In its first earnings report as a publicly traded company, mortgage software provider Ellie Mae posted a net loss of $800,000 for the first quarter of 2011.
Revenue was up 19% over the first quarter of 2010, $10.6 million in 1Q11 compared to $8.9 million a year ago. The first quarter loss was equivalent to $0.22 per share, better than the $1.6 million ($0.48 per share) loss in 1Q10.
The first quarter loss compares to net income of approximately $84,500 in 4Q10 off revenue of $12.7 million.
There were 41,351 lender mortgage professionals who used Ellie Mae’s Encompass loan origination system at least once during the quarter, up 18% from 34,987 in 1Q10 and up 4.2% from 4Q10.
Active broker mortgage professionals using the software sat at 11,014 at the end of 2010—down 49% from the same period of 2009—but Ellie Mae did not disclose the number of active brokers during 1Q11. The company only filed a Form 8-K with the Securities and Exchange Commission Wednesday. The full quarterly report is pending the registration of Ellie Mae’s 1Q11 Form 10-Q.
In a call with analysts after the close of markets Wednesday, Sig Anderman, the president and CEO of Ellie Mae, said the number of broker users dropped below 10,000 in 1Q11, the result of declining number of mortgage brokers in the industry.
“The broker market is being pretty much decimated out there,” Anderman said. “We’re not focusing at all on brokers. Our entire focus is on lenders because that’s where the future is in this business; it’s pretty clear from virtually every perspective.”
That's a major shift for the company, which has long counted on its mortgage broker business. At the end of 2008, Ellie Mae had 29,344 active broker users and 28,083 lender users. At the end of 2010, Ellie's lender users totaled 39,687—a 41.3% increase—while broker users numbered 11,013—a 62.4% drop.
But even when brokers outnumbered the individual users at lenders, Ellie Mae's Encompass-related revenue from lenders has historically outpaced broker revenue.
Annual Encompass-related revenue in 2008 from lender users was $20.4 million, compared to $8.8 million with brokers. The annual Encompass revenue in 2010 for lenders was $34.1 million, up 67.3%, while broker revenue slipped 46.6% to $4.7 million.
The company projects annual revenue to be $50 million to $52 million in 2011, which would be an increase of 16% to 20% from 2010’s revenue of $43.2 million. Ellie Mae also projected net income of $2.1 million to $3.1 million for all of 2011, which would be an increase of 170% to 299% from 2010’s annual net income of $777,000.
Ellie Mae CFO Ed Luce told analysts the projections are based on estimates of $1 trillion origination market in 2011 and growth in the number of users on Ellie Mae’s LOS, but declined to specify Ellie Mae’s target for annual new customers growth.
“We had planned to add 2,400 success-based pricing users in the first quarter, which are almost entirely lender users,” Luce told analysts. “We beat that handily.”
Lender use of its software-as-a-service LOS has increased to more than 11,100 mortgage professionals at the end of 1Q11, from 2,738 at the end of 1Q10 and 8,704 at the end of 4Q10. The Pleasanton, Calif.-based company said the average revenue per active lender user was $216, up 16% from $186 in 1Q10, but down 19% from 4Q10.
Ellie Mae’s software and services revenue (its LOS business) was $8.4 million, an 18% increase from 1Q10, but down 17% from 4Q10. Network transaction revenue, which is generated when the company’s users pay to access other service providers across the Ellie Mae Network, was $2.2 million, up 24% from 1Q10, but down 15% from the previous quarter.
Since pricing its initial public offering at $6 per share on April 15, Ellie Mae common stock has traded from $5.81 to $7.60 per share and sat at $7.12 at the close of market Wednesday.
