Toronto Stock Exchange Symbol: SXC

Systems Xcellence announces results for fiscal Period ended december 31, 2003 

MILTON, Ontario, March 10, 2004, Systems Xcellence Inc., (“SXC”) (TSX: SXC) today reported its results for the period ended December 31, 2003. As a result of the change in the Company's year-end to December 31 from February 28 (effective December 31, 2003), the latest fiscal period consists of the ten-month period from March 1, 2003 to December 31, 2003. In addition to the change in its year-end, SXC is now reporting its financial results in U.S. dollars, effective with the December 31, 2003 period end. Therefore, all figures are in U.S. dollars, unless otherwise indicated. 

Revenue for the ten-month period ended December 31, 2003 was $28.7 million compared to $30.6 million for the twelve-month period ended February 28, 2003. Net income for the ten-month period was $3.1 million, or $0.07 per share, compared to $1.8 million, or $0.04 per share, for the twelve-month period in the prior year. For the ten-month period, revenue of a recurring nature was $14.5 million, or 51% of total revenue, versus $14.9 million, or 49% of total revenue, in the prior twelve-month period.  

Revenue for the twelve-month period ended December 31, 2003 (“Calendar 2003”) was $34.6 million compared to $29.5 million in the comparable prior period (“Calendar 2002”), representing a 17.1% increase.  Net income rose during this period from $0.2 million to $3.9 million.  These results are summarized in the accompanying table of Supplemental Financial Information (unaudited) in connection with the Company’s change in year-end. 

Key highlights for the period included:

• $6.7 million, three-year application service provider (ASP) contract with a mid-size, U.S.-based pharmacy benefit manager (PBM);

• $1.5 million, four-year ASP contract with a U.S.-based PBM;

• $2.5 million, four-year renewal of a hosted services agreement;

• $3.4 million, private placement (bought deal) providing SXC with proceeds for working capital, potential acquisitions or for future debt repayment purposes;

• Over 100 million annualized transactions processed in the Company’s data centre – representing a 61% increase over the same period last year;

• Backlog of $49.4 million consisting primarily of recurring revenue sources, compared to $47.5 million in the prior period;

• The launch of InformedRx, a suite of à la carte pharmacy benefits services for the managed care marketplace;

• A strategic partnership with Misys Healthcare Systems to enhance sales efforts of RxEXPRESS® for Windows to out-patient hospital pharmacies 

“During the fiscal year we made significant progress in executing on our business plan as we added key new customers to our transaction processing business and expanded our addressable market with new product launches,” said Gordon S. Glenn, President & CEO of SXC. “Through strong cash flow generation and a private placement financing completed in June 2003, we have strengthened our balance sheet considerably and in the coming year we will leverage our financial strength to grow our core transaction processing business, support initiatives in new markets and explore partnership and acquisition opportunities.” 

Financial Results

Gross margin was 59% in the ten-month period ended December 31, 2003 compared to 54% in the twelve-month period ended February 28, 2003. Improved gross profit margins resulted from increased transactional processing activity at the Company’s data center and from a higher portion of revenue derived from software license sales. 

Total expenses, comprised of product development and selling, general and administration costs, were $11.5 million, or 40% of revenue, for the ten-month period compared with $10.2 million, or 33% of revenue, in the twelve-month period of the prior year. The rise in expenses is primarily due to an increase in product development costs. The increase in expenses also reflects additional hiring and consulting resources deployed for the RxEXPRESS® for Windows product suite. 

Earnings before interest taxes depreciation and amortization (EBITDA) for the ten-month period was 19.2% of revenue compared to 20.5% of revenue in the prior twelve-month period.  This decline on a percentage basis is primarily attributed to the Company’s continued investment in its new product and service offerings. EBITDA does not have any standardized meaning prescribed by generally accepted accounting principles and therefore may not be comparable to similar measures presented by other issuers. 

Net income for the ten-month period was $3.1 million, or $0.07 per share, compared to $1.8 million, or $0.04 per share for the twelve-month period ended February 28, 2003.  The increase in net income is attributed to improved gross profit, reduced interest expense, and a reduction in the amortization of capitalized product development costs. 

At December 31, 2003, the Company had a working capital position of $14.2 million, with cash and cash-equivalents of $13.5 million, compared with $6.3 million of working capital and $6.8 million of cash and cash-equivalents at February 28, 2003. The $6.7 million increase in the Company’s cash position was primarily the result of strong cash flow from operations of $3.4 million, and a (bought deal) private placement completed in June 2003, resulting in net proceeds of $3.4 million. 

At December 31, 2003, the Company’s contract order backlog was $49.4 million compared with $47.5 million at February 28, 2003.  Management anticipates this contracted order backlog to be realized over a three-year period.  

Calendar Year Financial Information

To assist investors in assessing past and future financial performance on a calendar-quarterly basis, SXC will post its U.S. denominated calendar-based quarterly Consolidated Statements of Operations (unaudited) for Calendar Years 2002 and 2003, on its website (www.sxc.com) at 4:00PM ET on Wednesday, March 10, 2004. The following table summarizes this information: 

Notice of Conference Call

SXC will host a conference call on March 11, 2004 at 8:30AM (ET) to discuss its fiscal period-end financial results. Mr. Gordon S. Glenn, President and CEO, will host the call.  

A live audio webcast of the call will be available at www.financialdisclosure.ca and www.sxc.com. Webcast attendees are welcome to listen to the conference in real-time or on-demand at your convenience. A taped replay of the call will be archived at those sites for 90 days. A replay of the call can also be heard by dialling 1-800-408-3053 or 416-695-5800 and entering the reference code 3013051. The taped call is available until March 18, 2004. 

About Systems Xcellence Inc.

Systems Xcellence (SXC) is headquartered in Milton, Ontario with offices and processing centres in Lombard, Illinois, Scottsdale, Arizona and Victoria, British Columbia.  SXC is a leading provider of healthcare information technology solutions and services to the healthcare benefits management industry. The company’s product offerings and solutions combine a wide range of software applications, application service provider (ASP) processing services and professional services, designed for many of the largest organizations in the pharmaceutical supply chain, such as pharmacy benefit managers, managed care organizations, retail pharmacy chains and other healthcare intermediaries.  SXC can be found on the Internet at www.sxc.com.

This press release contains forward-looking statements based on current expectations. These forward-looking statements entail various risks and uncertainties that could cause actual results to differ materially from those reflected in these forward-looking statements. Risks and uncertainties about the Company's business are more fully discussed in the Management Discussion and Analysis published in the Company's annual report.
 

LINK TO QUARTERLY STATEMENTS - PDF FORMAT

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