By Ken Nagy, CFA
On May 15, 2013, Auxilio, Inc., (AUXO) the Mission Viejo, California based Managed Print Services (MPS) company for the health care industry, reported its first quarter fiscal 2013 results.
A strong quarter resulted in a 54.4 percent year over year jump in sales, with revenue expanding $3.555 million to $10.092 million from $6.537 million for the first quarter ended March 31, 2012. Auxilio’s strength in its year over year revenues was primarily a result of the addition of the six new recurring revenue contracts starting during 2012.
Cost of revenue for the year, which consists of document imaging equipment, parts, supplies and salaries and expenses of field services personnel, grew to $8.515 million for the for the quarter ended March 31, 2013 as compared to $6.188 million for the same period of 2012.
As a result, first quarter gross margin jumped year over year to 15.6 percent from 5.4 percent for the comparable period in 2012. The jump in margins reflects the maturing of Auxilio’s customer base and managements focus on margin improvement.
Although gross margin improved year over year, 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.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.
Total operating expenses increased year over year by $94,221 to $1.674 million but improved to only 16.6 percent of revenues compared to operating expenses being 24.2 percent of revenues during the first quarter fiscal 2012.
Auxilio reported a net loss of $230,300, which was a year over year improvement of $1.389 million from a net loss of $1.619 million during the first quarter, ended March 31, 2012.
Based on the weighted average number of basic and diluted common shares of 20.115 million shares, basic and diluted net loss per share resulted in a net loss of $0.01 per basic and diluted share during the first quarter ended March 31, 2013. This compares to a basic and diluted net loss per share of $0.08 on a weighted average number of basic and diluted shares of 19.449 million shares during the three months ended March 31, 2012.
The Company’s balance sheet improved with, Auxilio having $2.684 million of cash and equivalents, a working capital deficit of $418,556 and zero borrowing to its line of credit during the period ended, December 31, 2012. This compares to cash and equivalents of $2.190 million, a working capital deficit of $25,084 and $528,000 borrowed against its line of credit for the quarter ended December 31, 2012.
By adding new accounts and expanding existing accounts and driving contracts toward profitability, the Company has made significant progress on its growth objectives.
Auxilio is currently engaged in several brand new hospital implementations including Sharp Healthcare and Citrus Valley heath partners in California, a new contract announced earlier this year. Once fully implemented, and startup cost have been absorbed, these nine hospitals will increase recurring revenue and soon be driving additional margin.
Into the Catholic Health East contract at December 2011 and up through the end of 2012, Auxilio doubled the size of its national portfolio to over 80 hospitals with more than 1600 affiliated care entities across the United States.
As a result of these implementations, the Company is seeing a reduction in its start up costs per hospital and an improvement in its margins which will support the Company’s efforts to reach positive cash flow from operations in 2013.
This is significant as this new revenue adds to the cash flow from the Company’s legacy accounts moving Auxilio that much closer to cash flow positive from operations.
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By Ken Nagy, CFA