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 Revenue
As 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