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Ellie Mae Reports Fourth Quarter and Full Year 2016 Results

February 9, 2017 at 4:06 PM EST

Fiscal Year 2016 Revenue Up 42% to $360.3 Million

Record Annual Seat Bookings of 52,800

PLEASANTON, Calif.--(BUSINESS WIRE)--Feb. 9, 2017-- 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 fourth quarter and full year ended December 31, 2016.

Fourth Quarter 2016 Highlights

  • Revenue of $96.2 million, up 48% from $64.9 million in 2015
  • Net income of $10.9 million, up 126% from $4.8 million in 2015
  • Adjusted EBITDA of $29.4 million, up 72% from $17.1 million in 2015
  • 12,000 Encompass seats booked
  • Revenue per average active Encompass® user of $587, up 24% from $475 in 2015

Full Year 2016 Highlights

  • Revenue of $360.3 million, up 42% from $253.9 million in 2015
  • Net income of $37.8 million, up 70% from $22.3 million in 2015
  • Adjusted EBITDA of $113.1 million, up 51% from $74.7 million in 2015
  • 52,800 Encompass seats booked
  • 164,648 active Encompass users, up 21% from the year-ago period

“We finished the year with a great fourth quarter,” said Jonathan Corr, president and CEO of Ellie Mae. “Fourth quarter year-over-year revenue growth of 48% was driven by increased mortgage volume, the addition of new Encompass users, and the adoption of our services. Total seat bookings reached 12,000 during the quarter and we grew contracted users to a record 216,000, highlighting our ongoing business momentum.”

“With lenders recognizing the power of the Encompass Lending Platform to increase productivity and efficiency, we expect to see solid growth in 2017 as newer customers ramp loan production on our platform, we add customer seats and drive the adoption of both existing and new services. We also plan to further drive innovation with the continued introduction of our Encompass Connect suite of solutions and the beginning rollout of Encompass NG.”

Financial Results

Total revenue for the fourth quarter of 2016 was $96.2 million, compared to $64.9 million for the fourth quarter of 2015. Net income for the fourth quarter of 2016 was $10.9 million, or $0.31 per diluted share, compared to $4.8 million, or $0.16 per diluted share, for the fourth quarter of 2015.

On a non-GAAP basis, adjusted net income1 for the fourth quarter of 2016 was $20.0 million, or $0.57 per diluted share, compared to $13.5 million, or $0.44 per diluted share, for the fourth quarter of 2015. Adjusted EBITDA for the fourth quarter of 2016 was $29.4 million, compared to $17.1 million for the fourth quarter of 2015. GAAP and non-GAAP per share results for the quarter ended December 31, 2016 include the effect of an additional 3.2 million weighted average shares from the August follow-on offering.

Total revenue for 2016 was $360.3 million, compared to $253.9 million for 2015. Net income for 2016 was $37.8 million, or $1.15 per diluted share, compared to $22.3 million, or $0.72 per diluted share, for 2015.

On a non-GAAP basis, adjusted net income1 for 2016 was $74.8 million, or $2.28 per diluted share, compared to $52.2 million, or $1.69 per diluted share, for 2015. Adjusted EBITDA for 2016 was $113.1 million, compared to $74.7 million for 2015. GAAP and non-GAAP per share results for the year ended December 31, 2016 include the effect of an additional 1.3 million weighted average shares from the August follow-on offering.

First Quarter and Full Year 2017 Financial Outlook

Commencing with the first quarter of 2017, we are tax effecting adjusted net income to conform to the recent Compliance and Disclosure Interpretations published by the U.S. Securities and Exchange Commission in May of 2016 (the “May C&DI”) on non-GAAP measures. Our guidance for the first quarter and full year 2017 reflects these changes. Details of the impact on prior year periods are included in the financial data sheet posted to the investor relations section of Ellie Mae’s website.

For the first quarter of 2017, our revenue is expected to be in the range of $92.0 million to $93.0 million. Net income2 is expected to be in the range of $4.5 million to $5.0 million, or $0.13 to $0.14 per diluted share. Adjusted net income1 is expected to be in the range of $7.4 million to $7.5 million, or approximately $0.21 per diluted share, which reflects the tax adjustment. Adjusted EBITDA is expected to be in the range of $19.3 million to $19.5 million. Per share guidance assumes a weighted average share count of approximately 36 million.

For the full year 2017, revenue is expected to be in the range of $433.0 million to $440.0 million. Net income2 is expected to be in the range of $45.0 million to $50.0 million, or $1.23 to $1.36 per diluted share. Adjusted net income1 is expected to be in the range of $65.6 million to $70.7 million, or $1.79 to $1.92 per diluted share, which reflects the tax adjustment. Adjusted EBITDA is expected to be in the range of $139.5 million to $147.4 million. Per share guidance assumes a weighted average share count of approximately 37 million.

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.”

Quarterly Conference Call

Ellie Mae (the “Company”) will discuss its fourth quarter and full year 2016 results today, February 9, 2017, via teleconference at 4:30 p.m. Eastern Time. To access the call, please dial 877-591-4953 or 719-325-4823 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 February 23, 2017 by dialing 888-203-1112 or 719-457-0820 and entering access code 8508388.

Use of Non-GAAP Financial Measures

Ellie Mae provides investors with the non-GAAP financial measures of adjusted net income1, 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 stock-based compensation expense, amortization of intangible assets, and impairment loss on intangible assets. EBITDA consists of net income plus depreciation, amortization of intangible assets, impairment loss on 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 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.

Note Regarding New Share-based Compensation Expense Accounting Standard

In March 2016, Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2016-09, Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"), which addresses, among other items, the accounting for income taxes, forfeitures and cash flow presentation. Under ASU 2016-09, excess tax benefits generated upon the settlement or exercise of stock awards are no longer recognized as additional paid-in capital but are instead recognized as a reduction to income tax expense. This amendment to the accounting for income taxes became effective on January 1, 2017 and has been applied by Ellie Mae to its 2017 guidance.

Note Regarding Adjusted Net Income

Recent Compliance and Disclosure Interpretations published by the U.S. Securities and Exchange Commission in May of 2016 (the “May C&DI”) related to the use of non-GAAP financial measures would require the Company to include an additional adjustment to adjusted net income to reflect the income tax effects of the adjustments to GAAP net income (the “tax adjustment”), as discussed above. In reporting adjusted net income results for the fourth quarter and full year 2016, the Company has elected to present adjusted net income consistent with its historical practice, excluding the tax adjustment discussed in the May C&DI. The Company believes that maintaining consistency with its historical practice and previously reported 2016 financial outlook better allows the Company’s investors to evaluate financial performance. For the first quarter and full year 2017 guidance, the Company has included the tax adjustments in the adjusted net income presentation.

The non-GAAP reconciliation tables below include the adjusted net income before and after the inclusion of the tax adjustment for the fourth quarter and full year 2016 results and the first quarter and full year 2017 guidance.

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, adjusted EBITDA, and adjusted net income for the first quarter and fiscal year 2017. 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 (“SEC”), 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 SEC. 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.

________________

1 Please see paragraph titled, “Note Regarding Adjusted Net Income.”

2 Please see paragraph titled, “Note Regarding New Share-based Compensation Expense Accounting Standard.”

© 2017 Ellie Mae, Inc. Ellie Mae®, Encompass®, AllRegs®, the Ellie Mae logo and other trademarks or service marks of Ellie Mae, Inc. appearing herein are property 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)
 
      December 31,     December 31,
      2016     2015
Assets            
Current assets:            
Cash and cash equivalents     $ 380,907       $ 34,396  
Short-term investments     41,841       48,975  
Accounts receivable, net of allowance for doubtful accounts of $45 and $124 as of December 31, 2016 and December 31, 2015, respectively     39,358       28,568  
Prepaid expenses and other current assets     15,209       9,874  
Total current assets     477,315       121,813  
Property and equipment, net     126,297       81,360  
Long-term investments     45,931       55,473  
Intangible assets, net     17,289       22,810  
Deposits and other assets     10,138       8,888  
Goodwill     74,547       74,547  
Total assets     $ 751,517       $ 364,891  
Liabilities and Stockholders’ Equity            
Current liabilities:            
Accounts payable     $ 15,942       $ 9,911  
Accrued and other current liabilities     39,809       37,307  
Deferred revenue     23,126       15,864  
Total current liabilities     78,877       63,082  
Leases payable, net of current portion     85       685  
Other long-term liabilities     17,647       10,273  
Total liabilities     96,609       74,040  
             
Stockholders’ equity:            
Common stock, $0.0001 par value per share; 140,000,000 authorized shares, 33,685,649 and 29,566,511 shares issued and outstanding as of December 31, 2016 and December 31, 2015, respectively     3       3  
Additional paid-in capital     612,098       285,342  
Accumulated other comprehensive loss     (219 )     (257 )
Retained earnings     43,026       5,763  
Total stockholders’ equity     654,908       290,851  
Total liabilities and stockholders’ equity     $ 751,517       $ 364,891  
 
 
Ellie Mae, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands, except share and per share amounts)
 
      Quarter ended December 31,     Year Ended December 31,
      2016     2015     2016     2015
Revenues     $ 96,181       $ 64,867       $ 360,285       $ 253,937  
Cost of revenues(1)     32,843       23,555       120,145       84,208  
Gross profit     63,338       41,312       240,140       169,729  
Operating expenses:                        
Sales and marketing(1)     14,257       10,562       54,704       38,208  
Research and development(1)     16,305       11,734       58,501       40,451  
General and administrative(1)     18,434       14,103       71,318       57,212  
Total operating expenses     48,996       36,399       184,523       135,871  
Income from operations     14,342       4,913       55,617       33,858  
Other income, net     424       180       989       619  
Income before income taxes     14,766       5,093       56,606       34,477  
Income tax provision     3,864       271       18,830       12,219  
Net income     $ 10,902       $ 4,822       $ 37,776       $ 22,258  
Net income per share of common stock:                        
Basic     $ 0.33       $ 0.16       $ 1.21       $ 0.76  
Diluted     $ 0.31       $ 0.16       $ 1.15       $ 0.72  
Weighted average common shares used in computing net income per share of common stock:                        
Basic     33,481,511       29,483,605       31,179,857       29,179,352  
Diluted     35,010,867       30,959,344       32,799,785       30,842,584  
                         
Net income     $ 10,902       $ 4,822       $ 37,776       $ 22,258  
Other comprehensive income, net of taxes:                        
Unrealized gain (loss) on investments     (284 )     (319 )     38       (162 )
Comprehensive income     $ 10,618       $ 4,503       $ 37,814       $ 22,096  
                         
(1)Includes stock-based compensation expense of the following for the periods presented:
                         
Cost of revenues     $ 1,352       $ 1,029       $ 4,835       $ 3,218  
Sales and marketing     1,249       779       4,429       2,752  
Research and development     1,879       1,470       7,296       5,431  
General and administrative     3,535       3,359       14,911       12,840  
      $ 8,015       $ 6,637       $ 31,471       $ 24,241  
 
 
Ellie Mae, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
 
      Year Ended December 31,
      2016     2015
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net income     $ 37,776       $ 22,258  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization     20,460       10,842  
Amortization of intangible assets     5,521       5,180  
Impairment loss on intangible assets           562  
Legal settlement           (522 )
Stock-based compensation expense     31,471       24,241  
Excess tax benefit from stock-based compensation     (10,246 )     (11,387 )
Impairment and loss on sale of property and equipment     5       97  
Deferred income taxes     7,784       2,255  
Amortization of investment premium     1,024       1,033  
Changes in operating assets and liabilities:            
Accounts receivable, net     (10,791 )     (7,943 )
Prepaid expenses and other current assets     (5,334 )     1,381  
Deposits and other assets     (3,464 )     (1,985 )
Accounts payable     3,678       290  
Accrued, other current and other liabilities     17,585       35,079  
Deferred revenue     7,184       5,849  
Net cash provided by operating activities     102,653       87,230  
CASH FLOWS FROM INVESTING ACTIVITIES:            
Acquisition of property and equipment     (25,191 )     (24,768 )
Acquisition of internal-use software     (35,097 )     (27,608 )
Proceeds from sale of property and equipment           58  
Purchases of investments     (62,533 )     (60,816 )
Maturities of investments     58,223       63,204  
Sale of investments     20,000        
Cash paid for acquisitions, net of cash acquired           (16,419 )
Net cash used in investing activities     (44,598 )     (66,349 )
CASH FLOWS FROM FINANCING ACTIVITIES:            
Payment of capital lease obligations     (3,827 )     (3,745 )
Proceeds from issuance of common stock under employee stock plans     17,297       14,199  
Proceeds from issuance of common stock in public offering, net of issuance costs     271,379        
Payments for repurchase of common stock     (663 )     (31,530 )
Tax payments related to shares withheld for vested restricted stock units     (5,976 )     (3,552 )
Excess tax benefit from stock-based compensation     10,246       11,387  
Net cash provided by (used in) financing activities     288,456       (13,241 )
NET INCREASE IN CASH AND CASH EQUIVALENTS     346,511       7,640  
CASH AND CASH EQUIVALENTS, Beginning of period     34,396       26,756  
CASH AND CASH EQUIVALENTS, End of period     $ 380,907       $ 34,396  
 
 
Ellie Mae, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
(UNAUDITED)
(in thousands)
 
      Year Ended December 31,
      2016     2015
Supplemental disclosure of cash flow information:            
Cash paid for interest     $ 294       $ 133
Cash paid for income taxes     $ 267       $ 104
Supplemental disclosure of non-cash investing and financing activities:            
Fixed asset purchases accrued but not paid     $ 5,945       $ 3,662
Stock-based compensation capitalized to property and equipment     $ 2,831       $ 1,126
Acquisition of property and equipment under capital leases     $       $ 6,998
 
 
Ellie Mae, Inc.
NON-GAAP RECONCILIATION
(UNAUDITED)
(in thousands, except share and per share amounts)
 
      Quarter ended December 31,     Year Ended December 31,
      2016     2015     2016     2015
Net income     $ 10,902       $ 4,822       $ 37,776       $ 22,258  
Depreciation and amortization     5,973       3,518       20,460       10,842  
Amortization of intangible assets     1,079       1,491       5,521       5,180  
Other income, net     (424 )     (180 )     (989 )     (619 )
Impairment loss on intangible assets           562             562  
Income tax provision     3,864       271       18,830       12,219  
EBITDA     21,394       10,484       81,598       50,442  
                         
Stock-based compensation expense     8,015       6,637       31,471       24,241  
Adjusted EBITDA     $ 29,409       $ 17,121       $ 113,069       $ 74,683  
                         
Net income     $ 10,902       $ 4,822       $ 37,776       $ 22,258  
Stock-based compensation expense     8,015       6,637       31,471       24,241  
Impairment loss on intangible assets           562             562  
Amortization of intangible assets     1,079       1,491       5,521       5,180  
Adjusted net income before tax adjustments     $ 19,996       $ 13,512       $ 74,768       $ 52,241  
Income tax effects of adjustments     (3,763 )     (3,583 )     (14,195 )     (11,071 )
Adjusted net income with tax adjustments     $ 16,233       $ 9,929       $ 60,573       $ 41,170  
                         
Shares used to compute adjusted net income per share                        
Basic     33,481,511       29,483,605       31,179,857       29,179,352  
Diluted     35,010,867       30,959,344       32,799,785       30,842,584  
                         
Adjusted net income per share before tax adjustments                        
Basic     $ 0.60       $ 0.46       $ 2.40       $ 1.79  
Diluted     $ 0.57       $ 0.44       $ 2.28       $ 1.69  
                         
Adjusted net income per share with tax adjustments                        
Basic     $ 0.48       $ 0.34       $ 1.94       $ 1.41  
Diluted     $ 0.46       $ 0.32       $ 1.85       $ 1.33  
                         
Net cash provided by operating activities     $ 47,017       $ 22,694       $ 102,653       $ 87,230  
Acquisition of property and equipment and internal-use software, net     (13,996 )     (10,993 )     (60,288 )     (52,318 )
Free cash flow     $ 33,021       $ 11,701       $ 42,365       $ 34,912  
 
 
Ellie Mae, Inc.
NON-GAAP RECONCILIATION
(UNAUDITED)
(in thousands, except share and per share amounts)
 
      First Quarter 2017 Projected Range     Fiscal 2017 Projected Range
Net income     $ 4,500       $ 5,000       $ 45,000       $ 50,000  
                         
Depreciation and amortization     8,000       8,000       39,000       39,000  
Amortization of intangible assets     1,100       1,100       4,400       4,400  
Income tax provision/other     (2,500 )     (2,900 )     12,600       14,000  
EBITDA     11,100       11,200       101,000       107,400  
                         
Stock-based compensation expense     8,200       8,300       38,500       40,000  
Adjusted EBITDA     $ 19,300       $ 19,500       $ 139,500       $ 147,400  
                         
Net income     $ 4,500       $ 5,000       $ 45,000       $ 50,000  
Stock-based compensation expense     8,200       8,300       38,500       40,000  
Amortization of intangible assets     1,100       1,100       4,400       4,400  
Adjusted net income before tax adjustments     $ 13,800       $ 14,400       $ 87,900       $ 94,400  
Income tax effects of adjustments     (6,400 )     (6,900 )     (22,300 )     (23,700 )
Adjusted net income with tax adjustments     $ 7,400       $ 7,500       $ 65,600       $ 70,700  
                         
Shares used to compute non-GAAP net income per share                        
Basic     33,700,000       33,900,000       34,500,000       34,800,000  
Diluted     35,500,000       35,700,000       36,600,000       36,800,000  
                         
Projected net income per share                        
Basic     $ 0.13       $ 0.15       $ 1.30       $ 1.44  
Diluted     $ 0.13       $ 0.14       $ 1.23       $ 1.36  
                         
Adjusted net income per share before tax adjustments                        
Basic     $ 0.41       $ 0.42       $ 2.55       $ 2.71  
Diluted     $ 0.39       $ 0.40       $ 2.40       $ 2.57  
                         
Adjusted net income per share with tax adjustments                        
Basic     $ 0.22       $ 0.22       $ 1.90       $ 2.03  
Diluted     $ 0.21       $ 0.21       $ 1.79       $ 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