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 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