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Ellie Mae Reports Third Quarter 2015 Results

October 28, 2015 at 4:09 PM EDT

Record Quarterly Seat Bookings of 11,900

Raises 2015 Revenue Guidance

PLEASANTON, Calif.--(BUSINESS WIRE)--Oct. 28, 2015-- 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 third quarter ended September 30, 2015.

Third Quarter 2015 Highlights

  • Record revenue of $68.9 million, up 61% from $42.8 million in Q3 2014
  • Net income of $6.2 million, up 24% from $5.0 million in Q3 2014
  • Adjusted EBITDA of $20.3 million, up 45% from $14.0 million in Q3 2014
  • Revenue per average active Encompass user of $520, up 24% from $419 in Q3 2014

“Ellie Mae again delivered strong growth with third quarter financial results that exceeded expectations,” said Jonathan Corr, president and CEO of Ellie Mae. “We grew revenue by 61% as we added more Encompass users, drove greater adoption of our services, and continued to see a sustained uptick in the purchase market. During the quarter our customers continued to grow their businesses and add more seats, which helped achieve another quarter of record seat bookings of 11,900. Our results are a testament to the strong value proposition we provide in helping lenders’ achieve loan quality, regulatory compliance and operating efficiency.”

Financial Results

Total revenue for the third quarter of 2015 was $68.9 million, compared to $42.8 million for the third quarter of 2014. Net income for the third quarter of 2015 was $6.2 million, or $0.20 per diluted share, compared to net income of $5.0 million, or $0.17 per diluted share, for the third quarter of 2014.

On a non-GAAP basis, adjusted net income for the third quarter of 2015 was $13.9 million, or $0.45 per diluted share, compared to $8.6 million, or $0.29 per diluted share, for the third quarter of 2014. Adjusted EBITDA for the third quarter of 2015 was $20.3 million, compared to $14.0 million for the third quarter of 2014.

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 30% year-over-year to 135,000;
  • The total number of active users of the SaaS version of Encompass increased 47% year-over-year to 116,000, or 86% of all active Encompass users; and
  • Revenue per average active Encompass user in the third quarter increased 24% year-over-year to $520.

Fourth Quarter and Full Year 2015 Financial Outlook

For the fourth quarter of 2015, we expect revenue to be in the range of $59.5 million to $60.5 million. Reflecting the normal seasonality in a purchase-centric market, increased investments, and expected purchase accounting impact for the Mortgage Returns acquisition that we announced on October 14, 2015, we are expecting a net loss of between $(3.8) million to $(3.3) million, or $(0.12) to $(0.10) per diluted share. Adjusted net income is expected to be in the range of $5.5 million to $6.3 million, or $0.18 to $0.20 per diluted share, and Adjusted EBITDA is expected to be in the range of $6.7 million to $7.9 million for the quarter.

For the full year 2015, we expect revenue to be in the range of $248.5 million to $249.5 million, up from the previously provided range of $237.5 million to $238.5 million. Net income is expected to be in the range of $13.2 million to $13.7 million, or $0.43 to $0.44 per diluted share, up from the previously provided range of $10.0 million to $11.5 million, or $0.32 to $0.37 per diluted share. Adjusted net income is expected to be in the range of $43.8 million to $44.6 million, or $1.43 to $1.44 per diluted share, up from the previously provided range of $39.4 million to $41.6 million, or $1.27 to $1.32 per diluted share. And Adjusted EBITDA is expected to be in the range of $64.0 million to $65.2 million, up from the previously provided range of $57.7 million to $61.6 million.

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, other income, net, and income tax provision. Adjusted EBITDA consists of EBITDA plus stock-based compensation expense. Free cash flow is calculated by subtracting cash paid for the acquisition of property and equipment (net of proceeds from sale of property and equipment) from net cash provided by operating activities. 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, 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. Ellie Mae uses free cash flow as a complementary measure to its entire consolidated statements of cash flows since purchases of property and equipment are a necessary component of ongoing operations. 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, or as an alternative to cash flows from operating activities as a measure of the Company’s profitability or liquidity. The Company cautions that other companies in Ellie Mae’s industry may calculate adjusted net income and adjusted EBITDA differently than the Company does, further limiting their usefulness as a comparative measure. A reconciliation of net income to adjusted net income and adjusted EBITDA is included in the tables below.

Quarterly Conference Call

Ellie Mae will discuss its third quarter 2015 results today, October 28, 2015, via teleconference at 4:30 p.m. Eastern Time. To access the call, please dial 877-876-9175 or 785-424-1668 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 November 11, 2015 by dialing 888-203-1112 or 719-457-0820 and entering access code 105357.

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 fourth quarter and fiscal year 2015. 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; changes in anticipated rates of existing customer conversions and 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, 2014 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.

© 2015 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
(in thousands, except share and per share amounts)
         
   

September 30,
2015
(Unaudited)

 

December 31,
2014
(Audited)

Assets        
Current assets:        
Cash and cash equivalents   $ 52,417   $ 26,756  
Short-term investments     57,933     49,352  
Accounts receivable, net of allowances for doubtful accounts of $77 and $66 as of September 30, 2015 and December 31, 2014, respectively     28,924     20,403  
Prepaid expenses and other current assets     16,419     16,021  
Total current assets     155,693     112,532  
Property and equipment, net     72,440     28,694  
Long-term investments     48,930     58,679  
Intangible assets, net     17,763     21,452  
Deposits and other assets     6,183     3,425  
Goodwill     65,338     65,338  
Total assets   $ 366,347   $ 290,120  
Liabilities and Stockholders’ Equity        
Current liabilities:        
Accounts payable   $ 9,162   $ 6,726  
Accrued and other current liabilities     28,652     16,822  
Acquisition holdback, net of discount     522     522  
Deferred revenue     13,392     9,729  
Total current liabilities     51,728     33,799  
Leases payable, net of current portion     1,303     443  
Other long-term liabilities     19,736     2,994  
Total liabilities     72,767     37,236  
         
Stockholders’ equity:        
Common stock, $0.0001 par value per share; 140,000,000 authorized shares, 29,796,381 and 28,907,147 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively     3     3  
Additional paid-in capital     273,171     242,527  
Accumulated other comprehensive income (loss)     62     (95 )
Retained earnings     20,344     10,449  
Total stockholders’ equity     293,580     252,884  
Total liabilities and stockholders’ equity   $ 366,347   $ 290,120  
         
                 
Ellie Mae, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands, except share and per share amounts)
                 
    Three Months Ended September 30,   Nine Months Ended September 30,
    2015   2014     2015   2014
Revenues   $ 68,939   $ 42,798     $ 189,070   $ 114,960  
Cost of revenues(1)     22,441     11,669       60,653     31,563  
Gross profit     46,498     31,129       128,417     83,397  
Operating expenses:                
Sales and marketing(1)     9,082     6,245       27,646     18,791  
Research and development(1)     11,138     6,456       28,717     19,348  
General and administrative(1)     16,658     9,556       43,109     28,100  
Total operating expenses     36,878     22,257       99,472     66,239  
Income from operations     9,620     8,872       28,945     17,158  
Other income, net     154     134       439     343  
Income before income taxes     9,774     9,006       29,384     17,501  
Income tax provision     3,552     3,989       11,948     6,978  
Net income   $ 6,222   $ 5,017     $ 17,436   $ 10,523  
Net income per share of common stock:                
Basic   $ 0.21   $ 0.18     $ 0.60   $ 0.38  
Diluted   $ 0.20   $ 0.17     $ 0.57   $ 0.36  
Weighted average common shares used in computing net income per share of common stock:            
Basic     29,363,621     28,007,770       29,076,820     27,657,217  
Diluted     31,005,651     29,661,211       30,773,353     29,332,162  
                 
Net income   $ 6,222   $ 5,017     $ 17,436   $ 10,523  
Other comprehensive income, net of taxes:                
Unrealized gain (loss) on investments     27     (75 )     157     (3 )
Comprehensive income   $ 6,249   $ 4,942     $ 17,593   $ 10,520  
                 
(1) Includes stock-based compensation expense of the following for the periods presented:            
                 
Cost of revenues   $ 761   $ 441     $ 2,189   $ 1,065  
Sales and marketing     783     247       1,973     1,127  
Research and development     1,438     1,038       3,961     2,610  
General and administrative     3,538     1,326       9,481     5,738  
    $ 6,520   $ 3,052     $ 17,604   $ 10,540  
                             
         
Ellie Mae, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
         
    Nine Months Ended September 30,
    2015   2014
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income   $ 17,436     $ 10,523  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation     7,324       3,933  
Provision for uncollectible accounts receivable     14       12  
Amortization of intangible assets     3,689       1,575  
Amortization of discount related to acquisition holdback           36  
Stock-based compensation expense     17,604       10,540  
Excess tax benefit from stock-based compensation     (3,828 )     (5,306 )
Deferred income taxes     9,977       (37 )
Loss on disposal of property and equipment     91        
Amortization of investment premium     778       972  
Changes in operating assets and liabilities:        
Accounts receivable     (8,535 )     (5,856 )
Prepaid expenses and other current assets     (394 )     644  
Deposits and other assets     (985 )     (632 )
Accounts payable     303       1,172  
Accrued, other current and other liabilities     17,366       7,258  
Deferred revenue     3,696       (54 )
Net cash provided by operating activities     64,536       24,780  
CASH FLOWS FROM INVESTING ACTIVITIES:        
Acquisition of property and equipment     (20,677 )     (4,523 )
Acquisition of internal-use software     (20,706 )     (8,316 )
Proceeds from sale of property and equipment     58        
Purchases of investments     (39,243 )     (49,662 )
Maturities of investments     39,790       42,965  
Acquisitions, net of cash acquired           (6,500 )
Net cash used in investing activities     (40,778 )     (26,036 )
CASH FLOWS FROM FINANCING ACTIVITIES:        
Payment of capital lease obligations     (2,891 )     (987 )
Proceeds from issuance of common stock under employee stock plans     12,770       8,002  
Payments for repurchase of common stock     (8,830 )      
Tax payments related to shares withheld for vested restricted stock units     (2,974 )     (668 )
Excess tax benefit from stock-based compensation     3,828       5,306  
Net cash provided by financing activities     1,903       11,653  
NET INCREASE IN CASH AND CASH EQUIVALENTS     25,661       10,397  
CASH AND CASH EQUIVALENTS, Beginning of period     26,756       33,462  
CASH AND CASH EQUIVALENTS, End of period   $ 52,417     $ 43,859  
Supplemental disclosure of cash flow information:        
Cash paid for interest   $ 101     $ 41  
Cash paid for income taxes   $ 15     $ 43  
Supplemental disclosure of non-cash investing and financing activities:        
Fixed asset purchases accrued but not paid   $ 2,133     $ (220 )
Stock-based compensation capitalized to property and equipment   $ 705     $ 350  
Acquisition of property and equipment under capital leases   $ 6,998     $ 1,269  
         
                 
Ellie Mae, Inc.
NON-GAAP RECONCILIATION
(UNAUDITED)
(in thousands, except share and per share amounts)
                 
    Three Months Ended September 30,   Nine Months Ended September 30,
    2015   2014   2015   2014
Net income   $ 6,222     $ 5,017     $ 17,436     $ 10,523  
Depreciation     3,014       1,495       7,324       3,933  
Amortization of intangible assets     1,178       535       3,689       1,575  
Other income, net     (154 )     (134 )     (439 )     (343 )
Income tax provision     3,552       3,989       11,948       6,978  
EBITDA     13,812       10,902       39,958       22,666  
                 
Stock-based compensation expense     6,520       3,052       17,604       10,540  
Adjusted EBITDA   $ 20,332     $ 13,954     $ 57,562     $ 33,206  
                 
Net income   $ 6,222     $ 5,017     $ 17,436     $ 10,523  
Stock-based compensation expense     6,520       3,052       17,604       10,540  
Amortization of intangible assets     1,178       535       3,689       1,575  
Adjusted net income   $ 13,920     $ 8,604     $ 38,729     $ 22,638  
                 
Shares used to compute non-GAAP net income per share                
Basic     29,363,621       28,007,770       29,076,820       27,657,217  
Diluted     31,005,651       29,661,211       30,773,353       29,332,162  
                 
Adjusted net income per share                
Basic   $ 0.47     $ 0.31     $ 1.33     $ 0.82  
Diluted   $ 0.45     $ 0.29     $ 1.26     $ 0.77  
                 
Net cash provided by operating activities   $ 25,686     $ 10,977     $ 64,536     $ 24,780  
Acquisition of property and equipment and internal-use software, net     (10,906 )     (5,418 )     (41,325 )     (12,839 )
Free cash flow   $ 14,780     $ 5,559     $ 23,211     $ 11,941  
                 
                 
Ellie Mae, Inc.
NON-GAAP RECONCILIATION
(UNAUDITED)
(in thousands, except share and per share amounts)
                 
    Fourth Quarter 2015 Projected Range   Fiscal 2015 Projected Range
Net income (loss)   $ (3,800 )   $ (3,300 )   $ 13,200   $ 13,700
                 
Depreciation     3,700       3,800       11,000     11,100
Amortization of intangible assets     2,700       2,800       6,400     6,500
Income tax provision/other     (2,500 )     (2,200 )     9,200     9,500
EBITDA     100       1,100       39,800     40,800
                 
Stock-based compensation expense     6,600       6,800       24,200     24,400
Adjusted EBITDA   $ 6,700     $ 7,900     $ 64,000   $ 65,200
                 
Net income (loss)   $ (3,800 )   $ (3,300 )   $ 13,200   $ 13,700
Stock-based compensation expense     6,600       6,800       24,200     24,400
Amortization of intangible assets     2,700       2,800       6,400     6,500
Adjusted net income   $ 5,500     $ 6,300     $ 43,800   $ 44,600
                 
Shares used to compute non-GAAP net income per share                
Basic     29,500,000       30,000,000       29,000,000     29,500,000
Diluted     31,000,000       31,500,000       30,500,000     31,000,000
                 
Projected net income (loss) per share                
Basic   $ (0.13 )   $ (0.11 )   $ 0.46   $ 0.46
Diluted   $ (0.12 )   $ (0.10 )   $ 0.43   $ 0.44
                 
Adjusted net income per share                
Basic   $ 0.19     $ 0.21     $ 1.51   $ 1.51
Diluted   $ 0.18     $ 0.20     $ 1.43   $ 1.44

 

Source: Ellie Mae, Inc.

IR Contacts:
Ellie Mae, Inc.
Edgar Luce, 925-227-7079
Executive VP and CFO
IR@elliemae.com
or
Ellie Mae, Inc.
Michelle Gable, 925-227-7108
Vice President, Investor Relations
michelle.gable@elliemae.com