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Streamline Health Solutions, Inc. (STRM)

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Streamline Health Solutions Inc. (STRM)

Q3 2017 Earnings Conference Call

December 13, 2017 9:00 am ET

Executives

David Sides - President, Chief Executive Officer

Nick Meeks - Senior Vice President, Chief Financial Officer

Randy Salisbury - Senior Vice President, Chief Marketing Officer

Analysts

Matt Hewitt - Craig-Hallum Capital

Presentation

Operator

Good day and welcome to the Streamline Health Third Quarter 2017 Financial Results conference call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Randy Salisbury. Please go ahead, sir.

Randy Salisbury

Thank you for joining us to review the financial results of Streamline Health Solutions for the third quarter of fiscal year 2017, which ended October 31, 2017. As the conference call operator indicated, my name is Randy Salisbury. As 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’ll open the call for a question and answer session. If anyone participating on today’s call does not have a full text copy of our press release announcing these results, you can retrieve it from the company’s website at streamlinehealth.net or at numerous other financial websites.

Before we begin with prepared remarks, we want to be sure we are clear for everyone on the record how certain information which may be provided today, as with all of our earnings calls, should be viewed. We therefore submit for the record the following statement. First, statements made on 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. These are subject to risks, uncertainties, assumptions and other factors that could cause actual results to differ materially from those we may discuss. Please refer to the company’s press release and filings made with the U.S. Securities and Exchange Commission, including our most recent Form 10-K annual report for more information about these risks, uncertainties and assumptions and other factors. As always, we are presenting management’s current analysis of these items as of today. Our participants on this call should take into account these risks when evaluating the topics we will discuss. Please note Streamline Health is not undertaking any commitment or obligation to publicly revise any such forward-looking statements made today.

Second, we will discuss non-GAAP financial measures such as adjusted EBITDA. Management uses these measures to help provide better insight into our financial performance; however, certain items of income and expense are not included in these measures, so these calculations may differ from those which another entity may reach using their own non-GAAP measures. To help you compare these amounts on consistent terms, 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.

With that said, let me turn the call over to David Sides, President and Chief Executive Officer. David?

David Sides

Thank you, Randy, and good morning everyone. This morning I want to comment on our performance in the third quarter of fiscal year 2017. As usual, we’ll also look at our fourth quarter performance to date and what we expect for the remainder of this fiscal year.

As released yesterday afternoon, for the third quarter of fiscal 2017 we generated revenues of approximately $6.4 million, an 8% increase over the previous quarter of this fiscal year and a decrease of approximately 3% from the third quarter of 2016. The increase in our third quarter revenue was driven partially by an increase in professional services revenue related to contracts signed in fiscal 2017. It was also driven by an increase in recurring revenue derived from additional facility activations among our existing client base. The decrease from last year was a result of the expected declines left over from last year’s sale of our patient engagement solution, the continuing attrition we are experiencing with our legacy content management solution, and the inherent unpredictability in our channel partnerships with perpetual license sales.

Recurring revenues were 79% of total revenue for the third quarter, down slightly from the second quarter due primarily to the increase in professional services revenue. While we are seeing new revenue growth, the fact that we have not yet booked a perpetual revenue contract so far this fiscal year is a primary factor in offsetting these revenue declines. It continues to be difficult to predict the execution timing of a perpetual contract primarily through some of our channel partner relationships, such as Optum 360, but we continue to work closely with these partners and understand from them that the potential for closing a deal which could generate material revenue contributions before the end of the fiscal year remains.

Turning our attention now to professional services, revenues were approximately $800,000 in the third quarter, an increase of approximately 40% over the second quarter of this fiscal year. This was primarily due to a large professional services contract we signed in the quarter and one contract that had approximately $300,000 of catch-up revenue booked in this quarter. Our bookings for the third quarter of 2017 continue to improve and have grown consecutively throughout the year, up from $1.1 million last quarter to approximately $1.9 million in Q3 of this fiscal year. The bookings in the third quarter consisted primarily of net new SaaS contracts, including four new Evaluator contracts, two of which came from existing clients and two from new clients, as well as a new financial management software solutions client, Nobilis Health, which I referenced in my Q2 prepared remarks.

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