Analysts and company executives are optimistic about Ellie Mae's 2012 prospects after the loan origination system vendor beat internal projections and Wall Street estimates for the fourth quarter and full year 2011.
Total 4Q11 revenue increased 48% to $18.75 million, while net income was $1.8 million, down 5% from the year-ago quarter and
Net income was improved by a $1.6 million tax benefit related to Ellie Mae’s
“The strong revenue performance was driven by user additions and revenue per loan well above expectations, evidence that Ellie Mae’s strategy is playing out as we believed it could, and is doing so without a great end-market environment,” noted William Blair analysts Brandon Dobell and Timo Connor.
2011 was Ellie Mae’s most profitable year on record dating back to at least 2006, according to the company’s April 2011 initial public offering prospectus. The company beat its 2011 revenue outlook of $51 to $53 million, which was revised upward at the end of 3Q11 on account of the DMD acquisition from $50 million to $52 million. Net income also was better than Ellie’s projected $100,000 to $1 million, which was previously revised down from $2.1 million to $3.1 million.
Consensus expectations for Ellie’s 4Q11 revenue was $15.3 million, according to Morgan Keegan analysts, who reiterated their expectation that Ellie’s stock will outperform the S&P 500 over the next 12 months and increased their target price to $10 from $7. The stock has closed above $8 per share every day since Ellie released its earnings on Feb. 23, and reached an all-time high at $9.19 per share on Feb. 24.
Ellie Mae generates revenue both from sales and transaction fees from its LOS and revenue generated from fees charged for accessing its Ellie Mae Network, which connects lenders to various third-party origination services. Software revenue increased 34% in 2011 to $45.4 million and network revenue for the year increased 8% to $10.1 million compared to 2010.
“In 2011, over 85% of our revenues were attributable to our on-demand offerings; the SaaS and success-based pricing versions of Encompass, our document preparation, compliance and product and pricing services in the Ellie Mae Network,” said Ellie Mae President and CEO Sig Anderman in a recent call with analysts.
There were a record 46,238 lender mortgage professionals who used Ellie Mae’s Encompass LOS at least once during the quarter, up 17% from 4Q10. About half of the users originated loans on the software as a service version of Encompass, up 74% from a year ago. Ellie Mae said 5,540 Encompass SaaS seat licenses were sold during the quarter, 69% of which were conversions of existing clients off the subscription models of Encompass and DataTrac.
Revenue from the DataTrac acquisition accounted for only 4% of Ellie Mae’s 4Q11 results, but Anderman said DMD operation has been fully integrated into Ellie Mae. In December,
With Encompass Originator, Ellie Mae will attempt to sell the value of a direct integration with DataTrac to convert users off competitors’ POS without making the lenders give up DataTrac. Long-term, Ellie Mae plans to develop an end-to-end LOS that combines the best of Encompass and DataTrac for all its customers.
“Several Datatrac customers have already migrated to Encompass and many others are evaluating that move,” Anderman said. “We'll be introducing important Encompass releases throughout the year that we believe will fully address all the functionality demands of Datatrac customers.”
Ellie Mae is projecting 2012 annual revenue of $68 million to $70 million and net income for the year to be $2.4 million to $3.8 million, based on an industry origination volume of $1 trillion, down 20% from 2011. For 1Q12, Ellie Mae said it expects revenue to be in the range of $17.9 million to $18.3 million and net income in the range of $1.9 million to $2.4 million.
