ECLG Ecollege Common St (MM)

Company Reports Record First Quarter Net Income From Continuing Operations of $2.0 Million, Up 56 Percent CHICAGO, May 7 /PRNewswire-FirstCall/ -- eCollege(R) (NASDAQ:ECLG), a leading provider of value-added information services to the post-secondary education industry, today announced that its eLearning Division achieved record revenue of $14.8 million for the quarter ended March 31, 2007, an increase of 23 percent from revenue of $12.0 million for the first quarter of 2006. Net income from continuing operations totaled $2.0 million, up 56 percent from the same period in the prior year. "We are very pleased with our solid start to 2007, and believe our strong revenue and earnings growth for the quarter, as well as the depth of our pipeline, leave us well positioned to hit our guidance targets for the remainder of the year," said Oakleigh Thorne, chairman and CEO of eCollege. "Additionally, we still expect to make an announcement about Datamark in the first half of the year." First Quarter 2007 Financial Highlights - Continuing Operations The Company's financial statements for 2006 have been revised to reflect the classification of the Datamark business as a discontinued operation. Continuing operations are comprised of the Company's eLearning Division and its related corporate overhead. Comparative 2006 results shown below reflect such classifications. Revenue eLearning Division revenue for the first quarter of 2007 increased 23 percent from the same period in 2006 to $14.8 million. Student fee revenue, which represented 91 percent of the eLearning Division's revenue in the first quarter of 2007, increased 24 percent from the first quarter of 2006. Gross Profit Gross profit from continuing operations for the first quarter of 2007 increased 19 percent to $10.5 million from $8.9 million for the same period in the prior year. Gross margin decreased to 71 percent for the first quarter of 2007 from 74 percent for the same period in 2006 due in part to investments the Company is making in a second data center. Operating Income Operating income from continuing operations for the first quarter of 2007 was $3.3 million, an increase of 66 percent from $2.0 million for the first quarter of 2006. Operating margin increased to 22 percent for the first quarter of 2007 from 16 percent for the same period in the prior year. Net Income before Income Taxes Net income before taxes from continuing operations for the first quarter of 2007 was $3.4 million, an increase of 65 percent from $2.0 million for the first quarter of 2006. Income Taxes The tax provision for continuing operations for the first quarter of 2007 was $1.4 million, which reflects an effective tax rate for the quarter of 42 percent. This compares to an effective tax rate of 39 percent for the same period in the prior year. Net Income Net income from continuing operations for the first quarter of 2007 was $2.0 million ($0.08 per diluted share), an increase of 56 percent from net income of $1.2 million ($0.05 per diluted share) for the first quarter of 2006. Adjusted EBITDA Adjusted EBITDA from continuing operations (EBITDA plus stock-based compensation expense) was $4.9 million for the first quarter of 2007, an increase of 46 percent from $3.4 million for the first quarter of 2006. Differences between GAAP net income from continuing operations and adjusted EBITDA from continuing operations are further explained in the financial tables that follow the unaudited Condensed Consolidated Statements of Operations included in this press release. Capital Expenditures Capital expenditures for continuing operations, including capitalized software development costs, were $1.7 million for the first quarter of 2007, compared to $1.6 million for the same period in 2006. Second Quarter 2007 Financial Guidance - Continuing Operations The Company is providing the following guidance for continuing operations for the second quarter of 2007: * eLearning revenue of $15.6 million to $15.8 million, representing growth of 18 to 20 percent from the second quarter of 2006. * Operating income of $3.6 million to $3.9 million, compared to $3.3 million in the second quarter of 2006. * Net income of $2.2 million to $2.4 million ($0.10 per fully diluted share), compared to $2.4 million ($0.10 per fully diluted share) in the second quarter of 2006. * Adjusted EBITDA of $5.4 million to $5.7 million, compared to $4.9 million for the second quarter of 2006. * Capital spending and capitalized software development costs of $2.8 million and $600 thousand, respectively. Second quarter guidance for adjusted EBITDA from continuing operations is reconciled to GAAP net income from continuing operations in the accompanying financial tables. Operating Highlights - Continuing Operations * For the 2007 spring academic term, which impacts both the first and second quarters, the total number of distance student enrollments supported by the eLearning Division is expected to be approximately 695,000, up 32 percent from approximately 528,000 distance student enrollments in the spring term of 2006. * The eLearning Division signed one new platinum customer and two silver customers in the first quarter of 2007, in line with Company plans. * Average annualized revenue per client at the eLearning Division was approximately $330,000 in the first quarter of 2007, an increase of 22 percent from approximately $271,000 in the first quarter of 2006. * eCollege's course management system and support services both were awarded Best in Category in the IMS Global Learning Consortium (IMS GLC) Technology Satisfaction and Trends Report. First Quarter 2007 Financial Highlights - Discontinued Operations As previously announced, the Company is exploring strategic alternatives for its Enrollment Division, Datamark, Inc. As a result, the Enrollment Division has been classified as an asset held for sale and its operating results, including appropriate allocations of certain corporate expenses, are being reported as discontinued operations in the Company's consolidated financial statements. The comparative 2006 results shown below reflect this classification. Net Income Net income from discontinued operations for the first quarter of 2007 totaled $199 thousand ($0.01 per diluted share) compared to a net loss of $199 thousand ($0.01 per diluted share) for the first quarter of 2006. Results for the first quarter of 2007 included: * Revenue from the Enrollment Division of $13.5 million, compared to $15.4 million for the first quarter of 2006. The decline in revenue was primarily related to reduced direct mail revenue associated with one large client. * Capital expenditures, including capitalized software development costs, of $371 thousand, compared to $579 thousand for the same period in 2006. The capital spending in the current period primarily related to investment in Datamark's technology infrastructure. * Adjusted EBITDA from discontinued operations of $666 thousand, compared to $1.6 million in the first quarter of 2006. Differences between the Company's GAAP net loss from discontinued operations and adjusted EBITDA from discontinued operations are further explained in the financial tables that follow the unaudited Condensed Consolidated Statements of Operations included in this press release. Balance Sheet As of March 31, 2007, the Company had cash of $19.4 million as compared to $16.3 million at December 31, 2006 and $26.7 million at March 31, 2006 -- this includes cash categorized as assets of discontinued operations held for sale. As of March 31, 2007, the Company's debt consisted of $500 thousand in original face amount of seller notes. Conference Call eCollege will hold a conference call to discuss its 2007 first quarter financial results at 3:30 p.m. Central time (4:30 p.m. Eastern time) on May 7, 2007. Interested parties can listen to the live conference call webcast by going to the Investor Relations section of eCollege's Web site at http://www.ecollege.com/ and clicking on the "Live Webcast" link. Please access the Web site at least 15 minutes prior to the call to register, download and install any necessary audio software. For those unable to listen at the designated time, the archived webcast will be available on eCollege's Web site for the next 12 months. A conference call replay also will be available from approximately 5:30 p.m. Central time (6:30 p.m. Eastern time) on May 7, 2007 until 11 p.m. Central time (midnight Eastern time) on May 14, 2007. To listen to the replay, participants should dial 800-642-1687. The conference ID for the replay is 4775825. About eCollege eCollege (NASDAQ:ECLG) is a leading provider of value-added information services to the post-secondary and K-12 education industries. The Company's eLearning Division designs, builds and supports some of the most successful, fully online degree, certificate/diploma and professional development programs in the country. The Company's Enrollment Division, Datamark, Inc., helps institutions build new enrollments and increase student retention. Customers include publicly traded for-profit institutions, community colleges, public and private universities, school districts and state departments of education. eCollege was founded in 1996 and is headquartered in Chicago, with the eLearning Division headquartered in Denver. Datamark was founded in 1987 and is headquartered in Salt Lake City. For more information, visit http://www.ecollege.com/ and http://www.datamark.com/. This news release contains statements that are not historical in nature and that may be characterized as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of these forward-looking statements include statements about the Company's pursuit of strategic alternatives for Datamark (including the Company's ability to achieve the strategic objectives contemplated thereby), expected future revenue, expenses, income from operations, net income, EBITDA, adjusted EBITDA, cash and cash equivalents, capital expenditures, profitability, customer enrollments and any other statements that are not historical facts. These statements are based on management's current expectations and are subject to a number of uncertainties and risks. Actual performance and results may differ materially from those reflected in these forward-looking statements due to general financial, economic, regulatory and political conditions affecting the Company's industries as well as the more specific risks and uncertainties facing the Company, including those identified in the Company's reports on Form 10-K, Form 10-Q and Form 8-K filed with the U.S. Securities and Exchange Commission ("SEC"), which you are encouraged to review in connection with this release. You should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date of this release. We are not obligated to publicly release any revisions to forward-looking statements to reflect events after the date of this release. This news release and/or the financial results attached hereto include "adjusted EBITDA" amounts that are considered "non-GAAP financial measures" under SEC rules. As required, we have included reconciliations of these measures to GAAP with this news release. eCollege is a registered trademark of eCollege. eCollege Condensed Consolidated Balance Sheets Unaudited (in thousands) March 31, December 31, 2007 2006 ASSETS CURRENT ASSETS: Cash and cash equivalents $8,642 $7,540 Accounts receivable, net of allowances of $86 and $49, respectively 10,747 6,084 Accrued revenue receivable 1,463 1,795 Deferred income taxes 1,827 1,827 Other current assets 1,515 1,078 Assets of discontinued operations held for sale 21,375 20,557 Total current assets 45,569 38,881 Property and equipment, net 4,863 4,427 Software development costs, net 3,193 2,871 Other assets 275 270 Deferred income taxes 19,191 20,441 Assets of discontinued operations held for sale 56,398 56,023 TOTAL ASSETS $129,489 $122,913 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $794 $396 Other accrued liabilities 5,992 4,618 Deferred revenue, current portion 4,872 3,456 Current income taxes 149 40 Current portion of capital lease obligations 365 360 Liabilities of discontinued operations held for sale 10,930 11,685 Total current liabilities 23,102 20,555 LONG-TERM LIABILITIES: Deferred revenue, net of current portion 70 41 Other liabilities 452 49 Capital lease obligations, net of current portion 187 280 Liabilities of discontinued operations held for sale 5,031 4,622 Total long-term liabilities 5,740 4,992 Total liabilities 28,842 25,547 STOCKHOLDERS' EQUITY: Common stock, $0.01 par value, 50,000 shares authorized, 22,397 and 22,314 shares issued, respectively, and 22,382 and 22,299 shares outstanding, respectively 224 223 Additional paid-in capital 150,207 148,796 Treasury stock at cost, 15 shares (148) (148) Warrants, restricted stock rights, and options for common stock 3,304 3,304 Accumulated deficit (52,940) (54,809) Total stockholders' equity 100,647 97,366 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $129,489 $122,913 eCollege Condensed Consolidated Statements of Operations Unaudited (in thousands, except per share data) For the Three Months Ended March 31, 2007 2006 CONTINUING OPERATIONS REVENUE: $14,820 $12,028 COST OF REVENUE 4,293 3,162 Gross profit 10,527 8,866 OPERATING EXPENSES: Product development 2,398 2,185 Selling and marketing 1,498 1,289 General and administrative 3,330 3,408 Total operating expenses 7,226 6,882 INCOME FROM OPERATIONS 3,301 1,984 Interest income and other income 83 77 Interest expense (30) (31) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND ACCOUNTING CHANGES 3,354 2,030 Income tax expense (1,402) (782) INCOME FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGES 1,952 1,248 DISCONTINUED OPERATIONS Income from discontinued operations, net of tax (benefit) expense of ($1,035) and $252 199 (199) INCOME BEFORE ACCOUNTING CHANGES 2,151 1,049 Cumulative effect of accounting change, net of tax -- 28 NET INCOME $2,151 $1,077 BASIC INCOME PER SHARE AMOUNTS Income from continuing operations before accounting changes $0.09 $0.06 Income/(loss) from discontinued operations, net of tax $0.01 ($0.01) Income before accounting changes $0.10 $0.05 Cumulative effect of accounting change, net of tax -- -- BASIC NET INCOME PER SHARE $0.10 $0.05 DILUTED INCOME PER SHARE AMOUNTS Income from continuing operations before accounting changes $0.08 $0.05 Income/(loss) from discontinued operations, net of tax $0.01 ($0.01) Income before accounting changes $0.09 $0.05 Cumulative effect of accounting change, net of tax -- -- DILUTED NET INCOME PER SHARE $0.09 $0.05 WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 22,368 22,040 WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 23,039 23,010 eCollege Condensed Consolidated Statement of Cash Flows Unaudited (in thousands) For the Three Months Ended March 31, 2007 2006 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $2,151 $1,077 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 675 781 Loss on dispositions of assets 7 1 Accrued interest 17 -- Provision for doubtful accounts 85 (12) Amortization of capitalized internal-use software development costs 236 147 Amortization of intangible assets -- 414 Amortization of debt issuance costs and discount on debt 7 258 Stock-based compensation 1,130 1,004 Cumulative effect of accounting change -- (28) Excess tax benefits from issuance of stock-based awards (167) (137) Deferred income taxes 1,348 725 Changes in Accounts receivable and accrued revenue receivables (2,922) (2,644) Other current assets (445) (1,214) Other assets (15) 72 Accounts payable and accrued liabilities 1,136 1,180 Deferred revenue and customer advances 1,466 3,842 Other liabilities 251 (96) Cash flows provided by operating activities 4,960 5,370 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (1,459) (1,376) Proceeds from disposition of property and equipment 3 -- Capitalized internal-use software development costs (581) (308) Net cash used in investing activities (2,037) (1,684) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 114 (54) Payments on capital lease (107) (92) Excess tax benefits from issuance of stock based awards 167 137 Net cash provided by (used in) investing activities 174 (9) NET INCREASE IN CASH AND CASH EQUIVALENTS 3,097 3,677 Discontinued Activity Cash Operations Included Above, Add: Cash balance of discontinued operations at beginning of period 8,741 13,410 Less: Cash balance of discontinued operations at end of period 10,736 16,720 Cash and Cash Equivalents at beginning of period 7,540 9,627 CASH AND CASH EQUIVALENTS, end of period $8,642 $9,994 Schedule A eCollege Reconciliation of GAAP to Non-GAAP Measures First Quarter 2007 Unaudited (in thousands, except per share data) CONTINUING OPERATIONS For the Three Months Ended March 31, 2007 2006 Reconciliation of Net Income to Adjusted EBITDA(1) Net Income $1,952 $1,276 Adjustments for Non-Cash Charges Stock-Based Compensation Expense 703 723 Depreciation 675 521 Amortization of Capitalized Software 236 105 Cash Interest Income, Net (54) (46) Income Taxes 1,402 783 Adjusted EBITDA(1) $4,914 $3,362 DISCONTINUED OPERATIONS For the Three Months Ended March 31, 2007 2006 Reconciliation of Net Income to Adjusted EBITDA(1) Net Income $199 $(199) Adjustments for Non-Cash Charges Stock-Based Compensation Expense 411 235 Amortization of Identified Intangibles -- 414 Non-Cash Interest Expense 25 258 Depreciation -- 261 Amortization of Capitalized Software -- 42 Cash Interest (Income)/Expense, Net (100) 584 Income Taxes 131 (28) Adjusted EBITDA(1) $666 $1,567 CONSOLIDATED For the Three Months Ended March 31, 2007 2006 Reconciliation of Net Income to Adjusted EBITDA(1) Net Income $2,151 $1,077 Adjustments for Non-Cash Charges Stock-Based Compensation Expense 1,114 958 Amortization of Identified Intangibles -- 414 Non-Cash Interest Expense 25 258 Depreciation 675 782 Amortization of Capitalized Software 236 147 Cash Interest (Income)/Expense, Net (154) 538 Income Taxes 1,533 755 Adjusted EBITDA(1) $5,580 $4,929 (1) Adjusted EBITDA is not a generally accepted accounting principles, or "GAAP," based measure. However, management believes, based on feedback from investors, analysts and other users of the Company's financial information, that Adjusted EBITDA is an appropriate measure of the operating performance of the Company because it is an indication of the resources available for strategic opportunities and is used by many investors to assess the Company's profitability from current operations. Further, as a result of the Company's acquisition of Datamark in the fourth quarter of 2003 and related borrowings, Adjusted EBITDA has been defined by the Company's lenders as an important metric, and is used in the Company's debt compliance covenants. This measure, however, should be considered in addition to, not as a substitute for or superior to, net income, cash flows or other measures of financial performance prepared in accordance with GAAP. Adjusted EBITDA is reconciled herein to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP. Q2 2007 Financial Guidance for Continuing Operations (in thousands, except share and per share data) Q2 2006 Q2 2007 Y/Y Q2 2007 Y/Y Actual Guidance Growth Guidance Growth (unaudited) Low % High % Revenue - Cont. Ops. $13,166 $15,600 18% $15,800 20% Operating Income - Cont. Ops. 3,327 3,600 8% 3,900 17% Operating Margin 25.3% 23.1% 23.9% Net Income - Cont. Ops. 2,408 2,200 (9%) 2,400 0% Adj. EBITDA(1) - Cont. Ops. 4,875 5,400 11% 5,700 17% Reconciliation of Adjusted EBITDA to Net Income Net Income - Cont. Ops. 2,408 2,200 2,400 Stock-based Compensation Expense 762 700 700 Depreciation 636 900 900 Amortization of Capitalized Software 150 250 250 Interest Expense (71) (50) (50) Income Tax 990 1,400 1,500 Adjusted EBITDA(1) - Cont. Ops. 4,875 5,400 5,700 Earnings Per Share Weighted Average Shares - Diluted 23,159,000 23,100,000 23,100,000 Net Income Per Diluted Share - Cont. Ops. $0.10 $0.10 $0.10 Capital Spending - Cont. Ops. $1,027 $2,800 $2,800 Capitalized Software Dev - Cont. Ops. $362 $600 $600 DATASOURCE: eCollege CONTACT: Reid Simpson, Chief Financial Officer, +1-312-706-1706, , or Kristi Emerson, Director, Corporate Communications, +1- 303-915-9574, , both of eCollege Web site: http://www.ecollege.com/

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