Morgan continued, “In the second quarter, we sharpened our customer focus and applied what we have learned about market demand. We are accelerating our investment in the core technology-oriented solutions that are driving sales across the markets we serve, specifically healthcare software and services and marketing solutions software and services, where we can deliver more value for the customer, produce higher margins and offer a complete portfolio of solutions.”
Second Quarter Results
Total revenues declined 6 percent to $155.1 million in the second quarter compared to $164.3 million in the second quarter of 2011. Core solutions grew 3.4 percent, primarily due to increases in unit sales, while Legacy product declined 11.8 percent. At the end of the second quarter, approximately 43 percent of revenue was derived from core solutions sales and approximately 57 percent of revenue came from legacy products.
Healthcare revenues declined 7 percent for the quarter, to $54.8 million compared to $59.0 million in the prior year quarter. Operating income for the second quarter was $3.7 million compared to $3.8 million for the same period in 2011. Growth in core solutions was offset by declines in unit sales of legacy products, particularly clinical paper documents. Healthcare Solutions, technology-oriented products and services within the healthcare portfolio, grew 14 percent in the quarter, primarily driven by strong growth in patient information and marketing and communications solutions sales. New customers and new product introductions also impacted the quarter and are expected to contribute to additional core solutions sales in the second half of 2012. As healthcare customers transition to Electronic Medical Records (EMR), accelerated declines in sales of legacy products such as clinical forms is expected throughout 2012.
During the second quarter, the company’s Commercial Markets, Financial Services and Industrial business units were consolidated into one Business Solutions business unit to more efficiently develop and market technology-driven products and services across vertical markets. Business Solutions revenues for the second quarter was $100.3 million, a decrease of 5 percent compared to second quarter 2011 revenue of $105.3 million. Growth in core solutions sales was offset by declines in legacy product sales. Revenue from core solutions increased by 2.6 percent in the quarter, primarily due to new customer implementation and organic growth with existing customers, particularly in critical communications and on-demand publishing. The legacy decrease is primarily attributable to documents no longer being used rather than loss of customers, and to the associated loss of freight and other service revenues.