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Systems Xcellence Reports Year-to-Date RevenueGrowth of 47.8%

MILTON, Ontario (January 29, 1999) – Systems Xcellence is pleased to announce an increase in third quarter revenues of 35.8% over the same quarter in the previous year. Revenues for the third quarter of fiscal 1999 were $4,630,204, up considerably from $3,409,378 in the same period the previous year. The revenues for the nine months ended November 30, 1998 increased to $12,444,108, compared to $8,418,992 for the same period last year, representing a 47.8% increase.

Three Months

Three Months

Nine Months

Nine Months

ended

ended

ended

ended

November 30, 1998

November 30, 1997

November 30, 1998

November 30, 1997

Software Licenses

$ 2,873,059

$ 2,047,529

$ 7,096,690

$ 5,233,129

Maintenance

$ 448,618

$ 521,739

$ 1,407,589

$ 1,532,323

Services

$ 1,308,527

$ 840,110

$ 3,939,829

$ 1,653,540

Total

$ 4,630,204

$ 3,409,378

$ 12,444,108

$ 8,418,992

The Company’s revenue breaks down into the following components:

Net income from continuing operations for the third quarter of fiscal 1999 was $18,985 or $0.00 per share, compared to $72,144 or $0.00 per share for the third quarter of fiscal 1998. Net loss from continuing operations for the nine-month period ended November 30, 1998 was $1,025,978 or $0.05 per share. This was an improvement over the same nine-month period last year, where a net loss of $1,409,490 or $0.09 per share was reported.

The net income for the three months ended November 30, 1998 was $18,985 or $0.00 per share, down from $110,580 or $0.01 per share for the same quarter last year. A net loss of $1,025,978 or $0.05 per share was reported for the nine months ending November 30, 1998, as compared to a net loss of $971,054 or $0.06 for the same nine-month period last year.

The Company continues to show an improvement in gross profit margins. Our third quarter gross profit margins were 74.6% compared to 67.6% for the same period last year. Over the nine-month period ending November 30, 1998, the gross profit margins were 71.6% compared to 67.8% for the same period last year.

Operating expenses for the third quarter increased to $4,537,728 from $3,320,463 for the same quarter last year. For the nine-month period ended November 30, 1998 the total operating expenses were $12,553,054, up from $9,851,443 for the same period last year.

Systems Xcellence has, and will continue to invest in product development, sales and marketing, and the expansion of its delivery capabilities. It is important to note that management has taken a conservative stance with respect to the accounting of software development costs, in that those costs are expensed as incurred.

The Company is pleased with its third quarter results. The increase in revenues and gross profit margins further demonstrate our ongoing commitment to execute our growth strategy effectively and according to plan.