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Ellie Mae (ELLI) Down 0.1% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Ellie Mae (ELLI). Shares have lost about 0.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ellie Mae due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Ellie Mae Reports Q4 Results

Ellie Mae recently inked an all-cash deal worth approximately $3.7 billion, per which it will to be acquired by private equity firm Thoma Bravo. Per the conditions of the contract, shareholders will be given $99 per share upon closure, which is expected to be completed in the second or third quarter of 2019.

Consequently, the company neither held an earnings conference call for the fourth quarter of 2018 nor issued any financial outlook.

Ellie Mae’s fourth-quarter adjusted earnings per share of 27 cents (adjusted for ASC 606) or 23 cents (per ASC 605) missed the Zacks Consensus Estimate of 36 cents. Also, the bottom line fell from 33 cents reported in the year-ago quarter.

Fourth-quarter revenues came in at $116 million (ASC 606) or $115.2 million (ASC 605), up from $112.9 million generated in the fourth quarter of 2017. The figure beat the consensus estimate of $114 million. The top line was driven by continued adoption of Encompass as well as improved efficiencies across its portfolio. However, overall decline in the housing industry was an overhang.

Also, the company, which had been performing well in the last few years, has been hit badly by the recent decline in mortgage origination volumes.  Notably, the Zacks Consensus Estimate for 2019 revenues indicates a year-over-year improvement of 6%, which is much lower than 15% growth witnessed by the company in 2018.

Quarter Details

During the quarter, Ellie Mae closed 623,000 loans on the Encompass Lending Platform.

The company continued to focus on integrating Velocify’s lead management and engagement capabilities into its consumer engagement platforms.

Per ASC 606, Non-GAAP gross profit came in at $71.2 million. Per ASC 605, the figure was $70.4 million compared with $71.9 million in the year-ago quarter.

Non-GAAP gross margin of 61.4% fell 220 basis points, per ASC 606.

Adjusted EBITDA for the fourth quarter was $25.5 million. Per ASC 605, adjusted EBITDA was $24 million compared with $28.7 million a year ago.

Balance Sheet and Other Financial Details

Ellie Mae ended the quarter with cash and investments of $181.7 million compared with $342 million in the previous quarter.

Cash flow from operating activities was $123.7 million as of Dec 31, 2018.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

Currently, Ellie Mae has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Ellie Mae has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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