ECLG Ecollege Common St (MM)

Company Reports Fourth Quarter EPS of $0.09 and Adjusted EPS of $0.15 CHICAGO, March 13 /PRNewswire-FirstCall/ -- eCollege(R) (NASDAQ:ECLG), a leading provider of value-added information services to the post-secondary education industry, today announced it achieved record revenue of $29.6 million for the fourth quarter ending December 31, 2005, an increase of 21 percent from the same period in the prior year. Fourth quarter revenue included $11.0 million from the Company's eLearning Division, an increase of 19 percent from the prior year, and $18.5 million from the Company's Enrollment Division, an increase of 22 percent from the prior year. Net income for the quarter was $2.0 million ($0.09 per diluted share) compared to reported net income of $17.5 million ($0.80 per diluted share) for the fourth quarter of 2004. Prior year results included two non-operating events that significantly impacted the Company's net income: a net tax benefit of $18.6 million ($0.85 per diluted share) resulting from the reversal of a valuation allowance associated with a deferred tax asset related to net operating loss carry-forwards, and an incremental interest charge of $2.5 million ($0.11 per diluted share) resulting from the prepayment of $10.0 million in original face amount of seller notes. Excluding these two items, net income for the fourth quarter of 2005 grew 47 percent from net income of $1.4 million ($0.06 per diluted share) for the fourth quarter of 2004. "We are very pleased with our strong 21 percent top-line growth in the fourth quarter, consistent with our long-term revenue growth objective of 20 percent," said Oakleigh Thorne, chairman and CEO of eCollege. "We also are extremely proud of our 108 percent free cash flow growth, which demonstrates the tremendous operating leverage in our business and is well ahead of our long-term growth target of 40 percent. We did this while still investing heavily in our business, including product advancements such as our Enhanced Gradebook and the next phase of our Program Intelligence Manager." "Based on the roll out of large new clients at our eLearning Division, and very strong new sales at Datamark, we are reiterating our guidance of 18 to 21 percent revenue growth and 40 to 45 percent free cash flow growth for 2006," Thorne said. "We plan to achieve these results while continuing to invest in the quality and scope of our products through initiatives that include a second data center, internationalization of our software platform and upgraded production capabilities at Datamark." Fourth Quarter 2005 Financial Highlights Revenue eLearning Division revenue for the fourth quarter of 2005 increased 19 percent from the same period in 2004 to $11.0 million. Student fee revenue, which represented 89 percent of the eLearning Division's revenue in the fourth quarter of 2005, increased 18 percent from the fourth quarter of 2004. All other eLearning revenue increased 21 percent from the same period in the prior year, primarily as a result of academic consulting revenue associated with the implementation of new customers. Enrollment Division revenue for the fourth quarter of 2005 increased 22 percent from the same period in 2004 to $18.5 million. Direct mail revenue, which represented 68 percent of the Enrollment Division's revenue in the fourth quarter of 2005, increased 26 percent from the fourth quarter of 2004. Interactive revenue, which represented 25 percent of the Enrollment Division's revenue in the fourth quarter of 2005, increased 21 percent from the fourth quarter of 2004. Gross Margin Gross margin declined to 43 percent for the fourth quarter of 2005 from 46 percent for the same period in 2004. The decline resulted primarily from the recording of a $485 thousand accounting charge related to sales tax exposure evaluated as part of the Company's Sarbanes-Oxley remediation efforts. Other factors contributing to the decrease in gross margin included increased direct mail costs and the timing of other marketing costs at the Company's Enrollment Division, as well as increased software amortization expenses. Income from Operations Income from operations for the fourth quarter of 2005 was $3.9 million, an increase of 54 percent from the fourth quarter of 2004. Excluding the impact of the sales tax charge discussed above, income from operations increased 73 percent. Operating Margin Operating margin increased to 13.2 percent for the fourth quarter of 2005 from 10.4 percent for the same period in the prior year. Excluding the impact of the sales tax charge, operating margin for the fourth quarter of 2005 was 14.8 percent. Operating margin adjusted for stock-based compensation expense was 15.8 percent, or 17.5 percent excluding the impact of the sales tax charge. This compares to 14.3 percent for the same period in the prior year. Net Income Before Taxes Net income before taxes for the fourth quarter of 2005 was $3.1 million, an increase of 389 percent from the fourth quarter of 2004. Results for 2004 included an incremental interest charge of $2.5 million related to the prepayment of $10.0 million in original face value of seller notes. Excluding the impact of the interest charge associated with the debt prepayment, net income before taxes for the fourth quarter of 2005 increased 117 percent from the fourth quarter of 2004. Income Taxes The tax provision for the fourth quarter of 2005 was $1.1 million, which reflects an effective tax rate for the quarter of 35 percent. This compares to a net tax benefit of $18.6 million for the same period in the prior year. The fourth quarter of 2004 included a tax benefit resulting from the reversal of a valuation allowance associated with a deferred tax asset related to approximately $66.0 million in net operating loss carry-forwards. The tax provision for the fourth quarter of 2005 included a $294 thousand reduction related to adjustments associated with the tax benefit and provision calculation. Net Income Net income for the fourth quarter of 2005 was $2.0 million ($0.09 per diluted share) compared to $17.5 million ($0.80 per diluted share) for the same period in the prior year. Excluding the impact of the net tax benefit of $18.6 million and the interest charge associated with the debt prepayment, net income for the fourth quarter of 2004 was $1.4 million ($0.06 per diluted share). Adjusted Net Income In the fourth quarter of 2005, the Company recorded non-cash charges of $1.4 million, including expenses related to stock-based compensation, amortization of identifiable intangible assets associated with the Datamark acquisition and the accretion of the discount on the Company's debt (non-cash interest expense). After adding these items back to GAAP net income, adjusted net income was $3.4 million ($0.15 per diluted share) for the fourth quarter of 2005 compared to adjusted net income of $21.4 million ($0.98 per diluted share) for the fourth quarter of 2004. Excluding the impact of the net tax benefit of $18.6 million and the interest charge associated with the debt prepayment, adjusted net income for the fourth quarter of 2004 was $2.8 million ($0.13 per diluted share). Differences between the Company's GAAP net income and adjusted net income and adjusted net income per diluted share are further explained in the financial table that accompanies the unaudited Condensed Consolidated Statements of Operations included in this press release. Free Cash Flow and Capital Expenditures For the fourth quarter of 2005, the Company generated free cash flow of $4.9 million, up 108 percent from $2.4 million for the fourth quarter of 2004. Free cash flow, an alternative non-GAAP measure of liquidity, is defined as adjusted EBITDA (adjusted net income plus cash interest, income taxes, depreciation and amortization of capitalized software) less cash interest and capital expenditures. Capital expenditures, including capitalized software development costs, were $461 thousand for the fourth quarter of 2005, compared to $1.1 million for the same period in 2004. Cash interest expense was $590 thousand for the fourth quarter of 2005, compared to $1.1 million for the fourth quarter of 2004. Differences between the Company's GAAP net income and free cash flow are further explained in the financial table that accompanies the unaudited Condensed Consolidated Statements of Operations included in this press release. Full-Year 2005 Financial Highlights Results of Operations For the full year 2005, consolidated revenue was $102.9 million, an increase of 15 percent from 2004. Gross margin was 48 percent, unchanged from 2004, primarily as the result of the sales and use tax expenses of $485 thousand and increased software amortization expense. Operating income was $13.5 million, an increase of 64 percent from 2004. Adjusted net income was $11.3 million, a decrease of $16.6 million from 2004. After excluding from 2004 results the net tax benefit of $18.6 million and the interest charge associated with the debt prepayment, adjusted net income decreased by $500 thousand from 2004 to 2005, primarily due to decreased stock-based compensation expense. Free cash flow was $13.7 million for 2005, an increase of 84 percent from 2004. These results were in line with the 2005 full-year guidance previously provided by the Company. Balance Sheet As of December 31, 2005, the Company had cash of $23.0 million as compared to $16.2 million at September 30, 2005 and $8.2 million at December 31, 2004. As of December 31, 2005, the Company's debt consisted of $2.0 million in original face amount of seller notes and $20.0 million in original face amount of senior subordinated debt. Operating Highlights * For the 2005 fall academic term, which impacts both the third and fourth quarters, the total number of distance student enrollments supported by the eLearning Division was approximately 280,000, up 61 percent from approximately 174,000 distance student enrollments in the fall term of 2004. * The Company's eLearning Division signed seven new platinum customers in 2005, ahead of internal plans. * Cross sell revenues totaled $7.3 million for 2005, up from $5.0 million in 2004. * Average annualized revenue per client at the eLearning Division was $238 thousand in the fourth quarter of 2005, an increase of 18 percent from $202 thousand in the fourth quarter of 2004. * Total media under management (defined as customers' gross media spending for direct mail, interactive and other media managed by Datamark), totaled approximately $30 million for the fourth quarter of 2005, an increase of 64 percent from the same quarter last year. 2006 Financial Guidance and Outlook The Company is reiterating the full-year guidance it provided on December 15, 2005, and is providing the following guidance for the first quarter and initial outlook for the second quarter: * First quarter revenue of $26.7 million to $27.0 million, growth of 12 to 13 percent from the first quarter of 2005. The Company expects approximately 55 percent to come from the Enrollment Division and approximately 45 percent to come from the eLearning Division. * Second quarter revenue of $28 million to $28.8 million, growth of 21 to 25 percent from the second quarter of 2005. * First quarter income from operations of $2.4 million to $2.7 million. * First quarter net income of $900 thousand to $1.1 million (EPS of $0.04 to $0.05 based on an estimated 22.8 million diluted shares), assuming an effective tax rate of 43 percent. * First quarter adjusted net income of $2.4 million to $2.7 million (adjusted net income per diluted share of $0.11 to $0.12), which reflects adjustments of approximately $1.6 million for non-cash expenses including stock-based compensation, amortization of intangibles and non-cash interest expense. * First quarter free cash flow of $1.4 million to $1.7 million, reflecting cash interest expense of approximately $600 thousand and capital expenditures (including capitalized software development costs) of approximately $2.7 million. First quarter guidance for adjusted net income, adjusted net income per diluted share and free cash flow is reconciled in the accompanying financial tables. Conference Call eCollege will hold a conference call to discuss its fourth quarter and full-year 2005 financial results at 9:00 a.m. Central time (10:00 a.m. Eastern time) on March 13, 2006. 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 noon Central time (1:00 p.m. Eastern time) on March 13, 2006 until 11 p.m. Central time (midnight Eastern time) on March 20, 2006. To listen to the replay, participants should dial 800-642-1687. The conference ID for the replay is 5509762. 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 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," "net income excluding non-operating events," "adjusted EBITDA," "free cash flow" and "adjusted income from operations" 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, December 31, 2005 2004 Current Assets: Cash and Cash Equivalents $ 23,037 $ 8,223 Accounts Receivable and Other Current Assets 18,667 15,538 Total Current Assets 41,704 23,761 Property and Equipment (Net), Software Development Costs (Net) and Other Assets 10,074 8,752 Identified Intangible Assets (Net) 8,745 10,359 Deferred Tax Asset 18,806 19,846 Goodwill 54,745 55,097 Total Assets $134,074 $117,815 Current Liabilities: Accounts Payable and Accrued Liabilities $ 14,923 $ 14,340 Deferred Revenue and Customer Advances 3,766 3,790 Current Portion of Capital Lease Obligation 320 136 Current Portion of Long-Term Debt 0 1,000 Total Current Liabilities 19,009 19,266 Deferred Revenue 26 67 Other Liabilities and Capital Lease Obligation 572 543 Long-Term Debt ($20 million face value) 18,366 18,434 Seller Notes Payable ($2 million face value) 1,657 1,589 Total Liabilities 39,630 39,899 Common Stock and Additional Paid In Capital, Less Treasury Stock 140,015 127,798 Warrants, Options and Deferred Compensation (Net) 6,980 8,597 Accumulated Deficit (52,551) (58,479) Total Shareholders' Equity 94,444 77,916 Total Liabilities and Shareholders' Equity $134,074 $117,815 eCollege Condensed Consolidated Statements of Operations Unaudited (in thousands, except per share data) For the Three Months Ended For the Twelve Months Ended December 31, December 31, December 31, December 31, 2005 2004 2005 2004 Revenue eLearning Revenue $11,032 $ 9,300 $41,457 $34,781 Enrollment Marketing Revenue 18,532 15,129 61,411 54,486 Total Revenue 29,564 24,429 102,868 89,267 Cost of Revenue 16,800 13,074 53,976 46,780 Gross Profit 12,764 11,355 48,892 42,487 Research and Development 1,829 1,611 7,249 6,635 Sales and Marketing 2,730 2,435 10,178 9,878 General and Administrative 3,891 4,407 16,317 16,213 Amortization of Intangible Assets 414 373 1,613 1,492 Total Operating Costs and Expenses 8,864 8,826 35,357 34,218 Income from Operations 3,900 2,529 13,535 8,269 Interest and Other Income (Expense), Net (824) (1,114) (3,515) (4,927) Loss from Early Repayment of Debt 0 (2,479) 0 (2,479) Income (Loss) Before Income Taxes 3,076 (1,064) 10,020 863 Income Tax (Expense) Benefit (1,074) 18,598 (4,092) 18,497 Net Income $ 2,002 $17,534 $ 5,928 $19,360 Basic Net Income Per Share $ 0.09 $ 0.85 $ 0.27 $ 0.95 Diluted Net Income Per Share $ 0.09 $ 0.80 $ 0.26 $ 0.88 Shares Used in Computing Basic Net Income Per Share 21,942 20,668 21,729 20,358 Shares Used in Computing Diluted Net Income Per Share 22,773 21,839 22,405 21,996 Reconciliation of Adjusted Income from Operations to Income from Operations(1): Income from Operations $ 3,900 $ 2,529 $13,535 $ 8,269 Stock-Based Compensation Expense 782 967 2,840 3,820 Adjusted Income from Operations $ 4,682 $ 3,496 $16,375 $ 12,089 Reconciliation of Adjusted Net Income, Adjusted EBITDA and Free Cash Flow to Net Income(1): Net Income $ 2,002 $17,534 $ 5,928 $ 19,360 Adjustments for Non-Cash Charges Stock-Based Compensation Expense 782 967 2,840 3,820 Amortization of Identified Intangibles 414 373 1,614 1,492 Non-Cash Interest Expense 233 2,536 917 3,200 Adjusted Net Income(1) $ 3,431 $21,410 $11,299 $27,872 Depreciation 731 629 2,702 2,438 Amortization of Capitalized Software 158 34 583 325 Cash Interest (Income)/ Expense, Net 590 1,057 2,598 4,171 Income Taxes 1,074 (18,598) 4,092 (18,497) Adjusted EBITDA(1) $ 5,984 $ 4,532 $21,274 $16,309 Capital Expenditures 362 317 3,606 2,848 Capitalized Software 99 783 1,339 1,809 Cash Interest 590 1,057 2,598 4,171 Free Cash Flow(1) $ 4,933 $ 2,375 $13,731 $ 7,481 For the Three Months Ended For the Twelve Months Ended December 31, December 31, December 31, December 31, 2005 2004 2005 2004 Reconciliation of Adjusted Net Income per Diluted Share to Net Income per Diluted Share (1): Net Income per Diluted Share $0.09 $0.80 $0.26 $0.88 Adjustments for Non-Cash Charges Stock-Based Compensation Expense 0.03 0.04 0.13 0.17 Amortization of Identified Intangibles 0.02 0.02 0.07 0.07 Non-Cash Interest Expense 0.01 0.12 0.04 0.15 Adjusted Net Income per Diluted Share(1) $0.15 $0.98 $0.50 $1.27 (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. eCollege Reconciliation of GAAP to Adjusted (Non-GAAP) Condensed Consolidated Statements of Operations Unaudited (in thousands, except per share date) For the Three Months Ended For the Three Months Ended December 31, 2005 December 31, 2004 Non-GAAP Non-GAAP Actual Adj. Results Actual Adj. Results Revenue eLearning Revenue $11,032 -- $11,032 $ 9,300 -- $ 9,300 Enrollment Marketing Revenue 18,532 -- 18,532 15,129 -- 15,129 Total Revenue 29,564 -- 29,564 24,429 -- 24,429 Cost of Revenue 16,800 (485) 16,315 13,074 -- 13,074 Gross Profit 12,764 485(2) 13,249 11,355 -- 11,355 Research and Development 1,829 -- 1,829 1,611 -- 1,611 Sales and Marketing 2,730 -- 2,730 2,435 -- 2,435 General and Administrative 3,891 -- 3,891 4,407 -- 4,407 Amortization of Intangible Assets 414 -- 414 373 -- 373 Total Operating Costs and Expenses 8,864 -- 8,864 8,826 -- 8,826 Income from Operations 3,900 485(2) 4,385 2,529 -- 2,529 Interest and Other Income (Expense), Net (824) -- (824) (1,114) -- (1,114) Loss from Early Repayment of Debt -- -- -- (2,479) 2,479(4) -- Income (Loss) Before Income Taxes 3,076 485(2) 3,561 (1,064) 2,479(4) 1,415 Income Tax (Expense) Benefit (1,074) (488)(2,3)(1,562) 18,598 (18,648)(5) (50) Net Income $ 2,002 $(3) $1,999 $17,534 $(16,169) $1,365 Basic Net Income Per Share $ 0.09 -- $ 0.09 $ 0.85 $ (0.78) $ 0.07 Diluted Net Income Per Share $ 0.09 -- $ 0.09 $ 0.80 $ (0.74) $ 0.06 Shares Used in Computing Basic Net Income Per Share 21,942 -- 21,942 20,668 -- 20,668 Shares Used in Computing Diluted Net Income Per Share 22,773 -- 22,773 21,839 -- 21,839 (2) To adjust for sales and use tax charge. (3) To adjust for adjustments to tax provision. (4) To adjust for interest charge related to prepayment of $10.0 million original face amount of seller notes. (5) To adjust for net tax benefit related to reversal of a valuation allowance associated with a deferred tax asset. eCollege Reconciliation of GAAP to Adjusted (Non-GAAP) Condensed Consolidated Statements of Operations (Cont.) Unaudited (in thousands, except per share date) For the Three Months Ended For the Three Months Ended December 31, 2005 December 31, 2004 Non-GAAP Non-GAAP Actual Adj. Results Actual Adj. Results Reconciliation of Adjusted Income from Operations to Income from Operations(1): Income from Operations $3,900 $485(2) $4,385 $ 2,529 -- $2,529 Stock-Based Compensation Expense 782 -- 782 967 -- 967 Adjusted Income from Operations $4,682 485 $5,167 $ 3,496 -- $3,496 Reconciliation of Adjusted Net Income, Adjusted EBITDA and Free Cash Flow to Net Income(1): Net Income $2,002 $ (3) $1,999 $17,534 ($16,169) $1,365 Adjustments for Non-Cash Charges Stock-Based Compensation Expense 782 -- 782 967 -- 967 Amortization of Identified Intangibles 414 -- 414 373 -- 373 Non-Cash Interest Expense 233 -- 233 2,536 (2,479)(4) 57 Adjusted Net Income(1) $3,431 $ (3) $3,428 $21,410 $(18,648) $2,762 Depreciation 731 -- 731 629 -- 629 Amortization of Capitalized Software 158 -- 158 34 -- 34 Cash Interest (Income)/ Expense, Net 590 -- 590 1,057 -- 1,057 Taxes on Income 1,074 488 1,562 (18,598) 18,648 50 Adjusted EBITDA(1) $5,984 $485 $6,469 $ 4,532 -- $4,532 Capital Expenditures 362 -- 362 317 -- 317 Capitalized Software 99 -- 99 783 -- 783 Cash Interest 590 -- 590 1,057 -- 1,057 Free Cash Flow(1) $4,933 $485 $5,418 $2,375 -- $2,375 For the Three Months Ended For the Twelve Months Ended December 31, December 31, December 31, December 31, 2005 2004 2005 2004 Reconciliation of Adjusted Net Income per Diluted Share to Net Income per Diluted Share (1): Net Income per Diluted Share $0.09 $0.80 $0.26 $0.88 Adjustments for Non-Cash Charges Stock-Based Compensation Expense 0.03 0.04 0.13 0.17 Amortization of Identified Intangibles 0.02 0.02 0.07 0.07 Non-Cash Interest Expense 0.01 0.12 0.04 0.15 Adjusted Net Income per Diluted Share(1) $0.15 $0.98 $0.50 $1.27 eCollege Condensed Consolidated Statement of Cash Flows Unaudited (in thousands) For the Three Months Ended For the Twelve Months Ended December 31, December 31, December 31, December 31, 2005 2004 2005 2004 Cash Flows from Operating Activities: Net Income $ 2,002 $17,534 $ 5,928 $19,360 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 731 629 2,702 2,438 Amortization of Capitalized Software 158 34 583 325 Amortization of Intangible Assets 414 373 1,614 1,492 Stock-Based Compensation 782 967 2,840 3,820 Deferred Income Taxes 608 (18,716) 3,529 (18,716) Other (Net) (31) 1,597 1,073 3,539 Changes In: Accounts Receivable 4,583 4,508 (2,805) (3,613) Accounts Payable and Accrued Liabilities 1,604 (1,301) 854 3,668 Deferred Revenue (4,630) (3,489) (64) 1,261 Other Changes in Assets and Liabilities (Net) 607 2,348 (144) 1,590 Net Cash Provided by Operating Activities 6,828 4,484 16,110 15,164 Cash Flows from Investing Activities: Purchases of Property and Equipment (362) (317) (3,606) (2,848) Datamark Acquisition 353 (53) 353 (208) Capitalized Software Development Costs (99) (783) (1,339) (1,809) Other (Net) (510) Net Cash Used in Investing Activities (108) (1,153) (4,592) (5,375) Cash Flows from Financing Activities Proceeds from Issuance of Common Stock 237 602 4,927 2,551 Stock Issuance Costs -- -- -- (10) Proceeds/Payments from (on) Leasing Arrangements (Net) (76) (32) 286 284 Proceeds/Payments from (on) Term Loan (Net) -- (250) (1,917) (1,000) Proceeds/Payments from (on) Line of Credit (Net) -- (9,688) -- (9,365) Proceeds/Payments from (on) Senior Subordinated Notes (Net) -- (10,000) -- (10,000) Net Cash Provided by Financing Activities 161 (19,368) 3,296 (17,540) Net Increase (Decrease) in Cash and Cash Equivalents 6,881 (16,037) 14,814 (7,751) Cash and Cash Equivalents, Beginning of Period 16,156 24,260 8,223 15,974 Cash and Cash Equivalents, End of Period $23,037 $ 8,223 $23,037 $8,223 Reconciliation of GAAP Net Income and Net Income per Diluted Share Guidance to Adjusted Net Income, Adjusted Net Income per Diluted Share and Free Cash Flow Guidance For the Three Months Ending March 31, 2006 Range ($ Thousands) Per Share Net Income Guidance $900 to $1,100 $0.04 to $0.05 Adjustments for Non-Cash Charges Stock-Based Compensation Expense $900 $0.04 Amortization of Identified Intangibles $400 $0.02 Non-Cash Interest Expense $300 $0.01 Adjusted Net Income Guidance(1) $2,500 to $2,700 $0.11 to $0.12 Depreciation $800 Amortization of Capitalized Software $100 Cash Interest (Income)/Expense, Net $600 Taxes on Income $700 to $800 Adjusted EBITDA(1) $4,700 to $5,000 Capital Expenditures $2,400 Capitalized Software $300 Cash Interest $600 Free Cash Flow Guidance(1) $1,400 to $1,700 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/ http://www.datamark.com/

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