Dominant Quarter at Auxilio - Analyst Blog

By
A A A

Dominant Quarter at Auxilio

By Ken Nagy, CFA

On August 14, 2012, Auxilio, Inc. ( AUXO ) , the Mission Viejo, California based  Managed Print Services (MPS) company for the health care industry, reported financial results for its fiscal 2012 second quarter and six months, ended June 30, 2012.

A strong quarter resulted in a nearly 123 percent year over year jump in sales, with revenue expanding $5.918 million to $10.722 million from $4.803 million for the second quarter ended June 30, 2011.

Auxilio's strength in its year over year revenues was primarily driven by to the contribution from the four new accounts signed during the July 2011 to April 2012 period and the high equipment revenue related to the fleet refresh.

Furthermore, management expects continued revenue growth throughout 2012 as a result of new contracts signed.

Still, cost of revenue during the second quarter, which consists of document imaging equipment, parts, supplies and salaries and expenses of field services personnel, jumped to $9.323 million for the three months ended June 30, 2012, as compared to $4.019 million for the same period in 2011.

This resulted in gross margin for the quarter falling year over year to 13.1 percent from 16.3 percent for the three months ended June 30, 2011.

It's important to note that gross margin is negatively impacted by new contracts, which at the onset, translate to higher costs associated with absorbing new customer's legacy contracts in advance of anticipated revenue.

As Auxilio implements its programs, it attempts to improve upon these contracts, therefore reducing costs over the term of the contract.

Again, while the upfront costs associated with bringing on new accounts will continue, management expects to partially offset those costs with accelerated growth and quicker ramp up of new accounts.

However, Auxilio reported a net loss of $26,818, which was a year over year improvement of $542,878 from a net loss of $569,696 during the three months ended June 30, 2011.

The decrease in net loss was primarily a result of higher revenues offset by lower gross margin as well as slightly higher total operating expenses.

Based on the weighted average number of basic and diluted common shares of 19.568 million shares, basic and diluted net loss per share resulted in a net loss of $0.00 per basic and diluted share during the second quarter ended June 30, 2012.  This compares to a basic and diluted net loss per share of $0.03 on a weighted average number of basic and diluted shares of 19.336 million shares during the three months ended June 30, 2011.

Revenues for the six months ended June 30, 2012 were $17.260 million, nearly an 82 percent or $7.773 million year over year increase when compared to revenues of $9.486 million for the first half of 2011.

Still, net loss for the six months ended June 30, 2012 increased year over year by $212,305 to a net loss of $1.646 million compared to a net loss of $1.433 million for the first half of 2011.

The increase in year over year net loss for the first half of 2012 was primarily a result of lower gross margin and increased interest expense offset by slightly lower total operating expenses.

Gross margin for the first half of 2012 fell to 10.1 percent compared to 11.9 percent for the first six months of 2011.

Based on the weighted average number of basic and diluted common shares of 19.509 million shares, basic and diluted net loss per share resulted in a net loss of $0.08 per basic and diluted share during the six months ended June 30, 2012.  This compares to a basic and diluted net loss per share of $0.07 on a weighted average number of basic and diluted shares of 19.336 million shares during the first half of 2011.

As of June 30, 2012, Auxilio had $1.581 million in cash and equivalents and a working capital deficit of $708,426.  This compares to $1.031 million in cash and equivalents and a working capital deficit of $703,508 as of March 31, 2012.

Still, by adding new accounts and expanding existing accounts and driving contracts toward profitability, the Company has made significant progress on its growth objectives.

Looking ahead, management is focused on building Auxillio's awareness in the healthcare industry to add new accounts with large healthcare systems, expanding geographic presence domestically and renewing existing accounts to three to five year terms as well as moving all new accounts toward profitability.

While the number of health systems has decreased as a result of industry consolidation the size of individual systems has increased.

Auxillio has responded by targeting these larger health systems and generating a strong pipeline of sizable customers.

The success of capturing these larger systems is demonstrated by the recent large customer wins which include the $40 million five year program with Catholic Health East (CHE), the $35 million five year contract with Bon Secours Health System (BSHS) as well as the $10 million five year agreement with Sharp HealthCare.

While the bulk of the implementation and startup costs for CHE occurred in the first quarter of 2012, the Company has integrated the majority of CHE operations into its systems of Print Management and expects to have CHE fully integrated by end of third quarter.

Similarly, management anticipates completing the implementation and fully integrating the BSHS system by the end of this year while the target date to complete implementation and full system integration for Sharp HealthCare is the middle of next year.

Still, although the Company's initiatives include the targeting of larger health systems, Auxillio has been able to leverage and turn strong relationships with existing accounts into opportunities to expand its reach.

For example during the second quarter John Hopkins Health Systems expanded its MPS program to include Suburban Hospital in Montgomery County, Maryland.
Auxillio now operates on-site in 22 states throughout the nation representing more than 26,000 patient beds in over 80 hospitals.

Likewise, the Company has retained 100 percent of its hospital partnerships since its launch and currently has a national portfolio of 80 long-term contracts representing hospitals, health care systems and affiliated clinical and administrative support offices that consist of over 100 facilities.

Along the same lines the Company's MPS offerings continue to be in high demand as health care systems and hospitals increasingly search for solutions to reduce costs and enhance efficiencies.


Auxilio's unshared position as the only managed print service provider in the U.S. dedicated exclusively to the health care industry and hospitals allows it to tap into HITECH incentives indirectly by bringing a unique exposure and knowledge in assisting customers in the preparation of electronic records management and the complex compliance requirements of the 'meaningful use' criteria federal mandates.

As Hospitals and IT departments are pressured to further reduce cost and enhance efficiencies as well as act quickly on cost cutting measures to comply with these EHR (Electronic Health Records) mandates, it leads to shorter sales cycles for Auxilio.

Similarly, the continued trend of high levels of consolidation within the healthcare industry should work to the Company's advantage.

As healthcare systems consolidate and become larger, the need to streamline cost and increase efficiencies also grows, presenting a strong demand driver for Auxilio's MPS solutions.

Please visit scr.zacks.com to access a free copy of the AUXO research report.
 


 
AUXILIO INC (AUXO): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AUXO , CHE

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Don't Pay Up to Play REITs
Don't Pay Up to Play REITs          

Stocks

Referenced

100%

Most Active by Volume

100,376,898
  • $17.62 ▲ 0.51%
83,231,837
  • $25.62 ▲ 1.91%
75,739,329
  • $111.78 ▼ 0.77%
65,297,937
  • $36.37 ▼ 1.76%
59,053,093
  • $47.66 ▲ 0.29%
53,482,350
  • $2.59 ▼ 0.38%
51,504,284
  • $7.34 ▲ 2.37%
51,434,656
  • $8.14 ▲ 6.96%
As of 12/19/2014, 04:15 PM


Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com