ELLI Ellie Mae, Inc.

Revenue Up 26% to $93.0 million

Seat Bookings of 12,100

Ellie Mae® (NYSE:ELLI), a leading provider of innovative on-demand software solutions and services for the residential mortgage industry, today reported results for the first quarter ended March 31, 2017.

First Quarter 2017 Highlights

• Revenue of $93.0 million, up 26% from $73.6 million in 2016
• Net income of $9.6 million1, up from $2.5 million in 2016
• Adjusted EBITDA of $20.8 million, up 33% from $15.6 million in 2016
• 12,100 Encompass seats booked

“We had a very productive first quarter and are on track for a solid year,” said Jonathan Corr, president and CEO of Ellie Mae. “Revenue increased 26% and seat bookings were strong at 12,100. While industrywide mortgage volume declined by 34% from the fourth quarter, lenders of all sizes continue to see the value of our Encompass Lending Platform as demonstrated by our Q1 seat bookings.”

“Excitement for our platform was on full display this March in Las Vegas at our annual user conference, Experience, which sold out with over 3,000 attendees, an increase of over 30% from last year. At the event, we introduced our Connect Suite of Products, including, Consumer, TPO, Loan Officer and Developer Connect, which all leverage our new open, secure and scalable architecture so that lenders and partners can work together on our platform more efficiently and seamlessly. We also previewed Encompass NG, which will roll out progressively through 2018, as well as the direction of our data driven initiatives, as we focus on driving further innovation.”

Financial Results

Total revenue for the first quarter of 2017 was $93.0 million, compared to $73.6 million for the first quarter of 2016. Net income for the first quarter of 2017 was $9.6 million1, or $0.27 per diluted share, compared to $2.5 million, or $0.08 per diluted share, for the first quarter of 2016. First quarter 2017 net income reflects the impact of changes to the GAAP tax treatment of stock compensation benefits.

On a non-GAAP basis, adjusted net income for the first quarter of 2017 was $8.9 million, or $0.25 per diluted share, compared to $7.6 million, or $0.24 per diluted share, for the first quarter of 2016. Adjusted EBITDA for the first quarter of 2017 was $20.8 million, compared to $15.6 million for the first quarter of 2016. GAAP and non-GAAP per share results for the quarter ended March 31, 2017 include the effect of an additional 3.2 million shares from the follow-on offering in August 2016.

In the first quarter of 2017, the Company began presenting adjusted net income including non-GAAP tax adjustment effects to conform to the Compliance and Disclosure Interpretations published by the U.S. Securities and Exchange Commission in May of 2016 on non-GAAP measures. Adjusted net income for the prior year period was also adjusted to reflect the tax effects for comparison purposes. Details of the impact on prior year periods are included in the financial data sheet posted to the investor relations section of Ellie Mae’s website.

Second Quarter and Full Year 2017 Financial Outlook

For the second quarter of 2017, our revenue is expected to be in the range of $109.0 million to $111.0 million. Net income is expected to be in the range of $15.7 million to $16.4 million, or $0.43 to $0.45 per diluted share. Adjusted net income is expected to be in the range of $18.2 million to $19.2 million, or $0.50 to $0.53 per diluted share, which reflects the non-GAAP tax adjustment. Adjusted EBITDA is expected to be in the range of $37.5 million to $39.1 million. Per share guidance assumes a weighted average share count of approximately 36 million.

For the full year 2017, revenue is expected to be in the range of $433.0 million to $440.0 million. Net income is expected to be in the range of $50.0 million to $55.0 million, or $1.37 to $1.49 per diluted share. Adjusted net income is expected to be in the range of $65.6 million to $70.7 million, or $1.79 to $1.92 per diluted share, which reflects the tax adjustment. Adjusted EBITDA is expected to be in the range of $139.5 million to $147.4 million. Per share guidance assumes a weighted average share count of approximately 37 million.

Additional information about the non-GAAP financial measures presented in this release, including a reconciliation of the non-GAAP financial measures to their related GAAP financial measures is set forth below under the section entitled “Use of Non-GAAP Financial Measures.”

Quarterly Conference Call

Ellie Mae (the “Company”) will discuss its first quarter 2017 results today, April 27, 2017, via teleconference at 4:30 p.m. Eastern Time. To access the call, please dial 888-334-3020 or 719-457-2506 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 May 11, 2017 by dialing 888-203-1112 or 719-457-0820 and entering access code 9702841.

Use of Non-GAAP Financial Measures

Ellie Mae provides investors with the non-GAAP financial measures of adjusted net income, adjusted EBITDA, adjusted gross profit, and free cash flow in addition to the traditional GAAP operating performance measure of net income as part of its overall assessment of its performance. Adjusted net income consists of net income plus stock-based compensation expense, amortization of intangible assets as well as the income tax effects of the adjustments. EBITDA consists of net income plus depreciation, amortization of intangible assets, and income tax provision, less other income, net. Adjusted EBITDA consists of EBITDA plus stock-based compensation expense. Adjusted gross profit consists of gross profit plus stock-based compensation and amortization of intangible assets that are included in cost of revenues. Free cash flow consists of net cash used in operating activities less acquisition of property and equipment and internal-use software, net. Ellie Mae uses adjusted net income, adjusted EBITDA, and adjusted gross profit as measures of operating performance because they enable period to period comparisons by excluding potential differences caused by variations in the age and depreciable lives of fixed assets, the 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 stock-based compensation expense from adjusted net income, adjusted EBITDA, and adjusted gross profit 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. The income tax effects are calculated based on the annual non-GAAP effective tax rate, which quantifies the tax effects of the non-GAAP adjustments. 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 GAAP. The Company cautions that other companies in Ellie Mae’s industry may calculate adjusted net income, EBITDA, adjusted EBITDA, adjusted gross profit, and free cash flow differently than the Company does, further limiting their usefulness as a comparative measure. A reconciliation of net income to adjusted net income, EBITDA, adjusted EBITDA, gross profit to adjusted gross profit, and operating cash flow to free cash flow are included in the tables below.

Note Regarding Employee Share-Based Payment Accounting Standard

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2016-09, Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"), which addresses, among other items, the accounting for income taxes, forfeitures and cash flow presentation. Under ASU 2016-09, excess tax benefit generated upon the settlement or exercise of stock awards are no longer recognized as additional paid-in capital, but are instead recognized as an income tax benefit. Ellie Mae adopted this amendment in accounting for income taxes effective January 1, 2017 and recognized a benefit to GAAP net income of $6.5 million for the first quarter of 2017.

Disclosure Information

Ellie Mae uses the investor relations section on its website as the means of complying with its disclosure obligations under Regulation FD. Accordingly, we recommend that investors should monitor Ellie Mae’s investor relations website in addition to following Ellie Mae’s press releases, SEC filings, and public conference calls and webcasts.

About Ellie Mae

Ellie Mae (NYSE:ELLI) is a leading provider of innovative on-demand software solutions and services for the residential mortgage industry. Mortgage lenders of all sizes use Ellie Mae’s Encompass® all-in-one mortgage management solution, Mavent Compliance Service, and AllRegs research, reference and education resources to improve compliance, loan quality and efficiency across the entire mortgage lifecycle. Visit EllieMae.com or call (877) 355-4362 to learn more.

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 projected revenue, net income, adjusted EBITDA, and adjusted net income for the second quarter and fiscal year 2017. 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 the volume of residential mortgages in the United States; changes in other macroeconomic factors affecting the residential real estate industry; changes in strategic planning decisions by management; our ability to manage growth and expenses as we continue to scale our business; reallocation of internal resources; costs incurred and delays in developing new products; changes in anticipated rates of SaaS seat additions, and new customer acquisitions; the possibility that economic benefits of future opportunities may never materialize, including unexpected variations in market growth and demand for the acquired products and technologies; delays and disruptions, including changing relationships with partners, customers, employees or suppliers; the satisfactory performance, reliability and availability of our products and services; the amount of costs incurred in connection with 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 U.S. Securities and Exchange Commission (“SEC”), including but not limited to its Annual Report on Form 10-K for the year ended December 31, 2016 as updated from time to time by our quarterly reports on Form 10-Q and our other filings with the SEC. 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, unless otherwise required by law.

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1 Please see paragraph titled, “Note Regarding Employee Share-Based Payment Accounting Standard.”

© 2017 Ellie Mae, Inc. Ellie Mae®, Encompass®, AllRegs®, the Ellie Mae logo and other trademarks or service marks of Ellie Mae, Inc. appearing herein are property of Ellie Mae, Inc. or its subsidiaries. All rights reserved. Other company and product names may be trademarks or copyrights of their respective owners.

  Ellie Mae, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share and per share amounts)      

  March 31,  

    December 31, 2017 2016 Assets Current assets: Cash and cash equivalents $ 334,926 $ 380,907 Short-term investments 58,809 41,841 Accounts receivable, net of allowance for doubtful accounts of $45 and $45 as of March 31, 2017 and December 31, 2016, respectively 39,870 39,358 Prepaid expenses and other current assets 16,182   15,209   Total current assets 449,787 477,315 Property and equipment, net 141,716 126,297 Long-term investments 54,241 45,931 Intangible assets, net 16,211 17,289 Deposits and other assets 23,855 10,138 Goodwill 74,547   74,547   Total assets $ 760,357   $ 751,517   Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 16,843 $ 15,942 Accrued and other current liabilities 19,859 39,809 Deferred revenue 19,811   23,126   Total current liabilities 56,513 78,877 Leases payable, net of current portion 55 85 Other long-term liabilities 12,502   17,647   Total liabilities 69,070   96,609     Stockholders' equity: Common stock, $0.0001 par value per share; 140,000,000 authorized shares, 34,063,216 and 33,685,649 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively 3 3 Additional paid-in capital 624,275 612,098 Accumulated other comprehensive loss (161 ) (219 ) Retained earnings 67,170   43,026   Total stockholders' equity 691,287   654,908   Total liabilities and stockholders' equity $ 760,357   $ 751,517       Ellie Mae, Inc. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (in thousands, except share and per share amounts)       Three Months ended March 31, 2017     2016 Revenues $ 93,002 $ 73,625

Cost of revenues(1)

34,768   26,631 Gross profit 58,234 46,994 Operating expenses:

Sales and marketing(1)

19,380 15,287 Research and development(1) 17,407 12,453 General and administrative(1) 16,942   15,731 Total operating expenses 53,729   43,471 Income from operations 4,505 3,523 Other income, net 501   199 Income before income taxes 5,006 3,722 Income tax provision (benefit) (4,593 ) 1,216 Net income $ 9,599   $ 2,506 Net income per share of common stock: Basic $ 0.28   $ 0.09 Diluted $ 0.27   $ 0.08 Weighted average common shares used in computing net income per share of common stock: Basic 33,702,109   29,471,214 Diluted 35,609,459   31,080,314   Net income $ 9,599 $ 2,506 Other comprehensive income, net of taxes Unrealized gain on investments 58   328 Comprehensive income $ 9,657   $ 2,834   (1) Includes stock-based compensation expense of the following for the periods presented: Cost of revenues $ 1,444 $ 970 Sales and marketing 1,176 878 Research and development 1,861 1,504 General and administrative 3,370   3,338 $ 7,851   $ 6,690     Ellie Mae, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)         Three Months ended March 31, 2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 9,599 $ 2,506 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,339 3,954 Amortization of intangible assets 1,078 1,457 Stock-based compensation expense 7,851 6,690 Deferred income taxes (4,647 ) 1,172 Loss on disposal of property and equipment — 5 Amortization (accretion) of investments (164 ) 239 Changes in operating assets and liabilities: Accounts receivable, net (511 ) (10,906 ) Prepaid expenses and other current assets (973 ) (1,598 ) Deposits and other assets (89 ) (1,565 ) Accounts payable 1,860 625 Accrued, other current and other liabilities (19,442 ) (13,817 ) Deferred revenue (3,323 ) 1,178   Net cash used in operating activities (1,422 ) (10,060 ) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment (11,327 ) (13,298 ) Acquisition of internal-use software (11,439 ) (7,112 ) Purchases of investments (38,907 ) (18,971 ) Maturities of investments 13,851 18,094 Sale of investments —   20,000   Net cash used in investing activities (47,822 ) (1,287 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of capital lease obligations (111 ) (868 ) Proceeds from issuance of common stock under employee stock plans 7,283 6,719 Payment of issuance costs relating to common stock issued in public offering (15 ) — Tax payments related to shares withheld for vested restricted stock units (3,894 ) (360 ) Net cash provided by financing activities 3,263   5,491   NET DECREASE IN CASH AND CASH EQUIVALENTS (45,981 ) (5,856 ) CASH AND CASH EQUIVALENTS, Beginning of period 380,907   34,396   CASH AND CASH EQUIVALENTS, End of period $ 334,926   $ 28,540   Supplemental disclosure of cash flow information: Cash paid for interest $ 305 $ 79 Cash paid for income taxes $ 63 $ 97 Supplemental disclosure of non-cash investing and financing activities: Fixed asset purchases accrued but not paid $ 5,001 $ 2,036 Stock-based compensation capitalized to property and equipment $ 937 $ 488     Ellie Mae, Inc. NON-GAAP RECONCILIATION (UNAUDITED) (in thousands, except share and per share amounts)       Three Months ended March 31, 2017     2016 Net income $ 9,599 $ 2,506 Depreciation and amortization 7,339 3,954 Amortization of intangible assets 1,078 1,457 Other income, net (501 ) (199 ) Income tax provision (benefit) (4,593 ) 1,216   EBITDA 12,922 8,934   Stock-based compensation expense 7,851   6,690   Adjusted EBITDA $ 20,773   $ 15,624     Gross profit $ 58,234 $ 46,994 Stock-based compensation expense(1) 1,444 970 Amortization of intangible assets(1) 767   1,139   Adjusted gross profit $ 60,445   $ 49,103     Net income $ 9,599 $ 2,506 Stock-based compensation expense 7,851 6,690 Amortization of intangible assets 1,078 1,457 Income tax effects of adjustments(2)

 

(9,605 )

 

(3,084 ) Adjusted net income(2) $ 8,923   $ 7,569     Shares used to compute adjusted net income per share Basic 33,702,109 29,471,214 Diluted 35,609,459 31,080,314   Adjusted net income per share Basic $ 0.26   $ 0.26   Diluted $ 0.25   $ 0.24     Net cash used in operating activities $ (1,422 ) $ (10,060 ) Acquisition of property and equipment and internal-use software, net (22,766 ) (20,410 ) Free cash flow $ (24,188 ) $ (30,470 )   (1) Amount represents the cost of revenues portion of stock-based compensation expense and amortization of intangible assets. (2) The prior period amount has been adjusted to include the tax effects of the adjustments to net income to conform to the current period presentation.   Ellie Mae, Inc. NON-GAAP RECONCILIATION (UNAUDITED) (in thousands, except share and per share amounts)      

Second Quarter 2017Projected Range

   

  Fiscal 2017  Projected Range

Net Income $ 15,700     $ 16,400 $ 50,000     $ 55,000   Depreciation and amortization 9,900 9,900 39,000 39,000 Amortization of intangible assets 1,100 1,100 4,400 4,400 Income tax provision/other 1,900   2,300   7,600   9,000   EBITDA 28,600 29,700 101,000 107,400   Stock-based compensation expense 8,900   9,400   38,500   40,000   Adjusted EBITDA $ 37,500   $ 39,100   $ 139,500   $ 147,400     Net Income $ 15,700 $ 16,400 $ 50,000 $ 55,000 Stock-based compensation expense 8,900 9,400 38,500 40,000 Amortization of intangible assets 1,100 1,100 4,400 4,400 Income tax effects of adjustments (7,500 ) (7,700 ) (27,300 ) (28,700 ) Adjusted net income $ 18,200   $ 19,200   $ 65,600   $ 70,700     Shares used to compute non-GAAP net income per share Basic 34,300,000 34,500,000 34,500,000 34,800,000 Diluted 36,100,000 36,300,000 36,600,000 36,800,000   Projected net income per share Basic $ 0.46 $ 0.48 $ 1.45 $ 1.58 Diluted $ 0.43 $ 0.45 $ 1.37 $ 1.49   Adjusted net income per share Basic $ 0.53 $ 0.56 $ 1.90 $ 2.03 Diluted $ 0.50 $ 0.53 $ 1.79 $ 1.92

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IR CONTACTS:Ellie Mae, Inc.Alex Hughes, 925-227-7079VP of Investor RelationsIR@elliemae.comorThe Blueshirt Group for Ellie Mae, Inc.Lisa Laukkanen, 415-217-4967lisa@blueshirtgroup.comorPRESS CONTACT:Ellie Mae, Inc.Erica Harvill, 925-227-5913Erica.Harvill@elliemae.com