AUXO Rolls Along
Ken Nagy, CFA
On March 29, 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 2011 full year, ended December 31, 2011.
A solid year resulted in a nearly 42 percent year over year increase in sales, with revenue expanding $6.438 million to $21.845 million from $15.407 million for the full year ended December 31, 2010.
Auxilio’s strength in its year over year revenues was primarily driven by traction gained from nine new or expanded contracts signed since the fourth quarter of 2010 and the Company’s recurring revenue base that reflects its 100 percent customer retention rate which includes the renewal of two major companies during fiscal 2011.
The Company has retained 100 percent of its hospital partnerships since its launch and currently has a national portfolio of 35 long-term contracts representing hospitals, health care systems and affiliated clinical and administrative support offices that consist of over 100 facilities.
Still, Auxilio reported a net loss of $2.591 million, an increase of $1.021 million from a net loss of $1.569 million during the twelve months ended December 31, 2010.
The increase in net loss was primarily a result of an increase in total operating expenses as well as lower margins.
Gross margin fell from 18.7 percent in the fiscal year 2010 to 12.4 percent for the full year ended December 31, 2011.
Margins were negatively impacted higher costs of new contracts, which at the onset, translates to higher costs associated with absorbing new customer’s legacy contracts in advance of anticipated revenue.
It is important to note that as Auxilio implements its programs, it attempts to improve upon these contracts, therefore reducing costs over the term of the contract.
Still, the account revenue contribution grows through the life of the contract and the Company expects all contracts active from 2011 will be profitable in the first quarter of 2012.
Furthermore it should be noted that Auxilio has recently made several key operational enhancements including scaling sales and business development efforts to build on its foundation in preparation for strong growth.
What’s more, the Company continues to show significant strength and improvement in milestones as evidenced by new MPS contract sales, increased resources through a marketing alliance and improved presence in its current markets.
Matter of fact, in December 2011, Auxilio signed two MPS agreements.
The recent agreements includes Auxilio’s single largest contract in the Company’s history, a five year, $40 million agreement with Catholic Health East, a multi-institutional Catholic health system .
The Company expects this contract to be fully implemented by September 2012.
Based on the weighted average number of basic and diluted common shares of 19.376 million shares, basic and diluted net loss per share resulted in a net loss of $0.13 per basic and diluted share during the full year ended December 31, 2011. This compared to a basic and diluted net loss per share of $0.08 on a weighted average number of basic and diluted shares of 19.226 million shares during the fiscal year ended December 31, 2010.
As of December 31, 2011 Auxilio had $1.832 million in cash and equivalents and working capital of $370,638. This compares to $2.249 million in cash and equivalents and working capital of $820,548 as of December 31, 2010.
The Company continues to be focused on gaining market share and expanding geographic presence.
Along the same lines, it should be noted that in the second quarter fiscal 2011, Auxilio secured an expanded marketing alliance with Sodexo, a leading provider of comprehensive service solutions.
The Company expects the expanded relationship with Sodexo to further advance sales progress as well as expand the ability to attract and sign new customer contracts.
The strategic relationship with Sodexo promotes Auxilio’s managed print solutions and leverages Sodexo’s customer pipeline by providing crucial, C-suite access to over 1,300 U.S. hospitals in the $22 billion market in which Auxilio competes.
Furthermore, Auxilio believes it is well positioned for growth in 2012 and anticipates continued revenue growth as a result of its new contracts signed in 2011, seeing growth somewhere north of 30 percent.
What’s more, trends are providing additional growth opportunities across the industry due to Electronic Medical Record System mandates making AUXO increasingly attractive.
With its exclusive focus on the healthcare industry, the Healthcare Information Technology (HITECH) portion of the American Recovery and Reinvestment Act of 2009 (ARRA) offers Auxilio a unique growth opportunity.
The HITECH portion of the bill includes nearly $20 billion of reimbursement incentives to those providers achieving “Meaningful Use” for the implementation of an Electronic Medical Record System.
The funding begins in 2012 for those who achieve “Meaningful Use” in 2011 and Medicare will begin applying penalties to hospital and physicians who fail to adopt Electronic Medical Record Systems starting in 2015.
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.
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