-- Favorably impacted Managed Services revenues by $0.7 million
-- Favorably impacted Consulting Services revenues by $0.1 million
-- Adversely impacted "Adjusted Earnings¹" by $0.3 million
The following is a summary of revenue by major component:
Three Months Ended Twelve Months Ended
-------------------------- --------------------------
(000's) 1/1/2011 12/26/2009 %Change 1/1/2011 12/26/2009 %Change
-------- ---------- ------ -------- ---------- ------
Revenue:
Managed Services $ 14,664 $ 14,426 2% $ 54,096 $ 49,864 8%
Consulting
Services 4,732 5,672 -17% 17,712 29,998 -41%
-------- ---------- ------ -------- ---------- ------
Services Revenue 19,396 20,098 -3% 71,808 79,862 -10%
Product 2,375 2,933 -19% 12,581 17,780 -29%
-------- ---------- ------ -------- ---------- ------
Net Revenue 21,771 23,031 -5% 84,389 97,642 -14%
Reimbursed
expenses 1,048 975 3,715 3,971
-------- ---------- ------ -------- ---------- ------
Total Revenue $ 22,819 $ 24,006 -5% $ 88,104 $ 101,613 -13%
======== ========== ====== ======== ========== ======
Q4 Company Highlights
-- Signed $37.9 million of Managed Services contracts in the fourth quarter
-- Increased Managed Services Backlog(2) to a record $130.3 million
-- Grew Services revenues 3% on an adjusted sequential basis
-- Grew Managed Services revenues 3% on an adjusted sequential basis
-- Achieved $0.4 million of Adjusted Earnings(1)
-- Generated $5.5 million of cash
Q4 Behavioral Analytics™ Service Business Unit Highlights
-- Increased Managed Services Backlog(2) to a record $84.5 million
-- Signed $32.7 million of Managed Services contracts
-- Signed initial deployment with a leading energy retailer
-- Signed two contracts for new applications with existing customers
-- Signed two large renewals
Q4 Integrated Contact Solutions Business Unit Highlights
-- Achieved significant Business Unit profitability
-- Signed $5.2 million of Managed Services contracts
-- Grew Services revenues 3% on an adjusted sequential basis
-- Grew Managed Services revenues 6% on an adjusted sequential basis
First Quarter 2011 Guidance
eLoyalty currently expects its First Quarter 2011 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, February 16, 2011. 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 March 9, 2011, by dialing (800) 642-1687 or,
for international callers, (706) 645-9291 and entering conference ID number
38136094.
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: $50.6m in 2011; $39.2m in 2012; $23.9m in 2013; $16.6m in 2014 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
------------------ --------------------
Jan. 1, Dec. 26, Jan. 1, Dec. 26,
2011 2009 2011 2009
-------- -------- --------- ---------
Revenue:
Services $ 19,396 $ 20,098 $ 71,808 $ 79,862
Product 2,375 2,933 12,581 17,780
-------- -------- --------- ---------
Revenue before reimbursed
expenses (net revenue) 21,771 23,031 84,389 97,642
Reimbursed expenses 1,048 975 3,715 3,971
-------- -------- --------- ---------
Total revenue 22,819 24,006 88,104 101,613
Operating expenses:
Cost of services 11,067 12,828 43,333 52,442
Cost of product 1,844 2,344 10,360 14,814
-------- -------- --------- ---------
Cost of revenue before
reimbursed expenses 12,911 15,172 53,693 67,256
Reimbursed expenses 1,048 975 3,715 3,971
Total cost of revenue, exclusive
of depreciation and amortization
shown below: 13,959 16,147 57,408 71,227
Selling, general and
administrative 9,730 9,141 38,793 35,163
Severance and related costs 244 313 1,180 1,341
Depreciation 1,069 1,055 4,074 4,242
Amortization of intangibles 15 37 144 223
-------- -------- --------- ---------
Total operating expenses 25,017 26,693 101,599 112,196
-------- -------- --------- ---------
Operating loss (2,198) (2,687) (13,495) (10,583)
Interest and other (expense)
income, net (55) (40) (120) 53
-------- -------- --------- ---------
Loss from continuing operations
before income taxes (2,253) (2,727) (13,615) (10,530)
Income tax provision (35) (28) (93) (44)
-------- -------- --------- ---------
Loss from continuing operations (2,288) (2,755) (13,708) (10,574)
Loss on discontinued operations - (46) (136) (46)
-------- -------- --------- ---------
Net loss (2,288) (2,801) (13,844) (10,620)
Dividends related to Series B Stock (317) (323) (1,273) (1,292)
-------- -------- --------- ---------
Net loss available to common
stockholders $ (2,605) $ (3,124) $ (15,117) $ (11,912)
======== ======== ========= =========
Per common share:
Basic loss from continuing
operations $ (0.16) $ (0.21) $ (1.00) $ (0.80)
Basic loss from discontinued
operations $ - $ - $ (0.01) $ -
======== ======== ========= =========
Basic net loss available to
common stockholders $ (0.19) $ (0.23) $ (1.10) $ (0.90)
======== ======== ========= =========
Per common share:
Diluted loss from continuing
operations $ (0.16) $ (0.21) $ (1.00) $ (0.80)
======== ======== ========= =========
Diluted loss from discontinued
operations $ - $ - $ (0.01) $ -
======== ======== ========= =========
Diluted net loss available to
common stockholders $ (0.19) $ (0.23) $ (1.10) $ (0.90)
======== ======== ========= =========
Shares used to calculate basic
net loss per share 13,874 13,365 13,701 13,255
======== ======== ========= =========
Shares used to calculate diluted
net loss per share 13,874 13,365 13,701 13,255
======== ======== ========= =========
Stock-based compensation,
primarily restricted stock, is
included in individual line
items above:
Cost of services $ 11 $ 85 $ 106 $ 504
Selling, general and
administrative 1,283 1,531 5,622 5,793
Severance and related costs - - 76 248
eLoyalty Corporation
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share and per share data)
January 1, December
2011 26, 2009
--------- ---------
ASSETS:
Current Assets:
Cash and cash equivalents $ 20,872 $ 28,982
Restricted cash 2,460 3,745
Receivables, (net of allowances of $85 and $151) 8,613 9,313
Prepaid expenses 13,746 10,126
Other current assets 892 944
Total current assets 46,583 53,110
Equipment and leasehold improvements, net 5,867 6,194
Goodwill 2,643 2,643
Intangibles, net 428 476
Other long-term assets 10,671 8,180
Total assets $ 66,192 $ 70,603
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY:
Current Liabilities:
Accounts payable $ 2,498 $ 3,634
Accrued compensation and related costs 3,033 5,762
Unearned revenue 24,212 20,436
Other current liabilities 4,983 5,067
Total current liabilities 34,726 34,899
Long-term unearned revenue 15,928 9,526
Other long-term liabilities 1,592 1,705
Total liabilities 52,246 46,130
Redeemable Series B Stock, $0.01 par value; 5,000,000
shares authorized and designated; 3,549,078 and
3,616,169 shares issued and outstanding at January
1, 2011 and December 26, 2009, respectively, with a
liquidation preference of $19,367 and $19,733 at
January 1, 2011 and December 26, 2009, respectively 18,100 18,442
Stockholders' (Deficit) 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; 15,642,822 and 14,871,521 shares issued
at January 1, 2011, and December 26, 2009,
respectively; and 14,786,005 and 14,220,279
outstanding at January 1, 2011 and December 26,
2009, respectively 156 149
Additional paid-in capital 208,511 203,627
Accumulated deficit (204,665) (190,821)
Treasury stock, at cost, 856,817 and 651,242
shares at January 1, 2011 and December 26,
2009, respectively (4,468) (3,295)
Accumulated other comprehensive loss (3,688) (3,629)
--------- ---------
Total stockholders' (deficit) equity (4,154) 6,031
--------- ---------
Total liabilities and stockholders' (deficit)
equity $ 66,192 $ 70,603
========= =========
eLoyalty Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
For the
Twelve Months Ended
------------------
January 1, December
2011 26, 2009
-------- --------
Cash Flows from Operating Activities:
Net loss $(13,844) $(10,620)
Adjustments to reconcile net loss to net cash (used
in) provided by operating activities:
Depreciation and amortization 4,218 4,465
Stock-based compensation 5,728 6,297
Loss on discontinued operations 136 46
(Reversal) provision for uncollectible amounts (78) 82
Severance and related costs 94 270
Deferred income taxes 1 7
Changes in assets and liabilities:
Receivables 750 668
Prepaid expenses (6,311) (6,395)
Other assets 54 (60)
Accounts payable (1,136) (273)
Accrued compensation and related costs (2,728) 737
Unearned revenue 10,200 13,145
Other liabilities (95) (626)
-------- --------
Net cash (used in) provided by operating
activities (3,011) 7,743
-------- --------
Cash Flows from Investing Activities:
Capital expenditures and other (2,812) (3,327)
Proceeds from sale/leaseback of assets 423 -
Sale of short-term investments - 337
-------- --------
Net cash used in investing activities (2,389) (2,990)
-------- --------
Cash Flows from Financing Activities:
Principal payments under capital lease obligations (1,688) (1,384)
Payment of Series B Stock dividends (1,297) (649)
Acquisition of treasury stock (1,173) (838)
Decrease (increase) in restricted cash 1,285 (90)
Proceeds from stock compensation and employee stock
purchase plans, net 202 141
-------- --------
Net cash used in financing activities (2,671) (2,820)
-------- --------
Effect of exchange rate changes on cash and cash
equivalents (39) (15)
-------- --------
(Decrease) increase in cash and cash equivalents (8,110) 1,918
Cash and cash equivalents, beginning of period 28,982 27,064
-------- --------
Cash and cash equivalents, end of period $ 20,872 $ 28,982
======== ========
Non-Cash Investing and Financing Transactions:
Capital lease obligations incurred $ 1,398 $ 869
Capital equipment purchased on credit 1,398 869
Change in net unrealized security loss - (108)
Supplemental Disclosures of Cash Flow Information:
Interest paid $ (157) $ (356)
eLoyalty Corporation
CALCULATION OF ADJUSTED EARNINGS MEASURE
(Unaudited and in thousands)
For the For the
Three Months Ended Twelve Months Ended
---------------- ------------------
Jan. 1, Dec. 26, Jan. 1, Dec. 26,
2011 2009 2011 2009
------- ------- -------- --------
GAAP - Operating loss $(2,198) $(2,687) $(13,495) $(10,583)
Add back (reduce) the effect of:
Stock-based compensation 1,294 1,616 5,728 6,297
Severance and related costs 244 313 1,180 1,341
Depreciation and amortization 1,084 1,092 4,218 4,465
------- ------- -------- --------
Adjusted earnings measure - income
(loss) $ 424 $ 334 $ (2,369) $ 1,520
Contact Information: Contact: eLoyalty Corporation Bill Noon Vice President, Chief Financial Officer (847) 582-7019