Streamline Health Solutions Inc (STRM) 2012 Q1 法說會逐字稿

Greetings and welcome to Streamline Health Solutions first quarter fiscal year 2012 earnings call. At this time, all participants are in a listen-only mode. A 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, Landon Barretto. Thank you Mr. Barretto. You may begin.

Thank you Claudia. Thank all of you for joining us to review the financial results of Streamline Health Solutions for the first quarter of fiscal year 2012 which ended April 30, 2012. As the conference call operator indicated my name is Landon Barretto with Barretto Pacific Corporation; we're the investor relations firm that represents Streamline Health. With us on the call representing the Company today are Bob Watson, the President and Chief Executive Officer; Steve Murdock, Senior Vice President and Chief Financial Officer; and Gary Winzenread, Senior Vice President and Chief Operating 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 from the Company's website at www.streamlinehealth.net or numerous financial websites.

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 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 the 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 and healthcare IT 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 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 Bob Watson, President and Chief Executive Officer of Streamline Health Solutions. Bob?

Thank you, Landon and good morning to all of you participating on today's call. Thank you for your time today and for your continued interest and support of our Company. We are very pleased with the financial performance for the quarter and, as noted in our press release earlier this morning, our first-quarter performance was very strong from many vantage points. Steve Murdock, our Chief Financial Officer, will discuss some of the more pertinent financial performance numbers with you in a few minutes. However, at this point in our presentation, I wanted to take the opportunity to give you my thoughts on some of our recent accomplishments. I believe it is clear that we are continuing to make meaningful progress against our strategic initiatives and to a great extent are accelerating at a pace that exceeds our own projections. The forward momentum on the process of tightening our focus as a results-driven enterprise is well underway.

During the first quarter we made significant gains on each of our four strategic goals for this fiscal year. First, we are well into the process of investing in our human capital, but some hiring has lagged. Our operational and sales teams performed exceptionally well in the quarter despite being significantly understaffed. Our plan is to build for growth so that we may provide world class healthcare information technology solutions to our growing list of clients. That being said, we are also seeing increased cross sell opportunities within our current client base as well as net new client acquisition opportunities. Therefore we have increased the headcount in our sales team during and subsequent to the end of the first quarter. Additionally we have several internal technical and administrative projects in process that, when completed, will position us to better address the growth we see being generated from the sales organization.

Second, we have expanded our sales footprint to capture a greater share of net new sales opportunities. Our relationship with FTI Consulting announced in January of this year, while in its early stages, is adding significantly to our sales pipeline opportunities. Since the inception of that agreement we have closed three transactions with their participation. We will, however, continue to pursue other distribution partnerships as I stated in our last call. We continue to believe that supplementing our direct sales organization with distribution partners is a viable strategy. During the quarter our sales and account management teams continued to exhibit their ability to not only add to the sales pipeline, but to close solution sales or renewal agreements in an orderly and timely manner.

Third, the process of enhancing the client experience is also well underway. Our 2012 NEXT Summit, or annual users group, was held in May. The participation among our clients and partners exceeded our original forecast for attendance and will, we believe, lead to greater cross-selling opportunities for our broadening suite of solutions. We will continue to invest significant time and resources in understanding the needs and requirements of our client base as we believe that knowledge provides a clear road map for our selling efforts, the development of new solutions, and our analysis of inorganic growth opportunities. Fourth, as I just mentioned, we will strategically introduce new and enhanced solutions to the market. This will be accomplished by bolstering our development efforts to address the solution development opportunities we see within our current client base and the broader market in general. The goal of these new and enhanced solutions is always to improve the financial and operating performance of our clients.

To summarize, we believe the results for the first quarter indicate we are making significant progress and that momentum is building. However, as I have done in all of our prior earnings calls, I want to remind everyone that this is a process. Our execution plan is aggressive yet measured, we are making and will continue to make investments required to deliver the results that we have promised to all of our stakeholders, our clients, our associates, and our shareholders. As a management team we are very deliberate and methodical in executing on our strategic and tactical plans. It is our plan to recruit only the best and brightest talent as part of the Streamline Health team and we remain very disciplined in these efforts. The financial impact of adding this human capital talent to our teams in order to address the needs of client and limitations and continuing sales opportunities will be felt in the later quarters of this year. Now to review the specific financial performance of the quarter I'd like to turn the call over to Steve Murdock. At the conclusion of Steve's remarks we will open the call for your questions. Steve?

Thank you Bob. I would like to review some of the more significant aspects of the financial results for the quarter ended April 30, 2012. As Bob stated, our first-quarter performance was solid in many areas. Revenue for the quarter was $5.4 million, representing a 32% increase over the first quarter of last year. This included $490,000 of revenue related to the acquired Interpoint operations. On a same-store basis, revenue increased 20% quarter-over-quarter, comprised of a 13% increase in maintenance revenue and a 22% increase in SaaS revenue. While operating expenses increased approximately 9% over the prior year, our operating profit turned positive at $672,000 compared to an operating loss in the prior-year period of $254,000.

Net income for the first quarter was $492,000 or $0.05 per share compared to a net loss in the first quarter of last year of $281,000 or negative $0.03 per share. Clearly our EPS exceeded our expectations for a couple of reasons. First, revenue was higher than projected and our pipeline continues to look solid. Secondly, our anticipated increase in payroll and other related areas did not materialize per our plan as we did not ramp up our headcount with additional sales and implementation resources as quickly as we had planned. As Bob said, we expect the incremental cost we anticipated in Q1 will begin to hit the financials this quarter and in the second half of the year.

New bookings for the first quarter totaled $4.395 million and contract renewals were $3.106 million. This resulted in a $4.081 million increase in our backlog from the end of the fourth quarter of last year for a total backlog to date of $31.447 million. Approximately $26 million or 83% of this backlog is related to maintenance support and SaaS contracts. We continue to see a favorable increase in cash from operations and cash collections. Our cash balances at the end of the quarter were $3.1 million, up from $2.2 million at the end of last quarter. Additionally, we currently have no outstanding debt under our $3 million line of credit facility.

One final note, in our earnings release, we have included a table reconciling our net loss to the non-GAAP financial measure of adjusted EBITDA. We define adjusted EBITDA as net earnings or loss plus interest expense, tax expense, depreciation and amortization expense of tangible and intangible assets, and stock compensation expense. Given the relatively large amount of non-cash charges, we feel that adjusted EBITDA is a more meaningful measure in understanding our underlying cash-based earnings. For the three months ended April 30, 2012, adjusted EBITDA increased 2.7 times to $1.713 million as compared to a corresponding adjusted EBITDA of $639,000 for the prior comparable period. We will continue to provide this non-GAAP financial measure in future earnings releases. I will now turn the call back to Bob Watson. Bob?

Thanks, Steve. As always, I want to thank our entire team of associates for their hard work, results, and support of Management's strategic plan. Our progress against our strategic and tactical goals has been demonstrated by our improved financial results, the growth in our backlog, and the growth of our sales pipeline. There is much work left to do, not only with the continuing integration of our fourth-quarter acquisition, but internally as well. However, as I noted earlier today and in my prior calls, we remain firmly convinced that we will reach our goal of becoming a world class healthcare information technology company and we will do so very soon. This concludes my prepared remarks we will now open the call for your questions. In addition to Steve Murdock and myself, we will be joined for this Q&A session by Gary Winzenread, Senior VP and Chief Operating Officer. Landon?

Claudia, please begin the Q&A session. Thank you.

(Operator Instructions)

Matt Hewitt, Craig-Hallum.

Good morning gentlemen and congratulations on a very good start to the year.

Thanks, Matt.

First question, maybe you could talk a little bit about the pipeline. I believe you've provided some metrics in the past as to where you currently sit relative to your bookings.

In terms of, as we just reported the bookings, new sales bookings for the quarter were about $4.4 million contract renewals for the period just closed were $3.1 million. The total sales pipeline opportunity numbers are as you would expect during the period obviously went down a little as we realized the actual closing of some sales and obviously new opportunities being entered into the pipeline. The current pipeline sits in the high $30 million range in terms of opportunities that we have visibility on.

Okay that is great. Secondly, there was a class study that was presenter announced during the quarter that garnered some press, that talked about the amount of new business intelligence and business analytics software that was likely to be purchased over the next few years. And I'm wondering if you could talk a little bit about what that has meant so far if anything, but more importantly what that could mean for your OpportunityAnyWare product over the next few years?

The cost report suggested that something in the order of magnitude of 50% of all US hospitals would be making a purchase decision in the next three years for business analytics solutions similar to what we provide through our OpportunityAnyWare solutions. I can tell you that we do see a significant bolus of activity around that solution set inside our sales pipeline. It is playing out, the level of interest is high. And there are several reasons driving that high level of interest from the marketplace, by the way, not the least of which is the fact that virtually anyone who is active in healthcare today anticipates a significant change in the payment models in the next two to three years.

And to be in a position to analytically analyze what those outcomes of those new payment schemes might mean is important and many of the current tools available in the market are not flexible enough to do that. Second, as hospitals expand their footprint through the purchase of physicians practices the complexity of having an enterprise view are much different than they were even two or three years ago and so those are some of the factors driving that demand.

That's great, and as you look at the integration of the two software platforms or solution platforms, could you give us an update? Is that still something that you anticipate mid to late second half of this year?

The first phase of the integration will be probably late third quarter, early fourth quarter of this fiscal year. Deeper integration will be targeted for early in 2013.

Okay and then a couple of questions about your current business. One, how many customers are currently still utilizing a perpetual software license versus how many are currently on the SaaS model? And then a little bit of a follow-up, how many cross sales have you been able to do since the Interpoint acquisition?

Our current customer base right now is probably evenly split between SaaS customers and customers still on the maintenance agreement. I can give you the exact numbers but it is roughly a 50/50 split. We reported a sale to Albert Einstein in Q1; that was the first cross sell of the OpportunityAnyWare solution into an AccessAnyWare client. Einstein has been a client of Streamline for quite some time and that sales cycle was frankly less than three months from the time we purchased the asset. So we're pretty pleased with that.

Is that the type of sales cycle we should anticipate on the cross sales and how does that compare to new business?

I think the Einstein case I think is particularly unique and we're always happy to take them when the sales happen sooner than we forecast them. But our sense for the OpportunityAnyWare solution is that it is a six- to nine-month sales cycle; it might be a little shorter with AccessAnyWare clients on the cross sell, but just from our own forecasting standpoint that's how were looking at it. AccessAnyWare is a much longer sales cycle. It would be a quick sale for AccessAnyWare if it was a nine-month selling cycle; the average is probably 12 to 14 months.

All right and then one last for me and then I'll hop back into the queue, but headcount today versus last quarter and a year ago and then I guess if you could break out the sales portion of that, that would be helpful.

Sure, last year at this time -- we were 91 associates at this time last year. At the end of first quarter this year, we were at about 75 associates and again we are lagging, as we noted earlier, we're lagging a little bit on our hiring since the end of the quarter, we've added I think 5 new associates to the team. On the sales side, last year at this time there were three resources committed to the sales organization. Today that number is seven.

Great, thank you and congratulations again on the first quarter.

You're welcome.

Darrell Patrick, SJ Wolfe Investments.

The P&L shows a tenfold increase in interest expense. Of the term loan and convertible note, how much of that was put on in the last year?

The term loan and the convertible note both resulted from the acquisition of Interpoint Partners in December 8, 2011.

Okay, and what kind of rates are you paying on those back.

The term loan from Fifth Third is a 12% interest rate; the interest rate on the convertible note is 8%.

Okay and what is the conversion factor?

The conversion price is $2 a share.

Okay and was that a private placement?

No that was part of -- both those -- the debt from Fifth Third and the convertible note relate to the purchase of Interpoint Partners on December 8 of last year.

Okay, fine. Thank you very much.

You're welcome.

(Operator Instructions)

Joe Munda, Sidoti & Company.

Real quick, pretty much following up on the first caller, the software as a signal is the backlog here increased significantly. How much of that you guys think you will work through in the next nine months?

How much work through the next nine months?

Yes.

The next nine months of the backlog we will, $12 million to $14 million of it, in that range. Some of it depends on the realization of the professional services side.

Okay, so you are saying of the $26 million in maintenance in professional -- I'm sorry, wait a minute, hold on. As far as the $26 million in maintenance and support as well as SaaS, you think combined you're going to work through $14 million?

It's going to be -- at the outside it is $14 million. It is probably in the $12 million to $13 million range. If you think about it, even if you look at the first quarter at the end of the fiscal year our backlog was $27 million, our backlog now sits at $31 million. Revenues for the quarter were $5.5 million or $5.4 million. The bulk of the revenue, not all of it, but the bulk of it came out of backlog. So the backlog went down by some significant portion of that $5.4 million and then went back up to $31 million which reflects the $4.4 million in bookings for the period and the $3.1 million in renewals and extensions.

Okay.

You will see it go up and down on that sort of order of magnitude, so as the sales team produces results we add to the backlog. Each quarter we burn some of it down.

Yes, and as far as your current revenue on the SaaS side it went up $200,000 this quarter. Is that a good number to work off of going forward or are you expecting that recurring revenue number in SaaS to increase?

We expect the SaaS portion of our revenue to continue to increase.

Okay. And then my final question would be, Bob, if Supreme Court struck down government healthcare, what effect if any would it have on you guys?

Not a thing.

Okay.

Not a factor.

Okay, and just one final question, sorry about that.

You get two final questions.

Thanks. In regards to your relationship with FTI can you walk us through what exactly, how it works and what they are doing? Is it to help you guys facilitate some new sales?

Sure, the arrangement with FTI which was announced in January is a joint marketing agreement not dissimilar from our existing arrangement with General Electric where we co-market into the client base. They are only co-marketing on the OpportunityAnyWare platform. The FTI as you may or may not know is a New York Stock Exchange company, $1.5 billion in revenue and about a third -- (multiple speakers)

I've seen the board at Yankee Stadium.

There you go. I've seen it myself. About a third of the revenue comes from healthcare. Most of that healthcare revenue, or a significant portion of the healthcare revenue, is revenue cycle consulting. The concept is that we will -- in that new customer sell our solution to the client FTI will sell a consulting engagement and the FTI personnel will use our solution to perform their services.

Okay so that $30 million opportunity that you think you guys see that includes the relationship with FTI?

It does.

Okay. That is all I had for now, thank you.

Thanks, Joe.

(Operator Instructions)

Frank Sparacino, First Analysis Securities.

Two questions. First is on the hiring, was it strictly an issue in terms of timing or are there maybe some constraints in terms of resources in the marketplace and then just a comment overall in the labor market there?

Honestly, I think it was a couple of factors. One was the fact that our teams were very, very busy during the quarter and frankly, we just didn't have the bandwidth to devote the energy to the hiring process. Second, and I alluded to this in my earlier remarks, is we've -- since this team has been here we've tried to be obsessively rigid in our on-boarding and hiring practices. We think there is a certain profile of an individual both from their technical skills level and from their ability to engage in the culture that we are building here. Because we are focused on those items, the process is probably a little bit more elongated than some of the folks around here would like, but I think at the end of the day it allows us to get the experienced meaningful talent that we've been able to get to join the team. So for example, in the sales organization this past quarter, we added three individuals all with strong backgrounds in healthcare IT and strong backgrounds in revenue cycle solution selling. So, we think those are critical additions to the team and reflect our commitment to really trying to hire the best talent we can find.

Great and lastly, maybe if you could comment in terms of what you are seeing from a hospital IT spend perspective in terms of overall budgets or maybe some reallocation of where they are spending money as it relates to EHR, revenue cycle, et cetera.

Yes, so, I think we all know that the result of the high-tech act in 2008, that there has been a significant amount of EMR purchases which has clearly driven the revenue growth for the EMR folks like Epic and Sonar and others. What we are seeing now is as those EMRs are deployed, there is a refocusing on other areas of challenge. So, in some cases, as it relates to our AccessAnyWare solution, some of the EMR purchases did not include an electronic content management solution and they are finding that there are gaps along their internal processes where ECM solutions such as ours could be of huge value. So it does create some -- we think there is some moderate growth in the AccessAnyWare business because of that.

On the OpportunityAnyWare side, the drivers as I mentioned earlier in the call with a question from Matt is really about the preparing for a change in the payment schemes. And secondly, to looking for solutions to address the complexity of organizations that are now not simply acute care focused and that have challenges across their entire enterprise. A good example amount of that among our client base -- we announced an agreement with Boston Medical Center at the end of the quarter. They have been eight customer of OpportunityAnyWare on the acute care side, and found that they needed a solution to help them look at their opportunities and their denials and their receivables across their physician enterprise. The combination of the two solutions from us allows them to look broadly across the entire enterprise and we think that is a significant value to the client base.

Great, thank you. Nice job.

Thanks, Frank.

Sam Rebotsky, SER Asset Management.

Phenomenal quarter.

Thank you.

Did I understand that the improvement -- did any of that relate to the lack of the hiring? Would the profits be a little lower and do we expect the impact of the hiring to impact future quarters profitability per se?

Yes, in my prepared remarks that is what I was trying to get on the table is that because the hiring lagged in the quarter, and we have to hire those bodies. The good news is, Stan, when you have a sales team that performed like they did in the first quarter and the way they did in the fourth quarter, that requires high-quality, generally expensive talent to get those clients up and running in a timely fashion which allows us to recognize the revenue. So, we will see some impact from the hiring as we go into the year. I think Steve mentioned it in his prepared remarks as well.

And does it appear that you are ahead of schedule in general for revenue and profitability based on what has happened this quarter as you've -- the additional sales you've been making?

Yes, I think that is a fair characterization, Sam.

How much longer before the Interpoint is fully integrated our are you pretty much fully integrated now?

With the exception of interfacing the individual solutions, Interpoint is fully integrated into the Streamline organization. We are nearly complete with the relocation of their data centers into ours so we are well down that path.

And you basically have said that the -- when you are selling these products, your customers are very happy that you have these extra products to sell. And are you ready to start looking at other potential acquisitions? I assume you are currently doing that.

Look, Sam, we will consider inorganic -- I said it in the prepared remarks too that we will consider inorganic growth opportunities if they address a need we see among our client base or if we see a weakness in our current solutions offering. We have -- we still have a lot of work to do. We are very pleased with the Interpoint transaction. We think the addition of the OpportunityAnyWare solution to our Company and to our AccessAnyWare solution set is really a significant driver for not only our near-term growth but our long-term growth.

Well, it is very exciting and it seems like you've done an awful lot in the short time that you've turned the Company around and hopefully you could achieve greater growth and create more acceptance of your products and in the stock market. Good luck.

Thank you, Sam.

Mark Cahill, Private Investor.

Nice quarter, congratulations.

Thanks, Mark.

A couple of quick questions. The breakeven quarterly number, used to be about ballpark $4 million a quarter, is it now about $4.25 million or $4.5 million?

About $4.5 million.

Cash seems to have performed well, do you expect that to increase over the coming year?

Yes, as I said in my prepared remarks, we really don't have anything out on our line of credit. We saw a significant increase this last quarter, a lot of that is as we've mentioned in the past, related to the timing of when we build maintenance. So, the cash increase -- we will continue to generate cash from operations. If you look at that number for the first quarter it was $1.6 million, you take out the amount of capitalized software so it is about $1.1 million -- that is actually about a $2 million turnaround of where we were at the same time last year.

Right.

So, we will see that continue. We will burn some cash as Bob mentioned related to additional hiring and things like that, but we will see that cash balance continue to go up, I think.

Right, good. Can you describe how a client gets onto your pipeline list? What qualifies them to make that list?

There are -- to make the pipeline list, you have to have been qualified which means our sales personnel have gone through a couple of steps in the process to get the qualifications. And I can go through each of those if you would like, but the fact of the matter is that they don't hit the list until it has -- the salesperson has had a conversation with Mike Schiller who is the Senior VP for Sales and together they agree based upon the qualifications that this is a likely prospect.

Would Streamline have been declared a vendor of choice in a competition to get the business or are you in the top two --?

To get on the pipeline, you are in the sales process. And the pipeline has various percentages of where they are in the sales cycle. For example, to be vendor of choice it would be at an 80% probability, because there is a probability factor involved. If you are newly onto the pipeline, you would have a 10% probability.

I see, okay.

It is ranked where you are along the continuum.

Okay. Is your current pipeline more geared through the shorter cycles single solutions set as opposed to the long-term trying to sell a whole HIM contract?

Greater than 50% of the current pipeline relates to the OpportunityAnyWare solution but it is pretty close to 50/50. So on the OpportunityAnyWare side that is generally a net new sale or cross sell, selling that solution to a AccessAnyWare client. Within the AccessAnyWare client base, we have significant activity underway, not only about cross-selling OpportunityAnyWare but also as we talked about last year, selling additional workflows, selling the upgrade to the 5.1 platform and the conversion of some of our legacy maintenance clients to software as a service client. So there is a mix of stuff in that pipeline.

In the Boston Medical press release, Boston Medical said it was extending 'Streamlines product into the acute ambulatory side. Are you guys seeing more of that? Do you think that is a new area for you guys or is it a one-off?

No. It is not a one-off. The OpportunityAnyWare solution has both the acute care which is hospital-based and an ambulatory solution. Again, we see many of our hospitals today as I noted earlier in one of the other questions, many of our hospitals acquiring physician practices. As they acquire those practices there is a significant need to have an enterprise view with a financial performance at those acquired practices and OpportunityAnyWare Clinic provides that type of solution for the CFOs.

Okay. Last question, when you convert a customer to the cloud model are you pulling the hardware that was previously installed from the customer and then using your own hardware?

We simply use our own hardware. The hardware at the client site stays -- they can repurpose it if they want. That is their issue, but the hardware support, hardware maintenance, database maintenance, all those fall to our data center team.

That's it for me, thank you.

Thanks, Mark.

(Operator Instructions)

Matt Hewitt, Craig-Hallum.

Just one follow-up for me gentlemen. As we look at, given your move towards a more recurring SaaS-based model, how should we think about the linearity of your top line, your revenues? You've gone -- I think done a nice job of talking about some of the expense ramp that we should see over the coming quarters, but how should we think about that top line? The SaaS you mentioned should continue to grow but what about the other areas of the business?

The SaaS revenue line will continue to grow. The maintenance level line will by design decline as we convert some of those clients to software as a service. So your maintenance line will go down and the revenue will reappear in software as a service. Professional services, we will see some variability in the professional services number depending on the mix of installation work we are doing. It is a revenue recognition issue. In our AccessAnyWare implementations, the implementation fees are recognized on a percentage of completion basis. In a OpportunityAnyWare deployment, the revenue associated with the implementation is recognized ratably over the life of that client.

Okay, so just back of the envelope math here, you had a very strong first quarter. Your guidance, which it sounds like you are just sticking with that initial guidance given that it was the first quarter, but how should we think about given the strong Q1, should we be thinking towards the upper end of that range or just the midpoint, just where you want to be at the moment?

You are still asking me to give guidance again, Matt. (laughter) Honestly, look, first quarter, we honestly outperformed our expectations and that being said, I am not prepared to change our guidance for the year. It will be somewhere in the range. We may see some, because of the way revenue came in in the first quarter, particular around the professional services line, you may see a slight dip in professional services as we move into the second and third quarters as we implement more OpportunityAnyWare solutions. Because the revenue from professional services for the OpportunityAnyWare platform is recognized over the three-year or five-year contract, not at the time it is done.

Okay, yes, I understand.

You see some variability because of that. But on the other hand, the positive part of that, frankly, as we go forward, we will have much more visibility, you guys will be at a much better position to accurately forecast quarter-over-quarter growth in our revenue line. And it will be reflected in the SaaS line, not in the professional services line.

Okay, that is very helpful. Thank you very much and again congratulations on a good first quarter.

You're welcome.

Scott Ferguson, Hilliard Lyons.

Can we flesh out just a little bit more of the employee thing. Now the 90-something figure you gave, is that total employees of the firm?

That was last year at this time.

Okay. Can you give me an idea of how many salesmen you had back then and how many you have now.

The sales organization last year at this time was three, it's I think it is seven today.

Seven, including the sales manager?

Yes, sir.

And is he a producing manager or is he strictly focused on trying to hire new guys and manage the ones he has?

Everybody with a Senior VP title is a producer on the sales side. I just don't count all of them is salespeople.

Okay. With the integration on the acquisition and with the partnership that you have with GE currently, are they adding meaningfully to your overall revenue growth of new sales particularly like on the SaaS model?

GE? Did you ask me about GE?

Yes, GE or who is the other one?

FTI.

Yes.

I was hoping to get through the call and I have to talk about GE. The reality is GE added very little to our bookings last year or to our pipeline. We do not see material impact either in terms of new sales or pipeline growth coming through the GE channel in 2012 and there is a whole series of reasons that entirely relate to GE's challenges around getting meaningful use for their own electronic medical record. So, we've eliminated GE from our forecasting.

FTI on the other hand, as I noted in prepared remarks, is a very significant part of our pipeline growth. We are in the early stages of that relationship. We are working very closely with them. We see that relationship as very, very important to our go-forward bookings number and because they are focused on the OpportunityAnyWare solution, all of the sales through the FTI channel will be SaaS -based.

Okay. At this point, on the OpportunityAnyWare type of product, overall percentages, what would you guess in your market overall your market share is at this point?

Market share in OpportunityAnyWare?

In that type of product.

In that type of product, de minimus. We think it is a fast-growing market. There are a number of competitors. We tend to really focus in on four or five folks as competitors, but it's -- we have 15 to 18 clients in some stage of implementation or actually up and running on that solution today. And that number will continue to grow. So, it is a relatively small number relative to total market.

Most of the sales you guys are making in that type of product, are you poaching clients from other vendors or other companies or are you actually, are they new adds to that type of platform?

I would characterize it today as being probably 60% to 70% net new add, not so much replacement. Replacements may be 30% to 40% of the sales.

Right. At some point down the road, does it get to where most of the hospitals that would be prospects for that type of product have already or are already entrenched in someone else's system and that opportunity is lost or is it --?

No. If you go back to one of the early questioners, Matt asked about the cost report which is KLAS, they really see that 50% of the hospitals in the next three years making a purchase decision around that solution set. That is a tremendous numbers of purchases.

I ask about the sales force only because I've been out on the road calling on clients for a lot of years and it just seems like to me that one guy can only do so much and can only get out there and pound on so many doors. And it just seems like to me that having guys out banging on hospital doors should be the mantra at this point and I was just asking about the overall employment at 90-something and the sales force being less than 10% is what makes me scratch my head just a little bit.

Well, remember, the 90 was last year, we are at 75 today.

So you are roughly at 10%.

We are roughly at 10% of that does not include the impact of our client services team on the sales process because they are responsible particularly within our current customer base of highlighting sales opportunities for the account management team. So, it's a little broader than that. Plus, I really think the FTI relationship is critical. I mean they have a significant sales team out there every day inside hospitals talking to CFOs and we are following right along behind them. So, our ability to scale a sales team is really about having the right distribution partner. I think, while we have FTI and they are focused on a certain subset of hospitals around the country, we think there are other opportunities to have other partnership relationships with other consulting firms that address other subsegments in the market.

At this point are you guys working on those other types of relationships?

Yes, sir.

Good deal. Listen, thanks, guys.

Thank you for joining us today.

Gentlemen there are no further questions at this time I'll now turn the floor back over to management for closing remarks.

Bob?

As always thanks for spending an hour with us today. We will be back in touch at the end of next quarter. Thank you.

Ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time and we thank you for your participation.