Auxilio Loses another 1.6 million

Particularly for large MPS engagements, there can be substantial costs that are absorbed by the provider at the beginning of a contract. These costs are due to repairing printers that have been in need of major repairs, stocking toner in advance of billing, high-CPP printers in a competitive transaction, etc. It can take over a year for some of these large engagements to reach profitability, and it seems like that Auxilio only engages with large healthcare clients. In healthcare, if the provider does not understand the types of jobs that are being printed, they can end up barely treading water. For example, if doctors choose to print X-rays (>90% coverage) for patient files, a few printers can kill the profitability of the entire account.

At some point, Auxilio's older clients will start to reach profitability, particularly if they do a decent job of fleet optimization. The challenge is going to be for them to determine how much business they can handle so they are not constantly incurring more start-up costs going after new business than they are bringing in profit from more mature engagements.

Get this, I'm in the elevator with a VP from Auxilio, and what do you think I asked him? I asked "When do you think your company will start turning a profit"? His answer was "We don't have to turn a profit", and he then went on to explain that the cost of implemented new contracts had a huge upfront cost and hinted that they would continue not be profitable for sometime and need some of the existing contracts to mature. With that he also stated that they will have a huge press release in a matter of days. He also stated that they have unlimited resources, I guess that was inreference to financing.

We'll have to wait and see this play out.

Art

I don't understand how companies feel comfortable running at a loss,and I don't understand how customers award contracts to companies that are not operating at a profit.

If I was a purchaser looking for a vendor the first thing I'd be thinking about is will I still be dealing with the same company by the end of the contract.

These guys are RIPE for a takeover.

I can't wait to see how much they lose this year.