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Executives

Joe Hill - CFO

Stephen Kahane - President, CEO and Chairman

Analysts

Bret Jones - Leerink Swann

Steve Halper - Thomas Weisel Partners

Corey Tobey - William Blair & Company

Stan Mann - Mann Family Investments

Jon Robohm - Gagnon Securities

Ryan Vardeman - Palogic Capital

AMICAS Inc. (AMCS) Q4 2007 Earnings Call February 29, 2008 8:30 AM ET

Operator

Welcome to today’s teleconference. (Operator Instructions) I’ll now turn the program over to Joe Hill, Chief Financial Officer of AMICAS. Please begin, sir.

Joe Hill

Thank you and good morning, everybody. Welcome to the Earnings Call for AMICAS, Inc. As the operator mentioned, my name is Joe Hill, Senior Vice President and Chief Financial Officer for AMICAS. On the call this morning with me is Dr. Stephen Kahane, our President, CEO and Chairman. Before beginning, I’d like to inform you that during this call we will discuss our business outlook and make forward-looking statements regarding our business.

These forward-looking statements and all other statements that may be made during this conference call that are not historical facts are subject to a number of risks and uncertainties. Our actual results may differ materially from those suggested by our forward-looking statements. Please note that any forward-looking statement represents our view as of today and should not be relied upon as representing our view as of any subsequent date. And we are under no obligation to update these statements and specifically disclaim any obligation to do so.

For more information on the risk factors that could cause actual results to differ please refer to our Safe Harbor section of our earnings press release issued today as well as various document that we filed with the SEC including the section entitled Risk Factors, of our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q.

In addition, I want to note that although we may use non-GAAP financial measures in our presentation, these measures should be viewed as supplemental to the company’s GAAP financial measures and not as an alternative to them. Now I’d like to introduce our CEO, Dr. Steve Kahane.

Stephen Kahane

Thank you, Joe. Good morning, everyone and thank you for joining us to review AMICAS results for the fourth quarter of 2007 and fiscal year 2007. We will begin our conference with Joe Hill who will go over our fourth quarter and fiscal year 2007 results. I will then share with you a few pieces of additional information and some thoughts on the quarter and the business. We will then open it up for questions. I’ll now turn the call over to Joe. Joe.

Joe Hill

Thanks, Steve. First, I’ll review the Q4 financial highlights for revenue, operating income, net income and cash and cash flow, then I’ll follow with the fiscal year financial highlights for those same categories. So for Q4, our financial highlights include revenue with total revenues of the fourth quarter of 2007 were $11.7 million compared to $11.4 million for the fourth quarter of 2006. Our operating loss for the fourth quarter of 2007 was $1.9 million compared to an operating loss of $2.1 million for the fourth quarter of 2006.

Our net loss from continuing operations for the fourth quarter of 2007 was $902,000 or a loss of $0.02 per share, compared to a net loss from continuing operations of $1.1 million or a loss of $0.03 per share for the same quarter previous year 2006. In the fourth quarter of 2007, both operating loss and net loss from continuing operations included a $300,000 charge related to the elimination of the position of the Chief Operating Officer, a $300,000 non-cash stock-based compensation expense and an $800,000 charge of depreciation and amortization.

In the fourth quarter of 2006, operating net loss from continuing operations included $400,000 of non-cash stock-based compensation expense and $800,000 for depreciation and amortization. We ended the fourth quarter of 2007 with a cash, cash equivalents and marketable securities balance of $75.6 million with no long-term debt and working capital of $69.5 million.

Moving on to the full-year financial highlights. Total revenues for the year ended December 31, 2007 were $49.9 million compared to $49.4 million for the year ended December 31, 2006. Our operating loss for the year ended December 31, 2007 was $4.5 million compared to an operating loss of $4.9 million for the year ended December 31, 2006.

The company’s net loss from continuing operations for the year ended December 31, 2007 was $862,000 or $0.02 per share compared to a net loss from continuing operations of $1.3 million or $0.03 per share for the year ended December 31, 2006.

Please note that for the year ended December 31, 2007, both operating loss and net loss from continuing operations included 1.9 million of stock-based comp expense, $3.1 million of depreciation and amortization and $300,000 of the elimination of the COO position. For the year ended December 31, 2006, both operating loss and net loss from continuing operations included $500,000 of non-recurring charges, $1.8 million of stock-based compensation expense and $3.2 million of depreciation and amortization.

Moving on to cash, for the year ended December 31, 2007, we generated net cash provided from operations of $7 million as compared to a net cash provided by operations of $3.6 million for the year earlier ending December 31, 2006. During the fourth quarter of 2007, our Board of Directors directed the company to initiate a $25 million stock repurchase plan.

We did purchase approximately 301,000 shares of common stock for approximately $800,000 in the last quarter of 2007. Under a previously authorized stock repurchase plan during 2006 we repurchased 4.5 million shares of our common stock for approximately $15 million, the total amount authorized by the AMICAS Board of Directors under the prior plan. At this point I am going to pass it back to Steve.

Stephen Kahane

Thank you, Joe. As Joe mentioned total revenue to the fourth quarter were $11.7 million. This consists of maintenance, which includes software and hardware support and electronic data interchange or EDI of $7.9 million, services of about $1.8 million, and software and system sales of $2 million.

Comparing Q4 year-over-year revenues increased from $11.4 million to $11.7 million which with rounding is about 2%. When compared with the same period a year ago the recurring portion of our revenue increased from $7.4 million to $7.9 million or 6%. Also note that our non-recurring backlog in deferred revenue increased to $10.9 million at the end of Q4, 2007 from $9.6 million at the end of Q3, 2007.

This is an important number and as most of you know this updated number reflects what we were able to take off of backlog as a result of meeting certain milestones and what we were able to add as a result of new order bookings that weren’t converted to revenue in the same quarter that is in Q4. Bookings for Q4 were 8.2 million, up from 5.5 million in Q3 of 2007 and up from 8 million in Q4 of 2006. For the quarter that is a year-over-year increase of about 3%, fiscal year 2007 bookings however were 29 million, an increase of about 5 million over the previous year or 21% year-over-year growth. As always we must emphasize that we believe quarter-to-quarter bookings results are hard to predict and will likely continue to fluctuate. Still we are pleased that we are able to grow bookings by more than 20% especially when compared with the results others have delivered in what we all agree is a tricky market environment.

On the earnings front when adjusted for the non-cash stock compensation expense of about $300,000 and a non-recurring charge that Joe mentioned of about $300,000. We had an operating loss of 1.2 million, operating income when you adjusted it for depreciation and amortization of $800,000 came out to a loss of about $400,000 which compares to the equivalent metric for the previous quarter Q3 of 2007 of a positive $800,000 and to Q4 of 2006’s results of a negative $900,000.

Net income from continuing operations was a negative $900,000 which compares with a loss in Q4 of 2006 of $1.1 million, remember that Q4 includes a sizeable expense associated with RSNA, the largest medical meeting in the world and our largest marketing event of the year. We were able to keep operating cash flow positive ending the year with a total operating cash flow for 2007 of about $7 million. Our total pipeline grew nicely in 2007 and remains healthy.

As you all know during the fourth quarter of 2007 the Board of Directors approved a $25 million stock repurchase plan as Joe mentioned the company repurchased approximately 300,000 shares for about $800,000, that was all in the last quarter of 2007. Under the previously ordered stock repurchase plan during 2006 the company repurchased 4.5 million shares of its common stock utilizing the full authorized amount provided By The Board of Directors of about $15 million.

We are continuing to make progress in marketing and in development with new product introductions we’ve completed and others we have scheduled. As we mentioned last quarter, Vision Reach and our Insight Services products are now generally available. We are now actively marketing and selling Vision Series Financials and our Dashboards products as well. We continue to believe that our solutions are some of the best in the industry.

Especially important and noteworthy is our distinguishing ability to offer radiology groups, teleradiology and imaging center owners, an end to end automation solution including a modern radiology information system, PACS system and revenue cycle management offerings. We believe that we are doing the right things to optimize our position and our ability to win and retain good business.

Obviously, we are committed to continuing to try to improve our positioning and our execution over time. Along those lines and as per our announcement in the first half of last year, we completed the acquisition of a new revenue cycle management software product and have put this new and unique release of this product in the field for testing late last year.

Our new Vision Series Financials products offer state of the art billing and accounts receivables management automation with some very new and exciting features developed by AMICAS. When coupled with the business intelligence capabilities of our Dashboards product and some of the advanced features of Insight Services. We believe AMICAS has extended its lead as the best revenue cycle management software solution provider in radiology.

In Q4 we signed four new contracts for this product. We believe that our end-to-end solution is now even more compelling. As I mentioned, we are now actively marketing Vision Series Financials as well as the new Dashboards business intelligence product. We continue to believe that there is a great market for image and information management solution. The ability to offer a suite of tools and products that address this entire spectrum of automation need, is potentially a big differentiator in the market place. AMICAS has a very attractive, proven and competitive suite available today.

We continue to refine at end-to-end offering as both a comprehensive solution and as a modular solution and at the same time working hard to make sure that the market knows about AMICAS and its solutions. Despite the challenges many have felt in this market place, AMICAS was able to grow bookings and win several very significant new customer partnerships in 2007.

Several of the country’s largest radiology groups made decisions to use AMICAS products as the basis for their automation infrastructure going forward. In addition, one of the largest imaging center enterprises in the country MedQuest made the strategic decision to standardize on AMICAS.

In the fourth quarter of 2007, AMICAS was able to sign several very sophisticated and informed imaging service providers. Several Q4 wins that are worthy of note, include the MedQuest relationship. MedQuest is a leading diagnostic imaging center company, one of the largest in the country that owns and operates 92 outpatient imaging centers in 13 states.

MedQuest chose AMICAS Vision Series PACS and Vision Reach as the platform on which they will standardize their image management and results distribution across their nationwide network of imaging centers. Radiology Limited is a radiology group consisting of over 45 radiologists operating ten imaging centers and providing coverage for three hospitals in the greater Tucson area.

Radiology Limited has been an AMICAS PACS customer for several years and made this strategic decision to complement there existing PACS system with the entire suite of AMICAS radiology automation products including systems to support scheduling, report production, document management and comprehensive revenue cycle management. This is an actual example of a large well respected radiology group investing in the end-to-end automation solution from AMICAS.

Radiology Alliance, Tennessee’s largest radiology practice has 45 radiologists in three imaging centers serving four area hospitals in the mid-state area. Radiology Alliance has been in existing AMICAS revenue cycle management customer for a number of years, they will be upgrading there existing revenue cycle management platform to the new Vision Series Financials platform. They will also use Vision Series Reach, Vision RIS, Insight Services and Insight Dashboards solution to support there goal for growth and further operational efficiency.

This is another example, excellent example of a large very well respected radiology group increasing their automation partnership with AMICAS. We will work hard to help these new partners succeed and to make sure others follow in their footsteps. It is noteworthy that even with obstacles such as the Deficit Reduction Act, DRA and other reimbursement pressures, these groups made the decision to take their automation support to the next level with industry leading offerings from AMICAS.

We also want to emphasize that we expect several of these new wins will generate a lot more up site for AMICAS when compared with the bookings number which is based on a strict definition we have described before.

As we’ve discussed in previous calls, we believe as do many of our customers that the use of imaging in clinical practice will continue to grow. As one of the most profound innovations in healthcare, diagnostic imaging has brought about great improvements in quality of care. The fundamental trends in imaging continue. In addition, fundamental demographic trends including the overall aging of the population and unrivaled public interest in health and fitness and the lay publics increasing demands for non-invasive diagnostic interventions, all support our belief that imaging study volumes will continue to grow.

At the same time, the number of images being collected per study will probably continue to increase. These trends support our belief that there will be continued growth in imaging. This growth and other related trends such as the growing interest in teleradiology, electronic medical records, computer-based physician order entry and pay for performance reimbursement schemes will fuel an increased need for more and better automation support of image and information management.

As the demand for imaging in clinical practice continues to grow and outpace the supply of radiologists to provide interpretation services, we believe that competition and focus on efficiency in automation will also continue to intensify. New business models for providing radiology services, such as regional and national radiology groups and teleradiology providers are increasingly addressing the supply demand imbalance with innovative distributed interpretation services. We believe that this is a significant trend in our industry. We also believe that AMICAS is well positioned to capitalize on these and other industry trends. Our solutions match the needs and our focus is on the segment of the market that is likely to win.

We believe that AMICAS has excellent products and that our reputation in the marketplace is continuing to spread and improve and that we have several new product introductions currently available in the market and plan for the near future. In many ways we believe that AMICAS is positioned better than anyone else in the market to dominate the radiology group, teleradiology and imaging center markets and to be a leader in certain segments of the hospital market.

Our installed base of customers and our strong technology and product offerings such as our web-based PACS and RIS and our complete end-to-end offering of PACS, RIS, revenue cycle management and document management, help position us to win in these segments. Looking forward, while predicting results has been difficult for many in our space, AMICAS estimates that 2008 revenues will be between $52 million and $54 million with pro forma EBITDA between $1 and $1.5 million, which is consistent with a net loss of approximately $0.02 per share.

AMICAS remains committed to customer success and innovation in this market. We will continue to invest aggressively in R&D and related areas in order to support the kind of automation capability this market needs and deserves. Combining a market where imaging businesses continue to embrace automation as part of the answer to the DRA and other trends, with the collection of new product introductions already in progress, AMICAS expects 2008 bookings growth of about 10 to 20%.

Bookings are defined as contractual commitments from customers for licenses, services, hardware and maintenance support. We have our stock buy-back in place and expect to continue to be opportunistic in our use of cash for stock buy-back purposes.

As all of you know we have kept operating expenses around $8 million per quarter. As we mentioned on the call several times last year, we are planning some increased spending related to our Vision Series Financials initiatives. We are also investing in some platform technology areas that we believe will be important for the market over the coming years.

As we explained throughout last year, forecasting revenue and profit is made more difficult because of the market conditions associated with DRA and other issues and because of the changes AMICAS has made and is making to its approach to the market; such as offering long-term financing options, subscription packages, et cetera.

And the implications those types of changes tend to have on the timing of revenue recognition. While 2007 bookings increased over 20% from 2006, there is no guarantee that results will continue to improve in the near term. As you can probably tell from our comments, however, we are excited about our new product introductions and the related improvement in our value proposition related to end-to-end automation.

Our progress with Vision Reach and other product initiatives such as Dashboards are equally exciting. We will continue to have an excellent balance sheet. Positive cash flow from operations again with 2007 cash flow from operations of about $7 million, a great installed base of customers, and a business with high recurring revenue in a market that needs strong automation support.

Okay. Let’s open it up for questions.

Question-and-Answer Session

Operator

Very good, sir. (Operator Instructions) We will take our first question from the site of Bret Jones from Leerink Swann. Your line is open.

Bret Jones - Leerink Swann

Hi, good morning. I was just trying to understand how the 20% bookings guidance, last year – when we look at 20% bookings guidance, your relatively positive view on the market, and the effect that the DRA has essentially been lapped. How does that rectify, or how is that reflective in the 4 to 8% revenue growth guidance? Is that mostly the effect of customers going to an ASP model?

Stephen Kahane

Bret, the last part of your question – I wasn’t sure. You said something about 48%?

Bret Jones - Leerink Swann

4 to 8% revenue growth?

Stephen Kahane

Oh, 4 to 8% revenue growth. Okay. Yes. I mean the short answer to that and Joe feel free to chime in on top of this, is yes, that the deals, we are doing more subscription-type licensing, some more deals with extended payment terms, that tend to delay rev rec, but that’s really the short answer. Joe do you want to elaborate on that?

Joe Hill

That’s the same phenomena that we saw that this year is that, as we are doing more of these extended deals, the order growth is going to outpace for the short term the revenue growth.

Bret Jones - Leerink Swann

Okay, and I was wondering if we could talk about the maintenance and service component, it was about 76% of total revenue. How much of that would you consider to be true recurring revenue versus like implementation services and things like that?

Stephen Kahane

So every quarter, Brett, we break out services from maintenance and support. That’s usually the first paragraph of my little speech. So we can give you that in a minute, but I think this quarter, of the total recurring which in the public documents is presented as maintenance and services, we break that apart, and the breakdown was of the $7.9 million, the services were $1.8 million and true recurring was $7.9 million, so and that when you add it together is the maintenance and services.

Bret Jones - Leerink Swann

Okay. So I was just curious as to how much is that service – so $7.9 million, the vast majority of your service and maintenance is going to be recurring, so it would imply, yeah, I’m just trying to get to what the...

Joe Hill

Of the total revenue for this year for 2007, $31.1 million of that was our recurring revenue.

Bret Jones - Leerink Swann

Okay, great.

Joe Hill

True, recurring revenue...

Stephen Kahane

And that’s true recurring, we don’t include – some people report in their recurring revenue what they sold into their base on top of that. We are not including that, this is true, maintenance and support for software, hardware, and electronic data interchange, recurring transactions.

Bret Jones - Leerink Swann

All right so about 60, looks like a little over 60% of it is true recurring revenue that we are going to see again next year.

Stephen Kahane

Correct.

Bret Jones - Leerink Swann

Okay, great. Just one last question then on the bookings, have you seen a change in the competitive environment? I was wondering if you had booked – I think the guidance was around 30%; bookings growth for 2007 came in around 20%.

Stephen Kahane

Yeah.

Bret Jones - Leerink Swann

I am just wondering are you seeing larger competitors moving from the in-patient market to the freestanding imaging center? You know more and more of that?

Stephen Kahane

You know we have talked about that in the past. You know I can’t say that we have seen a lot more of that recently. You know there was a blip in the first half of 2006 when a couple of those guys tried to come in, a couple of them have left, a couple have stayed.

Bret Jones - Leerink Swann

And the ones that have stayed, are you running into them more often, or do you feel like they’re having better success in the market, where as the win rate, the win rate in the bids you’re in or has that remained fairly steady?

Stephen Kahane

Yes, I don’t think there’s been any dramatic change there in the last few quarters.

Bret Jones - Leerink Swann

All right, great, thank you.

Stephen Kahane

Sure.

Operator

We’ll go next to the site of Steve Halper from Thomas Weisel Partners. Your line is open.

Steve Halper - Thomas Weisel Partners

Yes, hi. Do you think, we’re a couple of years after DRA and the slow down, do you think things are beginning to shake loose a little bit and providers have sort of adjusted to the new world order that’s in place and a lower level of profitability?

Stephen Kahane

So, Steve, I think that’s a very important question. The, remember the announcement came out in February of ‘06 if I remember correctly, somewhere around that, first quarter of ‘06, DRA was announced. The really big hit in reimbursements started in January ‘07, and, as you know, groups feel the hit of a change in reimbursement usually 90 to 120 days after it takes place. So it was the first half of ‘07 that the practices really started feeling a low, the hit in their take-home pay. In the second half of ‘06, however, just based on the announcement of the change and some modest changes that had been put in place we felt, I think the phrase we tended to use was that a lot of groups were like deer in headlights.

They were shocked at the level of reimbursement change and we saw a bunch of deals sort of freeze or go away. I think 2007 was the first time they really felt it in their pocket book. They absolutely have felt it, I mean consistently, I’ve visited dozens of practices, there’s no question they felt it in ‘07; but I do think that they are adjusting to it. They have had time to think through what their options are, and I think the more sophisticated ones have already gotten their act together and made, are starting to make the move. How much that will continue, whether the medium and smaller groups will follow, how quickly, we don’t know, unfortunately. But groups like Rad Ltd. and Rad Alliance, who I don’t think had made major moves for several years, did in 2007, Q4 of 2007.

Steve Halper - Thomas Weisel Partners

Great, thanks.

Stephen Kahane

Thank you, Steve.

Operator

And we go next to site of Corey Tobin from William Blair & Company. Your line is open.

Corey Tobey - William Blair & Company

Hi. Good morning, gentlemen, it’s Jeremy for Corey. Just of couple quick questions, on this MedQuest deal, obviously a very nice marquee client for you guys so that’s a great win. I’m wondering to the extent you’re comfortable to talk about whether this is a recurring revenue arrangement or whether this is a traditional booking, and to what extent that – what is the assumptions for that contract in terms of your P&L guidance for ‘08?

Stephen Kahane

Sorry, hang on one second on that one. Okay, Joe will comment on this.

Joe Hill

So as we’ve disclosed previously on the MedQuest deal, it is a five-year term contract. It’s recognized fairly ratably over the five years with a bit heavier on the first three years and a little lighter on the second two years. And as we’ve said before, there won’t be any significant blip in earnings related to the MedQuest deal in any one quarter.

Corey Tobey - William Blair & Company

Okay, and as you look into ‘08, in terms of the guidance itself, is there anything you can kind of share with respect to the assumption in terms of implementation of the deal, how you expect this to kind of...

Stephen Kahane

Yes, I’m going to jump in. It’s Steve. I really think, we’ve said this before; we really don’t like talking about specific deals. It’s just not right for us to get into too much detail. So...

Corey Tobey - William Blair & Company

Okay, fair enough. I don’t want to push the envelope there for you. But with respect to I guess maybe in general the recurring revenue element, can you give us maybe a little bit of color on, obviously this is sort of a, this is a new development in 2007 and I’m wondering if you can kind of give us a feeling for what the guidance maybe would have been if you didn’t start offering these kind of subscription contracts, if you just kind kept on the traditional path?

Stephen Kahane

No.

Corey Tobey - William Blair & Company

Okay.

Stephen Kahane

But good try. I respect you for trying.

Corey Tobey - William Blair & Company

Okay, fair enough. And just one last kind of a housekeeping thing, we’ve seen a couple of HCIT providers as well as other companies in general talk about auction rate securities on their balance sheet and I am wondering if there’s any exposure to that and if that’s disrupted kind of anything that you guys were planning to do.

Joe Hill

No, we’ve kept an eye on this and we’ve been managing that. We don’t believe we have any exposure related to that.

Corey Tobey - William Blair & Company

All right. Thank you.

Stephen Kahane

Good. Thanks.

Operator

Your next question from the site of Stan Mann, Mann Family Investments. Your line is open.

Stan Mann - Mann Family Investments

Good morning.

Stephen Kahane

Good morning, Stan.

Stan Mann - Mann Family Investments

Several questions, the easy ones, telemetric radiology, how does that fit into your suite of products and your potential in the future? Any change? Does it mean anything?

Stephen Kahane

Yes, teleradiology is a growing trend. As the technology has gotten better, as the supply-demand problem has continued, maybe some could argue even intensified, and as groups have come to realize that there is an opportunity to reach out beyond, their local or regional areas and grab business. I think that, I think more groups are looking at the possibility of investing in technology to support the effort to reach out beyond their local territory.

AMICAS’ technology is excellent for that. AMICAS grew up, really the early days of AMICAS were aimed at image distribution over low bandwidth lines and so our technology, I would argue better than almost anyone else’s out there, handles low bandwidth lines, beautifully keeps the expenses for these groups low so they don’t have to pay those communication carriers large sums of money for moving big images around. And as the study span, as the studies have gotten bigger and bigger, that’s a real issue. So relatively speaking I think AMICAS is very well positioned to support both our customers expanding into providing teleradiology services, but also AMICAS winning new teleradiology clients.

Stan Mann - Mann Family Investments

Are you hearing and of course you’ve got the RS and the show coming up, but are you getting more requests? Are you seeing a segment develop for a new business area for you?

Stephen Kahane

Yeah, there’s no question that if you looked at our pipeline, Stan, and segmented out teleradiology groups or teleradiology products, that has gone up significantly throughout 2007.

Stan Mann - Mann Family Investments

Okay. Second question and this is my standard question. You’ve got $75 million, you’ve got $25 million allocated to a stock repurchase, and I’m wondering when that will happen. And the third question is, so you’ll have more than $50 million, when are we going to do something with it? It’s been like, it’s like, it's locked in the vault. So have you got plans to utilize the $50 million or can you give it back to us?

Stephen Kahane

Yes, again, very reasonable question. We are, Stan, as we’ve said, we continue to look at other options for the use of that cash. And the market is changing. We think that, I’ve said I think on several calls maybe a year ago, that we got close on a few things, but the prices were unacceptable and I think we want to keep those options open. I think that’s the right thing for shareholders, for AMICAS to retain that as an option for a bit longer to see how the market plays out.

Stan Mann - Mann Family Investments

You’re saying that the play-out, you’re seeing more possible opportunity. Can we say that?

Stephen Kahane

Yes, I can say that. Yes.

Stan Mann - Mann Family Investments

Okay, and the buy-back, are we going to kind of speed up or do something? It’s unusual to drag as long as we seem to drag.

Stephen Kahane

I believe it is fair to say that we have certain external constraints around how much we can buy based on the low volumes of trading. I think there’s some rules, Joe, you may want to comment.

Joe Hill

Under a 10b5 plan, which we have, which allows us to trade at any time, whether, no matter what’s happening with the company, you’re restricted to the average four-week, previous four-week volume. So under the 10b5 there are restrictions to how much we can trade.

Stan Mann - Mann Family Investments

But you could have traded more than you’re already bought. That’s my point. That’s really obvious.

Stephen Kahane

Yeah, I’d have to look more closely at that. Again, it’s limited to 25% of the average daily volume on a given day. So, we can take that off-line and look at that more carefully with you, Stan.

Stan Mann - Mann Family Investments

Okay. Last question is do you feel that what you projected, you’re being extremely careful for 2008? Would you say that? Conservative, careful?

Stephen Kahane

Well, I would say that the last few years have been extremely humbling. And so, yes, I think we’re trying to be careful. It’s hard to predict, but this is honestly what we think is fair and appropriate to put out there right now.

Stan Mann - Mann Family Investments

Okay. If the show is extremely excellent, will you comment on it post-show?

Stephen Kahane

So, Stan, we had the big RSNA in November. That doesn’t come back around until next November. We did just last week have an HIMS show, but that’s not nearly as significant.

Stan Mann - Mann Family Investments

Right.

Stephen Kahane

So we do have a couple more shows coming up, we have our user conference. We’ll update you, both of those actually will happen, I think both of those happen before the next fall, I think that’s right.

Stan Mann - Mann Family Investments

Okay. Thank you.

Stephen Kahane

We’ll update you on those then.

Stan Mann - Mann Family Investments

Thank you.

Stephen Kahane

All right. Thanks, Stan.

Operator

(Operator Instructions) We’ll go next to Jon Robohm of Gagnon Securities. Your line is open.

Jon Robohm - Gagnon Securities

Good morning, guys.

Stephen Kahane

Hey, Jon, we can’t hear you.

Jon Robohm - Gagnon Securities

Yeah, Stephen?

Stephen Kahane

Yes?

Jon Robohm - Gagnon Securities

You made a comment that some of these orders, these larger orders that you’ve won will generate more revenue than the bookings that you accounted. Can you discuss that, please?

Stephen Kahane

Yes, so I was reluctant, we were reluctant to say that, but we decided we would. Again it’s not, we have a way that, and it’s a strict definition that we use for how we report bookings, as you know Neil, bookings is not a GAAP term. We define that for ourselves internally and for investors so that we can communicate clearly and unambiguously about that. One of the things about our definition of a booking is that if there’s any contingency in a contract such that the customer could get out of future obligations, so based on something happening they could stop using some module and not pay for it anymore or things of that sort.

Jon Robohm - Gagnon Securities

You’re talking about contingencies?

Stephen Kahane

Yes, contingencies. Those contingencies result in the booking value coming down and sometimes contingencies are real, contain some significant risk, and other times contingencies have to be in there just because the prospect, the customer, the partner felt they needed it even though we view it as low risk; and a third reason, as Joe just mentioned, is it may just be a competitive situation. So our comment on the Q4 deals, several of them, was that we felt in general and in a fairly significant way the bookings number was understating the likely value to AMICAS over time; and I’m reluctant to say that because other times, anyway, that was really it. I think it is fair to say.

Jon Robohm - Gagnon Securities

That’s a condition that has been caused by the marketplace?

Stephen Kahane

I think it’s really idiosyncratic to the deals that got done in Q4. Some of it’s influenced by the marketplace, yes.

Jon Robohm - Gagnon Securities

Okay. Can you discuss with us the trend between regular perpetual deals and whatever else you’re doing? What has been the trend of that?

Stephen Kahane

Yes, we have commented on that in the past.

Joe Hill

We have commented in the past and what we’ve said is, historically the trend has been about 25% of our deals have been multi-year, new, price model deals. Now that does fluctuate a bit. Some quarters we’ve had a low amount of those, some quarters we’ve had a little more but on the average, we’re assuming about 25% of our deals going forward will be of this nature.

Jon Robohm - Gagnon Securities

Okay, Joe, that’s fine, but what actually happened to you in the fourth quarter and was there any trend throughout the year or is this year ‘07 different from ‘06?

Joe Hill

So, Q4 was higher than our trend of 25%. Q3 was lower than our trend of 25%. Q1 and Q2 were about at the trend of 25%.

Jon Robohm - Gagnon Securities

Okay. Good. Thanks.

Operator

We’ll take our next question from the site of Ryan Vardeman from Palogic Capital. Your line is open.

Ryan Vardeman - Palogic Capital

Hey, guys.

Stephen Kahane

Hey.

Ryan Vardeman - Palogic Capital

So, I guess back to the question that was just asked, I mean looking at this MedQuest deal, and I know you don’t like talking about particular deals, but it seems like it was a deal on an order of magnitude that warrants speaking about a little bit. I think we are a little bit surprised that, that particular deal being 92 imaging centers, maybe we misunderstand the deal? You’re installed in, I don’t know, over 600 places now, only a fraction of those are PACS Systems, which is, I believe, your higher margin product, or higher cost ASP product.

So it reasons that this would be a significant win for you in so far as revenue and potential earnings are concerned and, just curious, if Q4 was higher then trend in so far as the – and it sounds like this is one of those new subscription-based model for pricing, does the reason that it’s not just higher than trend but a lot higher than trend on the order of...?

Joe Hill

The answer to your question about the proportion of our orders that are a different pricing model other than a typical software deal, is I think that it’s fair to say that typically the large deals will be a extended type deal. So in quarters where we are announcing significant large deals, it’s fair to conclude that our percentage of total orders that are extended deals is greater than the average.

Ryan Vardeman - Palogic Capital

Okay.

Joe Hill

So it’s fair to say that when we have a deal as large as MedQuest that is an extended deal and that definitely for the quarter does drive up the percentage.

Ryan Vardeman - Palogic Capital

Okay, and so would you walk me just through the backlog definition one more time please?

Joe Hill

So our backlog, which we call backlog and deferred revenue, is non-recurring, orders for which we have taken that we have not recognized revenue yet.

Ryan Vardeman - Palogic Capital

Okay.

Joe Hill

Now, it doesn’t include maintenance renewals.

Ryan Vardeman - Palogic Capital

Okay.

Joe Hill

It only includes the orders for the systems, the services, and the initial maintenance that somebody signs up for.

Ryan Vardeman - Palogic Capital

Okay. So let’s say for example that you signed up a 5 year term deal and it was going to be recognized roughly ratably over the five years, perhaps some of it being recognized over the first three years more aggressively than the last two years. How would that show up in backlog? Or would it? Or would that show up anywhere on the balance sheet? Or in any of these operation trends that you have presented?

Joe Hill

Most of it will not show up on the balance sheet because the only thing that shows up in deferred revenue is something that we have invoiced.

Ryan Vardeman - Palogic Capital

Sure.

Joe Hill

Which is why we use this non-GAAP term of backlog and deferred revenue, which doesn’t appear on any financial statements anywhere.

Ryan Vardeman - Palogic Capital

Right.

Joe Hill

And what shows up in that backlog and deferred revenue are the minimum contractual obligations. So what you will see in this backlog and deferred, for MedQuest is the minimum non-contingence amount that they signed up for.

Stephen Kahane

Not including support, no maintenance stuff in there, it’s all non-recurring.

Ryan Vardeman - Palogic Capital

Okay. Seeing as it – I guess it sounds like you’re moving more towards this model. Would it be possible to get a view of maybe, I don’t know 5 year backlog number? Or something like that as these deals come on and are more and more significant portion of the things that you are booking or signing up the GAAP numbers most certainly don’t reflect the real health of those contracts and even this backlog number doesn’t sound like it really reflects what is going on.

Joe Hill

So, let me help you a little bit in understanding our conversion of backlog.

Ryan Vardeman - Palogic Capital

Right.

Joe Hill

So we have discussed before how long it takes to convert our backlog and deferred revenue, our non-recurring backlog and deferred revenue into backlog and non-deferred – non-recurring backlog and deferred balances into revenue. And so what we’ve said previously was that a couple years ago it took about 12 months to convert this into revenue. As we’ve been selling more of these protracted deals, that’s actually extended probably to twice that. So it takes, it’ll take probably about 18 to 28 months to burn down the backlog on deferred.

Stephen Kahane

I think the other thing to your question is, if over time, this becomes a clear trend and issue, we will, I think we’re comfortable trying to shed more light on the details of what’s in there. So I think right now what Joe just went over is enough detail.

Ryan Vardeman - Palogic Capital

Okay. And then, how many shares have you repurchased subsequent to the end of the quarter?

Joe Hill

It was 301,000 shares.

Ryan Vardeman - Palogic Capital

No. I’m sorry – subsequent to the end of the fourth quarter.

Joe Hill

I’m sorry, but what we did last time and what we did this time is we announce at our earnings call four times a year what the purchase has been for the quarter which we’re announcing.

Ryan Vardeman - Palogic Capital

Okay. I mean, it’s going to show up in your share count whenever you file your K. I mean there’s going to be, shown...

Joe Hill

Yeah. So when we file the K that will be announced as well.

Ryan Vardeman - Palogic Capital

Okay. All right. And I guess to one of the other previous callers’ points: I mean I understand that these, you do have volume restrictions with respect to the share repurchase. There are ways that you can purchase more than just the volume restricted amount.

And I know it’s in a 10b5 so you guys don’t have a whole lot of discretion and if some broker out there who nobody, who you haven’t, I don’t know who it is, but some broker out there that’s, I guess, able to use that discretion. There are ways to set it up to where it potentially is more aggressive than what you have and I think you’ll probably have an opportunity to buy more shares here in the next few weeks, I suspect.

Stephen Kahane

Yes. And again we put it in a 10b5, so that we don’t have to spend cycles worrying about that. And that’s just – we need to focus on building a great business. So I think we did the right thing by handing it off to a professional, gave him some high level guidelines and they’ll use their judgment.

Ryan Vardeman - Palogic Capital

Okay. You need to be focused on making sales, I agree.

Stephen Kahane

Yes.

Ryan Vardeman - Palogic Capital

All right, thank you guys.

Stephen Kahane

Thank you.

Operator

And we have a follow-up question again from the site of Corey Tobin with William Blair & Company. Your line is open.

Corey Tobey - William Blair & Company

Hi. Two quick follow-ups. Steve, I just want to make sure I got that non-recurring backlog, the year-end number. Was it 9.4 million you said?

Stephen Kahane

No. No, it’s...

Joe Hill

10.9 million at the end of 2007.

Corey Tobey - William Blair & Company

I totally struck out on that, okay. And we’ve heard some of your competitors talk about the replacement cycle and how that was picking up. I’m wondering maybe if qualitatively in terms of your pipeline can you give us a feeling for how the mix has changed between Greenfield and replacement cycle?

Stephen Kahane

Yeah, I think what some of the other vendors talk about and several of the ones that speak publicly about the imaging or the PACS market tend to be focused on the higher end of the market. And up there as you know there was earlier significant penetration, the 300 bed and up, market place, hospital market place, has been 80 to 90% penetrated for several years. There is a bunch of turnover going on up there where those large hospitals that bought – the early leaders were Agfa, GE, Siemens, are being – those folks are re-evaluating their options and considering newer vendors. We don’t play up there. There is some of that going on in the mid-sized hospital market but it’s I think less significant. But yes, there is no question, 2007 deals, there were more replacement deals in 2007 that we did than what we did in 2006.

Corey Tobey - William Blair & Company

Would you say you’re allocating I guess resources to try to get in on those opportunities? Or are you just kind of sticking to the bread and butter smaller hospital and imaging center market?

Stephen Kahane

I would say the latter. We’re tending to stay focused on our target market.

Corey Tobey - William Blair & Company

Okay, thank you.

Stephen Kahane

Yes, good.

Operator

(Operator Instructions) And I’m showing no further questions at this time so I’ll turn it back to our speakers for any closing remarks.

Stephen Kahane

All right everybody well, listen, we thank you for your interest and support. You know AMICAS has entered 2008 energized, focused and ready to work relentlessly to reach our goals and objectives and to become the leading independent vendor of choice in the image and information management market place. We remain excited about the opportunities before us and we look forward to speaking with you again on our call next quarter. Thanks, everybody.

Operator

This does conclude today’s teleconference. Thanks for your participation. Have a great day. You may disconnect.

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