Three Months Ended Twelve Months Ended --------------------------- --------------------------- % % (000's) 12/26/2009 12/27/2008 Change 12/26/2009 12/27/2008 Change ---------- ---------- ----- ---------- ---------- ----- Revenue: Managed Services $ 14,426 $ 11,374 27% $ 49,864 $ 42,094 18% Consulting Services 5,672 8,653 -34% 29,998 35,702 -16% ---------- ---------- ----- ---------- ---------- ----- Services Revenue 20,098 20,027 0% 79,862 77,796 3% Product 2,933 3,926 -25% 17,780 9,777 82% ---------- ---------- ----- ---------- ---------- ----- Net Revenue 23,031 23,953 -4% 97,642 87,573 11% Reimbursed expenses 975 1,137 3,971 3,624 ---------- ---------- ----- ---------- ---------- ----- Total Revenue $ 24,006 $ 25,090 -4% $ 101,613 $ 91,197 11% ========== ========== ===== ========== ========== =====Q4 2009 Highlights
-- Grew Managed Services revenues 14% sequentially to a record $14.4 million -- Achieved 37% sequential growth in Behavioral Analytics™ Service Subscriptions -- Realized record ICS Managed Services revenues -- Improved Adjusted Earnings(1) $143 thousand sequentially2009 Highlights
-- Grew Managed Services revenues 18% -- Increased Behavioral Analytics™ Service Subscriptions 58% -- Improved GAAP results $11.0 million -- Increased Managed Services Backlog(2) 19% -- Generated $2.0 million in Total CashFirst Quarter 2010 Guidance eLoyalty currently expects its First Quarter 2010 Services revenues will be approximately $18.0 million. 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. Conference Call Information eLoyalty management will host a conference call at 5:00 p.m. ET on Wednesday, February 10, 2010. 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 February 23, 2010 by dialing (800) 642-1687 or, for international callers, (706) 645-9291 and entering conference ID number 50889138. 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: $37.4m in 2010; $23.9m in 2011; $16.2m in 2012; $10.2m in 2013 and thereafter. eLoyalty Corporation CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited and in thousands, except per share data) For the For the Three Months Ended Twelve Months Ended ------------------------ ------------------------ December 26, December 27, December 26, December 27, 2009 2008 2009 2008 ----------- ----------- ----------- ----------- Revenue: Services $ 20,098 $ 20,027 $ 79,862 $ 77,796 Product 2,933 3,926 17,780 9,777 ----------- ----------- ----------- ----------- Revenue before reimbursed expenses (net revenue) 23,031 23,953 97,642 87,573 Reimbursed expenses 975 1,137 3,971 3,624 ----------- ----------- ----------- ----------- Total revenue 24,006 25,090 101,613 91,197 Operating expenses: Cost of services 12,319 13,015 50,346 51,613 Cost of product 2,344 3,080 14,814 7,945 ----------- ----------- ----------- ----------- Cost of revenue before reimbursed expenses 14,663 16,095 65,160 59,558 Reimbursed expenses 975 1,137 3,971 3,624 ----------- ----------- ----------- ----------- Total cost of revenue, exclusive of depreciation and amortization shown below: 15,638 17,232 69,131 63,182 Selling, general and administrative 9,650 9,870 37,259 43,155 Severance and related costs 313 497 1,341 1,635 Depreciation 1,055 927 4,242 3,845 Amortization of intangibles 37 109 223 340 ----------- ----------- ----------- ----------- Total operating expenses 26,693 28,635 112,196 112,157 ----------- ----------- ----------- ----------- Operating loss (2,687) (3,545) (10,583) (20,960) Interest and other (expense) income, net (40) 83 53 70 ----------- ----------- ----------- ----------- Loss from continuing operations before income taxes (2,727) (3,462) (10,530) (20,890) Income tax (provision) benefit (28) 61 (44) (15) ----------- ----------- ----------- ----------- Loss from continuing operations (2,755) (3,401) (10,574) (20,905) Loss on discontinued operations (46) (748) (46) (748) ----------- ----------- ----------- ----------- Net loss (2,801) (4,149) (10,620) (21,653) Dividends related to Series B convertible preferred stock (323) (323) (1,292) (1,296) ----------- ----------- ----------- ----------- Net loss available to common stockholders $ (3,124) $ (4,472) $ (11,912) $ (22,949) =========== =========== =========== =========== Per common share: Basic loss from continuing operations $ (0.21) $ (0.27) $ (0.80) $ (2.02) =========== =========== =========== =========== Basic loss from discontinued operations $ - $ (0.06) $ - $ (0.07) =========== =========== =========== =========== Basic net loss per common share $ (0.23) $ (0.35) $ (0.90) $ (2.21) =========== =========== =========== =========== Per common share: Diluted loss from continuing operations $ (0.21) $ (0.27) $ (0.80) $ (2.02) =========== =========== =========== =========== Diluted loss from discontinued operations $ - $ (0.06) $ - $ (0.07) =========== =========== =========== =========== Diluted net loss per common share $ (0.23) $ (0.35) $ (0.90) $ (2.21) =========== =========== =========== =========== Shares used to calculate basic net loss per share 13,365 12,772 13,255 10,365 =========== =========== =========== =========== Shares used to calculate diluted net loss per share 13,365 12,772 13,255 10,365 =========== =========== =========== =========== Stock-based compensation, primarily restricted stock, is included in individual line items above: Cost of services $ 85 $ 663 $ 504 $ 3,345 Selling, general and administrative 1,531 2,191 5,793 11,335 Severance and related costs - - 248 103 eLoyalty Corporation CONSOLIDATED BALANCE SHEETS (Unaudited and in thousands, except share and per share data) December 26, December 27, 2009 2008 ----------- ----------- ASSETS: Current Assets: Cash and cash equivalents $ 28,982 $ 27,064 Restricted cash 3,745 3,655 Receivables, (net of allowances of $151 and $107) 9,313 10,005 Prepaid expenses 10,126 7,783 Other current assets 944 1,251 ----------- ----------- Total current assets 53,110 49,758 Equipment and leasehold improvements, net 6,194 6,424 Goodwill 2,643 2,643 Intangibles, net 476 611 Other long-term assets 8,180 4,787 ----------- ----------- Total assets $ 70,603 $ 64,223 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities: Accounts payable $ 3,634 $ 3,904 Accrued compensation and related costs 5,762 4,994 Unearned revenue 20,436 11,525 Capital leases 1,590 1,311 Other current liabilities 3,477 3,336 ----------- ----------- Total current liabilities 34,899 25,070 Long-term unearned revenue 9,526 5,274 Capital leases 1,430 2,280 Other long-term liabilities 275 292 ----------- ----------- Total liabilities 46,130 32,916 ----------- ----------- Redeemable Series B convertible preferred stock, $0.01 par value; 5,000,000 shares authorized and designated; 3,616,169 and 3,619,537 shares issued and outstanding with a liquidation preference of $19,733 and $19,107 at December 26, 2009 and December 27, 2008, respectively 18,442 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; 14,871,521 and 14,152,702 shares issued at December 26, 2009 and December 27, 2008; and 14,220,279 and 13,661,746 outstanding at December 26, 2009 and December 27, 2008, respectively 149 142 Additional paid-in capital 203,627 198,853 Accumulated deficit (190,821) (180,201) Treasury stock, at cost, 651,242 and 490,956 shares at December 26, 2009 and December 27, 2008, respectively (3,295) (2,457) Accumulated other comprehensive loss (3,629) (3,490) ----------- ----------- Total stockholders' equity 6,031 12,847 ----------- ----------- Total liabilities and stockholders' equity $ 70,603 $ 64,223 =========== =========== eLoyalty Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and in thousands) For the Twelve Months Ended --------------------------- December 26, December 27, 2009 2008 ----------- ----------- Cash Flows from Operating Activities: Net loss $ (10,620) $ (21,653) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 4,465 4,185 Stock-based compensation 6,297 14,680 Loss on discontinued operations 46 748 Provision for uncollectible amounts 82 18 Severance and related costs 270 293 Deferred income taxes 7 (2) Changes in assets and liabilities: Receivables 668 1,140 Prepaid expenses (6,395) 1,305 Other assets (60) (523) Accounts payable (273) 919 Accrued compensation and related costs 737 (296) Unearned revenue 13,145 (2,362) Other liabilities (626) 112 ----------- ----------- Net cash provided by (used in) operating activities 7,743 (1,436) ----------- ----------- Cash Flows from Investing Activities: Capital expenditures and other (3,327) (698) Sale of short-term investments 337 - ----------- ----------- Net cash used in investing activities (2,990) (698) ----------- ----------- Cash Flows from Financing Activities: Principal payments under capital lease obligations (1,384) (748) Acquisition of treasury stock (838) (3,741) Payment of Series B dividends (649) (1,317) Increase in restricted cash (90) (1,200) Proceeds from stock compensation and employee stock purchase plans, net 141 343 Proceeds from rights offering, net - 14,845 ----------- ----------- Net cash (used in) provided by financing activities (2,820) 8,182 ----------- ----------- Effect of exchange rate changes on cash and cash equivalents (15) (396) ----------- ----------- Increase in cash and cash equivalents 1,918 5,652 Cash and cash equivalents, beginning of period 27,064 21,412 ----------- ----------- Cash and cash equivalents, end of period $ 28,982 $ 27,064 =========== =========== Non-Cash Investing and Financing Transactions: Capital lease obligations incurred $ 869 $ 2,429 Capital equipment purchased on credit 869 2,429 Change in net unrealized security loss (108) (343) Supplemental Disclosures of Cash Flow Information: Interest paid (356) (536) eLoyalty Corporation CALCULATION OF ADJUSTED EARNINGS MEASURE (Unaudited and in thousands) For the For the Three Months Ended Twelve Months Ended ------------------------ ------------------------ December 26, December 27, December 26, December 27, 2009 2008 2009 2008 ----------- ----------- ----------- ----------- GAAP - Operating loss $ (2,687) $ (3,545) $ (10,583) $ (20,960) Add back (reduce) the effect of: Stock-based compensation 1,616 2,854 6,297 14,680 Severance and related costs 313 497 1,341 1,635 Depreciation and amortization 1,092 1,036 4,465 4,185 ----------- ----------- ----------- ----------- Adjusted earnings measure - income (loss) $ 334 $ 842 $ 1,520 $ (460) ========== =========== =========== ===========
Contact Information: Contact: eLoyalty Corporation Bill Noon, Vice President, Chief Financial Officer (847) 582-7019