Source: Ellie Mae.
The housing market has performed quite strongly over the past several years, and the resulting uptick in mortgage volume has been a boon not just to mortgage lenders but to the companies that help them handle their business needs. Ellie Mae (ELLI) has capitalized on the strength in mortgage activity by offering its on-demand technology solutions and services to the residential mortgage industry, and coming into Thursday afternoon's second-quarter financial report, Ellie Mae shareholders wanted to see more of the superb results that the company has produced in the recent past. Ellie Mae once again managed to exceed investor expectations by a wide margin, proving the strength of its business model and its ability to garner further market share. Let's take a closer look at Ellie Mae's latest results and whether the company will keep thriving in the future.
Ellie Mae hits new records -- again
Once again, Ellie Mae posted amazing growth rates during the second quarter. Revenue soared 65%, hitting a new record of $65.9 million and far exceeding the 50% growth that investors had expected to see. On the bottom line, Ellie Mae produced a 62% jump in net income, and after making allowances for stock-based compensation, adjusted earnings of $0.48 soared by half compared to the year-ago quarter. The consensus estimate was for Ellie Mae to show only flat earnings for the quarter.
Once again, the strength of Ellie Mae's software systems showed up in its business metrics. The company's number of active users of its Encompass system jumped 28% year over year to 127,000, and Ellie Mae saw even greater penetration of its cloud-based version of Encompass, with more than five out of every six clients using Encompass on the cloud. On-demand revenue jumped 70% and now represents all but 2% of Ellie Mae's overall sales. Revenue per active user also continued its upward trend, rising another 28% to $526, which was up more than $50 just since the first quarter of 2015.
CEO Jonathan Corr was once again happy to let the robust housing market support its business. "With a healthy pickup in the purchase market," Corr explained, "our customers continued to grow their businesses and close more loans during the quarter." At the same time, Corr noted that Ellie Mae's unique offerings stand out in the industry, and that "has resulted in growth that outpaced the overall mortgage origination market as we continued to capture market share."
Could things get even better for Ellie Mae?
As if its past results weren't strong enough, Ellie Mae's third-quarter guidance pointed to continued dominance of the mortgage-servicing industry. The company believes it can bring in between $61 million and $62 million in revenue during the third quarter, with adjusted earnings coming in between $0.31 and $0.34 per share. Not only are both figures well above current forecasts from investors, but Ellie Mae's ability to outpace its own guidance for the second quarter shows that there's even more potential for growth.
Ellie Mae also has higher hopes for the full 2015 year. As we saw last quarter, it once again increased its revenue guidance, this time by roughly $13.5 million to a new range of $237.5 million to $238.5 million. Guidance for adjusted earnings of $1.27 to $1.32 per share was about $0.19 better than previously expected, and similar upticks for other metrics suggest ongoing success for Ellie Mae companywide.
Investors were quite happy with Ellie Mae's news, sending the stock up by more than 7% in the first half-hour of after-market trading following the announcement. Ellie Mae is still tied quite closely to the health of the mortgage market, and so if the Federal Reserve ever starts tightening its monetary policy and rates start to rise more substantially, then there's a possibility that the company could see tougher times in the future. For now, though, with favorable conditions in the mortgage market, Ellie Mae is taking full advantage of its opportunity to strike while the iron is hot and grab up as much market share as it can.
