Ellie Mae : 07.27.17Ellie Mae Reports Second Quarter 2017 Results

PLEASANTON, Calif. - July 27, 2017 - 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 second quarter ended June 30, 2017.

Second Quarter 2017 Highlights

• Revenue of $104.1 million, up 16% from $90.1 million in 2016
• Net income of $18.8 million, up from $10.6 million in 2016
• Adjusted EBITDA of $35.8 million, up 16% from $30.9 million in 2016
• 9,600 Encompass seats booked

'Despite mortgage volumes being down 8% in the second quarter, we were able to grow revenue 16% year-over-year and increased revenue 20% in the first half of the year with volumes down 3%,' said Jonathan Corr, president and CEO of Ellie Mae. 'We continued to increase share with another 9,600 seats booked as lenders embrace our platform's all-in-one value proposition. Moreover, with our investments in Encompass NG, we are extending our technology lead even further.'

'The mortgage market is in the process of transitioning from a refi centric one to a purchase driven one. Some of our customers experienced closed loan volume lower than we expected in the second quarter as they dealt with declining refi volume, while the tight housing inventory held back purchase volume. We also saw some enterprise customers, which comprise an increasing portion of our customer base, take longer to ramp on our platform than planned. These factors led to a lower closed loan volume than expected, so we are resetting assumptions for the year as the market completes this transition. Beyond this year, we expect the market to normalize and for our business to resume stronger growth,' concluded Mr. Corr.

Financial Results

Total revenue for the second quarter of 2017 was $104.1 million, compared to $90.1 million for the second quarter of 2016. Net income for the second quarter of 2017 was $18.8 million, or $0.52 per diluted share, compared to $10.6 million, or $0.34 per diluted share, for the second quarter of 2016. Second 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 second quarter of 2017 was $18.2 million, or $0.51 per diluted share, compared to $16.8 million, or $0.54 per diluted share, for the second quarter of 2016. Adjusted EBITDA for the second quarter of 2017 was $35.8 million, compared to $30.9 million for the second quarter of 2016. GAAP and non-GAAP per share results for the quarter ended June 30, 2017 include the effect of an additional 3.2 million shares from the follow-on offering in August 2016.

Third Quarter and Full Year 2017 Financial Outlook

For the third quarter of 2017, our revenue is expected to be in the range of $104.0 million to $106.0 million. Net income is expected to be in the range of $7.0 million to $8.0 million, or $0.19 to $0.22 per diluted share. Adjusted net income is expected to be in the range of $13.9 million to $15.1 million, or $0.38 to $0.41 per diluted share, which reflects the non-GAAP tax adjustment. Adjusted EBITDA is expected to be in the range of $30.4 million to $32.4 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 $400.0 million to $405.0 million. Net income is expected to be in the range of $40.0 million to $42.0 million, or $1.11 to $1.16 per diluted share. Adjusted net income is expected to be in the range of $52.8 million to $54.3 million, or $1.47 to $1.50 per diluted share, which reflects the non-GAAP tax adjustment. Adjusted EBITDA is expected to be in the range of $114.0 million to $117.8 million. Per share guidance assumes a weighted average share count of approximately 36 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 second quarter 2017 results today, July 27, 2017, via teleconference at 4:30 p.m. Eastern Time. To access the call, please dial 877-719-9799 or 719-325-4791 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 August 10, 2017 by dialing 888-203-1112 or 719-457-0820 and entering access code 8375982.

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 and amortization, 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 provided by 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 and 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

Ellie Mae adopted an accounting standard issued in 2016 where 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. The adoption was effective January 1, 2017 and the Company recognized a benefit to GAAP net income of $7.3 million and $13.8 million for the three and six months ended June 30, 2017. The adoption also resulted in a $1.2 million increase in net cash provided by operating activities and a corresponding $1.2 million decrease in net cash provided by financing activities for the six months ended June 30, 2016.

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 the leading cloud-based platform provider for the mortgage finance industry. Ellie Mae's technology solutions enable lenders to originate more loans, reduce origination costs, and shorten the time to close, all while ensuring the highest levels of compliance, quality and efficiency. 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 third 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.

Please see paragraph titled, 'Note Regarding Employee Share-Based Payment Accounting Standard.'

IR CONTACT

Alex Hughes
VP, Investor Relations
Ellie Mae, Inc.
(925) 227-7079
IR@elliemae.com

Lisa Laukkanen
The Blueshirt Group for Ellie Mae, Inc.
(415) 217-4967
lisa@blueshirtgroup.com

PRESS CONTACT

Erica Harvill
Ellie Mae, Inc.
(925) 227-5913
Erica.harvill@elliemae.com

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