SOURCE: eLoyalty Corporation

February 10, 2010 16:15 ET

eLoyalty Announces Fourth Quarter 2009 Results

LAKE FOREST, IL--(Marketwire - February 10, 2010) - eLoyalty Corporation (NASDAQ: ELOY), a leading Integrated Contact Solutions and Behavioral Analytics™ services company, today announced financial results for the fourth quarter ended December 26, 2009.

For the fourth quarter of 2009, total revenue was $24.0 million and the net loss was $2.8 million. The net loss available to common shareholders was $0.23 per share. eLoyalty realized "Adjusted Earnings(1)" income of $0.3 million for the fourth quarter of 2009. Adjusted Earnings is a non-GAAP measure. For a reconciliation of Adjusted Earnings to operating loss, see the accompanying schedule.

The following is a summary of revenue by major component:

                      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 sequentially

2009 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 Cash

First 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
    Email Contact