Streamline Health Solutions Inc (STRM) 2011 Q4 法說會逐字稿

Greetings, and welcome to Streamline Health Solutions fourth-quarter 2011 and year-end results conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Landon Barretto. Thank you, sir. You may begin.

Good morning. Thank you for joining us to review the financial results of Streamline Health Solutions for the fourth quarter of fiscal year 2011, which ended January 31, 2012, and for the fiscal year ended the same date. As the conference call operator indicated, my name is Landon Barretto. I'm with Barretto Pacific Corporation; we're the Investor Relations consulting firm for Streamline Health.

With us on the call representing the Company today are Bob Watson, President and Chief Executive Officer; Steve Murdock, Senior Vice President and Chief Financial Officer; Rick Leach, Senior Vice President, Solutions Marketing. 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 from the Company's website at www.streamlinehealth.net or numerous financial websites.

Before we begin with the 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 expectations 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 Solutions 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 revisions 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 Bob Watson, President and Chief Executive Officer of Streamline Health Solutions. Bob?

Thank you, Landon. Good morning to all of you participating on today's call. We thank you for your time today and for your continued interest and support of our Company. With four full quarters behind this management team, it is clear that we are making meaningful progress toward becoming a best-in-class healthcare information technology company, delivering solutions that improve our clients' operating and financial performance.

Looking back at the fourth quarter, which ended January 31, 2012, we are pleased with our financial performance for the period. We achieved breakeven after accounting for the transaction costs associated with the December acquisition of Interpoint Partners. Absent the impact of that transaction, net income would have exceeded $400,000 for the quarter. Even with the cost of this important acquisition, we returned the Company to profitability.

As noted in our press release, the Company achieved net earnings of $13,000 for the year. This is a $3 million improvement, approximately, over the prior year. This was accomplished on revenues of nearly 3% less than fiscal 2010, which was in line with our 2011 guidance. Adjusting for the revenue contribution from the acquisition in Q4, revenues for the year were down 5% on the core electronic content management business. Again, this is in line with our previous guidance for the fiscal year 2011.

In our earnings release, we have included a table reconciling our net earnings to the non-GAAP financial measure of adjusted EBITDA. We define adjusted EBITDA as net earnings plus interest expense, tax expense, depreciation, amortization of tangible and intangible assets, and stock-based compensation expense. Given the relatively large amount of non-cash charges included in our financial results, we believe that adjusted EBITDA is a more meaningful measure in understanding our underlying cash-based earnings.

For the fiscal year ended January 31, 2012, adjusted EBITDA was $3.8 million, an improvement of approximately $1 million over the prior year. As we have noted previously, we will continue to provide this non-GAAP financial measure in future earnings releases. We believe this is a very meaningful improvement, which was achieved despite the burden of high severance costs in 2011, the cost of on-boarding new executives and associates as part of the overall transition of our human capital talent, and the cost of the Interpoint Partners acquisition in December.

I also went to remind you that as we shift our focus to SaaS, or software as a service transactions, revenue recognition will be delayed due to the time lag between contract signings and implementation, or go-lives. We continue to believe that sacrificing near-term perpetual license-based revenue and long-term predictability of SaaS-based revenue is the correct business model.

Furthermore, the solutions acquired from Interpoint Partners are only available on a SaaS basis. We are particularly encouraged by the increase in the backlog by nearly $10 million during the fourth quarter. Backlog at the end of the year was $2.7 million compared to last year's backlog. This is a 56% increase.

Steve Murdock, our Chief Financial Officer, will provide more detail on this in a few minutes. For those of you who have listened to these calls during 2011, you know that we were focused on five key strategies. Those five strategies were becoming a market-facing organization; building a sales and distribution organization; leveraging our core competencies to broaden the scope of our product portfolio and expand our recurring revenue stream within our current client base; building the human capital required to accomplish the foregoing; and, finally, to continue to drive costs out of our infrastructure. I am pleased to report that we have made significant progress in implementing all five of these strategies.

First, becoming a market-facing organization. We have gained a much more complete understanding of the needs of our current clients and of the market-wide solutions. Aside from our previously noted webinar series and other programs, it is important to note that each and every one of our clients was contacted at least two times during the past year by at least one senior-level executive. We plan to continue this level of executive engagement with our clients as a key part of our long-term strategic plan. The information gathered during these visits has been and is critical for our solution development process and to our long-term strategic plans.

This is especially true as it relates to our expanded revenue cycle solutions offering. The acquisition of Interpoint Partners, for example, was guided by listening to our clients in the marketplace in general.

Second, building a sales and distribution organization. During the year we worked very diligently to secure each and every new opportunity to sell within the scope of our solutions offerings. We reported in each of the last two quarters that we had added $6 million to our sales pipeline. However, in the fourth quarter we added over $10 million in opportunities to our pipeline. Also, during the fourth quarter we added two new clients, Aria Health Systems, Philadelphia, Pennsylvania; and Riverside Medical Group, Norfolk, Virginia.

Importantly, we created subsequent to the year end the Senior Vice President of Sales position that we filled with Mike Schiller, who will report to me. The drivers for creating this role were twofold. First, when this team began to come together in the first quarter of 2011, we agreed to view the year as a year to learn more about the enterprise content management market in general, and our clients, specifically. We did that.

Second, with the information at hand from our clients' and sales prospects' visits during the year, plus the added opportunities in the new sales pipeline from the addition of the Interpoint Partners solutions to our portfolio, we felt it was time to separate the client-facing activities into two distinct units, sales and solutions marketing. Our regional sales executives and account executives will report to Mr. Schiller. Mr. Rick Leach will continue to lead our solutions management and marketing teams and will continue to report to me as well.

On the question of our partner distribution channels, we announced a joint marketing agreement with FTI Consulting in February of this year. While in our opinion, this announcement went largely unnoticed, it is a critical part of our new client sales plan. We expect FTI to be a material driver of new business over the coming five-year period. In fact, the Riverside Medical Center contract announced in January was a direct result of this relationship.

Likewise, we continue to maintain our agreement with GE Healthcare. While that relationship did not generate a net new sale in 2011, we continue to invest resources in managing our current clients that we share with GE. We did generate over $2 million in contract bookings and renewals inside that installed client base in 2011. However, after several attempts to revive the relationship with Standard Register, we have elected to discontinue that relationship as we move into fiscal 2012.

We were successful via the FTI relationship in delivering a new distribution partner, as promised, for 2011. We will continue to pursue other distribution and channel partners in fiscal 2012.

Third, leveraging our core competencies to broaden the scope of our product portfolio and expanding our recurring revenue stream within our current client base. Going here, we did this in four ways. One, we achieved Meaningful Use Certification for two versions of our core enterprise content management solutions. Two, we released our new integration suite for Epic EMR. Three, we acquired Interpoint Partners for its healthcare solutions and the revenue cycle optimization and business analytics.

Four, on December 20, AccessAnyWare 5.1, which is built on an entirely new architecture, became commercially available. This is not only an important milestone in the transition of our core enterprise content management solutions to this technologically advanced architecture and suite of functionality, it also allows us to accelerate the planning with all of our clients to migrate them to this platform. We also believe that this profit will open the door for us to offer our software as a service option in lieu of a traditional maintenance agreement renewal.

It's worth noting that as we transition our clients to the new platform, the Company will not only generate billable professional services revenue, but we will have the opportunity to sell additional software solutions, such as our suite of health information management workloads and our new patient financial services solutions. These solutions will help our clients to continue to improve their operational efficiency and financial results.

As I noted earlier, this migration path to version 5.1 creates an opportunity to transition those legacy maintenance clients, cooperate our solutions within their connect groups to the SaaS-based revenue model. This transition to SaaS will tend to increase our net revenue per client, and in addition, we believe, will lower our clients' net cost of ownership of our solutions. These economics should make our software-as-a-service offering a financially attractive alternative to the traditional on-premises model.

During 2011 we significantly expanded our recurring revenue stream within our client base. Since our last earnings call, we have continued to make significant progress in this area. Specifically, we have secured a number of new agreements from existing clients during and subsequent to the end of the third quarter, including an agreement with Nationwide Children's Hospital, Columbus, Ohio, that extended their staff term an additional 5 years while adding FolderAnyWare, which is our non-patient-centric content management system, and our CharityWare workflow solution, and our integration suite for Epic EMR. An agreement with Oakwood Healthcare in Dearborn, Michigan, that transitions them from an indirect agreement through a channel partner to a direct agreement with us. This is similar to the transaction earlier in the year with the University of Virginia.

This agreement also included, like Nationwide Children's, our integration suite for Epic EMR and FolderAnyWare. During the year, a total of three clients moved to direct agreements with us in lieu of renewing via channel partners. This has been a direct and meaningful, positive impact on our revenue realization from those clients. We expect this trend to continue into 2012.

Agreements with three clients to upgrade to AccessAnyWare 5.1, which will bring the total number of clients who have committed to migrating to the newest platform, the 5. Likewise, we expect this trend to continue into 2012. We have announced to our clients that we are sunsetting several older versions of our AccessAnyWare platform in 2013. This will require our clients to either move to the 5.1 platform or to version 1.9 SP3, both of which are Meaningful Use Certified.

We also signed agreements with several clients, including those previously noted, to implement our integration suite for Epic EMR, which will increase our number of epic integrations to 9, with one more currently in the contracting process.

We also signed an agreement with a major Texas health system to extend their maintenance and support agreement for 5 years. We expect the trend of longer-term maintenance and/or fast-paced term contracts to continue as we move away from one-year renewals.

Returning to the 5 strategic points, the fourth strategic point was building human capital. We brought together the human capital that is required to accomplish each of the areas of strategic focus as we transform to a best-in-class healthcare information technology company.

During the year we made material changes to our team, with the addition of Mike Schiller, as discussed earlier, but also with the addition of the founders of Interpoint Partners, Matt Seefeld as Chief Strategist, revenue cycle; Gene Schrifka as our Chief Technology Officer. We also added 6 very talented former Interpoint associates to our team in the Atlanta office. While we did have a material decline in our headcount, which now stands at 75, which is down from nearly 100 the end of fiscal year 2010, 22 of our current associates are in their first 15 months with the Company.

Our fifth strategic point for 2011 was continuing to drive costs out of our infrastructure. Operating expenses for the year were $2.5 million less than the prior year. We believe that we have taken substantially all of the costs possible out of our infrastructure during the year. We will continue, in the ordinary course of business, to monitor our spending patterns closely.

In summary, we are very pleased with the progress we've made it during the past fiscal year in each of the 5 strategic areas. We believe that providing you with the outline of our strategic plan for the coming year, as we did last April, our shareholders and stakeholders in the Company will have a basis from which to assess our performance.

During 2012 we have 4 key strategic initiatives. First, we will scale and manage our infrastructure costs to help us efficiently and effectively grow the business. While 2011 had a focus on reducing infrastructure costs, 2012 will be a year for our teams to focus on managing the growth of our infrastructures as the business begins to grow and scale. We will continue to invest in our human capital resources as we ramp to support our anticipated growth, but we will also closely manage the technical and administrative infrastructure of the business.

Second, we will expand our sales footprint to capture a greater share of the net new sales opportunity. While we added FTI Consulting as a distribution partner via our joint marketing agreement, we believe that we need to continue to develop channel partners to accelerate our growth. However, as is the case with many distribution partnerships, there is a trade-off with this business model -- namely, that we sacrifice a percentage of the new revenue generated that is likely greater than if we sold the new sales prospect via our direct sales force.

That being said, we believe the channel strategy, crossmapped to an expanded direct sales team both under the leadership of a dedicated senior executive focused on revenue generation, will increase the number of net new sales opportunities for us.

Third, we will enhance our client experience. We spent much of last year deepening our knowledge of our client base. This year we will work to enhance the experience our clients have with us. While we maintain very good relationships with our clients, our business during the year highlighted areas where we believe we have the opportunity to improve their experience with our solutions. Our success with this initiative will be borne out by a series of client surveys, as well as by the success of our upcoming 2012 NEXT Summit, our annual user's group meeting.

Our fourth and final strategy for this year is to introduce new and enhanced solutions to the market. During the upcoming fiscal year we will look to continue to broaden, deepen, and integrate all of our solutions offerings. This will be accomplished by bolstering our development efforts, based upon input from our clients and from our understanding of where we see the challenges they face.

As we did with the Interpoint Partners transaction, we may also consider inorganic solutions development and growth opportunities as well. As I have commented on the previous calls, I want to remind everyone that this is a process. We are embarking on a measured, yet aggressive growth plan and, as such, there may be bumps along the way. But we will manage our way through them.

The steps we need to take remain as clear to this management team today as they were in 2011. By methodically executing on our strategic and tactical plans, we believe positive results will be borne out by our financial performance in the years to come. Given the work that we have done in 2011 to control our costs, understand the needs and opportunities within our client base, developing our sales and account management teams and channel partners, we feel that we have a reasonable insight into our financial performance for this year and next.

Accordingly, we project 15% to 20% growth in net revenue for 2012. This would project revenue in a range of $20 million to $22 million. Looking ahead, we project approximately 25% to 30% growth in net revenue in 2013 over 2012. This would project revenue in the range of $26 million to $28 million, not including the potential impact of any inorganic growth opportunities.

In addition, we anticipate adjusted EBITDA to grow at rates of 25% to 35%, respectively, for those periods, generating approximately $4.5 million to $5 million this year, and approximately $6 million to $7.5 million in 2013. Our earnings per share are projected to be between $0.07 and $0.09 this year and growing by approximately 20% to 25% to $0.09 to $0.11 per share in 2013.

I want to thank our entire team of associates for their hard work in support of management's strategic plan. Our progress against our strategic and tactical goals has been demonstrated by our improved financial results, our growth in the backlog of nearly $10 million to the current level of $27.4 million, and the growth of our current sales pipeline opportunities to over $35 million.

There is much left to do, not only in the continuing integration of our fourth-quarter acquisition, but internally as well. Suffice it to say that I believe we are well on our way to becoming a market-leading, best-in-class healthcare information technology company, one that all of our associates and shareholders can be proud of.

I will now turn the call over to our CFO, Steve Murdock, for a review of our Q4 and year-end financial information. Steve?

Thank you, Bob. I'd like to highlight some of the more significant aspects of our financial results for the fourth quarter and year ended January 31, 2012.

As we have discussed on previous earnings calls, we expected revenues to be slightly below or flat as compared to the prior year. Revenues for the fourth quarter were $4.518 million, the highest of any quarter this year, but 8% below prior-year fourth quarter.

As Bob noted, revenue for this fiscal year was $17.1 million, 3% below revenue for the prior fiscal year. The decrease in revenue is primarily a result of decreases in proprietary software, hardware, and third-party software sales as we continue to shift from a standard perpetual license model to a software as a service model.

These increases were offset by increases in maintenance and support revenue of approximately $1 million, and 17% increase in software as a service revenue over the prior year. Total revenue from our GE Healthcare relationship decreased 12% to $5.2 million from the prior year. Revenues from our patient financial services solution, formerly known as Interpoint Partners, was $287,000 for the fourth quarter and year to date, as that acquisition was completed on December 7, 2011.

Total cost of sales for the fourth quarter was $2.2 million, a 36% decrease over the prior-year fourth quarter, and on a year-to-date basis cost of sales was down 21% to $8.9 million from the prior fiscal year, which resulted in a 30% increase in gross margin for the year. Declining cost of sales over the prior year is a result of an impairment charge for capitalized software, which was taken in the prior year, as well as significant staff reduction in professional services, client support that took place in the second quarter of this fiscal year as we continue to rightsize the organization.

Selling, general, and administrative expenses for the fourth quarter were $1.835 million, which is comparable to the prior-year fourth quarter. For the fiscal year ended January 31, 2012, selling, general, and administrative expenses were $6.577 million for a 2.7% increase over the prior fiscal year.

However, the fourth quarter included approximately $370,000 in one-time costs associated with the on-boarding of new associates and a transactional cost related to the Interpoint Partners acquisition. On a year-to-date basis, there were one-time costs of approximately $739,000 associated with the Interpoint Partners acquisition, on-boarding of new associates, and severances paid to former associates.

Research and development expense for the fourth quarter was $345,000, a 7% increase over the fourth quarter of the prior year, and on a year-to-date basis was $1.409 million, down 19% from the prior year. In examining research and development costs, it's important to compare R&D expense along with R&D capitalized. Total R&D costs, including capitalized costs for this fiscal year, was $4.009 million, a 10% decrease over the prior fiscal year.

As Bob noted, we believe an important metric for future revenue predictability is our backlog. We've been very successful this year in renewing client contracts and, in many cases, extending the term of those contacts. This is reflected in our increase in our backlog. As of January 31, 2012, backlog was $27.4 million compared to a backlog at January 31, 2011, of $17.6 million, an increase of $9.8 million or 56% over the prior year. Of the $27.4 million in backlog, $5.9 million is related to professional services. $10.5 million is related to maintenance and support, and $10.5 million is related to staff contacts. We expect to recognize approximately $7 million of the maintenance backlog in the next fiscal year.

On a year-to-date basis, the Company achieved net earnings of $13,000, which is approximately a $3 million improvement over the prior year. In our earnings release, we've included a table reconciling our net earnings to the non-GAAP prep financial measure of adjusted EBITDA. We define adjusted EBITDA as net earnings plus interest expense, tax expense, depreciation, amortization of tangible and intangible assets, and stock-based compensation expense.

Given the relatively large amount of non-cash charges included in our financial results, we believe that adjusted EBITDA is a more meaningful measure in understanding our underlying cash-based earnings. But in fiscal year ended January 31, 2012, adjusted EBITDA was $3.825 million, approximately a $1 million improvement over the prior year. We will continue to provide this non-GAAP financial measure in future earnings releases. Cash balances at the end of the current fiscal year were approximately $2.2 million, with no drawdowns in our $3 million line of credit.

We continue to see improvement in cash as we generate cash from operations, and we continue our focus on cash collections. We believe we have the appropriate capital resources available to operate our business going forward.

That concludes our review of the financial results for the quarter and year ended January 31, 2012. Now I will return the call back over to Landon Barretto, who will open the question-and-answer period.

Thanks, Steve. Jackie, please begin the question-and-answer period.

(Operator instructions). thank you. Our first question is coming from Bill Bunn of Fort Washington Investment Advisors.

Good morning. Thanks for having the call. I've got a backlog-related question. I know that we were just given the breakdown -- $5.9 million for professional services and the rest between maintenance and staff, but could you go into a little bit more detail? How much of that, if any, represents backlog where you've already been paid but you haven't recognized the revenues? Is there any of that in there?

It's very little prepayment. We have one maintenance customer which does generally prepay a year in advance, but -- I mean, a couple of other customers we bill on an annual basis, but most of it is not in the current revenue.

So when you establish something as a backlog number, what degree of confidence do you need to have before you actually classify it as such?

It's really a function of having a signed contract with the customer. We have very few significant collections issues, historically. We pull it into revenue on a monthly basis, as appropriate.

And in the revenue section, system sales, you mentioned that you're certainly going to underemphasize that, but is that a thing of the past? And to what degree can you control that? Is that just a function of who your partners are and how they want to handle it, or do you guide people towards something?

I'm sorry. Could you ask the question again? I was just looking up a number for you.

That's all right. System sales 2011 was much reduced from 2010. I think you indicated in the call that that's to be deemphasized, because you'd rather have the referring revenue model. To what degree can you control that line? Is that something that you dictate, or does that -- do your partners dictate that? Do the customers dictate that?

I'd like to be able to dictate it, but I can't. It's really a function of the client making the decision of which model they're most comfortable with, staying on a maintenance agreement or moving to SaaS, or in the case of new customers, coming on as a SaaS agreement or the more traditional perpetual license purchase model.

Now what we have seen in the market this year is a relatively significant shift, both in current customers and in new sales prospects, of leaning toward the software as a service model. We think ultimately, over time, it lowers the net cost of ownership for our current clients and sales prospects. So we think it's a pretty attractive model going forward in terms of the receptiveness of the sales prospects and clients.

Could you go into more detail about the acquisition? Was the fit there? What kind of synergies were you looking for? To what degree did that acquisition actually affect this year's revenue and cash flow, and how do you see the next 12 months being impacted by that acquisition?

The revenue impact was slightly under $300,000 for the quarter, as it was closed mid-December, and it's the only -- we only really realized 7 weeks' worth of revenue from it. The synergy question and why this fits into what we're doing is really very important.

If you remember, one of our strategic points for last year was to gain a deeper knowledge of our client base and become more market-facing. And as part of that process of engaging at an executive level broadly across our clients and, frankly, even as we expand our sales prospecting, one of the things that became clear was -- is that the economic buyer of the legacy Streamlined solutions, in many cases, is the Chief Financial Officer or the VP of Revenue Cycle. And if you sit with those executives as this team did, one of the questions that we would probe them about is where are there gaps, what could we do better.

One of the things that was quite clear to us is enduring the period after a bill is dropped and they are going through the collections process, the solutions that are available to them today do not have connectivity, for the most part, back to the EMR or back to the documents associated with that patient visit. We capture those documents as part of what we do, and we have the interfaces bidirectionally with the EMRs from all the major vendors.

So the concept was that we would -- when the product becomes integrated, have, for example, a simple documents tab, if you will -- it will be a little more sophisticated than that when we get it done -- but a document tab inside the Interpoint solution which allows collectors and financial officers to very quickly connect back to documents that relate to that particular visit by that patient. We really think it's a huge efficiency in driving the collections process. Is that helpful?

Yes, thank you. What impact do you see the -- this organic acquisition having for you going forward, and are there other things that you need to fill in with in order to enhance that operation?

We think that that segment of our business will have material growth rates as we move into 2012 and 2013. We announced a few weeks ago the first sale of that solutions set to one of our long-term Streamline customers, Albert Einstein in Philadelphia. We think the ability to cross-sell that solution to our other legacy Streamline customers is a very, very important part of our strategy as we move into 2012.

We also think there is opportunity to cross sell the electronic content management solutions of Streamline into the former clients of Interpoint, now our clients. So we think there is a significant and meaningful opportunity in cross-selling. We also find as we go into the marketplace that leading with the patient financial services solutions set, or the products we acquired in December, is really a key part of our sales process for 2012.

This is my last question, and then I'll pass the baton here. Your debt is up sharply year over year, and that's largely due to the acquisition. Companies of your size -- for companies of your size, debt can be a several-edged sword, I guess, would be my expression. What level of debt are you comfortable carrying at this point? Do you see yourself whittling this down? Is that a priority?

I wouldn't put it as a priority for 2012, to use your word, whittle down the debt. Now, I do think we're quite comfortable with the debt level or we would not have done the transaction that way. I think the terms that we received from Fifth Third were very good. I think you should also note that at some point, there's a high probability that the note that was issued to the Interpoint shareholders, because of its conversion features, will convert to equity.

Okay.

Thank you for your questions today, and thanks for taking time to join the call.

Frank Sparacino, First Analysis.

Bob, could you just remind me where you stand in terms of converting the legacy installed base, number one, to the new version? Then, two, I would assume that number is consistent with converting them to SaaS contracts. But that's my first question.

Actually, it's not consistent in terms of assuming they're going to go from maintenance to SaaS. Now, where we are is that we have had 5 legacy clients commit to moving to the 5.1 platform; we've had several other clients that are on older versions commit to moving to the 1.9 platform, which is the other platform that we are going to continue to support after July 2013.

That being said, we still have 20 plus opportunities to transition somebody from maintenance agreements to the software as a service option, and again, our account executive team, led by Mike Schiller, have been appropriately incented during 2012 to try to make that -- many of those transitions as possible. In fact, they're really a key part of our sales strategy this year as we go through the maintenance renewal process with folks.

Secondly, just following up on the one cross-sell you talked about to Albert Einstein. I was curious if you could give some more detail in terms of that sales cycle, in terms of how competitive it was, etc.

First, in terms of sales cycle. One thing we learned last year in general is when we are selling new solutions or advanced solutions -- it could be our HIMs workflows on the legacy business or the PFS stuff in the new solutions -- the sales cycle is generally much shorter.

It can be as short as three months, as it was in the case of Albert Einstein. I think that's an outlier. Legitimately, they should be in the 6 to 9 month cycle for those kinds of opportunities, as opposed to a net new customer, which can be 9 to 18 month sales cycle. So we think the cross-selling opportunity this year, across both client sets, is significant for us.

And then, Bob, given -- with the existing customer, was there a competitive solution you guys were banked off against in that situation, or maybe you could just talk about that.

Let's talk about the competitive market in specific, and I'll come back to Albert Einstein. The competitive market on that side -- you have the usual cast of characters that you expect to be there, MediFinance, MedAssets, Kindware. That pool.

In the particular case of Albert Einstein, they were considering other solutions. We were able, frankly, because of our role there as a trusted vendor, to essentially short circuit much of that sales cycle, and we've seen that in other current existing clients where we are talking about this -- the patient financial services solution set -- that there is an ability because we are in this position as a trusted vendor.

I mean, one of the really significant drivers that we see in the marketplace today is that the CIOs and CFOs -- they tell us not only are they concerned about their cash flow and the economics, but they want to reduce the number of vendors they have. You've been around healthcare long enough, Frank, to know that there is never going to be a single vendor solution.

On the other hand, you can't sit there and run a billion-dollar enterprise supporting 250 applications from 155 vendors. That's lunatic. The CIOs are telling us that, and we've -- many of our streamlined customers, the clients, have been clients for 10 years or more. We are fully integrated into their operations. So to the extent that we can go back to them with solutions that help them not only improve their operational financial performance, which is our overall goal, but also help them reduce the number of vendor agreements they have -- and very, very important, and we think, again, a key part of our strategy is we present to our current clients.

Great. Thank you, Bob.

You're welcome; thanks for being on the call.

Sam Rebotsky, SER Asset Management.

Good morning, Bob. I think it's a good accomplishment for the year. You have changed the Company around dramatically. The pipeline went from $25 million to $35 million. Of the $25 million last year, how much did you close into sales?

Let's talk about that. The pipeline -- let's talk about pipeline versus -- we're talking about pipeline now, not backlog, just to confirm we're on the same --

Right.

Okay. So let's talk about pipeline. When we came in here last February, we essentially reset the pipeline to zero. Our view was, by the end of the first quarter we had $4 million or $5 million in opportunities that we thought were legitimate.

As we moved through the course of the year, it started growing at the rate of about $6 million in Q2, $6 million in Q3, and then the big jump in Q4. That being said, across those opportunities during 2011, we did $7.2 million in new sales bookings for the year in that pipeline, which was significantly in excess of what we had originally forecast, to be honest.

I'm not sure there's a strong data point to take away from that at this point, because we've only been through this process a year and we had such a material jump in the fourth quarter. But I do think, as we go forward, we'll get more refinements of sales pipeline reporting as we move into 2012 and 2013.

So this $35 million that you currently have, assuming both of them are new, it takes as much as 18 months to close, assuming you do close a transaction.

If they are net new customers. Now, remember, in the sales pipeline we include not just net new customers, but identified opportunities to sell solutions into our current clients.

Did you break down the new versus current in the $35 million?

I can. I don't have it off the top of my head, but I can.

Now, as far as the Interpoint, you say that cost you about $400,000 in the current quarter. What are your expectations? Is that contributing accretive now going forward?

It will -- I mean, through the first two quarters of the year we did not expect it to be accretive. As we move through the end of the year, we expect it to be accretive on a cash flow basis and a slight drag on earnings for 2012.

Are you comfortable the way everything is going with the Interpoint? It's meeting what you -- your expectations? And would you be ready to look at other acquisitions at this point, or when would you be ready?

Let's talk about Interpoint first. If I had to grade us today on where we sit on the integration, I would put it in exceeding our expectations, frankly. We had benefited, because there was a significant lag last fall from when we signed a letter of intent and we actually closed the transaction, that our implementation and technology teams, led by Gary Winzenread, were able to invest a significant amount of time in the planning process so that when we hit the go switch on December 7, things were in place to start moving it along.

Now has it been perfect? No. But I think we're well down the path, and we're quite comfortable where we are. From a sales and marketing standpoint, we are fully integrated at this point. The actual transfer of the technology from their former datacenters into ours is in process now. It's in the timeframe that which we expected it to happen, so we are quite pleased with the status of where we are on the integration of that asset into this organization.

On the question of other opportunities, when it's appropriate and situations arise that are economically appropriate and fit with the strategic plan that we have, we'll certainly consider them.

You projected $0.07 to $0.09 and $0.09 to $0.11 in sales increases, et cetera. Do you expect these profitability and sales to be flat or lumpy? How do you look at this on a quarter-to-quarter basis going forward?

I think on the -- there is some risk in our -- of some lumpiness, really reflective of timing of go lives, or in completion of implementation. So you get a little bump there, because we don't recognize any of the revenue from SaaS-based contracts until the client is live. So, by default, if you have a one-month delay or a two-week delay on something, it does have some potential impact on lumpiness. But I don't really think it's that material as we move through this year.

Sounds good. Hopefully, you could keep showing the improvements you've shown so far. Good luck.

(Operator instructions) Mark Cahill, a private investor.

Good afternoon, guys. I jumped on the call late, so I missed the initial comments. Forgive me if I ask something redundant. Regarding FDI Consulting, what is their client base like? Large households, small, domestic, international?

Their clients are primarily domestic, generally large -- larger than 500 bed, multi-hospital systems for the most part. It's just their business model.

When you approach a new opportunity regarding a partnership, is exclusivity an issue, and how do you prevent partners from stepping on each other?

Well, part of it is we've not had to address the exclusivity request from anyone so far. I think part of it is making sure that the reason you select someone as a distribution partner is consistent with the relationships you had with your other distribution partners.

To give you an example, GE, because of the nature of our relationship with them, if it's a net new sales opportunity, it is only going to be an opportunity where the decision at the sales prospect is about changing out their core electronic medical records. So that's very different. So in the case of -- and again, they are only going to be very, very large institutions, because it's GE.

In the case of FTI, the decision with the FTI guys is around how to improve their revenue cycle, which is not something GE would be involved in, necessarily, directly. So we sort of carved that out for that segment. We see our partner for the revenue cycle side of what we do in the larger-sized healthcare institutions to, frankly, be FTI.

Regarding GE, Emergis, etc., do you expect much production out of them in 2012?

GE -- we don't, we really have no ability to forecast the GE net new sales. Not at all. I mean, they'll call us if there's an opportunity. That being said, they made no net new sales that benefited us in 2011. Now, we continue to work with them, as we noted in the call, on our current clients we share with them. We had something over $2 million in new sales bookings into that installed base last year, I think was, frankly, quite material given the turmoil that was going on.

As it relates to TELUS, which is formally Emergis, we continue to be -- work with them in installing facilities in the Quebec province pursuant to an agreement that was announced a couple of years ago. We've not seen any significant net new sales opportunity from this channel.

In 2011 a lot of the sales involved Epic systems. Are you going to go after non-Epic systems sales?

Well, let's talk about how those Epic systems arose. I mean, virtually -- actually, all of those Epic opportunities in 2011 were opportunities where the client had changed their core EMR from one of our distribution partners to Epic and elected to stay with us as opposed to transitioning to a another content management solutions provider.

They're -- Streamline had lost a couple of customers in 2010 where the client shifted their EMR from another vendor to Epic, and at that time Streamline did not have its integration suite for Epic EMR in place. You'll note that we made that a priority. I think we said this on the very first call in April of last year, and in fact, in April of last year we announced the beta availability of that solution and the uptick in our customer base, where we moved from none at the start of 2011 to, I think, we're currently at 9 contracts. To deploy that solution is quite material.

We will continue to see that some of our current customers shift from their current EMR vendor to Epic. On the net new sales opportunity, it's not Epic-specific or AllScripts-specific or Sterner-specific; it's driven by a whole set of other variables about why we would be in there trying to sell them something.

Okay. At the end of the year I saw that you have the subscription announcements, and I also noticed that Sharon Brightman sold a lot of stock. I never saw any of the hard numbers show up in the volume trading.

Two questions. Did you need -- was there a pressing need for cash at the time? And were management and directors also involved in reducing Brightman's stock position?

As it relates to the stock purchases by the Board and management in December, during the December period, we felt that there -- we as a group had decided we wanted to make an investment in the Company, not because cash was required, but merely we felt we wanted to continue, as we have done every quarter we were allowed to purchase stock -- because, as you know, some quarters we're not allowed for various reasons to do so -- we wanted to take an opportunity to put a stake in the ground and send a message to our shareholders that this Board of Directors and this management team was committed to the strategies that we put forth throughout 2011.

And it just happened to happen during the month of December around the fact that the shelf registration we could take down some shares on. No other reason for it, Mark, other than sending a message to you guys --

What message?

We're in. Is it relates to Ms. Brightman, we have no knowledge of her transaction other than the same Form 4 that you saw.

I saw that the -- Streamline's hosting the Summit in mid-May. Are you booked solid and have you established new offices in Atlanta?

Let's talk about the summit first. The attendance for the Summit continues to grow each week as we get closer to event. I mean, the historic pattern is that as you get within the first month before the event, registrations pick up.

That being said, we are pleased with the level of registrations to date. And, frankly, we have a really good representation of long-term Streamline Health clients, and also from the new clients that came to us through the Interpoint acquisition. We are fully sold out in all of our sponsor packages, which is a huge commitment from our technology partners and a significant increase in contribution from them compared to the Summit in March or February of 2011. We have a really stellar lineup of clients, associates, and external speakers, and expect it to be a great event.

Excellent.

As to the question about Atlanta, the Interpoint company was headquartered in Atlanta, and we do maintain that office as part of that transaction.

Last question. Is the Interpoint product fully integrated now? Did Gary and his team work overtime?

Gary and his team are always working overtime. There is no other option here.

I think I said this earlier in answering one of the questions I think the guy from Fort Washington that the integration, from a technology standpoint, is in process. We're on a timetable to complete it. We're performing well against that timetable. The non-technology pieces of that integration have been completed to customers and we have a plan. We're sticking to the plan, and over the course of next year the products will become integrated.

Great teamwork this year. Congratulations.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing remarks.

Thank you. My thanks to everyone for participating in today's call. In the past four quarters we have taken demonstrable steps in implementing our strategic plan. We believe we are making significant process. We are focused on delivering results for our clients and our shareholders.

As each day passes, we make progress towards our goal of becoming a best-in-class healthcare information technology company. We have a lot to look forward to, as do our shareholders. We will speak with you again at the conclusion of the current quarter. Have a good day, and thank you for taking time to join us today.

Thank you for choosing VCall conference. You may disconnect your lines at this time. Thank you all for your participation.