, there -- just to put that in perspective, last year in 2007, we announced four deals, and you saw the impact on revenues, depending on whether you look at GAAP or non-GAAP, it was 4.4% growth versus 11% growth. That is not -- that is below our expectations, but it sure was better than the previous year, which was flat. This year, we see us returning to more revenue results commensurate with what we had two years ago, which was 20% plus. And the reasons for that I mentioned, including the opportunity to recognize 1.1 million in deferred revenue from last year.

Now, if you just put a comparison between what we see clearly in our visibility for the first half, there are seven transactions that we are in negotiations, some in the very late stages, some in mainstage, we have an opportunity to close the same amount or possibly more deals in the first half of this year than we did all of last year. So, that's our reason for optimism.

And that is not to say we don't have opportunities in the second half of the year but again, with the quarterly fluctuations I don't want to get into a quarterly discussion. I just want to talk about annual and at some point maybe some visibility for the next six months and leave it at that. So there's a lot of reason for optimism just based on the contracts that we are engaged with right now. Some of them are very large.

Would be unfair on these quarterly conference calls to give a rolling six months assessment of where you think you'll be?

I could do that. I think that's reasonable. I just don't want to get into a quarterly discussion because it's too variable. The deals are large relative to our annual revenue. One deal moving a week into a new quarter, as you found out last year, with the revenue recognition challenge, has a dramatic impact on our results.

Mark Cahill.

I will take the bait on that sales question and ask a more detailed question. Last where, you had about six deals that you mentioned that you could possibly close in the fourth quarter. You closed two, and now you have approximately seven. So you have a net new three; does that sound right?

That's a fair assumption, yes. Good math.

With the addition of Emergis, over the next few months, I would hope that you will close some of these deals and you will be able to maintain this six, seven number going forward. Does that sound reasonable?

It does, and that's why we've added new resources, sales resources, is to try to grow the $80 million pipeline to double that. If you have two more resources, why not double the backlog -- or excuse me the pipeline. Now I don't know if we can achieve that but we want significant growth in the pipeline so that we have a rolling six, seven, eight, nine deals that we can work with going forward. I just want to reemphasize that I don't have the visibility out Q3 and Q4 yet but, that's why we're putting resources in place today is to build the pipeline so we can continue that track record throughout the year and beyond.

The four deals that did not close that you mentioned in Q4, were they delayed? Was this -- I know one of them was Emergis, and a lot of their customers are government related.

They were all delayed. It's just very complex transactions. They were all delayed, but somewhere in the latter stages.

Okay, when do you think Standard Register will start adding significant revenue opportunities, part of that 6 to 7 rolling number?

I'm shooting for the second half of the year. If you say significant I hope to close some departmental solutions in the first half of the year but if you want to talk about significant I would say second half of the year.

There's a lot of elements of that relationship that I haven't described that I might want to take the opportunity to do so now. You may be asking what's different about this round versus previous. And I've said before I think we both errored in terms of the business case and the value proposition and the original relationship simply wasn't enough value proposition for what I would describe as down and dirty storage and retrieval.

This is different in that these new workflows, which we have chunked down to make affordable to a department have significant value proposition, and they fit in the sweet spot of the Standard Register sales organization. So, we have both have been reenergized by this and we've worked very hard on compensation plans to make sure that they are motivated to sell this solution, that they are trained to sell it and that they have substantial resources on our side to assist them in selling it. And so, for all those reasons, we are very optimistic that we will be successful. And clearly, our organization is too small and doesn't have enough sales infrastructure to mass-market departmental solutions across the country. So, we absolutely need a large distribution partner who has a significant presence in terms of number of sales reps to sell this product. So, even if we build a better mousetrap, we still have the distribution problem. So that's why I'm optimistic about Standard Register solving that problem. They will have several sales specialists who focus on our solutions. I can't recall the exact number. It's less than 10. And they are going to have approximately 50 general sales reps, who will be assisted by these sales specialists and also assisted by our sales resources. So, we have put all the pieces in place. Now it's time to execute.

You mentioned that you might see near-term with respect to departmental modules, I guess you can sell individual modules?

That's correct. Some of those may be through our direct sales organization.

Okay, then, down the road, you're thinking the larger picture or expanded several modules?

Oh yes. Gary's organization has developed a new Workflow architecture that allows us to pop these out in a much more timely fashion. And all of the most, of the new workflows, will be capable of stand-alone implementation. There's a couple where we're going to have to go back and retool them but most of them will be capable of stand-alone, which is significant in terms of taking advantage of our distribution relationship with Standard Register.

Right. Changing gears here, what about HERAE? We've heard about this in the past but no results yet.

That's correct, and I've asked our business development resource to focus on getting several deals consummated in the first half of the year. So, stay tuned. Again, it's a focus of ours.

What's different is that prior to the beginning of our year, the HERAE channel was new to us. It involves some knowledge that our account executives didn't have, frankly, in terms of remittance process management and remittance advice reconciliation. That's an area of weakness in terms of our domain knowledge. As you need to know, our account executives are generalists that sell our entire suite of solutions, and it was just too much to throw on their backs.

What I've done is I've taken our business development resource, one of them, and focused them in a sales capacity to go out and sell this solution as opposed to asking our generalists to sell it. So, there's much sharper focus and much more domain knowledge, and we hope that will generate results.

It sounds to me like you're making your business development guys sales guys.

In some words, yes. Yes.

It's time to produce results from these guys.

It's time to get the channels producing results. Remember, in fairness to them, some of the opportunities that they chased were very long-term. Emergis took two years. So, now I'm asking them to turn within their existing channels and get their revenue flowing.

It sounds good. It's about time.

It is about time. But in fairness to them, they were on a different mission, which was a longer-term mission. Now they are on a near-term mission, and stay tuned.

At this time, we have no further questions in queue.

I want to thank everyone for joining us and wish to advise you that the first-quarter 2008 earnings release is currently scheduled for release on Monday, May 19, 2008 and a corresponding conference call is currently scheduled for Tuesday, May 20, 2008 at 10 AM Eastern time. Thank you for joining us and good day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect.