Ellie Mae Reports First Quarter 2013 Results

Ellie Mae Reports First Quarter 2013 Results

Revenue up 48% from prior year

Revenue guidance raised for 2013


PLEASANTON, Calif.--(BUSINESS WIRE)-- Ellie Mae® (NYS: ELLI) , a leading provider of on-demand, enterprise level automation solutions for the residential mortgage industry, today reported results for the first quarter ended March 31, 2013.

First Quarter Highlights

  • Revenue up 48% year over year to $30.9 million

  • Adjusted EBITDA up 87% year over year to $10.0 million

  • $7.9 million of free cash flow generated

  • Record 80,710 active Encompass360® users as of March 31, 2013

"We had a great start to the year with strong financial and operating performance in the first quarter," said Sig Anderman, CEO of Ellie Mae. "Through solid execution we delivered robust growth in both revenue and profits while generating significant free cash flow. We sold a record number of SaaS Encompass360 seats, with continued strong progress in adding new customers, increasing users from existing customers, and upgrading existing customers to our SaaS platform. We also had a record increase in the number of new active SaaS users during the quarter, which we believe will provide a solid foundation for continued growth in 2013 and beyond."

"Setting a new user growth record this quarter on the heels of record growth last year speaks to the tremendous appeal of our on-demand platform," continued Mr. Anderman. "Encompass360 is a compelling, end-to-end value proposition for lenders that automates and streamlines the mortgage origination process, assures regulatory compliance and helps reduce IT and other operational costs. With the heightened concerns lenders have about quality, regulatory compliance and efficiency; our innovative on-demand technology solutions provide us the opportunity for continued growth well into the future."

"With the business momentum we experienced in the first quarter, we are pleased to raise our full year revenue guidance, even in the face of current expectations for a decline in 2013 mortgage origination volumes. We are maintaining our bottom line guidance for the full year, enabling us to incrementally increase our investment in growth initiatives and further enhance our compliance capabilities with a goal of extending our leadership position," Mr. Anderman concluded.

First Quarter 2013

Total revenue for the first quarter of 2013 increased 48% to $30.9 million, compared to $20.9 million in the first quarter of 2012. Net income for the first quarter of 2013 was $3.9 million, or $0.14 per diluted share, compared to net income of $3.6 million, or $0.16 per diluted share, in the first quarter of 2012.

On a non-GAAP basis, adjusted net income for the first quarter of 2013 was $7.6 million, or $0.27 per diluted share, compared to $4.6 million, or $0.20 per diluted share, in the first quarter of 2012. Adjusted EBITDA for the first quarter of 2013 was $10.0 million, compared to $5.4 million for the first quarter of 2012.

A reconciliation of the non-GAAP financial measures to their related GAAP financial measures is set forth below.

Key Operating Metrics as of and for the Quarter Ended March 31, 2013:

  • On-demand revenue increased 55% year over year to $27.6 million, comprising approximately 89% of total revenues for the quarter;

  • The total number of users actively using the Company's Encompass360 enterprise solution ("active Encompass360 users") increased 37% year over year to 80,710;

  • Revenue per average active Encompass360 user increased 7% year over year to $394;

  • At the end of the first quarter, the number of users of the SaaS version of Encompass360 increased 65% year over year to 48,121, or 60% of all active Encompass360 users; and

  • Total SaaS Encompass360 revenues increased 97% year over year to $16.5 million or 53% of total revenue for the quarter.

Second Quarter and Fiscal Year 2013 Financial Outlook

The April 2013 composite forecast of Fannie Mae, Freddie Mac and the Mortgage Bankers Association for 2013 mortgage origination volume is approximately $1.6 trillion, which represents a 14% decrease from estimated mortgage volume in 2012. These organizations publish monthly updates of their annual and quarterly forecasts. The April 2013 composite quarterly forecast for origination volume is as follows:

($ in
billions)

Q1

Q2

Q3

Q4

Annual

2013

$

482

$

488

$

363

$

302

$

1,635

Approximately 50% of our revenue is sensitive to fluctuations in mortgage volumes and we are therefore providing financial guidance for the second quarter and full fiscal year 2013 based in part on these composite quarterly forecasts.

For the second quarter of 2013, revenue is expected to be in the range of $33.5 million to $34.0 million. Net income is expected to be in the range of $4.0 million to $4.4 million, or $0.14 to $0.16 per diluted share. Adjusted net income is expected to be in the range of $7.7 million to $8.2 million, or $0.27 to $0.29 per diluted share. Adjusted EBITDA is expected to be in the range of $11.4 million to $12.5 million.

For the full fiscal year 2013, revenue is expected to be in the range of $130.0 million to $131.5 million, up from the previously provided range of $127.5 million to $129.0 million. Net income is expected to continue to be in the range of $15.6 million to $16.2 million, or $0.55 to $0.57 per diluted share. Adjusted net income is expected to continue to be in the range of $30.2 million to $31.0 million, or $1.06 to $1.09 per diluted share. Adjusted EBITDA is expected to continue to be in the range of $44.2 million to $45.4 million.

Use of Non-GAAP Financial Measures

Ellie Mae provides investors with adjusted net income, adjusted EBITDA and free cash flow in conjunction with traditional GAAP operating performance of net income as part of its overall assessment of its performance. Adjusted net income consists of net income plus amortization of acquired intangibles, non-cash, stock-based compensation expense, acquisition costs and other acquisition-related adjustments. EBITDA consists of net income plus depreciation and amortization, interest income and expense and income tax provision (benefit). Adjusted EBITDA consists of EBITDA plus non-cash, stock-based compensation expense and acquisition costs. Free cash flow is calculated by subtracting cash paid for the acquisition 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 of book depreciation of fixed assets and 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 non-cash, 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 first quarter 2013 results today, April 30, 2013, via teleconference at 4:30 p.m. Eastern Time. To access the call, please dial 877-941-1427 or 480-629-9664 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 14, 2013 by dialing 800-406-7325 or 303-590-3030 and entering access code 4611661.

About Ellie Mae

Ellie Mae, Inc. is a leading provider of on-demand automation solutions for the mortgage industry. The Company offers an end-to-end solution, delivered using a Software-as-a-Service model that serves as the core operating system for mortgage originators and spans customer relationship management, loan origination and business management. The Company also hosts the Ellie Mae Network™ that allows Encompass360 users to electronically conduct business transactions with the lenders and settlement service providers they work with to process and fund loans. The Company's offerings include the Encompass®, Encompass360® and DataTrac® mortgage management software systems.

Ellie Mae was founded in 1997 and is based in Pleasanton, California. To learn more about Ellie Mae, visit www.EllieMae.com or call 877.355.4362.

© 2013 Ellie Mae, Inc. Ellie Mae®, Encompass®, Encompass360®, DataTrac®, Ellie Mae Networkand the Ellie Mae logo are registered trademarks or 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.

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 discussions regarding growth opportunities, projected revenue, net income, adjusted EBITDA and adjusted net income for the second quarter and fiscal year 2013, as well as discussions regarding potential increases in investment in growth initiatives and further enhancement of the Company's capabilities. 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 strategic planning decisions by management; reallocation of internal resources; changes in the volume of residential mortgage volume in the United States; changes in anticipated rates of existing customer conversions and new customer acquisitions; the risk that the anticipated benefits, growth prospects and synergies expected from the Del Mar Datatrac acquisition may not be fully realized or may take longer to realize than expected; the possibility that economic benefits of future opportunities in an emerging industry may never materialize, including unexpected variations in market growth and demand for the acquired products and technologies; delays, disruptions, including changing relationships with partners, customers, employees or suppliers; the amount of costs incurred in connection with the 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, 2012 and Current Reports on Form 8-K. 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.

Ellie Mae, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share amounts)

March 31,
2013

December 31,
2012

Assets

Current assets

Cash and cash equivalents

$

25,916

$

44,114

Short-term investments

34,584

16,243

Accounts receivable, net of allowances for doubtful accounts of $58 and $74 as of March 31, 2013 and December 31, 2012, respectively

9,663

9,753

Prepaid expenses and other current assets

3,397

2,956

Deferred tax assets

652

645

Note receivable

1,000

1,000

Total current assets

75,212

74,711

Property and equipment, net

10,327

9,494

Long-term investments

52,666

43,728

Other intangible assets, net

6,170

6,531

Goodwill

51,051

51,051

Deposits and other assets

501

100

Total assets

$

195,927

$

185,615

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

2,825

$

2,039

Accrued and other current liabilities

5,608

5,777

Income taxes payable

1,255

15

Acquisition holdback, net of discount

2,969

2,948

Deferred revenue

4,503

4,896

Deferred rent

263

252

Total current liabilities

17,423

15,927

Acquisition holdback, net of current portion and discount

1,925

1,911

Other long-term liabilities

891

915

Total liabilities

20,239

18,753

Stockholders' equity:

Common stock, 0.0001 par value per share; 140,000,000 authorized shares, 26,281,531 and 26,058,533 shares issued and outstanding as of March 31, 2013 and December 31, 2012, respectively

3

3

Additional paid-in capital

189,624

184,616

Accumulated other comprehensive loss

(160

)

(65

)

Accumulated deficit

(13,779

)

(17,692

)

Total stockholders' equity

175,688

166,862

Total liabilities and stockholders' equity

$

195,927

$

185,615

Ellie Mae, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(in thousands, except share and per share amounts)

Three months ended
March 31,

2013

2012

Revenues

$

30,855

$

20,906

Cost of revenues

7,611

5,257

Gross profit

23,244

15,649

Operating expenses:

Sales and marketing

4,903

4,000

Research and development

5,548

4,133

General and administrative

7,586

3,676

Total operating expenses

18,037

11,809

Income from operations

5,207

3,840

Other income (expense), net

121

(20

)

Income before income taxes

5,328

3,820

Income tax provision

1,415

178

Net income

$

3,913

$

3,642

Net income per share of common stock:

Basic

$

0.15

$

0.17

Diluted

$

0.14

$

0.16

Weighted average common shares used in computing net income per share of common stock:

Basic

26,166,290

21,404,789

Diluted

27,962,156

22,513,854

Net income

$

3,913

$

3,642

Other comprehensive loss, net of taxes

Unrealized losses on investments

(95

)

Comprehensive income

$

3,818

$

3,642

Ellie Mae, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

Three months ended
March 31,

2013

2012

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

3,913

$

3,642

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

1,095

611

Provision (recovery) for uncollectible accounts receivable

(12

)

36

Amortization of other intangible assets

361

409

Amortization of discount related to acquisition holdback

35

54

Stock-based compensation

3,373

517

Excess tax benefit from exercise of stock options

(249

)

(55

)

Deferred income taxes

(287

)

Amortization of investment premium

319

Changes in operating assets and liabilities:

Accounts receivable

102

(493

)

Prepaid expenses and other current assets

(493

)

56

Deposits and other assets

(251

)

Accounts payable

671

(380

)

Income taxes payable

1,240

Accrued and other current liabilities

(155

)

(1,160

)

Deferred revenue

(382

)

76

Deferred rent

(60

)

(50

)

Net cash provided by operating activities

9,220

3,263

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property and equipment

(1,349

)

(828

)

Purchase of investments

(31,683

)

(1,112

)

Maturities of investments

3,996

951

Net cash used in investing activities

(29,036

)

(989

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of capital lease obligations

(2

)

(1

)

Proceeds from issuance of common stock under stock incentive plans

1,371

1,447

Excess tax benefit from exercise of stock options

249

55

Net cash provided by financing activities

1,618

1,501

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(18,198

)

3,775

CASH AND CASH EQUIVALENTS, Beginning of period

44,114

23,732

CASH AND CASH EQUIVALENTS, End of period

$

25,916

$

27,507

Supplemental disclosure of cash flow information:

Cash paid for interest

$

28

$