TruBridge Inc (TBRG) 2006 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Computer Programs and Systems Incorporated third quarter 2006 conference call.

During today's presentation, all participants will be in a listen-only mode.

Afterwards, we will conduct a question-and-answer session. [Operator Instructions]

As a reminder this conference is being recorded, Friday, October 20th, 2006.

It is now my pleasure to turn the conference over to Mr. Boyd Douglas, President and Chief Executive Officer.

Please go ahead, sir.

Thank you, Christina.

Good morning, everyone, and thank you for joining us.

During this conference call, we may make statements regarding future operating brands, expectations and performance that constitute forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

We caution you that any such forward-looking statements are only predictions and are not guarantees of future performance.

Actual results might differ materially from those projected in the forward-looking statements as a result of risk, uncertainties, and other factors including those described in our public releases and are [Inaudible] filed with the Securities and Exchange Commission.

Including but not limited to our recent annual report on the Form 10-K.

We also caution investors that the forward-looking information provided in this call represents our outlook only as of this date, and we undertake no obligation to update or advise any forward-looking statements to reflect events or developments after the date of this call.

With me this morning is our Chief Financial Officer, Steve Walker.

Steve and I have about five minutes of prepared comments and then we will take your questions.

In the third quarter we installed our Financial and Patient Accounting System at our core clinical departmental applications at eight new hospital clients.

Eight facilities implemented nursing Point of Care, and five hospitals went live with ImageLink pacs.

Add-on sales to existing clients made up 22% of total revenue.

Our revenue and net income finished at the low end of our previous guidance for the third quarter.

The primary reason for this involves two new hospital installations that we expected to install in the third quarter that actually slid to the fourth quarter.

As stated in the earnings release, in the third quarter we signed five contracts for new system implementations.

This is well below our average of 10 to 12 per quarter.

While we are obviously disappointed in our new sales performance for the quarter, we did win exactly one-half of the deals that were decided in the quarter which is only slightly below our traditional win rate.

And, of our five new contracts, three are replacements of incumbent key competitors.

At this time, we do not believe that the decreased contract activity we saw in the third quarter is indicative of a slowdown in the marketplace.

In fact, we firmly believe that the sales department changes and additions that we made in the second quarter have directly led to a 31% increase in the number of new sale prospects in our sales pipeline over the last four months.

Therefore, we are optimistic that our new customer sales will return to previous levels in the near future.

At this time we expect to install our Financial and Patient Accounting System at 10 facilities in the fourth quarter.

We anticipate eight new installations of our Core Clinical departmental modules, 11 nursing Point-of-Care implementations, and six ImageLink installs.

In outsourcing services for the third quarter, we executed eight new business office outsourcing contracts, six of which were for private pay collections and two for full Business Office outsourcing.

For the fourth quarter we are projecting 30% year-over-year growth in outsourcing revenue.

We continue to be very pleased with both the current growth and continued long-term potential for our outsourcing business and we expect this to be our fastest growing revenue segment and definitely into the future.

I will turn it over to Steve for a few comments on the financials.

Thank's Boyd.

Our DSOs were 47 days for the third quarter, up five days from the second quarter, and within our range of 45 to 60 days.

Cash provided from operations for the quarter was $3.3 million.

Free cash flow was $2.8 million for the quarter.

We defined free cash flow as net cash provided by operating activities less CapEx.

CapEx for the quarter was $0.5 million, compared with $0.6 million in '05.

Depreciation for the quarter was $457,000.

Cash collections were $27.7 million for the third quarter of 2006, and 2005.

We recognize stock compensation expense of $356,000 in the third quarter of '06, after adopting SFAS No. 123R

After applying income taxes, net income was impacted by $217,000 or $0.02 per diluted share.

For comparative purposes, excluding the impact of SFAS No. 123R from both periods, net income for the quarter ended September 30, '06 increased 1.9% to $3.6 million or $0.34 cents per diluted share, compared with $0.33 per diluted share for the third quarter of '05.

We filed our 2005 tax returns September and trued up our tax provision to the as filed tax return in the third quarter.

Our tax rate in the third quarter is reduced to 35% due to a one time GO Zone tax credit related to Hurricane Katrina as filed on our 2005 tax return.

We anticipate our effective tax rate for the fourth quarter will be 39%.

Operator, we would now like to turn the call to questions.

Thank you. [Operator Instructions] Our first question comes from the line of Richard Close of Jefferies & Company.

Please proceed with your question.

Yes, thank you.

I was curious if you could just give us a little bit more information with respect to the slippage of several deals, you know, what were the reasons for that?

And then with respect to the realignment of the sales force, and productivity there and characterized that that led to the increase in the pipeline, if you could just give us additional details.

Sure, Richard.

Actually, it was two hospitals that slipped from the third quarter to the fourth quarter, and they are currently being installed right now.

They were both brand new start-up facilities, and they were just behind on construction and did not open their doors until October, until now, and we are installing those facilities now.

As far as the sales, you know, the pipeline has increased.

Some of that certainly is due to the changes we made, or we feel like it is.

We have more people there.

So, obviously there's more prospects that we can add.

Secondly, you know, only ten hospitals made decisions this past quarter.

So that inherently leads to the pipeline growing a little bit.

Okay.

So how many -- maybe if you could give us data points with respect to salespeople you had at the beginning of the year, versus where you are today.

We are -- in sales we are at 44 today.

At the beginning of the year, I don't know if I still have that.

Do you remember that number?

I don't know how many, but we talked about it on the last call.

I don't remember what that number was.

I want to say 32 but --

So you haven't added anyone since then?

That's correct.

Okay.

And then are those people pretty much, you know -- usually it takes sometime for individuals to get productive.

Are they -- do they hit the ground running, basically because they have been with the company for so long?

I think certainly that's the case more than not is they hit the ground running because they have -- as you know we have a promote-from-within policy, so all the people that have been here a minimum of five years in a support-type role.

So for the most part, yes, they can hit the ground running.

But, of course, every individual is different.

Some of them hit the ground running faster than others.

So I think it will take a good six to nine months to realize the full effect of it, but we are certainly already seeing some benefits from it now.

Are you seeing any progress with respect to, expanding in the western U.S.?

I think you were throwing some resources towards, getting a better presence in the West.

Correct.

We are doing that we are actually moving three salespeople out there.

One is out there now, the other two are still here in Mobile, but will be moving here in the next quarter or two.

And so -- and we are seeing some effects already from having the people out west, yes.

Okay.

And then just comment maybe a little bit on competition.

Are you -- you know, McKesson, I think we have asked that question before, McKesson has talked about it coming into the area, so have some other people.

Who are you going up head-to-head?

Has that changed at all?

And maybe just commentary?

It really hasn't changed much at all.

You know, routinely we run into Meditech, HMS and Dairyland ar some of the other smaller facilities.

That really hasn't -- the landscape of that has not changed at all.

Okay.

So it's not necessarily an increased competitive atmosphere right now?

We have not seen that at all, no.

Okay.

Thank you very much.

You're welcome.

Our next question comes from the line of Sean Jackson from Avondale Partners.

Please proceed with your question.

Yes, good morning.

Hi, Sean.

You said that -- you know, you gave a metric as far the sales pipeline, 31%.

Can you just -- how do you guys define the pipeline number?

And also, can you compare that number with, say, what it was last quarter?

Well, as far as how we define it, that's what we call our prospects.

Those are the facilities that are actively starting the process for a new system.

They have issued -- typically that starts with the issuance of an RFP.

If you have an RFP out there and we responded to it, that's typically when we consider you a prospect.

That's what's grown, again, over the last four months about 31%, a lot of that, to answer your question, is back within the last quarter, that's grown 31%.

Okay.

And also, I mean, is it a rough, round number on what it grew, the number of prospects grew last quarter or, earlier in the year?

I mean 10% number a normal metric or is it 20 or can you just comment on that?

I really can't.

Okay.

And also just tell us again the reasoning for the increase in salespeople.

What specifically have you guys seen this year that has caused you to ramp-up that effort?

There really wasn't anything specific.

It's more of a gut feeling that -- like what David and I talked about at the end of last years, when we started putting the motions in place to get it all going.

It's really more natural progression of the company.

Certainly the main impetus, if you will, was the -- the desire on our part to focus on the West.

And we realized that while we were selling out West, we were spending a lot of our time on a plane flying from Mobile to get out to the West Coast and taking a day to get out there and a day to get home, and that only gave you, in any given week, three days in front of the customer.

We felt like, obviously, like selling anything else, the more time you spend in front of a prospect, then the better chance you have got of winning the deal.

Okay.

All right.

Thank you.

Okay.

Our next question comes from the line of Robert Dodd, from Morgan Keegan.

Please proceed.

Hi, guys.

You won 50% of the decisions in the quarter.

I mean, that is only down marginally as you said.

Is it any change in, you know, patent there or do you think it's just regular volatility?

Regular volatility.

No change at all.

Okay.

And then lastly -- only 10 decisions were made in the quarter.

How much of an effect do you think the various Medicare, Medicaid questions at the end of that fiscal year had on hospitals, you know, willingness to make a decision during that quarter?

That's a tough number to comment.

I certainly think that does have an effect.

I think boards, obviously, are always looking at the financial aspect of it, deciding whether they can afford a new system or not.

So, that's always a piece of it.

You know, Medicare held payment for two weeks there in September, which I am sure affected some of the hospitals.

Of course, they are back now paying.

So, that should have been a momentary blip in their cash flow.

But, it's certainly something boards always look.

It's something we are always fighting.

Okay.

And can you give us any -- on the pipeline side of the business process versus outsourcing.

Can you give us any -- any color on that pipeline?

If we are going to put a number on it, we certainly -- I would gauge the interest still as high.

It's not necessarily any higher than it was last quarter, but, certainly, interest is high.

Like we always say, that's a tough sale, because typically we were replacing jobs in the community there.

There really has to be a reason for them to want to move the business office outsourcing.

Thanks, Boyd.

Our next question comes from the line of Den Veru.

Please proceed with your question.

Good morning, gentlemen.

Hi, Den.

I just want to better understand.

You had two contracts that pushed from Q3 into Q4.

But were those considered wins, as part of the five in the third quarter?

No.

Those were simply installs that were supposed to go in in September, and now they are being installed now as we speak.

But, no, those are not wins.

Okay.

Okay.

So I guess looking at it from -- if my thinking is correct, then you technically may win seven contracts in the quarter, but the two -- but two of them got pushed out nominally because of hospital specific issues?

No, we count a win when they sign a contract with us, which is typically 90 days, 90 to 120 days before the install.

Okay.

All right.

I'm sorry.

Those were 90, 120 days ago, probably.

Okay.

Okay.

And then coming back to the marketplace, if you can -- if you can sort of help us understand what's going on in the marketplace, 10 total decisions in the quarter seems awfully low from industry norm.

Is there anything you can -- that you can sort of gauge that reduced the number of decisions made by hospitals?

I can't.

I don't think there's any one thing.

It's just the typical volatility that we see in doing what we do.

I think there is somewhat of a, I guess, concern, would be the right word.

The whole -- EMR push and these vendors, there's been a lot of educating of boards going right now about what an EMR, where we are, where we are as a hospital to get to an EMR.

I think because there's so much push for an EMR, there is so much confusion out in the marketplace, and I think everybody is being extra careful in making sure that they are making the right decision and probably taking a little bit longer to make some of these decisions than they normally do.

Because, again, a lot of it is educating the boards, what an EMR is.

They are seeing all of this in the news and in the press and things, and, so, they want to make sure that their hospital is on the right track to an EMR and that may cause the whole process to slow down a little bit.

That's just a guess on my part.

I think most of it is just typical, what we see, the volatility of our marketplace.

Right.

Okay.

And then the competitive landscape, we hear Dairyland sort of come in and out as a competitor from time to time, and I understand that they are doing some sort of an upgrade of their software.

How does that impact the competitive landscape the way you see it?

Well, any time a competitor has an upgrade situation, where they are -- and we believe this to be the truth, where they are forcing an upgrade on customers, you are not forcing, but selling an upgrade, you need to purchase this piece of software to take the next step toward and EMR.

And, that's with any competitor, not necessarily Dairyland.

That obviously brings people at least to the marketplace to reevaluate their systems, where they are, and is this the company that we want to move forward to eventually get to an EMR.

We are subject to that as well.

We have a lot of our customers that are financials only, that when they are looking at clinical packages, you know, they are going to test the waters and see what else is out there.

So while that's an opportunity, if it's another vendor, certainly, if it's us, it's one that we certainly work hard to keep their business.

So, it potentially can throw some customers in for a potential edge where you can just intermediate a competitor?

Yes.

Okay.

And as I mentioned, of the five contracts, three of them were from, competitors of ours that we consider the HMSs, Dairylands, and Meditechs of the world, so there is some of that going on right now.

So, is that sort of indicative that you, perhaps, nominally picked up some market share or were any of your customers taken away from you?

We did not lose any customers that I'm aware of, so I guess nominally, you could you say that we picked up some market share, I don't know if this is the start of something or it was just, you know, an anomaly of the quarter.

Right.

Okay.

I know you don't -- no longer put out contract sizes or talk about individual deal sizes, but within the five that you -- is there anything you can tell us about the five customers that you signed in terms of, you know, where they fit these would be the norms that we have seen in the past?

Was there any difference in the size -- directionally in the size of the contract?

Or --

They were pretty much middle of the road, what I would consider -- if you historically know our contract averages, right in the middle.

Right in the middle.

Okay.

Thank you very much.

I will get back in queue.

You're welcome.

Our next question comes from the line of George Hill of Leerink Swann.

Please proceed with your question.

Good morning, guys.

Good morning.

Yes.

Just one question.

I know you guys are not talking about average deal size.

But maybe, can we talk about what you are seeing in the RFP environment and are the RFPs more comprehensive and would you suspect that the -- I guess the cost to deploy in the current RFP environment would be going up versus what it was a year ago?

I haven't seen too much change there.

RFPs are very similar.

I haven't seen a lot of change, you know.

A year and a half, two years ago, maybe two and a half years ago, when EMR started being a big push, you saw the RFPs getting more comprehensive, but I haven't seen any change within the last year.

So, when you guys are getting RFPs, now they are RFPs, they going to need the admin system on the back end and they are going to need a full suite of clinicals on the front end -- I should not say the front end and the back end, but combined, integrative.

I would say most of them are that way.

When it actually comes down to decision time and signing the contract, sometimes they back off, they have bigger plans than maybe their finances will allow, so they are backing off, and obviously that's what we've seen here in the last several quarters where our contracts were not as big as they had historically been because they are backing off and just installing the maybe the Financials first, with plans within the next 6 to 18 months of installing the Clinicals and Point-of-Care and things like that.

On the BPO site, you guys are then most times largely competing against the hospital.

Do these deals often go out to a competitive bid process when they chose to outsource or do they just go to you guys?

It's a competitive situation.

And who are you mostly running up against there?

Just a variety of different vendors.

I don't know that there's any one in particular that we run into any more than the other.

Okay.

And my last question, and then I will hop back into the queue is you guys have added some salespeople, and I will say given what the -- I guess your deployment projectory looks like -- we'll say, over the next two quarters, would there be any plans in the future to add another deployment team?

On the south side?

No, on the implementation side.

On the implementation side.

No, right now we are happy with our install capacity right now.

All right.

Thanks a lot.

Sure.

Our next question comes from the line of Dell Worthington of Delwar Capital Management.

Please proceed with your question.

Gentlemen, two simple questions.

I'm sure -- are you implying that SFAS has affected your top line?

And what is the size of the two deals that slipped from to the fourth quarter?

It did not affect our top line, of course, but it did affect our bottom line by approximately $0.02 per diluted share, and we project the exact same effect in the fourth quarter.

And what is the size of those two deals that slipped from the third to fourth quarter?

I'm sorry, I didn't understand you.

The size of the two deals that have slipped from the third to the fourth quarter.

We don't give the size of our ASPs that slipped from the quarter, but it was a result of construction delays.

Thank you.

You're welcome.

Our next question comes from the line of Duane Pfenningwerth of Raymond James.

Please proceed with your question.

Hi.

Thanks.

Just in terms of maybe the customer mind-set this quarter, or preceding this quarter, do you think there were fewer people making decisions or those decisions were basically taking longer?

Are you seeing a lengthening of the sales cycle?

I'm not sure that's not the same thing.

It's certainly fewer.

You know, typically we see 18 to 24 decisions in any quarter and only 10 decided.

The pipeline did grow as I mentioned.

So, certainly, I think there is more so --I guess could you translate that into they are taking longer.

And what do you think specifically it is that is creating that delay?

I mean, if they were to see a more favorable reimbursement environment, do you think that would accelerate it or are there other things that are causing the delay?

You know, I really don't know.

Obviously, if there was an acceleration in reimbursements, sure, I think that would help, but I don't think that's necessarily hindering it either, with that being said.

As I mentioned earlier, the only thing I could even guess at is that the confusion about -- there's just so much information and propaganda out there in the marketplace about EMRs that maybe they are being a little more careful when they are deciding.

Great.

And then just wondering if you had any update on the ambulatory product and specifically, I guess, the certification process that you were pursuing.

Right, we did sit for the testing on that two weeks ago, I believe it was.

And the results are going to be announced, we think, next Monday.

Originally it was October 31st.

Now we are hearing it is going to be October 24th.

And we feel good about how we did in the testing.

Great.

And then just lastly, Steve, obviously there was a period over the last couple of years where you have seen pretty dramatic acceleration in the end market which may have masked some of the seasonality in the business.

How do we typically think about 1Q from a just a sort of purely steady state perspective?

Could you restate that question?

Sure.

Sorry.

What is sort of the standard, seasonal trends from a top line perspective from 4Q to 1Q.

We would generally see a decrease in sales effort, I mean sales revenue in the first quarter from fourth quarter.

Fourth quarter is generally our largest quarter, and we generally build throughout the year, although the trends vary from year-to-year, as to what we see in each quarter but typically we will see an increase in the fourth quarter and then either flat or slight decrease in the first quarter.

Okay, guys.

Thanks a lot.

You bet.

Our next question comes from the line of Corey Tobin from William Blair & Company.

Please proceed with your question.

Hi, good morning.

A couple of things I wanted to touch upon.

Just trying to reconcile a couple of data points.

So, it looks like the number of deals, rather, decisions I should say, in the end market decreased quite a bit from the historical norms.

And the win rate or the loss rate, I should say ticked up a little bit.

Can you help me take those few data points and reconcile them to the comments that you feel that the sales -- or that the -- the bookings are going to accelerate here as we go forward, which is I think what you said during the prepared remarks.

Is it simply that the pipeline increases gives you confidence that that's going to occur, or is there some other factors as well?

Well, the win rate basically stayed the same and, yes, the pipeline has increased.

That, obviously, gives us some confidence there.

As far as our guidance for the fourth quarter, typically, this already being in the fourth quarter, we have got pretty good visibility over the installs for this quarter.

Now I'm more talking about bookings.

I think you said you during the prepared remarks you are optimistic that sales will return to prior levels.

Did I hear that correctly?

Yes.

Okay.

When you say sales, are you speaking about bookings there or are you speaking about revenue.

I'm speaking about bookings.

Okay.

So on bookings, is there something else that gives you confidence that bookings are going to reaccelerate here despite the fact that the pipeline has picked up -- or, I'm sorry, outside of the fact that the pipeline has picked up.

And our win rate basically stayed the same.

We don't see any major changes there.

So, with the pipeline picking up, we would think that translates into, it will return to more normal levels.

But there's still a risk that the number of -- you know, the decisions are delayed or pushed out, right?

Sure.

Sure.

I mean, there's no crystal ball that tells me whether there is going to be more decisions made, but I feel like there will be.

Okay.

So, it's really the fact that the pipeline has picked up and that's where the confidence is based upon?

That's correct.

Okay.

Great.

And then, can we shift for a second to the dividend.

I mean the dividend has obviously been something that a lot of people like about the stock, and can you just quickly walk through the policy that the board uses to set the dividend and what -- if there's any thoughts regarding where the dividend level will be in 2007 at this point.

Sure.

There's really no set policy.

The decision that -- basically in January of every year is when we have a big dividend discussion and we discuss the previous year, and the free cash flow from it.

And we have basically declared a dividend equal to the free cash flow from the prior year.

We have, roughly, $20 million in cash in the bank.

The goal is for that to stay right around that number, give or take, you know 15% either way.

We want to maintain $20 million in cash.

So that's kind of what the dividend policy comes from.

Obviously, if we don't have the free cash flow to sustain a dividend from one year to the next, we would have to decrease it.

But we take that seriously, if it was $0.02 or $0.03 off the free cash flow -- and I can't speak for the rest of the board because that would be a board decision and discussion -- I would think, based on prior discussions, that we would do everything we can to at least keep it the same, and we would take very seriously the thought of having to go down on it but, certainly, that is a possibility.

So there would -- so, for the dividend to be at risk at the current there would have to be a material downturn in cash flow this year versus 2005?

Yes.

Okay.

Great.

Thank you.

You're welcome.

Our next question comes from the line of Sandy Draper from GMP Securities.

Please proceed with your question.

Thanks.

I apologize, I got on a little bit late, so I may be beating a dead horse here.

But I guess, Steve, I just want to make sure I understand.

It sounds like there are -- that there are two distinct issues, one in terms of that the revenue coming in short, that's purely a function of the slippage of the two contracts -- or the two deals that you didn't start implementing -- or didn't do implementation on; is that correct?

That's certainly a large part of it.

And, we have to estimate add-on sales and other sales that might come in during the quarter that would be part of the signed contract per se.

And so that is an estimate that we -- we try to post it as closely as we can, plus the two slippages would account for primarily the low side on the sales.

Okay.

And so then, you got that slippage.

And the second is, in terms of the lower win rate, that would really just affect the backlog number and revenue going forward, correct?

You wouldn't expect to see much revenue -- let's say you had had two more deals close but implementation has not started.

That would not have impacted your revenue.

That's just a backlog and a guidance issue, am I understanding that correctly?

Yes, you are.

That's correct.

Okay.

So, the two issues are one, quarter was a little bit lighter with the push of a couple this implementations the second is the lower sales, but it sounds like obviously, Boyd, you are feeling more comfortable in the outlook.

Yes.

Okay.

Great.

I just wanted to clear that up.

Thank you, very much.

Our next question comes from the line of [Jeff Eckschmidt] from Sidoti.

Please proceed with your question.

Hey, guys I wanted to touch quick back on certification if you could comment on the competition there.

Do you guys know if HMS or Dairyland have a product that they are submitting for certification?

We have no idea.

And do you feel you were hurt by the fact that Meditech did have the certification in the power quarter?

Do you think that effected any of the win rate?

I do not.

Okay.

Furthermore, do you think the -- it will speed up the decision going forward, when -- when the certification becomes more of a player?

That's what we -- you know, we hope so, if we are fortunate enough to get the certification, we would hope that would be, a benefit to us.

All right.

I just have one more question.

As far as -- you guys typically beat guidance.

If you guys did -- if the two sales did not slip in this quarter, where do you guys feel like you would have come?

Towards the high end of guidance or would you have beaten it?

Well, just with relation to those two deals, we would have probably been in the middle of our guidance.

Thank you guys.

Our next question is a follow-up question from the line of Sean Jackson from Avondale Partners.

Please proceed with your question.

On the add-on sales, can you just comment on the time between, when the core product is actually sold and add-on sales occurs, how has that time changed over the last couple of quarters or can you talk about that in a little more detail.

I don't know that it's really changed.

You know, that's a pretty varied mix.

We have some hospitals that have been customers for 12, 15 years and we're just now installing clinicals at their facilities, and then we have other customers that pretty much fast track it and we may install the financials -- the clinicals, within six months of the installing the financials.

So. that's just kind of all over the board there's really no changes there.

Okay.

All right.

Thanks.

Sure.

Our next question is a follow-up question from the line of Den Veru of Palisade Capital Management. [Operator Instructions] Please proceed with your question.

Hey, Boyd.

One other follow up.

You know, from time to time Sterner will make public comments about getting into smaller hospitals.

Two questions, first of all, when was the last time or how often do you see them as a competitor?

And can you gauge for us their definition of a small hospital, versus your definition of a small hospital?

As far as --I don't recall the last time that we actually ran into them in a deal.

As far as -- have no idea how they judge a small hospital.

Obviously our marketplace is 300 beds and less with the vast majority of our customers being under 100 beds.

You have not run into them, seeing them as talking about -- obviously you are not seeing them as a competitor yet but you don't get -- you don't get a sense that this is a segment of the market that they would reach down to at this point in time?

No, I do not.

Okay.

And then could you talk a little bit more about tax?

Clearly, I think you were more optimistic about opportunities for PACs, a year, year and a half ago in terms of the uptake with your customer base.

What's going on in that market segment?

And are there things that you can do that potentially could improve your win rate in terms of the getting more of your customers to add on the PACs modules?

The PACs pipeline, yes, while historically, we are basically geared to do eight installs per quarter and we are typically doing around five or six, based on the pipeline, and the interest we have seen, it looks like -- I think eight is a good number and going into next year, I'm happy with having eight as our capacity, because I believe we will be able to actually do that more next year.

So, I do think that we are making some progress there.

Is there something that you are -- is it a pricing issue?

Is it the way you are selling it?

Are you bundling it?

What is it?

Can you get a little more specific on how you -- why you are more optimistic on the win rate specifically from PACs?

I don't know that it's necessarily the win rate as much as that there just more hospitals that interested in it and ready to move that's why a lot of our hospitals are probably a little bit behind on that side of things in radiology and going digital in their radiology departments.

I think we just have more hospitals.

I don't know that I'm expecting the win rate to change that much.

As I discussed on these calls before, as David has, PACs is typically a little bit different animal to sell because you have radiologists involved that sometimes practice at other hospitals and things like that.

So if they are using one of our competitors PACs at a bigger hospital down the road, typically that makes it a harder sale for us, as opposed to something like trying to sell our other add-on applications like our clinical packages or our Point-of-Care.

But I think mainly the reason I'm more optimistic about the PACs is, again, because of the amount of interest that we have from our existing customers, not that I am necessarily thinking that our win rate is going to be better or worse than it has been.

So it's really tied to the sales pipeline growth?

That's correct.

Okay.

Okay.

That's it.

Thank you.

Sure, Den.

Mr. Douglas, there are no further questions at this time.

I would now like to turn the conference back to you.

Thanks, everyone, for joining us on the call and have a good day.

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