Louis Silverman - President and CEO Paul Holt - CFO Greg Flynn - EVP and GM of QSI Division Pat Cline - President and NextGen Healthcare Information Services

Sean Wieland Atif Rahim Richard Close George Hill Dan Katz Gene Mannheimer David Eassley David Angel Chris Leonard Greg Haddad Richard Close Greg Lynn Len Podolsky Richard Adams Donald Rich Michelle McDonald

Good afternoon. My name is Ben and I will be your conference operator today. At this time, I would like to welcome everyone to the Quality Systems 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. (Operator Instructions). Thank you. Mr. Silverman, you may begin your conference.

Thank you, Ben and welcome, everyone to our call. Paul Holt, our CFO; Greg Flynn, our Executive Vice President and General Manager of the QSI Division and Pat Cline, President of NextGen Healthcare Information Services Division once again join me on this afternoons call. On today's call, the company will be discussing its preliminary results for the quarter ended December 31st 2006. These results which should now be on the wire are deemed preliminary in the nature, because the company has received written notification from the Securities and Exchange Commission, stating that the commission has initiated an investigation of trading activity in the Company's security. I am making it clear that investigation does not mean that the commission has concluded there has been a violation of law. The commission seeks Company documents and records concerning the Company’s Chief Financial Officer. The company intends to cooperate fully with the commission’s investigation. The Independent Registered Public Accounts Review of the un-audited interim financial statements for the period ended December 31, 2006 to be filed on Form 10-Q as not yet completed as the auditors receive notification of this investigation on February 1, 2007. We would appreciate on this call and thereafter your respecting our very limited ability to provide further comments on this matter. Additionally, please note that the comments made on this call will include statements that are the forward-looking within the meaning of the Securities Laws, including without limitation, statement related to anticipated industry trends, the Company's plans, products and strategies, preliminary and/or projected operating results, capital and equity initiative, pending litigation and the implementation of or potential impact of legal, regulatory and accounting requirement. Actual events or results may differ materially from our expectations and projections, and you should refer to our prior SEC filings including our Form 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, preliminary or otherwise is not necessarily indicative of future performance. I'll now provide some summary comments on the quarter. Paul, Greg and Pat will follow with additional detail. For the December quarter, the company expects to report revenue of $38.5 million, up approximately 44% over the prior year. Fully diluted earnings per share are expected to be $0.32, which would represent a 78% increase over the $0.18 earned in the same quarter of the prior year. This $0.32 figure is inclusive of an approximate $0.02 per share expense tied to the adoption of FAS 123R, which is the accounting pronouncement related to accounting for stock options as well as a little over $0.01 per share benefit tied to reduction of our tax rate as a result of the re-enactment of the R&D tax credit in December of 2006. Paul will have additional details on this item for you. NextGen Healthcare's revenues for the quarter is expected to be $34.2 million, which would represent a 50% year-over-year increase; expected NextGen operating income of $13.4 million will represent a 70% increase over prior year. QSI Division revenue and operating income performance is expected to be up over prior year's performance. Revenue is expected to be up approximately 10% on a year-over-year basis, and operating income is expected to be up 44% on a year-over-year basis. Corporate expenses are expected to be $2.2 million which represent a 26% year-over-year increase. EDI revenue for the quarter is expected to come in at $4.3 million, which would be up 30% over prior year. I will again remind listeners the EDI revenue is reported as part of Divisional revenue each quarter for each division. Cash and cash equivalents are expected to be $80.4 million. At quarter end actually $74.7 million in the prior quarter. Headcount at quarter end was 618. Regarding investor conferences during the quarter, our company did present at the Credit Suisse, JMP and Piper Conferences, JP Morgan initiated to cover down the company during the quarter. Between quarter end and this call, the presented at the JP Morgan Conference and the Needham Conference, First Analysis initiated coverage of the company as well in January. On February 1, the company announced that it would pay a $1 per share dividend to shareholders record as of February 13, 2007 with anticipated distribution date of February 28, 2007. As well as the establishment of a regular quarterly dividend of $0.25 per share to commence after the conclusion of the quarter ended June 30, 2007 and continuing quarterly thereafter. In closing my prepared comments for this call, I wanted to clearly point out that there are no guarantee that the company or either of these divisions will meet or exceed their past or expect to level the performance in future periods. It's possible that investors or analysts will set new short, medium or long-term expectations for the company, in response for the possibility please continue to note, that we do not give out financial guidance for the investors and community and we do not comment on guidance advance by members of the financial community. I will now turn things over to Paul Holt.

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Thanks, Louis and hello everyone. Preliminary consolidated revenue increased to $38.5 million this quarter, an increase of 44% compared to $26.8 million in the year ago quarter. Our preliminary consolidate system sales was $19 million this quarter represents an increase of 41% compared to $13.5 million in the prior year quarter. Preliminary maintenance EDI, another services revenue rose 47% to $19.5 million compared to $13.3 million in the prior year quarter. Preliminary consolidated gross profit margin this quarter came in at 67% up 64.9% a year ago, an increase in our preliminary gross margin over last year is due to couple of factors, relatively lower amount of hardware and third party software as well payrolls expansion as a percentage of revenue. Total preliminary SG&A increase by approximately $2.6 million to $10.6 million in the third quarter compared to 8 million a year ago. The increase in preliminary SG&A was primarily from increases in selling and compensation-related expenses within the NextGen Division, as well as higher corporate-related expenses. Preliminary SG&A expense as a percentage of revenue this quarter decreased to 27.5% compared to 30% in the prior year quarter, primarily due to a significant year-over-year growth in revenue, which grew at a faster rate than SG&A expenses. Company's preliminary effective income tax rate was significantly lower this quarter compared to the prior year at 35.6% compared to 37.6% last year. The reason for the decrease in the preliminary effective tax rate was primarily due to the re-enactment of federal research and development tax credit, which occurred in December 2006. The re-enactment was retroactive to the start of our fiscal year, resulting in a catch-up of research and development credits recorded during the quarter ended December 31, 2006. The December 31, 2006 quarter preliminary income tax provision included approximately $369,000 or $0.01 per diluted share in net benefit related to R&D tax credits, including catch-up amounts from the first two quarters of the fiscal year. Before I move to divisional performance, note that third quarter preliminary results include 782,000 and additional pre-tax expenses related to stock options due to the adoption of FASB 123R. The after-tax impact of FASB 123R option expensing for the quarter was 587,000 or $0.02 per diluted share. And note that the prior year quarter does not include expensing of stock options under FASB 123R. In terms of divisional performance, our preliminary system sales of the NextGen Division rose 40% to 17.9 million this quarter compared to 12.8 million a year ago. Continued growth in NextGen’s base of installed users drove preliminary maintenance, EDI, and other revenue in that division, 61% higher than last year, at 16.3 million versus 10.1 million last year. Preliminary operating income in the NextGen Division was up 17% to 13,424,000 compared to 7,904,000 a year ago. The Dental Division reported preliminary year-over-year increase of 10%, reporting revenue of 4,267,000 compared to 3,867,000 last year. Preliminary operating income for the division was 1,368,000. Moving down to our balance sheet, our preliminary cash increased by approximately 5.7 million this quarter to 80.4 million or $2.98 per share, compared to 74.7 million or $2.77 at the end of the prior quarter. This quarter, our preliminary DSOs grew five days, at 140 days versus 135 days last quarter. DSOs in the year ago quarter were 129. Our preliminary DSOs this quarter were impacted by a significant customer, which represented 20% of total gross account receivable as of December 31, 2006, were also impacted by re-staffing in our Credit and Collections Group, as well as an increase in the amount of unpaid deferred revenue. We intend to work on bringing this number down. Our preliminary DSOs by division in this quarter were 90 days for the QSI Division and 146 for the NextGen Division. Preliminary deferred maintenance and services revenue was $40.5 million, and as of December 31, that’s up 1.2 million in the prior quarter, and up 4.6 million compared to the beginning of the fiscal year. Again, the primary drivers of the growth in deferred revenue is differed cum implementation and training, as well as maintenance services in the NextGen Division. And again, for those of you who are tracking this, our preliminary non-cash expenses for the quarter breakdown is as follows -- total amortization expense, 832,000, that’s 36,000 for QSI and 796,000 for NextGen; total depreciation expense, 520,000, 57,000 for QSI and 463,000 for NextGen; stock option compensation, 889,000. And then, our investing activities for the quarter were as follows -- capitalized software, 1,330,000, that’s 44,000 for QSI and 1,259,000 for NextGen. Fixed assets totaled -- we invested 1,115,000 that breaks down to 62,000 for QSI and 1,293,000 for NextGen. Again, I would like to thank you all for being on this call, your interest in our company and I will turn things over to Greg Flynn, who will provide you an update on the QSI Division.

Thank you, Paul, and thanks to those of you who are on the call for joining us. The QSI Division as well as the EDI preliminary financial data have been addressed in detail by Lou and Paul. So, I will focus on software development achievements for the Division and then other historical areas of interest for these calls. Most key for the Division in the last quarter were our development, implementation efforts for the CPS, Clinical Product Suite software package. We are clearly advancing in our goal of merging our business functions with our clinical functions. We are enabling practitioners to have knowledge and control of both their patient treatment, and business management share size. There are many new CPS developments to be debuted at our Users Group Meeting beginning tomorrow. I am excited to see our users' reactions and I am proud of our staff's effort in advancing our CPS product. Now following the line of historical questions, I will comment on our sales staffing and pipeline. Our sales staffing remains unchanged from last quarter, and our pipeline is approximately $3.2 million. Our pipeline is defined in sales situations, where QSI is in the final pre-purchase choices and we believe that the sale will occur within 180 days. With that, I will turn the call over to Pat Cline, as you know, President of our NextGen Division.

Thanks Greg. During the quarter, NextGen executed approximately 80 new customer agreements, up significantly from the prior quarter and at the high-end of our historic range. I am also happy to report that the company reached new heights in areas of customer service, last quarter for example, in response time related to customer support calls. Our salesforce grew once again to a total of 58 people and we are working hard to getting many of our newer people up to speed. Our pipeline has also grown to over $70 million at this point, NextGen continues to win key sales in the marketplace and we feel very good about the company's future. In closing, I would like to once again thank NextGen's employees for the hard work and our customers for their continued confidence. Ben, we are ready for questions.

(Operator Instructions). Your first question comes from Sean Wieland

Hi thanks for taking the question, and I don't -- I haven't seen the numbers -- at least I haven't seen them on [MyWire] yet. But, I guess the first question that I have -- you said that one customer was 20% of accounts receivable, was this a deal that was signed in the quarter or was it a historical deal, could you tell us who it is?

Sean, this is Paul. We don't -- we won't get into naming any individual customer, but that -- they do cause -- this particular customer constitutes 20% of AR and that's as far as we really can go with that.

And Sean this is Louis, that's the aggregate AR, it's not bracketed into the quarter.

Okay.

It's the total company, sort of the accumulated AR over however much time [the AR is] captured.

Okay. So would it be safe to assume that it would be [three months]?

You are free to make [any number of] assumptions you want, safe or otherwise.

Okay. And you kind of went over a little bit fast on what we can ask you about on the pending SEC investigation. Can you just -- I missed some of the moving parts there, can you tell us what that is again?

Yeah all I said was that given the nature that we'd appreciate, you're respecting our limited ability to provide further comments on the matter.

Okay. It's there a filing on that or will there be?

We will have just a good question -- I think it's -- we have our press release that has a little bit of texture on that, although not much more than I read, and then we will -- with our Q that has been dated in there its premature to speculate exactly what's going to be in there, but --

Okay.

That's -- the plan is. I have essentially repeated what I read through, in a couple of places, both in the transcripts for this call and the press release, will be pretty close to that. And then -- well more then, likely put something in our Q when we file.

Great. And just, I can't find the release anywhere in the wire. So, there might be delay in that?

I apologize for that. And I know that we've people working on it. It will be out there at some point and it should have been out there long ago, I have -- we do have people working on it.

Okay. Thank you very much.

Your next question comes from Atif Rahim.

Hi. I haven't seen the numbers either. But just wondering, I missed the earlier comments on the SEC investigation. Pat, could you explain us to why you can't tell us any more about it, than what you've told us at this moment? At least when you received the notice of the investigation?

On that, I think that at this point we're content with the information. We believe that the information we provided thus far, again it is an investigation that's trading in the company's equities. And the data -- the efficacy of that for some results are not activities of Paul Holt, our CFO.

Okay. And do you have an expected day here, final day for your Q?

We know what the deadlines are, and we anticipate everybody working who put the maximum effort to meet those deadlines.

Okay. Thank you.

That's short of a guarantee, but that's definitely -- we now are presently working hard to get there.

Thanks.

Your next question comes from Richard Close.

Great. Thank you. We will look forward to those press releases as well. Just quickly I was wondering if we could talk about a little bit about the sales force, you said you increased that as 58 with this quarter, I believe it was flat last quarter at 52, is that correct?

I think we somewhere in that number, I don’t have the prior Q number, I think 52-54 or somewhere in that.

Okay, so with that being said, of the 10 people you hired I guess in the June quarter of last year, how many would you say are still at the firm? Or at the company?

Well, I have to apologize again, I don’t have that in front of me. Typically out of 10 people hired, 3 or 4 may make it to the first year, most of the turnover in the first year would be caused by losses as opposed to any other factor.

Okay. And then with respect to the 20% accounts receivable, would that one customer have been 10% in the September quarter?

Richard this is Lou, my recollection is that we did have an AR concentration in the September quarter. I don’t remember the exact concentration, about 15% and we also would have an obligation to disclose the revenue concentration as it was greater than 10% in a quarter or on a year-to-date basis and we haven’t disclosed that?

Okay, and then final question because I know other people want to jump on here, but with respect to, I believe you gave in your Q the level of millions of dollars of sales with buyers. Do you have that for this quarter, the December quarter, or should I look in the Q when that comes out.

Why don’t you just standby for the Q when that’s come out.

Okay, thank you very much.

Thanks Richard.

Your next question comes from George Hill.

Good afternoon guys. Can you explain me, I don’t necessarily understand why the investigation is delaying the filing of the Q?

Fair question and we continue to work with our auditors to make sure that they're ready to sign off and check off on our numbers and I think they are just reviewing their audit procedures and internal standard to make sure that in the context of this investigation that they have completed all of the reviews that they need to. I don't think it's advisable for me to get into the business of charting out what the auditors are going to do or what they need to do. I know they are working on that and we intending to work with them to assist in anyway we can.

Okay, and just because I also have not seen the press release --

I think, George we have - we are not sure exactly what is going on, are we going to keep getting assurances that -- somebody said it just hit.

Yes, could you say was it was Paul or Pat that is the subject of the investigation?

Paul Holt, our Chief Financial Officer.

Okay, that might explain a little bit more about the filing--

Actually, let me clarify that, nobody said that Paul Holt was the subject of an investigation.

That's for your clarification.

Okay. And then the last question I want to dig into is, just to hit a couple of the numbers real quick, you said the NextGen system revenue was?

The total NextGen system revenue --

NextGen system revenue is what you ask?

Yes.

$17.9 million.

Okay. And 80 new deals in the quarter?

That’s about 80.

Are there any new deals? I am sorry, according to my model that would indicate that average deal size is falling off a little bit. Are you guys seeing more traction down-market, I guess would be my next question or is my assumption there wrong?

Well. It depends on how broader time horizon upon which you make your assumption. If you look quarter-over-quarter, certainly the average deal size would be down. If you look over a longer period of time, I think you will see that it’s well within the historical range.

Okay. Is there any changes you guys are seeing in the competitive market, I will say it just for my perspective, we have seen one of the smaller private companies get more aggressive especially on price, anything you guys are seeing from a competitive per pricing perspective you can comment on?

As I mentioned on a couple of prior calls, we see one or two of our -- actually a couple of our competitors getting more aggressive. As I think about, I will correct myself and say that I can think of three of our competitors that have gotten more aggressive on pricing. Fortunately, NextGen has not had to reacting in any material way to that. We think we bring quite a lot of value in our current price structure. From time to time if there is a deal or potential customer that is strategic value to us we may reduce our price not to meet competition but to push somebody who is sitting on the fence to our side of defense but I don’t think our competitors pricing tactics have affected us very much.

And I will ask one more brief question before I wrap off, with the customer that you see outstanding DSO issue, is there anything that's different in their terms that would be different from the average customer, that would lead to the increase in DSO days?

Yes, you will see it in our Q that there’s -- they had some impact on the terms that we've extended and that has some impact on DSOs.

And I will hop in the queue. Thanks again guys.

Your next question comes from [Michelle McDonald]

Hi. Can you explain to me why your NextGen system sales were down $1 million sequentially?

Pat, you're going to take that one?

I can't. It's very difficult to look quarter-over-quarter, I think if you were to grab the company's results over a two-year period, you see trends with respect to system sales and just about everything else, I’m very positive. If the time horizon is one quarter, that's tough for me to react to.

Okay Thank you.

Your next question comes from Dan Katz.

My question has been asked. Thank you.

Your next question comes from Gene Mannheimer.

Thanks for taking my question. Pat, could you elaborate a little bit on the mix of bookings within NextGen, specifically practice management versus EMR?

The EMR was a little bit up in the quarter but not out of the historic range. For those on the call that may not be familiar with that range, the mix of EMR to EPM in most quarters has been about equal, mainly there is been slight edge on the EMR side that I attribute to the market. Also, about two-thirds to 3 quarters of sales of our customers have tended in the past to purchase both products, that is, the practice management and the electronic health record product and not a material change in this quarter. It will vary slightly quarter-to-quarter but nothing big to report.

Okay, thanks, Pat. With respect to the segment of the market, say, small, medium and high end, can you give us any color on how their bookings breakout among practice size?

No, we typically don't report or break it down by practice size. Well, I don't have all that information in front of me based on sort of my gut and my knowledge of the quarter, we faired pretty well in each of the segments. I don't think we saw a big shift from larger side to smaller or smaller to mid range or anything like that. It’s pretty well near as what we have done in past.

Okay, thanks, Pat. And final question with respect to Siemens, do you typically invoice Siemens on delivery of software? And thank you for taking the questions.

We typically invoice on delivery of software. I think that we have to answer yes. We do charge for our products.

However, while they maybe invoiced upon delivery of the software, they also may have payment terms that are tied to other milestones or other timeframe. So, invoicing upon delivery of software isn’t necessarily the same as payment for the software being due with the invoice?

Well said, Pat.

Understood, thanks very much.

Your next question comes from [David Eassley]

Hi. I wanted to touch on that the system sales question and ask it seems like since Q4 fiscal ’06, I guess the system sales have peaked to 20 million and now have run down to over 79. So, can you give a sense of why that is I mean what’s happening up in the marketplace because as I think as Pat just spoke you acknowledge that there has been tremendous growth over last couple of years in this area and it now seems to be flattening out and the business has been one in the maintenance and EDI space. So, may be qualitatively, after you answer the first part, give us kind of a connection between how you are driving the ancillary revenues?

Well, certainly as the existing customer base grows and as our systems are accepted in the marketplace by the providers or physicians that are using them, those existing customers want to purchase more in the way of additional services, additional modules, and those kinds of things, so sales to existing customers whether that’s services or EDI or those kinds of things are not -- I wouldn’t characterize them as bad things. I think that’s good and again a testimony to the software’s success and I don’t necessarily agree with the notion that new system sales are flattening out. And again, if you look at a relatively short time horizon, you may conclude that, again I just don’t necessarily agree with that conclusion.

I apologize for trying to fox you into Wall Street view. I will concur that you had it. Over time it’s being growing. So I apologize.

That needs to be included in here is that Q4 number that you're referring, includes a fairly good size chunk of revenue that was picked up from that Siemens transaction from last year. So you may not be using a fair comparison there in light of that individual transactions that we had last year.

Sure. But I was putting it in the context, what you said, which was that you had -- I believe in the NextGen systems, they will grow up 50%, so you weren't really playing that -- to that. If you want to quantity that Siemens push-out that would be great?

Well I think if we did disclose -- we had $2.4 million that was recognized in that Q4 quarter.

And that was all Siemens, is that right?

Yeah that was -- part of that [individual] transaction --

Okay. So that helps us. Thank you I didn't know that.

Your next question comes from [Vald Avatamina].

Hey actually it's [David Angel]. I have some questions for you. You said that the investigation relates to the trading activities? And you say that your (inaudible) records relating to the CFO. Does the record reflect exclusive to the trading activities of the CFO, or is the information request broader than that?

We've said what we have to say on the investigation, at this time. We're not going to place -- we're not going to go into extreme level of detail.

What I am getting at is, is the investigations relating around the company's activity based upon the information request according to CFO? Or is it circling around trading activity?

It is the -- the information you saw is our documents and records concerning the activities of our CFO.

But broader than just trading activity?

I don't think, we can characterize. It's tough for us to know exactly what -- other than what's been asked the information that has been asked of the company. Exactly what is being looked into, I wanted to repeat that. Well let me just say that, I've got every confidence in Mr. Holt. I think if the company felt that there was any wrongdoing, Mr. Holt may not be on this telephone call and I will add that, as far as I know the company is not the target of investigation.

Okay. As far as you know the company is not the target of investigation?

Yes, that's [correct].

Okay. Thank you very much.

Your response comes from Chris Leonard.

My question has been answered. Thank you very much.

The next response comes from Greg Haddad.

Thank you good afternoon. On the NextGen market environment, can you comment on whether the any kickback [statuette] Safe Harbor and Stark exception that were inactive at the beginning of the quarter, had positive-negative neutral impact on new sales volume?

I think -- once again looking over a little bit over the longer time horizon, the relaxation of the Stark regulations has positively impacted NextGen and our competition. I think, the market has heated up. The relaxation of the Stark was, is -- customer organizations take advantage of it -- those organizations would be typically the larger organizations, larger opportunities and the sale cycles typically associated with those organizations tend to be drawn out. But I do think that over the last quarter, we have seen some benefit from it, yes.

Thank you, and with respect to subscription based pricing. Could you comment on your top process on that right now and both from a market perspective, competitively what's going on, as well as your own our products and services and what you are thinking about there?

While NextGen's primary licensing model is to sell software licenses and provide help in having customers finance those licenses over a longer period of time, if they would like to pay for them by the month. We also offer a subscription model pricing. Subscription model pricing is something that's preferred by, at this point a small -- in our opinion, subset of the market. But we will need to keep an eye on it.

Thanks very much.

You are welcome.

Your next question comes from Richard Close.

Yes, with respect to headcount, you gave us the salespeople, can you talk a little bit about any additions in terms of numbers on the NextGen side before implementations?

Richard, this is Louis, just popping a line here in front of Pat, we gave you the total company headcount. We haven't typically broken out department-by-department. Pat and I have some addition -- granularity on this, but from my perspective I think it's fair to say that our additions to headcount on a longview basis have been relatively consistent across all departments of the company. So, that is to say, our additions have been spread out through many, many of our departments. We believe if that is -- that is a good way to run a business, to continue to reinvest and both through the rosters of the key departments in the company to keep up with growth that we have enjoyed in the past and hopefully through (inaudible) foundation from growth in the future.

Okay. What was headcount then? I missed that, I am sorry.

I believe 618 company wide and this defiantly yes, 618 at quarter end for the company.

I will add a little more text to that. Over the last six or nine months, I think we have added somewhere in the neighborhood of between 30 and 40 people in the company between our implementation and training department and our customer support or customer service departments. It's somewhere in that range. Again I don’t want to get into a habit of breaking that out every quarter but just to give you a texture over that longer period of time. The company is increasingly focused on customer satisfaction and customer service. We think strategically that’s the way that we can continue to protect our margins and our pricing. And we -- in addition to continuing to grow the sales force, we will continue to grow our service task accordingly.

And then a final question. May be how would you characterized, how you guys see yourself in terms of market share and then possibly saw us on your win rate and competitive situations?

I don’t have our market share numbers in front of me. It's something that we do pay attention to when we are very pleased with where we are relative to market share, share of new sales. And especially our share of those key strategically important sales that are highly competitive, we win our fair share of the ones that we want to win.

Okay, thank you.

Your next question comes from [Len Podolsky].

Hi guys, thanks for taking the follow up. Question for Lou, do you guys plan on doing the follow up call after the finalized numbers come out?

Good question and I was going to leave that as an open item at this point in time, to set-up by you.

Okay, sounds good and then moving on to the business. On the last, on the last call you guys commented that revenue from existing costumer was up as a percentage of revenue sequentially; can you give some commentary on that on the December quarter?

Revenue from existing customers is [80%].

Well I think what we said was, last quarter we didn’t give out any numbers but we said that revenues with existing costumers were up significantly that quarter and they did have an impact on that quarter, I think that is what we said for the prior quarter. This quarter, I mean if we are getting into, I am not going to get any quantitative--

Yes, I think the commentary was pretty qualitative.

Qualitatively I think we went to a little bit, more a traditional mix of existing versus new customers from a quantitative point of view.

Okay, was there any concentration that had an impact there?

As we talked about [Glen], the concentration that we referenced last quarter in the Q was the receivables concentration. We also talked about a similar concentration for this particular quarter. And we also mentioned that there was no disposable revenue concentration in either of those quarters.

And then, one final question for Pat. You mentioned on the last call that one of your goal is to figure out how to sell 100 to 200 systems a quarter versus 50 to 70, I guess, anything in hopper that you have on that front to get you guys to that goal at some point?

No, we have number of initiatives underway in a lot of different areas as the company. I alluded to one or two of them. We have some things that we're pretty excited about relative to partnerships and in particular our partnership with Siemens and additional opportunities that may come down the road, but while we feel very positively about our future including the number of systems per quarter, again that's – it’s not really something that you can look at on a quarter-over-quarter and maybe not even a year-over-year basis. What I was talking about -- well, I am not sure what particular call you are referencing because--

It was the November 2.

Okay. I have talked about that a couple of times, also with respect to scalability, and that is, how do we leverage our training and implementation resources across the broader base of customers to make sure that when we have that type of demand that we can adequately delivery, and adequately train our customers, and continue to do a great job for them.

I am sorry, one final question, and I'll promise I will leave at that, any update on the small practice product?

Not that I am going to go into on this call. I apologize.

Okay, thanks, thanks very much.

Thank you.

Your next question comes from Richard Adams.

Yeah, hi, do you guys have a cash flow from operation number for the quarter?

We will -- until we file the Q, I have got it -- I want you to wait until we get there, get the Q, which we might get out shortly.

Okay. And then just to clarify the DSOs coming up 5 days, did you say all that was attributable to the one customer or just part of it?

Well, I mentioned a couple of -- three factors, I think it's safe to say that significant customer is part of it, so I wouldn’t -- I have – I don’t have some kind a finely-tuned analysis that breaks it all that up for you, but I did -- I mentioned the three, where I – we feel are the most significance factors there.

Okay. And then just lastly, I think you mentioned -- seen some pricing pressure from some competitors, and I think eClinicalWorks was mentioned, have you seen them moving up into the mid-market segment from the small segment? Are they becoming a competitor in -- from a head-to-head basis?

I am not sure that ECW was mentioned, but now you've mentioned them, not any more than usual, we have seen them from time to time for a while in that mid-market segment, and we were very happy with the way that we fair in that segment as well.

Okay. Great, thanks guys.

Your next question comes from [Donald Rich].

Hello. Thank you for taking my question, guys you had a financially great quarter. Basically two questions; number one, do you have procedures in place and policies in place for trading the company's stock for employees, offices, and directors?

We have a policy, yes.

Second thought, your cash on hand looks pretty decent, but going to a subscription or permitting a prescription -- subscription basis and a 140 days DSO and paying the dividend, is just going to strain your cash on hand and -- at all?

The Board of Directors, when they were looking at this issue, took into account a whole bunch of factors and concluded that this was a prudent decision for the company. And fairly we need to continue to execute it at the company through avoid the risks that you are pointing out. But I think it's fair to go ahead with that taking into consideration as the board deliberated and from their conclusion.

Thank you.

I'll also add, this is Pat; that I didn't mention that we were moving to a subscription model, I just mentioned that we had offered a subscription model, but our primary model is selling licenses. There hasn't been any major shift of focus growth is to subscription based pricing. And finally our DSOs as we've talked about on a couple of prior calls, tends to be sort of artificially inflated. Paul, do you want to quickly go into the deferrals issue?

Yeah, we have -- our balance sheet, we included in accounts receivable amounts there are -- that are sitting in accounts receivable as well as in deferred revenue. And we call it unpaid deferred revenue and we have disclosures in the Q which allow you to calculate DSO's on a gross basis or on a net basis. And on a net basis, although I don't have that number in front me. It's substantially vesting on the gross basis.

Thank you.

Thank you.

Your next response is from [Michelle McDonald].

Hi, could you tell me, what the tax rate we should apply for next quarter and next year please?

Well, we don't have a practice of giving out any forwarding guidance like that. Unfortunately I am afraid I can't really give you guidance about the future on our tax rates. But I can just talk about, what we are reporting on today.

Okay. And another question is when the board voted on the dividends, do you have knowledge of the SEC investigation at that time?

I am not going to comment on that at this time.

Okay, thank you.

No other questions.

Okay, well thank you everyone for joining us on our call today. And we'll look forward to chatting with you again down the road. Thank you.

That concludes today's Quality Systems conference call. You may now disconnect.

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