Three Months Ended
-------------------------------
(000's) 03/28/2009 03/29/2008 % Change
---------- ---------- ---------
Revenue:
Managed Services $ 11,180 $ 10,771 4%
Consulting Services 7,646 10,581 -28%
========== ========== =========
Services Revenue 18,826 21,352 -12%
Product 12,038 1,778 577%
---------- ---------- ---------
Net Revenue 30,864 23,130 33%
Reimbursed expenses 944 738
---------- ---------- ---------
Total Revenue $ 31,808 $ 23,868 33%
---------- ---------- ---------
Q1 2009 Highlights
First Quarter 2009 highlights include:
-- $30.9 million in total revenues before reimbursed expenses
-- 29% sequential increase in total revenues before reimbursed expenses
-- 15% sequential increase in ICS Consulting revenues
-- Record $15.2 million of Services revenue and $27.3 million of total
revenues before reimbursed expenses from our primary Service Lines (ICS and
the Behavioral Analytics™ Service)
-- Record $86.9 million Managed Services Backlog(2)
-- $116 thousand of Adjusted Earnings
Second Quarter 2009 Guidance
eLoyalty provides guidance for Services revenue only. Product revenue from
the sale of third-party software and hardware can fluctuate substantially
between periods and is not a primary focus of the Company's business.
Based on these factors, eLoyalty currently expects its Second Quarter 2009
Services revenues will increase by 9% sequentially to approximately $20.5
million.
Conference Call Information
eLoyalty management will host a conference call at 5:00 p.m. ET on
Wednesday, May 6, 2009. A webcast of the conference call and slide
presentation will be available live via the Internet at the Investor
Relations section of eLoyalty's web site at
http://www.eloyalty.com/investor/ where this press release, as well as
other financial information that will be discussed on that call, is also
available. For those who cannot access the live broadcast, or the
continued availability on eLoyalty's website, a replay of the conference
call will also be available beginning approximately two hours after the
live call is completed until May 20, 2009 by dialing (800) 642-1687 or, for
international callers, (706) 645-9291 and entering conference ID number
94216458.
About eLoyalty
eLoyalty helps its customers achieve breakthrough results with
revolutionary analytics and advanced technologies that drive continuous
business improvement. With a long track record of delivering proven
solutions for many of the Fortune 1000, eLoyalty's offerings include the
Behavioral Analytics™ Service, Integrated Contact Solutions and
Consulting Services, each of which enables focused business transformation.
Safe Harbor Statement
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, including
statements regarding anticipated financial results and other matters that
are not strictly historical in nature. These forward-looking statements
are based on current management expectations, forecasts and assumptions,
and are subject to risks and uncertainties that could cause actual results
to differ materially from those expressed or implied by the forward-looking
statements. The risks, uncertainties and other factors that might cause
such a difference include those described under "Forward-Looking
Statements" and "Risk Factors" in eLoyalty's Form 10-K, Form 10-Q and other
filings with the U.S. Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on forward-looking statements. They
reflect opinions, assumptions and estimates only as of the date they are
made, and eLoyalty Corporation undertakes no obligation to publicly update
or revise any of these forward-looking statements, whether as a result of
new information, future events or circumstances or otherwise.
(1) eLoyalty presents Adjusted Earnings, a non-GAAP measure that represents
cash earnings performance, excluding the impact of non-cash expenses and
expense reduction activities, because management believes that Adjusted
Earnings provide investors with a better understanding of the results of
eLoyalty's operations. Management believes that Adjusted Earnings reflect
eLoyalty's resources available to invest in its business and strengthen its
balance sheet. In addition, expense reduction activities can vary
significantly between periods on the basis of factors that management does
not believe reflect current-period operating performance. Although similar
adjustments for expense reduction activities may be recorded in future
periods, the size and frequency of these adjustments cannot be predicted.
The Adjusted Earnings measure should be considered in addition to, not as a
substitute for or superior to, operating income, cash flows or other
measures of financial performance prepared in accordance with GAAP.
(2) eLoyalty uses the term "backlog" to reflect the estimated future amount
of Managed services revenue related to its Managed services contracts. The
value of these contracts is based on anticipated usage volumes over the
anticipated term of the agreement. The anticipated term of the agreement
is based on the contractually agreed fixed term of the contract, plus
agreed upon, but optional extension periods. Anticipated volumes may be
greater or lesser than anticipated. In addition, these contracts typically
are cancellable without cause based on the customer making a substantial
early termination payment or forfeiture of prepaid contract amounts. The
reported backlog is expected to be recognized as follows: $30.2m in 2009;
$27.1m in 2010; $15.2m in 2011; $14.4m in 2012 and thereafter.
eLoyalty Corporation
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share data)
For the
Three Months Ended
----------------------
March 28, March 29,
2009 2008
---------- ----------
Revenue:
Services $ 18,826 $ 21,352
Product 12,038 1,778
---------- ----------
Revenue before reimbursed expenses
(net revenue) 30,864 23,130
Reimbursed expenses 944 738
---------- ----------
Total revenue 31,808 23,868
Operating expenses:
Cost of services 12,729 13,349
Cost of product 10,401 1,401
---------- ----------
Cost of revenue before reimbursed expenses 23,130 14,750
Reimbursed expenses 944 738
---------- ----------
Total cost of revenue, exclusive of depreciation and
amortization shown below: 24,074 15,488
Selling, general and administrative 9,702 11,443
Severance and related costs 644 169
Depreciation and amortization 997 963
---------- ----------
Total operating expenses 35,417 28,063
---------- ----------
Operating loss (3,609) (4,195)
Interest and other (expense) income, net (179) 78
---------- ----------
Loss before income taxes (3,788) (4,117)
Income tax provision (18) (33)
---------- ----------
Net loss (3,806) (4,150)
Dividends related to Series B convertible preferred
stock (323) (324)
---------- ----------
Net loss available to common stockholders $ (4,129) $ (4,474)
========== ==========
Basic net loss per common share $ (0.32) $ (0.49)
========== ==========
Diluted net loss per common share $ (0.32) $ (0.49)
========== ==========
Shares used to calculate basic net loss per share 13,086 9,062
========== ==========
Shares used to calculate diluted net loss per share 13,086 9,062
========== ==========
Stock-based compensation, primarily restricted stock, is included in
individual line items above:
Cost of services $ 336 $ 360
Selling, general and administrative 1,748 3,422
Severance and related costs 248 45
eLoyalty Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share and per share data)
March 28, December 27,
2009 2008
---------- ----------
ASSETS:
Current Assets:
Cash and cash equivalents $ 18,637 $ 27,064
Restricted cash 3,459 3,655
Receivables, (net of allowances of $136 and $107) 21,669 10,005
Prepaid expenses 9,191 7,783
Other current assets 3,550 1,251
---------- ----------
Total current assets 56,506 49,758
Equipment and leasehold improvements, net 6,663 6,424
Goodwill 2,643 2,643
Intangibles, net 576 611
Other long-term assets 7,605 4,787
---------- ----------
Total assets $ 73,993 $ 64,223
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 9,959 $ 3,904
Accrued compensation and related costs 4,841 4,994
Unearned revenue 15,130 11,525
Other current liabilities 4,982 4,647
---------- ----------
Total current liabilities 34,912 25,070
Long-term unearned revenue 7,695 5,274
Other long-term liabilities 2,702 2,572
---------- ----------
Total liabilities 45,309 32,916
---------- ----------
Redeemable Series B convertible preferred stock,
$0.01 par value; 5,000,000 shares authorized and
designated; 3,619,378 and 3,619,537 shares issued
and outstanding with a liquidation preference of
$19,428 and $19,107 at March 28, 2009 and
December 27, 2008, respectively 18,459 18,460
Stockholders' Equity:
Preferred stock, $0.01 par value; 35,000,000
shares authorized; none issued and outstanding - -
Common stock, $0.01 par value; 50,000,000 shares
authorized; 14,758,972 and 14,152,107 shares
issued at March 28, 2009 and December 27, 2008,
respectively; and 14,161,821 and 13,661,746
outstanding at March 28, 2009 and December 27, 2008,
respectively 148 142
Additional paid-in capital 200,535 198,853
Accumulated deficit (184,007) (180,201)
Treasury stock, at cost, 597,151 and 490,956 shares
at March 28, 2009 and December 27, 2008,
respectively (2,890) (2,457)
Accumulated other comprehensive loss (3,561) (3,490)
---------- ----------
Total stockholders' equity 10,225 12,847
---------- ----------
Total liabilities and stockholders' equity $ 73,993 $ 64,223
========== ==========
eLoyalty Corporation
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
For the
Three Months Ended
----------------------
March 28, March 29,
2009 2008
---------- ----------
Cash Flows from Operating Activities:
Net loss $ (3,806) $ (4,150)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 997 963
Stock-based compensation 2,084 3,782
Provision for uncollectible amounts 47 14
Severance and related costs 248 45
Changes in assets and liabilities:
Receivables (11,722) (1,483)
Prepaid expenses (4,605) (1,681)
Other assets (2,268) (511)
Accounts payable 6,058 1,563
Accrued compensation and related costs (147) (1,079)
Unearned revenue 6,030 760
Other liabilities (185) (104)
---------- ----------
Net cash used in operating activities (7,269) (1,881)
---------- ----------
Cash Flows from Investing Activities:
Capital expenditures and other (666) (337)
---------- ----------
Net cash used in investing activities (666) (337)
---------- ----------
Cash Flows from Financing Activities:
Acquisition of treasury stock (433) (1,229)
Decrease in restricted cash 196 -
Payment of Series B convertible preferred stock
dividends (2) (669)
Proceeds from employee stock purchase plan 25 126
Principal payments under capital lease
obligations (214) (121)
---------- ----------
Net cash used in financing activities (428) (1,893)
---------- ----------
Effect of exchange rate changes on cash and cash
equivalents (64) 28
---------- ----------
Decrease in cash and cash equivalents (8,427) (4,083)
Cash and cash equivalents, beginning of period 27,064 21,412
---------- ----------
Cash and cash equivalents, end of period $ 18,637 $ 17,329
========== ==========
Non-Cash Investing and Financing Transactions:
Capital lease obligations incurred $ 579 $ 1,201
Capital equipment purchased on credit 579 1,201
Change in net unrealized security loss (9) (116)
Supplemental Disclosures of Cash Flow Information:
Interest paid $ (213) $ (161)
eLoyalty Corporation
CALCULATION OF ADJUSTED EARNINGS MEASURE
(Unaudited and in thousands)
For the
Three Months Ended
----------------------
March 28, March 29,
2009 2008
---------- ----------
GAAP - Operating loss $ (3,609) $ (4,195)
Add back (reduce) the effect of:
Stock-based compensation 2,084 3,782
Severance and related costs 644 169
Depreciation and amortization 997 963
---------- ----------
Adjusted earnings measure - income (loss) $ 116 $ 719
========== ==========
Contact Information: Contact: eLoyalty Corporation Bill Noon Vice President, Chief Financial Officer (847) 582-7019