Auxilio Inc. Reports Fourth Quarter and Full Year 2016 Results
MISSION VIEJO, CA--(March 27th, 2017) - Auxilio, Inc. (NYSE MKT: AUXO), a leading provider of enterprise security and document workflow solutions for the healthcare industry, today announced financial results for the fourth quarter and year ended December 31, 2016.
Financial and operational highlights for the fourth quarter of 2016 include:
· Revenues for the fourth quarter were $16.2 million, an increase of 1% from $16.1 million in the fourth quarter of 2015. |
· Gross Margin was 23% for the fourth quarter compared to 22% in the fourth quarter of 2015 and 23% in the third quarter of 2016. |
· Adjusted income from operations for the fourth quarter, which excludes charges related to stock-based compensation and amortization and impairment of intangibles, was $1.5 million compared to $1.2 million in the fourth quarter of 2015. |
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· Inclusive of a $5.1 million tax benefit and $2.6 million impairment charge, net income for the fourth quarter was $3.8 million or $0.47 per basic share and $0.46 per diluted share compared to net income of $1.5 million or $0.18 per basic and diluted share in the fourth quarter of 2015. |
· At December 31, 2016, the Company had $6.1 million in cash and $5.8 million in working capital. |
· During the fourth quarter the Company announced a five-year contract with MaineHealth, a prominent 1,100 bed health system employing more than 11,000 employees. |
Significant events subsequent to the December 31st, 2016 fiscal year end include:
· Acquisition of Austin,TX based CynergisTek, a leader in cybersecurity consulting services for the healthcare industry, for initial consideration of $26.0 million with $7.5 million in additional potential earn-outs based on EBITDA targets |
· Listed shares on NYSE MKT |
· Announced new multi-million dollar Print as a Service (PRaaS) contract over five years with a prestigious university medical center |
"This has been the most transformative period in the history of the company, and I could not be more pleased with our execution. The acquisition of CynergisTek has had an immediate positive impact on our ability to compete for document workflow business and played a key role in our recently announced multi-million dollar contract win. Our ability to combine security with advanced document solutions and services is becoming a significant competitive advantage in the market," commented Joseph J. Flynn, CEO. "While continuing to see some margin pressure in our document management solutions business in general, we are investing in ways technology can mitigate this impact while also leveraging the brand and expanding aggressively in higher margin areas, much like we are doing with security. We remain very excited about the future of both of these service offerings, and we believe that our ability to bundle these capabilities together will drive continued growth over time."
Financial Results for the three months and year ended December 31, 2016
For the three months ended December 31, 2016, the Company reported revenues of $16.2 million, an increase of 1% when compared to $16.1 million reported in the fourth quarter of 2015. The Company's services revenue decreased approximately $0.2 million in the fourth quarter of 2016 due to some reduction in cybersecurity professional services at Redspin. Equipment revenues in the fourth quarter were $2.0 million compared to approximately $1.6 million in the fourth quarter of 2015.
Cost of revenue for the fourth quarter of 2016 was $12.5 million, compared to $12.6 million in 2015. The Company incurred approximately $0.6 million less in staffing costs, including contract labor, and incurred approximately $0.4 million in additional service and supply costs, primarily as a result of new customers. Equipment costs increased by approximately $0.4 million, largely as a result of the increase in equipment revenues. Gross profit for the fourth quarter of 2016 was $3.7 million, or 23% of revenues, compared to $3.5 million or 22% of revenues, for the same period in 2015. The increase in gross margin is due to the maturation of previously announced new services contracts as well as seasonally strong fourth quarter services activity.
Operating expenses for the fourth quarter were $2.4 million, flat from $2.4 million in the fourth quarter of 2015. The Company incurred a $2.6 million impairment charge in the fourth quarter of 2016 related to intangible assets and goodwill acquired with the Delphiis and Redspin acquisitions. Sales and marketing expenses increased by 18% due to greater marketing activities when compared to the same period in 2015. General and administrative expenses decreased 9% to $1.7 million attributed to a higher fourth quarter 2015 expenses related to costs from a reorganization and integration of the security businesses that were purchased.
Operating loss was $1.3 million for the three months ended December 31, 2016 compared to operating income of $1.0 million in the fourth quarter of 2015, the decline largely being attributable to the $2.6 million impairment charge.
Net income for the three months ended December 31, 2016, was $3.8 million, or $0.47 per basic share and $0.46 per diluted share, compared to net income of $1.5 million, or $0.18 per basic and diluted share, in the same period of 2015. Net Income was largely impacted by a tax benefit of $5.1 million related to the removal of a previously recorded valuation allowance against our deferred tax assets from NOL carryforwards given the increased likelihood they will be utilized.
Excluding $0.1 million in charges related to stock based compensation and $2.8 million in amortization and impairment of intangibles, the Company achieved adjusted income from operations of $1.5 million in fiscal 2016, or $0.18 per basic and diluted share, compared to adjusted income from operations, after excluding charges of $0.1 million in stock based compensation and amortization of intangibles, of $1.2 million, or $0.14 per basic and diluted share for the same period last year.
For the year ended December 31, 2016, the Company reported revenues of $60.2 million, a decrease of 2% compared to $61.3 million reported in 2015. The Company added approximately $3.2 million of services revenue with net new recurring service revenue contracts being partially offset by reductions from existing customers related to pricing, sales volumes, and non-renewing contracts. In addition, the Company experienced a decrease of $4.2 million in equipment revenue, compared to the same period in 2015.
Cost of revenue was $47.9 million compared to $50.7 million in 2015 representing a decrease of 5% or $2.8 million. Gross profit for the year ended December 31, 2016, was $12.3 million, or 20% of revenues, compared to $10.6 million, or 17% of revenues, for the same period in 2015.
Operating expenses for the year ended December 31, 2016, were $12.3 million, an increase of 28% from $9.6 million in the same period of 2015. When excluding the $2.6 million impairment charge, operating expenses were flat year over year. Sales and marketing expenses decreased by 3% to $2.7 million and general and administrative expenses increased 2% to $6.9 million.
Net income for the year ended December 31, 2016 was $5.0 million, or $0.61 per basic share and $0.60 per diluted share, compared to net income of $1.3 million, or $0.16 per basic and diluted share, in the same period of 2015. As previously mentioned, net income for full year 2016 also includes a $5.1 million tax benefit related to the removal of a previously recorded deferred tax asset valuation allowance against our NOL carryforwards.
Excluding $0.2 million in charges related to stock based compensation and $3.2 million in amortization and impairment of intangibles, the Company achieved adjusted income from operations of $3.4 million in fiscal 2016, or $0.42 and $0.41 per basic and diluted share respectively, compared to adjusted income from operations, after excluding charges of $0.4 million related to stock based compensation and $0.5 million in amortization of intangibles, of $1.8 million, or $0.23 and $0.22 per basic and diluted share for the same period last year.
At December 31, 2016, the Company had $6.1 million of cash and cash equivalents and working capital of $5.8 million. The Company maintains a line of credit, which was recently amended and increased to $5 million with the acquisition of CynergisTek.
Conference Call Information
Date: Monday, March 27, 2017
Time: 1:30pm PT, 4:30 pm ET
US: 1-888- 293-6960
International: 1-719-325-2472
Conference ID: 1920867
Webcast: http://public.viavid.com/index.php?id=123469
A replay of the call will be available from 7:30 pm ET on March 27, 2017 to 11:59 pm ET on April 11, 2017. 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 1920867.
About Auxilio, Inc.
Auxilio (www.auxilioinc.com) is a leading provider bundling best of breed IT security and workflow solutions into its managed document services program designed exclusively for the healthcare industry. Since 2004, the company has saved more than $80 million for its clients by providing a vendor neutral program that enhances security of printed, stored data and digital documents while driving out costs and inefficiencies within the patient information logistical chain. The company's document management best practices and intelligent workflow automation suite transforms printed documents to digital workflows, reducing waste and improving end-user satisfaction.
CynergisTek (www.CynergisTek.com) is a top-ranked cybersecurity and privacy consulting firm. The company offers solutions to help organizations measure privacy, security and compliance programs against regulatory requirements and assists in developing risk management best practices. Since 2004 the company has served as a partner to hundreds in the healthcare industry and is dedicated to supporting and educating the industry by contributing to relevant industry associations. The company has been named in numerous research reports as one of the top firms that provider organizations turn to for privacy and security, and won the 2017 Best in KLAS award for Cyber Security Advisory Services.
For more information about Auxilio, visit http://www.auxilioinc.com.
Forward Looking Statements
This earnings press release contains forward-looking statements based on management's current expectations, estimates and projections. All statements that address expectations or projections about the future, including our actions that will drive earnings growth, demand for our products and expectations for growth, are forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, potentially inaccurate assumptions and other factors, some of which are beyond our control and difficult to predict. If known or unknown risks materialize, or should underlying assumptions prove inaccurate, our actual results could differ materially from past results and from those expressed in forward-looking statements. Important factors that could cause our results to differ materially from those expressed in forward-looking statements include, but are not limited to, economic, business, competitive, political, regulatory, legal and governmental conditions in the regions in which we operate. These factors and others are discussed more fully in the reports we file with the Securities and Exchange Commission, particularly our latest annual report on Form 10-K. We assume no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.
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Contact:
Investor Relations:
MZ North America
Mike Cole, 949-259-4988
Vice President
mike.cole@mzgroup.us
www.mzgroup.us
or
Media Relations:
Auxilio
Carrie Mulcahy
Director of Corporate Marketing
AUXILIO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | As of December 31, | |
| | | 2016 | | | 2015 | |
| ASSETS | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 6,090,844 | | | $ | 6,436,732 | |
| Accounts receivable, net | | | 9,614,486 | | | | 7,397,957 | |
| Prepaid and other current assets | | | 438,140 | | | | 625,806 | |
| Supplies | | | 1,087,318 | | | | 1,458,609 | |
| Total current assets | | | 17,230,788 | | | | 15,919,104 | |
| | | | | | | | | |
| Property and equipment, net | | | 689,418 | | | | 495,324 | |
| Deposits | | | 41,522 | | | | 58,118 | |
| Deferred income taxes | | | 5,282,531 | | | | - | |
| Intangible assets, net | | | 1,112,395 | | | | 2,731,250 | |
| Goodwill | | | 2,109,143 | | | | 3,665,656 | |
| Total assets | | $ | 26,465,797 | | | $ | 22,869,452 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 7,736,207 | | | $ | 8,306,860 | |
| Accrued compensation and benefits | | | 2,495,156 | | | | 2,856,165 | |
| Deferred revenue | | | 562,679 | | | | 913,677 | |
| Current portion of long-term liabilities | | | 606,686 | | | | 598,750 | |
| Total current liabilities | | | 11,400,728 | | | | 12,675,452 | |
| | | | | | | | | |
| | | | | | | | | |
| Long-term liabilities: | | | | | | | | |
| Term loan, less current portion | | | 750,000 | | | | 1,250,000 | |
| Capital lease obligations, less current portion | | | 199,644 | | | | 125,496 | |
| Total long-term liabilities | | | 949,644 | | | | 1,375,496 | |
| | | | | | | | | |
| Commitments and contingencies | | | | | | | | |
| | | | | | | | | |
| Stockholders' equity: | | | | | | | | |
| Common stock, par value at $0.001, 33,333,333 shares authorized, 8,185,936 shares issued and outstanding at December 31, 2016 and 8,150,695 shares issued and outstanding at December 31, 2015 | | | 8,186 | | | | 8,151 | |
| Additional paid-in capital | | | 27,985,448 | | | | 27,698,363 | |
| Accumulated deficit | | | (13,878,209 | ) | | | (18,888,010 | ) |
| Total stockholders' equity | | | 14,115,425 | | | | 8,818,504 | |
| Total liabilities and stockholders' equity | | $ | 26,465,797 | | | $ | 22,869,452 | |
AUXILIO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| | | Year Ended December 31, | |
| | | 2016 | | | 2015 | |
| Net revenues | | $ | 60,200,383 | | | $ | 61,253,853 | |
| Cost of revenues | | | 47,888,296 | | | | 50,664,713 | |
| Gross profit | | | 12,312,087 | | | | 10,589,140 | |
Operating expenses: | | | | | | | | |
| Sales and marketing | | | 2,723,735 | | | | 2,809,377 | |
| General and administrative expenses | | | 6,927,404 | | | | 6,802,582 | |
| Impairment of goodwill and intangible assets | | | 2,633,701 | | | | - | |
| Total operating expenses | | | 12,284,840 | | | | 9,611,959 | |
| Income from operations | | | 27,247 | | | | 977,181 | |
Other income (expense): | | | | | | | | |
| Interest expense | | | (91,885 | ) | | | (127,576 | ) |
| Reduction in contingent consideration in connection with acquisition of Redspin | | | - | | | | 623,000 | |
| Loss on disposition of property and equipment | | | - | | | | (3,513 | ) |
| Total other income (expense) | | | (91,885 | ) | | | 491,911 | |
| | | | | | | | | |
| (Loss) income before provision for income taxes | | | (64,638 | ) | | | 1,469,092 | |
| Income tax benefit (expense) | | | 5,074,439 | | | | (152,436 | ) |
| Net income | | $ | 5,009,801 | | | $ | 1,316,656 | |
| | | | | | | | | |
| Net income per share: | | | | | | | | |
| Basic | | $ | 0.61 | | | $ | 0.16 | |
| Diluted | | $ | 0.60 | | | $ | 0.16 | |
| | | | | | | | | |
| Number of weighted average shares outstanding: | | | | | | | | |
| Basic | | | 8,173,203 | | | | 8,050,191 | |
| Diluted | | | 8,283,862 | | | | 8,326,312 | |
AUXILIO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2016 AND 2015
| | Common Stock | | | | | | | | | | |
| | | Shares | | | Amount | | | Additional Paid-in Capital | | | Accumulated Deficit | | | Total Stockholders' Equity (Deficit) | |
| Balance at January 1, 2015 | | | 7,874,540 | | | $ | 7,876 | | | $ | 26,592,255 | | | $ | (20,204,666 | ) | | $ | 6,395,465 | |
| Stock compensation expense for options and warrants granted to employees and directors | | | - | | | | - | | | | 277,668 | | | | - | | | | 277,668 | |
| Stock compensation expense for restricted stock granted to key employee | | | 33,333 | | | | 33 | | | | 101,847 | | | | - | | | | 101,880 | |
| Stock options exercised | | | 6,116 | | | | 6 | | | | (6 | ) | | | - | | | | - | |
| Conversion of related party note payable to common stock | | | 85,945 | | | | 86 | | | | 257,749 | | | | - | | | | 257,835 | |
| Common stock issued in connection with the acquisition of Redspin | | | 150,761 | | | | 150 | | | | 468,850 | | | | - | | | | 469,000 | |
| Net income | | | - | | | | - | | | | - | | | | 1,316,656 | | | | 1,316,656 | |
| Balance at December 31, 2015 | | | 8,150,695 | | | | 8,151 | | | | 27,698,363 | | | | (18,888,010 | ) | | | 8,818,504 | |
| Stock compensation expense for options and warrants granted to employees and directors | | | - | | | | - | | | | 226,970 | | | | - | | | | 226,970 | |
| Stock options exercised | | | 35,046 | | | | 35 | | | | 60,115 | | | | - | | | | 60,150 | |
| Effect of reverse stock split | | | 195 | | | | - | | | | - | | | | - | | | | - | |
| Net income | | | - | | | | - | | | | - | | | | 5,009,801 | | | | 5,009,801 | |
| Balance at December 31, 2016 | | | 8,185,936 | | | $ | 8,186 | | | $ | 27,985,448 | | | $ | (13,878,209 | ) | | $ | 14,115,425 | |
AUXILIO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | Year Ended December 31, | |
| | | 2016 | | | 2015 | |
| Cash flows provided by operating activities: | | | | | | |
| Net income | | $ | 5,009,801 | | | $ | 1,316,656 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Depreciation | | | 211,654 | | | | 155,183 | |
| Amortization of intangible assets | | | 541,667 | | | | 483,750 | |
| Impairment of intangible assets | | | 2,633,701 | | | | - | |
| Bad debt | | | - | | | | 22,000 | |
| Stock compensation expense for options and warrants granted to employees and directors | | | 226,970 | | | | 277,668 | |
| Stock compensation expense for restricted stock issued to key employee | | | - | | | | 101,880 | |
| Interest expense related to accretion of debt discount costs | | | - | | | | 30,189 | |
| Loss on disposition of property and equipment | | | - | | | | 3,513 | |
| Increase in net deferred tax assets | | | (5,282,531 | ) | | | - | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | (2,216,529 | ) | | | (431,365 | ) |
| Prepaid and other current assets | | | 187,666 | | | | (395,870 | ) |
| Supplies | | | 371,291 | | | | (392,477 | ) |
| Deposits | | | 16,596 | | | | (20,527 | ) |
| Accounts payable and accrued expenses | | | (570,653 | ) | | | 43,302 | |
| Accrued compensation and benefits | | | (361,009 | ) | | | 1,291,024 | |
| Deferred revenue | | | (350,998 | ) | | | (39,340 | ) |
| Net cash provided by operating activities | | | 417,626 | | | | 2,445,586 | |
| Cash flows (used for) investing activities: | | | | | | | | |
| Purchases of property and equipment | | | (205,121 | ) | | | (214,478 | ) |
| Purchase of Redspin | | | - | | | | (1,876,966 | ) |
| Net cash (used for) investing activities | | | (205,121 | ) | | | (2,091,444 | ) |
| Cash flows (used for) provided by financing activities: | | | | | | | | |
| Net repayments on line of credit agreement | | | - | | | | (200,000 | ) |
| Proceeds from term loan | | | - | | | | 2,000,000 | |
| Payments on term loan | | | (500,000 | ) | | | (250,000 | ) |
| Payments on notes payable to related parties | | | - | | | | (105,888 | ) |
| Payments on capital leases | | | (118,543 | ) | | | (104,917 | ) |
| Proceeds from exercise of options and warrants | | | 60,150 | | | | - | |
| Net cash (used for) provided by financing activities | | | (558,393 | ) | | | 1,339,195 | |
| Net change in cash and cash equivalents | | | (345,888 | ) | | | 1,693,337 | |
Cash and cash equivalents, beginning of year | | | 6,436,732 | | | | 4,743,395 | |
Cash and cash equivalents, end of year | | $ | 6,090,844 | | | $ | 6,436,732 | |
AUXILIO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
| | | Year Ended December 31, | |
| | | 2016 | | | 2015 | |
| Supplemental disclosure of cash flow information: | | | | | | |
| Interest paid | | $ | 91,885 | | | $ | 97,386 | |
| Income tax paid | | $ | 220,076 | | | $ | 158,521 | |
| | | | | | | | | |
| Non-cash investing and financing activities: | | | | | | | | |
| Property and equipment acquired through capital leases | | $ | 200,627 | | | $ | 223,795 | |
| Conversion of note payable to related party | | $ | - | | | $ | 257,835 | |
| Common stock issued in connection with the acquisition of Redspin | | $ | - | | | $ | 469,000 | |
