Ellie Mae's earnings down on accounting change and M&A costs
Ellie Mae saw a 20% year-over-year increase in second-quarter revenue with more loans closed using Encompass, but net income fell nearly 50% on an accounting change and acquisition costs.
The company had net income of $9.5 million for the quarter, down from $18.8 million one year prior. The drop was because of the adoption of Accounting Standards Codification 606, which affects revenue recognition as well as the amortization of intangibles related to the Velocify acquisition.
"I am pleased to report another solid quarter in which our financial results exceeded our expectations," President and CEO Jonathan Corr said in a press release. "The number of closed loans on Encompass increased 6% year-over-year despite lower industry volumes while revenue per loan increased 13% year-over-year."
Second-quarter revenue was $125 million, up from $104.1 million one year prior. Income from operations was $6.3 million, down from $18 million in the second quarter of 2017. But there was a $3.2 million income tax benefit recorded by Ellie Mae in the period, up from $836,000 the previous year.
There were 721,000 loans closed on Encompass during the second quarter, compared with 553,000 in the first quarter and 682,000 in the second quarter last year.
"The value proposition of Encompass remains strong as the industry seeks a digital mortgage platform that improves and streamlines the complex origination process," Corr said. "We have made continued progress in the rollout of our Encompass Lending Platform, announcing the general availability of several Encompass Connect solutions."
For the third quarter, Ellie Mae's revenue is expected to be in the range of $127 million to $129 million. Net income is expected to be in the range of $4 million to $6 million because of additional amortization of intangible assets and integration costs related to the Velocify acquisition.