Streamline Health Solutions Inc (STRM) 2014 Q1 法說會逐字稿

(Operator Instructions) Matt Hewitt, Craig-Hewitt (sic).

Good afternoon, gentlemen. This is actually Dillon on for Matt. (multiple speakers). hey, guys. So I'm going to start off with a couple more macro-oriented questions. First off, last time we spoke about a month ago, you had noted that the healthcare IT spending environment -- appetite for spending was improving. Is that still the same? Has it gotten any better, worse, kind of the same status quo since then?

I would call it status quo. I mean it's only been a month. We do still see fairly robust activity inside the sales pipeline, which we think is a good indicator of that metric for us.

Okay. And then a question on a specific opportunity in general. We've been getting a lot of news headlines around the VA patient scheduling replacement. Given your acquisition of Unibased opportune, are you guys involved in that process? Is there an RFP that's been submitted or in the works? Can you comment at all on that?

Yes, I can. There is forthcoming an RFP from the Veterans Administration. It's expected sometime in the next 30 to 60 days. We will participate in that process. As you know, we have a live VA site using our scheduling asset today.

Okay. And would you care to quantify that opportunity or is it not at that stage yet?

You know, I'd rather not at this point. If -- it's 171 hospitals or 150 or 171 hospitals, something like that. It's a very large opportunity. It's very complex. It's fraught with political nonsense that happens in DC. If you pick up the newspaper, or read USA Today online or the Wall Street Journal, virtually every day there's some debate regarding the poor care our veterans have received in those hospitals. So it's a very politicized process.

Okay, okay. And then just drilling down on streamline in particular, last call you disclose that it was three go-lives in Q1 and two in Q2, have you guys had anymore since that into Q2 or too early?

We've had one more since a month ago.

One more, Q2. Okay. And then --

And just to clarify Dillon, let me clarify something there. When these go-lives happen, there's a lag of 30 days to 60 days before there's revenue recognition on our side, so just so you understand the lag time.

Okay. And then lastly for me, maintenance and support, I know that's kind of a lumpy business, pretty strong, actually the strongest -- I've seen it over the past couple of years. Was there any big one-time things in nature there or any orders got pulled from Q2 or pushed out, I guess, from Q4?

In the maintenance revenue line?

Yes.

Yes, no, that's -- they are -- nothing unusual in that line reflects the addition of the Unibased asset in the quarter and that's the only thing that's reflected in that number.

Okay, thanks for the color.

Frank Sparacino, First Analysis.

Maybe first on the bookings, could you just talk about when you look at the SaaS line with the $1.2 million, what comprised that, what products?

It was analytics, Frank.

On the cash flow side of things, given the start of the year, what would you anticipate for the full year in terms of cash flow from operations?

Frank, this is Nick. I would expect that it's certainly positive and more positive than it was last year. Given the distraction with the audit, we had a rough start in managing our own revenue cycle, but I have every expectation that it will return to positive cash generation during the year and be more positive than it was last year.

And then lastly, just on the acquisition front, any update on CentraMed?

No change from when we spoke on the call a month or so ago. The -- certain closing conditions have not been met. When and if those conditions are met, the transaction will close. If they are not met, we are obligated under security rules to release a press release noting that those closing additions were not met.

Okay, thanks, I will drop back in the queue.

Bruce Jackson, Lake Street Capital.

Hi, so one follow-up question on CentraMed. Do you think it can still close this quarter or would it be maybe moved into the next quarter?

We are -- unlikely this quarter. We are a couple of weeks away from the end of the quarter and unlikely this quarter.

Okay, and then with Unibased, you said that you had to take a little bit of a haircut. What was the actual revenue contribution of Unibased in fiscal Q1?

Let me talk about the haircut for a minute while Nick gets the actual contribution from Unibased. I mean the impact of 50% haircut on the deferred revenue was approximately a reduction in revenue for the quarter of about $340,000. And that will -- from our original plans internally. So it's a fairly material cut.

It's $385,000 was their total contribution to revenue in the quarter.

Okay, great. And then one last question on [Calabra] revenue. I think it was -- you were expecting it to be backend-loaded for this year. Is that still the case?

We expected license revenue to be backend-loaded this year. Not specific -- I don't think we gave any guidance as to specific solutions, but we do continue to see the license opportunities percolate through the sales pipeline. And they will be -- given the fact that we are where we are in the year, backend-loaded.

Okay, great. Thank you very much.

Jack Wallace, Sidoti.

Just thinking about the recent rebranding of the LookingGlass platform, the full set of software as a whole, how much early success have you had going ahead and up-selling existing customers with the full suite of product and I guess when would we see down the road customers taking the full package?

Let's -- that's actually a good question, so let me walk you through a couple of examples. So over the last 3 1/2 years, we've had some clients that have continued to make additional purchases of additional solutions as we brought them on. We have one client today that actually has pieces of all four of the key solution areas in their health system.

Part of our plan has been in terms of rationalizing our acquisition strategy in our platform strategy has been our ability to cross sell those solutions across the client base. And there's been a significant amount of that over the last couple of years. We are approaching a level of -- close to 20% of our clients today have solutions for more than one solution stack.

And as -- so as we move through that sales process over the next couple of years, we expect to see more uplift inside the client base. I've said before that I continue to think that our sales organization ought to deliver something in the vicinity of 70% of net new sales should come from our current accounts as opposed to net new accounts. We performed at about a 60%/40% level last year, 50%/50% the prior year. So the metrics are starting to get in line where I'd like them to be.

Now the concept of someone actually buying the entire platform as an initial purchase, frankly, that's unlikely. Many of our net new clients are going to take off a relatively smaller chunk of our solution set on day one as they get to know us. But the same strategy then plays out.

Once they are a current client, we work them into the sales process for the other solutions over time. And -- so that's our model, Jack. I don't think there should be any expectation that there is a buyer that is going to take 100% of the platform on an initial purchase. Just statistically unlikely.

Thanks, that's some good color, Bob. And then maybe you can give me a better idea for the expected success for converting the pipeline for the rest of the year. You mentioned it would be backend-loaded and I'm just wondering what pieces of the solution circle, if you will, are expected to be converting.

So if you look at the sales pipeline conversion, from opportunity to sale, over the course of the year, we're just talking to Jack. Or Bruce, excuse me. We were talking Bruce, we were talking about -- excuse me, I've got a little bit of a sinus infection so --. We were talking to Bruce, we made the point that the solutions get moved through the pipeline in orderly fashion that were backend-loaded on some license sales that we forecast early in the year. On a prior call, we noted that somewhere 10% to 15% of our revenue this year would be license sales revenue. We expect that revenue to hit as we move through quarters three and four.

As we look at the sales pipeline conversion numbers, it will move the mix of the business this year -- the raw pipeline today stands at about 40% in the financial management sector, 25% in the HIM coding sector, 20% in scheduling, and the balance in patient care. And as you know, the patient care solution is the solution -- primarily the solution we acquired from Montefiore last fall.

When we made that acquisition in - the call around that acquisition, we noted that we didn't expect to have a sale until Q3 of this year. We just discussed today in the prepared remarks that we had a proof of concept's purchase order on that solution in the second quarter. So, we think the progress is pretty good.

Okay, thanks. And then lastly, are there any changes to the guidance of call it $34 million -- I think it was $37 million for the rest of the year or -- excuse me, for the entire year?

No change to the guidance.

Okay, thank you.

James Terwilliger, Newport Coast Securities.

Very quickly, I'm new to the story but I wondered, Bob -- this is probably old news for a lot of people on this call and I apologize, but I wonder if you could provide some color and visibility into some of the expense lines? The two expense lines I would like you to discuss at a high level would be the increase in selling SG&A expenses and also the increase in R&D.

Are there any one-time items maybe from the audit that are in these expense lines and how should I trend those lines going forward is I start to do some modeling?

So, there are one-time items -- this is Nick Meeks. There are some one-time items in the SG&A section and the easiest way to see them is by the adjusted EBITDA reconciliation. We will give you the breakdown.

When you think about R&D, there are two big factors there. Since the comparable period of 2013, we made both the CLG position and the Unibased acquisition. We've also limited capitalized software to the legacy business -- the legacy streamline business, and as such, as our R&D department has spread over a much broader solution portfolio, we're capitalizing less. So I'm going to say, in round numbers, we capitalized $260,000 less in this quarter than we did in the same quarter in 2013.

Okay, excellent. And just one more question real quick. On the sales and marketing side, Bob, how is that chanting? You've done some acquisitions. Have you been able to crosstrain some of the acquired salesforce with your different products? Are you looking to hire salespeople? I mean just at a high level, talk to me a little bit about maybe the momentum of the sales and marketing department with a number of initiatives that you have going on within the Company.

Sure, so couple of things. As we noted again in the prepared remarks, we had a change in leadership at the start of the year. We did promote from within which we -- into the sales leader role which we think is very important. We've added somewhat significantly to the sales team over the ensuing sort of five or six -- seven months of it -- six months of this fiscal year. All of our sales assets are crosstrained on the selling process. We don't necessarily have a specialist in any one area.

We think that model plays out well when you think about the fact that they have a significant number of current accounts as well as new business responsibilities, but a significant number of current accounts that they are responsible for cross-selling. And as I noted in one of my earlier comments, we've -- about 20% of our client base has multiple solutions from us today.

So there's still plenty of positive runway in front of us there for the sales organization and again, as I said earlier, I believe that we need to get our cross-selling percentage of sales bookings into this 70% range this year.

Okay, I will jump back in queue. Thanks a lot, guys, for taking my questions. Thank you.

(Operator Instructions) Frank Sparacino, First Analysis.

Just want to confirm in the earlier comments around bookings expectation for the year, I think you stated you believe we would see growth relative to last year.

Correct.

And on that front, Bob, can you just talk about on the HIM coding side of the business, with the discussions have been like recently as it relates to CAC or CDI and just what's going on in the marketplace?

Yes, you know, it's interesting. The delay notification -- and I think I probably said this on the call a month or so ago, but the delay notification for vendors like ourselves is -- has been a net positive. Our pipeline continues to grow in total dollar value. The number of opportunities that are related to either -- to some segment of the HIM coding CDI portfolio are relatively significant. They tend to be -- because of the nature of that, tend to be very large opportunities, so they move a little slower through the pipeline, but they are very, very, very meaningful when they're closed.

So it's --. The activity levels continue to be high. If you go back to Q4, in Q4, we had the first sale of AccessAnyWare and computer-assisted coding and CDI in the same sale and sale to Cymetrix. That model, I think, going forward for us is sort of interesting. To be able to leverage the value of the unstructured data that's in -- that's captured through the solution firmly known as AccessAnyWare is really important to many of the clients we're speaking to -- or sales prospects we're speaking to the marketplace.

(Operator Instructions) And at this time, I'm showing no further questions in queue.

All right, well, if you will give it back to me, I will conclude today's call. Again, we thank you very much for your interest and support of Streamline Health. If you have any additional questions or need more information, please feel free to contact me directly at Randy.Salisbury@StreamlineHealth.net. And as Bob mentioned, so did Nick, we look forward to speaking with you again in early September when we will report our second-quarter 2014 earnings. Good day.

And thank you for joining us today, ladies and gentlemen. We certainly appreciate everyone's participation today. Today's program has concluded. You may disconnect at any time. Once again, thank you for joining us.