Auxilio Inc. Reports Third Quarter 2016 Results

Auxilio, Inc. (OTCQB: AUXO), a leading provider of complete Document Solutions and IT Security for the healthcare industry, today announced financial results for the third quarter ended September 30, 2016.
Financial and operational highlights for the third quarter of 2016 include:
Net Income for the quarter was $0.7 million or $0.03 per basic and diluted share compared to net income of $0.5 million or $0.02 per basic and diluted share in the third quarter of 2015.

• Adjusted income from operations for the third quarter, which excludes charges related to stock-based compensation and amortization of intangibles, was $1.0 million compared to $0.9 million in the third quarter of 2015.
• Gross Margin was 23% for the third quarter compared to 18% in the third quarter of 2015 and 20% in the second quarter of 2016.
• Revenues for the quarter were $14.3 million, a decrease of 9% from $15.7 million in the third quarter of 2015. Excluding a decrease of $1.4 million of equipment sales, which are ancillary to our core business, revenues were flat year over year.
• At September 30, 2016, the Company had $5.4 million in cash and $4.4 million in working capital.
• During the quarter the Company completed the first successful cross-sell of the full breadth of our security offering, including our assessment and consulting services to an existing Document Solutions customer.

Joseph J. Flynn, President and CEO commented, “I am pleased with our operational performance for the quarter, as we posted strong bottom line results while also executing on strategic initiatives laid out earlier in the year. With the demand from major health systems to find solutions to reduce costs, improve efficiency and offer greater IT security, we are pursuing significant opportunities to expand our product and service offerings with high margin revenue streams that are recurring in nature.” Flynn continued, “As we continue diversifying our revenue streams, we are targeting greater consistency in our profitability levels over time. Our vision is to create a company that is a leading provider of total document workflow solutions and security services for the healthcare sector and we continue making solid progress with that endeavor.”
Financial Results for the three and nine months ended September 30, 2016
For the three months ended September 30, 2016, the Company reported revenues of $14.3 million, a decrease of 9% when compared to $15.7 million reported in the third quarter of 2015. The addition of $1.5 million of new recurring service revenue contracts was offset by reductions of approximately $1.5 million due to volume reductions and terminated services. Equipment revenues in the third quarter were $0.2 million compared to approximately $1.6 million in the third quarter of 2015.
Cost of revenue was $11.1 million, compared to $12.9 million in 2015. The Company incurred approximately $0.6 million less in staffing costs, including contract labor, and incurred approximately $0.1 million in additional service and supply costs, primarily as a result of new customers. Equipment costs decreased by approximately $1.2 million, largely as a result of the decrease in equipment revenues. Gross profit for the third quarter of 2016 was $3.2 million, or 23% of revenues, compared to $2.9 million or 18% of revenues, for the same period in 2015. The increase in gross margin is due to the maturation of previously announced new services contracts.
Operating expenses for the third quarter were $2.5 million, an increase of $0.2 million compared to the third quarter of 2015. Sales and marketing expenses decreased by 5% due to decreased marketing spend when compared to the same period in 2015. General and administrative expenses increased 12% to $1.8 million due to approximately $50,000 more in rent paid from our move to a larger office in 2016 and approximately $150,000 of non-recurring expenses related to consulting fees for strategic initiatives.
Net income for the three months ended September 30, 2016, was $0.7 million, or $0.03 per basic and diluted share, compared to net income of $0.5 million, or $0.02 per basic and diluted share, in the same period of 2015. The Company achieved an adjusted income from operations of $1.0 million in the third quarter of 2016, compared to an adjusted income from operations of $0.9 million in the third quarter of 2015 after excluding charges of $0.2 million and $0.3 million respectively, related to stock-based compensation and amortization of intangibles.
For the nine months ended September 30, 2016, the Company reported revenues of $44.0 million, a decrease of 3% compared to $45.2 million reported in the same period of 2015. The Company added approximately $3.4 million of net new recurring service revenue contracts, offset by a decrease of $4.6 million in equipment revenue, compared to the same period in 2015.
Cost of revenue was $35.4 million compared to $38.1 million in 2015 representing a decrease of 7% or $2.7 million. Gross profit for the nine months ended September 30, 2016, was $8.6 million, or 20% of revenues, compared to $7.1 million, or 16% of revenues, for the same period in 2015.
Operating expenses for the nine months ended September 30, 2016, were $7.3 million, an increase of 1% from $7.2 million in the same period of 2015. Sales and marketing expenses decreased by 9% due to lower compensation expense and reduced marketing spend. General and administrative expenses increased 6% to $5.2 million due to increased rent and non-recurring consulting fees.
Net income for the nine months ended September 30, 2016 was $1.2 million, or $0.05 per basic and diluted share, compared to a net loss of $0.2 million, or $0.01 per basic and diluted share, in the same period of 2015. Excluding $0.6 million in charges related to stock based compensation and amortization of intangibles, the Company achieved an adjusted income from operations of $1.9 million for the nine months ended September 30, 2016, compared to adjusted income from operations of $0.7 million, after excluding charges of $0.7 million related to stock-based compensation and amortization of intangibles for the same period in 2015.
At September 30, 2016, the Company had $5.4 million of cash and cash equivalents and working capital of $4.4 million.
Conference Call Information
Date: Wednesday, November 9, 2016
Time: 1:30pm PT, 4:30 pm ET
US: 1-888-778-9065
International: 1-913-312-0497
Conference ID: 3320086
Webcast: https://public.viavid.com/index.php?id=121713
A replay of the call will be available from 7:30pm ET on November 9, 2016 to 11:59 pm ET on November 24, 2016. To access the replay, please dial 1-844-512-2921 from the U.S. and 1-412-317-6671 from outside the U.S. The PIN is 3320086.
About Auxilio, Inc.
Since 2004, over 220 of the nation’s leading hospitals and health systems have turned to Auxilio to solve broken document and digital workflow processes. Auxilio’s Document Solutions are proven to reduce waste, safeguard PHI, and improve operational efficiency while driving incredible cost savings for a healthcare organization. Auxilio delivers its proven results through its core services lines, Managed Print Services, Document Consulting and iPLATFORM, an intelligent workflow automation suite.
Auxilio’s Managed Print Services’ business model is vendor neutral, provides full-time, on-site customer service and technical experts while guaranteeing 20% cost savings starting day-one of the contract. Auxilio’s Document Consulting analyzes and remediates inefficient document workflow programs bringing transparency of what is printed, by department, by user and how much to find opportunities for process improvement and increased security for HIPAA compliance. iPLATFORM, helps make clinical and administrative tasks easier and faster, improving the patient experience by 50%, creating a 99% registration accuracy rate and producing practical cost-effective digital workflows, eliminating 90% of fax documents.
Auxilio’s cybersecurity arm, Redspin, helps hospitals, health systems and Business Associates find and fix network and application security issues. Their fully comprehensive portfolio of services and technology include HIPAA security risk assessments, penetration testing, risk and compliance consulting and a SaaS technology solution, Delphiis ™ IT Risk Manager.
For more information about Auxilio, visit https://www.auxilioinc.com.
Forward Looking Statements
This release contains certain forward-looking statements relating to the business of Auxilio, Inc. that can be identified by the use of forward-looking terminology such as “believes,” “expects,” “anticipates,” “may” or similar expressions. Such forward-looking statements involve known and unknown risks and uncertainties, including uncertainties relating to product/services development, long and uncertain sales cycles, the ability to obtain or maintain patent or other proprietary intellectual property protection, market acceptance, future capital requirements, competition from other providers, the ability of our vendors to continue supplying the company with equipment, parts, supplies and services at comparable terms and prices, expectations relating to momentum of the business, expectations of increased demand for Auxilio’s services, growth of Auxilio’s vertical framework, anticipated results from cross-selling efforts, growing demand for Auxilio’s MPS programs, and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are or will be described in greater detail in our Form 10-K and Form 10-Q filings with the Securities and Exchange Commission, which are available at https://www.sec.gov. Auxilio, Inc. is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.