Streamline Health Solutions Inc (STRM) 2009 Q3 法說會逐字稿

Good afternoon, and welcome to the Streamline Health Solutions Third Quarter 2009 Financial Results Conference Call. All participants will be in listen-only mode.

(Operator Instructions)

Please note, this event is being recorded. I would now like to turn the conference over to Joe Diaz of Lytham Partners. Please go ahead, sir.

Thanks, Amy. And I thank all of you for joining us today to review the financial results of Streamline Health Solutions for the third quarter of fiscal year 2009, which ended on October 31, 2009. As the conference call operator indicated, my name is Joe Diaz. I'm with Lytham Partners. We're the financial relations consulting firm for Streamline Health. With us on the call representing the Company today are Mr. Brian Pasty, President and Chief Executive Officer; and Mr. Don Vick, Interim Chief Financial Officer.

At the conclusion of today's prepared remarks, we will open the call for a question and answer session. If anyone participating on today's call does not have a full text copy of the release, you can retrieve it off the Company's website at streamlinehealth.net or numerous financial websites on the Internet.

Before we begin with prepared remarks, we submit for the record the following statement. Statements made by the management team of Streamline Health Solutions during the course of this conference call that are not historical facts are considered to be forward-looking statements subject to risks and uncertainties. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements.

The words believe, expect, anticipate, estimate, will, and other similar statements of expectation identify forward-looking statements. The forward-looking statements contained herein are subject to certain risks, uncertainties, and important factors that could cause actual results to differ materially from those reflected in the forward-looking statements included herein.

These risks and uncertainties include, but are not limited to, the impact of competitive products and pricing, product demand and market acceptance, new product development, key strategic alliances with vendors that resell the Company's products, the ability of the Company to control costs, availability of products produced from third-party vendors, the healthcare regulatory environment, healthcare information systems' budgets, availability of healthcare information systems' trained personnel for implementation of new systems, as well as maintenance of legacy systems, fluctuations in operating results, and other risks detailed from time to time in the Streamline Health Solution's filings with the US Securities and Exchange Commission.

Participants on this call are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revision to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.

With that said, let me turn the call over to Mr. Brian Patsy, President and Chief Executive Officer of Streamline Health Solutions. Brian?

Thank you, Joe, and good afternoon. For today's call, Don Vick, our Interim Chief Financial Officer, will summarize our financial results. And after Don's summary, I'll discuss our third quarter results. And then we will conduct our question and answer session.

At this point, I'd like to turn the call over to Don Vick for his financial summary.

Thanks, Brian. I would like to highlight the more significant aspects of the financial results of our third quarter of our fiscal year ended October 31, 2009. Revenues for the third quarter of 2009 decreased 7% to $4.1 million, compared to $4.4 million in the third quarter in 2008. The decrease in revenues was primarily due to the decrease of approximately $1.2 million in systems sales when compared to the comparable third period of last year, as customers are increasingly shifting towards application hosting services. Accordingly, the decrease in systems sales was offset by increases in hosting services, maintenance and support, and professional services revenues.

The net loss for the quarter was $296,000 or $0.03 per share, compared to a net profit of $15,000 or $0.00 per share in the third quarter of 2008. Systems sales in the third quarter were $170,000 compared with $1.3 million in the third quarter of fiscal 2008. This decrease is due to a system sale of approximately $1 million for one customer, which was recorded in the third quarter of fiscal 2008 without a similar such system sale in this most recent fiscal year.

After the close of the quarter, we signed a new large purchase contract valued well in excess of $1 million. It is expected that this contract should contribute at least $600,000 in revenues in the fourth quarter of 2009.

Services, maintenance, and support revenues for the third quarter totaled $3 million, reflecting an 18% increase from the $2.5 million of services, maintenance, and support revenues in the third quarter of 2008. This growth was principally driven by a significant increase in professional services revenues due to the timing of the services performed.

Application hosting services revenues increased 80% to $930,000 in the third quarter of fiscal 2009, compared with $517,000 in the third quarter of fiscal 2008. This increase is a result of the incremental rollout of the new hosting customers that we have noted in our prior conference calls. The customer trend towards hosting services is now beginning to make a significant positive impact in our financial results.

Total operating expenses for the three months ended October 31, 2009 and 2008 were each $4.4 million. Total operating expenses for the nine months ended October 31, 2009 were $12.2 million, compared with $14.1 million in the prior comparable period. This $1.9 million expense reduction was primarily the result of effective cost management measures begun in the third quarter of 2008.

The costs of systems sales for the three months ended October 31, 2009 was $658,000 compared with $950,000 in the comparable prior period. The decrease in the cost of sales is primarily the result of the reduced capitalized software amortization expense, pending general release of our latest-generation product line, in addition to the reduction in direct costs associated with reduced third-party hardware and software sales.

The cost of services, maintenance, and support for the three months ended October 31, 2009 was $1.3 million, compared with $1.1 million in the prior period. This increase is due to increased Professional Services' staffing costs and third-party maintenance contract costs associated with supporting an increased customer base; hence, the start-up cost of the business process management, or as we refer to it as BPM, services initiatives.

The cost of application hosting services for the three months ended October 31, 2009 was $408,000, compared with $286,000 in the prior period. The increase is primarily attributable to increased depreciation and third-party license and maintenance fees as a result of the growing hosting center operations.

Selling, general, and administrative expenses for the three months ended October 31, 2009 and 2008 were $1.5 million and $1.7 million respectively. This decrease of 9% over the comparable prior period is due to effective cost management measures begun in the third quarter of 2008. The Company has been able to capitalize on efficiencies gained in the current three and nine-month periods by improving the allocation of resources and reducing expenses.

During the third quarter of fiscal 2009, research and development expenses increased approximately $102,000 or 28% when compared with the comparable prior quarter of fiscal 2008. This increase is primarily attributable to the final-stage development efforts of the re-architecture and internationalization of the Company's flagship product, Access Anywhere, in preparation of its expected general release in the fourth quarter of 2009.

The Company capitalized approximately $859,000 and $1.217 million of product research and development costs in the third quarter of fiscal 2009 and 2008 respectively. As a result of revenue and expense items noted above, our operating loss for the third quarter of fiscal 2009 was $285,000 compared to an operating profit of $26,000 in the third quarter of fiscal 2008.

The operating loss for the first nine months of fiscal 2009 was $275,000 compared with an operating loss of $1.215 million in the first nine months of fiscal 2008. This represents a significant improvement of approximately $940,000 over the comparable prior period. Total backlog at the end of the quarter was $22.6 million, compared with $22.8 million backlog of a year ago. The bulk of our backlog continues to come from hosting services contracts versus software licensing sales.

We were pleased to renegotiate and close a new increased line of credit with Fifth Third Bank during the third quarter. The two-year facility is priced off of LIBOR and has a maximum borrowing amount of $2.75 million. The terms and covenants are more favorable than our previous facility. Our cash at October 31 was approximately $800,000 with $1.9 million drawn under our line of credit.

Our cash cycles are still very much dependent upon our seasonal patterns of prepaid annual maintenance billings to our clients. Our fourth quarter is traditionally our best quarter for collections of these annual maintenance billings, as will be the case again this year.

We anticipate approximately $3 million in collections from maintenance billings this quarter. And, accordingly, we intend to pay down approximately $1 million on our line of credit from the excess cash generated during this quarter. We continue to monitor our expenses, cash balances, and receivables carefully to ensure they are on plan.

That concludes my review of the numbers for the quarter. Let me now turn the call back to Brian Patsy. Brian?

Thanks, Don. Today I will briefly provide three updates. One, an update on our sales and implementation activities; two, an update on efforts to deliver our fifth-generation architectural platform, which is called Access Anywhere 5.0; and, finally, I'll provided updated guidance for the remainder of our year. After my updates, we'll move to the question and answer session.

Let me start by updating our sales and implementation activities since our last earnings call. Last quarter, I mentioned that we closed a significant new departmental workflow sale via our host to delivery model in a very large healthcare organization in the New York City metropolitan area. Although we were precluded from issuing a press release due to hospital policy, I am able to provide further details in this earnings call.

The customer is New York-Presbyterian Hospital, which is composed of two renowned medical centers; Columbia University Medical Center and Weill Cornell Medical Center. The contract calls for the implementation of our preoperative workflow solution integrated to their existing Microsoft Amalga Unified Intelligence System, which provides retrieval and display of patient information from many disparate sources. As a result of our integration to the Microsoft Amalga solution, we are in sync with Microsoft's initial forays into the healthcare marketplace.

Hospitals such as NewYork-Presbyterian Hospital often waste valuable resources when a scheduled surgery is delayed or canceled. A litany of forms and paperwork must be completed to successfully prepare a patient for surgery. Much of this preparation is document-based, and consequently is a manual error-prone process.

Given the volume of paperwork required, the multiple document owners, and consistent pressure to maximize operating room time, the preoperative checklist is sometimes not completed in time for the scheduled surgery. At other times, documents requiring additional clinical follow-up are not found in a timely manner or are absent altogether; this causes delays, surgeons' dissatisfaction, and lost revenue.

Our preoperative workflow solution will automate and mange their entire preoperative document workflow process and help nurses gather, complete, and correct insurance information, as well as clinical documentation for each patient prior to surgery.

Automated document deficiencies will be electronically presented to their surgical staff in time for resolution in advance of scheduled procedures, while the entire surgical team will be provided with convenient electronic access to all of the pertinent preoperative information from a single location, thereby enhancing patient safety and surgeon satisfaction.

NewYork-Presbyterian Hospital is a well-recognized surgery hospital with some of the world's busiest and best surgeons. This speaks to the importance and relevance of providing an innovative solution that can fill current gaps associated with surgery delays, lost productivity, and surgeon dissatisfaction.

Once implemented early next year, our preoperative workflow solution will greatly help NewYork-Presbyterian, more efficiently and effectively manage their 1.3 million documents required for the preoperative process, driving their 65 plus operating suites and over 66,000 ambulatory surgeries performed last year.

This is the first departmental workflow implementation at NewYork-Presbyterian Hospital that takes advantage of previously installed enterprise document repository integrated with their Eclipsys Sunrise Clinical Manager clinical information system.

The total value of the NewYork-Presbyterian workflow installed and hosted is approximately $1 million in hosting services over a five-year period, which is in addition to the approximately $1.6 million in hosting contracts signed with them in the latter part of last year for an enterprise document management services solution. As a final note, NewYork-Presbyterian is the second major New York hospital to install our preoperative workflow solution.

As mentioned yesterday in a press release, just after the end of our third quarter, we closed another large sale through our GE Healthcare partnership with Moses Cone Healthcare System located in Greensboro, North Carolina.

This license-based contract, valued well in excess of $1 million, of which at least $600,000 should be recognized in Q4 of this year, calls for us to implement our enterprise workflow solutions integrated seamlessly with Moses Cone's GE Centricity enterprise system in order to provide clinicians immediate access to complete patient information. Implementation has already begun.

And once fully implemented sometime mid next year, Moses Cone clinicians will have instant electronic access to all forms of healthcare information. Our trusted relationship with the customer, our integration to GE Healthcare, our large portfolio of departmental workflow solutions, and our ability to help Moses Cone achieve its goals of becoming paperless within the next five years were key differentiators in closing this sale. Needless to say, our partnership with GE Healthcare remains productive, and we are off to a great start for our fourth quarter of this year.

We also have closed three large system upgrades within our installed base of customers, in addition to two expansions at two other customer locations. The upgrades include Christana Care Health System, The Health Alliance of Cincinnati, and Beth Israel Medical Center. The system expansions include Albert Einstein Health Network and Nassau University Medical Center. Combined, these new opportunities will contribute approximately $750,000 in incremental new services revenue over the next 12 months.

As a final comment, this Thursday we will be announcing the signing of another new Streamline Health business process management workflow solution at a large multi-hospital organization, which will help that organization ensure government compliance within their materials management organization.

Clearly, we are beginning to gain traction in our sales and marketing efforts to grow hosting revenues via our expanding portfolio of departmental workflow solutions. These recent wins help corroborate our vision of market expansion and incremental revenue growth by focusing on business process management workflow solutions and services at the departmental level.

Next, I'll update our progress toward achieving general availability status for our fifth-generation Access Anywhere 5.0 platform. As was mentioned in last quarter's earnings call, in late July of this year we achieved a significant development milestone by completing the coding, internal testing, and delivery of our fifth-generation architectural platform called Access Anywhere 5.0 to the University of Montreal Health Centers in Canada through our partnership with TELUS Health.

This new product platform provides many new and improved capabilities, such as multi-language, multi-time zone, single sign-on for multiple applications, an advanced internal workflow engine, and built-in troubleshooting diagnostics, among other things. Our new platform and medical records solution portfolio is now installed in Canada, is deep into the beta testing process, and is performing as expected.

We are on target for a January go-live milestone in 12 selected pilot locations. Ultimately, under existing contracts and active implementation projects, our solution will be installed in over 60 inpatient and outpatient healthcare facilities in the Montreal region. We have invested heavily in this new architecture to the tune of $11 million in planned R&D expenditures over the past two years, and are on course for achieving general availability status by the end of our fiscal year.

Given general availability status, we estimate that between $1.7 million to $2 million in incremental revenue will be recognized in our Q4 as a result of realization of revenue deferrals on our two major contracts with TELUS Health; one, for the University of Montreal and McGill University Health Centers signed late last year, and one for the Montreal Agency of Health and Social Services signed earlier this year.

And, finally, I will update our guidance for the remainder of the year. Our internal business plan at the beginning of 2009 called for laying the groundwork for achieving and sustaining consistent double-digit revenue growth and much-improved profitability.

Anticipating constrained capital procurement for information technology in the hospital segment due to broad, adverse economic conditions late last year and much of this year, our plan called for achieving approximately 12% to 15% revenue growth this year. We also expected profitability, impacted by our planned large investments in R&D this year to deliver our fifth-generation architectural platform, in the range of $700,000 to $800,000.

We also provided guidance at the beginning of the year that because of the increased predictability related to subscription-based hosting services, we anticipated approximately an 80% increase in application hosting revenues in the latter part of this year as a result of our eight new hosting contracts signed last year, and new hosting contracts expected this year. And, finally, we targeted significant operating expense reductions as a result of cost management measures implemented late last year.

I am pleased to report that our internal targets for revenue growth, for maintaining expense reduction targets, and improving operating income have played out exactly as expected or better this year. Our updated guidance for the remainder of the year continues to call for revenue in the $18 million revenue range, contingent on general availability status for our Access Anywhere 5.0 platform.

We also expect our profitability to be well-ahead of our internal plan, assuming no adjustments for capitalized software impairment charges or deferred tax asset valuations, which are difficult to estimate.

Let me close my remarks by providing a glimpse into next year. As Don pointed out earlier, our subscription-based hosting contracts secured over the last year and a half are contributing significant new recurring revenue, which will continue to grow next year when considering the recurring revenue that will be generated by all of our hosting contracts signed to-date, our recurring maintenance revenues, our anticipated professional services revenues, and typical add-on revenue for expansion within our installed base of customers, we are now looking at a revenue run rate next year in approximately the $17.5 million range, exclusive of any expected new customer contracts. As stated earlier, our goal is consistent double-digit revenue growth year-over-year and a profit improvement growth rate in excess of our revenue growth rate.

This concludes my prepared remarks. Now, I'd like to turn the call over to Joe for the question and answer session.

Thank you, Brian and Don, for your comments. With that, Amy, if you would please provide instructions for the Q&A.

Thank you.

(Operator Instructions)

Our first question comes from Tom Carpenter at Hilliard Lyons.

Good morning, Brian.

How are you doing, Tom? Hope you're safe with all this bad weather.

I am. So I want to make sure I am crystal clear on next year. So the revenue run rate of $17.5 million is basically if you guys go on vacation; that's no new deals, whether they are systems sales or ASP.

That's correct.

And do you see the systems sales stabilizing next year? A lot of your competitors that are focused on both big, small, and medium hospitals are seeing an uptick in interest because of the stimulus. And they've actually been hiring more folks who they expect they a large increase -- they already seeing an increase in the pipeline. But they expect the deals to be signed starting sometime in the first half of next year.

Where are you seeing the most interest? I know you guys have been saying the past year and a half on the hosted side, but are system sales going to come back? Or, is it going to be pretty much ASP the next two years?

Great questions. I'll start by saying that we anticipated a slowdown in deal cadence this year as a result of the economic conditions. And it played out for all healthcare IT companies the first part of the year. Although, I will agree that over the last quarter and a half it's picked up substantially.

And it does relate to the stimulus dollars. It does relate to budgets being freed up. For example, one of our large ASP customers out west had a moratorium on capital and subscription deals over the last year and that was just released, so that's good news.

We're also seeing a pick-up in our sales activities, our pipeline, and budgets are starting to roll again. So, what I see now is a deal cadence that is comparable to last year -- not this year, so we'll pick up the cadence quite a bit. Where we see it is still predominately ASP-based. And, as you know, those deals don't drop right into recognizable revenue in the short-term, but they sure build for the long-term. And that's what we've been enjoying this year as a result of last year's success.

Okay. Over the last couple of years, you've invested very heavily in product development, both in the architecture, multi-language capabilities, and revamping the sales team. We saw some efforts in '08, especially on the new wins side. And you built ASP now back to where it was before, actually a customer transition.

But, are we going to see a big bump in the coming years? I know already for next year you've got the baseline fairly close to this year. But, when are we going to see the payoff from the investments and sales people and R&D?

Great observations. First of all, as you know, we did invest heavily over the last two years to the tune of $11 million in R&D. Our headcount went up substantially. Our costs went up substantially. Now we've finished -- we're on the tail end of that project. So I need to comment that our R&D expenditures will table off, perhaps decline.

We're going to start shifting those investments onto the sales side now in terms of creating demand. So, we are anticipating an uptick in revenue, and I should say an uptick in deal cadence because, as you know, if 100% of those deals come through ASP you may not see that revenue in the short-term, but you certainly will see it in the long-term.

We see the growth in terms of our core business of creating an electronic repository growing. We see our Access Anywhere 5.0 opportunities growing. We are focusing more on the small to medium-sized hospitals now. We describe that as our Blue Ocean policy; we see that growing.

And the greatest growth that we see right now is what we've just announced, and what we will be announcing between now and the end of the year, and that's departmental workflow solutions that provide business process optimization. We see that as our biggest driver and growth factor next year and beyond.

Those deals, which can be standalones, such as preoperative workflow like NewYork-Presbyterian, do pull us into enterprise opportunities, including enterprise document management and workflow. So, we do anticipate a significant pick-up in business.

Okay. That's good. Is Don in the room with you?

Yes, I am. Hello.

Don, hats off last year on managing the cash and renewing the credit line at more favorable terms; that's not easy.

Thank you. I appreciate that.

As we look out into next year going past the fourth quarter, I think those of us that are interested in the stock and some of our investors we work with would like to see the cash start growing so it's not one of these things where, hey, fourth quarter it looks great. Then, throughout the year, it bleeds down and goes through the process maybe where you guys start out running that.

With the strong base that you guys have for next year, is this going to be the last year that we see that cycle where it's so pronounced? Is it going to even out now that ASP is picking up significantly?

Unfortunately, I can't say that it is our last year. I mean, we're still very much dependent on the huge maintenance billing collections that we have. And the size of those collections are still much larger than the ASP side of the house.

Okay.

But as the ASP continues to build, it will certainly fill that void and will tend to get us towards the more positive cash flow. However, just as Brian mentioned, given the nature of the rollout of the ASP and the incrementally slow rollout, it takes some time in order for that cash to really build.

Right. The payback for you guys is kind of years three, four, and five.

Yes. And just in my forecasting as of this moment, I'm not seeing enough of that build on the ASP to totally fund everything that we're needing. However, where the real positive cash flow will be is where there are new system sales on top of the ASP. And those large deals are what can really provide the cash cushion.

Hey, Tom. it's Brian. The other comment I'll make, and it's a challenge; when you're seeing significant growth in hosted deals, it absolutely creates cash pressures in short-term. We have to go out and buy equipment and install it in our hosting center. And the payments are spread out over four to five years. So, we go negative cash flow in the first 12 to 14 months.

So, in some degree we're a victim of our own success here, and it's a nice problem. And there will be an inflection point, clearly, but it isn't -- we don't see it in the next 12 months because of the large amount of, as Don said, the maintenance renewal dollar amount. It will take a while for us to get that critical mass to cover that inflection point.

Okay. Great. One more question, and I'll jump back into queue. With Access Anywhere 5.0 general availability hopefully this quarter, where does that change the game for you guys with some of the other folks that you integrate with like Epic, Eclipsys, [Walston], some of the other BPO/BPM companies and then maybe some of the other ones on the small side? Maybe you can help investors on the call understand what this is going to do to take you to the next level.

Well, it's a great question, Tom. And I don't want to get too technical on you, but I'll speak in laymen's term. We mentioned last quarter's earnings call that this new generation software -- and we literally wrote it from scratch. Obviously, we took all of our domain knowledge and all of the functionality of our existing solution and carried it forward.

But what we basically did was build it in something called a service-oriented architecture. And the best analogy I can give is like building a car the old-fashioned way before Henry Ford, where they custom built everything and hard-wired everything to building harnesses and making things interconnect so that a transmission in a Chevy fits a transmission of a Pontiac.

We've taken all of our sub-components; we call those business objects. For example, scanning, auditing, security, printing, viewing, workflow; all of those things are now built modular. And what that allows us to do is, first of all, tremendously lower our support costs. And we've built in telemetry to identify problems, which will lower our -- shorten our time to market.

The other thing that it does for us, it opens up new business opportunities because we can take those components now, and we build a library of these objects. And we can market those to different types of companies, and have them embed it into their applications. So, these containers now are going to be sold in piece parts.

It also gives us multi-language, which clearly I've talked in the past opens up international opportunity and, indeed, that's how we won the business in Canada; it's a French-speaking application, French-Canadian. And it also allows us to significantly lower our infrastructure costs. And this is probably one of the -- one of the two biggest benefits of this is that we have something called multi-entity or a multi-instance.

Today when we implement a hosted deal for a customer, we isolate the equipment to each customer and keep them partitioned by physical equipment. With this new architecture, we can now use one set of computers and partition logically so that we can now deliver our applications and keep all the data completely separate and secure with one set of computers, instead of dozens of computers for dozens of customers.

So, we have a competitive advantage price-wise. We have a technology advantage because the IT people, as I like to joke that where the [propellerheads] are going to love the flexibility and the freedom that they have with our architecture. And we're going to have competitive advantage in terms of our ability to get speed to market in terms of reacting to market needs. So, there's a lot of things that come under the hood of this new architecture that we're really licking our chops and can't wait to get it deployed.

Is the first customer going to go live in the fourth quarter? Or, is that just a unique customer because of the language capabilities?

No. It's the same product that will be deployed throughout all of North America; it just happens to be French-Canadian language, and it will go live in January. And it's the same product that -- we were already in the process of contracting to upgrade our current installed base to this new platform in the states next year. You know, that will create opportunities for revenue in terms of upgrades.

Right. So this is something that you've been going out and talking to customers about?

And I got to tell you, the response is really excitement about the architecture and the ease of use and, probably most importantly, the two big areas in terms of cost savings are cost of support and cost of infrastructure to deliver the application on an ASP basis. We're going to be more competitive because of that.

Well, that should make for some exciting press releases and earnings calls in 2010.

We hope so.

Okay. Thanks for your time.

(Operator Instructions)

Our next question comes from Mark Cahill, private company.

Hello, guys.

Hello.

Congratulations on the Moses deal.

Thank you very much, Mark.

Could you go into a little bit more on the Blue Ocean program, how many new sales staff you're going to need, and what more you can add on to that?

Mark, we've been focusing on providing a solution to the -- we describe that as 50 beds up to 250 beds. And we launched it mid this year. We had a dedicated sales professional that we hired to launch it. And launching it had a lot of work in the back room. We had to basically better package our implantation sources, streamline them, because these are not high-end hospitals that have large IT staff.

So, we had to basically cookie-cut the implementation and services component. We had to re-price it. We had to re-brand it and re-message it. And we've done all those things, and we've gone out to market. Now, what we've learned -- and by the way we have a pipeline of opportunities in the Blue Ocean. What we learned that we didn't know when we launched this mid-year is the sales cycles are almost as long as the high end of the market, and that's something that we didn't factor in.

Right.

So, you haven't seen the deal cadence just yet because the sales cycles, frankly, are longer than we anticipated. But the activity is there. The pipeline is there. It's just that smaller hospitals take just as long to make decisions as large hospitals, even though the dollar amounts are smaller.

What kind of numbers -- regarding sales people, are you going to create a hub-and-spoke sales organization for this effort?

Well, it's funny you should bring that up. And I don't want to go into a lot of details just yet because this is a work in process, and we're pulling all of our sales people in next week to discuss our strategy. And I don't want to give a -- pre-announce or even give our competitors a glimpse.

But, we're going to be changing our sales strategy to be more comprehensive and give us better reach into the market. And I'll leave it at that for now. And I'll provide further details in the next earnings call.

So, we're changing the formula on how we get reach into the market in the Blue Ocean. And I'm excited about it, and I think our sales people will be, as well. We're also going to invest a lot more money upstream in lead generation, in-house as well as outsource. So, we're going to be active in speaking engagements. We're going to be active in the regional shows. There will be a lot of things that we'll be rolling out that I'll provide more colored commentary in the next earnings call.

I saw the Cincinnati article about you guys getting some tax credit from the Ohio Tax Credit Authority.

Yes.

Yes.

Adding 25 new jobs and retaining 70 some odd -- 73 or so, whatever it was. So, it sounds to me like the expansion of employees are going to be geared towards the sales side.

That's correct. It's geared to three primary areas; sales, number one. Because now that we have the new architecture, the new platform, we've established a beachhead for business process optimization for these departmental workflows. As you've heard in terms of some of our announcements, we're now enjoying success with those departmental workflows, ASP delivery model.

We've had some experience, as well. Sales is number one. Number two is investing in business process management expertise so that we can have more feet on the street in terms of digging into the departmental needs and building these configurable solutions that are standalone. So, those are more of a consultative type people.

And, thirdly, our implementation people because as the deal cadence picks up, we obviously need to provide the resources to implement those systems. So, you'll see revenue bumps on the ASP side, which, by the way, are spread over four to five years.

So you're not going to see -- even though we may have dramatic deal cadence, you're not going to see dramatic revenue increases. You're going to see dramatic deal cadence. You're going to see more experts providing consulting services, and you're going to see more Professional Services revenues as a result of these deals.

One thing I'll add to that is that estimate of the 25 jobs, that's not instantaneous; it's spread over roughly a three-year period is the way that we modeled it with the state of Ohio.

But the message is we're growing, and we're investing now -- we're shifting the investments from R&D to get the word out and improve the reach.

Right.

Which is where we need to be.

Okay.

We didn't want to get ahead of our skis last year. We wanted to make sure we finished the product first. And now we're ready to -- we're at the starting gate, and we're getting ready for that gun to go off.

Right. Regarding GE Healthcare, are they done with their Intermountain partnership with creating the new platform? Is that done?

Well, I want to be careful, Mark, not to comment on GE's business, other than to say this; the relationship is strong. And they are now selling and have won deals with the new architecture, which bodes well for us.

As you know, that relationship, although strong, the deal cadence for net new deals for our partner GE have been flat over the last several years because everybody is anticipating the new architecture that they're releasing. They're where we are; they have now finished that task and it is rolling out. And so, I am hopeful that the deal cadence through our GE partner will pick up, as well.

Is the Moses Cone deal under the new platform or the old? Are you integrating into the old platform?

That's an existing customer on GE's previous platform. And so, it is a GE deal, of course, but it's on the old platform.

Okay. With respect to TELUS, I believe you said you had about 12 pilot locations. You're going to have somewhere just under 20 total when you're all said and done, right?

60 total.

60?

Including clinics; several hospitals and a number of clinics. Unfortunately, I'm not sure of the breakdown between hospitals and clinics, but there's 60 total locations. The 12 pilots are all clinics.

Okay. Assuming this gets completed, are you going to do a general availability announcement --?

You bet we are. Absolutely.

Okay. Is TELUS, their sales force, already trying to line up new clients using your product?

We are engaged with their sales force. And we are involved in incremental deals besides the ones we've already signed. It's in the sales pipeline now not -- so, we are active there.

Right. In your prepared remarks, you mentioned this Thursday you're making an announcement. That's tomorrow.

I'm sorry. You're right. When I prepared my remarks, it was yesterday. So, yes, tomorrow -- is that correct, Melissa, that we will have an announcement tomorrow morning?

Yes.

I don't want to take the thunder away from that.

Was this a new sales --?

Yes. Yes, it's a new sale.

Okay.

It's a departmental workflow sale. And it just corroborates, as I said in my prepared remarks, that we're starting to bear the fruit of business process management, standalone workflow applications that solve very acute problems in specific departments and hospitals, which gets us in the door with some very nice revenue streams that are ASP-based, and gives us opportunities in a platform to sell up to the enterprise.

Okay. Two more questions, and then that will be it for me. Regarding cash, you've already received pre-payments? Is your cash level -- ?

Yes. Yes, we have. We've had quite a few that came in here early December, and we're still expecting some more. Basically, for the -- here for the quarter the number looks like it should be around $3 million in those collections.

Okay. And you're going to pay down $1 million on the --

That's my plan at this point. Yes.

Okay. Also, I think it was the last conference call you mentioned your profitability range of $1.5 million to $2 million, I think it was. With the addition of this Moses Cone, would you increase that range?

No. That was considering Moses Cone, which I couldn't talk about at the time.

Oh, okay.

And, you know, life is timing. That deal closed just a few days after our quarter, otherwise we'd have been talking about it last quarter.

Right.

But it all comes out in the wash as long as we get it closed before the end of the year. So, that was anticipating Moses Cone.

Okay. All right. That's it for me. Thank you.

(Operator Instructions)

This concludes our question and answer session. I would like to turn the conference back over to Mr. Brian Patsy for any closing remarks.

Well, thank you, Amy. Again, we appreciate the time you've invested in listening to our story and our recent success. And we look forward to having a spirited discussion in our next earnings call. And when would that be, Don?

Towards the end of March.

Toward the end of March. Thanks, again, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.