SXC Health solutions announces strong first quarter financial results



    
    -   Company revises 2009 guidance higher as positive momentum from 2008
        continues into 2009
    

    LISLE, IL, May 7 /CNW/ - SXC Health Solutions Corp. ("SXC" or the
"Company") (NASDAQ:   SXCI, TSX: SXC), announces its financial results for the
three-month period ended March 31, 2009. Financial references are in U.S.
dollars unless otherwise indicated.

    
    Q1 2009 Financial Highlights
    ----------------------------
    -   Revenue was $291.0 million, compared to $24.3 million in Q1 fiscal
        2008
    -   Gross profit was $39.2 million, compared to $13.5 million in Q1
        fiscal 2008
    -   Adjusted EBITDA(1) was $16.3 million compared, to $6.3 million in Q1
        fiscal 2008
    -   GAAP net income increased to $7.7 million, or $0.31 per share
        (diluted), compared to $3.4 million, or $0.16 per share (diluted), in
        Q1 fiscal 2008
    -   Non-GAAP adjusted earnings per share(1) (diluted), which excludes the
        NMHC transaction-related amortization, was $0.38 for Q1 fiscal 2009
    -   Cash from operations was $11.8 million, compared to $8.0 million in
        Q1 fiscal 2008
    -   Adjusted prescription claim volume(1) for the PBM segment was 8.4
        million in Q1 2009
    -   Gross margin per adjusted prescription for the PBM segment was $3.43
        in Q1 2009
    -   Transaction processing volume for the HCIT segment was 96.8 million
        in Q1 2009

    Q1 2009 Operational Highlights
    ------------------------------
    -   Won three-year, multi-million dollar contract to provide Resident
        Care Management technology and services to PharMerica Corporation
    -   Awarded a three-year contract, valued at approximately $80 million
        annually, to provide PBM services to the 110,000 members of the UFCW
        & Employers Benefit Trust
    -   informedRx and the State of Arkansas Employee Benefit Division were
        co-awarded PBMI's 2009 Rx Benefit Innovation Award
    -   Won other informedRx business increasing our covered lives by an
        additional 150,000
    

    "The strong momentum we built in 2008 continued in Q1 and resulted in
solid financial and operational performance," said Mark Thierer, President and
CEO of SXC. "Our core business is largely resilient to the turbulence in the
broader economy and based on our promising outlook we are raising our
financial guidance for 2009. Strategically we have emerged as the industry's
technology-enabled PBM; we are now very focused on driving our differentiated
model with new sales. We see significant growth opportunities in each of the
markets we serve and we've built a sales engine that can generate new wins
across multiple markets."

    
    Financial Review
    ----------------
    Revenue and gross profit segmented by PBM and HCIT was as follows:
    

    Three-months ended March 31, (unaudited, in thousands)(2)

    Effective with the acquisition of NMHC, the Company evaluates segment
performance based on revenue and gross profit. A reconciliation of the
Company's business segments to the consolidated financial statements for the
three months ended March 31, 2009 and 2008 is as follows (in thousands):

    
                     PBM                  HCIT              Consolidated
            --------------------- --------------------- ---------------------
               2009       2008       2009       2008       2009       2008
            ---------- ---------- ---------- ---------- ---------- ----------
    Revenue $ 267,780  $       -  $  23,180  $  24,317  $ 290,960  $  24,317
    Gross
     profit $  28,808  $       -  $  10,376  $  13,480  $  39,184  $  13,480
    Gross
     profit
     %          10.8%       0.0%      44.8%      55.4%      13.5%      55.4%

    (2) In reviewing the above tables, please note that the revenue for SXC's
        legacy informedRx business is captured in the HCIT segment for Q1
        2008 and in the PBM segment for Q1 2009. As a result, the HCIT
        segment shows a slight decline in revenue for the three-month period
        ended March 31, 2009, due to the inclusion of some of the previously
        classified HCIT business now recorded in the new PBM segment.
    

    PBM revenue was $267.8 million for Q1 2009, due to the acquisition of
NMHC and the launch of new contracts since the purchase.
    Q1 2009 HCIT revenue was $23.2 million compared to $24.3 million in the
same period in 2008. This decrease is due primarily to the reclassification of
certain customers into the PBM segment effective April 1, 2008. Recurring
revenue consisted of transaction processing revenue of $13.7 million, compared
to $14.6 million in Q1 2008, and maintenance revenue of $4.5 million, compared
to $4.2 million in Q1 2008. Recurring revenue accounted for 79% of HCIT
revenue in Q1 2009, consistent with 78% in Q1 2008.
    Q1 2009 non-recurring revenue consisted of professional service revenue
of $3.6 million, compared to $3.8 million in Q1 2008, and system sales revenue
of $1.3 million, down from $1.7 million last year.

    Product Development Costs

    Product development costs for Q1 2009 were $3.2 million compared to $2.5
million for Q1 2008. Product development remains a key priority for the
Company as it develops enhancements to existing products and launches new
offerings. Product development costs included stock-based compensation cost of
$0.1 million for both Q1 2009 and Q1 2008.

    Selling, General and Administration ("SG&A") Costs

    SG&A costs for Q1 2009 were $20.8 million compared to $5.9 million in Q1
2008. The increase is largely attributable to the acquisition of NMHC and
initiatives to expand the Company's sales and support capabilities. SG&A costs
included stock-based compensation cost of $0.5 million and $0.7 million for
the three months ended March 31, 2009 and 2008, respectively.

    Adjusted EBITDA(1)

    Q1 2009 adjusted EBITDA was $16.3 million compared to $6.3 million in Q1
2008. Q1 2009 adjusted EBITDA benefited from a $2.0 million non-recurring
gross margin pick-up due to a high level of demand for seasonal cold and flu
medications in the PBM unit's specialty pharmacy operations and certain
activity in the HCIT unit. Q1 2009 adjusted EBITDA increased year-over-year
due in part to the addition of the NMHC business, the addition of new contract
wins, improved purchasing efficiencies on prescription drugs, cost synergies
generated from the acquisition, and was offset in part by the addition of
NMHC's operating expenses.

    Income Taxes

    The Company recognized income tax expense of $2.9 million in Q1 2009,
representing an effective tax rate of 27%, compared to a $1.6 million income
tax expense representing an effective tax rate of 33% for the same period in
2008. The change in the effective tax rate is due primarily to the NMHC
acquisition.

    Net Income

    The Company reported Q1 2009 net income of $7.7 million, or $0.31 per
share (fully-diluted), which includes $2.8 million of intangible amortization,
compared to $3.4 million, or $0.16 per share (fully-diluted), which includes
$0.4 million of intangible amortization, in Q1 2008.

    Cash from Operations

    SXC continues to generate strong cash from operations. For Q1 2009, the
Company generated $11.8 million of cash through its operations, compared to
$8.0 million during Q1 2008. The Company's quarterly cash flows can be
impacted by the timing of pharmacy deposit and rebate payments it receives for
certain customers.
    At March 31, 2009 and December 31, 2008, the Company had cash and cash
equivalents totalling $80.0 million and $67.7 million, respectively. The
Company believes that its cash on hand, together with cash generated from
operating activities and amounts available under its existing credit facility,
will be sufficient to support planned operations through the foreseeable
future.

    2009 Financial Guidance

    With today's announcement, SXC is revising certain of its financial
targets for 2009:

    
    -   Revenue of $1.25-$1.35 billion versus prior estimate of $1.2-$1.3
        billion
    -   Gross profit of $145-$155 million versus prior estimate of $140-$150
        million
    -   GAAP EPS (fully-diluted) of $0.93-$1.01 versus prior estimate of
        $0.77-$0.85
        (including all transaction-related amortization)
    -   Adjusted EBITDA of $57-$60 million versus prior estimate of $51-$54
        million
    -   Non-GAAP adjusted earnings per share(1) (fully-diluted) of
        $1.13-$1.21 versus prior estimate of $0.99-$1.08 (excluding the NMHC
        transaction-related amortization)
    

    Notice of Conference Call

    SXC will host a conference call on Thursday, May 7, 2009 at 8:30 a.m. ET
to discuss its financial results. Mark Thierer, President and CEO, and Jeff
Park, EVP and CFO will co-chair the call. All interested parties can join the
call by dialing 416-644-3421 or 1-800-731-5774. Please dial in 15 minutes
prior to the call to secure a line. The conference call will be archived for
replay until Thursday, May 14, 2009 at midnight. To access the archived
conference call, please dial 416-640-1917 or 1-877-289-8525 and enter the
reservation code 21303555 followed by the number sign.
    A live audio webcast of the conference call will be available www.sxc.com
and www.newswire.ca. Please connect at least 15 minutes prior to the
conference call to ensure adequate time for any software download that may be
required to join the webcast. An archived replay of the webcast will be
available for 365 days.

    (1) Non-GAAP Financial Measures

    SXC reports its financial results in accordance with generally accepted
accounting principles in the United States ("GAAP"). SXC's management also
evaluates and makes operating decisions using various other measures. Two such
measures are adjusted earnings per share, and adjusted EBITDA, which are
non-GAAP financial measures. SXC's management believes that these measures
provide useful supplemental information regarding the performance of SXC's
business operations.
    Adjusted earnings per share is a non-GAAP measure which takes earnings
per share and adds back the impact of amortization expense related to the
acquisition of NMHC, net of tax. Acquisition-related amortization expense is a
non-cash expense arising from the acquisition of intangible assets in
connection with the acquisition. SXC excludes acquisition-related amortization
expense from non-GAAP adjusted earnings per share because it believes (i) the
amount of such expenses in any specific period may not directly correlate to
the underlying performance of SXC business operations and (ii) such expenses
can vary significantly between periods as a result of new acquisitions and
full amortization of previously acquired intangible assets. Investors should
note that the use of these intangible assets will contribute to revenue in the
future period presented and periods beyond that and should also note that such
expense will recur in future periods. The 2009 guidance of adjusted earnings
per share was computed by taking the Company's GAAP earnings per share
guidance and adding back the expected impact of acquisition-related
amortization expense, net of tax.
    Adjusted EBITDA is a non-GAAP measure that management believes is a
useful supplemental measure of operating performance prior to net interest
income (expense), income taxes, depreciation, amortization, stock-based
compensation, and certain other one-time charges. Management believes it is
useful to exclude depreciation, amortization and net interest income (expense)
as these are essentially fixed amounts that cannot be influenced by management
in the short term. In addition, management believes it is useful to exclude
stock-based compensation as this is not a cash expense. Lastly, certain other
one-time charges (including losses on disposals of capital assets) are
excluded as these are not considered to be recurring items.
    Adjusted prescription volume equals SXC's Mail Service prescriptions
multiplied by three, plus its retail and specialty prescriptions. The Mail
Service prescriptions are multiplied by three to adjust for the fact that they
typically include approximately three times the amount of product days
supplied compared with retail prescriptions.
    Management believes that adjusted earnings per share, adjusted EBITDA and
adjusted prescription volume provide useful supplemental information to
management and investors regarding the performance of the Company's business
operations and facilitate comparisons to its historical operating results.
Management also uses this information internally for forecasting and budgeting
as it believes that the measures are indicative of the Company's core
operating results. Note however, that these items are performance measures
only, and do not provide any measure of the Company's cash flow or liquidity.
Non-GAAP financial measures should not be considered as a substitute for
measures of financial performance in accordance with GAAP, and investors and
potential investors are encouraged to review the reconciliation of adjusted
earnings per share and adjusted EBITDA.
    Adjusted earnings per share and adjusted EBITDA do not have standardized
meanings prescribed by GAAP. The Company's method of calculating these items
may differ from the methods used by other companies and, accordingly, it may
not be comparable to similarly titled measures used by other companies.
Reconciliation of adjusted EBITDA to net income and adjusted net income to net
income is shown below:

    
                                                  For the three months ended
                                                            March 31,
                                                        2009          2008
                                                     ---------      ---------
    (unaudited, in thousands)

    Adjusted EBITDA                                   $16,331         $6,333

    Amortization of Intangible Assets                  (2,825)          (396)

    Depreciation of Property & Equipment               (1,976)        (1,164)

    Stock-Based Compensation                             (613)          (779)

    Other Income (expense)                                325             (6)

    Interest (Expense) Income, Net                       (710)         1,019

    Income Tax Expense                                 (2,850)        (1,649)
                                                     ---------      ---------

    Net Income                                         $7,682         $3,357
                                                     ---------      ---------
                                                     ---------      ---------



    Non-GAAP Adjusted Earnings Per Share                 For the 3 months
                                                        ended Mar 31, 2009
                                                        ------------------
    (unaudited)
    (in thousands, except per share data)

    Net Income                                                $7,682

    Amortization of NMHC Intangibles (Net of Taxes)            1,700
                                                               -----

    Adjusted Net-Income                                       $9,382
                                                              ------
                                                              ------

    Adjusted EPS (diluted)                                     $0.38

    (2) On April 30, 2008, SXC closed the acquisition of NMHC. As a result,
    SXC has introduced some new segmentation and presentation of its
    financial results. Revenue is now segmented into two groups: Pharmacy
    Benefits Management ("PBM") which includes informedRx as well as
    mail-order and specialty pharmacies, and Health Care Information
    Technology ("HCIT"). SXC records PBM revenue from NMHC exclusively on a
    gross basis which equates to the prescription price paid by consumers
    plus an administrative fee. The HCIT business records revenue only on
    the basis of the administrative fee; drug ingredient cost is not included
    in revenues or cost of claims.
    

    The net effect is that SXC's year-over-year revenues have increased
dramatically while gross profit margin and adjusted EBITDA have increased in
absolute dollar terms, but have declined as a percentage of total sales. These
changes do not affect profitability on an absolute dollar or per share basis.

    About SXC Health Solutions Corp.

    SXC Health Solutions Corp. is a leading provider of pharmacy benefit
management (PBM) services and Healthcare Information Technology (HCIT)
solutions to the healthcare benefits management industry. The Company's
product offerings and solutions combine a wide range of advanced PBM services,
software applications, application service provider (ASP) processing services,
and professional services. SXC serves many of the largest organizations in the
pharmaceutical supply chain, such as health plans; employers; Federal,
provincial, and state governments; pharmacy benefit managers; and retail
pharmacy chains. SXC is headquartered in Lisle, Illinois with multiple
locations in North America.
    For more information, please visit www.sxc.com.

    Forward-Looking Statements

    Certain statements included herein, including those that express
management's expectations or estimates of our future performance, constitute
"forward-looking statements" within the meaning of applicable securities laws.
Forward-looking statements are necessarily based upon a number of estimates
and assumptions that, while considered reasonable by management at this time,
are inherently subject to significant business, economic and competitive
uncertainties and contingencies. We caution that such forward-looking
statements involve known and unknown risks, uncertainties and other risks that
may cause our actual financial results, performance, or achievements to be
materially different from our estimated future results, performance or
achievements expressed or implied by those forward-looking statements.
Numerous factors could cause actual results to differ materially from those in
the forward-looking statements, including without limitation, our ability to
achieve increased market acceptance for our product offerings and penetrate
new markets; consolidation in the healthcare industry; the existence of
undetected errors or similar problems in our software products; our ability to
identify and complete acquisitions, manage our growth and integrate
acquisitions; our ability to compete successfully; potential liability for the
use of incorrect or incomplete data; the length of the sales cycle for our
healthcare software solutions; interruption of our operations due to outside
sources; our dependence on key customers; maintaining our intellectual
property rights and litigation involving intellectual property rights; our
ability to obtain, use or successfully integrate third-party licensed
technology; compliance with existing laws, regulations and industry
initiatives and future change in laws or regulations in the healthcare
industry; breach of our security by third parties; our dependence on the
expertise of our key personnel; our access to sufficient capital to fund our
future requirements; and potential write-offs of goodwill or other intangible
assets. This list is not exhaustive of the factors that may affect any of our
forward-looking statements. Other factors that should be considered are
discussed from time to time in SXC's filings with the U.S. Securities and
Exchange Commission, including the risks and uncertainties discussed under
that captions "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our 2008 Annual Report on
Form 10-K and subsequent Form 10-Qs, which are available at www.sec.gov.
Investors are cautioned not to put undue reliance on forward-looking
statements. All subsequent written and oral forward-looking statements
attributable to SXC or persons acting on our behalf are expressly qualified in
their entirety by this notice. We disclaim any intent or obligation to update
publicly these forward-looking statements, whether as a result of new
information, future events or otherwise.
    Certain of the assumptions made in preparing forward-looking information
and management's expectations include: maintenance of our existing customers
and contracts, our ability to market our products successfully to anticipated
customers, the impact of increasing competition, the growth of prescription
drug utilization rates at predicted levels, the retention of our key
personnel, our customers continuing to process transactions at historical
levels, that our systems will not be interrupted for any significant period of
time, that our products will perform free of major errors, our ability to
obtain financing on acceptable terms and that there will be no significant
changes in the regulation of our business.

    
                         SXC HEALTH SOLUTIONS CORP.
                         Consolidated Balance Sheets
              (in thousands of U.S. dollars, except share data)

                                                      March 31   December 31
                                                   --------------------------
                                                        2009         2008
                                                   ------------- ------------
                                                    (unaudited)
    ASSETS

    Current assets
      Cash and cash equivalents                     $   79,970    $   67,715
      Restricted cash                                   13,628    $   12,498
      Accounts receivable, net of allowance
       for doubtful accounts of $3,560
       (December 31, 2008 - $3,570)                     84,379        80,531
      Rebates receivable                                23,887        29,586
      Unbilled revenue                                       1            73
      Prepaid expenses and other                         4,803         4,382
      Inventory                                          6,032         6,689
      Income tax recoverable                             2,933         1,459
      Deferred income taxes                              8,546        10,219
                                                   ------------- ------------
        Total current assets                           224,179       213,152

    Property and equipment, net of accumulated
     depreciation of $20,873
     (December 31, 2008 - $19,449)                      20,117        20,756
    Goodwill                                           143,594       143,751
    Other intangible assets, net of accumulated
     amortization of $16,924
     (December 31, 2008 - $14,099)                      43,581        46,406
    Deferred financing charges                           1,369         1,481
    Deferred income taxes                                1,461         1,323
    Other assets                                         1,397         1,474
                                                   ------------- ------------
    Total assets                                    $  435,698    $  428,343
                                                   ------------- ------------
                                                   ------------- ------------



    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Accounts payable                              $    7,104    $    8,302
      Customer deposits                                 14,049        11,875
      Salaries and wages payable                        11,779        15,681
      Accrued liabilities                               24,751        32,039
      Pharmacy benefit management rebates payable       38,777        36,326
      Pharmacy benefit claim payments payable           51,891        51,406
      Deferred revenue                                  11,225         7,978
      Current portion of long-term debt                  4,800         3,720
                                                   ------------- ------------
        Total current liabilities                      164,376       167,327

    Long-term debt, less current installments           42,720        43,920
    Deferred income taxes                               14,539        15,060
    Deferred lease inducements                           3,105         3,217
    Deferred rent                                        1,528         1,461
    Other liabilities                                    3,035         3,195
                                                   ------------- ------------
      Total liabilities                                229,303       234,180
                                                   ------------- ------------

    Shareholders' equity
      Common stock: no par value, unlimited
       shares authorized; 24,476,544 shares
       issued and outstanding at March 31, 2009
       (December 31, 2008 - 24,103,032 shares)         150,495       146,988
      Additional paid-in capital                        12,868        11,854
      Retained earnings                                 43,433        35,751
      Accumulated other comprehensive income              (401)         (430)
                                                   ------------- ------------
        Total shareholders' equity                     206,395       194,163

                                                   ------------- ------------
    Total liabilities and shareholders' equity      $  435,698    $  428,343
                                                   ------------- ------------
                                                   ------------- ------------



                         SXC HEALTH SOLUTIONS CORP.
                    Consolidated Statements of Operations
              (in thousands of U.S. dollars, except share data)

                                                        Three months ended
                                                             March 31,
                                                        2009          2008
                                                   ------------- ------------
                                                           (unaudited)

    Revenue:
      PBM                                           $  267,780    $        -
      HCIT:
        Transaction processing                          13,727        14,648
        Maintenance                                      4,474         4,210
        Professional services                            3,642         3,791
        System sales                                     1,337         1,668
                                                   ------------- ------------
    Total revenue                                      290,960        24,317

    Cost of revenue:
      PBM                                              238,972             -
      HCIT                                              12,804        10,837
                                                   ------------- ------------
    Total cost of revenue                              251,776        10,837
                                                   ------------- ------------
    Gross profit                                        39,184        13,480

    Expenses:
      Product development costs                          3,163         2,458
      Selling, general and administrative               20,797         5,871
      Depreciation of property and equipment             1,482           762
      Amortization of intangible assets                  2,825           396
                                                   ------------- ------------
                                                        28,267         9,487

                                                   ------------- ------------
    Operating income                                    10,917         3,993

    Interest income                                       (246)       (1,053)
    Interest expense                                       956            34
                                                   ------------- ------------
      Net interest expense (income)                        710        (1,019)

    Other (income) expense                                (325)            6
                                                   ------------- ------------
    Income before income taxes                          10,532         5,006

    Income tax expense:
      Current                                            2,201         1,382
      Deferred                                             649           267
                                                   ------------- ------------
                                                         2,850         1,649

                                                   ------------- ------------
    Net income                                      $    7,682    $    3,357
                                                   ------------- ------------
                                                   ------------- ------------

    Earnings per share:
      Basic                                         $     0.32    $     0.16
      Diluted                                       $     0.31    $     0.16

    Weighted average number of shares used in computing earnings per share:

      Basic                                         24,324,911    20,995,688
      Diluted                                       24,923,208    21,489,156



                         SXC HEALTH SOLUTIONS CORP.
                    Consolidated Statements of Cash Flows
                       (in thousands of U.S. dollars)

                                                        Three months ended
                                                             March 31,
                                                        2009          2008
                                                   ------------- ------------
                                                           (unaudited)

    Cash flows from operating activities:
      Net income                                    $    7,682    $    3,357
      Adjustments to reconcile net income to
       net cash provided by operating activities:
        Stock-based compensation                           613           779
        Depreciation of property and equipment           1,976         1,164
        Amortization of intangible assets                2,825           396
        Deferred lease inducements and rent                (45)          (64)
        Deferred income taxes                              649           302
        Tax benefit on option exercises                 (1,562)          (22)
        (Gain) loss on foreign exchange                    (94)           14
      Changes in operating assets and liabilities,
       net of effects from acquisition:
        Accounts receivable                             (3,863)        1,210
        Rebates receivable                               5,699             -
        Restricted cash                                 (1,130)            -
        Unbilled revenue                                    72           178
        Prepaid expenses                                  (421)         (467)
        Inventory                                          657           (15)
        Income tax recoverable                              88         1,018
        Accounts payable                                (1,198)         (594)
        Accrued liabilities                             (8,617)          358
        Pharmacy benefit claim payments payable            485          (238)
        Pharmacy benefit management rebates payable      2,541         1,412
        Deferred revenue                                 3,247          (755)
        Customer deposits                                2,174             -
        Other                                               64             -
                                                   ------------- ------------
          Net cash provided by operating
           activities                                   11,842         8,033

    Cash flows from investing activities:
      Purchases of property and equipment               (3,289)       (2,603)
      Acquisitions, net of cash acquired                  (180)            -
                                                   ------------- ------------
        Net cash used in investing activities           (3,469)       (2,603)

    Cash flows from financing activities:
      Repayment of long-term debt                         (120)            -
      Proceeds from exercise of options                  2,346           195
      Tax benefit on option exercises                    1,562            22
                                                   ------------- ------------
        Net cash provided by financing activities        3,788           217

    Effect of foreign exchange on cash balances             94           (14)

                                                   ------------- ------------
    Increase in cash and cash equivalents               12,255         5,633

    Cash and cash equivalents, beginning
     of period                                          67,715        90,929

                                                   ------------- ------------
    Cash and cash equivalents, end of period       $    79,970    $   96,562
                                                   ------------- ------------
                                                   ------------- ------------
    

    %SEDAR: 00001439E




For further information:

For further information: Jeff Park, Chief Financial Officer, SXC Health
Solutions, Inc., Tel: (630) 577-3100, investors@sxc.com; Dave Mason, Investor
Relations - Canada, The Equicom Group Inc., (416) 815-0700 ext. 237,
dmason@equicomgroup.com; Susan Noonan, Investor Relations - U.S., The SAN
Group, LLC, (212) 966-3650, susan@sanoonan.com

Organization Profile

Catamaran

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890