How Ellie Mae's CEO plans to get the company back into growth mode
Ellie Mae shook the mortgage world in mid-May when the recently privatized company reduced its headcount by 10%.
Until then, the company had been in growth mode for many years, starting in 2000 with the purchase of Genesis 2000, and the next year, Contour, when Ellie Mae was still privately owned. It went public in 2011; and acquired AllRegs, Mortgage Returns and Velocify in the years that followed. Between 2011 and 2018, the number of active users of its flagship Encompass loan origination system grew to 186,543 from 53,767. But it plateaued in 2018 as only about 2,600 users were added in that year.
Restarting the company's growth, supported by Ellie Mae's parent, private equity firm Thoma Bravo, is what its CEO Jonathan Corr is thinking about right now. That's possible because being privately owned gives Ellie Mae the freedom to pursue transactions and not have to worry about how investors would respond, he said in an interview with National Mortgage News at the recent Mortgage Bankers Association's National Secondary Market Conference.
Below is a discussion with Corr about the changes at Ellie Mae. The responses are excerpted and edited for length.
The transaction with Thoma Bravo closed just about a month ago. Early on, how is the transition going?
JONATHAN CORR: Basically, two things have been constant at this company for 20 years and the 17 I've been here. The North Star is to automate everything between the consumer and the investor; and our values and commitment to the customer.
And that hasn't changed through our various financial configurations. We were a venture backed company, and we had strategic investors like Fannie Mae and PMI [Group] and Genworth and First American. We took the company public, we were public for eight years, and we had some long-term view investors and we had some short-term view traders.
Now we've got an investor that has a long-term view in terms of what we can do over the next four to six years — whatever the horizon usually is — that really is backing us to keep doing what we're doing. They love the platform, love the culture, they want us to double the size of the company, keep driving organic revenue as well as support us to do acquisitions, and probably even more acquisitions than we've done in the past.
So we're excited. We are very much aligned. I don't have to worry about short-term earnings and analysts that are fixated on this penny or that penny or revenue growth at any cost, and focus on building great products for customers, customer success and profitability.
You mentioned doing acquisitions. As a privately held company, Ellie Mae might have some more freedom to pursue deals. But on the other hand, it no longer has the ability to use stock as currency.
Most of the time, you aren't going to use stock to buy something. In most acquisitions these days, especially in our industry, people are buying things for cash. We've never used our stock as currency to buy things in the past, and we've done since we went public, six acquisitions.
Now I can actually use a combination of equity [and cash] but I also have leverage in the business. So I have some ability to have additional power to go out and do acquisitions.
As we continue to grow and drive profitable growth, we're going to generate more cash and that's going to fuel our ability to make more investments in the company. But probably more importantly, do acquisitions that add value for our customers.
So were the layoffs just a temporary retrenchment for Ellie Mae?
Basically, there's a set of costs that public companies have, certain folks that we don't need as a private company. We held off coming into this year doing your traditional, what I'll call trimming of folks on the edge. So you'd do that anyways. We took this as an opportunity to really look at what the most important things are for our customers, what areas are going to create the most value, and to make sure that we're being as sharp and efficient as possible.
So we made modest changes and I feel personally that it's very tough to make any changes. This is an organization with a strong culture and a family orientation, but at the same time I've got to look at what's the best thing for all the employees in the organization and our customers going forward.
But I think going forward you'll see us make additional investments over the next number of years.