Mattersight 8-K Results of Operations and Financial Condition

Exhibit 99.1

Contact:
Steven Pollema
eLoyalty Corporation
(847) 582 7100
ir@eloyalty.com

eLoyalty Reports Results for Fourth Quarter 2005

Lake Forest, IL, February 13, 2006 –eLoyalty Corporation (NASDAQ: ELOY), a leading enterprise CRM services and solutions company, today posted fourth quarter financial results for the period ended December 31, 2005.

For the fourth quarter of 2005, eLoyalty reported total revenue of $18.6 million and, on a GAAP basis, the company also announced a net loss of $2.3 million. The net loss available to common shareholders was $0.41 a share. On a non-GAAP basis, eLoyalty realized an “Adjusted Earnings¹” loss of $0.9 million for the fourth quarter of 2005. For a reconciliation of Adjusted Earnings income to GAAP operating loss, see the accompanying schedule.

The following is a summary of revenue by major component:

	Three Months Ended				Twelve Months Ended
(000’s)	12/31/2005		01/01/2005		12/31/2005		01/01/2005
Revenue:
Consulting services	$	10,818	$	12,965	$	46,013	$	50,185
Managed services		4,987		5,275		19,543		14,905
Services revenue		15,805		18,240		65,556		65,090
Product		1,896		773		9,710		3,153
Reimbursed expenses		897		1,018		3,742		4,330
Total revenue	$	18,598	$	20,031	$	79,008	$	72,573

Highlights

eLoyalty is focused on accelerating its growth and improving its business model by establishing leadership positions in three emerging market niches: Behavioral Analytics (BA), Converged IP for Contact Centers (CIPCC), and Smart Speech. During the fourth quarter, the company achieved key milestones supporting this strategy, including:

Ÿ Entering into an agreement with Cisco Systems, Inc. under which Cisco has the right to sell certain of our BA modules as Cisco-branded
   products,

Ÿ Increasing Managed services revenue 21% sequentially to approximately $5.0 million, and

Ÿ Increasing Managed services backlog² 14% sequentially to approximately $26.7 million.

Current Business Outlook

eLoyalty currently expects to achieve Total revenue in the first quarter of 2006 in the range of $17.9 million to $19.4 million, which includes Services revenue in the range of $15.5 million to $16.5 million. Further, the company currently expects to sign new and renewal Managed services contracts with a total expected value in the range of $19.0 million to $23.0 million.

Conference Call Information
eLoyalty management will host a conference call at 5:00 p.m. eastern time on Monday, February 13, 2006.A webcast of the conference call 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. It is recommended that participants using the Web access the site at least fifteen minutes before the webcast begins, in order to download and install any necessary audio software. 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 two hours after the call is completed until February 24, 2006 by dialing (888) 509-0081 or, for international callers, (416) 695-5275. There is no passcode for the replay.

About eLoyalty
eLoyalty is a leading management consulting, systems integration, and managed services company focused on optimizing customer interactions. With professionals in offices throughout North America and Europe, eLoyalty’s broad range of enterprise Customer Relationship Management (CRM) related services and solutions include creating customer strategies; defining technical architectures; selecting, implementing and integrating best-of-breed CRM software applications; and providing ongoing support for multivendor systems. The combination of eLoyalty’s methodologies and technical expertise enables eLoyalty to deliver the tangible economic benefits of customer loyalty for its Global 2000 and government clients. For more information about eLoyalty, visit www.eloyalty.com or call 877-2ELOYAL.

1

eLoyalty presents the below non-GAAP “Adjusted Earnings” results and reconciliation to GAAP results because management believes the Adjusted Earnings measure allows investors a better understanding of the results of eLoyalty’s operational activities by focusing on cash earnings performance, exclusive of the impact of non-cash expenses and expense reduction activities. The Adjusted Earnings measure reflects the company’s resources available to invest in the business and strengthen the 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. While 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

The term of each Managed services contract ranges from six months to five years. eLoyalty uses the term “backlog” with respect to its Managed services engagements to refer to the expected revenue to be received under the applicable contract, based on their currently contracted terms and, when applicable, currently anticipated levels of usage and performance. Actual usage and performance might be greater or lesser than anticipated. In general, eLoyalty’s Managed services contracts may be terminated by the customer without cause but, in substantially all cases, early termination requires that the customer make a substantial early termination payment.

ASSUMPTIONS UNDERLYING FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS
This news release contains forward-looking statements, including references to plans, strategies, objectives and anticipated future performance and other statements not strictly historical in nature, which are based on current management expectations, forecasts and assumptions. These forward-looking statements are subject to risks and

uncertainties that could cause actual events or results to differ materially from those expressed or implied by the forward-looking statements. Such risks, uncertainties and other factors that might cause such a difference include, among others: the ability to attract new clients and continuation of existing and new business from existing clients; reliance on major clients and suppliers, increasing client concentration and maintenance of good relations with key business partners; risks involving the variability and predictability of the number, size, scope, cost and duration of, and revenues from, client engagements, including unanticipated deferrals or cancellations of engagements due to changes in customers’ requirements or preferences for the company’s services (because the company’s business is relationship based, substantially all of the company’s customers retain the right to defer or cancel the company’s engagement, regardless of whether there is a written contract); management of other risks associated with increasingly complex client projects and new services offerings, including risks involving collection of billed amounts, shifts from time and materials to alternative or value-based pricing and variable employee utilization rates, project personnel costs and project requirements; maintenance of the company’s reputation and financial strength to remain competitive; the company’s ability to execute its strategy of reducing costs, achieving benefits from cost reduction activities and maintaining a lower cost structure; management of growth and expansion of business with new services offerings and into new markets; continued access to capital resources to meet eLoyalty’s operating and financial needs; implementation of appropriate infrastructure in a timely and cost-effective manner; the ability to attract and retain highly skilled employees in a competitive information technology labor market; demand for CRM services and software generally and continuing intense competition in the information technology services industry generally and particularly in the provision of CRM services and software; the rapid pace of technological innovation in the information technology services industry and the ongoing challenge of creating innovative solutions that meet client expectations; risks associated with eLoyalty’s global operations; future legislative, regulatory or legal actions affecting the information technology services industry or the protection of eLoyalty’s intellectual property rights; the uncertain extent of the current economic recovery and its impact on eLoyalty’s financial results; eLoyalty’s ability to integrate acquired operations into its business in the manner anticipated; and other general business, capital market and economic conditions and volatility. For further information about these and other risks, see eLoyalty’s recent SEC filings, including, without limitation, its most recent annual report on Form 10-K and quarterly reports on Form 10-Q, as well as those identified under “Risk Factors” in the Registration Statement on Form S-3 filed on September 24, 2002.

eLoyalty Corporation
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share data)

	For the						For the
	Three Months Ended						Twelve Months Ended
	December 31,			January 1,			December 31,			January 1,
	2005			2005			2005			2005
Revenue	$	18,598		$	20,031		$	79,008		$	72,573
Operating Expenses:
Cost of services		15,242			14,526			60,550			53,232
Selling, general and administrative		4,889			5,113			20,385			19,482
Severance and related costs		—			331			411			947
Depreciation		804			1,625			5,151			5,247
Amortization of intangibles		106			168			532			350
Total operating expenses		21,041			21,763			87,029			79,258
Operating loss		(2,443	)		(1,732	)		(8,021	)		(6,685	)
Interest income (expense) and other, net		121			79			374			231
Loss before income taxes		(2,322	)		(1,653	)		(7,647	)		(6,454	)
Income tax benefit		(6	)		(587	)		(17	)		(587	)
Net loss		(2,316	)		(1,066	)		(7,630	)		(5,867	)
Dividends related to Series B preferred stock		(366	)		(371	)		(1,471	)		(1,499	)
Net loss available to common stockholders	$	(2,682	)	$	(1,437	)	$	(9,101	)	$	(7,366	)
Basic net loss per common share	$	(0.41	)	$	(0.23	)	$	(1.43	)	$	(1.22	)
Diluted net loss per common share	$	(0.41	)	$	(0.23	)	$	(1.43	)	$	(1.22	)
Shares used to calculate basic net loss per share		6,504			6,133			6,359			6,027
Shares used to calculate diluted net loss per share		6,504			6,133			6,359			6,027
Noncash compensation included in individual line items above:
Cost of services	$	287		$	304		$	1,154		$	1,063
Selling, general and administrative		323			461			1,462			1,697
Severance and related costs		—			—			(25	)		176
Total noncash compensation	$	610		$	765		$	2,591		$	2,936

eLoyalty Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share and per share data)

	December 31,			January 1,
	2005			2005
ASSETS:
Current Assets:
Cash and cash equivalents	$	17,851		$	20,095
Restricted cash		524			698
Short-term investments		4,000			6,975
Receivables (net of allowances of $188 and $389)		10,801			11,187
Prepaid expenses		3,661			2,829
Other current assets		202			578
				��
Total current assets		37,039			42,362
Equipment and leasehold improvements, net		3,131			6,779
Goodwill		2,643			2,650
Intangibles, net		1,181			1,713
Long-term receivables and other		1,234			1,863
Total assets	$	45,228		$	55,367
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current Liabilities:
Accounts payable	$	1,974		$	1,528
Accrued compensation and related costs		3,102			4,165
Unearned revenue		3,576			4,466
Other current liabilities		3,046			3,638
Total current liabilities		11,698			13,797
Long-term unearned revenue		864			774
Other long-term liabilities		281			664
Total liabilities		12,843			15,235
Commitments and contingencies
Redeemable Series B convertible preferred stock, $0.01 par value; 5,000,000 shares authorized and designated; 4,099,968 and 4,150,803 shares issued and outstanding with a liquidation preference of $21,642 and $21,910 at December 31, 2005 and January 1, 2005, respectively		20,910			21,169
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; 7,611,915 and 7,407,065 shares issued and outstanding, respectively		76			74
Additional paid-in capital		149,949			150,659
Accumulated deficit		(128,662	)		(121,032	)
Accumulated other comprehensive loss		(3,947	)		(3,451	)
Unearned compensation		(5,941	)		(7,287	)
Total stockholders’ equity		11,475			18,963
Total liabilities and stockholders’ equity	$	45,228		$	55,367

eLoyalty Corporation
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)

	For the
	Twelve Months Ended
	December 31,			January 1,
	2005			2005
Cash Flows from Operating Activities:
Net loss	$	(7,630	)	$	(5,867	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and noncash compensation		8,299			8,357
Changes in assets and liabilities, net of effect of acquisition:
Receivables		344			(2,395	)
Prepaids and other current assets		(489	)		(1,379	)
Accounts payable		457			(1,409	)
Accrued compensation and related costs		(1,958	)		(1,271	)
Unearned revenue		(800	)		3,773
Other liabilities		(726	)		(2,141	)
Long-term receivables and other		502			(598	)
Net cash used in operating activities		(2,001	)		(2,930	)
Cash Flows from Investing Activities:
Interelate acquisition		7			(5,587	)
Sale of short-term investments		2,975			2,875
Capital expenditures and other		(1,509	)		(475	)
Net cash provided by (used in) investing activities		1,473			(3,187	)
Cash Flows from Financing Activities:
Proceeds from exercise of stock options		—			1
Decrease in restricted cash		174			201
Payment of Series B dividends		(1,480	)		(1,483	)
Net cash used in financing activities		(1,306	)		(1,281	)
Effect of exchange rate changes on cash and cash equivalents		(410	)		390
Decrease in cash and cash equivalents		(2,244	)		(7,008	)
Cash and cash equivalents, beginning of period		20,095			27,103
Cash and cash equivalents, end of period	$	17,851		$	20,095
Supplemental Disclosures of Cash Flow Information:
Cash refunded (paid) for income taxes, net	$	17		$	10

eLoyalty Corporation
CALCULATION OF ADJUSTED EARNINGS MEASURE
(Unaudited and in thousands)

	For the						For the
	Three Months Ended						Twelve Months Ended
	December 31,			January 1,			December 31,			January 1,
	2005			2005			2005			2005
GAAP — Operating Loss	$	(2,443	)	$	(1,732	)	$	(8,021	)	$	(6,685	)
Add back (reduce) the effect of:
Noncash compensation		610			765			2,616			2,760
Severance and related costs		—			331			411			947
Depreciation and amortization		910			1,793			5,683			5,597
Adjusted earnings measure — (loss) income	$	(923	)	$	1,157		$	689		$	2,619