TruBridge Inc (TBRG) 2014 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Computer Programs and Systems first-quarter 2014 earnings conference call.

During the presentation, all participants will be in a listen-only mode.

Afterwards, will conduct a question-and answer-session.

(Operator Instructions)

As a reminder, this conference is being recorded Friday, May 2, 2014.

I would now like to turn conference over to the President and Chief Executive Officer of Computer Programs and Systems, Mr. Boyd Douglas.

Please go ahead, Sir.

Thank you, Bryant.

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

During this conference call, we may make statements regarding future operating plans, 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 only reflect management expectations and predictions based upon currently available information, and are not guarantees of future results or performance.

Actual results might differ materially from those expressed or implied by such forward-looking statements as a result of known and unknown risks, uncertainties, and other factors, including those described in our public releases and reports filed with the Securities and Exchange Commission, including, but not limited, to our most recent annual report on 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 revise any forward-looking statements to reflect events or developments after the date of this call.

Joining me on the call this morning is David Dye, our Chief Financial Officer.

David and I have a few minutes of prepared comments, and then we will be happy to take your questions.

In the first quarter, we installed our financial and patient accounting system in nine hospitals and our core clinical departmental applications at 12 facilities.

Additionally, 12 hospitals implemented nursing point-of-care, and 44 customers went live with the physician's applications which consist of ChartLink, CPOE, and physician documentation.

Add-on sales to existing clients were $13.5 million, or 26% of total revenue for the quarter.

At this time, we expect to install our financial and patient accounting system in five facilities in the second quarter.

We anticipate 11 new installations of the core clinical departmental modules, 7 nursing point-of-care implementations, and 67 installations of physician's applications.

In mid-April, we held our annual master users conference and in Destin, Florida.

Our new week-long format, consisting of financial seminars during the first part of the week followed by a clinical focus in the latter part of the week, was deemed a tremendous success by all in attendance.

We were thrilled to host a record number of our customers at this event.

As you can imagine, much of the focus of this year's conference was on Meaningful Use stage 2. As you know, our customer success in achieving Meaningful Use Stage 1 is unparalleled.

Looking ahead to Stage 2, we are expecting even greater success for our clients in meeting the more demanding Meaningful Use Stage 2 requirements.

We fully expect to separate ourselves even further from our competitors as we enter this stage of the ARRA stimulus program.

This will further solidify our dominance in the small hospital marketplace as a number of our competitors continue to struggle with obtaining certification for their software, as well as struggling with the installation and usability of their software in the small hospital market.

On the development front, we are progressing well with the new ED package.

We are wrapping up usability studies and are now entering the alpha- and beta-testing stages of the release of this new software.

We are continuing to target third quarter for general release.

Customer interest in ED continues to remain very high.

Now, I'd like to update you on the progress from our services subsidiary, TruBridge.

During the quarter, TruBridge executed 10 new accounts receivable management contracts, one of which was for full services, and nine for private pay and insurance follow-up services.

Three of the private-pay contracts are with hospitals that do not utilize CPSI as their EHR vendor.

We continue to be excited about the opportunities for TruBridge, and David will add some color to TruBridge in his remarks.

With that, I'm going to turn the call over to David for his comments.

Thank you for being on the call.

Thank you, Boyd, and good morning, everyone.

Our employee headcount as of March 31 was 1384, just down 6 sequentially and 39 year over year.

The accumulated unrecognized revenue related to first generation Meaningful Use contracts as of March 31 was $2.6 million.

In April, we recognized $600,000 in first generation contract revenue, so that as of April 30, a total unrecognized revenue was now $2 million.

This amount is primarily made up of amounts outstanding from two hospitals, and we continue to anticipate recognizing this remaining $2 million in 2014.

Four of the nine new client installs we performed in the first quarter were gen two contracts, four were standard, and one was SaaS.

Of the five scheduled second-quarter 2014 installations, three are gen 2 contracts, one is SaaS, and one is standard payment term contracts.

Our fourth-quarter cash collections were $50 million.

Our overall cash and investments balance grew $6.8 million during the quarter, and we expect our cash to continue to accumulate throughout the year as a result of Meaningful Use contract collections and expense controls.

As is the case in CPSI's first quarter each year, 401(k) match expense and payroll tax expense are higher than in subsequent fiscal quarters.

We expect a $1.8 million sequential decrease of these items for the second quarter.

Also, at the beginning of 2014, we chose to participate in IRS to $5000 de minimus safe harbor capitalization election, which served to reduce addition of capital assets and increased current expense by a approximately $170,000 in the quarter.

We expect a similar decrease in capital expenditures and corresponding increase in current expense in future quarters as a result of this election.

We are particularly pleased with the continuing growth of TruBridge, which showed a 20% increase over the prior-year period.

Growth continues within all facets of our TruBridge services spectrum, but most notably clinical consulting, medical record coding, private-pay collection services and cloud-based services.

We do not expect a meaningful revenue timing shift as a result of the recent one-year ICD-10 implementation deadline pushed back.

Although it will likely result in a minor amount of short-term engagement delays, offset by a longer-term increase in the total number of ICD-10 revenue opportunities available prior to the new October 1, 2015 deadline.

In order to be prepared for these future demands, we continue to make significant investments in our TruBridge personnel resources, in particular, clinical professionals and medical record coding specialist.

That's all for our prepared comments.

For Q&A, please note that I'm travelling and Boyd is in the office, so please forgive us if we talk over each other a bit.

And with that, Frank, if you can please open the call for questions?

(Operator Instructions)

Mohan Naidu, Stephens.

Boyd, David, thanks for taking my questions.

First, maybe on Q2 installs, the number seems a little lighter than what we were expecting, anything seasonally going on for Q2?

I don't think there's anything seasonal.

I think that's more just actually the natural ebbs and flows of our market.

Some quarters a little bit lighter than others.

But there's really no particular reason and certainly no seasonality.

And you are still expecting 28 installs for the full year?

That would be better for Dave.

That still our target for the year.

Got it.

And on the ED product that you talked about, just curious what are your current customers using now?

Are they using some other product?

Or is this going to be going from paper to your ED product if they choose to go that route?

We've got both scenarios out there.

Our larger customers that have more active ERs typically have gone ahead and installed a standalone ED package, and more the likely have interfaced with that package.

But then there are a lot of other customers that are holding off on the purchase because they see the value of the integration and want to have a fully integrated system, so we've got some of both.

Okay.

One last question.

David, on the G&A you talked about 401(k) matching, is that $1.8 million that you noted, is that all 401(k)?

No, some of that is the additional first-quarter payroll tax expense, when you are doing the FICA Social Security match.

That is heavy for everybody in the first quarter.

I'd say a approximately $1.3 million of that $1.8 million is 401(k) and the rest was higher payroll tax expense that will be reduced by about $500,000 in subsequent quarters.

Okay.

And last year in Q1 you had some insurance overflows that impacted your G&A.

You did not see any of those this quarter, right?

We did not.

Now, it is generally, and it was this time, not materially higher in the first quarter because we have some self insurance deductibles.

But it was immaterial and certainly not anywhere close to the magnitude of the claims that we had last year in the first quarter.

Got it.

Thank you very much for taking my questions, guys.

I will hop back in the queue.

Thank you.

Ryan Daniels, William Blair & Company.

Yes, thanks for taking my questions as well.

Boyd, I will start with one for you.

In regards to the Q2 outlook, one number that stood out was this 67 physician applications.

I guess not a surprise, ahead of Meaningful Use, that the clients would demand that.

But the absolute number seems pretty big.

So talk about your capacity to get nearly 70 of those installed?

And then I'm curious if you're going to be bringing on any temporary staff or if your team can fully implement that?

Our team can fully implement it.

We're probably looking at a max in any quarter of any 75.

What we've done, and you notice when David gave the headcount numbers, we've taken a lot of people because the other areas, soliar, the clinical, and the point-of-care, because the majority of our customers have now installed those.

We're taken a lot of those people that obviously are very familiar with the system from a clinical perspective and training them on the physician's aspect of things.

They are actually, so that's where the extra bodies are coming in, the extra people.

And that extra experience, and it is really working out quite well because it is an advantage that they already know the clinical side, and so it's really turned out to work out well for us.

In addition to installing those three applications, we will also utilize those personnel to install the new MPM EMR 5 system as well.

Okay.

That's helpful.

And then looking at the penetration rate, in Q2 alone it is almost it's roughly 10% of your client base.

Do you have current penetration on the physician applications where those stand?

David, do you have that number?

I've got it somewhere, Ryan, let me see if I can --

I think I have it enough to give you some color.

I think that the physician documentation still has a lot of runway.

I think at the end of the second quarter, we will still be slightly less than 50% penetrated there.

I think the remainder of the, if you want to call them legacy applications including CPOE and ChartLink and everything else, they are all in the 90% range by the end of the second quarter.

Okay, perfect.

And then, David, while you're on, can you go through the IRS safe harbor election just one more time in the near- a longer-term income statement, maybe balance sheet?

I didn't follow that.

Yes, it was available beginning in September of last year.

And it allows any asset that's less than $5000 to be expensed in the current period, as opposed to capitalized and then further appreciated, and that number prior to that was $500.

In many cases, specifically like with laptop computers and other things that you need to run an office, those items are clearly greater than $500 and less than $5000, so those are the type of things that we will be able to expense in a current period as opposed to capitalize.

And it is simply a question for us of, as you probably know, we are a cash driven business and that's one of our primary goals.

And it is a better decision from a long-term cash generation perspective, so that's why we did it.

Okay.

In terms of the answer to question, it will be -- it can vary in the quarter from we think it will be anywhere between a $75,000 to $200,000 difference in any one quarter.

Probably averaging I'm guessing low $100,000s.

Okay.

That's perfect.

That makes a lot of sense.

And then, I guess last question, you get asked this all the time on your calls, but I'm curious, we continue to hear more noise with some of the larger vendors, two in particular moving down market.

And I'm curious, if you look at the pipeline, talk to your sales teams, if you are seeing any of those guys more aggressive in the smaller hospital space?

Thanks.

I can say that we are not, it is certainly something that we continue to be, keep our eye on.

I don't remember if it was two or three calls ago that we specifically mentioned that we had seen a lot more concern in the last three to six months.

And I would say since that point, that amount of volume has decreased.

I mean, clearly perhaps they have enough to do up in this segment of the market because I know they are doing very well.

But, so it's something we continue to be interested in.

But in our pipeline, we are still competing with the traditional vendors that we have been over the last, for the most part, couple decades.

Okay.

Thanks, guys.

I appreciate it.

Thanks, Ryan.

Jamie Stockton, Wells Fargo.

Yes, good morning, guys, thanks for taking my questions.

I guess maybe first one, Boyd, I think that you had some comments about Stage 2 in your prepared remarks and maybe I didn't catch it, if you said it, but have you guys had anyone was attested yet for Stage 2?

We have had, yes, we have not had anybody to my knowledge that has received the funds yet, but we have people that have attested.

Okay.

I know in the quarter that ended, for the nine day period that ended March 31, I know for that period we had four hospitals successfully attest Stage 2.

That's great.

Boyd or David, whoever wants to take it, are you aware of whether any of your primary competitors have had anyone attest at this point?

I am not.

Yes, sorry, Boyd, I know Meditech has.

Other than that, I'm not aware of our primary competitors that have.

Okay.

And then maybe on TruBridge, you guys continue to sign up a healthy number of hospitals for private pay.

I was curious, high-deductible health plans are becoming a bigger and bigger deal for hospitals.

And I imagine that you guys are working on a lot of those receivables for hospitals.

How big of a tailwind has that been or could that be for the TruBridge business?

Whether it is your existing client base or a motivator for incremental hospitals to say, hey, we need to have somebody help us work on this?

That's a great question, Jamie, and I'm not sure I have a quantifiable answer other than I would say that the concept of rural hospitals outsourcing their private pay collections to us or anybody else has been a trend that's been slowly rising prior to any insurance reimbursement model changes as a result of ObamaCare or anything else that are beginning to occur at this point in time.

So I think that the trends that you mentioned would only stand to increase the interest to do so.

I cannot say we've seen a quantifiable change yet.

But we definitely continue to see a trend, and it is hard to know if it is because we continue to do a good job performing for our existing clients and in marketing those services to both existing and non-CPSI EHR clients.

Or if it is because it is just generally a trend in the marketplace and we are one of the only viable players in this small hospital space.

But your right on target in that from a tailwind perspective, the private pay collections area of the TruBridge business is certainly an area that we think could potentially be the highest growing area within that segment.

Okay.

My last question, David, just on the TruBridge business.

The gross margin for business management services came down a little more in the quarter.

Some of that may just be seasonality of when some expenses flow through or early in the calendar year.

But is any of it just continuing to build infrastructure for that business and then, hey, at some point in the future, we will leverage this expense base?

That is definitely the case.

It would be an exaggeration to say we've thrown caution to the wind.

But something close to that in terms of whatever we need to be prepared for the demand we are seeing now and that we expect to continue to see going forward.

And as I mentioned in the comments, namely personnel, we continue to hire RNs and physician's assistants, nurse practitioners, in some case pharmacists, and those people, that's a heavy investment.

But they pay off in dividends from their clinical experience and their ability to do consulting and project engagement for us out the field.

And in addition to that, the medical records coding portion of the business is something that's taken off a little bit more than we might have thought.

So we continue to hire medical records coding professionals, which as you might imagine, have always been, but at this point with ICD-10 looming, it is a very competitive market out there for those percent personnel.

So we certainly expect to see those margins improve at some point in the future.

We are just not terribly concerned with when that is, as long as we continue to grow.

Okay, just for modeling purposes, do you think that that will be this year?

Or should be thinking about that as a 2015 and beyond event?

No, it probably won't surprise you to hear me say that I don't know and don't particularly care, but a pure guess is I would think they would improve on some level that is reasonably significant by the end of year.

Okay, that's great.

Thank you.

You bet.

Thanks, Jamie.

David Larsen, Leerink Partners.

Yes, thanks, it is Chris Abbott in for Dave.

Your system sales margin has been pretty strong the past two quarters.

Obviously down a little sequentially here, but if we look relative to 1Q 2013, up almost 10 points.

What is driving that increase, especially considering that the 1Q 2013 had about I think it was about almost $2 billion of that high-margin Meaningful Use gen 1 revenue, and there's only about $100,000 this quarter.

Is there a different mix that we are looking at now?

Or is a mid-40% range a sustainable rate looking forward?

I would say it is a function of three things.

One, being is that we've got a, we continue to have a greater mix of add-on software, particularly around Meaningful Use which is typically a little bit more profitable.

A more significant reason is that, as you know, we haven't done any significant hiring in our software services and implementation divisions since September in 2012.

And that was all very planned, and so we're able to utilize the 400 plus people that we hired from 2009 through middle of 2012 to do these 67 physician application installs that we are doing in a second quarter.

And so not only do we have them, but they also have at least several years of experience.

So therefore, we know our salary cost have peaked in that regard.

And so as we continue to sell those out on software businesses, that improves the margin there.

And one last factor that I won't quantify but I do know from looking at the statements, and it was immaterial but it was still a bit of help to the quarter.

Last year in the first quarter, we had a significant number of implementations on the West Coast, and so our travelling expenses were particularly high and we did not have that in this quarter this year.

Okay.

That's helpful.

Maybe one more with the ICD-10 delay, you're mentioning that there could be I guess maybe some delays on some service engagements in 2014.

Are there any potential acceleration of purchases, either for core systems or financial systems, that you might see this year now that has potentially freed up that constraint?

Or is it really more of a net headwind in 2014?

I think if anything it is a very minimal net headwind.

I don't know if Boyd may have some comments, but I never heard about anybody in our segment of the market that was delaying any type of software purchases because of ICD-10.

I know that some of the larger vendors have mentioned that, but that's not something that I've seen.

Okay, thanks, guys.

You bet.

Bret Jones, Oppenheimer.

Good morning.

Thank you for taking the questions.

I just wanted to touch on guidance.

I know you don't generally update guidance, but EPS was quite a bit lower than we were expecting.

I'm just wondering, was there anything from a cost perspective in the first quarter that differed from what you were expecting when you provided the guidance?

No, as I mentioned in the call, these significantly higher G&A expenses that we had in the first quarter have become very consistent, so we certainly expected them.

Okay, so you would update guidance if anything had materially changed?

If you didn't think you could make the full year there?

Our policy is to give the guidance at the beginning of year.

And if we ever think there's a material upside or downside, we will update at that time.

Okay.

So we will stick with that.

You bet.

Okay, perfect.

Thank you.

I just wanted to ask also in terms of TruBridge in the margin, I wanted to go back to that a little bit.

In terms of the mix of labor you are hiring, nurse practitioners, physician assistants, has the mix of labor change from what you typically used to do, and is that more of a permanent impact on margin?

Or do still think you can get those margins back up into that 40%-ish range?

It is definitely a shift.

And we've had those personnel on staff for quite some time, but the increase is definitely a newer trend.

And we try and hire in advance as much as possible so that we can have our good people up to speed down the road.

And so, which is why in our history, we've never had to have, and I think Ryan mentioned this in his question, we've never had utilized a third-party consulting firm to help with implementations, and hopefully we never will.

I mean, we want to use our full-time employees to do all this work for Our customers.

And so, part of it is just simply we hire people in advance of expected demand.

And that's what we are doing here.

Okay.

And then just lastly from me, I just wanted to touch on the 67 physician apps that you guys are going to install in the second quarter.

Can you give us a any sense for the mix for those?

Was it weighted more toward CPOE or physician documentation?

And are you starting to do the emergency department installs?

It is certainly weighted more toward the physician documentation.

And as far as the ED, like I said, we are doing some, very shortly, doing some of alpha- and beta-testing, so we will be doing some installs with those facilities.

But like I said, we expect general availability in the third quarter.

All right, great.

Thank you very much.

You bet.

Sandy Draper, SunTrust.

Thanks, good morning, Boyd and David.

Just a couple of questions.

I guess first for David, relative the other comment, one of the comments you made in terms of guidance I think was that you thought overall that by the end of year, gross margin would actually be higher in 2014 than 2013.

Obviously system sales in that came in strong, but I'm just wondering, do you think the investments you are making in the outsourcing side, which certainly I appreciate in terms of the long-term growth, could actually maybe make -- suggest that at the end of year, your gross margins would be down year-over-year in aggregate?

At this point, I don't think so.

I will stick with what we said a quarter ago.

Okay, that's helpful.

And then --

I don't think they will be that consistent and, yes, it remains to be seen.

And we're certainly, as we've said before and I know you alluded to this in your question, but there's no decision making that will take any of that into account.

But at this point I think that especially with all the maintenance and support that comes in as result of all that software sales from 2013 and what we are doing in 2014 and all these physician applications and so forth, from an overall Company gross-margin perspective, I think will more than overcome the TruBridge expansion.

Okay, great, that's helpful.

And then second, you gave us some good details in but I just want to make sure I've got it correct.

So is it fair to say netting out any other increases, we should basically think about there was $1.8 million of expense in the first quarter that will not replicate itself, because that doesn't include that shift from CapEx to operating expense?

I'm just trying to make sure I'm thinking about the right step-down number.

$1.8 million is the proper step-down number.

It does not include the CapEx shift.

Okay.

And the CapEx shipped shift will basically, you will have a little bit of a drag through this year.

But assuming you continue to do that, it normalizes itself when you look out in 2015, 2016, and beyond, that just becomes the new way you're doing it, so there's not a comp issue?

There's not a comp issue, and as well, we will have that depreciation expense.

Yes, it will even out over the long term.

Right.

So this year you are getting a little bit of a double whammy.

You have still got the depreciation from how you recognized this stuff last year, but you are also, you've got the hit of the expense this year, so you're taking a double hit, but then in normalizes itself?

Yes, we are, but we are getting the benefit on the cash side this year.

Right.

Exactly, on the cash side.

Okay, that make sense.

Those are my questions, thanks, guys.

Thanks, Sandy.

Thanks, Sandy.

Richard Close, Avondale Partners.

Yes, just really quick, I want to clarify how many new hospitals or new customers did you expect this year?

Was it 28, was that the number?

Yes.

Right.

Okay.

And just curious what you are seeing in terms of the competitive marketplace?

I know we touched earlier on maybe some of the larger guys coming in, and I guess you are saying you haven't necessarily seen that as much as maybe earliest with Cerner as before.

But are you seeing any renewed competition from the likes of people like MEDHOST or any of the other smaller providers?

I don't know that I know you mean by renewed, but where certainly those guys are out there and we are competing with them every day, the traditional, we talked about that MEDHOST, Healthland, Meditech, certainly.

Are you guys, in terms of head-to-head competition, are you picking off any particular customers or competitors clients?

Where you are seeing yourself maybe more successful?

We are.

I don't know that we are any more successful.

But certainly, those trends continue and we're doing quite well, and we are real pleased with where we are in the market.

I think our Meaningful Use success is responsible for a lot of that.

And as I said my prepared comments, we fully expect our Meaningful Use stage 2 success to maybe help us pick off even a few more.

We are real excited about where we are competitively.

Okay.

And I guess my --

I will add to that slightly refrain with the stage 2. I think our sales team is seeing more, even over the last quarter or two, more skittishness on behalf of some hospitals that have a competitive system installed.

But there's been they're either part way or no way toward stage 2 certification at this point.

And given the timing of looming deadlines, there some -- we are pleased to see that there appears to be some folks that are low bit more nervous at this point where stack could only help us.

It remains to see be seen, but that can only help us down the road.

My final question is on TruBridge.

Are there any other areas that you see that you can expand into on the TruBridge side in terms of additional service areas that you guys are contemplating?

Or maybe making investments in today to roll out over the next year or two?

There's always things within TruBridge that we are thinking about, and there are a couple that could be relatively significant going forward that we are investing some time and resources into.

At this point, remains to be seen if we follow through.

Maybe in subsequent calls, but it is nothing that we would care to publicize at this point.

But there's a great deal of thought going into what else can we do here to help the small hospital marketplace from a services standpoint and generate some revenue for us.

Okay, thank you.

You bet.

Thanks, Richard.

Dave Francis, RBC Capital Markets.

Good morning, guys.

Just a couple quickies.

First, Boyd, on the emergency department product.

I guess I'm a little confused on the timing and I just may have heard this incorrectly on the previous call.

But you are expected general availability in the third quarter, from what I understand, and is that just relative to timing and how that revenue might hit the income statement in the back half of the year?

Are you expecting that as a front end of the quarter, a back end of the quarter, or where in Q3 do you expect to go GA and be in a position to start driving meaningful revenue through that line item?

More through the to the back in the quarter.

Of the third quarter?

Right.

Okay, thanks.

And then, secondly, you guys have done a great job of managing headcount.

And given the growth on the TruBridge side, I guess I'm wondering, are you having success in moving people from one side of the business over to the other?

Are you simply having to go through attrition on the traditional system side of the business and net new hires on the TruBridge side?

How is that working?

It is actually both.

We do, we have and we continue to move people over, which as you can imagine, is from an experienced standpoint, is we think a good move on our part.

And it is worked out very well for us in the past and we think it will continue to.

But a lot of it is traditional hiring as well, so it is a combination of both.

We expect the overall employee number still to remain around 1400.

It may creep sometimes above and sometimes a little below it, but at least for the rest of this year.

I mean, we are doing some attrition replacement hiring in software and we expect to continue to grow the total employee count within TruBridge.

Our guess is it will -- we are just below it right now and we should stay there or anywhere around 1400 back and forth for a while.

Great.

That's helpful.

Thanks, guys.

You bet.

Thanks, Dave.

(Operator Instructions)

Sean Wieland, Piper Jaffray.

Thank you and good morning.

A follow up to Dave's question.

Why did the timing of the release of the ED product slip?

Just development happens in the development process.

I don't know that it was a major slip, but certainly just development and usability studies would come back, come with more things to do.

Just getting it out there.

Wasn't any particular reason other than we certainly want to make sure it's right and ready to use and good to go when we put it out there in the field.

Did you find that it was scope expansion, that it didn't have the necessary functionality that it needed?

Was it a technology issue?

Was is some issues with some of the alpha testing?

It is more on the application side, different functionality, different ways to do things.

Sometimes the functionality is there, but you get alpha-testing side or user that would like to see something a little bit different, so sometimes you give them options and different ways to do things.

Certainly nothing on the technology side, we are using all the same technology.

All right.

You've reiterated your guidance despite now losing about six months worth of selling and revenue recognition opportunity on that product.

What's the magnitude of that?

It is relatively insignificant, Sean.

We never expected major revenue from ED in the first half of this year, and certainly we are not shying away from the fact that that's been pushed back a bit.

I think that we have learned over the last several decades that one of the biggest mistakes you can make is to put stuff out there for general release too soon.

And if we don't have some revenue in a given quarter because we pushed something back to make sure that it works properly when it is in the field, we could care less.

I think that's even more important when you're dealing with a product that's used primarily by physicians.

You pretty much only get one chance to get it right.

So we are going to get it right.

All right.

Thanks a lot.

Thanks, Sean.

Nicholas Jansen, Raymond James.

Hey, guys.

Just focusing a little bit on cash flow.

You're at $18.5 million of cash on the balance sheet.

I would anticipate free cash flow to continue to build this year as your finance receivables come down.

Any change in philosophy with regard to how you are going to deploy that?

Or how should we think about your guys' opportunities to put that cash to work?

Thanks.

Yes, great question.

No change at this time.

Our Board has evaluated what to do with excess cash in the past and if and when that continues to grow, I'm sure we will again.

As you know, our primary policy in the past has been to reward the shareholders with that cash generation through the dividend.

I think that will always continue to be a part of our strategy.

At least in the short- to mid-term future.

The short answer to your question is so the Board will continue to evaluate it.

I don't -- probably throughout 2014, can't expect any sort of change in our philosophy there.

Okay.

And just a follow up to that, your financing receivables have come down about $5 million from the peak.

What's the expectation there over the next couple quarters?

Or how should we think about that balance coming down near and long term?

Thanks.

Creeping down near-term.

And I don't honestly know the answer long term.

I don't think we will ever see it get back to that number again.

I think that with stage 2, stage 3 Meaningful Use, it will be more of the standard contract terms.

I think that with new system sales, I think this is a long-term guess, that it would be probably half and half gen 2 contracts.

Well, let's say half gen 2 and the other half, about half standard and half SaaS.

That's just a guess.

So I think that's my best guess to answer your question.

Thanks, guys.

You bet, thank you.

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

Please continue with your presentation or closing remarks.

Right.

We certainly appreciate everyone's time and interest in CPSI.

And I thank you for being on the call and have a great weekend.

Ladies and gentlemen, that does conclude the conference call for today.

We thank you for your participation and ask that you please disconnect your lines.

Have a great day everyone.