ECLG Ecollege Common St (MM)

Company Reports Fourth Quarter Net Income From Continuing Operations of $2.4 Million, Up 95 Percent CHICAGO, March 14 /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 $13.9 million for the quarter ended December 31, 2006, an increase of 26 percent from revenue of $11.0 million for the same period in the prior year. Net income from continuing operations totaled $2.4 million, up 91 percent from the same period in the prior year. As previously announced, the Company is exploring strategic alternatives for its Enrollment Division, Datamark. As a result, the Enrollment Division has been classified as an asset held for sale and its operating results for the fourth quarter and full year 2006, including appropriate allocations of certain corporate expenses, are being reported as discontinued operations in the Company's consolidated financial statements. "We are really pleased with our fourth quarter earnings performance as it lends credence to our long-term 40 percent earnings growth target, and we are very comfortable with our first quarter and 2007 earnings guidance we provided in January based on our strong pipeline and operating performance thus far," said Oakleigh Thorne, chairman and CEO of eCollege. "Additionally, we are making solid progress on the strategic transaction process for Datamark." Fourth Quarter 2006 Financial Highlights - Continuing Operations The Company's financial statements for 2005 have been revised to reflect the classification of the Datamark business as a discontinued operation. Comparative 2005 results shown below reflect such revisions. Revenue eLearning Division revenue for the fourth quarter of 2006 increased 26 percent from the same period in 2005 to $13.9 million. Student fee revenue, which represented 91 percent of the eLearning Division's revenue in the fourth quarter of 2006, increased 28 percent from the fourth quarter of 2005. Gross Profit Gross Profit from continuing operations for the fourth quarter of 2006 increased 29 percent to $10.0 million from $7.8 million for the same period in the prior year. Gross margin increased to 72.4 percent for the fourth quarter of 2006 from 70.4 percent for the same period in 2005. Income Income from continuing operations for the fourth quarter of 2006 was $3.9 million, an increase of 92 percent from $2.0 million for the fourth quarter of 2005. Operating margin increased to 28 percent for the fourth quarter of 2006 from 18 percent for the same period in the prior year. Operating margin adjusted for stock-based compensation expense was 32 percent, compared to 24 percent for the same period in the prior year. Net Income before Income Taxes Net income before taxes from continuing operations for the fourth quarter of 2006 was $4.0 million, an increase of 91 percent from $2.1 million for the fourth quarter of 2005. Income Taxes The tax provision for the fourth quarter of 2006 was $1.5 million, which reflects an effective tax rate for the quarter of 38.2 percent. This compares to an effective tax rate of 39.6 percent for the same period in the prior year. Net Income Net income from continuing operations for the fourth quarter of 2006 was $2.4 million ($0.11 per diluted share), an increase of 95 percent from net income of $1.3 million ($0.05 per diluted share) for the fourth quarter of 2005. Adjusted Net Income In the fourth quarter of 2006, the Company recorded non-cash charges of $544 thousand for stock-based compensation expense for continuing operations. After adding this item back to GAAP net income from continuing operations, adjusted net income from continuing operations was $3.0 million ($0.13 per diluted share) for the fourth quarter of 2006, compared to adjusted net income of $1.9 million ($0.08 per diluted share) for the fourth quarter of 2005. Adjusted EBITDA Adjusted EBITDA from continuing operations (EBITDA plus stock-based compensation expense) was $5.3 million for the fourth quarter of 2006, an increase of 64 percent from $3.3 million for the fourth quarter of 2005. Free Cash Flow and Capital Expenditures For the fourth quarter of 2006, the Company generated free cash flow from continuing operations of $4.4 million, an increase of 47 percent from $3.0 million for the fourth quarter of 2005. Free cash flow, an alternative non-GAAP measure of liquidity, is defined as adjusted EBITDA less cash interest and capital expenditures. Capital expenditures, including capitalized software development costs, were $1.0 million for the fourth quarter of 2006, compared to $300 thousand for the same period in 2005. Differences between GAAP net income from continuing operations and adjusted net income, adjusted net income per diluted share, adjusted EBITDA and free cash flow from continuing operations are further explained in the financial tables that follow the unaudited Condensed Consolidated Statements of Operations included in this press release. First Quarter 2007 Financial Guidance - Continuing Operations The Company reiterated its previously announced guidance for continuing operations for the first quarter of 2007: * eLearning revenue of $14.7 million to $14.9 million, representing growth of 22 to 24 percent from the first quarter of 2006. * Operating income of $2.5 million to $2.7 million, compared to $2.0 million in the first quarter of 2006. * Net income of $1.5 million to $1.6 million ($0.06 to $0.07 per fully diluted share), compared to $1.2 million ($0.05 per fully diluted share) in the first quarter of 2006. * Adjusted EBITDA of $4.0 million to $4.2 million, compared to $3.3 million for the first quarter of 2006. * Capital spending and capitalized software development of $1.4 million and $500 thousand, respectively. First 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 2006 fall academic term, which impacted both the third and fourth quarters, the total number of distance student enrollments supported by the eLearning Division was approximately 430,000, up 53 percent from approximately 280,000 distance student enrollments in the fall term of 2005. * For 2006, distance student enrollments supported by the eLearning Division totaled approximately 1,240,000, up 69 percent from approximately 735,000 distance student enrollments for 2005. * The Company signed two new gold customers in the fourth quarter of 2006. The Company signed seven platinum customers and nine gold customers for the full year 2006, compared to a target of four platinum and eight gold customers. * Average annualized revenue per client at the eLearning Division was approximately $300,000 in the fourth quarter of 2006, an increase of 23 percent from approximately $243,000 in the fourth quarter of 2005. * The eLearning Division renewed all three of the Top 20 customers, and eight of the nine Top 40 customers, that were up for renewal in 2006. Fourth Quarter 2006 Financial Highlights - Discontinued Operations Net Income Net loss from discontinued operations for the fourth quarter of 2006 totaled $9.0 million ($0.39 per diluted share) compared to net income of $800 thousand ($0.03 per diluted share) for the fourth quarter of 2005. Excluding the one-time non-cash interest and impairment charges described below, net income from discontinued operations for the fourth quarter of 2006 totaled approximately $1.0 million. Results for the fourth quarter of 2006 included: * Revenue from the Enrollment Division of $16.2 million, a decrease of 12 percent from $18.5 million for the fourth quarter of 2005. * Net interest expense of $2.1 million, including a one-time, pre-tax non-cash charge of $1.9 million related to the prepayment of the senior subordinated debt. * An $8.9 million impairment charge related to the write down of Datamark's intangible assets. Adjusted Net Income In the fourth quarter of 2006, the Company recorded non-cash charges of $11.9 million for discontinued operations, including the impairment charge and expenses related to stock-based compensation, amortization of identifiable intangible assets and non-cash interest. After adding these items back to GAAP net loss from discontinued operations, adjusted net income from discontinued operations was $2.9 million ($0.12 per diluted share) for the fourth quarter of 2006 compared to adjusted net income of $1.5 million ($0.07 per diluted share) for the fourth quarter of 2005. Adjusted EBITDA Adjusted EBITDA from discontinued operations was $2.1 million for the fourth quarter of 2006, a decrease of 24 percent from $2.7 million for the fourth quarter of 2005. Free Cash Flow and Capital Expenditures For the fourth quarter of 2006, the Company generated free cash flow from discontinued operations of $1.5 million, a decrease of 22 percent from $1.9 million for the fourth quarter of 2005. Capital expenditures, including capitalized software development costs, were $400 thousand for the fourth quarter of 2006, compared to $200 thousand for the same period in 2005. Cash interest expense was $182 thousand for the fourth quarter of 2006 compared to $630 thousand for the fourth quarter of 2005. Differences between the Company's GAAP net loss from discontinued operations and adjusted net income, adjusted net income per diluted share, adjusted EBITDA and free cash flow 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 December 31, 2006, the Company had cash of $16.3 million as compared to $28.4 million at September 30, 2006 and $23.0 million at December 31, 2005. As of December 31, 2006, the Company's debt consisted of $500 thousand in original face amount of seller notes. On October 31, 2006 the Company prepaid $20.0 million in original face amount of senior subordinated debt. Conference Call eCollege will hold a conference call to discuss its 2006 fourth quarter and year-end financial results at 3:30 p.m. Central time (4:30 p.m. Eastern time) on March 14, 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 March 14, 2007 until 11 p.m. Central time (midnight Eastern time) on March 21, 2007. To listen to the replay, participants should dial 800-642-1687. The conference ID for the replay is 9928089. 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, adjusted income from operations, net income, adjusted net income, non-cash charges, EBITDA, adjusted EBITDA, cash and cash equivalents, free cash flow, 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 net income," "adjusted net income per diluted share," "adjusted EBITDA" and "free cash flow" 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) December 31, 2006 2005 ASSETS CURRENT ASSETS: Cash and cash equivalents $7,540 $9,627 Accounts receivable, net of allowances of $49 and $272, respectively 6,084 3,506 Accrued revenue receivable 1,795 1,191 Deferred income taxes 1,827 1,481 Other current assets 1,078 746 Assets of discontinued operations held for sale 20,557 25,153 Total current assets 38,881 41,704 Property and equipment, net 4,427 3,434 Software development costs, net 2,871 1,986 Other assets 270 261 Deferred income taxes 20,441 24,741 Assets of discontinued operations held for sale 56,023 67,884 TOTAL ASSETS $122,913 $140,010 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $396 $643 Other accrued liabilities 4,618 3,999 Deferred revenue, current portion 3,456 2,493 Current income taxes 40 -- Current portion of capital lease obligations 360 320 Liabilities of discontinued operations held for sale 11,685 11,554 Total current liabilities 20,555 19,009 LONG-TERM LIABILITIES: Deferred revenue, net of current portion 41 26 Other liabilities 49 322 Capital lease obligations, net of current portion 280 250 Liabilities of discontinued operations held for sale 4,622 25,959 Total long-term liabilities 4,992 26,557 Total liabilities 25,547 45,566 STOCKHOLDERS' EQUITY: Common stock, $0.01 par value, 50,000 shares authorized, 23,314 and 22,002 shares issued, respectively, and 22,299 and 21,987 shares outstanding, respectively 223 220 Additional paid-in capital 148,796 139,943 Treasury stock at cost, 15 shares (148) (148) Warrants, restricted stock rights, and options for common stock 3,304 6,982 Deferred compensation -- (2) Accumulated deficit (54,809) (52,551) Total stockholders' equity 97,366 94,444 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $122,913 $140,010 eCollege Consolidated Statements of Operations Unaudited (in thousands, except per share data) For the Three Months Ended December 31, 2006 2005 CONTINUING OPERATIONS REVENUE: $13,851 $11,031 COST OF REVENUE 3,817 3,270 Gross profit 10,034 7,761 OPERATING EXPENSES: Product development 2,112 1,829 Selling and marketing 1,227 1,295 General and administrative 2,788 2,604 Total operating expenses 6,127 5,728 INCOME FROM OPERATIONS 3,907 2,033 Interest income and other income (expense) 85 70 Interest expense (30) (30) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND ACCOUNTING CHANGES 3,962 2,073 Income tax (expense) benefit (1,517) (822) INCOME FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGES 2,445 1,251 DISCONTINUED OPERATIONS Income from discontinued operations, net of tax (benefit) expense of ($1,035) and $252 (9,023) 751 INCOME BEFORE ACCOUNTING CHANGES (6,578) 2,002 Cumulative effect of accounting change, net of tax -- -- NET INCOME $(6,578) $2,002 BASIC INCOME PER SHARE AMOUNTS Income from continuing operations before accounting changes $0.11 $0.06 Income from discontinued operations, net of tax(benefit) $(0.40) $0.03 Income before accounting changes $(0.29) $0.09 Cumulative effect of accounting change, net of tax -- -- BASIC NET INCOME PER SHARE $(0.29) $0.09 DILUTED INCOME PER SHARE AMOUNTS Income from continuing operations before accounting changes $0.11 $0.05 Income from discontinued operations, net of tax(benefit) $(0.39) $0.03 Income before accounting changes $(0.28) $0.08 Cumulative effect of accounting change, net of tax -- -- DILUTED NET INCOME PER SHARE $(0.28) $0.08 WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 22,291 21,942 WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 22,996 22,773 The accompanying notes to consolidated financial statements are an integral part of these statements. eCollege Consolidated Statements of Operations Unaudited (in thousands, except per share data) For the Twelve Months Ending December 31, 2006 2005 CONTINUING OPERATIONS REVENUE $52,085 $41,460 COST OF REVENUE 14,740 12,299 Gross profit 37,345 29,161 OPERATING EXPENSES: Product development 8,452 7,170 Selling and marketing 4,820 4,711 General and administrative 11,838 10,572 Total operating expenses 25,110 22,453 INCOME FROM OPERATIONS 12,235 6,708 Interest income and other income (expense) 422 146 Interest expense (148) (107) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND ACCOUNTING CHANGES 12,509 6,747 Income tax (expense) benefit (4,502) (2,689) INCOME FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGES 8,007 4,058 DISCONTINUED OPERATIONS Income from discontinued operations, net of tax (benefit) expense of ($1,398) and $1,403 (10,293) 1,870 INCOME BEFORE ACCOUNTING CHANGES (2,286) 5,928 Cumulative effect of accounting change, net of tax 28 -- NET INCOME $(2,258) $5,928 BASIC INCOME PER SHARE AMOUNTS Income from continuing operations before accounting changes $0.36 $0.19 Income from discontinued operations, net of tax(benefit) $(0.46) $0.09 Income before accounting changes $(0.10) $0.27 Cumulative effect of accounting change, net of tax -- -- BASIC NET INCOME PER SHARE $(0.10) $0.27 DILUTED INCOME PER SHARE AMOUNTS Income from continuing operations before accounting changes $0.35 $0.18 Income from discontinued operations, net of tax(benefit) $(0.45) $0.08 Income before accounting changes $(0.10) $0.26 Cumulative effect of accounting change, net of tax -- -- DILUTED NET INCOME PER SHARE $(0.10) $0.26 WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 22,174 21,729 WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 23,016 22,405 The accompanying notes to consolidated financial statements are an integral part of these statements. eCollege Condensed Consolidated Statement of Cash Flows Unaudited (in thousands) For the Twelve Months Ended December 31, 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $(2,258) $5,928 Adjustments to reconcile net income to net cash provided by operating activities: Income from discontinued operations 10,293 (1,870) Depreciation 2,510 1,753 Loss on dispositions of assets (4) 71 Accrued interest 18 -- Provision for doubtful accounts (35) 25 Amortization of capitalized internal-use software development costs 663 339 Stock-based compensation 2,720 2,550 Deferred income taxes 4,670 2,641 Changes in Accounts receivable and accrued revenue receivables (3,146) (1,375) Other current assets (333) (89) Other assets (9) 263 Accounts payable and accrued liabilities 372 19 Deferred revenue and customer advances 977 156 Other liabilities (240) (84) Cash flows provided by (used in) operating activities - continuing operations 16,198 10,327 Cash flows provided by operating activities - discontinued operations 4,347 5,783 Net cash provided by operating activities 20,545 16,110 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (3,507) (2,560) Proceeds from disposition of property and equipment 8 -- Capitalized internal-use software development costs (1,548) (1,124) Net cash used in investing activities - continuing operations (5,047) (3,684) Net cash used in investing activities - discontinued operations (1,877) (379) Net cash flows from investing activities (6,924) (4,063) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 1,090 4,753 Proceeds from sale-leaseback arrangements -- -- Payments on sale-leaseback arrangements -- -- Payments on capital lease 71 286 Payments on term loan Net cash used in investing activities - continuing operations 1,161 5,039 Net cash used in investing activities - discontinued operations (21,539) (2,272) Net cash flows from financing activities (20,378) 2,767 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,757) 14,814 CASH AND CASH EQUIVALENTS, beginning of year 23,037 8,223 CASH AND CASH EQUIVALENTS, end of year $16,280 $23,037 Schedule A eCollege Reconciliation of GAAP to Non-GAAP Measures Consolidated - 2006 Fourth Quarter Unaudited (in thousands, except per share data) For the Three Months Ended December 31, December 31, 2006 2005 Reconciliation of Net Income to Adjusted Net Income, Adjusted EBITDA and Free Cash Flow:(1) Net Income $(6,578) $2,002 Adjustments for Non-Cash Charges Stock-Based Compensation Expense 719 782 Amortization of Identified Intangibles 77 414 Goodwill & Intangibles Impaired 9,692 -- Non-Cash Interest Expense 1,940 233 Adjusted Net Income(1) $5,850 $3,431 Depreciation 738 731 Amortization of Capitalized Software 217 158 Cash Interest (Income)/Expense, Net 127 590 Income Taxes 482 1,074 Adjusted EBITDA(1) $7,414 $5,984 Capital Expenditures (926) (362) Capitalized Software (449) (99) Cash Interest (127) (590) Free Cash Flow(1) $5,912 $4,933 Net Income per Diluted Share $(0.29) $0.09 Adjustments for Non-Cash Charges Stock-Based Compensation Expense $0.03 $0.03 Amortization of Identified Intangibles -- $0.02 Goodwill & Intangibles Impaired $0.42 -- Non-Cash Interest Expense $0.08 $0.01 Adjusted Net Income per Diluted Share(1) $0.25 $0.15 (1) Adjusted Income from Operations, Adjusted Net Income, Adjusted Net Income per Diluted Share, Adjusted EBITDA and Free Cash Flow are not generally accepted accounting principles, or "GAAP," based measures. However, management believes, based on feedback from investors, analysts and other users of the Company's financial information, that Adjusted Income from Operations, Adjusted Net Income, Adjusted Net Income per Diluted Share, Adjusted EBITDA and Free Cash Flow are appropriate measures of the operating performance of the Company because they are an indication of the resources available for strategic opportunities and are used by many investors to assess the Company's profitability from current operations. Further, management believes, based on feedback from analysts, that Adjusted Net Income, Adjusted Net Income per Diluted Share and Free Cash Flow are important measures that analysts use in estimating and analyzing results for the Company, which estimates are used by investors and potential investors. Finally, 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. These measures, 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 Income from Operations, Adjusted Net Income, Adjusted Net Income per Diluted Share, Adjusted EBITDA and Free Cash Flow are reconciled herein to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP. Schedule B eCollege Reconciliation of GAAP to Non-GAAP Measures Continuing Operations - 2006 Fourth Quarter Unaudited (in thousands, except per share data) For the Three Months Ended December 31, December 31, 2006 2005 Reconciliation of Income from Continuing Operations to Adjusted Income from Continuing Operations:(1) Income from Continuing Operations $3,907 $2,033 Stock-Based Compensation Expense 544 634 Adjusted Income from Continuing Operations(1) $4,451 $2,667 Reconciliation of Net Income to Adjusted Net Income, Adjusted EBITDA and Free Cash Flow:(1) Net Income $2,445 $1,251 Adjustments for Non-Cash Charges Stock-Based Compensation Expense 544 634 Amortization of Identified Intangibles -- -- Goodwill & Intangibles Impaired -- -- Non-Cash Interest Expense -- -- Adjusted Net Income(1) $2,989 $1,885 Depreciation 684 483 Amortization of Capitalized Software 210 105 Cash Interest (Income)/Expense, Net (55) (40) Income Taxes 1,517 882 Adjusted EBITDA(1) $5,345 $3,255 Capital Expenditures (534) (186) Capitalized Software (449) (99) Cash Interest 55 40 Free Cash Flow(1) $4,417 $3,010 Net Income per Diluted Share $0.11 $0.05 Adjustments for Non-Cash Charges Stock-Based Compensation Expense $0.02 $0.03 Amortization of Identified Intangibles -- -- Goodwill & Intangibles Impaired -- -- Non-Cash Interest Expense -- -- Adjusted Net Income per Diluted Share(1) $0.13 $0.08 Schedule C eCollege Reconciliation of GAAP to Non-GAAP Measures Discontinued Operations - 2006 Fourth Quarter Unaudited (in thousands, except per share data) For the Three Months Ended December 31, December 31, 2006 2005 Reconciliation of Net Income to Adjusted Net Income, Adjusted EBITDA and Free Cash Flow: (1) Net Income $(9,023) $751 Adjustments for Non-Cash Charges Stock-Based Compensation Expense 175 148 Amortization of Identified Intangibles 77 414 Goodwill & Intangibles Impaired 9,692 -- Non-Cash Interest Expense 1,940 233 Adjusted Net Income(1) $2,861 $1,546 Depreciation 54 248 Amortization of Capitalized Software 7 53 Cash Interest (Income)/Expense, Net 182 630 Income Taxes (1,035) 252 Adjusted EBITDA(1) $2,069 $2,729 Capital Expenditures (392) (176) Capitalized Software -- -- Cash Interest (182) (630) Free Cash Flow(1) $1,495 $1,923 Net Income per Diluted Share $(0.39) $0.03 Adjustments for Non-Cash Charges Stock-Based Compensation Expense $0.01 $0.01 Amortization of Identified Intangibles -- $0.02 Goodwill & Intangibles Impaired $0.42 -- Non-Cash Interest Expense $0.08 $0.01 Adjusted Net Income per Diluted Share(1) $0.12 $0.07 Schedule D eCollege Reconciliation of GAAP to Non-GAAP Measures Consolidated - 2006 Full Year Unaudited (in thousands, except per share data) For the Twelve Months Ended December 31, December 31, 2006 2005 Reconciliation of Net Income to Adjusted Net Income, Adjusted EBITDA and Free Cash Flow: (1) Net Income $(2,259) $5,928 Adjustments for Non-Cash Charges Stock-Based Compensation Expense 3,708 2,840 Amortization of Identified Intangibles 1,372 1,614 Goodwill & Intangibles Impaired 9,692 -- Non-Cash Interest Expense 2,950 917 Adjusted Net Income(1) $15,463 $11,299 Depreciation 3,400 2,702 Amortization of Capitalized Software 1,369 583 Cash Interest (Income)/Expense, Net 1,492 2,598 Income Taxes 3,104 4,092 Adjusted EBITDA(1) $24,828 $21,274 Capital Expenditures (5,368) (3,606) Capitalized Software (1,535) (1,339) Cash Interest (1,492) (2,598) Free Cash Flow(1) $16,433 $13,731 Net Income per Diluted Share $(0.10) $0.26 Adjustments for Non-Cash Charges Stock-Based Compensation Expense $0.16 $0.13 Amortization of Identified Intangibles $0.06 $0.07 Goodwill & Intangibles Impaired $0.42 -- Non-Cash Interest Expense $0.13 $0.04 Adjusted Net Income per Diluted Share(1) $0.67 $0.50 Schedule E eCollege Reconciliation of GAAP to Non-GAAP Measures Continuing Operations - 2006 Full Year Unaudited (in thousands, except per share data) For the Twelve Months Ended December 31, December 31, 2006 2005 Reconciliation of Income from Continuing Operations to Adjusted Income from Continuing Operations:(1) Income from Continuing Operations $12,235 $6,708 Stock-Based Compensation Expense (28) 25 Adjusted Income from Continuing Operations(1) $12,207 $6,733 Reconciliation of Net Income to Adjusted Net Income, Adjusted EBITDA and Free Cash Flow: (1) Net Income $8,034 $4,055 Adjustments for Non-Cash Charges Stock-Based Compensation Expense 2,720 2,550 Amortization of Identified Intangibles -- -- Goodwill & Intangibles Impaired -- -- Non-Cash Interest Expense -- -- Adjusted Net Income(1) $10,754 $6,605 Depreciation 2,510 1,753 Amortization of Capitalized Software 663 339 Cash Interest (Income)/Expense, Net (274) (39) Income Taxes 4,502 2,689 Adjusted EBITDA(1) $18,155 $11,347 Capital Expenditures (3,456) (2,570) Capitalized Software (1,535) (980) Cash Interest 274 39 Free Cash Flow(1) $13,438 $7,836 Net Income per Diluted Share $0.35 $0.18 Adjustments for Non-Cash Charges Stock-Based Compensation Expense $0.12 $0.11 Amortization of Identified Intangibles -- -- Goodwill & Intangibles Impaired -- -- Non-Cash Interest Expense -- -- Adjusted Net Income per Diluted Share(1) $0.47 $0.29 Schedule F eCollege Reconciliation of GAAP to Non-GAAP Measures Discontinued Operations - 2006 Full Year Unaudited (in thousands, except per share data) For the Twelve Months Ended December 31, December 31, 2006 2005 Reconciliation of Net Income to Adjusted Net Income, Adjusted EBITDA and Free Cash Flow: (1) Net Income $(10,293) $1,873 Adjustments for Non-Cash Charges Stock-Based Compensation Expense 988 290 Amortization of Identified Intangibles 1,372 1,614 Goodwill & Intangibles Impaired 9,692 -- Non-Cash Interest Expense 2,950 917 Adjusted Net Income(1) $4,709 $4,694 Depreciation 890 949 Amortization of Capitalized Software 706 244 Cash Interest (Income)/Expense, Net 1,766 2,637 Income Taxes (1,398) 1,403 Adjusted EBITDA(1) $6,673 $9,927 Capital Expenditures (1,912) (1,036) Capitalized Software -- (359) Cash Interest (1,766) (2,637) Free Cash Flow(1) $2,995 $5,895 Net Income per Diluted Share $(0.45) $0.08 Adjustments for Non-Cash Charges Stock-Based Compensation Expense $0.04 $0.01 Amortization of Identified Intangibles $0.06 $0.07 Goodwill & Intangibles Impaired $0.42 -- Non-Cash Interest Expense $0.13 $0.04 Adjusted Net Income per Diluted Share(1) $0.20 $0.21 Q1 2007 Financial Guidance (in thousands, except share and per share data) Q1 2006 Q1 2007 Q1 2007 Actual Guidance Y/Y Guidance Y/Y (unaudited) Low Growth % High Growth % Revenue - Cont. Ops. $12,029 $14,700 22% $14,900 24% Operating Income - Cont. Ops. $2,030 $2,500 23% $2,700 33% Operating Margin 16.9% 17.0% 18.1% Net Income - Cont. Ops. 1,276 1,500 15% 1,600 30% Adj. EBITDA(1) - Cont. Ops. 3,361 4,000 18% 4,200 24% Reconciliation of Adjusted EBITDA to Net Income Net Income - Cont. Ops. $1,276 $1,500 $1,600 Stock-based Compensation Expense 722 600 600 Depreciation 521 700 700 Amortization of Capitalized Software 105 200 200 Interest Expense (46) (20) (20) Income Tax 783 1,020 1,120 Adjusted EBITDA(1) - Cont. Ops. $3,361 $4,000 $4,200 Earnings Per Share Weighted Average Shares - Diluted 23,010,000 23,100,000 23,100,000 Net Income Per Diluted Share - Cont. Ops. $0.06 $0.06 $0.07 Capital Spending - Cont. Ops. 1,317 1,400 1,400 Capitalized Software Dev - Cont. Ops. 308 500 500 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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