The time is apparently right for Ellie Mae Inc. to turn to the equity market for capital. A public filing disclosing its intent to make an initial public offering presented an interesting look inside a company that touches one out of every five home loans. It also presented some valuable data about the mortgage industry.
The Pleasanton, Calif.-based software provider made a FORM S-1 filing Friday with the Securities and Exchange Commission for an initial public offering up to $86 million. More than 45 million shares are being offered. Proceeds from the offering are expected to be used for working capital, acquisitions and further development of proprietary technology.
Ellie wants to offer its shares “as soon as practicable after this registration statement becomes effective.”
The underwriters listed were Goldman Sachs & Co., Keefe Bruyette & Woods, Macquarie Capital, Piper Jaffray, ThinkEquity LLC and William Blair & Co.
In the filing, Ellie noted that its Encompass network “electronically connects approximately 55,000 mortgage professionals to the mortgage lenders, investors and service providers integral to the origination and funding of residential mortgages.”
Ellie said that 30 of the 40 lenders that accepted business through Encompass went out of business between March 2007 and August 2009, while the number of mortgage origination professionals declined from around 495,000 at the end of 2006 to roughly 253,000 by the end of last year.
The average number of active Encompass users fell from 83,052 in 2007 to 68,950 in 2008; last year’s average was 59,217. But Encompass-related revenues per average active Encompass user climbed to $556 in 2009 from $427 in 2008 and $331 in 2007.
The company estimates its market share at 20 percent of the U.S. residential mortgage market.
During 2009, revenues were $38 million, while net income was under $2 million.
Total 2009 compensation for Ellie Chief Executive Officer and President Sigmund Anderman was $747,575, while Chief Financial Officer Edgar Luce earned $405,518 and Chief Technology Officer Limin Hu earned $414,357. Chief Sales Officer Joseph Langer raked in $575,858, while Chief Strategy Officer Jonathan Corr was compensated $489,980.
The First American Corp. currently owns nearly 17 percent of Ellie, while Anderman holds almost 6 percent. Big chunks are also held by Charter Legacy LLC ( around 16 percent), affiliates of Alloy Ventures (approximately 9 percent) and affiliates of Alta Partners (roughly 9 percent).
Ellie, founded in August 1997, said three groups of originators include around 20 mega-lenders, 7,500 mortgage lenders and around 15,000 mortgage brokerages. Mega-lenders grabbed 48 percent of the market share during 2009, though its customers are brokers and non-mega lenders.
The filing noted that less than 1 percent of all U.S. loans were completely digitally processed last year.
Other trends outlined in the document included increased mortgage regulation, tougher lender standards and a shift from mortgage broker originations to mortgage lender originations.