Ellie Mae (ELLI) Takes Off on Solid Earnings

Joel Anderson  |

Five-star Small-Cap Star Ellie Mae  (ELLI) is up over 16.5 percent on Friday following a strong earnings report that showed solid growth in 2013.

ELLI Earnings Report Drives Gains

Those long Ellie Mae stock probably found plenty to like in the earnings report released after the closing bell on Thursday. The company, a provider of automation solutions for the mortgage industry, reported a record year for revenue, up 26 percent year-over-year in 2013 to $128.5 million.

“Revenues for 2013 were up 26% to a record $128.5 million, even as national mortgage volume declined 14% from 2012,” said CEO Sig Anderman on the company’s Thursday earnings call. “Adjusted EBITDA grew 20% to $39.4 million. Our revenue growth is driven largely by a successful strategy to aggressively pursue market share even in the face of the downward cycle in the mortgage industry. We knew 2013 will be a challenging year for lenders with volume down and new regulations pressing their operations at every level and we also knew that our Encompass solution was built precisely to help those lenders comply with ever changing rules of the game and create efficiencies that would be especially attractive as volumes decline.”

The report also showed strong growth in the important SaaS segment that’s seen as an important driver of future revenues.

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“Key to our long-term growth strategy, we booked a record 39,000 new SaaS Encompass seats during the year,” said Anderman. “Contracted SaaS seats, the primary driver of our recurring revenues, increased to 95,000 up almost 60% from a year ago. We ended the year with 92,000 active Encompass seats, a 25% increase from 2012, with many of the newly booked seats still to be implemented during 2014. We are very pleased with our steady market penetration, as new lenders, driven by ever increasing regulations and operational challenges, are attracted to our comprehensive offerings.”

The company also released its FY 2014 guidance on Friday, predicting EPS for the coming year to be between $1.08 and $1.11, slightly more bullish than the Reuters consensus estimate of $1.08 a share.

ELLI Stock Volatile, but Up

With today’s gains, shares of Ellie Mae are up almost 40 percent over the last year. And a look at our Small-cap Stars system indicates that Ellie Mae’s success could be related to its strong fundamentals, particularly its EV/EBIT, EV/Invested Capital, and Cash as a percent of revenue.

What’s more, if you look at the DuPont Report available with Equities.com’s EVA Reports, you’ll see a company offering a significantly better return on equity than its industry counterparts. And, more promising, this improved ROE appears to be driven primarily by the company’s strong net margins, typically a positive sign.

[Image via Lending Memo]

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