Greenway Medical Technologies (GWAY)
F1Q13 Earnings Conference Call
November 1, 2012 5:00 PM ET
Bill Esslinger – Vice President, General Counsel and Secretary
Wyche T. Green, III – President and Chief Executive Officer
James A. Cochran - Chief Financial Officer
Ryan Daniels - William Blair & Company
Sean Wieland - Piper Jeffrey
Sandy Draper - Raymond James
Ricky Goldwasser - Morgan & Stanley
Greg Bolan - Sterne Agee & Leach
Charles Rhyee - Cowen & Company
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I would now like to hand the call over to your host for today, Mr. Bill Esslinger, General Counsel, Greenway Medical. Please proceed.
Thank you, Dorsel. Good afternoon everyone and welcome to the Greenway Medical Technologies fiscal 2013 first quarter conference call. In the course of this conference call management may make statements that contain forward-looking information within the meaning of the Private Security Litigation Reform Act of 1995, such as statements regarding future events, our company performance or estimates or projections relating to the future. Although the company believes that the assumptions underlying any forward looking statements are reasonable, we operate in a continually changing business environment and new factors emerge from time to time.
We cannot predict such factors or assess the impact, if any, of such factors on our financial position or results of operations. Therefore the company’s actual results could differ materially from those that may be projected in management’s discussions. Additional detailed information concerning a number of factors that could cause actual results to differ from the information that management may give you as detailed in the company’s filings with the SEC, including but not limited to the company’s 10-K for the year ended June 30th 2012. Copies of these reports are available upon request.
In addition, during today’s call we will refer to certain non-GAAP financial measures. Please refer to today’s earnings press release available in the investor relations portion of our website at greenwaymedical.com for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.
With that said, I’ll now turn the call over to the President and Chief Executive Officer, Greenway Medical Technologies, Mr. T. Green. Tee?
Wyche T. Green, III
Thanks Bill and good afternoon everyone. Thanks for joining our call today. Our prayers are with those of you who have been impacted by hurricane Sandy. There’s no doubt this has been a difficult time and it’s our hope that all are safe.
We’ve reported another strong quarter with our fiscal 2013 first quarter results. Our revenue grew by 28% which is particularly strong given that these results compared to 55% revenue growth for last year’s first quarter. Last year’s quarter was driven largely by the meaningful use attestation timetable. So our growth this quarter without that demand bolus is particularly encouraging. These results demonstrate that we continue to effectively manage our business.
Gross margin for the first quarter expanded by 262 basis points to 54.4% and that’s after absorbing incrementally larger amortization expense. We’re encouraged by the gross margin leverage we’re achieving. As important, we’re making excellent progress in executing our long term strategy, a strategy that will expand Greenway’s platform by gaining acceptance in each of the three market categories that we are pursuing. The Greenfield opportunity for electronic health records, the growing replacement market and partnerships with innovative organizations that are shaping the delivery of ambulatory care in this country.
I’ll spend some time going through our operating highlights in a few minutes, but since this is a report on our financial results, let me turn the call over to our Chief Financial Officer Al Cochran for a detailed review of these results. Al?
James A. Cochran
Thanks, Tee, and good afternoon everyone. As Tee said, we’ve reported strong results from operations for our fiscal 2013 first quarter and are comfortable that we’re on track to meet the financial objectives that we presented to you during last quarter’s earnings call. As Tee said, our revenue for the 2013 first quarter grew by 28% to $32.8 million. That’s up from $25.7 million for the comparable fiscal ’12 period, a period that as Tee said, was up 55% from the fiscal ’11 first quarter.
We’re pleased with our overall revenue mix. Growth of revenue from recurring sources continues to outpace non-recurring system sales, training and consulting services growth. Recurring revenue grew by 36% and for the first quarter this fiscal year is now at 51% of total revenue. Looking at revenue and cost of goods sold by each of our revenue lines, system sales growth was 36%, which is particularly strong when you recall that our fiscal ’12 first quarter system sales grew by 49% from the prior year. This growth in system sales is occurring even as we see a greater percentage of our new sites accepting our cloud based PrimeSUITE plus S solution which is our subscription offering that’s booked in our supported services revenue line.
Systems sales margin was 67% which is 550 basis points lower than the prior year, but it’s important to note that this year we’re absorbing $1.2 million of incremental amortization expense related to capitalized software development and acquired technology. Systems margin would have been 80% or more than 750 basis points better than the prior year when excluding incremental amortization expense.