Document services provider Auxilio Inc. grew rapidly this year. It bought a cybersecurity consulting firm in January, uplisted from the over-the-counter market to the New York Stock Exchange in February, assumed the name of the acquired company this month, and will soon be headquartered elsewhere with the relocation of Chief Executive Joe Flynn.
Auxilio provides managed document services, including printed, stored data and digital documents. It acquired cybersecurity, privacy and compliance consulting firm CynergisTek Inc. in Austin, Texas and has officially assumed the CynergisTek name, effective Sept. 8. Its ticker symbol is CTEK.
“There’s no question when we made the acquisition, one of the most important assets we bought was the brand name in logistics IT … Auxilio had a good name, but not to the extent of CynergisTek [when it comes to cybersecurity],” said Flynn. “At this juncture, from a revenue standpoint, the document management business is roughly 70% of the company’s revenue and cybersecurity is roughly 30%. [But] the number of cybersecurity clients we have is three or four times the number of document management clients.”
The difference in gross margin for the two platforms is roughly 50% for cybersecurity and 20% for document management—“so it will behoove us to focus heavily on growing the cybersecurity business quickly.”
The company reported revenue for the quarter ended June 30 of $16.8 million, up $1.6 million, or nearly 11% year-over-year. Operating profit increased by 41% from $3.1 million to $4.4 million. Most significantly, since the CynergisTek buy, the combined firm’s gross margins are up 3% to 26%.
CynergisTek recently traded at about $3.52 per share for a $33.4 million market cap.
“CynergisTek is becoming a holistic cybersecurity information management company, and document management is just one component of what we help our clients do,” said Mac McMillan, president and chief strategy officer. He co-founded CynergisTek.
McMillan said cybersecurity is information management involving securing and protecting data, as well as data management across the entire lifecycle—“risk management is something you do at the beginning and [also at the end when] you are retiring that system.”
McMillan said the merger has allowed CynergisTek to not only assess or advise on cybersecurity risk, but to send teams to help clients build out infrastructure.
Texas
The company currently has 380 employees, roughly equally distributed here and in Texas. Flynn said he anticipates relocating company headquarters from Mission Viejo to Austin, and that the Texas office will add employees. The company doesn’t anticipate changes to the Mission Viejo operation.
Auxilio acquired CynergisTek for $34.3 million, $26.8 million upfront and up to $7.5 million in milestone payments.
