Randy Salisbury – SVP and Chief Marketing Officer David Sides - President and CEO Nick Meeks – SVP and CFO.

Dillon Hoover - Craig-Hallum Frank Sparacino - First Analysis Marc Cahill - Private Investor Walt Sosnowski - SRC Capital Zach Wachter - Cowen & Company.

Good day and welcome to the Streamline Health Reports First Quarter conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Randy Salisbury, Chief Marketing Officer. Please go ahead, sir..

Thank you for joining us to review the financial results of Streamline Health Solutions for the first quarter of 2014, which ended April 30th of this year. As the conference call operator indicated, my name is Randy Salisbury, Senior Vice President and Chief Marketing Officer here at Streamline Health.

I manage all communications, including Investor Relations. Joining me on the call today are David Sides, President and Chief Executive Officer; and Nick Meeks, Senior Vice President and Chief Financial Officer. At the conclusion of today's prepared remarks, we will 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 at numerous financial websites. Before we begin with prepared remarks, we submit for the record the following statement.

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 within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks, uncertainties, assumptions and other factors that could cause actual results to differ materially from those reflected in the forward-looking statements included herein.

Please refer to the company's press releases and filings made with the U.S. Securities and Exchange Commission, including our most recent Form 10-K reports, for more information about these risks, uncertainties and assumptions and other factors.

Participants on this call are cautioned not to place undue reliance on these forward-looking statements that reflect management’s analysis only as of the date hereof. The company undertakes no obligation to publicly revise these forward-looking statements. On this call, the company will discuss non-GAAP financial measures such as adjusted EBITDA.

Please refer to our website at streamlinehealth.net and our earnings release for a reconciliation of such non-GAAP measures to the most comparable GAAP measures. Management uses certain non-GAAP measures to evaluate and monitor the ongoing financial performance of our operations.

These non-GAAP measures do not include certain items of income and expense that affect operations and other companies may calculate these non-GAAP measures differently. With that said, let me turn the call over to David Sides, President and Chief Executive Officer.

David?.

Thank you, Randy, and good afternoon to all of you participating on today's call. I stated last quarter that I was focusing my time and attention on leading our company to improve our performance in all areas. I remain committed to doing that over the coming quarters.

After five months as CEO, I believe we are making improvements across the board improvements that I believe will become visible next quarter and continue in subsequent quarters. In essence, I believe our Q1 financial results represent the lowest point in our company’s go-forward path to improved performance. Let me explain.

My first full quarter of being President and CEO, we have increased our sales pipeline total dollar value by 20%; [indiscernible] sales function to include a sales operation leader, in- house lead generation resources and replaced two regional sales VPs where performance did not meet expectations, cut our implementation timelines in half, consolidated data centers from four locations to two, moved from a physical to virtual server based environment to enable greater redundancy, security and scalability, reduced our recurring monthly expenses by 10%.

We believe these developments will lead to improved financial performance starting with our second quarter, which we are currently five weeks into today. In the second quarter, we should see meaningful improvements in the areas of revenue, adjusted EBITDA and cash while reducing our bank debt.

Our visibility into the 2015 guidance we provided during our year-end earnings call in April continues to improve. And we remain confident that we will achieve those goals. Specifically, we believe our revenue in Q2 will exceed $7 million. Our adjusted EBITDA will be no lower than breakeven, that our use of cash will net neutral at a minimum.

Since this is our first quarter fiscal 2015 earnings call, let me take a moment to review our performance from February 1st to April 30th. As previously released, we generated revenues of $6.2 million, down approximately 6% from last quarter and approximately 11% lower than the revenue generated in the first quarter last year.

Primary reason for this decline was the run rate impact of the previously discussed client attrition we experienced last year. Recurring revenue constituted 93% of total revenue for the quarter.

Professional services revenue is generally tied to the previous quarter’s bookings and our lower than normal Q4 bookings resulted in professional services revenue of approximately $400,000 in Q1 2015. That said, bookings for the first quarter are very solid at $6.4 million.

And with these bookings, we fully anticipate our professional services to increase appreciably in Q2. Improvement in our sales pipeline should enable us to generate multimillion dollars in new bookings every quarter for the foreseeable future. Improved bookings should lead to increased professional services revenue in future quarters beginning in Q2.

We continue to believe that we will generate between $2.5 million to $3 million in professional services this year per the guidance we provided last quarter.

Regarding our sales pipeline, we continue to generate great interest particularly in our Looking Glass Clinical Analytics solution, our clinical documentation improvement solution, and most recently, in our enterprise content management solution.

In fact, we have agreed to terms on a new ECM contract with Acadia, the leading nation-wide behavioral health provider. Deal is subject to the closing of Acadia’s purchase of those facilities from Einstein Healthcare Network and Acadia has announced that they expect this to occur on July 1st.

We have already begun implementation for Acadia and fully expect it to go live this quarter to be the quickest implementation of our ECM solution ever. With that transition, our Q2 bookings will currently stand at approximately $1.1 million just five weeks into the quarter.

Contract with Acadia will represent the first new ECM sale for our company since we made some major performance upgrades on this platform. We have background ECM as the legacy business of Streamline when the company began in Cincinnati back in the late 1980s known then as Lan vision.

By adding Acadia to our client roster, we are demonstrating that we are well-positioned to serve the needs of the behavioral health market segment which was a new segment for us. We believe this market segment represents a good long-term opportunity for growth for our company.

Turning our attention now to adjusted EBITDA, it was a negative $1.3 million in the first quarter, a decline from the negative $0.5 million of Q1 a year ago, negative $0.7 million from Q4. Unanticipated overages and audit fees as well as the decline in revenue discussed above contributed to this larger number.

Looking ahead, we believe our adjusted EBITDA will improve to breakeven in Q2 and turn positive for the year in Q4. I'll now turn the call over to Nick Meeks, our CFO, for additional insight into our quarterly performance.

Nick?.

Thank you, David. Jumping right in, as reported earlier today, revenue for the first quarter 2015 declined approximately 11% over the prior comparable period to $6.2 million.

The year-over-year decline was attributable to the run rate impact of previously discussed attrition, lower professional services revenues, and the absence of perpetual license sale in the quarter. As David mentioned, we believe that Q1 will represent the low point in revenue and adjusted EBITDA when we look back on this year.

Already in Q2 we are realizing positive traction in many areas of revenue generation, which has a positive impact on our adjusted EBITDA. Each quarter we have provided visibility into our unimplemented quarterly committed recurring revenue as a means to better demonstrate the potential impact on revenue these unimplemented contracts have.

Last quarter our unimplemented quarterly committed recurring revenue was approximately $1.2 million and it decrease to $1.1 million in the first quarter of this year representing a potential annual revenue impact of approximately $4 million.

Noteworthy with respect to future visibility we finished the quarter with approximately $74.6 million in revenue backlog representing a 19% increase from the same period one year ago.

In our earnings release and on our website at www.streamlinehealth.net, we have included a table reconciling our net loss to the non-GAAP financial measure of adjusted EBITDA.

We define adjusted EBITDA as net earnings or loss, plus interest and tax expense, depreciation and amortization expense of tangible and intangible assets, stock-based compensation expense, and nonrecurring expenses, such as severance costs.

Given the relatively large amount of non-cash charges and certain nonrecurring expenses, we feel that adjusted EBTIDA is a more meaningful measure in understanding our underlying cash based earnings. Adjusted EBITDA for the first quarter was a loss of $1.3 million.

Adjusted EBITDA was impacted by negative contribution from professional services and system sales. Significant adjustments for the quarter beyond equity-based compensation expense included a $1.3 million noncash adjustment for the value of our outstanding warrants and $750,000 related to our settlement with former unit-based shareholders.

Moving now to the balance sheet and our cash position, the ending cash balance for the quarter was down from $6.5 million at the end of fiscal year 2014 to $5.3 million at the end of Q1. I would remind everyone that historically the first quarter is the cyclical low point for annual renewal invoicing.

We have good visibility in the future quarters, not least Q2 and believe we will see meaningful improvement in our quarter end cash position. That concludes my remarks. I will now turn the call back over to David..

Thanks, Nick. As I stated last quarter, our number one objective this year is to ramp up our sales growth, primarily in the form of new contract bookings and to improve our client retention. This will remain our primary focus for this fiscal year and the years to come as we seek to take advantage of the large market opportunity we have before us.

One of that sales growth we believe can come from expanding our go-to-market strategy to include more channel partner opportunities. We continue to discuss these opportunities with the well-known companies I mentioned last quarter. We expect to announce these new agreements as soon as they are finalized.

Because many of you have asked about the Veterans Administration Medical Appointment Scheduling System, I will say a few words about it. In short, we’ve heard nothing from the VA, we do not know who the finalists are, how the demonstrations have gone, and if they are planning on naming a winner of the RFP with their stated goal doing so by May.

Should the VA not name a single vendor to deliver a scheduling solution nationwide, we hope to return to selling directly to groups of VA medical centers. We are making great progress with this last summer before it was put on hold by the federal government.

Before I turn the call over to the operator to begin our question-and-answer session, I want to thank our Streamline associates for their continued hard work, dedication to our clients, our shareholders and each other. Thanks to them, we are making progress towards the three strategic objectives we laid out at the beginning of the year.

We continue to believe there is a great opportunity ahead of us. We know there is a lot of work to realize this opportunity. I am confident that we have the solutions, clients and talent to make it happen. I will now turn the call over to the operator for a Q&A session.

Operator?.

[Operator Instructions] And we will go first to Matt Hewitt with Craig-Hallum..

Hey, guys. This is actually Dillon on for Matt..

Hey, Dillion..

Thanks for taking the question. Just kind of want to dig in real quick to that bookings number.

How much of that -- I know we talked about in the last call, there were some slippage from Q4, how much of that was slipped from Q4? And then where does Acadia fall, was that a perpetual deal or does that fall in dollar, is that all in backlog?.

From Q4 to Q1 may be about a $1 million got signed in the first two weeks of Q1, Acadia’s in Q2. As we find that at the beginning of this quarter and we are on track so far to go live in the same quarter, it’s not perpetual, it’s a term license yes, not perpetual, but term..

Okay. And then the breadth of that bookings, I am just trying to gauge that.

How many -- can you break it down further, is that 4.7 that software license, is that from one customer, from 10 customers, just trying to gauge the scale there?.

It was from a lot of different clients. When we were on analyst call last time we sold 400,000 between that call and the end of the quarter and the final two weeks that was all services.

So part of that is the confidence we have this quarter in our services revenues that we sold a lot of services last quarter that now we are working through and have assigned and working with clients on..

Okay.

And then refresh me, how you guys defined these sales attrition as client attrition from our legacy business? How much further do we have to go? I know you said that this is kind of the bottom of the curve, but are there still some contracts that are yet to fall out, or can we wash our hands with this?.

We still have in our projections that will be in upper-single digits, but we are trying to get down to our historical average of 4% to 6%. That’s what we have in our plan and we are tracking pretty well in that so far..

Okay.

And then I guess my quarterly temperature check of ICD-10, we’ve seen a couple of bills come to the House of Reps, the AMA stomping their feet again, how much exposure you guys even have to ICD-10 if it were to get delayed again and then what are you guys hearing from your customers?.

Our customers think it won’t get delayed so most of them are prepared last year. For us it won’t have much of an impact. One of the go lives we have this quarter is the CDI client that we sold last quarter.

And so if it delays, we may see an increase in buying these people who are delaying for the October date who may want to put in CDI afterward, but it shouldn’t have much of an impact and at least our clients don’t think that the date is going to delay..

All right. Thanks for taking the questions..

Thanks, Dillon..

And we will go next to Frank Sparacino with First Analysis..

Hi, guys.

Maybe first start, Nick, just on the or maybe David as well, just I think you alluded to some expense reductions, are those sort of ongoing? I mean, should we expect more than the 10% that you indicated and where would that be reflected on the income statement?.

Well, Frank, I think if you look at the income statement for the first quarter over the same period last year, you will see that they are almost universal. They are across the board lower in aggregate to the tune of about $750,000.

I think what you don’t see in those numbers explicitly is the rebalancing within SG&A towards the sales and away from G&A. I think we’ve probably realized in the first quarter 85% to 90% of the expense reduction that we can expect to realize for the year on a run rate basis.

There are still some opportunity and certainly there is still a mentality of looking to harvest additional opportunities..

Okay. And David, on the ECM side of things I know it’s been a while since we’ve talked about that marketplace for you guys. But do you feel like -- I mean, I'm not sure what you’ve done internally to be more competitive in that space.

And then secondly, as it relates to Acadia, I mean, is there anything unique as it relates to behavioral health that would be advantageous for you guys?.

As on your first question, we’ve worked on our ECM solution to make it perform better, to add in some new functionality to it. And we have a particular emphasis in the next few sprints to do some better epic integration.

So we have really good epic integration today but there's a couple final things like integrating to epic kiosk that we have client advocate for that we do now that we’re going to finish out. So that’s been one of the things we’ll finish out. And on your second question….

Behavioral health side..

Yeah. The behavioral health side, there is nothing that would have kept us from going to that marketplace before then maybe we thought about only hospitals and now we’re thinking about clinics, behavioral health, critical access hospitals, anyone in healthcare we’re happy to serve..

Okay. And lastly, kind of go back to your comment on sales to date or bookings to date in the quarter.

What was that figure that you cited?.

$1.1 million..

Okay. So obviously, we’re in the latter half of the quarter, I mean, how do you feel just in terms of…..

We’re five weeks in Frank..

Correct..

Seven weeks to go..

Yeah.

So my question was just on, should we still expect at this stage right, just sort of building pipeline for the business to be lumpy quarter to quarter or when would you expect kind of a more smoother or consistent tone on the bookings side?.

I think it’s possible this quarter that we could get to the same level as last quarter. And we need the right mix to come in, so we’ve got a lot building pipelines. We have more opportunities where we can start to get to the same consistent number.

So if you look at Q3, we have a larger pipeline in Q2, which is larger than Q1, all of them larger than Q4. And so we still need the right mix this quarter but at least, we’re off to a good start. So I think, we’ll start to see more consistency each quarter as we go forward and the pipeline continues to increase..

Okay. Great. Nice job guys. Thanks..

[Operator instruction] And we will go next to Bruce Jackson with Lake Street Capital Markets..

Hi. Thanks for taking my question. So couple quarters ago you announced the agreement with NantHealth for their clinical cancer information system that they were in.

Has there been any progress on that agreement?.

Bruce, yeah. We’ve installed the software. We’ve worked with Nant on what kinds of data can we feed in that we can start to find new knowledge and new discovery around cancer and continue to move that relationship forward. So we've made good progress with them.

We’re also talking to them about scheduling solution and what kinds of things we could help them with as far as the scheduling complexity of cancer treatment, as well as the genomic testing that they're doing..

Okay, okay. And then last quarter we talked a little bit about some of the things that you’re doing too little away the backlog and speed up the implementation.

Can you give me some quick update on how that's going? And if you're seeing the more rapid implementation that you’re hoping for?.

Yeah. So in my comment I mentioned this little bit. We’re starting to see the first go live this quarter from some of the things that we spread up. If at Acadia, if we signed that deal and go live in the same quarter for ECM that will be a huge improvement for us, those use to be almost year long projects.

On the CDI side, we find a client in Q1 that’s going to go live this quarter. So we’ve made a lot of changes in the implementation methodology. The thing that are happened, we streamline every piece of the process or take on more work as ourselves so that we’re not asking clients testing.

We test it first and give it to him, give him a good system that’s ready to go, standardized things as much as possible. Basically, the first two projects that really start to prove that out and they’re being done in much accelerated timelines.

To your question about backlog, we go through monthly a review of the backlog and client by client to see where we assigning backlog and working backlog and professional services.

To be sure, we’re generated the revenue whether it's time in materials or if there is a milestone based revenue that we’re getting that and working it and we’re predictable on. And I think you'll see a real improvement there in Q2 where we’ve gone to the entire backlog and have pretty much everything assigned and being worked at this point..

Okay. That’s it for me. Thank you..

Thanks, Bruce..

And we will go next to Marc Cahill, private investor..

Good afternoon, gentlemen. It’s Marc Cahill. Regarding NantHealth, almost back in the ethe third quarter, your predecessor said that there were two different installs into NantHealth.

Was that into a platform or client of NantHealth’s?.

Hi, Mark. So NantHealth has their own client base. So they're doing services for other clients who are looking to outsource and improve their cancer treatment or prevention. And they also have with those clients on their own clinical operating system that we worked with them to integrate into our clinical analytics.

So the answer in a way is both, we both integrated with their existing infrastructure. And when they engage new clients, we integrate with those clients infrastructure..

Right. You got the original equipment manufacturer and OEM so to speak..

Yeah..

You actually have the list right. That’s talk to pricing model for this. And I understand, your product was integrated into their clinical operating system.

Was they also integrated into their name Nantomix platform or just the clinical operating system?.

So far just the clinical operating system. The Nantomix, maybe something that we work with in the future. But one of the things that they like about our data model was its not rigid. And so we can take genetic information and other things, however they present, as you know, there is no standard for genetic output from the analyzers.

And so to the extent that we can take data from any analyzer that makes us more powerful tool that we’re not rigid in the way that you have to load the data, which can slow down the flow of data..

Right.

So there were two installs, one into clinical operating system, what was the other one, do you know?.

And so we also worked with Nant when they have their own clients that they engaged with directly..

Okay. I see. So there was – all right. It was one of [indiscernible] platform and the client. I got you..

Right..

Down the road, to me every client different as there is probably going to be some customization of the product, who does that? Since you’re the original equipment manufacturer, if customization required, who does that?.

Either ourselves or Nant, so they know how the system works as well and we haven’t installed in their data center. And so either part you can do the customization mark that’s required to load data to do the data mapping..

Your last -- in the last call, you mentioned the new markets, mental health, long term, acute care so forth, which of your products set into these new areas? All your products consider into the mental health, could you give us a little bit more color on that?.

All the solutions get fit into those different segments. It wasn’t that we couldn’t pursue them before. They are always available to us. Just now, we’re focusing on -- if interest comes in, we will respond to people if they are -- as our health systems, clients are getting more integrated into post acute care as a whole natural evolution for us..

Okay.

Regarding the potential new partnerships, seems to be big number of partnerships, new partnerships, are they going to be competitive conflicts that you are going to run into that will prevent you from signing all six?.

I don’t think so. In fact, we thought if you are asking in a way about channel conflict, we talked about channel conflict and we’d love to run into some channel conflict where we’re selling so much that we actually run into each other. I mean, it’s a big market in U.S.

and so our initial thought is let’s see how we go and if we get channel conflict, we’ll figure it out as those things come up..

Right.

Do you still anticipate signing one in this quarter?.

I think so..

Okay. Regarding the new -- the quarterly contracted unrecognized revenues, you had $6.4 million of new bookings discussed at quarter.

[indiscernible] that makes the definition of your quarterly contracted unrecognized revenue? Is that built into that number? The $6.4 million included in that new quarterly unrecognized revenue number?.

The $6.4 million would be the entire life of contract value, the quarterly values is fair down substantially from $6.4 million. Most of the …..

Right. Yeah. Converted into a quarterly number. Around debt net, better collection, back in the third quarter, you had that big bookings number of 20 plus.

Is that number now reflected in your quarterly number?.

So some of that number has now flown out of that number because it’s installed and is being recognized. So you think that the quarterly on implemented has a balance sheet concept. The bookings has an income statement concept. Its flowing through that quarterly on implemented.

Hopefully it’s not spending very much time in there and it’s turning around and employing back out again..

Right, right, I was just wondering. How is that number, the big number back in the third quarter last year, is that now flowing through the quarterly number.

I would have [indiscernible] jump in that number?.

Some of it remains in that number, some of it is now thrown out of that number..

Another words, it’s flowing through but there is a lot to go..

Lot to go. We had said that big contract or two were mostly backend loaded. We’d see more in years two and three and then you will see that spike accordingly..

Right. Yeah. I understand the lot of that number was going to be flowing through over approximately 18 months. I’m just trying to get down to as there are timing here.

We don’t really see because some of that bookings really won’t get implemented until six and nine months from now?.

Yeah. I think that’s fair. There is certainly some of the more large and complex science do take longer to flow out..

Yeah. So I’m just wondering why don’t that number must figure the quarterly number that you broadcast here? $20 million from third quarter last year is a big number.

So I think broken down into quarterly number, I understand it’s quarterly number but that suppose to be a big number?.

It’s a quarterly number for about five years..

Right..

And all it’s part of what we can control, we talk about in some frequency, markets that can’t necessarily control when the implementation begins based on the client availability of IT et cetera. So once that happens then these things flow into, so okay here it is. This is what will become a recognized revenue.

We’re trying to give you an idea as to in that formula number that David mentioned today, Nick did. That’s the amount of revenue that in a perfect world, if the flow is going at our speed not our client, you would see an additional $4 million in revenue. That’s the window into what unrecognized revenue could be if we’re moving this through.

We’re doing everything we can to get it through. So it says it’s in backlog.

So we’re going to move on here in a minute? So anything else today, March?.

Not at all. Thanks..

Excellent. Thank you..

And we will go next to Walt Sosnowski with SRC Capital..

Thanks for taking my call. In your opening remarks, you made some comments about your 2015 outlook.

Would you mind repeating what you said about the annual outlook?.

Yes. I have basically said that we’re reiterating our guidance for the year that we mentioned last analyst call..

Okay.

And is that the total revenues of $29 million to $30 million and is recurring of $25 million and professional services, $2.5 million to $3 million and perpetual license, $1.5 million to $2 million?.

Yes..

Okay.

And then adjusted EBITDA of $1 million to $1.5 million?.

Yes..

Okay. Great. Thanks..

And we will go next to Charles Rhyee with Cowen & Company..

Hi, guys. This is actually Zach on for Charles. Regarding the attrition that you referenced, what are you seeing in 2Q right now so far? Thanks..

Overall, like five week sense, so it looks reasonable so far. Of course there is seven weeks to go. I would say that, but overall to your question, well there is seasonality.

So most of our renewals come up at the end of the year in the December timeline, that’s when we have the most opportunities for clients to say I am not going to renew for another three years or one year depending on their contract.

So we are working as hard as we can on supporting our clients better, community with them better, improving our infrastructure so that they are reliable and happy with the services we provide so that we keep them as long as possible forever..

Okay. And just on reiterating the guidance, what do you think that gives you so much confidence that the revenue will start to accelerate as we go through the year? Thanks..

One, we have pretty clear visibility on our perpetual guidance. So we moved some relationships forward that give us confidence that we will be able to meet that number. The second is I talked a little bit earlier about the backlog and we had a really good sales quarter in Q1 for professional services. We got that work assigned this quarter.

We’ve already got one month under our belt and we’ve been able to run, what does that revenue look like and we are on plan there. So we knew about what our services would be last quarter when we talked on analyst call.

We already have that kind of baked into the number last quarter and knew that the rest of the year will look better and so far Q2 looks substantially better. The recurring revenue is the same as we thought. And so when you add those up, we are still in range for guidance and it looks like we are having a good start to the second quarter.

Hi, there, Zack?.

Thanks, guys. I am good..

It appears there are no further questions at this time. Mr. Salisbury, I would like to turn the conference back to you for any additional or closing remarks..

Well, thank you again for your interest and support in Streamline Health. If you have any additional questions or need more information, please contact me at randy.salisbury@streamlinehealth.net. We look forward to speaking with you all again in September when we will discuss our second quarter 2015 financial performance. Good day..

That does conclude our conference. Thank you for your participation..