Mattersight 8-K Results of Operations and Financial Condition

Exhibit 99.1

PRESS RELEASE   Contact: eLoyalty Corporation Bill Noon, Vice President, Chief Financial Officer (847) 582-7019 ir@eloyalty.com eLoyalty Corporation 150 Field Drive, Suite 250 Lake Forest, Illinois 60045   www.eloyalty.com   t 847.582.7000 f 847.582.7001

eLoyalty Announces Third Quarter 2010 Results

LAKE FOREST, IL, November 3, 2010 – eLoyalty Corporation (Nasdaq: ELOY), a leading Integrated Contact Solutions and Behavioral Analytics™ services company, today announced financial results for the third quarter ended September 25, 2010.

For the third quarter of 2010, total revenue was $23.3 million and the net loss was $2.8 million. The net loss available to common shareholders was $0.22 per share. eLoyalty realized an “Adjusted Earnings¹” loss of $0.1 million for the third 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						Nine Months Ended
(000's)	9/25/2010		9/26/2009		% Change		9/25/2010		9/26/2009		% Change
Revenue:
Managed Services	$	13,577	$	12,651		7%	$	39,432	$	35,438		11%
Consulting Services		4,508		7,037		-36%		12,980		24,326		-47%
Services Revenue		18,085		19,688		-8%		52,412		59,764		-12%
Product		4,188		1,977		112%		10,206		14,847		-31%
Net Revenue		22,273		21,665		3%		62,618		74,611		-16%
Reimbursed expenses		1,075		1,033				2,667		2,996
Total Revenue	$	23,348	$	22,698		3%	$	65,285	$	77,607		-16%

Q3 Company Highlights

• Signed $17.5 million of Managed Services contracts in the third quarter

• Increased Managed Services Backlog² to $107.0 million

• Grew Services revenues 5% sequentially

• Grew Managed Services revenues 9% sequentially

• Improved P&L sequentially to near breakeven Adjusted Earnings¹

Q3 Behavioral Analytics^TM Service Business Unit Highlights

• Signed $6.9 million in new Managed Services contracts

• Signed initial deployment with a top three Property and Casualty insurance company

• Signed two contracts for new Fraud applications

• Strengthened Managed Services pipeline for Q4 2010 and Q1 2011

Q3 Integrated Contact Solutions Business Unit Highlights

• Grew ICS Managed Services Backlog² to a record of $48.1 million

• Achieved significant Business Unit profitability

• Built strong visibility going into Q4 2010 and Fiscal Year 2011

Fourth Quarter 2010 Guidance

eLoyalty currently expects its Fourth Quarter 2010 Services revenues will be approximately $18.5 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, November 3, 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 athttp://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 November 17, 2010, by dialing (800) 642-1687 or, for international callers, (706) 645-9291 and entering conference ID number 18432584.

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: $13.7m in 2010; $42.9m in 2011; $29.7m in 2012; $20.7m in 2013 and thereafter.

eLoyalty Corporation

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share data)

	For the Three Months Ended						For the Nine Months Ended
	Sept. 25, 2010			Sept. 26, 2009			Sept. 25, 2010			Sept. 26, 2009
Revenue:
Services	$	18,085		$	19,688		$	52,412		$	59,764
Product		4,188			1,977			10,206			14,847
Revenue before reimbursed expenses (net revenue)		22,273			21,665			62,618			74,611
Reimbursed expenses		1,075			1,033			2,667			2,996
Total revenue		23,348			22,698			65,285			77,607
Operating expenses:
Cost of services		10,608			13,034			32,266			39,614
Cost of product		3,585			1,353			8,516			12,470
Cost of revenue before reimbursed expenses		14,193			14,387			40,782			52,084
Reimbursed expenses		1,075			1,033			2,667			2,996
Total cost of revenue, exclusive of depreciation and amortization shown below:		15,268			15,420			43,449			55,080
Selling, general and administrative		9,670			8,343			29,063			26,022
Severance and related costs		116			276			936			1,028
Depreciation and amortization		984			1,114			3,134			3,373
Total operating expenses		26,038			25,153			76,582			85,503
Operating loss		(2,690	)		(2,455	)		(11,297	)		(7,896	)
Interest and other (expense) income, net		(47	)		287			(65	)		93
Loss from continuing operations before income taxes		(2,737	)		(2,168	)		(11,362	)		(7,803	)
Income tax (provision) benefit		(15	)		18			(58	)		(16	)
Loss from continuing operations		(2,752	)		(2,150	)		(11,420	)		(7,819	)
Loss on discontinued operations		—			—			(136	)		—
Net loss		(2,752	)		(2,150	)		(11,556	)		(7,819	)
Dividends related to Series B Stock		(316	)		(322	)		(956	)		(969	)
Net loss available to common stockholders	$	(3,068	)	$	(2,472	)	$	(12,512	)	$	(8,788	)
Per common share:
Basic loss from continuing operations	$	(0.20	)	$	(0.16	)	$	(0.84	)	$	(0.59	)
Basic loss from discontinued operations	$	—		$	—		$	(0.01	)	$	—
Basic net loss available to common stockholders	$	(0.22	)	$	(0.19	)	$	(0.92	)	$	(0.66	)
Per common share:
Diluted loss from continuing operations	$	(0.20	)	$	(0.16	)	$	(0.84	)	$	(0.59	)
Diluted loss from discontinued operations	$	—		$	—		$	(0.01	)	$	—
Diluted net loss available to common stockholders	$	(0.22	)	$	(0.19	)	$	(0.92	)	$	(0.66	)
Shares used to calculate basic net loss per share		13,784			13,317			13,644			13,218
Shares used to calculate diluted net loss per share		13,784			13,317			13,644			13,218
Stock-based compensation, primarily restricted stock, is included in individual line items above:
Cost of services	$	23		$	34		$	95		$	419
Selling, general and administrative		1,469			1,222			4,338			4,262
Severance and related costs		—			—			76			248

eLoyalty Corporation

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands, except share and per share data)

	September 25, 2010			December 26, 2009
ASSETS:
Current Assets:
Cash and cash equivalents	$	14,029		$	28,982
Restricted cash		3,745			3,745
Receivables, (net of allowances of $92 and $151)		10,149			9,313
Prepaid expenses		14,082			10,126
Other current assets		2,166			944
Total current assets		44,171			53,110
Equipment and leasehold improvements, net		5,729			6,194
Goodwill		2,643			2,643
Intangibles, net		430			476
Other long-term assets		11,452			8,180
Total assets	$	64,425		$	70,603
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current Liabilities:
Accounts payable	$	4,275		$	3,634
Accrued compensation and related costs		4,468			5,762
Unearned revenue		21,600			20,436
Other current liabilities		4,456			5,067
Total current liabilities		34,799			34,899
Long-term unearned revenue		13,043			9,526
Other long-term liabilities		1,119			1,705
Total liabilities		48,961			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 September 25, 2010 and December 26, 2009, respectively, with a liquidation preference of $19,051 and $19,733 at September 25, 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; 15,592,431 and 14,871,521 shares issued at September 25, 2010 and December 26, 2009, respectively; and 14,769,819 and 14,220,279 outstanding at September 25, 2010 and December 26, 2009, respectively		156			149
Additional paid-in capital		207,494			203,627
Accumulated deficit		(202,377	)		(190,821	)
Treasury stock, at cost, 822,612 and 651,242 shares at September 25, 2010 and December 26, 2009, respectively		(4,251	)		(3,295	)
Accumulated other comprehensive loss		(3,659	)		(3,629	)
Total stockholders’ (deficit) equity		(2,637	)		6,031
Total liabilities and stockholders’ equity	$	64,425		$	70,603

eLoyalty Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

	For the Nine Months Ended
	September 25, 2010			September 26, 2009
Cash Flows from Operating Activities:
Net loss	$	(11,556	)	$	(7,819	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		3,134			3,373
Stock-based compensation		4,433			4,681
Loss on discontinued operations		136			—
(Reversal) provision for uncollectible amounts		(79	)		10
Severance and related costs		89			248
Changes in assets and liabilities:
Receivables		(779	)		(1,339	)
Prepaid expenses		(7,396	)		(8,323	)
Other assets		(1,220	)		(1,456	)
Accounts payable		650			(270	)
Accrued compensation and related costs		(1,292	)		957
Unearned revenue		4,695			17,678
Other liabilities		31			(502	)
Net cash (used in) provided by operating activities		(9,154	)		7,238
Cash Flows from Investing Activities:
Capital expenditures and other		(2,425	)		(2,987	)
Sale of short-term investments		—			337
Net cash used in investing activities		(2,425	)		(2,650	)
Cash Flows from Financing Activities:
Payment of Series B Stock dividends		(1,297	)		(648	)
Principal payments under capital lease obligations		(1,238	)		(994	)
Acquisition of treasury stock		(956	)		(715	)
Increase in restricted cash		—			(91	)
Proceeds from stock compensation and employee stock purchase plans, net		133			112
Net cash used in financing activities		(3,358	)		(2,336	)
Effect of exchange rate changes on cash and cash equivalents		(16	)		81
(Decrease) increase in cash and cash equivalents		(14,953	)		2,333
Cash and cash equivalents, beginning of period		28,982			27,064
Cash and cash equivalents, end of period	$	14,029		$	29,397
Non-Cash Investing and Financing Transactions:
Capital lease obligations incurred	$	215		$	865
Capital equipment purchased on credit		215			865
Change in net unrealized security loss		—			(108	)
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	(125	)	$	(293	)

eLoyalty Corporation

CALCULATION OF ADJUSTED EARNINGS MEASURE

(Unaudited and in thousands)

	For the Three Months Ended						For the Nine Months Ended
	Sept. 25, 2010			Sept. 26, 2009			Sept. 25, 2010			Sept. 26, 2009
GAAP — Operating loss	$	(2,690	)	$	(2,455	)	$	(11,297	)	$	(7,896	)
Add back (reduce) the effect of:
Stock-based compensation		1,492			1,256			4,433			4,681
Severance and related costs		116			276			936			1,028
Depreciation and amortization		984			1,114			3,134			3,373
Adjusted earnings measure — (loss) income	$	(98	)	$	191		$	(2,794	)	$	1,186