Three Months Ended Nine Months Ended
--------------------------- ---------------------------
% %
(000's) 9/26/2009 9/27/2008 Change 9/26/2009 9/27/2008 Change
--------- --------- ------ --------- --------- ------
Revenue:
Managed Services $ 12,651 $ 10,516 20% $ 35,438 $ 30,720 15%
Consulting
Services 7,037 7,682 -8% 24,326 27,049 -10%
========= ========= ====== ========= ========= ======
Services Revenue 19,688 18,198 8% 59,764 57,769 3%
Product 1,977 956 107% 14,847 5,851 154%
--------- --------- ------ --------- --------- ------
Net Revenue 21,665 19,154 13% 74,611 63,620 17%
Reimbursed
expenses 1,033 941 2,996 2,487
--------- --------- ------ --------- --------- ------
Total Revenue $ 22,698 $ 20,095 13% $ 77,607 $ 66,107 17%
--------- --------- ------ --------- --------- ------
Q3 2009 Highlights
-- Achieved record $12.7m of Managed Services Revenues
-- Realized 18% sequential growth in BA Subscriptions
-- Experienced record ICS Managed Services Revenues
-- Achieved strong year over year P&L improvement
-- Generated $2.0m Cash
-- Increased Managed Services Backlog(2) by 46% year over year
Fourth 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.
eLoyalty currently expects its Fourth Quarter 2009 Services revenues will
be approximately $20.0 million.
Conference Call Information
eLoyalty management will host a conference call at 5:00 p.m. ET on
Wednesday, November 4, 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 November 19, 2009 by dialing (800) 642-1687
or, for international callers, (706) 645-9291 and entering conference ID
number 36091484.
About eLoyalty
eLoyalty enables its customers to achieve breakthrough results with
revolutionary analytics and implementation of advanced VoIP applications.
eLoyalty's principal offerings include the Behavioral Analytics™ Service
and Integrated Contact Solutions (ICS).
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 less 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: $13.1m in 2009; $36.5m in 2010;
$24.6m in 2011; $28.0m in 2012 and thereafter.
eLoyalty Corporation
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share data)
For the For the
Three Months Ended Nine Months Ended
------------------ ------------------
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
2009 2008 2009 2008
-------- -------- -------- --------
Revenue:
Services $ 19,688 $ 18,198 $ 59,764 $ 57,769
Product 1,977 956 14,847 5,851
-------- -------- -------- --------
Revenue before reimbursed
expenses (net revenue) 21,665 19,154 74,611 63,620
Reimbursed expenses 1,033 941 2,996 2,487
-------- -------- -------- --------
Total revenue 22,698 20,095 77,607 66,107
Operating expenses:
Cost of services 12,507 11,673 38,027 38,598
Cost of product 1,353 1,041 12,470 4,865
-------- -------- -------- --------
Cost of revenue before
reimbursed expenses 13,860 12,714 50,497 43,463
Reimbursed expenses 1,033 941 2,996 2,487
-------- -------- -------- --------
Total cost of revenue, exclusive of
depreciation and amortization
shown below: 14,893 13,655 53,493 45,950
Selling, general and
administrative 8,870 10,608 27,609 33,285
Severance and related costs 276 686 1,028 1,138
Depreciation and amortization 1,114 1,094 3,373 3,149
-------- -------- -------- --------
Total operating expenses 25,153 26,043 85,503 83,522
-------- -------- -------- --------
Operating loss (2,455) (5,948) (7,896) (17,415)
Interest and other income
(expense), net 287 (95) 93 (13)
-------- -------- -------- --------
Loss before income taxes (2,168) (6,043) (7,803) (17,428)
Income tax benefit (provision) 18 (27) (16) (76)
-------- -------- -------- --------
Net loss (2,150) (6,070) (7,819) (17,504)
Dividends related to Series B
convertible preferred stock (322) (324) (969) (973)
-------- -------- -------- --------
Net loss available to common
stockholders $ (2,472) $ (6,394) $ (8,788) $(18,477)
======== ======== ======== ========
Basic net loss per common share $ (0.19) $ (0.63) $ (0.66) $ (1.93)
======== ======== ======== ========
Diluted net loss per common share $ (0.19) $ (0.63) $ (0.66) $ (1.93)
======== ======== ======== ========
Shares used to calculate basic net
loss per share 13,317 10,171 13,218 9,562
======== ======== ======== ========
Shares used to calculate diluted
net loss per share 13,317 10,171 13,218 9,562
======== ======== ======== ========
Stock-based compensation, primarily
restricted stock, is included in
individual line items above:
Cost of services $ 34 $ 682 $ 419 $ 2,682
Selling, general and
administrative 1,222 2,376 4,262 9,144
Severance and related costs - 58 248 103
eLoyalty Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share and per share data)
September 26, December 27,
2009 2008
------------- -------------
ASSETS:
Current Assets:
Cash and cash equivalents $ 29,397 $ 27,064
Restricted cash 3,746 3,655
Receivables, (net of allowances of $79
and $107) 11,394 10,005
Prepaid expenses 11,518 7,783
Other current assets 2,309 1,251
------------- -------------
Total current assets 58,364 49,758
Equipment and leasehold improvements, net 6,978 6,424
Goodwill 2,643 2,643
Intangibles, net 493 611
Other long-term assets 8,905 4,787
------------- -------------
Total assets $ 77,383 $ 64,223
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 3,638 $ 3,904
Accrued compensation and related costs 5,979 4,994
Unearned revenue 20,981 11,525
Other current liabilities 4,859 4,647
------------- -------------
Total current liabilities 35,457 25,070
Long-term unearned revenue 13,522 5,274
Other long-term liabilities 2,060 2,572
------------- -------------
Total liabilities 51,039 32,916
------------- -------------
Redeemable Series B convertible preferred
stock, $0.01 par value; 5,000,000 shares
authorized and designated; 3,617,309 and
3,619,537 shares issued and outstanding
with a liquidation preference of $19,417
and $19,107 at September 26, 2009 and
December 27, 2008, respectively 18,448 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; 14,843,887 and
14,152,702 shares issued at September 26,
2009 and December 27, 2008, respectively;
and 14,210,245 and 13,661,746 outstanding
at September 26, 2009 and December 27,
2008, respectively 148 142
Additional paid-in capital 202,477 198,853
Accumulated deficit (188,020) (180,201)
Treasury stock, at cost, 633,642 and
490,956 shares at September 26, 2009 and
December 27, 2008, respectively (3,172) (2,457)
Accumulated other comprehensive loss (3,537) (3,490)
------------- -------------
Total stockholders' equity 7,896 12,847
------------- -------------
Total liabilities and stockholders'
equity $ 77,383 $ 64,223
============= =============
eLoyalty Corporation
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
For the
Nine Months Ended
----------------------------
Sept. 26, Sept. 27,
2009 2008
------------- -------------
Cash Flows from Operating Activities:
Net loss $ (7,819) $ (17,504)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 3,373 3,149
Stock-based compensation 4,681 11,826
Provision for uncollectible amounts 10 (16)
Severance and related costs 248 229
Changes in assets and liabilities:
Receivables (1,339) 2,110
Prepaid expenses (8,323) (325)
Other assets (1,456) (2,836)
Accounts payable (270) 2,391
Accrued compensation and related costs 957 (903)
Unearned revenue 17,678 2,081
Other liabilities (502) 2
------------- -------------
Net cash provided by operating
activities 7,238 204
------------- -------------
Cash Flows from Investing Activities:
Capital expenditures and other (2,987) (641)
Sale of short-term investments 337 -
------------- -------------
Net cash used in investing activities (2,650) (641)
------------- -------------
Cash Flows from Financing Activities:
Principal payments under capital lease
obligations (994) (538)
Acquisition of treasury stock (715) (3,123)
Payment of Series B convertible preferred
stock dividends (648) (1,317)
Increase in restricted cash (91) (1,200)
Proceeds from stock options and employee
stock purchase plans 112 287
Rights offering, net - 14,898
------------- -------------
Net cash (used in) provided by financing
activities (2,336) 9,007
------------- -------------
Effect of exchange rate changes on cash and
cash equivalents 81 (131)
------------- -------------
Increase in cash and cash equivalents 2,333 8,439
Cash and cash equivalents, beginning of
period 27,064 21,412
------------- -------------
Cash and cash equivalents, end of period $ 29,397 $ 29,851
============= =============
Non-Cash Investing and Financing
Transactions:
Capital lease obligations incurred $ 865 $ 1,986
Capital equipment purchased on credit 865 1,986
Change in net unrealized security loss (108) (211)
Supplemental Disclosures of Cash Flow
Information:
Interest paid $ (293) $ (367)
eLoyalty Corporation
CALCULATION OF ADJUSTED EARNINGS MEASURE
(Unaudited and in thousands)
For the For the
Three Months Ended Nine Months Ended
------------------ ------------------
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
2009 2008 2009 2008
-------- -------- -------- --------
GAAP - Operating loss $ (2,455) $ (5,948) $ (7,896) $(17,415)
Add back (reduce) the effect of:
Stock-based compensation 1,256 3,058 4,681 11,826
Severance and related costs 276 686 1,028 1,138
Depreciation and amortization 1,114 1,094 3,373 3,149
-------- -------- -------- --------
Adjusted earnings measure -
income (loss) $ 191 $ (1,110) $ 1,186 $ (1,302)
======== ======== ======== ========
Contact Information: Contact: eLoyalty Corporation Bill Noon Vice President, Chief Financial Officer (847) 582-7019