Three Months Ended
-------------------------------
(000's) 3/27/2010 3/28/2009 % Change
---------- ---------- ---------
Revenue:
Managed Services $ 13,438 $ 11,180 20%
Consulting Services 3,584 7,646 -53%
---------- ---------- ---------
Services Revenue 17,022 18,826 -10%
Product 2,211 12,038 -82%
---------- ---------- ---------
Net Revenue 19,233 30,864 -38%
Reimbursed expenses 727 944
---------- ---------- ---------
Total Revenue $ 19,960 $ 31,808 -37%
========== ========== =========
Q1 Highlights
-- Signed $27.7 million of Managed Services contracts in the first
quarter
-- Increased Managed Services Backlog(2) 16% to $101.6 million
-- Achieved 20% year over year growth in Managed Services revenue
-- Grew Behavioral Analytics™ Service Subscriptions 73% year over
year
Second Quarter 2010 Guidance
Based on the weaker than expected first quarter Services revenues, early in
the second quarter, eLoyalty took actions to reduce its ICS Business Unit
expenses by approximately $2.5 million on an annual basis.
eLoyalty currently expects its Second Quarter 2010 Services revenues will
be approximately $17.5 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, May 5, 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 May 19, 2010, by dialing (800) 642-1687 or,
for international callers, (706) 645-9291 and entering conference ID number
67411138.
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: $34.6m in 2010; $32.2m in 2011; $22.0m in
2012; $12.8m in 2013 and thereafter.
eLoyalty Corporation
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share data)
For the Three Months Ended
--------------------------
March 27, March 28,
2010 2009
---------- ----------
Revenue:
Services $ 17,022 $ 18,826
Product 2,211 12,038
---------- ----------
Revenue before reimbursed expenses
(net revenue) 19,233 30,864
Reimbursed expenses 727 944
---------- ----------
Total revenue 19,960 31,808
Operating expenses:
Cost of services 11,048 13,255
Cost of product 1,796 10,401
---------- ----------
Cost of revenue before reimbursed expenses 12,844 23,656
Reimbursed expenses 727 944
---------- ----------
Total cost of revenue, exclusive of depreciation
and amortization shown below: 13,571 24,600
Selling, general and administrative 9,918 9,176
Severance and related costs 356 644
Depreciation and amortization 1,132 997
---------- ----------
Total operating expenses 24,977 35,417
---------- ----------
Operating loss (5,017) (3,609)
Interest and other income (expense), net 109 (179)
---------- ----------
Loss from continuing operations before income
taxes (4,908) (3,788)
Income tax provision (22) (18)
---------- ----------
Loss from continuing operations (4,930) (3,806)
Loss on discontinued operations (136) -
---------- ----------
Net loss (5,066) (3,806)
Dividends related to Series B Stock (323) (323)
---------- ----------
Net loss available to common stockholders $ (5,389) $ (4,129)
========== ==========
Per common share:
Basic loss from continuing operations $ (0.37) $ (0.29)
========== ==========
Basic loss from discontinued operations $ (0.01) $ -
========== ==========
Basic net loss $ (0.40) $ (0.32)
========== ==========
Per common share:
Diluted loss from continuing operations $ (0.37) $ (0.29)
========== ==========
Diluted loss from discontinued operations $ (0.01) $ -
========== ==========
Diluted net loss $ (0.40) $ (0.32)
========== ==========
Shares used to calculate basic net loss per
share 13,458 13,086
========== ==========
Shares used to calculate diluted net loss per
share 13,458 13,086
========== ==========
Stock-based compensation, primarily restricted
stock, is included in individual line items
above:
Cost of services $ 48 $ 336
Selling, general and administrative 1,511 1,748
Severance and related costs - 248
eLoyalty Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share and per share data)
March 27, December 26,
2010 2009
---------- ----------
ASSETS:
Current Assets:
Cash and cash equivalents $ 26,511 $ 28,982
Restricted cash 3,745 3,745
Receivables, (net of allowances of $68 and $151) 8,081 9,313
Prepaid expenses 12,562 10,126
Other current assets 1,695 944
---------- ----------
Total current assets 52,594 53,110
Equipment and leasehold improvements, net 5,954 6,194
Goodwill 2,643 2,643
Intangibles, net 396 476
Other long-term assets 10,813 8,180
---------- ----------
Total assets $ 72,400 $ 70,603
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 4,070 $ 3,634
Accrued compensation and related costs 5,433 5,762
Unearned revenue 22,641 20,436
Other current liabilities 4,843 5,067
---------- ----------
Total current liabilities 36,987 34,899
Long-term unearned revenue 13,955 9,526
Other long-term liabilities 1,439 1,705
---------- ----------
Total liabilities 52,381 46,130
---------- ----------
Redeemable Series B Stock, $0.01 par value;
5,000,000 shares authorized and designated;
3,616,162 and 3,616,169 shares issued and
outstanding at March 27, 2010 and December 26,
2009, respectively, with a liquidation preference
of $19,411 and $19,733 at March 27, 2010 and
December 26, 2009, respectively 18,442 18,442
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; 15,435,123 and 14,871,521 shares
issued at March 27, 2010 and December 26, 2009,
respectively; and 14,689,417 and 14,220,279
outstanding at March 27, 2010 and December 26,
2009, respectively 154 149
Additional paid-in capital 204,810 203,627
Accumulated deficit (195,887) (190,821)
Treasury stock, at cost, 745,706 and 651,242
shares at March 27, 2010 and December 26, 2009,
respectively (3,759) (3,295)
Accumulated other comprehensive loss (3,741) (3,629)
---------- ----------
Total stockholders' equity 1,577 6,031
---------- ----------
Total liabilities and stockholders' equity $ 72,400 $ 70,603
========== ==========
eLoyalty Corporation
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
For the Three Months Ended
--------------------------
March 27, March 28,
2010 2009
---------- ----------
Cash Flows from Operating Activities:
Net loss $ (5,066) $ (3,806)
Adjustments to reconcile net loss to net
cash (used in) operating activities:
Depreciation and amortization 1,132 997
Stock-based compensation 1,559 2,084
Loss on discontinued operations 136 -
Provision (reversal) for uncollectible
amounts (79) 47
Severance and related costs 5 248
Changes in assets and liabilities:
Receivables 1,288 (11,722)
Prepaid expenses (5,166) (4,605)
Other assets (750) (2,268)
Accounts payable 442 6,058
Accrued compensation and related costs (324) (147)
Unearned revenue 6,644 6,030
Other liabilities (3) (185)
---------- ----------
Net cash used in operating
activities (182) (7,269)
---------- ----------
Cash Flows from Investing Activities:
Capital expenditures and other (712) (666)
---------- ----------
Net cash used in investing
activities (712) (666)
---------- ----------
Cash Flows from Financing Activities:
Principal payments under capital lease
obligations (399) (214)
Acquisition of treasury stock (464) (433)
Payment of Series B Stock dividends (646) (2)
Decrease in restricted cash - 196
Proceeds from stock compensation and
employee stock purchase plans, net 34 25
---------- ----------
Net cash used in financing
activities (1,475) (428)
---------- ----------
Effect of exchange rate changes on cash and cash
equivalents (102) (64)
---------- ----------
Decrease in cash and cash equivalents (2,471) (8,427)
Cash and cash equivalents, beginning of period 28,982 27,064
---------- ----------
Cash and cash equivalents, end of period $ 26,511 $ 18,637
========== ==========
Non-Cash Investing and Financing Transactions:
Capital lease obligations incurred $ 108 $ 579
Capital equipment purchased on credit 108 579
Change in net unrealized security loss - (9)
Supplemental Disclosures of Cash Flow
Information:
Interest paid $ (48) $ (213)
eLoyalty Corporation
CALCULATION OF ADJUSTED EARNINGS MEASURE
(Unaudited and in thousands)
For the Three Months Ended
--------------------------
March 27, March 28,
2010 2009
---------- ----------
GAAP - Operating loss $ (5,017) $ (3,609)
Add back (reduce) the effect of:
Stock-based compensation 1,559 2,084
Severance and related costs 356 644
Depreciation and amortization 1,132 997
---------- ----------
Adjusted earnings measure - (loss) income $ (1,970) $ 116
========== ==========
Contact Information: Contact: eLoyalty Corporation Bill Noon, Vice President, Chief Financial Officer (847) 582-7019