Disclosure: I am long ELLI.
Ellie Mae (ELLI) appears on track to produce excellent on target Q4 results. We estimate earnings (fully taxed) will more than double on a 50% sales gain. (10Q) Ellie Mae acquired its largest competitor (DataTrak) in 2011. Over the last year the company has been integrating the two software platforms to improve the technology, and to retain DataTrak's installed customer base. Those users now are shifting to Ellie Mae's "success-based pricing" model, which is easier to maintain than a traditional on-site software package. Updates are made automatically with cloud computing. That format also aligns the amount of money each customer pays Ellie Mae with the amount of money they earn from new mortgage generation. Average revenue per loan to Ellie Mae is $100-$110. Mortgage bankers generally charge $750-$1,000 per loan. The pipeline of new users has been amplified with direct sales, as well. Ellie Mae is in the process of doubling its sales force again, a program that should be finished by the end of March. Existing customers also are adding more seats. That backlog of active users virtually ensures that revenue growth will be maintained at above average rates even if the U.S. economy stumbles next year. [Read on here]