Insurance For Less

LISLE, IL, Nov. 3, 2011 /CHICAGOPRESSRELEASE.COM/ – SXC Health Solutions Corp. (“SXC” or the
“Company”) (NASDAQ: SXCI, TSX: SXC), a leading provider of technology
and pharmacy benefit management (PBM) services, announces its financial
results for the three-month and nine-month periods ended September 30,
2011.

Q3 2011 Highlights

• Revenue grew 163% on a year over year basis to $1.3 billion, compared to
  $489.9 million in Q3 2010
• Gross profit increased 56% to $82.3 million, compared to $52.9 million
  in Q3 2010
• Net income increased 56% to $25.3 million, or $0.40 per share
  (fully-diluted), compared to $16.2 million, or $0.26 per share
  (fully-diluted), in Q3 2010
• Adjusted EBITDA¹ increased 58% to $48.0 million, compared to $30.4
  million in Q3 2010
• Non-GAAP adjusted earnings per share¹ (fully-diluted), which excludes
  all transaction-related amortization, increased 57% to $0.44, compared
  to $0.28 in Q3 2010
• Adjusted prescription claim volume¹ for the PBM segment was 23.3
  million, compared to 11.9 million in Q3 2010
• Transaction processing volume for the HCIT segment was 100.1 million in
  the quarter
• Generic dispense rate increased to 78% compared to 76% in Q3 2010
• Successfully converted two HCIT clients to PBM services in the quarter
• Launched the industry’s first automated, enhanced Coordination of
  Benefits service in the State Fee-For-Service Medicaid market
• Completed the acquisitions of PTRX, Inc., a full-service pharmacy
  benefit manager, and SaveDirectRx, Inc., its exclusive mail-order
  pharmacy provider, both previous clients of SXC, subsequent to the end
  of the period
• Signed a five-year HCIT contract renewal with Catalyst Health Solutions,
  Inc. (NASDAQ: CHSI), subsequent to the end of the period
• Ranked 1^st in FORTUNE Magazine’s 2011 “100 Fastest-Growing Companies” list

“Q3 was another strong quarter for SXC. Cash flow from operations was
strong and we achieved record EBITDA growth. We just posted our best
sales year in SXC’s history – more than $1.4 billion of new sales,
adding over 1 million new lives under management. The Company is very
well positioned moving forward,” said Mark Thierer, Chairman and CEO of
SXC.

Subsequent to the end of the quarter, Cigna announced the acquisition of
HealthSpring, SXC’s largest customer based on revenues.  HealthSpring
is in the first year of a five-year contract, which has a base three
year term with two one-year extensions.  SXC has met the performance
obligations under the contract and expects to service HealthSpring for
the duration of the agreement.

Financial Review
Revenue and Gross Profit segmented by PBM and HCIT:
SXC evaluates segment performance based on revenue and gross profit.
Reconciliations of the Company’s business segments to the consolidated
financial statements for the three and nine months ended September 30,
2011 and 2010 are as follows:

Three months ended September 30, (unaudited, in thousands)

Nine months ended September 30,  (unaudited, in thousands)

Revenue
Q3 2011 PBM revenue was $1.3 billion, compared to $463.0 million in Q3
2010. PBM revenue for the year-to-date (YTD) period was $3.5 billion,
compared to $1.3 billion in the prior period. The increase in revenue
on a year over year basis is primarily due to new customer starts,
including HealthSpring on January 1, 2011 and Optima on April 1, 2011,
as well as revenues generated from the acquisition of MedfusionRx, LLC (“MedfusionRx”).

Q3 2011 HCIT revenue was $30.9 million, compared to $26.9 million in Q3
2010.  For the YTD period, HCIT revenue was $85.8 million, compared to
$79.7 million in the prior period. The increase was primarily due to an
increase in revenues earned from professional services and transaction
processing as a result of increased utilization of these services by
HCIT clients.

Gross Profit
Consolidated gross profit for Q3 2011 was $82.3 million, an increase of
$29.5 million compared to $52.9 million in Q3 2010.  For the YTD
period, consolidated gross profit was $220.1 million, an increase of
$63.3 million compared to $156.8 million in the prior period.  The
increase is primarily due to incremental revenues from new customer
starts and the MedfusionRx acquisition. Consolidated gross profit as a percentage of revenue was
6.4% in Q3 2011, compared to 10.8% in Q3 2010 and 6.1% compared to
11.0% for the YTD 2011 and 2010 periods, respectively.  Gross profit as
a percentage of revenue has decreased due to new business wins carrying
a lower gross profit percentage than the historical rates for the PBM
segment.

PBM gross profit percentage increased in Q3 2011 compared to Q2 2011 due
to higher utilization of generics and specialty medications.  The gross
profit per adjusted prescription claim increased to $2.93 compared to
$2.65 in the subsequent quarter.  Additionally, gross profit increased
due to the recognition of $1.0 million in non-recurring revenue within
the HCIT segment.

Selling, General and Administration (“SG&A”) Costs
SG&A costs for Q3 2011 were $33.8 million, compared to $21.6 million in
Q3 2010. SG&A costs for the YTD period were $93.4 million, compared to
$64.4 million in the prior period. The change in SG&A costs compared to
prior periods was due to increased resources to support the Company’s
organic growth, increased stock-based compensation cost, and additional
operating costs related to the MedfusionRx and MedMetrics acquisitions.

Adjusted EBITDA¹
Q3 2011 adjusted EBITDA increased 58% to $48.0 million, compared to
$30.4 million in Q3 2010. Adjusted EBITDA for the YTD period was $124.6
million, compared to $89.6 million in the prior period. The growth in
adjusted EBITDA was due primarily to new contract wins, HCIT-to-PBM
conversions and additional business generated from the acquisitions of
MedfusionRx and MedMetrics.

Net Income
The Company reported Q3 2011 net income of $25.3 million, or $0.40 per
share (fully-diluted), compared to $16.2 million, or $0.26 per share
(fully-diluted), in Q3 2010. Net income for the YTD period was $65.1
million, or $1.03 per share (fully-diluted), compared to net income in
the prior period of $48.1 million, or $0.77 per share (fully-diluted).

Non-GAAP Adjusted EPS¹ excludes amortization of intangible assets, net of tax.  The Company
reported Q3 2011 adjusted EPS of $0.44 per share (fully-diluted),
compared to $0.28 per share (fully-diluted), in Q3 2010.  Adjusted EPS
for the YTD period was $1.15 per share (fully-diluted), compared to the
prior period of $0.83 per share (fully-diluted).

Cash from Operations
For Q3 2011, the Company generated $85.3 million of cash from
operations, compared to $26.1 million generated in cash from operations
during Q3 2010. For the YTD period, SXC generated cash from operations
of $84.7 million, compared to $62.9 million in the prior period. The
increased transaction volume in the PBM segment, propelled by new
customer starts during 2011, as well as the additional business
generated as a result of the Company’s recent acquisitions, were the
primary drivers of increased operating cash flow during the Q3 and YTD
periods.

At September 30, 2011 and December 31, 2010, SXC had cash and cash
equivalents totalling $405.1 million and $321.3 million, respectively. 
The Company believes that its cash on hand, together with cash
generated from operating activities, will be sufficient to support
planned operations for the foreseeable future.  Subsequent to the end
of the quarter, the Company utilized $77 million of cash on hand to
close the acquisitions of PTRX and SaveDirectRx.

2011 Full Year Financial Guidance
With today’s announcement, SXC is revising certain of its 2011 full year
financial targets:

• Revenue of $4.7 to $4.8 billion, versus prior estimate of $4.6 to $4.7
  billion.  The mid-point of the range implies an increase of $100
  million versus the prior estimate’s mid-point.
• Adjusted EBITDA¹ of $172 to $173 million, versus prior estimate of $168 to $172 million.
  The mid-point of the range implies an increase of $2.5 million versus
  the prior estimate’s mid-point.
• GAAP EPS (fully-diluted) of $1.46 to $1.47, versus prior estimate of
  $1.43 to $1.47. The mid-point of the range implies an increase of
  $0.015 versus the prior estimate’s mid-point.
• Adjusted EPS¹ (fully-diluted) of $1.62 to $1.63 versus prior estimate of $1.58 to
  $1.62 (excluding all transaction-related amortization).  The mid-point of the range implies an increase of $0.025 versus the
  prior estimate’s mid-point.

Notice of Conference Call
SXC will host a conference call on Thursday, November 3, 2011, at 8:30
a.m. ET to discuss its financial results.  Mark Thierer, Chairman and
CEO, and Jeff Park, EVP and CFO, will co-chair the call. All interested
parties can join the call by dialing 1-888-231-8191 or 647-427-7450.
Please dial in 15 minutes prior to the call to secure a line. The
conference call will be archived for replay until Thursday, November
10, 2011 at midnight. To access the archived conference call, please
dial 1-855-859-2056 or 416-849-0833 and enter the reservation code
20404937.

A live audio webcast of the conference call will be available at 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.

¹Non-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 EPS and adjusted EBITDA, which
are non-GAAP financial measures. SXC’s management believes that these
two measures provide useful supplemental information regarding the
performance of SXC’s business operations.

Adjusted EPS adds back the impact of all amortization of intangible
asset expenses, net of tax. Amortization of intangible asset expense
arises from the acquisition of intangible assets in connection with the
Company’s business acquisitions. SXC excludes acquisition-related
amortization expense from non-GAAP adjusted EPS because it believes (i)
the amount of such expenses in any specific period may not directly
correlate to the underlying performance of SXC’s 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 contributes to revenue in the periods presented as
well as future periods and should also note that such expenses will
recur in future periods.

Adjusted EBITDA is a non-GAAP measure that management believes is a
useful supplemental measure of operating performance prior to interest
income, interest expense and other expense, income taxes, depreciation,
amortization and stock-based compensation expenses. Management believes
it is useful to exclude these expenses as they 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 a non-cash expense.

The 2011 full year guidance of adjusted EBITDA was computed using the
Company’s estimated 2011 earnings before interest, taxes, depreciation
and amortization as well as estimated stock-based compensation expense
of approximately $9 million. Adjusted EPS was computed by taking the
Company’s GAAP EPS (fully-diluted) guidance and adding back the
expected impact of all acquisition-related amortization expense
totaling approximately $17 million less an estimated 34% tax rate.

Adjusted prescription claim 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 EPS, adjusted EBITDA and adjusted
prescription claim 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 reconciliations of
adjusted EPS and adjusted EBITDA to their most directly comparable GAAP
measure.

Adjusted EPS 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, may
not be comparable to similarly titled measures used by other companies.
Reconciliations of adjusted EBITDA to net income and GAAP EPS
(fully-diluted) to adjusted EPS (fully-diluted) are shown below:

About SXC Health Solutions Corp.
SXC Health Solutions Corp. is a leading provider of pharmacy benefits
management (PBM) services and Health Care Information Technology (HCIT)
solutions to the healthcare benefits management industry. The Company’s
product offerings and solutions combine a wide range of PBM services
and 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
health plans, employers, federal, provincial, and, state and local
governments, pharmacy benefit managers, retail pharmacy chains and
other healthcare intermediaries. SXC is headquartered in Lisle,
Illinois with multiple locations in the US and Canada.

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 the captions “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in our 2010 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.

SOURCE SXC Health Solutions Corp.

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