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Moderator: Lou Silverman
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Exhibit 99.1
QUALITY SYSTEMS, INC.
Moderator: Lou Silverman
February 9, 2006
3:30 pm CT
Operator: Good afternoon. My name is (Rodney) and I will be your
conference facilitator today. At this time I would like to
welcome everyone to the Quality Systems Third Quarter Fiscal
2006 Results conference call.
All lines have been placed on mute to prevent any background
noise.
After the speaker's remarks there will be a question and
answer session. If you would like to ask a question during
this time simply press star then the number 1 on your
telephone keypad. If you would like to withdraw your question
press star then the number 2 on your telephone keypad.
At this time I would like to turn the conference over to Mr.
Lou Silverman, President and CEO. Thank you. Mr. Silverman,
you may begin your conference.
Louis Silverman: Thank you, (Rodney), and welcome everyone to Quality Systems'
Fiscal 2006 Third Quarter conference call. Paul Holt, our CFO,
Greg Flynn, our Executive Vice President and General Manager
of the QSI Division and Patrick Cline,
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President of our NextGen Healthcare Information Systems
Division will once again join me on this afternoon's call.
We are conducting this call from a wider variety of locations
than usual so I'll apologize in advance for any technical
difficulties that we may encounter.
Please note that the comments made on this call may include
statements that are forward-looking within the meaning of the
Securities laws, including without limitation statements
related to anticipated industry trends, the company's plans,
products and strategies, projected operating results, capital
and equity initiatives, pending litigation and the
implementation and potential impact of legal, regulatory and
accounting requirements.
Actual events or results may differ materially from our
expectations and projections and you should refer to our prior
SEC filings, including our Forms 8-K, 10-K and 10-Q for
discussions of the risk factors, management discussion and
analysis and other information that could impact our actual
performance.
We undertake no obligation to update any projections or
forward-looking statements in the future. Also, as I have
mentioned on each and every call for the past many quarters,
please continue to note that the company's past performance is
not necessarily indicative of future performance.
I'll now provide summary comments on the quarter and, Paul,
Greg and Pat will follow with additional details.
For the December quarter, company revenue totaled $26.8
million, up approximately 21% over the prior year. Fully
diluted earnings per share at 35 cents compared to 32 cents in
the prior year. Though these figures represent
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year-over-year increases, note that they below levels obtained
in prior quarters.
NextGen's revenue for the quarter of $22.9 million represents
a 25% year-over-year increase. The quarter's revenue and
profit results exclude our first significant Siemens
transaction, a $4 million sale of NextGen licenses which was
closed and paid for in full during the December quarter.
We have deferred recognition of this revenue based on
applicable accounting literature. We're looking forward to
seeing this revenue move onto our income statement and
consistent with our historical practice we'll not be making
forward projections about the timing or pace of this process.
Determining the appropriate treatment for the Siemens contract
occupied much time and many resources of the company, our
Audit Committee and, in fact, of our independent auditors.
Today's earnings announcement comes a very, very short time
after the appropriate treatment was determined.
The QSI Division's $3.9 million in quarterly revenue was up
slightly over prior year performance.
The NextGen Division's operating income was $7.9 million, a
17-1/2% increase over prior year.
The QSI Division's operating income decreased on a
year-over-year basis and corporate expenses were higher
year-over-year. Paul will provide you with additional details
on those items shortly.
EDI revenue for the quarter came in at $3.3 million, up 21%
over the prior year. EDI grew 45% on a year-over-year basis at
NextGen and declined 8%
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year-over-year at the QSI Division. I'll once again remind
listeners that EDI revenue is reported as part of divisional
revenue totals each quarter for each division.
Cash and cash equivalents were at $75.2 million at quarter
end, up from $63.1 million last quarter.
Headcount at quarter end was 473. Annualized revenue per
employee was approximately $227,000.
As discussed on our September quarter call, late in the month
of October, the company and those individual directors elected
to the Board from the company's slate were informed that they
were being sued by Mr. Ahmed Hussein, a shareholder and
current Director over the election results certified by the
independent inspector of election.
Mr. Hussein's complaint alleged and alleges that the results
from the independent inspector of election included certain
proxies that should not have been included in the final vote
tabulation. The independent inspector certified the
aforementioned results after hearing Mr. Hussein's claim
concerning the matter.
Attorneys representing the company as well as individual named
Directors participated in a court hearing on this matter late
last week. A ruling from the judge is expected at the next
scheduled court date which is currently on the calendar for
March 7 of '06.
Current and prospective shareholders should know that the
company incurred expenses related to this matter during the
December quarter and has incurred related expenses during the
current quarter to date. It is possible that the
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company will continue to incur additional expense as a result
of this complaint and/or Mr. Hussein's future actions, if any.
It remains premature to speculate on the outcome of the
hearing, the entirety of Mr. Hussein's actions or the
magnitude of the expense to be incurred by the company.
Regarding acquisitions, we continue to review potentially
interesting opportunities.
Regarding investor conferences, over the next several weeks
QSI is scheduled to present at the upcoming UBS conference,
the Jefferies' conference, and the Sidoti conference. Each and
all of these conferences are in New York City.
A $1.75 per share dividend and a two for one stock split were
announced last week. The dividend will be distributed to
shareholders of record as of 2-24, February 24 that is. And
the stock split has a March 3 effective date.
In closing my prepared comments for this afternoon's call, I
want to once again clearly point out as I have over the past
many quarters that there are no guarantees that the company or
either of its divisions will meet or exceed their current
level of performance in future periods.
It's possible that this quarter's performance will cause
investors or analysts to set short, new short, medium or
long-term expectations for the company. In response to this
possibility, please continue to note that we do not give out
financial guidance to the investment community and we do not
comment on the guidance advanced by members of the financial
community.
Many thanks to our entire team for their leadership and
performance during the year-to-date.
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I will now turn the call over to Paul Holt, our CFO.
Paul Holt: Thanks, Lou, and hello everyone. Our consolidated system sales
rose to $13.5 million this quarter, an increase of 15%
compared to $11.7 million in the year ago quarter. Maintenance
and EDI and other revenues rose 28% to $13.3 million compared
to $10.4 million in the year ago quarter.
Our consolidated gross profit margin came in at 64.9%. It's
down from 66% a year ago. As I mentioned in numerous other
calls, the hardware and third-party software included in our
system sales will vary depending upon the needs of customers.
Total SG&A increased approximately $1.6 million to $8 million
in the third quarter. That compares with $6.4 million a year
ago. $1.2 million of this increase was in the NextGen Division
and consisted of increases in selling and administrative
salaries and related benefits, travel expenses and other
general and administrative expenses. The balance of the
increase was primarily a $ .4 million increase in corporate
related expenses, including professional services, salaries
and related benefits.
SG&A expense as a percentage of revenue increased slightly to
30% compared to 29.1% in the year ago quarter. That's
primarily due to the fact that the increase in the NextGen
SG&A expenses and corporate expenses was slightly faster than
the growth in the revenue in the same period.
Our effective income tax rate was slightly higher this quarter
compared to a year ago at 37.6%. That compares to 37.1% a year
ago. The primary cause for the higher rate this quarter was a
relatively lower benefit related to R&D tax credits compared
to the prior year, partly offset by a new deduction which went
into effect this year, the domestic manufacturer's production
deduction.
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During the year ago quarter the company recognized $ .2
million in tax credits from prior periods which had not been
recognized previously, resulting in a lower tax rate last
year. These tax credits were principally from credits on which
the Statute of Limitations had expired.
In terms of divisional performance, system sales in the
NextGen Division rose to $12.8 million this quarter and
compared to $11.3 million a year ago. Continued growth in
NextGen's base of installed users drove maintenance, EDI and
other revenue in that division 43% higher compared to a year
ago at $10.1 million.
Operating income in the NextGen Division was up 17% to
$7,904,000, compared to $6,727,000 a year ago.
Our QSI Division reported a year-over-year increase of 3%,
reporting revenue of $3,867,000 compared to $3,742,000 a year
ago. Operating income for this division was $951,000.
QSI Division EDI revenue was $1, 130,000 for the quarter
compared to $1,232,000 a year ago.
Moving on to our balance sheet, our cash increased this
quarter by approximately $12.1 million to $75.2 million or
$5.66 per share. That compares to $63.1 million or $4.79 at
the end of the prior quarter.
While our total accounts receivable declined by approximately
$2.9 million this quarter, our DSOs increased slightly by 3
days. DSOs by division were 90 days for the QSI Division and
136 for the NextGen Division.
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Total deferred revenue at $34.1 million is up $4 million from
the prior quarter due entirely to the deferred license revenue
related to the transaction that was discussed by Lou earlier
in the call.
For those of you who are tracking this, our non-cash expenses
for the quarter break down as follows: Total amortization
expense $634,000, that's $46,000 for QSI and $588,000 for
NextGen; total depreciation expense $340,000, that's $44,000
for QSI and $296,000 for NextGen; deferred stock option
compensation which is a non-cash expense was $107,000.
Investing activities for the quarter were as follows:
Capitalized software $691,000 with $16,000 for QSI and
$675,000 for NextGen; fixed assets $497,000, that's $34,000
for QSI and $463,000 for NextGen.
I want to thank you all for being on the call, and your
interest in our company and I'll now turn things over to Greg
Flynn, Executive Vice President and General Manager of our QSI
Division.
Greg Flynn: Thank you, Paul, and I'd also like to thank you all for
showing your interest in our company by being on this call.
The QSI Division numbers have already been covered by Lou and
Paul. I would again like to note the continued growth in the
NextGen EDI business. As you know, QSI Division staff are
instrumental in facilitating this business.
On our software development front, the CPS dental record
development which I discussed on our last call, new phosphorus
x-ray development technology, our expanding x-ray interface
offering, and continued application enhancements to offer more
practice management, patient billing, insurance
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and scheduling information chair side appear to be well
received by our end users.
We just conducted our annual dental users meeting and these
offerings, if judged by user/audience response were viewed as
both useful and high tech.
Per usual, I'll comment on our sales staffing and pipeline.
Our sales staffing remains unchanged from last quarter and our
pipeline is approximately $3.5 million.
Our pipeline is defined as sales situations where QSI is in
the final three purchase choices and we believe that the sale
will occur within 180 days.
I'd like to take this chance to remember division staff for
both their ongoing and long-term efforts for the company. Our
Vice President of Operations and Software Development for
example just celebrated his 25th anniversary with QSI. Thanks
to all of our staff.
Now I'll turn the call over to Pat Cline, our President of the
NextGen Division.
Pat.
Patrick Cline: Thanks, Greg. Although NextGen revenues and profits grew
measurably over the same quarter last year, I'm disappointed
that the deferral of the large order prevented us from setting
yet another quarterly record.
During the quarter NextGen executed about 60 contracts with
new customers. Since our last call our sales force has grown
by a net of 2 people. It's still our goal to grow the sales
force. We now have a total of 40 folks in that department.
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Our pipeline has grown to over $60 million. The market for our
products remains very strong and we continue to fare well
against our competition in the marketplace.
I'm proud that as of today we can announce that NextGen's
electronic medical record, NextGen's practice management
system and our community health solution were all just named
Best in Class by the Microsoft Healthcare Users Group or MS
HUG in the 2006 annual awards.
We're preparing for what we think will be a very successful
HIMSS conference in San Diego next week.
And in closing I'd like to once again thank NextGen employees
for their continued excellence and our customers for their
support and confidence.
Operator, we're ready for questions.
Operator: At this time I would like to remind everyone in order to ask a
question please press star then the number 1 on your telephone
keypad. We'll pause just for a moment to compile the Q&A
roster.
And your first question will come from the line of (George
Hill) from (Leerink Swann).
(George Hill): Yeah, good afternoon, Lou. I'm wondering if you can give us
the contribution from Siemens purchases in previous quarters,
whether or not they were accounted for differently. And I'll
stop there.
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Louis Silverman: As we've mentioned, (George), we as a rule have not gone into
great detail on specific Siemens contracts or contributions in
prior quarters. We've had a small number of them. They've been
not particularly significant and for a variety of reasons they
were accounted for differently.
(George Hill): Okay can you give us then some color on why there was an
apparent slowdown in organic growth in the quarter?
Louis Silverman: I'm not sure that I fully buy your assumption. I guess it
depends on whether you include or exclude the Siemens deferral
that we're talking about in terms of our overall growth. So if
you could sharpen up your question and come back that would be
helpful.
(George Hill): Okay. Well then the last question will be can you tell me how
these Siemens sales are going to be accounted for?
Louis Silverman: Yeah we've elected, (George), to not on this call delve into
specific contract or accounting literature details. You should
know that we, like many many others, are looking forward to
seeing this revenue move from deferred revenue on to our
income statement. But again, consistent with our historical
practice we'll decline to make forward projections in terms of
the precise timing of that.
(George Hill): Okay. I'll hop back into the queue.
Operator: And your next question will come from (Sean Weiland) from
Piper Jaffray.
(Sean Weiland): Hey guys. I bet you can't guess what my question is going to
be. Let's try to take a stab at the Siemens contract again. Is
the $4 million Siemens contract is it - did they buy licenses
which they are going to - they intend to go and resell
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to their customer bases or is this a pass through and are they
in fact placing the software into their customers as we speak?
Louis Silverman: Pat, do you want to take that one?
Patrick Cline: Sure. I think I understood the question. There are certain
provisions in our agreement with Siemens that prevent me from
going into a lot of details. But I will disclose that this was
an order of software licenses, the same type of order that
we've received over many years from many reseller
organizations. Typically these orders are slated for
particular end users. The Siemens orders thus far have been
slated for Siemens customers.
(Sean Weiland): Okay so we could then believe that this contract although
significant and larger in size than maybe past contracts was -
is that some of the same characteristics as the former
contracts? Is it accurate?
Louis Silverman: I think it's the same product in terms of the licenses but the
contract document itself by definition at this point has some
slightly different characteristics.
(Sean Weiland): Okay. And then on, you know, following up on what (George) was
saying. If - with this being kind of an outlier contract, it
appears like that organically the - your NextGen reps that are
focused on selling the typical NextGen deals may have been
behind plan in the quarter and that this was the contract that
was going to make up for any weakness. Is that an accurate way
of looking at this? Or if its not could you...
Patrick Cline: This is Pat. I would say that's not an accurate way of looking
at this. The order that we're talking about and again I can't
go into too much in the way of details, but I can tell you
that many many of our sales reps were involved leading up to
that order for many many months. There was quite an effort
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made to make sure that that order comes in. A lot of customer
calls, a lot of customer meetings and those kinds of things.
So I wouldn't characterize it personally as a slowdown in
organic growth. We have done business with resellers and in
fact an increasing amount over the years for many many years.
(Sean Weiland): Okay. What is the - just the last question and then I'll step
off. What's the business mix now between resellers and direct
sales?
Patrick Cline: I don't have that exactly. We do most of our business through
direct sales but we do have a handful of value added
resellers. These are people who truly add value and who are
out there sometimes by themselves but very often working
directly with our sales reps hand in hand with our folks to
call on end user customers and sell them NextGen's offerrings.
(Sean Weiland): Okay okay great. Thank you very much.
Man: Thanks.
Operator: And your next question will come from the line of (Van Brady)
from (Presidio Management).
(Van Brady): The name was (Brady). Could you comment if you care to on what
effect Allscripts purchase of A4 might affect the market and
specifically you people going forward. We've been told that A4
has a good position in the one to ten market if you want to -
if you think those segregations are meaningful, their average
number of doctors is about five or four to five per practice.
And they've gotten very little traction at all in the
so-called mid-market, that is the 11 to 25.
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The thinking is that once the Allscripts or Touchworks gets
interfaced with their system that they will be running very
hard in the middle market which has been I think where Quality
has had the most success. So I'm just curious if you think
that might provide stiffer competition down the road.
Patrick Cline: Well without offering an opinion as to whether A4s product are
competitive or not with ours, let me say that we don't run
into and we don't compete with that product line very often.
When we do I think we fare very, very well and that is in the
low end. The mid market and certainly in the high end is where
we've tended to play more often.
And I believe that Allscripts needed to acquire a practice
management system but I would say that the A4 acquisition is
considered by NextGen to be more of a non-event and something
that we're not concerned about in any way, shape or form.
(Van Brady): Okay thank you very much.
Operator: And your next question will come from the line of (Richard
Close) from Jefferies.
(Richard Close): Yes just real quick, I believe you said you had 60 new
customers in the quarter. Is that correct?
Patrick Cline: That's correct.
(Richard Cloke): Okay so how many - I guess - I think you've mentioned before
how many total contracts you've signed in the quarter.
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Patrick Cline: Yes I have mentioned it before and I've kind of been reluctant
to continue that practice. If I reported the number it would
likely be comparable to the last quarter, but let me give you
a little bit of more texture on that. With over 1,000
customers and tens of thousands of physicians it gets more and
more difficult to decide what constitutes a new order or a new
contract versus just an add-on order.
The fact is that literally hundreds of supplemental orders
were received in the third quarter. But again where you draw
the line as to, for example, if a practice orders two more
licenses for two more doctors of a product they already have I
typically wouldn't call that a new order.
If a practice had a practice management system and they place
a large order for a separate product typically that would be
called a new order. But again it really depends where you draw
the line. Again hundreds of supplemental orders. I think the
more meaningful number is the number of new customer
acquisitions. That's what people tend to want to hear.
(Richard Close): Okay. And then can you maybe characterize whether you've seen
any changes or trends developing over the last three months
maybe that are different from the September quarter, maybe
looking at, you know, the practice management software versus
people buying both that and the EMR or just the EMR.
Patrick Cline: We see an upturn in the market on the EMR side, more interest.
The market continues to heat up. Our particular mix has tended
to stay in the historical band of roughly 2/3 being
combination purchases of practice management and EMR. But
there is over the last few months more interest on the EMR
side as drivers such as pay for performance become more
prevalent.
(Richard Cloke): And are you involved in any of those pay for performance
options out there?
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Patrick Cline: We are.
(Richard Close): And can you maybe talk a little bit about the success you've
had on that front?
Patrick Cline: I don't want to go into too much detail in that area, but I
can - I will tell you that we consider ourselves leaders in
that area. We are involved in a number of programs and a
number of pilots. We've done specific work on the software to
make sure that we stay on the leading edge and help our
customers do the types of reporting, paper and electronic
reporting, required to prove better quality and outcomes.
(Richard Close): Okay. And one final question, I guess, Paul, if you could talk
a little bit about your DSOs with respect to the NextGen. How
did that compare versus September and then where do you see
that trending?
Paul Holt: Well as I said that was up 3 days from September. But on an
absolute basis our total accounts receivable actually declined
by $2.8 million. And as you know, the computation of DSOs is
going to be a function of your outstanding AR balance and it's
also a function of what your revenues are. So I'll just say
that, you know, as I had said earlier, we want to work to see
that number come down. But I think the change that we had in
the revenues contributed to that slight uptick in DSOs.
Patrick Cline: Paul, do you want to explain also briefly the impact of the
deferrals in service revenues on DSOs and so people can maybe
normalize that with the way other companies report DSOs?
Paul Holt: Yes I'll be happy to. Our balance sheet includes two elements
that are based on the way we put our contracts on our balance
sheet. We have unpaid
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deferred revenue that's included in both deferred revenue and
accounts receivable that I guess you could call it a gross up
if you will. If you net those two down you would get to a DSO
number of 73 days.
(Richard Close): Thank you.
Paul Holt: Yes.
Operator: Again if you do have a question please press star then the
number 1 on your telephone keypad. And your next question will
come from the line of (Gene Mannheimer) from (Carris and
Company).
(Gene Mannheimer): Thank you. I missed the very first part of the call, Lou, so
forgive me if you addressed this. But the $4 million of
Siemens revenue that was deferred out of the quarter, is your
expectation to recognize that next quarter?
Louis Silverman: So, (Gene), you're asking me about providing guidance, right?
(Gene Mannheimer): Essentially.
Louis Silverman: As we mentioned on the call and as we've mentioned on many
calls over many years, we don't provide guidance. I will say
that we - and we certainly understand many others - are
looking forward to seeing the deferral move from the balance
sheet onto the income statement. But to stay consistent with
our past practice and what we think are best practices, we
won't deviate from our practice of not making forward
projections. But again understand that we're working hard to
make that happen.
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(Gene Mannheimer): Okay. And in your historical pattern with the Siemens
relationship, if you close the deal in the quarter could you
typically ship the software in that quarter and therefore
recognize it? Or is this just an anomaly?
Louis Silverman: This particular contract had some unique features to it.
(Gene Mannheimer): Okay thank you.
Operator: And your next question will come from the line of (George
Hill) from (Leerink Swann).
(George Hill): Hey, Lou, we'll take more shots at this - I apologize. I'm
getting a lot of feedback on my phone.
Louis Silverman: You're coming through loud and clear.
(George Hill): Okay. Was any Siemens revenue included in the quarter?
Louis Silverman: Again we haven't made it a historical practice of breaking it
out. This particular transaction was large enough so that we
felt like it was important for people to consider this
particular transaction or situation as they considered the
company's performance in the quarter. We've had a little bit
of business over time with Siemens but I think I'd leave it at
that.
(George Hill): Okay. And my last question will be - two more questions - has
the Siemens business over the course of the last year, would
it be fair to characterize it as growing faster than
non-Siemens business over the last year?
Patrick Cline: I think the Siemens business while growing, probably can't be
directly compared because the Siemens contract or relationship
with NextGen is a new
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relationship in the last year and certainly in the first few
months of that type of relationship you're training sales
people and developing your message and training support people
and those types of things.
So the first month a sale is made typically it's relatively
low and the second month hopefully it grows and the third
month hopefully it grows. But between the second month and the
third month if there are three sales made as opposed to two it
might be a tremendous growth rate but it still could be
relatively low compared to the overall revenue number and in
fact growth number over the longer haul.
(George Hill): Okay fair enough. And last question would be do you think we
should perceive the dividend as indicative of how the company
would plan to finance or pursue an acquisition?
Louis Silverman: I'm not sure I fully understand your question. We have north
of $5.00 per share in cash. The dividend that was declared was
$1.75 per share in cash. I think that we continue to look at
acquisition opportunities though it's also fair to say that
over the past five or six years we haven't completed any.
I guess in essence I'd say the Board felt that this dividend
was an appropriate return of capital to shareholders and at
the same time was an appropriate business decision in the
context of not materially impacting any acquisition plans that
the company might have.
(George Hill): Okay. I was just trying to get a sense for the war chest you
guys want to keep. Thank you.
Operator: And your next question will come from the line of (Sean
Weiland) from Piper Jaffray.
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(Sean Weiland): Hi, thanks. Just one more question - Lou, what can you tell us
to assure us that this kind of timing on revenue recognition
won't happen in the future?
Louis Silverman: There are no absolute guarantees in life, (Sean). And on this
particular transaction we understand what needs to occur to
convert the deferred revenue to recognized revenue. And you
should know that. And that...
(Sean Weiland): And what - could you be a little bit more specific on the work
that still needs to be done to convert this from the deferred
to actual revenue?
Louis Silverman: Again we've elected to not delve into the specific cites on -
specific contract terms or accounting literature cites. That's
a decision that we made at the outset here. So I certainly
appreciate your interest and the inquiry but we've just
decided to not go into that absolute level of granularity.
(Sean Weiland): Okay thanks.
Louis Silverman: Thanks, (Sean).
Operator: And your next question will come from the line of (Michael
Turner) from (AAD Capital).
(Dan Wimset): Hey good afternoon. This is (Dan Wimset). Lou, just a quick
question, in some of your investor relations presentations
you've stratified the market with a number of practices and
physicians. Can you give us a sense, if you would please, I
know you've got the under 10 market which is not a big deal
for you and maybe the over 100 position market, can you give
us a sense in terms of sales cycles, how long it's taking now
and maybe what variables are causing
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the cycle to take longer and what variables are causing that
sales cycle to shrink a little bit? Thanks.
Louis Silverman: I'm going to let Pat take a run at that.
Patrick Cline: I don't see any measurable difference in the length of the
sales cycle except at the lower end. They seem to be
tightening up and some smaller practices seem to be making
decisions maybe a little bit faster. But again it's almost not
measurable. I think, as I mentioned earlier, the market for
electronic medical record systems is heating up. That would
indicate that sales cycles will get a little shorter. That's
our hope and we'll leave it at that.
(Dan Wimset): (Pat), you've talked about a $60 million pipeline. Can you
give us a sense the physician practices where there's north of
100 physicians typically how long is that cycle? Was it a four
month, six month, three month, a year, how long does it take?
Patrick Cline: Typically four to six months in that cycle but again it's
tough to characterize it as an over 100 because a 100
physician practice may be 4 to 6 months. A 1,000 or 2 or 3,000
physician network might take 6 months to a year, perhaps
closer to a year.
(Dan Wimset): Great, thank you.
Patrick Cline: Uh huh.
Operator: And your next question will come from the line of (Josh
Stewart) with Sidoti & Company.
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(Josh Stewart): Hi guys. I'm not too familiar with how these reseller
contracts usually work. Do they typically buy a batch of
software and you deliver it to them and you recognize the
revenue when you deliver the batch? Or is it kind of a one by
one process?
Patrick Cline: Typically when we deliver software licenses to resellers
revenue is recognized when the software is delivered to the
reseller. But as Lou pointed out, there are some differences
in contracts and some nuances and things that often can lead
to accounting for a deal differently than you have in the
past.
(Josh Stuart): Okay thanks.
Operator: And there are no further questions at this time, sir.
Louis Silverman: Thank you everyone for your participation on the call. And
we'll look forward to chatting with you in a few months.
Thanks again.
Operator: Thank you for participating in today's conference. You may all
now disconnect.
END