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Streamline Health Solutions (NASDAQ:STRM)

Q4 2011 Earnings Call

April 23, 2012 11:00 am ET

Executives

Landon Barretto -

Robert E. Watson - Chief Executive Officer, President and Director

Stephen H. Murdock - Chief Financial Officer and Senior Vice President

Analysts

William H. Bunn - Fort Washington Investment Advisors, Inc.

Frank Sparacino - First Analysis Securities Corporation, Research Division

Sam Rebotsky

Operator

Greetings, and welcome to Streamline Health Solutions Fourth Quarter 2011 and Year-End Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Landon Barretto. Thank you, sir. You may begin.

Landon Barretto

Good morning. Thank you for joining us to review the financial results of Streamline Health Solutions for the fourth quarter of fiscal year 2011, which ended January 31, 2012, and for the fiscal year ended the same date.

As the conference call operator indicated, my name is Landon Barretto. I'm with Barretto Pacific Corporation. We're the Investor Relations and consulting firm for Streamline Health. With us on the call representing the company today are Bob Watson, President and Chief Executive Officer; Steve Murdock, Senior Vice President and Chief Financial Officer; Rick Leach, Senior Vice President, Solutions Marketing.

At the conclusion of today’s prepared remarks, we'll 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: The 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 expectation identify forward-looking statements. The forward-looking statements contained herein are subject to certain risks, uncertainties and important factors that could cause actual results to differ materially from those reflected in the forward-looking statements included herein.

These risks and uncertainties include, but are not limited to, the impact of competitive products and pricing, product demand and market acceptance, new product development, key strategic alliances with vendors that resell the company's products, the ability of the company to control costs, availability of products produced from third-party vendors, the healthcare regulatory environment, healthcare information systems budgets, availability of healthcare information systems, trained personnel for implementation of new systems, as well as maintenance of legacy systems, fluctuations in operating results and other risks detailed from time to time in the Streamline Health Solutions' filings with the U.S. 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?

Robert E. Watson

Thank you, Landon, and good morning to all of you participating on today's call. We thank you for your time today and for your continued interest and support of our company. With 4 full quarters behind this management team, it is clear that we are making meaningful progress towards becoming a best-in-class healthcare information technology company, delivering solutions that improve our clients' operating and financial performance.

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

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

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

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

I also want to remind you that we shift our focus to SaaS or software-as-a-service transactions, revenue recognition will be delayed due to the time lag between contract signing and the implementation or go-live. We continue to believe that sacrificing near-term perpetual license-based revenue for the long-term predictability of SaaS-based revenue is the correct business model. Furthermore, the solutions acquired from Interpoint Partners are only available on a SaaS basis.

We are particularly encouraged by the increase in the backlog by nearly $10 million during the fourth quarter. Backlog at the end of the year was $2.7 million, compared to last year's backlog. This is a 56% increase. Steve Murdock, our Chief Financial Officer will provide more detail on this in a few minutes.

For those of you who have listened to these calls during 2011, you know that we were focused on 5 key strategies. Those 5 strategies were: Becoming a market-facing organization; building a sales and distribution organization; leveraging our core competencies to broaden the scope of our product portfolio and expand our recurring revenue stream within our current client base; building a human capital required to accomplish the foregoing; and finally, to continue to drive cost out of our infrastructure.

I'm pleased to report that we have made significant progress in implementing all 5 of these strategies. First, becoming a market-facing organization. We have gained a much more complete understanding of the needs of our current clients and of the market for our solutions. Aside from our previously noted webinar series and other programs, it is important to note that each and every one of our clients is contacted at least 2x during the past year by at least one senior-level executive. We plan to continue this level of executive engagement with our clients as a key part of our long-term strategic plan. The information gathered during the exhibits has been and is critical to our solution development process and to our long-term strategic planning. This is especially true as it relates to our expanded revenue cycle solutions offerings. The acquisition of Interpoint Partners, for example, was guided by listening to our clients and the marketplace in general.

Second. Building a sales and distribution organization. During the year, we worked very diligently to secure each and every new opportunity that fell within the scope of our solutions offerings. We reported in each of the last 2 quarters that we had added $6 million to our sales pipeline. However, in the fourth quarter, we added over $10 million in opportunities to our pipeline.

Also during the fourth quarter, we added 2 new clients, Aria Health Systems, Philadelphia, Pennsylvania and Riverside Medical Group, Norfolk, Virginia. Importantly, we created, subsequent to the year end, a Senior Vice President of Sales position that we filled with Mike Schiller who will report to me. The drivers for creating this role were twofold: First, when this team began to come together in the first quarter of 2011, we agreed to view the year as a year to learn more about the enterprise content management market in general and our clients specifically. We did that; second, with the information at hand from our client and sales prospect visits during the year, plus the added opportunities in the new sales pipeline from the addition of the Interpoint Partners solutions to our portfolio, we felt it was time to separate the client facing activities into 2 distinct units, Sales and Solutions marketing. Our regional sales executives and account executives will report to Mr. Schiller, Mr. Rick Leach will continue to lead our solutions management and marketing teams and will continue to report to me as well.

In the question of our partner distributions channels, we announced a joint marketing agreement with FTI Consulting in February of this year. On our opinion, this announcement went largely unnoticed as a critical part of our news client sales plan. We expect the FTI to be a material driver of new business over the coming 5-year period. In fact, the Riverside Medical Center contract announced in January was a direct result of this relationship.

Likewise, we continue to maintain our agreement with GE Healthcare. Where that relationship did not generate a net new sale in 2011, we continue to invest resources in managing our current clients that we share with GE. We did generate over $2 million in contract bookings and renewals inside that installed client base in 2011. However, after several attempts to revise the relationship with Standard Register, we have elected to discontinue that relationship as we move into fiscal 2012. We were successful via the FTI relationship in delivering a new distribution partner as promised for 2011. We will continue to pursue other distribution and channel partners in fiscal 2012. Third. Leveraging our core competencies to broaden the scope of our product portfolio and expanding our recurring revenue stream within our current client base.

During the year we did this in 4 ways: One, we achieved Meaningful Use certification for 2 versions of our core enterprise content management solutions; two, we released our new integration suite for Epic EMR; three, we acquired Interpoint Partners which deepened our solutions in the revenue cycle optimization and business analytics; and four, on December 20, accessANYware 5.1, which is built on an entirely new architecture, became commercially available. This is not only an important milestone in the transition of our core enterprise content management solutions through this technologically-advanced architecture and suite of functionality, it also allows us to accelerate the planning with all of our clients to migrate into this platform. We also believe that this process will open the door for us to offer our software-as-a-service option in lieu of a traditional maintenance agreement renewal.

It's worth noting that as we transition our clients to the new platform, the company will not only generate billable professional services revenue but we will have the opportunity to sell additional software solutions, which is our suite of Health Information Management workflows and our new Patient Financial Services solutions. These solutions will help our clients to continue to improve their operational efficiency and financial results.

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

During 2011, we significantly expanded our recurring revenue stream within our client base. Since our last earnings call, we have continued to make significant progress in this area. Specifically, we have secured a number of new agreements from existing clients during and subsequent to the end of the third quarter, including an agreement with Nationwide Children's Hospital, Columbus, Ohio that extended their SaaS term for an additional 5 years while adding FolderAnyWare, which is our non-patient-centric content management system and our CharityWare workflow solution and our integration suite for Epic EMR.

In agreement with Oakwood Healthcare, Dearborn, Michigan, the transition's done from an indirect agreement through a channel partner to a direct agreement with us. This is similar to the transaction earlier in the year with the University of Virginia. This agreement also included, like Nationwide Children's, our integration suite for Epic EMR and FolderAnyWare.

During the year, a total of 3 clients moved to direct agreements with us in lieu of renewing via channel partner. This has been a direct and meaningful positive impact on our revenue realizations from those clients. We expect this trend to continue into 2012. Agreements with 3 clients to upgrade to accessANYware 5.1, which will bring the total number of clients who have committed to migrating to the newest platform to 5. Likewise, we expect this trend to continue into 2012.

We have announced to our clients that we are sun setting several older versions of our accessANYware platform in 2013. This will require all clients to either move to the 5.1 platform or to version 1.9 SP3, both of which are Meaningful Use certified. We also signed agreements with 7 clients including those previously noted to implement our integration suite for Epic EMR, which will increase our number of Epic integrations to 9 with 1 more currently in the contracting process.

We also signed an agreement with a major Texas health system to extend their maintenance and support agreement for 5 years. We expect the trend of longer-term maintenance and or SaaS-based term contracts to continue as we move away from one-year renewals. Returning to the 5 strategic points, the fourth strategic point was building human capital. We brought together the human capital that is required to accomplish each of these areas of strategic focus as we transform to a best-in-class healthcare information technology company.

During the year, we made material changes to our team. With the addition, of Mike Schiller, as discussed earlier, but also with the addition of the founders of Interpoint Partners, Matt Seefeld as Chief Strategist, Revenue Cycle, James Skrinska as our Chief Technology Officer. We also added 6 very talented, former Interpoint associates to our team in the Atlanta office. While we did have a material decline in our headcount, which now stands at 75, which is down from nearly 100 at the end of fiscal year in 2010, 22 of our current associates are in their first 15 months with the company. Our fifth strategic point through 2011 was continuing to drive cost out of our infrastructure.

Operating expenses for the year were $2.5 million less than the prior year. We believe that we have taken substantially all of the costs possible out of our infrastructure during the year. We will continue, in the ordinary course of business, to monitor our spend patterns closely.

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

During 2012, we have 4 key strategic initiatives. First, we will scale and manage our infrastructure cost to help us efficiently and effectively grow the business. While 2011 had a focus on reducing infrastructure cost, 2012 will be a year for our teams to focus on managing the growth of our infrastructure as the business begins to grow in scale. We will continue to invest in our human capital resources as we ramp to support our anticipated growth, but we will also closely manage the technical and administrative infrastructure of the business. Second, we will expand our sales footprint to capture a greater share of the net new sales opportunities. While we added FTI Consulting as a distribution partner via our joint marketing agreement, we believe that we need to continue to develop channel partners to accelerate our growth.

However, as is the case with many distribution partnerships, there is a trade-off with this business model. Namely, that we sacrifice the percentage of the new revenue generated that is likely greater than if we sold the new sales prospect via our direct sales force. That being said, we believe that channel strategy cross mapped to an expanded direct sales team both under the leadership of a dedicated senior executive, focused on revenue generation, will increase the number of net new sales opportunities for us.

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

Our fourth and final strategy for this year is to introduce new and enhanced solutions for the market. During the upcoming fiscal year, we will look to continue to broaden, deepen and integrate all of our solutions offerings. This will be accomplished by bolstering our development efforts based upon input from our clients and from our understanding of where we see the challenges they face. As we did with the Interpoint Partners transaction, we may also consider inorganic solutions developments and growth opportunities as well.

As I have commented on previous calls, I want to remind everyone that this is a process. We are embarking on a measured yet aggressive growth plan, and as such, there may be bumps along the way. But we will manage our way through them. The steps we need to take remain as clear to this management team today as they were in 2011. By methodically executing on our strategic and tactical plans, we believe positive results will be borne out by our financial performance in the years to come.

Given the work that we have done in 2011 to control our cost, understand the needs and opportunities within our client base, development our sales and account management teams and channel partners, we feel that we have a reasonable insight into our financial performance for this year and next. Accordingly, we project 15% to 20% growth in net revenue for 2012. This would project revenue in the range of $20 million to $22 million.

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

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

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

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

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

Stephen H. Murdock

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

As we have discussed on previous earnings calls, we expected revenues to be slightly below or flat as compared to the prior year. Revenues for the fourth quarter were $4,518,000, the highest of any quarter this year, but 8% below the prior year's fourth quarter.

As Bob noted, revenue for this fiscal year was $17.1 million, 3% below revenue from the prior fiscal year. The decrease in revenue was primarily a result of decreases in proprietary software, hardware and third-party software sales as we continue to shift from a standard perpetual license model to a software-as-a-service model. These decreases were offset by increases in maintenance and support revenue of approximately $1 million, and a 17% increase in software-as-a-service revenue over the prior year.

Deferred revenue from our GE Healthcare relationship decreased 12% to $5.2 million from the prior year. Revenues from our Patient Financial Services solution, formerly known as Interpoint Partners, was $287,000 for the fourth quarter and year-to-date as that acquisition was completed on December 7, 2011. Total cost of sales for the fourth quarter was $2.2 million, a 36% decrease over the prior year fourth quarter and on a year-to-date basis, cost of sales was down 21% to $8.9 million from prior fiscal year, which resulted in a 30% increase in gross margin for the year.

The decline in cost of sales over the prior year as a result of an impairment charge from capitalized software, which is taken in the prior year, as well as significant staff reduction in professional services, client support that took place in the second quarter of this fiscal year as we continue to rightsize the organization. The selling, general and administrative expenses for the fourth quarter were $1,835,000, which were comparable to the prior fourth quarter. For the fiscal year ended January 31, 2012, selling, general and administrative expenses were $6,577,000, a 2.7% increase over the prior fiscal year. However, the fourth quarter included approximately $370,000 in onetime costs associated with the on-boarding of new associates and the transactional costs related to the Interpoint Partners acquisition.

On a year-to-date basis, there were onetime costs of approximately $739,000 associated with the Interpoint Partners acquisition, on-boarding of new associates and severances paid to former associates.

Research and development expense for the fourth quarter was $345,000, a 7% increase over the fourth quarter of the prior year and on a year to date basis was $1,409,000, down 19% from the prior year. In examining research and development costs, it's important to compare R&D expense along with R&D capitalized. Total R&D costs, including capitalized cost for this fiscal year was $4,009,000, a 10% decrease over the prior fiscal year.

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

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

Given the relatively large amount of noncash charges included in our financial results, we believe that adjusted EBITDA is a more meaningful measure in understanding our underlying cash based earnings. For the fiscal year ended January 31, 2012, adjusted EBITDA was $3,825,000, approximately a $1 million improvement over the prior year. We will continue to provide this non-GAAP financial measure in future earnings releases.

Cash balances at the end of the current fiscal year were approximately $2.2 million, with no drawdowns in our $3 million line of credit. We continue to see improvement in cash as we generate cash from operations and we continue our focus on cash collections. We believe we have the appropriate capital resources available to operate our business going forward.

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

Landon Barretto

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

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is coming from Bill Bunn of Fort Washington Investment Advisors.

William H. Bunn - Fort Washington Investment Advisors, Inc.

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

Robert E. Watson

There's very, very little prepayments. We have one maintenance customer which does generally prepay a year in advance, but with a couple of other customers, we build on an annual basis. But most of it is not in deferred revenue.

William H. Bunn - Fort Washington Investment Advisors, Inc.

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

Robert E. Watson

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

William H. Bunn - Fort Washington Investment Advisors, Inc.

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

Robert E. Watson

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

William H. Bunn - Fort Washington Investment Advisors, Inc.

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

Robert E. Watson

I'd like to be able to dictate it. I can't. It's really a function of the client making the decision of which model they're most comfortable with. Maintain on a maintenance agreement or moving to SaaS, or in the case of new customers, coming on as a SaaS agreement or the more traditional perpetual license purchase model. Now what we have seen in the market this year is a relatively significant shift, both in current customers and in the new sales prospects of leaning towards the software-as-a-service model. We think ultimately, over time, in forward and net cost of ownership for our current clients and sales prospects. So we think it's a pretty attractive model going forward in terms of the receptiveness of the sales prospects and clients.

William H. Bunn - Fort Washington Investment Advisors, Inc.

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

Robert E. Watson

The revenue impact was slightly under $300,000 for the quarter as it was closed mid-December and so we only really realized 7 weeks' worth of revenue from it. The synergy question in why this fits into what we're doing, is really very important. If you remember, one of our strategic points for last year was to gain a deeper knowledge of our client base and become more market facing. And as part of that process of engaging at an executive level broadly across our clients and frankly even with our, as we expanded our sales prospecting, one of the things that became clear to us is that the economic fire of the legacy Streamline Solutions, in many cases, as the Chief Financial Officer or the VP of Revenue Cycle and if you sit with those executives as this team did, one of the questions that we would probe them about is where there is gaps, what could we do better. Well one of the things that was quite clear to us is during the period after a bill is dropped and they're going to the collections process, the solutions that are available to them today do not have connectivity for the most part back to the EMR, back to the documents associated with that patient visit. We captured those documents as part of what we do and we have their interfaces in by directionally with the EMRs from all the major vendors. So the concept was that we would -- when the products become integrated, have for example, a simple documents tab, if you will, in fact it will be a little more sophisticated that when we get it done. But a documents tab inside the Interpoint Solutions, which allows collectors and financial officers to very quickly connect it back to the documents that relate to that particular visit by that patient. We really think it's a huge efficiency in driving the collections process. Is that helpful?

William H. Bunn - Fort Washington Investment Advisors, Inc.

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

Robert E. Watson

We think that, that segment of our business will have material growth rates as we move into 2012 and 2013. We announced a few weeks ago, the first sale of that solution set to one of our long-term streamlined customers, Albert Einstein in Philadelphia. We think the ability to cross sell that solution to our other legacy Streamline customers is a very, very important part of our strategy as we move into 2012. We also think there is an opportunity to cross-sell the electronic content management solutions of Streamline into the former clients of Interpoint, now our clients. So we think there's a significant and meaningful opportunity in cross-selling. We also find, as we go into the marketplace, that leading with the Patient Financial Services solution set or the products we've acquired in December, is really a key part of our sales process for 2012.

William H. Bunn - Fort Washington Investment Advisors, Inc.

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

Robert E. Watson

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

Operator

Our next question's coming from Frank Sparacino of First Analysis.

Frank Sparacino - First Analysis Securities Corporation, Research Division

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

Robert E. Watson

They actually are not consistent in terms of assuming they're going to go from maintenance to SaaS. Now where we are is that we've had 5 legacy clients commit to moving to the 5.1 platform. We've had several other clients that are on older versions, mid to moving to the 1.9 platform, which is the other platform that we are going to continue to support after July of 2013. That being said, we still have 20-plus opportunities to transition somebody from maintenance agreements to the software-as-a-service option and again, our account executive team, led by Mike Schiller, have been appropriately incented during 2012 to try to make that -- many of those transitions as possible. In fact, they're really a key part of our sales strategy this year as we go through the maintenance renewal process with folks.

Frank Sparacino - First Analysis Securities Corporation, Research Division

And then secondly, just following up on the one cross that you talked about, to Albert Einstein. I was curious if you could give some more detail in terms of that sales cycle in terms of how competitive it was, et cetera?

Robert E. Watson

Yes. First, in terms of sales cycle. One thing we learned last year in general, is when we are selling new solutions or advanced solutions, it could be our HIMs workflows on the legacy business or the PFS stuff and the new solutions, but this sales cycle is generally much shorter. It can be as short as 3 months, as it was the case of Albert Einstein, I think that's an outlier. Legitimately, they should be in the 6 to 9 month sort of cycle for those kinds of opportunities as opposed to a net new customer, which can be a 9 to 18 months sales cycle. So if -- we think the cross-selling opportunity this year across both client sets is significant for us.

Frank Sparacino - First Analysis Securities Corporation, Research Division

And then, Bob, just was -- given it was an existing customer, was there a competitive solutions you guys were baked off against in that situation? Or maybe just talk about that.

Robert E. Watson

Yes, I think -- let's talk about the competitive market in specific and I'll come back to Albert Einstein. So the competitive market on that side, you have the usual cast of characters that you'd expect to be there. Medifinance, MedAssets, Streamware, that pool. In the particular case of Albert Einstein, they were considering other solutions. We were able, frankly because of our role there as a trusted vendor, to essentially short-circuit much of that sales cycle. And we've seen that in other current existing clients where we're talking about the Patient Financial Services solution set that there is an ability because we are in this position as a trusted vendor. I mean one of the really significant drivers that we see in the marketplace today is that, that CIOs and CFOs, they tell us, is not only are they concerned about their cash flow in the economics, but they want to reduce the number of vendors they have. And you've been around health care long enough frankly to know that there's never going to be a single vendor solution. On the other hand, you can't sit there and run a billion-dollar enterprise supporting 250 applications from 155 vendors. That's woozy, and the CIOs are telling us that. And many of our Streamline customers and clients have been clients for 10 years or more. We are fully integrated into their operations so to the extent that we can go back to them with solutions that help them, not only improve their operation and financial performance, which is our overall goal, but also help them reduce the number of vendor agreements they have is very, very important. And we think a key part again, a key part of our strategy is we present to our current clients.

Operator

Our next question is coming from Sam Rebotsky of SER Asset Management.

Sam Rebotsky

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

Robert E. Watson

Well, let's talk about -- the pipeline, well let's talk about -- pipeline versus -- we're talking about pipeline now, not backlog. Just confirm around this thing.

Sam Rebotsky

Right.

Robert E. Watson

Okay. So let's talk about pipeline. When we came in here last February, we essentially reset the pipeline to 0. So our view was, by the end of the first quarter, we had $4 million or $5 million in opportunities that we would, thought were legitimate. As we move through the course of the year, it started growing at the rate of about $6 million in Q2, $6 million in Q3 and then the big jump in Q4. That being said, across those opportunities during 2011, we did $7.2 million in new sales bookings for the year in that pipeline, which was significantly in excess of what we had originally forecast, to be honest. So I'm not sure there's a strong data point to take away from that at this point because we've only been through this process a year and we had such a material jump in the fourth quarter, but I do think as we go forward, we'll get more refinements of the sales pipeline reporting as we move into 2012 and 2013.

Sam Rebotsky

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

Robert E. Watson

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

Sam Rebotsky

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

Robert E. Watson

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

Sam Rebotsky

Okay. Now, far as the Interpoint, you say that cost you $400,000 in the current quarter, what is your expectations? Is that contributing -- accretive now going forward?

Robert E. Watson

It will -- through the first 2 quarters of the year, we did not expect it to be accretive. As we move through the end of the year, we expect it to be accretive on a cash flow basis. A slight drag on earnings for 2012.

Sam Rebotsky

Okay. So are you comfortable the way everything is going with the Interpoint then? It's been your -- what your expectations and would you be ready to look at other acquisitions at this point or when would you be ready?

Robert E. Watson

Well, let's talk about Interpoint first. If I had to grade us today on where we sit on the integration, I would put us in exceeding our expectations, frankly. We had to benefit it because there was a significant lag last fall from when we signed a letter of intent than we actually closed the transaction that our implementation and technology teams led by Gary Winzenread, were able to invest in a significant amount of time in the planning process so that when we hit the go switch on December 7, things were in place to start moving along. Now has it been perfect? No. But I think we're well down the path and we're quite comfortable where we are. From a sales and marketing standpoint, we are fully integrated at this point. The actual transfer of the technology from their former data centers into ours is in process now. It's in the timeframe in which we expected it to happen. So we're quite pleased with the status of where we are on the integration of that asset into this organization. On the question of other opportunities. When it's appropriate and situations arise that are economically appropriate and fit with the strategic plan that we have, we will certainly consider them.

Sam Rebotsky

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

Robert E. Watson

I think there is some risk of some lumpiness and really reflective of timing of go lives and completion of implementation. So you get a little bumps there because we don't recognize any of the revenue from SaaS-based contracts until the client is live. So by default, if you have a one month delay or a 2-week delay on something it does have some potential impact on lumpiness. But I don't really think it's that material as we move through this year.

Operator

[Operator Instructions] Our next question is coming from Mark Cahill [ph], a private investor.

Unknown Attendee

I jumped on the call late, so I missed the initial comments. Forgive me if I ask something redundant. Regarding the FTI Consulting, what's their client base like? Large hospitals, small, domestic, international?

Robert E. Watson

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

Unknown Attendee

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

Robert E. Watson

Well, part of it is we've not had to address the exclusivity requests from anyone so far. I think part of it is making sure that the reason you select someone as a distribution partner is consistent with the relationships you have with your other distribution partners. To give an example, GE, because of the nature of our relationship with them, if it's a net new sales opportunity, it is only going to be an opportunity where the decision at the sales prospect is about changing out their core electronic medical record. So that's a very different. So in the case of -- and again, they are only going to be very, very large institutions because it's GE. In the case of FTI, the decision with the FTI guys is around how to improve their revenue cycle, which is not something GE would be involved into necessarily directly. So we sort of carved that out with that segment. And so we see our partner for the revenue cycle side of what we do in the larger size healthcare institutions to frankly, be FTI.

Unknown Attendee

Regarding GE, Emergis, et cetera, do you expect much production out of them in 2012?

Robert E. Watson

GE, we don't -- we really have no ability to forecast GE net new sales, none at all. I mean they'll call us if there's an opportunity. That being said, they made no net new sales that benefited us in 2011. Now, we continue to work with them, on as we noted in the call, our current clients we'd share with them. We had something over $2 million in new sales bookings into that installed base last year, which I think was frankly quite material given the turmoil that was going on. As it relates to TELUS, which is formerly Emergis, if we continue to be -- work with them in installing facilities in the Québec province, pursuant to our agreement that was announced a couple of years ago, we've not seen any significant net new sales opportunity from that channel.

Unknown Attendee

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

Robert E. Watson

Well, let's talk about how those Epic systems arose. I mean virtually, actually, all of those Epic opportunities in 2011 were opportunities where the client had changed their core EMR from one of our distribution partners to Epic and elected to stay with us as opposed to transitioning to another content management solutions provider. Streamline had at lost a couple of customers in 2010 where the client shifted their EMR from another vendor to Epic and at that time, Streamline did not have its integration suite for Epic EMR in place. You'll note that we made that a priority, I think we said this on the very first call in April of last year and in fact, in April of last year, we announced the Beta availability of that solution and the uptick in our customer base where we moved from none at the start of 2011 to I think currently 9 contracts, to deploy that solution is quite material. So we will continue to see that as some of our current customers shift from their current EMR vendor to Epic. For the net new sales opportunity, it's not Epic-specific or Allscripts-specific or Cerner-specific. It's driven by a whole set of other variables about why we would be in there trying to sell them something.

Unknown Attendee

Okay. At the end of the year, I saw the subscription announcement and I also noticed that Sharon Brightman sold a lot of stock, I never saw any of the hard numbers show up in the volume trading. Two questions. Did you need -- was there a pressing need for cash at the time? And were management and directors also involved in reducing Brightman's stock position?

Robert E. Watson

As it relates to the stock purchases by the Board and management in December. During the December period, we felt that there -- as a group, had decided that we wanted to make an investment in the company. Not because cash was required but merely we felt we wanted to continue, as we have done every quarter, we were allowed to purchase stock. As you know some quarters we're not allowed for various reasons to do so. We wanted to take an opportunity, put a stake in the ground and send the message to our shareholders that this Board of Directors and this management team was committed to the strategies that we put forth throughout 2011. And it just happened to happen during the month of December around the fact that with the shelf registration we can take down some shares on. No other reason for it, Mark, other than sending a message to you guys.

Unknown Attendee

What's the message?

Robert E. Watson

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

Unknown Attendee

I saw the -- [indiscernible] hosting the summit in mid-May. Are you booked solid and have you established new offices in Atlanta?

Robert E. Watson

Let's talk about the summit first. The attendance for the summit continues to grow each week as we get closer to be event. I mean the historic pattern is as you get within the first month before the event, registrations pick up. Now that being said, we're pleased with the level of registrations to date. And frankly, we have a really good representation of long term Streamline Health clients and also from the new clients that came to us through the Interpoint acquisition. We are fully sold out in all of our sponsor packages, which is a huge commitment from our technology partners and a significant increase in contribution from them compared to the summit in March or February of 2011. We have a really stellar lineup of client associates and external speakers and expect it to be accretive. As to the question about Atlanta, the Interpoint company was headquartered in Atlanta and we do maintain that office as part of that transaction.

Unknown Attendee

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

Robert E. Watson

Gary and his team are always working overtime. There's no other option here. I think I said this earlier in the -- answering one of the questions from I think the guy from Fort Washington, that the integration from a technology standpoint is in process. We're on a timetable to complete it. We are performing well against that timetable. The non-technology pieces of that integration have been completed successfully and we have a plan, we're sticking to the plan and over the course of the next year, the products will become integrated.

Operator

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

Robert E. Watson

Thank you. My thanks to everyone for participating in today's call. In the past 4 quarters, we have taken demonstrable steps in implementing our strategic plan and we believe we are making significant progress. We are focused on delivering results for our clients and our shareholders. As each day passes, we make progress towards our goal of becoming a best-in-class healthcare information technology company. We have a lot to look forward to, as do our shareholders. We will speak with you again at the conclusion of the current quarter. Have a good day, and thank you for taking time to join us today.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you, all, for your participation.

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