Elli Money House
Image source: Ellie Mae.

Software maker Ellie Mae (NYSE:ELLI) serves customers who make mortgage loans, and so it relies on favorable economic conditions in the housing market to spur greater loan volumes that in turn give companies an incentive to use its software. Coming into Thursday's fourth-quarter financial report, Ellie Mae shareholders had some concerns about whether the company would be able to keep its earnings growing, especially as lending giant Wells Fargo (NYSE:WFC) reported double-digit percentage drops in applications, originations, and pipeline figures for home loans. Yet Ellie Mae put all those concerns to rest, producing not only better revenue growth than expected but also boosting its bottom line as well. Let's take a closer look at Ellie Mae's latest results and what they say about its prospect for 2016.

Ellie Mae ends 2015 strong
Ellie Mae's fourth-quarter results continued a long track record of high growth. Revenue jumped 39% to $64.9 million, easily outpacing the 32% growth rate that most investors were expecting to see from the mortgage software provider. Net income climbed a more modest 12% to $4.8 million, but after accounting for various items, adjusted earnings came in at $0.44 per share, which was more than double the consensus forecast among investors.

Looking more closely at Ellie Mae's operational metrics, the company continues to grow its user base. For the fourth quarter, the company booked a record 16,200 seats for its software-as-a-service Encompass platform, bringing the total number of users on the cloud version of the program to more than 121,400, up 43% from a year ago. In total, Encompass users rose 25% to almost 136,200, and revenue per user hit an average of $475, or 10% higher than last year's fourth quarter.

CEO Jonathan Corr was extremely pleased with the results, which he saw as having been driven by "the continued ramp of Encompass users and adoption of our services." He also noted that among total seat bookings for the quarter were "a record 8,700 new customer seats, demonstrating our ongoing business momentum and the value of our offerings."

What's ahead for Ellie Mae in 2016?
Corr doesn't see any pause in Ellie Mae's upward momentum. "Even with the record number of seats we booked in 2015," the CEO said, "our new business pipeline remains very robust." Corr expects to add new users, introduce new services, and get existing clients to adopt more of its existing services in an effort to grow the business in every possible way.

Ellie Mae's guidance for 2016 showed the ambitious efforts that the company is making. For the first quarter, Ellie Mae expects revenue of between $67.5 million and $68.5 million, which is almost exactly in line with current expectations. Adjusted earnings of $0.29 to $0.31 per share are also consistent with what investors are looking for. As we saw last quarter, though, full-year revenue projections of $317 million to $321 million and adjusted earnings of $1.79 to $1.86 per share are both well above the current consensus forecast among analysts. Moreover, Ellie Mae has made a habit of starting out with low guidance and working its way up over the course of a year.

What could drive even better results is a continued drop in mortgage rates. Wells Fargo and other lenders were prepared to see higher rates in 2016, especially as the Fed started lifting its Fed Funds rate up from the 0% mark. Yet now, with economic turmoil starting to swirl, many expect a much slower pace of increases, and that could lead to another round of refinancing from which Wells Fargo and other banks could benefit.

Investors were happy with Ellie Mae's latest results, sending the stock up more than 6% in the first hour of after-market trading following the announcement. If the mortgage market ends up getting another round of refinancing activity, then that could provide even more of a tailwind for Ellie Mae in 2016.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Ellie Mae and Wells Fargo. The Motley Fool has the following options: short March 2016 $52 puts on Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.