Three Months Ended ------------------ (000's) 3/29/2008 3/31/2007 ---------- ---------- Revenue: Consulting services $ 10,581 $ 13,346 Managed services 10,771 8,831 ---------- ---------- Services revenue 21,352 22,177 Product 1,778 4,407 ---------- ---------- Net revenue 23,130 26,584 Reimbursed expenses 738 1,338 ---------- ---------- Total revenue $ 23,868 $ 27,922 ========== ==========First Quarter Highlights Highlights for the first quarter of 2008 include:
-- 6% sequential increase in Services Revenue -- 11% sequential increase in Total Revenue -- $719 thousand of Adjusted Earnings -- $2.5 million sequential improvement in Adjusted Earnings -- Record $10.8 million of Managed Services RevenueAs compared to Q4, Adjusted Earnings were positively impacted by an incremental $342 thousand from the expanded Salary Replacement Program. Outlook 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. During the second quarter, the Company expects lower CRM consulting revenue due to budget pressures at several large consulting accounts and to experience the one-time impact of a contract modification on one of its Behavioral Analytics™ contracts. Based on these factors, the Company currently expects to achieve second quarter Services revenue of $19.0 million and not exceed or fall below the target by more than 5%. Conference Call Information eLoyalty management will host a conference call at 5:00 p.m. ET on Wednesday, May 7, 2008. 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 call is completed until May 21, 2008, by dialing (800) 642-1687 or, for international callers, (706) 645-9291. To access the replay, participants will be required to enter the Conference ID of 42181474. About eLoyalty eLoyalty helps its customers achieve breakthrough results with revolutionary analytics and advanced technologies that drive continuous business improvement. With a long track record of delivering proven solutions for many of the Fortune 1000, eLoyalty's offerings include Behavioral Analytics™, Integrated Contact Solutions and Consulting Services, aligned to enable focused business transformation. 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.
eLoyalty Corporation CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited and in thousands, except per share data) For the Three Months Ended ------------------ March 29, March 31, 2008 2007 -------------- -------------- Revenue: Services $ 21,352 $ 22,177 Product 1,778 4,407 -------------- -------------- Revenue before reimbursed expenses (net revenue) 23,130 26,584 Reimbursed expenses 738 1,338 -------------- -------------- Total revenue 23,868 27,922 Operating expenses: Cost of services 13,349 14,737 Cost of product 1,401 3,514 -------------- -------------- Cost of revenue before reimbursed expenses 14,750 18,251 Reimbursed expenses 738 1,338 -------------- -------------- Total cost of revenue, exclusive of depreciation and amortization shown below: 15,488 19,589 Selling, general and administrative 11,443 12,438 Severance and related costs 169 - Depreciation and amortization 963 773 -------------- -------------- Total operating expenses 28,063 32,800 -------------- -------------- Operating loss (4,195) (4,878) Interest and other income (expense), net 78 327 -------------- -------------- Loss before income taxes (4,117) (4,551) Income tax (provision) benefit (33) 4 -------------- -------------- Net loss (4,150) (4,547) Dividends related to Series B preferred stock (324) (366) -------------- -------------- Net loss available to common stockholders $ (4,474) $ (4,913) ============== ============== Basic net loss per common share $ (0.49) $ (0.61) ============== ============== Diluted net loss per common share $ (0.49) $ (0.61) ============== ============== Shares used to calculate basic net loss per share 9,062 8,035 ============== ============== Shares used to calculate diluted net loss per share 9,062 8,035 ============== ============== Stock-based compensation, primarily restricted stock, included in individual line items above: Cost of services $ 360 $ 296 Selling, general and administrative 3,422 3,311 Severance and related costs 45 - eLoyalty Corporation CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited and in thousands, except share and per share data) March 29, December 29, 2008 2007 -------------- -------------- ASSETS: Current Assets: Cash and cash equivalents $ 17,329 $ 21,412 Restricted cash 2,455 2,455 Receivables, (net of allowances of $107 and $110) 12,795 11,322 Prepaid expenses 10,802 8,465 Other current assets 1,473 1,074 -------------- -------------- Total current assets 44,854 44,728 Equipment and leasehold improvements, net 8,021 7,391 Goodwill 2,643 2,643 Intangibles, net 773 828 Other long-term assets 4,267 4,461 -------------- -------------- Total assets $ 60,558 $ 60,051 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities: Accounts payable $ 4,574 $ 2,997 Accrued compensation and related costs 4,469 5,555 Unearned revenue 14,122 11,772 Other current liabilities 3,726 3,783 -------------- -------------- Total current liabilities 26,891 24,107 Long-term unearned revenue 5,848 7,416 Other long-term liabilities 2,322 1,625 -------------- -------------- Total liabilities 35,061 33,148 -------------- -------------- Redeemable Series B convertible preferred stock, $0.01 par value; 5,000,000 shares authorized and designated; 3,631,547 and 3,745,070 shares issued and outstanding with a liquidation preference of $18,845 and $19,768 at March 29, 2008 and December 29, 2007, respectively 18,521 19,100 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; 10,297,040 and 9,885,458 shares issued at March 29, 2008 and December 29, 2007; and 10,176,169 and 9,735,492 outstanding at March 29, 2008 and December 29, 2007, respectively 103 99 Additional paid-in capital 174,430 172,483 Accumulated deficit (162,698) (158,548) Treasury stock, at cost, 120,871 and 149,966 shares at March 29, 2008 and December 29, 2007 (1,242) (2,731) Accumulated other comprehensive loss (3,617) (3,500) -------------- -------------- Total stockholders' equity 6,976 7,803 -------------- -------------- Total liabilities and stockholders' equity $ 60,558 $ 60,051 ============== ============== eLoyalty Corporation CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and in thousands) For the Three Months Ended ------------------ March 29, March 31, 2008 2007 -------------- -------------- Cash Flows from Operating Activities: Net loss $ (4,150) $ (4,547) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 963 773 Stock-based compensation 3,827 3,607 Provision for uncollectible amounts 14 - Changes in assets and liabilities: Receivables (1,483) (3,500) Prepaid expenses (1,681) (2,504) Other assets (511) (785) Accounts payable 1,563 2,049 Accrued compensation and related costs (1,079) 661 Unearned revenue 760 5,612 Other liabilities (104) 504 -------------- -------------- Net cash (used in) provided by operating activities (1,881) 1,870 -------------- -------------- Cash Flows from Investing Activities: Capital expenditures and other (337) (1,007) -------------- -------------- Net cash used in investing activities (337) (1,007) -------------- -------------- Cash Flows from Financing Activities: Acquisition of treasury stock (1,229) (1,386) Payment of Series B dividends (669) (732) Proceeds from stock compensation and employee stock purchase plans 126 8 Principal payments under capital lease obligations (121) - Other - 1 -------------- -------------- Net cash used in financing activities (1,893) (2,109) -------------- -------------- Effect of exchange rate changes on cash and cash equivalents 28 13 -------------- -------------- Decrease in cash and cash equivalents (4,083) (1,233) Cash and cash equivalents, beginning of period 21,412 31,645 -------------- -------------- Cash and cash equivalents, end of period $ 17,329 $ 30,412 ============== ============== Non-Cash Investing and Financing Transactions: Capital lease obligations incurred $ 1,201 $ - Capital equipment purchased on credit 1,201 - Change in net unrealized security gain (116) - Supplemental Disclosures of Cash Flow Information: Cash refunded for income taxes, net $ - $ - Interest paid (161) - eLoyalty Corporation CALCULATION OF ADJUSTED EARNINGS MEASURE (Unaudited and in thousands) For the Three Months Ended ------------------ March 29, March 31, 2008 2007 ------------ ------------ GAAP - Operating loss $ (4,195) $ (4,878) Add back (reduce) the effect of: Stock-based compensation 3,782 3,607 Severance and related costs 169 - Depreciation and amortization 963 773 ------------ ------------ Adjusted earnings measure - income (loss) $ 719 $ (498) ============ ============
Contact Information: Contact: eLoyalty Corporation Chris Min, Vice President and Chief Financial Officer (847) 582-7222