Acquisition-Related Revenue Boosts SXC's Earnings

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On March 5, 2009, SXC Health Solutions ( SXCI) reported a 31.1% year-over-year increase in its Q4 FY08 earnings, driven by revenue from the acquisition of National Medical Health Card Systems (NMHC). Net income rose to $4.95 million or $0.20 per share from $3.78 million or $0.18 per share in Q4 FY07. Moreover, non-GAAP earnings were $0.28 per share, which beat the most recent consensus estimate of $0.13 per share.

SXCI's revenue surged multi-fold to $292.77 million from $23.55 million. Pharmacy Benefit Manager revenue was $269.80 million, reflecting the addition of 8 months of NMHC's business. Health Care Information Technology (HCIT) revenue inched down 2.5% to $22.96 million. Recurring revenue accounted for 81.3% of HCIT revenue, compared to 79.7% in Q4 FY07. Within the segment, revenue from transaction processing rose 3.1% to $14.61 million, while maintenance revenue dipped 2.1% to $4.06 million. Professional services sales plunged 30.8% to $2.79 million, and system sales increased 25.0% to $1.51 million.

SXC Health recently bought privately held formulary agent Zynchros. SXCI won a three-year contract to provide its resident care management services to PharMerica Corp. Additionally, the company's informedRx PBM unit entered into a three-year contract to offer services to the 110,000 member UFCW & Employers Benefit Trust. This contract is expected to generate $80.00 million revenue annually. PBM division also signed a 5-year agreement with the Health Plan of San Mateo, valued at $50.00 million per year.

During FY08, net profit spiked 15.0% to $15.11 million or $0.65 per share from $13.15 million or $0.61 per share in FY07. Annual revenue soared more than nine-fold to $862.94 million from $93.17 million.

Looking ahead to FY09, SXCI expects revenue to range between $1.20 billion and $1.30 billion and EPS of $0.77 to $0.85. Non-GAAP EPS is anticipated to range between $0.99 per share and $1.08 per share.

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