Here is a Cheesburger quote from an earlier thread where Cheesburger and I were discussing the individual components contributing to Operating Leverage in the TRCR business model.

"Of much greater impact is that the price per unit of transcription is falling. As voice recognition and overseas production become more widespread, they will drive down the price (as we all know, technology benefits accrue primarily to the end user - transcription is no exception). The big challenge to TRCR will be to reduce the cost of transcription per unit in direct relationship to the fall in pricing. "

I'm curious if we are now starting to see the margin squeeze kick in manifested via lower Gross margin.

Specifically, from Q2 to Q4 BeyondTxt volumes have increased 6% points and offshore has kept steady ~20%. However over this 3 quarter period gross margin has increased 0.5%. So during this period we are not seeing the operation leverage from BeyondTxT customer migration.

If you take the prior 4Q's - BeyondTxT volumes have increased 11% points and offshore 4% points yet Gross margin has increased 1.8% points.

I've added this into the model so you can see the production mix over time.

So there seems to be three explanations to this:
1) either the supervisor infructure costs have increased,
2) Transcription staff costs have increase; or
3) Transcription unit pricing are getting driven down on new and renewed business in-line with Cheesburger's comment.

Go forward the DeVenture will cloud the comparison but the last 3-4 quarters are very interesting.

This would be an excellent question for the next CC to understand this dynamic.

Thoughts?

Spin