eLoyalty Corporation (NASDAQ: ELOY), a leading Integrated Contact
Solutions and Behavioral Analytics™ services company, today
announced financial results for the second quarter ended June 26,
2010.
For the second quarter of 2010, total revenue was $22.0 million
and the net loss was $3.7 million. The net loss available to common
shareholders was $0.30 per share. eLoyalty realized an "Adjusted
Earnings(1)" loss of $0.7 million for the second quarter of 2010.
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 Six Months Ended
--------------------------- ---------------------------
(000's) 6/26/2010 6/27/2009 %Change 6/26/2010 6/27/2009 %Change
--------- --------- ------- --------- --------- -------
Revenue:
Managed
Services $ 12,417 $ 11,607 7% $ 25,855 $ 22,787 13%
Consulting
Services 4,888 9,643 -49% 8,472 17,289 -51%
--------- --------- ------- --------- --------- -------
Services Revenue 17,305 21,250 -19% 34,327 40,076 -14%
Product 3,807 832 358% 6,018 12,870 -53%
--------- --------- ------- --------- --------- -------
Net Revenue 21,112 22,082 -4% 40,345 52,946 -24%
Reimbursed
expenses 865 1,019 1,592 1,963
--------- --------- ------- --------- --------- -------
Total Revenue $ 21,977 $ 23,101 -5% $ 41,937 $ 54,909 -24%
--------- --------- ------- --------- --------- -------
Q2 Highlights
-- Signed $15.4 million of Managed Services contracts in the second
quarter
-- Increased Managed Services Backlog(2) to $103.6 million
-- Grew Behavioral Analytics™ Service Subscriptions 41% year over
year
-- Achieved 7% year over year growth in Managed Services revenue
Third Quarter 2010 Guidance
eLoyalty currently expects its Third Quarter 2010 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, August 4, 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 August 18, 2010,
by dialing (800) 642-1687 or, for international callers, (706)
645-9291 and entering conference ID number 87713670.
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: $25.0m in 2010; $37.0m in 2011; $25.2m in 2012;
$16.4m in 2013 and thereafter.
eLoyalty Corporation
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share data)
For the Three For the Six
Months Ended Months Ended
---------------- ----------------
June 26, June 27, June 26, June 27,
2010 2009 2010 2009
------- ------- ------- -------
Revenue:
Services $17,305 $21,250 $34,327 $40,076
Product 3,807 832 6,018 12,870
------- ------- ------- -------
Revenue before reimbursed expenses
(net revenue) 21,112 22,082 40,345 52,946
Reimbursed expenses 865 1,019 1,592 1,963
------- ------- ------- -------
Total revenue 21,977 23,101 41,937 54,909
Operating expenses:
Cost of services 10,610 13,325 21,658 26,580
Cost of product 3,135 716 4,931 11,117
------- ------- ------- -------
Cost of revenue before reimbursed
expenses 13,745 14,041 26,589 37,697
Reimbursed expenses 865 1,019 1,592 1,963
------- ------- ------- -------
Total cost of revenue, exclusive of
depreciation and amortization shown
below: 14,610 15,060 28,181 39,660
Selling, general and administrative 9,475 8,503 19,393 17,679
Severance and related costs 464 108 820 752
Depreciation and amortization 1,018 1,262 2,150 2,259
------- ------- ------- -------
Total operating expenses 25,567 24,933 50,544 60,350
Operating loss (3,590) (1,832) (8,607) (5,441)
Interest and other (expense), net (127) (15) (18) (194)
------- ------- ------- -------
Loss from continuing operations before
income taxes (3,717) (1,847) (8,625) (5,635)
Income tax provision (21) (16) (43) (34)
------- ------- ------- -------
Loss from continuing operations (3,738) (1,863) (8,668) (5,669)
Loss on discontinued operations -- -- (136) --
------- ------- ------- -------
Net loss (3,738) (1,863) (8,804) (5,669)
Dividends related to Series B Stock (317) (324) (640) (647)
------- ------- ------- -------
Net loss available to common
stockholders $(4,055) $(2,187) $(9,444) $(6,316)
======= ======= ======= =======
Per common share:
Basic loss from continuing operations $ (0.27) $ (0.14) $ (0.64) $ (0.43)
======= ======= ======= =======
Basic loss from discontinued operations $ -- $ -- $ (0.01) $ --
======= ======= ======= =======
Basic net loss $ (0.30) $ (0.17) $ (0.70) $ (0.48)
======= ======= ======= =======
Per common share:
Diluted loss from continuing operations $ (0.27) $ (0.14) $ (0.64) $ (0.43)
======= ======= ======= =======
Diluted loss from discontinued
operations $ -- $ -- $ (0.01) $ --
======= ======= ======= =======
Diluted net loss $ (0.30) $ (0.17) $ (0.70) $ (0.48)
======= ======= ======= =======
Shares used to calculate basic net loss
per share 13,690 13,250 13,574 13,168
======= ======= ======= =======
Shares used to calculate diluted net
loss per share 13,690 13,250 13,574 13,168
======= ======= ======= =======
Stock-based compensation, primarily
restricted stock, is included in
individual line items above:
Cost of services $ 24 $ 49 $ 72 $ 385
Selling, general and administrative 1,358 1,292 2,869 3,040
Severance and related costs 76 -- 76 248
eLoyalty Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share and per share data)
June 26, December 26,
2010 2009
---------- ----------
ASSETS:
Current Assets:
Cash and cash equivalents $ 21,604 $ 28,982
Restricted cash 3,745 3,745
Receivables, (net of allowances of $86 and $151) 8,414 9,313
Prepaid expenses 13,901 10,126
Other current assets 1,376 944
---------- ----------
Total current assets 49,040 53,110
Equipment and leasehold improvements, net 6,114 6,194
Goodwill 2,643 2,643
Intangibles, net 401 476
Other long-term assets 10,628 8,180
---------- ----------
Total assets $ 68,826 $ 70,603
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 4,256 $ 3,634
Accrued compensation and related costs 4,747 5,762
Unearned revenue 22,138 20,436
Other current liabilities 4,516 5,067
---------- ----------
Total current liabilities 35,657 34,899
Long-term unearned revenue 14,733 9,526
Other long-term liabilities 1,297 1,705
---------- ----------
Total liabilities 51,687 46,130
---------- ----------
Redeemable Series B Stock, $0.01 par value;
5,000,000 shares authorized and designated;
3,549,160 and 3,616,169 shares issued and
outstanding at June 26, 2010 and December 26, 2009,
respectively, with a liquidation preference of
$19,368 and $19,733 at June 26, 2010 and
December 26, 2009, respectively 18,101 18,442
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; 15,567,751 and 14,871,521 shares
issued at June 26, 2010 and December 26, 2009,
respectively; and 14,779,749 and 14,220,279
outstanding at June 26, 2010 and December 26,
2009, respectively 156 149
Additional paid-in capital 206,308 203,627
Accumulated deficit (199,625) (190,821)
Treasury stock, at cost, 788,002 and 651,242
shares at June 26, 2010 and December 26, 2009,
respectively (4,039) (3,295)
Accumulated other comprehensive loss (3,762) (3,629)
---------- ----------
Total stockholders' (deficit) equity (962) 6,031
---------- ----------
Total liabilities and stockholders' equity $ 68,826 $ 70,603
========== ==========
eLoyalty Corporation
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
For the Six Months
Ended
-------------------
June 26, June 27,
2010 2009
------- -------
Cash Flows from Operating Activities:
Net loss $(8,804) $(5,669)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 2,150 2,259
Stock-based compensation 2,941 3,425
Loss on discontinued operations 136 --
(Reversal) provision for uncollectible
amounts (85) 11
Severance and related costs 85 248
Changes in assets and liabilities:
Receivables 946 (2,014)
Prepaid expenses (6,384) (9,510)
Other assets (432) (132)
Accounts payable 622 430
Accrued compensation and related costs (1,007) 502
Unearned revenue 6,959 15,266
Other liabilities (463) (808)
------- -------
Net cash (used in) provided by operating
activities (3,336) 4,008
------- -------
Cash Flows from Investing Activities:
Capital expenditures and other (1,792) (2,476)
Net cash used in investing activities (1,792) (2,476)
------- -------
Cash Flows from Financing Activities:
Principal payments under capital lease obligations (813) (627)
Acquisition of treasury stock (744) (561)
Payment of Series B Stock dividends (663) (2)
Increase in restricted cash -- (104)
Proceeds from stock compensation and employee stock
purchase plans, net 85 65
------- -------
Net cash used in financing activities (2,135) (1,229)
------- -------
Effect of exchange rate changes on cash and cash
equivalents (115) 42
------- -------
(Decrease) increase in cash and cash equivalents (7,378) 345
Cash and cash equivalents, beginning of period 28,982 27,064
------- -------
Cash and cash equivalents, end of period $21,604 $27,409
======= =======
Non-Cash Investing and Financing Transactions:
Capital lease obligations incurred $ 215 $ 617
Capital equipment purchased on credit 215 617
Change in net unrealized security gain -- 181
Supplemental Disclosures of Cash Flow Information:
Interest paid $ (90) $ (224)
eLoyalty Corporation
CALCULATION OF ADJUSTED EARNINGS MEASURE
(Unaudited and in thousands)
For the Three For the Six
Months Ended Months Ended
---------------- ----------------
June 26, June 27, June 26, June 27,
2010 2009 2010 2009
------- ------- ------- -------
GAAP -- Operating loss $(3,590) $(1,832) $(8,607) $(5,441)
Add back (reduce) the effect of:
Stock-based compensation 1,382 1,341 2,941 3,425
Severance and related costs 464 108 820 752
Depreciation and amortization 1,018 1,262 2,150 2,259
------- ------- ------- -------
Adjusted earnings measure -- (loss)
income $ (726) $ 879 $(2,696) $ 995
======= ======= ======= =======
Contact: eLoyalty Corporation Bill Noon Vice President, Chief
Financial Officer (847) 582-7019 Email Contact
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