Ellie Mae Reports Third Quarter 2016 Results

Revenue Up 46% to $100.4 Million, Raises 2016 Guidance Announces CFO Succession Plan

PLEASANTON, Calif. – October 27, 2016Ellie 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, 2016.

Third Quarter 2016 Highlights
  • Revenue of $100.4 million, up 46% from $68.9 million in Q3 2015
  • Net income of $13.8 million, up 121% from $6.2 million in Q3 2015
  • Adjusted EBITDA of $37.1 million, up 83% from $20.3 million in Q3 2015
  • 12,800 Encompass seats booked
  • Revenue per average active Encompass® user of $640, up 23% from $520 in Q3 2015

“Third quarter results were strong across the board with the team continuing to execute, and mortgage volume remaining robust,” said Jonathan Corr, president and CEO of Ellie Mae. “We achieved our first $100 million revenue quarter and drove strong growth to net income, Adjusted EBITDA and revenue per active user during the quarter. In addition, Q3 seat bookings of 12,800 were better than expected, as lenders increasingly seek to improve efficiency, compliance and loan quality through our all-in-one platform.”

“I would also like to note that after serving as our chief financial officer for the past 12 years, Ed Luce has announced his intention to retire. Ed played a critical role in Ellie Mae’s evolution from a startup to a fast-growing public company and we are grateful for his contributions. Matt LaVay, our senior vice president of finance, will become CFO effective April 1, 2017. I have the utmost confidence in Matt’s ability to succeed in his new role and help drive our next phase of growth,” concluded Mr. Corr. To ensure a smooth transition, Mr. Luce will remain with the company in an advisory capacity for a period of time.

Mr. LaVay has over 20 years of finance and operations experience, and joined Ellie Mae in 2012. Prior to joining Ellie Mae, Matt held senior finance positions with Taleo Corporation, Scientific Learning Corporation, Salesforce.com, PeopleSoft, Inc. and Arthur Andersen LLP. He holds a Master of Professional Accountancy from Georgia State University and a B.S. in Industrial Management from The Georgia Institute of Technology. Matt is a Certified Public Accountant in the state of California.

Financial Results

Total revenue for the third quarter of 2016 was $100.4 million, compared to $68.9 million for the third quarter of 2015. Net income for the third quarter of 2016 was $13.8 million, or $0.41 per diluted share, compared to net income of $6.2 million, or $0.20 per diluted share, for the third quarter of 2015.

On a non-GAAP basis, adjusted net income for the third quarter of 2016 was $24.0 million, or $0.72 per diluted share, compared to $13.9 million, or $0.45 per diluted share, for the third quarter of 2015. Adjusted EBITDA for the third quarter of 2016 was $37.1 million, compared to $20.3 million for the third quarter of 2015. GAAP and non-GAAP per share results for the quarter ended September 30, 2016 include the effect of an additional 1.8 million weighted average shares from the August follow-on offering.

Key Operating Metrics:

  • The total number of active Encompass users increased 18% year-over-year to 159,523;
  • Contracted revenue increased 32% year-over-year to $54.5 million; and
  • Revenue per average active Encompass user in the third quarter increased 23% year-over-year to $640.
Fourth Quarter and Full Year 2016 Financial Outlook

For the fourth quarter of 2016, our revenue is expected to be in the range of $87.0 million to $89.0 million. Net income is expected to be in the range of $6.3 million to $6.8 million, or $0.18 to $0.19 per diluted share. Adjusted net income1 is expected to be in the range of $16.8 million to $17.5 million, or $0.48 to $0.49 per diluted share. Adjusted EBITDA is expected to be in the range of $26.9 million to $28.3 million. Per share guidance assumes a weighted average share count of approximately 35.3 million.

For the full year 2016, revenue is expected to be in the range of $351.0 million to $353.0 million, up from the previously provided range of $338.0 million to $341.0 million. Net income is expected to be in the range of $33.2 million to $33.7 million, or $1.01 to $1.02 per diluted share, up from the previously provided range of $27.5 million to $28.5 million, or $0.86 to $0.89 per diluted share. Adjusted net income1 is expected to be in the range of $71.1 million to $71.8 million, or $2.17 to $2.18 per diluted share, up from the previously provided range of $63.5 million to $66.0 million, or $2.00 to $2.06 per diluted share. Adjusted EBITDA is expected to be in the range of $109.6 million to $110.8 million, up from the previously provided range of $99.0 million to $103.0 million. Per share guidance assumes a weighted average share count of approximately 32.9 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 third quarter 2016 results today, October 27, 2016, via teleconference at 4:30 p.m. Eastern Time. To access the call, please dial 888-339-3513 or 719-325-2468 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 10, 2016 by dialing 888-203-1112 or 719-457-0820 and entering access code 2388390.

Use of Non-GAAP Financial Measures

Ellie Mae 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 stock-based compensation expense and amortization of intangible assets. 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 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 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 and guidance for the third and fourth quarters of 2016 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. The Company will begin including the tax adjustments in the adjusted net income presentation beginning with the Company’s first quarter 2017 and full year guidance.

The estimated tax effects of the non-GAAP adjustments for the three and nine months ended September 30, 2016 would reduce adjusted net income by approximately $4.1 million or $0.12 per diluted share and $10.4 million or $0.33 per diluted share, respectively, and for the three and nine months ended September 30, 2015 would reduce adjusted net income by approximately $3.0 million or $0.10 per diluted share and $7.5 million or $0.24 per diluted share, respectively. For the fourth quarter and full year of 2016 outlook, the estimated adjustment is expected to reduce adjusted net income by $3.8 million to $4.0 million or $0.10 to $0.12 per diluted share and $14.9 million to $15.1 million or $0.45 to $0.46 per share, respectively.

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 fourth 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 (“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” for the impact of the Company’s tax rate to adjusted net income.

IR CONTACTS

Alex Hughes
VP of Investor Relations
Ellie Mae, Inc.
(925) 227-7079
IR@elliemae.com

Lisa Laukkanen
The Blueshirt Group for Ellie Mae, Inc.
(415) 217-4967
lisa@blueshirtgroup.com

PRESS CONTACT

Erica Harvill
Ellie Mae, Inc.
(925) 227-5913
Erica.harvill@elliemae.com

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© 2016 Ellie Mae, Inc. Ellie Mae®, Encompass®, AllRegs®, DataTrac®, Ellie Mae Network, Mavent®, Millennial Tracker, 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.

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