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TMCNet:  Ellie Mae Reports Fourth Quarter and Fiscal Year 2012 Results

[February 14, 2013]

Ellie Mae Reports Fourth Quarter and Fiscal Year 2012 Results

PLEASANTON, Calif. --(Business Wire)--

Ellie Mae® (NYSE: ELLI), a leading provider of on-demand, enterprise level automation solutions for the residential mortgage industry, today reported results for the fourth quarter and fiscal year ended December 31, 2012.

Total revenue for the fourth quarter of 2012 increased 60% to $29.9 million, compared to $18.8 million in the fourth quarter of 2011. Net income for the fourth quarter of 2012 was $4.0 million, or $0.14 per diluted share, compared to net income of $1.8 million, or $0.08 per diluted share, in the fourth quarter of 2011.

On a non-GAAP basis, adjusted net income for the fourth quarter of 2012 was $7.6 million, or $0.27 per diluted share, compared to $2.8 million, or $0.13 per diluted share, in the fourth quarter of 2011. Adjusted EBITDA for the fourth quarter of 2012 was $10.3 million, compared to $3.4 million for the fourth quarter of 2011.

Total revenue for the full year 2012 increased 84% to $101.8 million, compared to $55.5 million in 2011. Net income for the full year 2012 was $19.5 million, or $0.76 per diluted share, compared to net income of $3.6 million, or $0.18 per diluted share, in 2011.

On a non-GAAP basis, adjusted net income for the full year 2012 was $27.9 million, or $1.09 per diluted share, compared to $4.9 million, or $0.24 per diluted share, in 2011. Adjusted EBITDA in 2012 was $32.8 million, compared to $6.6 million in 2011.

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 December 31, 2012:

  • On-demand revenue increased 70% year over year to $26.6 million, comprising approximately 89% of total revenues for the quarter;
  • The total number of users actively using the company's Encompass® enterprise solution ("active Encompass users") increased 37% year over year to 73,687;
  • Revenue per average active Encompass user increased 17% year over year to $414;
  • As of the end of the fourth quarter, the number of users of the SaaS version of Encompass increased 71% year over year to 41,458, or 56% of all active Encompass users; and
  • Total SaaS Encompass revenues increased 106% year over year to $15.4 million or 52% of total revenue for the quarter.

"Ellie Mae's 60% revenue growth in the fourth quarter was a spectacular finish to 2012," said Sig Anderman, CEO of Ellie Mae. "Our strong financial and operating performance for the fourth quarter was driven by new SaaS Encompass user activation and increasing revenue per user. We are very pleased with the pace at which we added new SaaS Encompass users and upgraded existing customers to our SaaS platform during the quarter."

"Our strong 2012 financial results reflect the demand we are experiencing for our end-to-end, comprehensive solution that meets the functional as well as regulatory compliance needs of lenders," continued Mr. Anderman. "During the year, we grew our SaaS users by 71% to 41,458. Even with this impressive growth in users, we believe we will continue to have good runway for both new SaaS customer acquisitions and existing customer conversions."

"As we enter 2013, we are excited about our growth opportunities even in the face of the currently expected decline in 2013 mortgage origination volumes. The rapidly evolving mortgage landscape is creating new requirements for our clients that we believe expand the long-term growth opportunities for Ellie Mae. We expect our growth to continue to be fueled by activating and ramping usage of SaaS Encompass users, adding more SaaS Encompass users and driving adoption of our on-demand solutions," Mr. Anderman concluded.

First Quarter and Fiscal Year 2013 Financial Outlook

The January 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 17% decrease from estimated mortgage volume in 2012, but a 4% increase from the October 2012 composite forecast for 2013 of $1.5 trillion. These organizations publish monthly updates of their annual and quarterly forecasts. The January 2013 composite quarterly forecast for origination volume is as follows:



                       
($ in billions) Q1 Q2 Q3 Q4 Annual
2013 $461 $438 $357 $298 $1,554
 

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

Additionally, following our strong financial performance over the last two years, we released the valuation allowance associated with our NOLs and are now at a full tax rate of 38% in 2013 compared to 8% in 2012.

For the first quarter of 2013, revenue is expected to be in the range of $30.0 million to $30.5 million. Net income is expected to be in the range of $3.2 million to $3.5 million, or $0.11 to $0.13 per diluted share. Adjusted net income is expected to be in the range of $6.4 million to $6.8 million, or $0.23 to $0.24 per diluted share. Adjusted EBITDA is expected to be in the range of $9.5 million to $10.0 million.

For the full fiscal year 2013, revenue is expected to be in the range of $127.5 million to $129.0 million. Net income is expected 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 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 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 and adjusted EBITDA 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. 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. 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 generally accepted accounting principles in the United States, 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 fourth quarter and fiscal year 2012 results today, February 14, 2013, via teleconference at 4:30 p.m. Eastern Time. To access the call, please dial 877-941-8416 or 480-629-9808 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 28, 2013 by dialing 800-406-7325 or 303-590-3030 and entering access code 4593741.

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 Encompass 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 Network and 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 projected revenue, net income, adjusted EBITDA and adjusted net income for the first quarter and fiscal year 2013. 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, 2011, Quarterly Report on Form 10-Q for the quarter ended September 30, 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.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
   
December 31,
2012 2011
(unaudited)  

(1)

 

Assets
Current assets
Cash and cash equivalents $ 44,114 $ 23,732
Short-term investments 16,243 1,933
Accounts receivable, net of allowances for doubtful accounts of $74 and $47, as of December 31, 2012 and December 31, 2011, respectively 9,753 6,819
Prepaid expenses and other current assets 2,956 1,165
Deferred tax assets 645 216
Note receivable   1,000     1,000  
Total current assets 74,711 34,865
Property and equipment, net 9,494 5,539
Long-term investments 43,728 -
Other intangible assets, net 6,531 8,166
Goodwill 51,051 51,051
Deposits and other assets   100     150  
Total assets $ 185,615   $ 99,771  
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 2,039 $ 2,255
Accrued and other current liabilities 5,792 4,937
Acquisition holdback, net of discount 2,948 2,948
Deferred revenue 4,896 4,548
Deferred rent   252     212  
Total current liabilities 15,927 14,900
Acquisition holdback, net of current portion and discount 1,911 4,725
Long-term deferred tax liabilities 130 260
Other long-term liabilities   785     1,028  
Total liabilities   18,753     20,913  
Commitments and contingencies
Stockholders' equity:
Common stock, $0.0001 par value per share;140,000,000 authorized shares, 26,058,533 and 21,019,590 shares issued and outstanding as of December 31, 2012 and December 31, 2011, respectively 3 2
Additional paid-in capital 184,616 116,012
Accumulated other comprehensive loss (65 ) -
Accumulated deficit   (17,692 )   (37,156 )
Total stockholders' equity   166,862     78,858  
Total liabilities and stockholders' equity $ 185,615   $ 99,771  
 
(1) Derived from audited financial statements.
 

Ellie Mae, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
       

Three months ended
December 31,

  Year ended December 31,
2012 2011 2012 2011
(unaudited) (unaudited)  

(1)

 

Revenues $ 29,914 $ 18,754 $ 101,845 $ 55,494
Cost of revenues   6,525     4,864     23,114     15,784  
Gross profit 23,389 13,890 78,731 39,710
Operating expenses:
Sales and marketing 5,308 4,131 17,887 12,126
Research and development 4,865 4,113 18,053 12,975
General and administrative   7,406     3,797     21,601     12,900  
Total operating expenses   17,579     12,041     57,541     38,001  
Income from operations 5,810 1,849 21,190 1,709
Other (expense) income, net   (28 )   (19 )   (43 )   76  
Income before income taxes 5,782 1,830 21,147 1,785
Income tax provision (benefit)   1,788     35     1,683     (1,835 )
Net income $ 3,994   $ 1,795   $ 19,464   $ 3,620  
Net income per share of common stock:
Basic $ 0.15   $ 0.09   $ 0.83   $ 0.23  
Diluted $ 0.14   $ 0.08   $ 0.76   $ 0.18  
Weighted average common shares used in computing net income per share of common stock:
Basic   25,832,303     20,828,571     23,523,222     15,618,053  
Diluted   27,896,937     22,039,426     25,537,192     20,649,451  
 
Net income $ 3,994 $ 1,795 $ 19,464 $ 3,620
Other comprehensive loss, after taxes
Unrealized losses on investments   (65 )   -     (65 )   -  
Comprehensive income $ 3,929   $ 1,795   $ 19,399   $ 3,620  
 
(1) Derived from audited financial statements.
 
Ellie Mae, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
   
Year ended December 31,
2012 2011
(unaudited)  

(1)

 

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 19,464 $ 3,620
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,144 1,964
Provision for uncollectible accounts receivable 70 469
Amortization of other intangible assets 1,635 896
Amortization of discount related to holdback 186 80
Stock-based compensation 6,849 1,680
Loss on sale of property and equipment 19 -
Excess tax benefit from exercise of stock options (1,967 ) -
Deferred income taxes (559 ) (1,654 )
Changes in operating assets and liabilities:
Accounts receivable (3,004 ) (2,584 )
Prepaid expenses and other current assets (1,506 ) (650 )
Deposits and other assets 50 621
Accounts payable 500 479
Accrued and other current liabilities 2,749 1,309
Deferred revenue 334 321
Deferred rent   (211 )   (179 )
Net cash provided by operating activities   27,753     6,372  
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (8,121 ) (3,688 )
Purchase of investments (65,811 ) (6,228 )
Maturities of investments 7,708 6,851
Acquisitions, net of cash acquired (2,907 ) (18,188 )
Other investing activities, net   10     (15 )
Net cash used in investing activities   (69,121 )   (21,268 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from public offerings, net of commissions 55,964 27,900
Offering costs paid during the period (433 ) (4,824 )
Payment of capital lease obligations (6 ) (116 )
Proceeds from issuance of common stock under employee stock plans 4,258 1,310
Excess tax benefit from exercise of stock options   1,967     9  
Net cash provided by financing activities   61,750     24,279  
NET INCREASE IN CASH AND CASH EQUIVALENTS 20,382 9,383
CASH AND CASH EQUIVALENTS, Beginning of period   23,732     14,349  
CASH AND CASH EQUIVALENTS, End of period $ 44,114   $ 23,732  
 
(1) Derived from audited financial statements.
 
Ellie Mae, Inc.
NON-GAAP RECONCILIATION
(UNAUDITED)
(in thousands, except share and per share amounts)
       

Three months ended December 31,

Year ended December 31,
  2012   2011   2012   2011  
Net income $ 3,994 $ 1,795 $ 19,464 $ 3,620
 
Depreciation and amortization 887 579 3,144 1,964
Amortization of intangible assets 409 415 1,635 896

Other (expense) income, net

28 19 43 (76 )
Income tax provision (benefit)   1,788   35   1,683   (1,835 )
EBITDA 7,106 2,843 25,969 4,569
 
Non-cash, stock-based compensation expenses 3,206 547 6,849 1,680
Acquisition costs   -   -   -   351  
Adjusted EBITDA $ 10,312 $ 3,390 $ 32,818 $ 6,600  
 
Net income $ 3,994 $ 1,795 $ 19,464 $ 3,620
Non-cash, stock-based compensation expenses 3,206 547 6,849 1,680
Acquisition related deferred tax assets - - - (1,654 )
Amortization of intangible assets 409 415 1,635 896
Acquisition costs   -   -   -   351  
Adjusted net income $ 7,609 $ 2,757 $ 27,948 $ 4,893  
 
Shares used to compute non-GAAP net income per share
Basic 25,832,303 20,828,571 23,523,222 15,618,053
Diluted 27,896,937 22,039,426 25,537,192 20,649,451
 
Adjusted net income per share
Basic $ 0.29 $ 0.13 $ 1.19 $ 0.31
Diluted $ 0.27 $ 0.13 $ 1.09 $ 0.24
 
Ellie Mae, Inc.
NON-GAAP RECONCILIATION
(UNAUDITED)
(in thousands, except share and per share amounts)
       

First Quarter 2013 Projected Range

Fiscal 2013 Projected Range
Net Income $ 3,200 $ 3,500 $ 15,600 $ 16,200
 
Depreciation and amortization 1,000 1,100 4,600 4,800
Amortization of intangible assets 400 400 1,400 1,400
Income tax provision/other   2,100   2,100   9,400   9,600
EBITDA 6,700 7,100 31,000 32,000
 
Non-cash, stock-based compensation expenses   2,800   2,900   13,200   13,400
Adjusted EBITDA $ 9,500 $ 10,000 $ 44,200 $ 45,400
 
Net Income $ 3,200 $ 3,500 $ 15,600 $ 16,200
Non-cash, stock-based compensation expenses 2,800 2,900 13,200 13,400
Amortization of intangible assets   400   400   1,400   1,400
Adjusted net income $ 6,400 $ 6,800 $ 30,200 $ 31,000
 
Shares used to compute non-GAAP net income per share
Diluted 28,000,000 28,000,000 28,400,000 28,400,000
 
Projected net income per share
Diluted $ 0.11 $ 0.13 $ 0.55 $ 0.57
 
Adjusted net income per share
Diluted $ 0.23 $ 0.24 $ 1.06 $ 1.09
 


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