SXC Health Solutions falls, cuts jobs and lowers 2007 guidance

Alex Alexandrov | Oct 01, 2007 3:18pm EDT | Comment

Rating: Unrated [rate it]

SXC Health Solutions Corp. (Nasdaq: SXCI), a provider of health-care information technology solutions, announced before the opening that it has cut 7% of its workforce in order to generate about $3 million in annual savings and is reducing its 2007 revenue guidance.

The staff reductions were focused on the provider and administrative segments of the business and mostly took place at the company’s headquarters in Leslie, Ill.

“Having completed a thorough review of the business, we believe this is the right time to reduce costs in certain areas of our operations in order to focus our resources on our [pharmacy benefits management] services and transaction processing business segments, the most rapidly growing segments,” said chairman and CEO Gordon Glenn in a statement.

SXC, which has a total of six locations in the United States and Canada, will incur one-time severance costs of approximately $0.8 million, which will be reflected in its third quarter fiscal 2007 financial results. The company said that it expects to hire new personnel during the fourth fiscal quarter of 2007 and into 2008 to support the areas of the business with the most promising growth opportunities.

Looking ahead, the SXC said that continued delays in the signing of new contracts and a slowdown in retail pharmacy sales have forced it to reduce its 2007 revenue guidance to between $92 million and $93 million, compared with a previous guidance calling for revenue in the range between $95 million to $97 million.

Similarly, the company is lowering its earnings projections to between $0.51 per share and $0.55 per share, down from a previous forecast of a net income between $0.63 per share and $0.68 per share.

A poll of analysts conducted by Thomson Financial shows that 13 analysts were calling for revenues of $95.99 million, and 14 analysts were projecting earnings of $0.67 per share.

At closing, SXC Health Solutions (SXCI) shares were down $2.87, or 18%, to $13.15.