Sunday, July 28, 2013

Auxilio (AUXO) Manages Printing and Copying

Auxilio (AUXO) provides managed print services to the health care sector.  That's another way of saying they service photocopiers and printers in hospitals.  I have a small amount of professional experience in dealing with managed print services.  I recall that having a contract directly with a machine's vendor is simpler and cheaper than using a third party.  The vendor's customer service rep was on call and did not need to be physically located in the office where the machines were installed.  The contract I touched was for a small number of copiers in a small office.  My own experience may not apply universally.

The company's leadership team has tons of general business experience, which begs the question of why the company isn't more financially successful.  They've had negative net income from 2010-2012 and their retained earnings deficit has increased in each of those years.  Auxilio has to compete directly against the makers of equipment such as Xerox and HP, who presumably know their own products pretty well.  A web search for the term "managed print services market" brought up more confirmation of the difficulty users have with outsourcing their print services to anyone but OEM vendors.

Auxilio's 10-Q for May 15, 2013 showed cash on hand of $2.7M as of March 31, 2013.  Their burn rate averaged about $200K/month in 2011 and 2012, although they reduced it somewhat in that most recent quarter.  The concern is that they're still losing money even though revenue has more than doubled since 2010.  If net income is still negative by this time in 2014 they will probably have to raise more capital.

This company isn't right for my portfolio.  They've been publicly listed since 2001 and have been a low-priced stock pretty much since mid-2003.  Auxilio needs to show some serious results.

Full disclosure:  No position in AUXO (or other companies mentioned) at this time.