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Cerner Corporation  (NASDAQ:CERN)
Q4 2017 Earnings Conference Call
February 5, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to Cerner Corporation's Fourth Quarter 2018 Conference Call. Today's date is February 5, 2019 and this call is being recorded.

The company has asked me to remind you that various remarks made here today constitute forward-looking statements, including without limitation, those regarding projections of future revenues or earnings, operating margins, operating and capital expenses, bookings, new solution, services and new offering development, capital allocation plans, and future business outlook, including new markets or prospects for the company's solutions and services.

Actual results may differ materially from those indicated by the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements may be found under Item 1A in Cerner's Form 10-K, together with the company's other filings.

A reconciliation of non-GAAP financial measures discussed in this earnings call can be found in the company's earnings release which was furnished to the SEC today and posted on the Investors section of Cerner.com. Cerner assumes no obligation to update any forward-looking statements or information except as required by law.

At this time, I'd like to turn the call over to Brent Shafer, Chairman and CEO of Cerner Corporation.

Brent Shafer -- Chairman and Chief Executive Officer

Thank you, Carmen. Good afternoon to everyone and welcome to the call. Today I'm going to provide reflections on my first year at Cerner and discuss steps we are taking to position ourselves for long-term profitable growth. I will then have our Chief Financial Officer Marc Naughton cover the numbers and John Peterzalek, our Chief Client Officer marketplace observations.

I'd like to begin with some observations from my first year. This past Friday marked my one year anniversary at Cerner. It's been an eventful and important 12 months. I spent a great deal of time learning the business, talking to clients, partners, the financial community, and of course Cerner associates. A clear take away from these conversations is the optimism around Cerner's role in having a positive impact on healthcare. Clients have been eager to give feedback on how Cerner solutions are advancing their businesses along with urging us to go faster because of our importance to them. Partners are pleased working with our platforms and the culture around associate base, our Cerner associate base, is linked to relentless innovation. These assessments have bolstered my confidence that Cerner is well-positioned to deliver profitable growth. I fully expect Cerner to continue its legacy as a growth company and innovator in healthcare.

As an overall leadership team, we have also focused on assessing market opportunities, listening to clients, reviewing our internal processes and evaluating our profitability in capital allocation strategy. You heard me on the last earnings call talk about four commitments that define our framework for delivering value. To reiterate, 1.) We must relentlessly advance our clients' success 2.) Imagine, design, and implement intelligent health networks 3.) Focus on better healthcare experiences and outcomes 4.) Become the partner of choice for healthcare innovation. In order to deliver on these commitments, I've worked with the team to create a better structure in improved processes.

This work has led to a refined operating model that we will discuss next week at HIMMS. It's my belief that we can reduce complexity for our clients and make it easier to do business with Cerner. I also believe we can innovate faster and more efficiently so clients can quickly adopt new solutions. By aligning resources around client focus and efficient delivery of innovation, I expect the business to operate more cost-effectively and have more predictable results and improved profitability. I want to highlight today's announcement that we plan to initiate a dividend. This decision is a significant milestone in Cerner's journey and illustrates our confidence in delivering strong operating performance in free cash flow generation. Marc will get the specifics but this decision underscores our commitment to delivering shareholder value.

We had a solid fourth quarter with all key metrics within our guidance ranges except for revenue which was slightly below guidance, primarily due to lower than expected technology resale. Given the lower margin profile of technology resale, the quarterly revenue shortfall had very little impact on earnings which were in line with expectations. For all of 2018, our revenue and EPS were both in the full-year guidance ranges we provided in our Q1 earnings call and we delivered solid bookings (00:05:14). But we did deliver our full-year guidance ranges. I'm aware that our results included a decline in operating earnings. This is not something we expect to continue, and I believe the structure and process changes we are making will help make Cerner more focused and efficient which should allow us to increase our predictability and profitability over time.

In summary, while we still have a lot to do, I am pleased with the progress we made as a leadership team in the past year. I believe we have the right mix of people, processes, and strategies to drive long-term financial success. I look forward to seeing many of you next week at HIMMS, now altering the call to Marc.

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Thanks, Brent. Good morning everyone. I am going to cover our results and guidance. I will start with bookings, which were $1.96 billion in Q4. This is above the midpoint of our guidance range and is the second highest bookings quarter in our history behind $2.329 billion in Q4 2017, which included several uniquely large contracts and has grown 62% over the prior 4th quarter. Full-year bookings were $6.721 billion, which is up 6% over $6.325 billion in 2017. We ended the quarter with a revenue backlog of $15.25 billion, which is up from $14.70 billion in Q3. As we've indicated, our backlog calculation under the new revenue standard excludes revenue potentially impacted by contract termination clauses. In our experience, clients rarely exercise this option, so this doesn't change our total long-term revenue opportunity, it just reduces the calculation of backlog. You'll see in our 10-K filing that we've supplemented our backlog disclosure by adding the amount of revenue we expect from contracts that are not included in the backlog calculation. For 2019, when you combine the 29% of our backlog, we expect to recognize with an additional $525 million expected from contracts not included in backlog, the total is approximately 85% of the midpoint of our revenue guidance.

Revenue in the quarter was $1.366 billion, up 4% over Q4 2017 and, as I mentioned, just below our guidance range of $1.37 to $1.42 billion. The shortfall in Q4 was primarily due to lower than expected levels of technology resale, which was down 42% compared to Q4 2017. Total revenue for the year was $5.366 billion, reflecting growth of 4% over 2017.

I'll now go through the business model detail and year-over-year growth compared to Q4 2017 and full-year 2017. Licensed Software revenue in Q4 was $166 million, down 2%, against a solid Q4 2017. Full-year Licensed Software revenue of $614 million was $2 million higher than 2017, or basically flat, with growth in SaaS offsetting declines in traditional software. As we've discussed, the smaller nature of the remaining EHR replacement market reduces our traditional software opportunity, but we do expect SaaS to continue growing and eventually become the majority of software revenue, which should reduce volatility over time.

Technology resale decreased 42% in Q4 to $46 million and was well below our forecast. Full-year technology resale revenue was $245 million, down 10% year-over-year. The weakness relative to our forecast in Q4 was largely due to transactions pushing. We are also beginning to see more of our third-party suppliers' transition to subscription and SaaS models, which did impact the sublicensed software portion of technology resale revenue in 2018.

Subscriptions revenue was $87 million in Q4, down from $115 million in Q4 2017. As we have discussed throughout the year, subscriptions were impacted by our adoption of the new revenue standard, reducing subscription backlog and classifying a portion of subscription revenue as support. Full-year subscriptions revenue was $326 million, down from $469 million in 2017. With a full-year of the transition to the new revenue standard behind us, we expect the subscription business model to return to solid growth in 2019.

Professional services grew in Q4 17% to $466 million, driven largely by growth in our Works businesses. Full-year professional services revenue grew 14% to $1.811 billion. Managed services increased 14% to $299 million in Q4, driven by strong bookings throughout the year. Full-year managed services revenue was $1.155 billion, an increase of 10% over 2017. Support and maintenance was up 6% to $277 million in Q4, and full-year revenue grew 7% to $1.118 billion, both reflecting our expected low-single-digit growth plus the previously discussed impact of the new revenue standard.

And finally, reimbursed travel inQ4 was $24 million, down $4 million from the year-ago quarter. Full-year reimbursed travel revenue was $97 million, down 4% year-over-year. Looking at revenue by geographic segment, domestic revenue was up 4% from the year-ago quarter at $1.205 billion, and non-U.S. revenue of $161 million was up $1 million from the year-ago quarter. For the full year, domestic revenue grew 3% and non-U.S. revenue grew 12%. Moving to gross margin. Our gross margin for Q4 was 82.6%, down slightly from 82.8% in Q3 2018 and flat year-over-year. Full-year gross margin of 82.5% is down from 83.4% in 2017, driven by higher 3rd party services costs.

Now I will discuss spending, operating margin and net earnings. For these items, we provide both GAAP and adjusted, or Non-GAAP, results. The adjusted results exclude share-based compensation expense, share-based compensation permanent tax items, acquisition-related adjustments, an allowance on a non-current asset, impact of U.S. tax reform, and other adjustments, all as detailed and reconciled to GAAP in our earnings release. Looking at operating spending, our fourth quarter GAAP operating expenses of $965 million were up 11% compared to $866 million in the year-ago period. Full-year GAAP operating expenses were $3.654 billion, up 10% from $3.328 billion in 2017.

Note that in Q4, we recognized a pre-tax charge of $45 million to provide an allowance against a non-current receivable with Fujitsu Services Limited that is in other assets on our balance sheet. As some of you will recall, Fujitsu's contract as the prime contractor in the National Health Service initiative to automate clinical processes and digitize medical records in the Southern region of England was terminated in the second quarter of 2008 by the NHS. This led to our subcontract being terminated. We continue to be in dispute regarding the amounts due as a result of such termination, but we determined in the fourth quarter that our chances of a favorable resolution have been reduced based on the outcome of the alternative dispute resolution procedures provided for in our subcontract. Note that after our subcontract with Fujitsu was terminated, Cerner went on to successfully deliver in the Southern region, as well as the London region, with another prime contractor, and the U.K. remains a strong and active market for us today.

Turning to adjusted operating expenses, they were up 7% compared to Q4 2017, and 9% for the full year. Looking at the line items for Q4, sales & client Service expense increased 6% over Q4 2017, primarily driven by an increase in personnel expense related to our services businesses. Software development expense increased 12% over Q4 2017, driven by a 7% increase in gross R&D, a 17% increase in amortization, and flat capitalized software. G&A expense was up 5%, and amortization of acquisition-related intangibles decreased $1 million year over year.

Moving to operating margins. Our GAAP operating margin in Q4 was 12% compared to 16.7% in the year-ago period, largely due to the $45 million allowance I discussed. Our adjusted operating margin for the quarter was 18.7%, down from 20.5% in Q4 2017, consistent with our guidance for the quarter. Our GAAP operating margin for the full-year 2018 was 14.4% compared to 18.7% in 2017. Our full-year adjusted operating margin was 18.8%, which is down from 22.4% last year. As we have discussed, 2018 was impacted by lower-than-anticipated licensed software revenue, higher growth of non-cash expenses, investments in our Works businesses and an increased mix of Works revenue. We continue to believe that many of these factors are temporary in nature, and our 2019 guidance reflects our expectation that our operating margins stabilize at approximately 19%. This could vary based on revenue mix, but we do not expect margin compression like we have experienced the past few years. Longer term, we believe adjustments we are making to our operating model and a focus on profitable growth will position us for additional margin expansion.

Now I'd like to preview an expense we expect to incur in Q2. As we discussed throughout 2018, we have been working to identify opportunities to operate more efficiently and innovate at scale. One outcome of that analysis was a recent announcement of a Voluntary Separation Plan, or VSP. Generally, the VSP is available to U.S. associates who meet a minimum level of combined age and tenure, with certain critical roles excluded for business continuity purposes. Associates who elect to participate in the VSP will receive financial benefits commensurate with their tenure and position, along with vacation payout and medical benefits. At this point, we do not have a firm estimate for the charge because the acceptance period ends later this month, but we anticipate less than 3% of our total associates will separate as part of this program. While a portion of these positions will be backfilled, we believe we will be able to fill many of the positions with existing associates, which should create efficiencies in the future while also creating career growth opportunities for our associates.

Moving to net earnings and EPS, our GAAP net earnings in Q4 were $131 million, or $0.40 per diluted share, compared to $1.00 in Q4 2017. For the full year, GAAP net earnings were $630 million, or $1.89 per diluted share. Adjusted net earnings in Q4 were $208 million and adjusted diluted EPS was $0.63, compared to $0.58 in Q4 2017. For the full year, adjusted net earnings were $819 million and adjusted diluted EPS was $2.45, up 3% from 2017. Our GAAP tax rate was 24% for the quarter and 21% for the year. Our non-GAAP tax rate was 21%, for the quarter and year. For 2019, we expect our GAAP and non-GAAP tax rates to be closer to 22%.

Now I'll move to our balance sheet. We ended Q4 with $775 million of cash and short-term investments, which is down from $814 million in Q3 2018, with our free cash flow being offset by $298 million of share repurchases. For the year, we repurchased 11.2 million of shares for $644 million, at an average price of $57.65. We currently have $283 million of remaining authorization under our repurchase program. Moving to debt, our total debt was up $3 million from last quarter to $444 million. Total receivables ended the quarter at $1.183 billion, down from $1.211 billion in Q3 2018. Our Q4 DSO was 79 days, which is down from 82 days in Q3 2018 and up from 72 days in the year-ago period.

Operating cash flow for the quarter was $407 million. Q4 capital expenditures were $141 million, and capitalized software was $65 million. Free cash flow, defined as operating cash flow less capital purchases and capitalized software development costs, was $201 million for the quarter. For the full year, operating cash flow was $1.454 billion, capital expenditures were $447 million, and capitalized software was $274 million. Full-year free cash flow was $733 million, which is $62 million higher than 2017. For 2019, we expect limited growth in our operating cash flow because we benefited in 2018 from a tax refund that offset most of our cash tax payments. This year, we expect to have more cash outflows for tax, and our cash flow will also be impacted by our VSP payouts.

On the capital side, we expect an increase in capital expenditures of more than $75 million in 2019, primarily to support our facilities requirements, including the peak year of spend on a phase at our Innovations Campus. Due to a combination of these two factors, we expect free cash flow to decline in 2019, but we still expect it to be solid. In 2020, we expect a return to normal operating cash flow growth and a meaningful decline in capital expenditures to lead to strong free cash flow.

Now I'd like to discuss capital allocation. As noted in our press release, subject to declaration by our Board, we plan to initiate a $0.15 cent per share quarterly cash dividend, with the first payment expected sometime in the third quarter. On an annualized basis, this represents a yield of just over 1% based on our current stock price and a payout ratio of 24% of 2018 adjusted net earnings. As you know, investing in innovation to fuel growth has been Cerner's core strategy since its inception. This will not change, and we are confident that meaningful growth opportunities exist and that we are making the right investments to deliver good long-term growth.

We are now at a point where we believe we can invest in this growth while also enhancing shareholder value with a dividend and continued share repurchases. We have several objectives we are looking to accomplish with our broader capital allocation strategy. First, we want to provide current income to existing shareholders while also increasing the attractiveness of Cerner to a wider investor base. Second, we expect to continue using free cash flow for share repurchases to offset dilution from equity compensation and do additional repurchases as deemed appropriate. Third, we want to have flexibility to make other investments in growth, including relationships like Lumeris or strategic acquisitions that complement our organic growth investments.

Given our very strong balance sheet and expected strong cash flow, we believe we are in a comfortable position to do all these things with free cash flow, while still maintaining flexibility to use debt for larger strategic opportunities. We also believe adding a dividend to our capital allocation approach will create discipline and focus on free cash flow generation, which is something we also plan to incorporate into our variable compensation plans as part of broader changes that we believe will increase alignment with shareholders. In summary, we have put a lot of thought into our capital allocation approach and listened to feedback from many of you, and we believe this approach is in the best interest of our shareholders.

Now I'll go through the guidance. We expect revenue in Q1 to be between $1.365 and $1.415 billion. The midpoint of this range reflects growth of 8% over Q1 2018. For the full year, we expect revenue between $5.650 and $5.850 billion, with the $5.750 billion midpoint reflecting 7% growth over 2018. We expect Q1 adjusted diluted EPS to be $0.60 to $0.62 per share. The midpoint of this range is 5% higher than Q1 2018. For the full year, we expect adjusted diluted EPS to be $2.57 to $2.67, with the $2.62 midpoint reflecting 7% growth over 2018. The midpoint of this range is $0.06 below consensus. We suspect about half of this is that consensus had a tax rate closer to our 2018 tax rate of 21%, and we expect a rate around 22%, with the rest likely being a slight difference in margins.

Moving to bookings guidance, we expect bookings revenue in Q1 of $1.1 billion to $1.3 billion. The midpoint of this range reflects a 14% decrease compared to the first quarter of 2018. Note that the first quarter of 2018 had a much higher than normal level of large, long-term bookings and we expect a much lower level in Q1 of this year. The combination of these two factors is the driver of the expected year-over-year decline in bookings, as the midpoint of our guidance range would reflect growth in bookings if you exclude the long-term portion. There are several large longer-term deals forecasted throughout the year and we expect the mix to normalize as the year progresses.

Before I wrap up, I'd like to remind you about our annual Investment Community Meeting at HIMSS next Wednesday, February 13th . If you plan to attend and have not registered, please do so through the link at the top of the investor section of Cerner.com. If you are unable to attend in person, there will also be a webcast available at the same location both live and archived. With that, I will turn the call over to John.

John T. Peterzalek -- Chief Client Officer

Thanks Marc. Good afternoon everyone. Today, I'll cover Q4 and full-year results and discuss the marketplace. I'll start with our bookings results. As Marc mentioned, Q4 bookings did decline compared to the all-time high in Q4 2017, but they were still our second highest level ever. Multiple large transactions contributed to the strength of our bookings, including six contracts that were greater than $75 million. These large contracts included significant solution and services expansions with existing clients and new Cerner Millennium footprints in both U.S. and non-U.S. marketplace.

In addition to the contributions from larger hospitals, our CommunityWorks and ambulatory businesses both had record full-year bookings. Looking at the mix of new business, 30% of bookings in Q4 came from outside our core Cerner Millennium installed base. The percent of bookings coming from long-term contracts in the quarter was 38% and included the addition of a Cerner ITWorks client and a RevWorks expansion. As Marc discussed, we are expecting a lower level of long-term deals in Q1, but we have a solid forecast for the year and the overall market remains attractive. This activity is reflected in our strong pipeline, which is at near-record levels. 2018 was also a strong year for our key growth areas, with Revenue Cycle, HealtheIntent Population Health solutions, and Cerner ITWorks all growing revenue more than 20%.

In Population Health, we are continuing to make early progress in our launch of our EHR-agnostic offering with Lumeris called Maestro Advantage. Maestro Advantage is designed to help health systems set up and manage provider sponsored Medicare Advantage Plans and enable population health service organizations to manage a portfolio of value-based reimbursement arrangements. We've continued to have strong interest in the offering. In addition, we had a joint client go live at the beginning of this year that is a longtime HealtheIntent client that chose Lumeris because of our plans to operate as an integrated offering. This client launched a Medicare Advantage plan in 2019 with first year enrollment exceeding client target expectations. For their initial launch, they are using the Lumeris platform for their new MA plan benefits administration and leveraging HealtheIntent for their population health management and provider performance technology platform, with complete migration to HealtheIntent for the combined Maestro Advantage platform when it is available. Further, we expect to sign a client outside of our EHR installed base for Maestro Advantage in the first half of this year.

Next, I'd like to provide an update on our federal business. Starting with the Department of Defense MHS Genesis project, we are continuing our work on the second wave of sites, and the projects are going as planned. Similarly, our work with the Department of Veterans Affairs has continued as planned since signing the initial contract in Q2 and additional task orders in Q3. We remain on track to steadily ramp our work on the project as we go through the year. The first major project milestone will be in 2020 when initial sites are scheduled to go live. As a related note, the Government shutdown didn't have a material impact on our DoD or VA projects.

Moving to our business outside of the U.S., our revenue for the quarter was flat versus a tough comparable in Q4 2017, but up 12% for the full year. From a booking's standpoint, the highlight of the fourth quarter was winning our second major region in Sweden after signing our first region in Q1 2018. Both of these were competitive wins against our primary competitor.

Now I'd like to discuss the marketplace and our approach to aligning with the shifts that are occurring. There are several macro drivers that are shaping the way we align with our clients and think about our long-term growth. First, provider consolidation continues to increase, with transacted deal revenue doubling on a year-over-year basis and primary and specialty practices owned by health systems nearing 50% for key service lines. This consolidation, focused within discrete metropolitan areas, has driven high levels of technology variance, with some health systems having 10+ disparate EMRs across its owned and affiliated assets. As the size and scale of these health networks grows, consolidators are looking for technology and services to increase near term fee-for-service revenue and enable emerging fee-for-value opportunities to include Episode Management and Provider-Sponsored Plans.

To better align with these trends, we made some adjustments in 2018 in how we align with the marketplace. This included creating a separate group focused on large clients that are driving much of the industry consolidation. Our focus is making sure these clients have the best of Cerner and to enable them to pursue their growth strategies. In some cases, this means we help them rapidly deploy Cerner's EHR across acquired sites that are using another EHR. For others, a strategy of using HealtheIntent as a single source of truth across a system with multiple EHRs may make more sense. We are also making more changes this year as part of the adjustments to our operating model Brent discussed. The changes primarily revolve around streamlining how we sell to different solution categories and client types to make it easier for existing clients to work with us and create more focus on opportunities outside of Cerner's core EHR installed base.

Before turning the call over to questions, I wanted to highlight an industry milestone that Cerner played a role in through our membership in CommonWell Health Alliance. Recall that CommonWell is an open, not-for-profit industry consortium that we co-founded with other healthcare IT firms to enable secure nationwide interoperability. In November of 2018, CommonWell announced general availability of its connection to CareQuality, another national interoperability framework. This connection allows CommonWell and CareQuality enabled healthcare providers to connect and bilaterally exchange health data to improve care coordination and delivery.

This is a significant milestone on the path to achieving true nationwide interoperability and making health data available to individuals and providers regardless of where care occurs. We are proud to have played a role in this accomplishment, and we plan to remain a leading advocate for interoperability because it is very important to healthcare. With that, I will turn the call over to the moderator for questions.

Questions and Answers:

Operator

Thank you, and ladies and gentlemen if you have a question at this time just press *1 of your touchtone telephone. If your question has been answered or you wish to be removed from the queue, press #. Please place your light on mute what your question has been stated. And our first question is from Sean Dodge with Jeffries, your line is now open.

Sean Dodge -- Jeffries Financial Group -- Analyst

Hi, good afternoon, thanks. Maybe, Brent, your comments the very beginning of the call around to focus on more efficient cost-effective innovation, certainly spends a lot of money on R&D, I'm curious to hear any updated thoughts you have around the longer-term trajectory of spending there. The mention of an emphasis on efficiency, is that something where you think you can hold spending flat and drive some operating leverage out of it in the future or is there even a possibility to reduce some of that spending with efficiencies and innovation to deliver maybe some of those savings to margins?

Brent Shafer -- Chairman and Chief Executive Officer

Thanks for your comment. Really, the focus is on efficiencies in our approach and getting more from the total spend that we have through better processes, better management, you know looking for ways to ensure we're not duplicating work etc. So, there's a couple of key components to this. One is around concentrating operations so that they're effective, things get scaled into market as quickly as possible with two areas we're really focusing on growth by concentrating resources in those. One around kind of an incubator concept where we get early stage ideas ready to scale, scale them through operations, etc., take them to market faster. The other areas around really focusing some resources on the strategic growth areas that are outside the core EMR or EHR market. So, the answer is doing more with the resources we have, making them more productive.

Sean Dodge -- Jeffries Financial Group -- Analyst

Okay, that's helpful thanks. And then on VA and margins, Marc, before you mentioned some of the VA task orders can include bigger chunks of software and that of course those being nice tailwinds to margin. Can you characterize for us, I guess I'm not asking you to quantify the VA revenue you expect in 2019, but rather frame for us if there's a lot of these kind of bigger software chunks from VA relative to maybe what you'd expect in subsequent years? Is this a big VA software year or not?

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Yeah, this is Marc. If you recall, the VA as prime, we are on a percent of completion contract method of recognizing the revenue from the VA. So, you basically put all of the revenue from the VA, software, services, third-party, all into a bucket and you recognize that bucket basically as you perform services. So that really in the VA, Sean, is not one -- you don't have the lumpiness or the chunks of revenue that come from a stand-alone software deal that you would get in our normal business. So, it will all be part of that overall profitability, so it goes into as calculating kind of a projected margin from that business including third-parties of 20 to 25% based on kind of the 50-50 split of work being done by us and work being done by third parties. So, there won't be a lumpiness to it relative to the software, it will be based on when the activity occurs relative to working down that contract.

Sean Dodge -- Jeffries Financial Group -- Analyst

Okay, sounds good, thank you.

Operator

Thank you, our next question comes from Michael Turney with Bank of America, your line is now open.

Michael Turney -- Bank of America -- Analyst

Good afternoon and thank you for taking the question. Tying back a little bit into the original question on R&D, but thinking about comprehensively, Brent, as you've taken your first year in the business, especially coming from a much larger organization, could you point out some of the things that as a company or what you've seen from Cerner that you think is really prudent investing areas where you have seen some specific returns, whether it some of that R&D incubation? And then especially going forward, and I apologize if I'm getting ahead of next week, but with a more moderate growth rate for the industry, how you think about that sales and client service business line item within the model?

Brent Shafer -- Chairman and Chief Executive Officer

Well, as you know we have a rich history of innovation and there's a lot of great work is been going on. I think one of the things that came out of talking with associates and clients and just kinda looking at where we are, is we've gone to a scale where efficient deployment of resources and so on and we started to get in our own way, I think, as we've gotten big. So, fundamentally what we've tried to do is look at standard ways of operating, finding efficiencies, eliminating duplication in organizational structures so that we can get early stage ideas to a point that they can be scaled to the whole market quickly. So, that's the focus and we'll continue to invest in innovation. I think there's a strong pipeline of things that we can bring to market but getting them to scale quickly and getting them to revenue quickly for us is the emphasis with these moves. And we'll go into more detail of the approach next week.

Michael Turney -- Bank of America -- Analyst

And then just one follow-up question, maybe for John, you talked about a very, very strong pipeline yet at the same time also talking about the replacement market slowing down. What constitutes that pipeline qualitatively? What are people looking to buy?

John T. Peterzalek Chief Client Officer

Well, the pipeline that we have is pretty consistent with what we've had in approach there in the past so, you'll see expansion into what we'll call the peripheral of the core, whether it's clinician communication, whether it's population health management and other things that make a health system more efficient in our core client base. And you'll see the mix very similar to what we had before. In terms of the replacement market, you're seeing the same phenomenon that we've also had for the last few years which is that the total number of opportunities are declining, they are off to the market as each one signs, but the number we work on every year has been really consistent. So, we remain very active in the replacement market and we see that being consistent in the near future as well. But the number we work on every year will remain constant while the total number of opportunities become fewer.

Michael Turney -- Bank of America -- Analyst

Great, thanks.

Operator

Thank you, our next question comes from Donald Hooker with KeyBank, please go ahead.

Donald Hooker -- KeyBank -- Analyst

Great, you mentioned in your prepared remarks, I think you all mentioned, talked about an ITWorks deal, he said it been an area of high-growth and it felt like it sort of hit a wall maybe about a year ago and growth there stopped, and it seems like it's starting to pick up there. Can you talk about the marketplace where ITWorks is large IT, we're seeing arrangement and how we should think about that over the next year or so? How much of that is in your pipeline?

John T. Peterzalek Chief Client Officer

Yeah, this is John again. We actually have considerable opportunities in ITWorks. If you look at some of the pressures that are provider clients are facing in terms of having to do more with less, having those efficiency gains is we actually have a tremendous value proposition about doing more and being able to bring all that Cerner has to bear which is broader than just software and those types of things. So, the interest remains strong. I would say that some of the lumpiness you'd see is primarily because these are large transactions and very complex from both the client side and the Cerner side. So, I think part of it is just timing. While we've done a really good job, I think of predicting when these things will close, the complexities make them less predictable than some of our other solutions and offerings, but the demand out there is still very strong.

Donald Hooker -- KeyBank -- Analyst

How many ITWorks contracts you have currently?

John T. Peterzalek Chief Client Officer

We are north of 30, I think Brett 32 right now.

Donald Hooker -- KeyBank -- Analyst

Okay, and then maybe one last question. You're kind of on this theme of outsourcing around the revenue cycle, I think over the past year you guys have highlighted some investments you've made in shared services infrastructure, I think with Advantis and maybe some others in Kansas City that kind of scale out a revenue cycle outsourcing capability. Where are you with that and again how do we think about that? That's also been an area where I think there was a lot of growth, it sort of slowed, how do we think about that going forward in the pipeline?

John T. Peterzalek Chief Client Officer

Yeah, to address that, the specific on the Kansas City service center you talked about, it's primarily as we transition the Advantis workforce and that's going on schedule as planned. In terms of the pipeline, the opportunities are out there, I think are pretty broad as well as again, as are provider clients are looking at ways to focus on their core business. They are looking at ways to outsource or take some of the burden of some of the process oriented things off their plate. And we have lots of opportunities out there to go get and we've been putting them in our service center as well so we get a big leverage out of what we're doing in Kansas City as well as doing some on-site staff that can leverage the same processes. So, I'm very optimistic that you continue to see that growth. They have some of the complexities that I mentioned with ITWorks because they tend to be larger opportunities in those type of things that kind of make them less predictable, but the opportunities are there.

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Yeah, Don, this is Marc. We have over 600 people that we've hired in Kansas City and keep in mind that was an investment we made during the year and one of the reasons that we readjusted our targets as we got into the end of Q1 and those will take over some of the responsibilities from some of our existing clients, but we are 2018 and part of 2019 is really the transition where we move that work into our billing center. It does allow us to pursue additional back office activities and keep in mind that back office versus a pure outsourcing is a higher margin outsourcing business for us. So, that's one of the reasons we wanted to create that center in Kansas City.

Donald Hooker -- KeyBank -- Analyst

Okay great, I'll see you all next week.

Operator

Thank you, our next question is from Eric Percher with Nephron Research, your line is now open.

Eric Percher --Nephron Research -- Analyst

Thank you. The dividend, I think you call it a milestone, represents a pretty material change relative to the board's historic approach. I'd love to hear your view on what the key determinant was or is and how does the targeted, or how is the payout today, how does it compare to what you think the target may be over time? Is this what you would like to target or is indicative of a greater payout targeted over time?

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Yeah, this is Marc. On relatively the dividend in our capital allocation review, I think certainly you go out with the dividend your expectation is you're gonna increase the dollar of that amount of that dividend on an annual basis. And certainly, is a growth company, that would be our expectation. We talked a lot of investors, a lot of shareholders as to what -- as we looked at our capital allocation strategies, I think that while people were appreciative of the stock repurchases, we heard the opportunity to lay in the dividend, especially when you look at the S&P 500 that has similar qualities to our company; about 80% of them are paying a dividend. It does open up another shareholder base that traditionally hasn't been able to buy our stock. And we think it enhances the shareholder returned that our shareholders can get. Given our strong free cash flow, the ability to do that plus pulling in, being able to do targeted repurchases and still fund the opportunities that we think from a strategic growth perspective, it just seemed like a good time in the lifecycle of the company to lay in that program.

Eric Percher -- adjusting what our Nephron Research -- Analyst

That's great to hear and did you say that there is an element that you will bring into compensation and as you're doing that, have you thought it all about bringing a measure of bookings or revenue like some of the technology peers in your proxy comparison group do in their compensation plans?

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Yes, right now we are looking at adjusting what currently the senior management team here focus primarily on EPS instead of compensation basis at least for the current and the cash. I think as we roll into 2019, you'll see us looking at adding revenue and free cash flow as part of the triumvirate of three metrics that we'll look to and set people on. So, it's kind of broad in the view. We have a lot of metrics that go deeper into the organization, there are a lot of cash collection targets. There are a lot of things that within the organization support each one of those, but traditionally we kinda let EPS stand in for the overall shareholder view of the company and what we're setting senior leadership on. I think you'll see us split that among two or three factors to take into account just exactly what you said.

Eric Percher -- adjusting what our Nephron Research -- Analyst

Well, it's great to see, thank you.

Operator

Thank you, our next question is from Jeff Garro with William Blair.

Jeff R. Garro -- William Blair & Co. LLC -- Analyst

Yeah, good afternoon guys and thanks for taking the question. I want to ask about the international opportunity and recognizing that the full-year growth was faster than the corporate average and you had some really nice wins throughout the year. So, I wanted to get your comments on the international pipeline, positioning abroad, and expectations to grow that piece of the business faster than the corporate average going forward.

John T. Peterzalek -- Chief Client Officer

Yeah, this is John. The international or outside the U.S. pipeline look strong and the great thing about outside the U.S., Is they tend to come in big chunks. They'll be purchasing either at a state level, a province level, region level as opposed to an individual health system level. So, they come with large pieces of business and broader than just the HR. They generally will cover some sort of social aspect to it as well as a population health or population health management aspect of it as well. So, you'll see us do very similar to I think what we did in Sweden which is we'll want to establish a core in a region or a state and then use that leverage to expand beyond that and there are several opportunities to do that. Not only countries where we are, but potential new countries coming in as well.

Jeff R. Garro -- William Blair & Co. LLC -- Analyst

Great, and then just as a follow-up, you mentioned potential new countries, any particular regions that you could call out?

John T. Peterzalek -- Chief Client Officer

Probably not right now as some of them are in pre-RFP stages, but we've got a pretty good bead on what's likely to come out over the next one, two, and three years.

Jeff R. Garro -- William Blair & Co. LLC -- Analyst

All right, thanks for taking the questions.

Operator

Thank you, our next question is from Mohan Naidu with Oppenheimer, please go ahead.

Mohan Naidu -- Oppenheimer -- Analyst

Thanks for taking my questions. Marc, two questions. First on the subscription revenue as your anniversary the new revenue standard, what kind of growth should we see? I think right now it's hard to see the true growth because of the comps.

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Yes, you kinda see a decline in the number as we went into 2018 with the impact of 606. I think once we get and have the 2018 numbers landed, which we do, then you'll start to see more normalized comparables going forward. So, I think is you kind of look to 2019, one of the reasons we feel good about looking at a guidance that gives us kind of a midpoint of a 7% top line growth after year in which we grew 4% is that we expect subscriptions to grow over their current level and probably certainly at least double digit growth compared to where they're at.

We're getting a lot uptake on some of our transaction activity that goes into subscriptions and we actually had good subscription bookings in 2018 which going to the backlog and then we'll see the revenue as we roll forward. I think a key element as we talk about 2019, and I just want to stress, is that we have 85% visibility into that revenue number as we come out of the year when you look at our backlog and our contracted revenue which isn't included in backlog and that's the highest, we've seen. So, I think that's, in our mind as we look at the numbers, supports why you can be a 4% growth last year and go to a 7% at the midpoint in 2019.

Mohan Naidu -- Oppenheimer -- Analyst

Thanks a lot, Marc, I think you touched on the backlog recoveries, that was going to be my second question. So, with 85%, I mean it's better than what you had last year at this time at 82%, but it looks like actually it's much better than 85% compared to then because you don't have these new contractor revenues in the backlog. Is that fair?

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Well, I think if you do the math, and the 10-K will give you the data to do that, and I think we gave you the data today, that if you take the backlog number times what we expect to rollout in 12 months and then you add the non-contracted backlog which I think is about $525 million for next year, some of those two things add up to about 85% of whatever revenue is for 2019. So, it does include the contracted revenue and reflects all of those elements.

Mohan Naidu -- Oppenheimer -- Analyst

Okay, thanks a lot, Marc.

Operator

Thank you, our next question is from David Grossman with Stifel, please go ahead.

David Grossman -- Stifel Financial Corp -- Analyst

Thank you, good afternoon. So, Marc, you mentioned in your prepared remarks the various factors leading to a flat margin assumption for next year. Can you just quickly review those? I don't know if I caught them all and perhaps outline the relative orders of magnitude in terms of impact year-over-year and I assume to be a contract is a year-over-year margin and help. In terms of the Works business though, is net portfolio can yield better margins year-over-year in 2019?

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Yeah, I think that the key when you're looking at is during 2018, we had a lot of services margin and a lot of that was related to really strong Works bookings that we had in 2018 and at the end of 2017. A lot of that is in the ITWorks and the RevWorks side of the business which in the initial phase of those contracts are very low margin, they are single digit. And so, when a significant chunk of new revenues coming in at that level and obviously 2019 will be even larger as more of those kick in for a full year, that's gonna have an impact that makes growing margins more difficult. I think certainly we look to get a little bit of an uptake in license software, but a component of that, and an ever-growing component of that is SaaS software and that's not 90% margins, that's more like 50% margins because of the need to host a lot of that.

So, a lot of the margin view depends on what the mixes can be. So, while we don't expect expansion into 2019, we also don't expect to decline which would reverse the trend that we've seen in the last few years. I think on the spend side, you're still getting hit although not quite as much in 2018, but in 2019 you're still getting hit with an amortization and depreciation impact from a non-cash expense that's gonna be an increase that you have to do and as Brent indicated, we want to be more efficient on how we deliver our R&D, but that's not a number that's gonna go down because we are in an industry that has a lot of opportunity. We're still going to invest organically even with the strategic growth views that we're having.

So, I think next year you probably are good to see, certainly this year, the R&D was growing faster than revenue and I think that may continue next year as well. So, certainly, we'll talk to you more about it at HIMMS relative to kind of some of the views we have relative to growing margins. But I think the focus for us is to grow revenue, we are a growth company, we're paying a dividend, but we are a growth company, but we need to grow earnings at a faster rate and we're growing revenue. And in 2019 we are probably gonna be relatively similar with a goal that going forward we are able to grow earnings at a faster level. Obviously, meaning that we're going to have some level of margin expansion.

And I'm sorry if you mentioned this, does the amortization and depreciation and start rolling off in 2020?

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

It starts equalizing so that you don't the year-over-year increases that we've been seeing in the last two years or so.

David Grossman -- Stifel Financial Corp -- Analyst

Got it, OK great, thank you very much.

Operator

Thank you, our next question is from Steve Hopper with Cantor Fitzgerald, please go ahead.

Steve Hopper -- Cantor Fitzgerald -- Analyst

Hi, in previous commentary, you talked about the VA getting to $1 billion of revenue over the next four years. Is that still a safe assumption?

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Yeah, I think that depends on when the task orders come through in the pace the project, but basically that's kind of the trajectory that the project plan is on.

Steve Hopper -- Cantor Fitzgerald -- Analyst

Right, and recognizing that you recognize revenues on a percentage of completion, how are costs, are those being expensed as incurred?

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

No, under percent of completion you're taking all of the dollars that are going to get brought in from revenue, all the costs get laid up in that and then when you recognize the dollar of revenue, you recognize the percent of expense. So, basically, Steve, assuming that you're getting 20 to 25% overall margins from that, that revenue dollar, that's pretty consistent margin that you see coming into the P&L when that revenue comes in.

Steve Hopper -- Cantor Fitzgerald -- Analyst

Okay, I just wanted to make sure if there was some element of VA costs in that 2019 number. Is there an assumption that VA contributes revenue in 2019 or not?

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Yes, certainly VA contributes some revenue in 2018 and that revenue goes up in 2019.

Steve Hopper -- Cantor Fitzgerald -- Analyst

Okay, great, thanks.

Operator

Thank you, our next is from Sandy Draper with SunTrust, your line is open.

Sandy Draper -- SunTrust Robinson Humphrey -- Analyst

Thanks very much, just a couple of quick ones. Marc, I know you saw the share repurchase, did you mention is there any share repurchase explicitly in the guidance or does the guidance exclude the share repurchase is?

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

I think for the most part, it'll be consistent with our prior activities which tends to be that we repurchase in an amount that offsets dilution. So, if you're looking at outstanding shares to model, it would be basically relatively flat.

Sandy Draper -- SunTrust Robinson Humphrey -- Analyst

Okay, great, that's helpful. And then I'm not sure if I quite caught it or understood it, I think it was John's comments about the first quarter bookings, it sounds like you expect traditional bookings to be up year-over-year, but all the decline to be driven by long-term bookings? Is that correct? I'm just trying to make sure I've got that. And then thinking about how that sort of flows through the rest of the year, but it sounds like with a couple of big deals you expect long-term bookings may actually grow even though there gonna be down materially in the first quarter.

John T. Peterzalek -- Chief Client Officer

Yeah, the long-term bookings aren't forecasted in Q1 as we said in the pipeline for the remainder of 2019 in terms of long-term bookings looks very positive.

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Yeah Sandy, I think when we look at it if you factor, kinda take long-term out of the equation, then non-long-term looks to be growing in Q1.

Sandy Draper -- SunTrust Robinson Humphrey -- Analyst

Okay, great, thanks so much.

Operator

Thank you, our next question is from Jamie Stockton with Wells Fargo, please go ahead.

Jamie Stockton -- Wells Fargo Securities LLC -- Analyst

Thanks for taking my question. Maybe just a quick follow-up to Steve's on the VA kind of revenue assumption. I think that to get to that billion that he referenced four years out, you guys have kind of talked about maybe 250 this year, 500 next year, 750, and then a billion. I know that it's probably impossible to predict with that level of accuracy given that you're dealing with the government here, but is that generally the cadence that people should still be thinking about?

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Yeah, Jamie, as you said, it's hard to exactly model what it looks like. I think what we've kinda said is that if it's a four-year growth to a billion without being too precise, if you just model it, it won't go in a straight line at that ramp rate, but if that's what you model it, I think you're not could be that far off.

Jamie Stockton -- Wells Fargo Securities LLC -- Analyst

Okay, that's it, think you.

Operator

Thank you, our next question is from Matthew Gillmor with Robert Baird, please go ahead.

Matthew D. Gillmor -- Robert W. Baird & Co., Inc. -- Analyst

Hey, thanks for the question. I just had one follow-up on the capital allocation. You talked about the dividend. I thought the commentary around the acquisition was maybe new as well. So, I just wanted to confirm that you are perhaps more open to M&A and if we heard that right, sort of what of the areas of particular focus?

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Yeah, this is Marc, one of the topics when Brent came aboard that he wanted us to focus on was let's look at capital allocation, you guys have a really strong balance sheet, it seems like we need to be applying that into the business. So, I think it is a little bit of a change. We've gone certainly in the past had much more of a mantra of we're going to build it ourselves and I think that's been very effective for us. But as we get in more of the HealtheIntent platform as an agnostic platform, it opens our ability to do some targeted niche acquisitions that can be quickly brought in to that architecture and therefore deliver to our clients on a pretty efficient cloud-based manner.

So, it definitely was a little bit of a change in what our approach is going to be. It's a little hard to target exactly what that's going to be. We are still kind of at the doing a process where we are reviewing a lot of different opportunities. I think it's safe to say that the majority will be focused either on things that can supplement our HealtheIntent platform or be implemented through use of that or some type of an opportunity that helps us in our government business or others that help us in some other new opportunities that we think, that we see the chance to grow such as networks. The Lumeris investment was very much focused on being able to grow networks and be able to assist our clients in doing that and I think that Lumeris is a great opportunity there, but I think there are other tangential opportunities that might be well suited to some type of an M&A or certainly, we're gonna also look at partnerships because that may be a more effective vehicle made in many cases.

Brent Shafer -- Chairman and Chief Executive Officer

I was just can add to that. One of the things we have gone through in the last recent months is really putting a portfolio review in place and looking at, one, how do we become more efficient with the organic growth, getting solutions to market quickly etc. on the spend, in what situations does it make sense to partner? There's just so much to go after. What are the criteria for partnership? How do you set effectively or build on the legacy partnerships we have? And then the third would be selective M&A as Marc described that are a niche and adjacency that fits well with our overall strategy that is just logical to make that move rather than to build it ourselves.

Matthew D. Gillmor -- Robert W. Baird & Co., Inc. -- Analyst

Got it, thanks very much.

Operator

Thank you, our next question is from Steve Valiquette with Barclays, please go ahead.

Steve J. Valiquette -- Barclays Capital, Inc. -- Analyst

Great, thanks. Good afternoon everyone, thanks for taking the question. I guess for me I also have yet another question here in the 2019 revenue guidance. This kinda relates a little bit more to the alternative breakdown of your revenues when you categorize it by the ITWorks, Rev Cycle, Pop Health. Global when core EHR; and I know you gave those 2018 numbers at HIMMS, but really just within the new revenue guidance, I'm just curious should we still may be expecting let's call it double-digit revenue growth for the for faster growth categories within this alternative revenue breakdown to offset what like you to be more flattish revenue trends in core EHR to hit the 2019 revenue growth guidance. And maybe the only quick follow-up on this would be when you were just talking about maybe adding another $250 million of VA revs in 2019, with most of that fall into the core EHR category or would be spread across all these categories? Thanks.

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Yeah, I think traditionally in the way we presented core through last HIMMS update, core would include federal and I think certainly federal is one place where we expect to see some significant growth. So, I wouldn't -- if your question relates to hey, as a lot of the growth can be Works businesses at a low margin, I don't think that's necessarily the case. I think we're gonna get some growth from our core business which includes federal and just as a -- give a spoiler alert, but I think the core is going to include that. We may want to give you a view of what federal looks like in a longer term view as well. But I think the -- when you look at 2019 revenue growth, you really see kind of a contribution from almost all of the elements of the business because you're going to see when you look at the 7% midpoint growth, I think you're going to see tech resale is get a rebound so there's gonna be a bump up there, that's not real high margin. There will be some license bump from basically a flat growth period.

And so, they'll be a little bit of margin expansion there. Subscriptions will be up, services will grow and probably more of the value-added services as opposed to the Works businesses services. And probably growth in hosting as well which is, as you know, pretty high margin stuff. So, I think there are opportunities that don't -- for broad growth across the business, but at the end of the day you've also got some growth in expenses and so you're going to end up basically with relatively flat margins. But I think yeah, the growth isn't just coming from one piece of the business. As John said, there's pretty good demand in the marketplace. We have a good pipeline and we are going to, I believe, see contributions from kind of every element on the income statement.

Steve J. Valiquette -- Barclays Capital, Inc. -- Analyst

Okay, that's helpful and I look forward to hearing more next week.

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Sounds good, and when we take one last question.

Operator

Thank you, and our last question is from Charles Rhyee with Cowen, please go ahead.

Charles Rhyee -- Cowen & Co. LLC -- Analyst

Yeah, hey thanks for squeezing me in here. Marc, I just wanted to clarify just a couple of points as it relates to the guidance here. I get the revenue piece. So, when we think about the EPS range and just to bring together a few people's questions before, we should be sort of assuming a share count relatively flat to this year because we're only assuming the share buybacks related to dilution? And then if we assume a 22% tax rate, in terms of other interest income, should we be thinking about similar to this past year or now that we're paying the dividend maybe something a little bit less? And then when I put all those things together, it sounds like earlier you're saying that relatively we should be looking at a flat out margin year-over-year, is that correct? Or when we think about the range here, could it be more little bit down a little bit? I just wanted to piece all those things together. Thanks.

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Yeah, that's probably a lot to go over, but I think relative to out margins, I think our indication is hey, because of some of the non-cash headwinds that are guidance would say kind of relatively flat, I think that's pretty fair. I think from a share count perspective, just assuming that we are going to offset dilution is probably the best assumption. Relative to interest income, I think our commentary relative to free cash flow is something you'd want to consider that free cash flow will be $100 million less in 2019. So, that will impact interest income. That probably won't be a material difference, but I think that's, if you're doing modeling, those are the things that we said that I would factor into those elements.

Charles Rhyee -- Cowen & Co. LLC -- Analyst

Obviously, we put in the dividend now and I think people look at that favorably, but you still generate still a lot of cash on top of that and it sounds like the message here is we want to be, I don't want to use aggressive, but more expansive in terms of and how we think about the coin capital. Do things like larger share buybacks factor into that? And thanks a lot for the questions.

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

Sure, as we went through our capital allocation analysis, we felt that from a dividend perspective starting a recurring dividend that we continue to work to grow as earnings grow, I think made the most sense. I think I would much rather leverage my balance sheet in my excess cash on investing back in the business and so I think that's what you'll see us do with the excess cash. We have strong cash flow, but we want to invest in this business and take advantage of the opportunities that we see in front of us. So, with that, I turn it over to Brent for final comments.

Brent Shafer -- Chairman and Chief Executive Officer

Thanks, Marc. Thank you all for your time today. I just want to restate, I've really enjoyed my first year at Cerner getting to know our associates, our capabilities, our clients. I believe we've positioned ourselves well for a good year in 2019 and as we mentioned, we're moving to an operating structure that I believe will allow us to innovate more efficiently, serve clients better, and pursue growth opportunities more effectively and I look forward to seeing you at HIMMS. Thank you all, have a good evening.

Operator

And ladies and gentlemen, thank you for participating in today's program. This concludes the conference and you may all disconnect. Have a wonderful evening.

Duration: 69 minutes

Call participants:

Brent Shafer -- Chairman and Chief Executive Officer

Marc G. Naughton -- Executive Vice President and Chief Financial Officer

John T. Peterzalek -- Chief Client Officer

Sean Dodge -- Jeffries Financial Group -- Analyst

Michael Turney -- Bank of America -- Analyst

Donald Hooker -- KeyBank -- Analyst

Eric Percher --Nephron Research -- Analyst

Jeff R. Garro -- William Blair & Co -- Analyst

Mohan Naidu -- Oppenheimer -- Analyst

David Grossman -- Stifel Financial Corp -- Analyst

Steve Hopper -- Cantor Fitzgerald -- Analyst

Sandy Draper -- SunTrust Robinson Humphrey -- Analyst

Jamie Stockton -- Wells Fargo Securities -- Analyst

Matthew D. Gillmor -- Robert W. Baird & Co., Inc. -- Analyst

Steve J. Valiquette -- Barclays Capital, Inc. -- Analyst

Charles Rhyee -- Cowen & Co. -- Analyst

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