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Ellie Mae (ELLI) Misses on Q4 Earnings, Inks Major Deal

Zacks Equity Research

Ellie Mae ELLI 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.

Ellie Mae, Inc. Price, Consensus and EPS Surprise

Ellie Mae, Inc. Price, Consensus and EPS Surprise | Ellie Mae, Inc. Quote

Zacks Rank and Stocks to Consider

Ellie Mae currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Jabil, Inc. JBL, Fortinet, Inc. FTNT, and eGain Corporation EGAN, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Jabil, Fortinet and eGain is projected to be 12%, 16.75% and 30%, respectively.

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