| E-LOAN, Inc. Reports Record Revenues and Second Consecutive GAAP Profitable Quarter in First Quarter 2002
Revenues Grow 27 Percent to $20.8 Million; Volume of Loans Closed and Sold Reaches $1.2 Billion for the Quarter
DUBLIN, CA (April 25, 2002) -- E-LOAN, Inc. (EELN) , a leading online provider of consumer loans, today reported that it achieved record revenues and its second consecutive GAAP profitable quarter in the first quarter ended March 31, 2002.
Revenues for the first quarter of 2002 were $20.8 million, up 27 percent from the $16.4 million reported in the first quarter of 2001. Net income for the first quarter of 2002 was $1.6 million or $0.03 per share basic and diluted on 54.0 million basic and 60.3 million diluted shares. This compares with a net loss of ($16.3) million or ($0.30) per share basic and diluted on 53.6 million basic and diluted shares during the first quarter of 2001.
"We are pleased that our vision of making lending not just more affordable but enjoyable has produced solid operating results and another profitable quarter," said Chris Larsen, E-LOAN's Chairman and CEO. "Our pro-consumer approach is the right thing for consumers and the right approach for the Company to grow our business. We will continue to apply our technology to drive down the consumer's costs for obtaining a loan and to improve the consumer's insight into the lending process. We have demonstrated the strength of our technology-based strategy. During the first quarter, we closed and sold a record $1.2 billion in loans, with our purchase mortgage, home equity and auto lending components demonstrating excellent growth."
"Our operating efficiency and position as a low cost producer of consumer loans allowed us to improve our overall direct margin by 11 percent over our preceding quarter and by 103 percent over the first quarter of last year," said Matt Roberts, E-LOAN's CFO. "As interest rates and economic conditions have changed, we have seen a change in the mix of loans in our three primary products: mortgage, auto, and home equity loans. We believe that we will continue to see a different revenue mix in the future."
Discussion of Q1 2002 Results
E-LOAN's revenues are primarily from the gain on sale of mortgage, auto, and home equity loans that we originate, fund and then sell on the secondary market. We also earn interest income on mortgage and home equity loans from the time of funding through the time of sale.
Revenues totaled $20.8 million, an increase of 27 percent compared to revenues of $16.4 million in the same period last year, and up 6 percent compared to revenues of $19.5 million in the prior quarter. |
Components of Revenue Q1 2002 Q4 2001 Q1 2001
($ in thousands) % of % of % of
$ Total Revenue $ Total Revenue $ Total Revenue
Mortgage $12,815 62% $12,769 65% $7,215 44%
Auto 2,291 11% 1,498 8% 5,281 32%
Home Equity 2,284 11% 1,705 9% 622 4%
Interest Income
on mortgage and
home equity 3,228 16% 3,442 18% 3,027 19%
Other * 148 <1% 101 <1% 222 1%
Total $20,766 100% $19,515 100% $16,367 100%
* Other revenue comes from credit card, personal loan and student loan
partnerships
During the first quarter, we closed and sold 14,296 loans with a value of $1.2 billion.
Loan Volume
($ in millions)
# of Loans $ Volume of # of Loans $ Volume of Loans
Closed Loans Closed Closed and Sold Closed and Sold
Mortgage 4,175 $855.4 4,507 $916.8
Auto 7,799 $145.9 7,506 $140.5
Home Equity 2,010 $85.8 2,283 $97.6
Total 13,984 $1,087.1 14,296 $1,154.9
Operations expenses -- the fixed and variable costs of processing loan transactions -- totaled $10.9 million or 52 percent of revenue in the first quarter compared to $11.5 million or 70 percent of revenue in the same period last year. Of total operations expenses, $5.9 million was non-interest mortgage related expense, $2.0 million was auto-related expense, $1.6 million was interest expense on mortgage and home equity loans, $1.3 million was non- interest home equity related.
Our direct margin is defined as revenue minus variable and fixed operations expense. The following table provides detail of direct margin classified by revenue-related categories, both in dollars and expressed as a percentage of its related revenue.
Direct Margins Q1 2002 Q4 2001 Q1 2001
($ in thousands)
% of % of % of
$ Total Revenue $ Total Revenue $ Total Revenue
Mortgage $6,966 54% $7,002 55% $2,139 30%
Interest Margin 1,606 50% 1,454 42% 146 5%
Home Equity 953 42% 752 44% 237 38%
Auto 278 12% (334) (22%) 2,167 41%
Other 111 75% 58 57% 190 86%
Total $9,914 $8,932 $4,879
Sales and marketing expenses totaled $5.1 million or 25 percent of revenue in the first quarter compared to $4.8 million or 30 percent of revenue for the same period last year.
Technology expenses were $1.4 million or 7 percent of revenue in the first quarter compared to $1.8 million or 11 percent of revenue for the same period last year.
General and administrative expenses were $1.6 million or 8 percent of revenue in the first quarter compared to $1.5 million or 9 percent of revenue for the same period last year.
Total assets at the end of the quarter were $146.7 million, which includes cash and cash equivalents of $28.0 million of which $2.5 million is restricted, and loans held for sale of $97.3 million.
Total liabilities at the end of the quarter were $105.3 million and included $93.9 million in borrowings related to mortgage, home equity and auto loans held for sale. Total stockholders' equity at the end of the quarter was $41.4 million.
Financial Guidance
The following guidance is based on E-LOAN's current expectations as of April 25, 2002 and does not reflect the potential impact of events that may occur after April 25, 2002. The company assumes no duty to update any forward-looking statements contained in this press release.
We are revising our forward guidance to reflect substantially lower refinance demand. We are doing so for two reasons. First, mortgage refinance demand dropped steeply in mid-March and has remained low for most of the period since. This sharp drop exceeded our previous expectations and was also accompanied by intense rate competition that reduces revenue per loan. We believe that there is a reasonable probability that the boom level of refinance demand is over. Second, investors have struggled to understand what our performance would be with refinance demand at sustainable rather than boom levels. By assuming a steeper decline in refinance volume and a continued high level of price competition, we are providing what we believe to be the most likely scenario and one that we hope will also help investors understand our performance expectations over the next nine months in a reduced refinance environment.
The key assumptions supporting our current guidance are discussed below.
While our refinance mortgage volume outperformed the industry with only a 4 percent sequential decline Q4 to Q1 (compared to the April Mortgage Bankers Association forecast of a 50 percent decline), our current level of refinance applications are trending in line with the Mortgage Bankers Association forecast for a Q1 to Q2 sequential decline of 42 percent.
Our current assumption is for mortgage refinance loan volume to decline a cumulative 57 percent from Q1 level by year-end compared to a 71 percent forecasted decline by the Mortgage Bankers Association over that same time period. This translates to mortgage refinance revenue declining as a percentage of our total revenue from 66 percent in Q1 to 29 percent in Q4.
We also assume that the significant mortgage pricing pressure we experienced in Q1 will continue to suppress our revenue per mortgage loan at roughly Q1 levels throughout the remainder of the year. Historically, the most significant pricing pressure occurs at the start of a refinance decline before lenders have adjusted their origination capacity. The pricing pressure typically abates over time as capacity is reconciled to the lower loan volumes.
Based on our April run rate of loans and application demand, home equity revenue is on track to grow over 60 percent sequentially in Q2. We then assumed approximately a 20 percent sequential growth in Q3 and Q4.
While auto revenue is to grow 39 percent by Q4 compared to Q1, its direct margin contribution is expected to improve to $1.2 million. The improvement in direct margin is largely a result of leverage on the fixed cost component of auto operations expense over higher loan volume coupled with new technology improvements.
Given the above assumptions, we now expect 2002 total revenue to grow to approximately $78 million -- representing a 15 percent improvement over 2001 results on a substantially different revenue mix.
Total direct margin in 2002 is expected to grow to approximately $35 million -- representing a 40 percent improvement over 2001 results and demonstrating our continued progress as a low cost producer.
We expect GAAP net income of approximately $3 million or $0.05 earnings per share on 62 million diluted shares in 2002, as compared to a GAAP net loss of $39.5 million or $0.73 loss per share on 53.8 million diluted shares in 2001.
The following table provides a more detailed quarterly overview of our forward guidance: |
E-LOAN, Inc.
2002 Guidance
(in millions except loans and per share data)
Actual Guidance Guidance Guidance Guidance
Q1 '02 Q2 '02 Q3 '02 Q4 '02 Total
Loans Closed and Sold
Mortgage 4,507 3,078 2,852 2,787 13,224
Home Equity 2,283 3,725 4,529 5,512 16,049
Auto 7,506 8,106 10,015 10,678 36,305
Total Loans 14,296 14,909 17,396 18,977 65,578
Revenue
Mortgage $12.8 $8.6 $8.2 $8.0 $37.6
Home Equity 2.3 3.7 4.5 5.5 16.0
Interest 3.2 3.3 3.0 2.9 12.4
Auto 2.3 2.5 2.9 3.2 10.9
Other 0.1 0.2 0.2 0.2 0.7
Total Revenue $20.8 $18.3 $18.8 $19.8 $77.6
Mortgage Refinance
% of Total Revenue (A) 66% 44% 36% 29% 45%
Pre-tax Operating Income $1.6 $-- $0.5 $1.0 $3.1
Diluted Weighted Average
Shares 53.6 62.0 63.0 64.0 62.0
Earnings Per Share $0.03 $-- $0.01 $0.02 $0.05
Direct Margin (expressed as a % of component revenue)
Mortgage 54% 43% 45% 45% 48%
Home Equity 43% 49% 56% 56% 53%
Interest 50% 48% 43% 41% 46%
Auto 13% 12% 28% 38% 24%
Other 100% 100% 50% 50% 71%
Total Direct Margin 48% 42% 45% 46% 45%
Other Expenses (expressed as a % of total revenue)
Sales & Marketing 25% 25% 25% 25% 25%
Technology 7% 8% 9% 8% 8%
General & Administrative 8% 8% 9% 8% 8%
(Statement of Operations and Balance Sheet to follow)
E-LOAN, Inc.
Statement of Operations
(in thousands, except per share amounts)
Three Months Ended
March 31, March 31,
2002 2001
Revenues $20,766 $16,367
Operating Expenses
Operations 10,852 11,488
Sales & marketing 5,137 4,831
Technology 1,429 1,783
General & administration 1,633 1,488
Non-cash marketing costs -- 2,985
Amortization of unearned compensation -- 257
Amortization of acquired intangibles and goodwill -- 9,933
Total operating expenses 19,051 32,765
Income (loss) from operations 1,715 (16,398)
Other income, net (57) 84
Income (loss) before taxes 1,658 (16,314)
Income taxes (54) --
Net income (loss) $1,604 $(16,314)
Net income (loss) per share:
Income (loss) per share
Basic $0.03 $(0.30)
Diluted $0.03 $(0.30)
Weighted average shares
Basic 54,029 53,623
Diluted 60,317 53,623
E-LOAN, Inc.
Balance Sheet
(in thousands)
March 31, December 31,
2002 2001
ASSETS
Current assets:
Cash and cash equivalents ($4,500 and
$2,500 restricted cash, respectively) $27,964 $32,538
Loans held-for-sale 97,275 162,246
Accounts receivable, prepaids and other current
assets 13,456 8,435
Total current assets 138,695 203,219
Fixed assets, net 6,147 6,215
Deposits and other assets 1,897 1,192
Total assets $146,739 $210,626
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Warehouse and other lines payable $93,879 $158,148
Accounts payable, accrued expenses and other
liabilities 6,322 7,535
Capital lease obligation 132 175
Notes payable 5,000 0
Total current liabilities 105,333 165,858
Notes payable 0 5,000
Total liabilities 105,333 170,858
Stockholders' equity:
Common stock 55 54
Additional paid-in-capital 256,611 256,578
Accumulated deficit (215,260) (216,864)
Total stockholders' equity 41,406 39,768
Total liabilities and stockholders' equity $146,739 $210,626
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