Toronto Stock Exchange Symbol: SXC
Systems Xcellence announces 2004 third quarter financial resultsMILTON, Ontario, November 4, 2004, Systems Xcellence Inc., (“SXC”) (TSX: SXC) today reported its third quarter financial results for the three-month period ended September 30, 2004 (“Q3 CY’04”). As a result of the change in the company's year-end to December 31 from February 29 (effective December 31, 2003) and in accordance with Canadian GAAP (Generally Accepted Accounting Principles), Q3 CY’04 will be compared to the second quarter of the prior fiscal year which represented the three-month period ended August 31, 2003. All figures are in U.S. dollars. Revenue for the three-month period ended September 30, 2004, was $8.2 million compared to $8.5 million for the three-month period ended August 31, 2003. Revenue of a recurring nature was $4.8 million in Q3 CY’04, or 59% of total revenue, versus $4.3 million, or 51% of total revenue, for the three months ended August 31, 2003. Net income for Q3 CY’04 was $0.9 million, or $0.02 per share, compared to $0.9 million or $0.02 per share, for the three-month period ended August 31, 2003. “We continue to make progress on our goal to become the leading provider of outsourced transaction processing solutions for healthcare payer organizations managing prescription drug claims. Driven by sales of our pharmacy benefit service offering, InformedRx, and our flagship RxCLAIM product, year-to-date, this strategy has helped to increase our recurring revenue to 60% of total sales, up from 48% of total sales last fiscal year. With our on-going implementation of new benefits processing customers coupled with a robust sales pipeline, we believe our InformedRx suite of services has now gained critical mass and is poised for accelerated growth,” said Gordon S. Glenn, President and CEO of SXC. “In addition, during the third quarter we further invested in our retail and mail-order pharmacy product, RxEXPRESS® for Windows®, as customers in this target market continue to seek technology-based workflow solutions to help them manage the rapidly rising volume of prescription drug claims.” Highlights for Q3 CY’04:
Financial Review Revenue from recurring sources was $4.8 million in Q3 CY’04 compared to $4.3 million in the comparable period, a 12% growth rate. Transaction processing and switching revenue was $3.4 million in Q3 CY’04 compared to $2.4 million in the comparable period, a 40% increase primarily due to the addition of new transactions processing customers and growth from existing customers during this period. Maintenance revenue was $1.4 million compared to $2.0 million in the comparable period, a 30% decrease largely due to the completion of a license, maintenance and services agreement in Q2 CY’04. Revenue from non-recurring sources was $3.4 million in Q3 CY’04 compared to $4.2 million in the comparable period, a 19% decline. Software license revenue was $2.2 million in Q3 CY’04, compared to $3.0 million in the comparable period, a 27% decline. The decline in license revenue is related to the agreement completed in Q2 CY’04, but was offset by the recognition of certain tiered-license arrangements during the quarter. Integration and consulting revenue was steady at $1.2 million compared to $1.2 million in the comparable period. “The growth in our transaction processing operations is consistent with our objective to build that part of our business and to increase the percentage of revenue that we earn from recurring sources” said Irwin Studen, Senior Vice President Finance & CFO at SXC. Earnings before interest taxes depreciation and amortization (EBITDA) for Q3 CY’04 were $1.6 million, or 20% of revenue compared to $1.7 million, or 20% of revenue for the three-month period ended August 31, 2003. The decrease in EBITDA is largely the result of decreased revenues between the comparable periods, offset by cost reductions the company initiated in the prior quarter. SXC continues to operate with a strong balance sheet from which to pursue its growth initiatives. At September 30, 2004, the company had a working capital position of $15.4 million, with cash and cash-equivalents of $13.6 million, compared with $14.2 million of working capital and $13.5 million of cash and cash-equivalents at December 31, 2003. At September 30, 2004, the company’s contract order backlog was $50.6 million, of which over 90% was from recurring revenue sources, compared with $49.4 million at December 31, 2003. This revenue backlog provides good visibility into the Company’s future revenue stream and management anticipates the majority of this contracted order backlog to be realized over a three-year period. Revenue for the nine-month period ended September 30, 2004, was $24.5 million compared to $25.3 million for the nine-month period ended August 31, 2003. Year-to-date, revenue of a recurring nature was $14.6 million, or 60% of total revenue, versus $12.2 million, or 48% of total revenue, for the nine months ended August 31, 2003. Net income for the nine-month period ended September 30, 2004 was $1.6 million, or $0.04 earnings per share (basic), compared to $2.8 million, or $0.07 per share (basic), for the nine-month period ended August 31, 2003. This $1.2 million decrease in net income was largely attributable to a $0.8 million decrease in revenue, a $2.1 million increase in product development expenses, $0.3 million increase in stock compensation expense, and a $0.2 million increase in SG&A, which was offset by a $1.3 million decrease in direct project costs, a $0.6 million decrease in amortization expense, and a $0.3 million decrease of capital asset write-offs. Higher product development costs are primarily due to the allocation of greater resources to the development of its InformedRx and pharmacy work-flow systems initiatives. Financial Guidance The company has previously established the following financial goals for calendar 2004: consolidated revenue to be in a range of $32-35 million, and earnings per share (basic) to be in a range of $0.04-0.07. Included in this net earnings guidance is approximately $0.02 of stock option compensation expense for the year. Based on results year-to-date, management now expects that its earnings per share for fiscal 2004 will come in near the mid-point of the previously announced range of $0.04-0.07 per share. The Company also stated that it expects its core transaction processing revenue to grow by more than 40% in Calendar 2004. Notice of Conference Call SXC will host a conference call on November 4, 2004 at 8:30AM (ET) to discuss its Q3 CY’04 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 3107390. The taped call is available until November 11, 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 and operates in the U.S. under its wholly-owned subsidiary,
SXC Health Solutions, Inc. 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. For more information, please contact:
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