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Ellie Mae Reports First Quarter 2016 Results

April 28, 2016 at 4:05 PM EDT

Record Revenue Up 36% to $73.6 Million

Raises 2016 Guidance

PLEASANTON, Calif.--(BUSINESS WIRE)--Apr. 28, 2016-- Ellie Mae® (NYSE:ELLI), a leading provider of innovative on-demand software solutions and services for the residential mortgage industry, today reported results for the first quarter ended March 31, 2016.

First Quarter 2016 Highlights

  • Record revenue of $73.6 million, up 36% from $54.2 million in Q1 2015
  • Adjusted EBITDA of $15.6 million, up 7% from $14.6 million in Q1 2015
  • Net income of $2.5 million, compared to $3.6 million in Q1 2015
  • 15,000 Encompass seats booked
  • Revenue per average active Encompass® user of $522, up 10% from $474 in Q1 2015

“We had a great start to the year with continued momentum across our business,” said Jonathan Corr, president and CEO of Ellie Mae. “In addition to growing revenue by 36% in the face of a 10% decline in origination volume, we continued to see robust adoption throughout the lender community. Seat bookings for Encompass were an impressive 15,000 in the first quarter. In March, we welcomed more than 2,200 industry professionals to our largest ever Ellie Mae user conference, Experience, where we introduced three new solutions in the areas of compliance, CRM and mobile, continuing our focus on innovation to help customers grow their businesses. With this strong foundation, we are raising our 2016 guidance.”

Financial Results

Total revenue for the first quarter of 2016 was $73.6 million, compared to $54.2 million for the first quarter of 2015. Net income for the first quarter of 2016 was $2.5 million, or $0.08 per diluted share, compared to net income of $3.6 million, or $0.12 per diluted share, for the first quarter of 2015.

On a non-GAAP basis, adjusted net income for the first quarter of 2016 was $10.7 million, or $0.34 per diluted share, compared to $9.9 million, or $0.33 per diluted share, for the first quarter of 2015. Adjusted EBITDA for the first quarter of 2016 was $15.6 million, compared to $14.6 million for the first quarter of 2015.

Additional information about the non-GAAP financial measures presented in this release, including a reconciliation of the non-GAAP financial measures to their related GAAP financial measures, is set forth below under the section entitled “Use of Non-GAAP Financial Measures.”

Key Operating Metrics:

  • The total number of active Encompass users increased 22% year-over-year to 144,533;
  • Contracted revenue increased 44% year-over-year to $46.0 million; and
  • Revenue per average active Encompass user in the first quarter increased 10% year-over-year to $522.

Second Quarter and Full Year 2016 Financial Outlook

For the second quarter of 2016, our revenue is expected to be in the range of $84.0 million to $86.0 million. Net income is expected to be $7.5 million to $8.0 million, or $0.24 to $0.25 per diluted share. Adjusted net income is expected to be in the range of $16.6 million to $17.6 million, or $0.53 to $0.56 per diluted share. Adjusted EBITDA is expected to be in the range of $25.5 million to $27.0 million.

For the full year 2016, revenue is expected to be in the range of $325.0 million to $329.0 million, up from the previously provided range of $317.0 million to $321.0 million. Net income is expected to be $23.5 million to $25.5 million, or $0.74 to $0.80 per diluted share, up from the previously provided range of $22.2 million to $24.2 million, or $0.71 to $0.76 per diluted share. Adjusted net income is expected to be in the range of $58.4 million to $61.4 million, or $1.84 to $1.92 per diluted share, up from the previously provided range of $56.1 million to $59.1 million, or $1.79 to $1.86 per diluted share. Adjusted EBITDA is expected to be in the range of $93.0 million to $97.5 million, up from the previously provided range of $90.0 million to $94.5 million.

Quarterly Conference Call

Ellie Mae will discuss its first quarter 2016 results today, April 28, 2016, via teleconference at 4:30 p.m. Eastern Time. To access the call, please dial 877-876-9176 or 785-424-1667 at least five minutes prior to the 4:30 p.m. Eastern Time start time. A live webcast of the call will be available on the Investor Relations section of the Company’s website at http://ir.elliemae.com. An audio replay of the call will be available through May 12, 2016 by dialing 888-203-1112 or 719-457-0820 and entering access code 8415904.

Use of Non-GAAP Financial Measures

Ellie Mae (the “Company”) provides investors with the non-GAAP financial measures of adjusted net income, adjusted EBITDA, and free cash flow in addition to the traditional GAAP operating performance measure of net income as part of its overall assessment of its performance. Adjusted net income consists of net income plus amortization of intangible assets and stock-based compensation expense. EBITDA consists of net income plus depreciation, amortization of intangible assets, and income tax provision, less other income, net. Adjusted EBITDA consists of EBITDA plus stock-based compensation expense. Free cash flow consists of net cash provided by (used in) operating activities less acquisition of property and equipment and internal-use software, net. Ellie Mae uses adjusted net income and adjusted EBITDA as measures of operating performance because they enable period to period comparisons by excluding potential differences caused by variations in the age and depreciable lives of fixed assets, the amortization of intangibles related to acquisitions, loss on impairment of intangible assets, and changes in interest expense and interest income that are influenced by capital market conditions. The Company also believes it is useful to exclude stock-based compensation expense from adjusted net income and adjusted EBITDA because the amount of non-cash expense associated with stock-based awards made at certain prices and points in time (a) do not necessarily reflect how the company’s business is performing at any particular time and (b) can vary significantly between periods due to the timing of new stock-based awards. These non-GAAP measures are not measurements of the Company’s financial performance under GAAP and have limitations as analytical tools. Accordingly, these non-GAAP financial measures should not be considered a substitute for, or superior to, net income or operating income or other financial measures calculated in accordance with GAAP. The Company cautions that other companies in Ellie Mae’s industry may calculate adjusted net income, EBITDA, adjusted EBITDA, and free cash flow differently than the Company does, further limiting their usefulness as a comparative measure. A reconciliation of net income to adjusted net income, EBITDA, adjusted EBITDA, and operating cash flow to free cash flow are included in the tables below.

Disclosure Information

Ellie Mae uses the investor relations section on its website as means of complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor Ellie Mae’s investor relations website in addition to following Ellie Mae’s press releases, SEC filings, and public conference calls and webcasts.

About Ellie Mae

Ellie Mae (NYSE:ELLI) is a leading provider of innovative on-demand software solutions and services for the residential mortgage industry. Mortgage lenders of all sizes use Ellie Mae’s Encompass® all-in-one mortgage management solution, Mavent Compliance Service, and AllRegs research, reference and education resources to improve compliance, loan quality and efficiency across the entire mortgage lifecycle. Visit EllieMae.com or call (877) 355-4362 to learn more.

Forward-Looking Statements

This press release contains forward-looking statements under the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These forward-looking statements include projected revenue, net income (loss), adjusted EBITDA, and adjusted net income for the second quarter and fiscal year 2016. These statements involve known and unknown risks, uncertainties, and other factors which may cause Ellie Mae’s results to be materially different than those expressed or implied in such statements. Such differences may be based on factors such as changes in the volume of residential mortgages in the United States; changes in other macroeconomic factors affecting the residential real estate industry; changes in strategic planning decisions by management; our ability to manage growth and expenses as we continue to scale our business; reallocation of internal resources; costs incurred and delays in developing new products; changes in anticipated rates of SaaS seat additions, and new customer acquisitions; the possibility that economic benefits of future opportunities may never materialize, including unexpected variations in market growth and demand for the acquired products and technologies; delays and disruptions, including changing relationships with partners, customers, employees or suppliers; the satisfactory performance, reliability and availability of our products and services; the amount of costs incurred in connection with supporting and integrating new customers and partners; ongoing personnel and logistical challenges of managing a larger organization; changes in other macroeconomic factors affecting the residential real estate industry and other risk factors included in documents that Ellie Mae has filed with the Securities and Exchange Commission, including but not limited to its Annual Report on Form 10-K for the year ended December 31, 2015 as updated from time to time by our quarterly reports on Form 10-Q and our other filings with the Securities and Exchange Commission. Other unknown or unpredictable factors also could have material adverse effects on Ellie Mae’s future results. The forward-looking statements included in this press release are made only as of the date hereof. Ellie Mae cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, Ellie Mae expressly disclaims any intent or obligation to update any forward-looking statements to reflect subsequent events or circumstances, unless otherwise required by law.

© 2016 Ellie Mae, Inc. Ellie Mae®, Encompass®, AllRegs®, DataTrac®, Ellie Mae Network™, Mavent®, Mortgage Returns®, Prospect Manager®, Total Quality Loan®, True CRM®, TQL® and the Ellie Mae logo are trademarks of Ellie Mae, Inc. or its subsidiaries. All rights reserved. Other company and product names may be trademarks or copyrights of their respective owners.

             
Ellie Mae, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share amounts)
             
     

March 31,

    December 31,
      2016     2015
Assets            
Current assets:            
Cash and cash equivalents     $ 28,540     $ 34,396  
Short-term investments       43,122       48,975  
Accounts receivable, net of allowances for doubtful accounts of $141 and $124 as of March 31, 2016 and December 31, 2015, respectively       39,474       28,568  
Prepaid expenses and other current assets       11,472       9,874  
Total current assets       122,608       121,813  
Property and equipment, net       96,673       81,360  
Long-term investments       42,292       55,473  
Intangible assets, net       21,353       22,810  
Deposits and other assets       9,281       8,888  
Goodwill       74,547       74,547  
Total assets     $ 366,754     $ 364,891  
Liabilities and Stockholders’ Equity            
Current liabilities:            
Accounts payable     $ 8,910     $ 9,911  
Accrued and other current liabilities       22,107       37,307  
Deferred revenue       17,009       15,864  
Total current liabilities       48,026       63,082  
Leases payable, net of current portion       571       685  
Other long-term liabilities       11,206       10,273  
Total liabilities       59,803       74,040  
             
Stockholders’ equity:            
Common stock, $0.0001 par value per share; 140,000,000 authorized shares, 29,971,612 and 29,566,511 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively       3       3  
Additional paid-in capital       298,607       285,342  
Accumulated other comprehensive income (loss)       71       (257 )
Retained earnings       8,270       5,763  
Total stockholders’ equity       306,951       290,851  
Total liabilities and stockholders’ equity     $ 366,754     $ 364,891  
                   
             
Ellie Mae, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands, except share and per share amounts)
             
      Three Months ended March 31,
      2016     2015
Revenues     $ 73,625     $ 54,189
Cost of revenues(1)       26,631       17,350
Gross profit       46,994       36,839
Operating expenses:            
Sales and marketing(1)       15,287       9,760
Research and development(1)       12,453       8,297
General and administrative(1)       15,731       12,302
Total operating expenses       43,471       30,359
Income from operations       3,523       6,480
Other income, net       199       132
Income before income taxes       3,722       6,612
Income tax provision       1,216       3,028
Net income     $ 2,506     $ 3,584
Net income per share of common stock:            
Basic     $ 0.09     $ 0.12
Diluted     $ 0.08     $ 0.12
Weighted average common shares used in computing net income per share of common stock:            
Basic       29,471,214       28,768,144
Diluted       31,080,314       30,442,163
             
Net income     $ 2,506     $ 3,584
Other comprehensive income, net of taxes:            
Unrealized gain on investments       328       171
Comprehensive income     $ 2,834     $ 3,755
             
(1) Includes stock-based compensation expense of the following for the periods presented:            
             
Cost of revenues     $ 970     $ 615
Sales and marketing       878       517
Research and development       1,504       1,147
General and administrative       3,338       2,728
      $ 6,690     $ 5,007
             
             
Ellie Mae, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
             
      Three Months ended March 31,
      2016     2015
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net income     $ 2,506       $ 3,584  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation       3,954         1,767  
Provision for uncollectible accounts receivable       33         38  
Amortization of intangible assets       1,457         1,332  
Stock-based compensation expense       6,690         5,007  
Excess tax benefit from stock-based compensation               (2,906 )
Deferred income taxes       1,172          
Loss on disposal of property and equipment       5          
Amortization of investment premium       239         275  
Changes in operating assets and liabilities:            
Accounts receivable       (10,939 )       (5,188 )
Prepaid expenses and other current assets       (1,598 )       3,007  
Deposits and other assets       (1,565 )        
Accounts payable       625         379  
Accrued, other current and other liabilities       (13,817 )       846  
Deferred revenue       1,178         2,805  
Net cash provided by (used in) operating activities       (10,060 )       10,946  
CASH FLOWS FROM INVESTING ACTIVITIES:            
Acquisition of property and equipment       (13,298 )       (10,253 )
Acquisition of internal-use software       (7,112 )       (5,762 )
Purchases of investments       (18,971 )       (15,816 )
Maturities of investments       18,094         15,665  
Sale of investments       20,000          
Net cash used in investing activities       (1,287 )       (16,166 )
CASH FLOWS FROM FINANCING ACTIVITIES:            
Payment of capital lease obligations       (868 )       (1,320 )
Proceeds from issuance of common stock under employee stock plans       6,719         5,071  
Payments for repurchase of common stock               (2,520 )
Tax payments related to shares withheld for vested restricted stock units       (360 )       (320 )
Excess tax benefit from stock-based compensation               2,906  
Net cash provided by financing activities       5,491         3,817  
NET DECREASE IN CASH AND CASH EQUIVALENTS       (5,856 )       (1,403 )
CASH AND CASH EQUIVALENTS, Beginning of period       34,396         26,756  
CASH AND CASH EQUIVALENTS, End of period     $ 28,540       $ 25,353  
Supplemental disclosure of cash flow information:            
Cash paid for interest     $ 79       $ 33  
Cash paid for income taxes     $ 97       $ 50  
Supplemental disclosure of non-cash investing and financing activities:            
Fixed asset purchases accrued but not paid     $ 2,036       $ 2,628  
Stock-based compensation capitalized to property and equipment     $ 488       $ 207  
Acquisition of property and equipment under capital leases     $       $ 5,996  
             
             
Ellie Mae, Inc.
NON-GAAP RECONCILIATION
(UNAUDITED)
(in thousands, except share and per share amounts)
             
      Three Months ended March 31,
      2016     2015
Net income     $ 2,506       $ 3,584  
Depreciation       3,954         1,767  
Amortization of intangible assets       1,457         1,332  
Other income, net       (199 )       (132 )
Income tax provision       1,216         3,028  
EBITDA       8,934         9,579  
             
Stock-based compensation expense       6,690         5,007  
Adjusted EBITDA     $ 15,624       $ 14,586  
             
Net income     $ 2,506       $ 3,584  
Stock-based compensation expense       6,690         5,007  
Amortization of intangible assets       1,457         1,332  
Adjusted net income     $ 10,653       $ 9,923  
             
Shares used to compute non-GAAP net income per share            
Basic       29,471,214         28,768,144  
Diluted       31,080,314         30,442,163  
             
Adjusted net income per share            
Basic     $ 0.36       $ 0.34  
Diluted     $ 0.34       $ 0.33  
             
Net cash provided by (used in) operating activities     $ (10,060 )     $ 10,946  
Acquisition of property and equipment and internal-use software, net       (20,410 )       (16,015 )
Free cash flow     $ (30,470 )     $ (5,069 )
                     
                         
Ellie Mae, Inc.
NON-GAAP RECONCILIATION
(UNAUDITED)
(in thousands, except share and per share amounts)
                         
     

Second Quarter 2016 Projected Range

    Fiscal 2016 Projected Range
Net income     $ 7,500     $ 8,000     $ 23,500     $ 25,500
                         
Depreciation       4,400       4,600       19,000       19,800
Amortization of intangible assets       1,500       1,500       5,900       5,900
Income tax provision/other       4,500       4,800       15,600       16,300
EBITDA       17,900       18,900       64,000       67,500
                         
Stock-based compensation expense       7,600       8,100       29,000       30,000
Adjusted EBITDA     $ 25,500     $ 27,000     $ 93,000     $ 97,500
                         
Net income     $ 7,500     $ 8,000     $ 23,500     $ 25,500
Stock-based compensation expense       7,600       8,100       29,000       30,000
Amortization of intangible assets       1,500       1,500       5,900       5,900
Adjusted net income     $ 16,600     $ 17,600     $ 58,400     $ 61,400
                         
Shares used to compute non-GAAP net income per share                        
Basic       29,700,000       29,800,000       30,300,000       30,500,000
Diluted       31,400,000       31,500,000       31,800,000       32,000,000
                         
Projected net income per share                        
Basic     $ 0.25     $ 0.27     $ 0.78     $ 0.84
Diluted     $ 0.24     $ 0.25     $ 0.74     $ 0.80
                         
Adjusted net income per share                        
Basic     $ 0.56     $ 0.59     $ 1.93     $ 2.01
Diluted     $ 0.53     $ 0.56     $ 1.84     $ 1.92

 

Source: Ellie Mae, Inc.

IR CONTACTS:
Ellie Mae, Inc.
Alex Hughes, 925-227-7079
VP of Investor Relations
IR@elliemae.com
or
The Blueshirt Group for Ellie Mae, Inc.
Lisa Laukkanen, 415-217-4967
lisa@blueshirtgroup.com
or
PRESS CONTACT:
Ellie Mae, Inc.
Erica Harvill, 925-227-5913
Erica.harvill@elliemae.com