Ellie Mae (ELLI) Jonathan H. Corr on Q4 2015 Results - Earnings Call Transcript

| About: Ellie Mae, (ELLI)

Ellie Mae, Inc. (NYSEMKT:ELLI)

Q4 2015 Earnings Call

February 11, 2016 4:30 pm ET

Executives

Lisa Laukkanen - Managing Director, The Blueshirt Group LLC

Jonathan H. Corr - President, Chief Executive Officer & Director

Edgar A. Luce - Chief Financial Officer & Executive Vice President

Analysts

Saket Kalia - Barclays Capital, Inc.

Ross MacMillan - RBC Capital Markets LLC

Brian Schwartz - Oppenheimer & Co., Inc. (Broker)

Richard Kenneth Baldry - ROTH Capital Partners LLC

Brandon B. Dobell - William Blair & Co. LLC

John Campbell - Stephens, Inc.

Patrick Walravens - JMP Securities LLC

Operator

Good day, and welcome to the Ellie Mae, Inc. Fourth Quarter and Fiscal Year 2015 Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Lisa Laukkanen with The Blueshirt Group. Please go ahead, ma'am.

Lisa Laukkanen - Managing Director, The Blueshirt Group LLC

Good afternoon, and thank you for joining us on today's conference call to discuss Ellie Mae's fourth quarter and fiscal year 2015 results. This call is being broadcast live over the Web and could be accessed for 90 days in the Investor Relations section of Ellie Mae's website at elliemae.com. Joining me on today's call are Jonathan Corr, Chief Executive Officer, and Ed Luce, Chief Financial Officer.

We would like to remind you that during the course of this conference call, Ellie Mae's management team will make projections and other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are simply predictions, and actual events or results may differ materially. We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's forms 10-K and 10-Q. These documents identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. I also want to inform our listeners that management will make some references to non-GAAP financial measures during the call. You will find supplemental data in the company's press release, which includes reconciliations of the non-GAAP measures to the comparable GAAP results.

Now I would like to turn the call over to Ellie Mae's Chief Executive Officer, Jonathan Corr.

Jonathan H. Corr - President, Chief Executive Officer & Director

Great. Thanks, Lisa. Good afternoon, everyone.

I am truly excited to share with you our fantastic results for the quarter and year. These results reflect our ongoing momentum as we continue to pursue our goal of automating the complex mortgage origination process. Our strong fourth quarter results capped a tremendous year for Ellie Mae. And we exceeded expectations across all metrics. We grew revenues by 39% year-over-year to $64.9 million. Adjusted EBITDA increased 34% to $17.1 million. We delivered seat bookings that soared to an all-time high of 16,200, with more than half of this coming from new customers. For the year, revenue increased 57% to $254 million and adjusted EBITDA grew 62% to $75 million.

Our results for 2015 represent the strongest performance in our company history. We further solidified our market leadership in the industry, continued our profitable growth rate and delivered financial results that exceeded expectations. Without question, we are very proud of this performance and our team that achieved it.

Our Q4 and full year outperformance was driven by strong momentum across our entire business as we expanded our user base and drove increased adoption of our product offerings. New customer seats booked during the quarter were a record 8,700. As a greater percentage of mortgage origination volume has shifted from mega lenders to large and mid-sized lenders, we have seen our customers continue to grow their businesses, adding more seats and conducting more transactions across our network. The strength of our customer base is also highlighted by the number of seats they added during the quarter, which totaled 3,000.

Overall, we expanded our market share to a 136,000 active Encompass users at yearend, a 25% increase over last year. The RESPA-TILA Integrated Mortgage Disclosure Rule became effective during the quarter. And we continue to see compliance being a key driver for automation and a demand for Encompass. We see continued regulatory and agency changes scheduled for the next several years.

As we discussed on prior calls, during the year the mortgage origination market shifted toward purchases and forecast is expected to remain a purchase-dominant market for this foreseeable future. Although economists forecast a slow rise in interest rates, origination volume projections also show a material increase in purchase volumes for 2016 and 2017. We expect that modest interest rate movements will have little to no effect on the overall demand for home purchases. Likewise, we expect such rate changes to have minimal impact on our financial results and seat bookings.

As we enter 2016, we plan to build on the success of the last year. AllRegs has experienced strong traction throughout 2015 and has further positioned Ellie Mae as a cornerstone of compliance solutions. Our expanded go-to market plans for the AllRegs solutions will enable us to further penetrate our existing customer base. In addition, we're in the process of rolling out the strategic partnerships we established with Fannie Mae and Freddie Mac in 2015. These comprehensive integrations will allow Ellie Mae customers to more easily originate and deliver high-quality loans to the government-sponsored enterprises.

Lastly, in the coming year, we will introduce both our newly acquired CRM platform and initial phases of our next generation of our Encompass platform. We believe our 2015 results are a testament to the strong value proposition we provide in helping lenders achieve loan quality, regulatory compliance and operating efficiency. We see continued opportunity to expand our market share and make progress on our vision of automating the entire mortgage industry.

We enter 2016 with a robust business pipeline, even after the record setting seat bookings of 2015. Our first quarter guidance reflects the seasonal decline in mortgage volumes, but we expect strong Q4 seat bookings to drive revenue growth in the coming quarters. We remain confident in our ability to grow our business by our target growth rate of 25%-plus and have reflected that in our guidance for the full year 2016.

With that, I will now turn the call over to our CFO, Ed Luce, to discuss our results and guidance in more detail. Ed?

Edgar A. Luce - Chief Financial Officer & Executive Vice President

Thank you, Jonathan. Good afternoon, and thanks again to everyone joining us today.

As Jonathan mentioned, we had a great fourth quarter and full year and I am pleased to report the following highlights. Total revenue for the fourth quarter of 2015 was $64.9 million, an increase of 39% from the fourth quarter last year. Contracted revenue increased 40% year-over-year to $41.7 million. During the quarter, contracted revenue represented 64% of our total revenue. We booked 16,200 seats in the fourth quarter. Of these sold 8,700 were from new customers as Jonathan mentioned; 3,000 came from add-on seats, and upgrades totaled 4,500. And we again grew our market share during the quarter with total active Encompass users increasing 25% year-over-year to 136,000.

We continue to see strong demand across all segments, including midmarket, large enterprise, as well as all lender types, including mortgage banks, community banks, and regional banks. Active SaaS Encompass users increased 43% year-over-year to approximately 121,000, and the total number of SaaS seats under contract increased 31% year-over-year to approximately 166,000.

Revenue per active Encompass user increased 10% year-over-year to $475 for the quarter. Because fourth quarter users increased more quickly than fourth quarter revenues, we saw a 9% sequential decline in ARPU as we forecasted and discussed in our last earnings call. For the full year, ARPU grew 24% over 2014. Implementation and professional services revenues also increased year-over-year, driven by the booking and on-boarding of enterprise lenders. During the quarter, professional services represented approximately 6% of revenue and 6% for the full year 2015 as well.

Cost of revenue for the fourth quarter was 36% of revenue at $23.6 million compared to 32% or $14.7 million in the prior year period. This planned increase was due primarily to staff added in the areas of implementation, professional services and SaaS operations, in addition to the amortization of internal use software associated with our application enhancement. This resulted in gross margin for the quarter of 64% compared to 68% in the fourth quarter last year. As we continue to invest in technical support, data centers and security systems and infrastructure, primarily to support the expansion of our enterprise customer base, we expect to see gross margins in the mid-60s% for the full year 2016.

We increased our staff by 69 people in the fourth quarter, mainly in those areas of implementation, professional services, and research and development. Our total head count at December 31 was 857, an increase of 217 people over the prior year or nearly 34%, and we expect to reach approximately 1,000 employees by the end of 2016.

Net income for the fourth quarter was $4.8 million or $0.16 per diluted share, compared to $4.3 million or $0.14 per diluted share in the fourth quarter 2014. The tax rate came down this quarter as the R&D tax credits were reinstated on a retroactive basis. So for the year 2015, our effective tax rate was 35%. Our projected annual effective tax rate is expected to be approximately 35% for the full year 2016 as well.

On a non-GAAP basis, adjusted net income for the fourth quarter was $13.5 million or $0.44 per diluted share compared to $11.5 million and $0.38 per diluted share in the fourth quarter 2014. Adjusted EBITDA for the fourth quarter was $17.1 million compared to $12.8 million for the fourth quarter 2014.

And now turning to our results for the full year 2015. We had a 57% increase in total revenues to $253.9 million compared to $161.5 million in 2014. On-demand revenue increased 62% to $249.6 million compared to $154.3 million last year. This increase was largely a result of the addition of new on-demand Encompass SaaS customers, the upgrades of existing customers to our SaaS platform, the ongoing adoption of our standalone products and services, the addition of AllRegs and a 23% increase in national volumes.

Gross margins for the full year were 67% compared to 71% for 2014. This reflects our growth in enterprise investment programs related to client implementation support teams, security and data center expansion. Net income for the full year 2015 was $22.3 million or $0.72 per diluted share compared to $14.8 million and $0.50 per diluted share in 2014. On a non-GAAP basis, adjusted net income for the full year was $52.2 million or $1.69 per diluted share compared to $34.1 million and a $1.15 per diluted share in 2014. And adjusted EBITDA for 2015 was $74.7 million, 62% higher than the $46 million we posted in 2014.

Shifting to the balance sheet. As of December 31, we have cash and investments totaling $139 million. Overall, we generated almost $90 million in cash from operations during the year. That's up 115% from $41 million in 2014.

We invested $25 million in data center equipment and software and $28 million in capitalized R&D, leaving $35 million of free cash flow. We also absorbed $16 million in acquisition costs related to the Mortgage Returns CRM acquisition and we've returned $32 million to Ellie Mae shareholders via stock repurchases during the quarter. So despite significant investments made across several key areas of the company during the year, we continued to generate significant positive cash flow. Fourth quarter diluted shares outstanding were 31 million compared to 30.1 million in the fourth quarter of 2014.

Now, before turning to guidance, I will note that given our transition to pure SaaS is expected to be completed in the first half of 2016 with the sunsetting of our legacy licensed software products, we plan to consolidate some of the metrics we provide to be more reflective of a 100% SaaS model. Therefore in 2016, we plan to provide the following metrics on a quarterly basis. Total contracted revenue, percent contracted, SaaS revenues, revenue per active Encompass user and contracted SaaS users, along with total seat bookings. We will no longer breakout on-premise revenue because this revenue category becomes immaterial.

Now turning to the guidance. Our 2016 annual guidance takes into consideration industry forecast for mortgage origination volume. We use the composite estimates of mortgage volumes as published by Fannie Mae, Freddie Mac and the Mortgage Bankers Association to forecast certain portions of our business. For the year, this composite shows an estimated 11% decline in origination volumes from 2015. The detailed blended forecast data can be found on our supplemental data sheet that's posted on the Investor Relations section of our website.

Against this backdrop, for the first quarter of 2016, our revenue is expected to be in the range of $67.5 million to $68.5 million. Net income is expected to be $1 million to $1.5 million or $0.03 to $0.05 per diluted share. Adjusted net income is expected to be in the range of $8.9 million to $9.7 million, or $0.29 to $0.31 per diluted share. And adjusted EBITDA is expected to be in the range of $14 million to $15.1 million for the quarter.

For the full year, total revenue is expected to be in the range of $317 million to $321 million. Net income is expected to be in the range of $22.2 million to $24.2 million or $0.71 to $0.76 per diluted share, and adjusted net income is expected to be in the range of $56.1 million to $59.1 million or a $1.79 to a $1.86 per diluted share. Adjusted EBITDA is expected to be in the range of $90 million to $94.5 million.

And finally, before we turn to your questions, I would like to mention that we will be hosting an Analyst Day event in Las Vegas on March 1, in conjunction with our annual user conference. In addition, we will be participating in the Morgan Stanley Technology Media & Telecom Conference in San Francisco and the 28th Annual ROTH Conference in Laguna Niguel, both during the month of March. More information is available on our website for the Experience User Conference and forthcoming press announcements will be issued with additional details on the investor conferences.

And now, we'd like to open the line for questions, operator.

Question-and-Answer Session

Operator

Certainly. Our first question comes from Saket Kalia with Barclays. Please go ahead.

Saket Kalia - Barclays Capital, Inc.

Hi, guys. Thanks for taking my questions here. Nice finish to the year.

Edgar A. Luce - Chief Financial Officer & Executive Vice President

Hi, Saket.

Jonathan H. Corr - President, Chief Executive Officer & Director

Hey, Saket, how are you? Thanks. Thanks a lot.

Saket Kalia - Barclays Capital, Inc.

Hey, Jonathan. So let's start on the new seat bookings given the big increase. Can you just maybe talk about how new products are contributing to that seat count if at all? And also, whether you're seeing any change competitively that's allowing you to sort of maintain this rate of new seat growth?

Jonathan H. Corr - President, Chief Executive Officer & Director

I would just say that from an overall standpoint, what is continuing to drive our success in the marketplace is previous success. It's kind of very much of a virtuous cycle. As we become more successful in all the segments, whether it'd be the enterprise segment, the large segment or the mid-market – that continued success is just driving more and more activity, more business coming our way. The compliance leadership that we have is so critical to the market and they, we see continuing to be critical. And that is a great tailwind for us. And the comprehensive nature of our solutions. So the fact that we keep adding to our product footprint, and we keep adding to our capabilities of automation very much are bringing customers across the table. And that also falls into all categories of lenders, not one category. So we're seeing mortgage banks, community banks, regional banks – success across the board.

And we had a wonderful Q4. The team did an amazing job, and the pipeline still looks very, very robust. And we just haven't – other competitors are just not keeping up, and for the most part, we just keep extending our differentiation and our lead. And it's all been quite a set of results for the team. And I see that for the foreseeable future.

Saket Kalia - Barclays Capital, Inc.

Great, great. And then maybe moving to the on-premise Encompass base. That base has shifted to success-based pricing through the year. You still have I think about 15,000 or 16,000 more seats to go. From what you've seen so far, can you just talk about what sort of retention rate you've seen through the transition so far? And also any sort of revenue lift that you've seen from those customers transitioning?

Jonathan H. Corr - President, Chief Executive Officer & Director

Sure, sure. So we continue to see momentum there. It's reflected in some of the upgrades we've seen over the last couple quarters. I'd say that even the active user number that we see out there is a trailing indicator because many of those customers have already I think committed and they are moving over to the hosted SaaS offering. We expect again to see the vast majority of those seats come over. Every single one will come over but we expect it to be well north of 70%. And I'd say, and we talked about this in the past, the beauty of our SaaS model's success-based pricing is that, as we shift people from on-premise to this model, we are really bringing a tremendous amount of additional value to the customer. So bringing the solution to the table, additional components of our services that cut across compliance and docs, electronic disclosure, websites et cetera.

And with that, obviously, taking on the responsibility to manage their infrastructure in our data centers, providing levels of security et cetera. And so typically we're seeing an uptick on this that is somewhere between three to four times what we were making from an on-premise customer. And the real idea there is that yes, we're gaining a much bigger wallet share from the customer but when they look at their overall costs, when they actually remove some of the costs that they were dealing with prior to moving to the SaaS model, they're doing better off. So it's a win-win across the board.

Saket Kalia - Barclays Capital, Inc.

Got it. And if I could sneak in one last housekeeping question. Ed what was the closed loan per active SaaS user per month in the quarter?

Edgar A. Luce - Chief Financial Officer & Executive Vice President

It was about 1.2.

Saket Kalia - Barclays Capital, Inc.

Great. Thanks very much, guys.

Jonathan H. Corr - President, Chief Executive Officer & Director

Yeah, sure.

Operator

Thank you. We'll go next to Ross MacMillan with RBC Capital Markets. Please go ahead.

Ross MacMillan - RBC Capital Markets LLC

Thanks so much and congrats from me to Jonathan, Ed and the team.

Jonathan H. Corr - President, Chief Executive Officer & Director

Thanks, Ross.

Edgar A. Luce - Chief Financial Officer & Executive Vice President

Thanks, Ross.

Ross MacMillan - RBC Capital Markets LLC

Can you just – one thing I'm curious on is how the revenue per loan trends are tracking? I think you talked at Analyst Day last year about 20% uplift in the prior two years. Can you talk about how that trended in 2015 and how do you think that will play out in the year ahead in 2016?

Edgar A. Luce - Chief Financial Officer & Executive Vice President

The trend should be fairly similar. We expect to see, and what we have baked into our guidance is continuing growth in that revenue per loan. We've certainly been working on the addition as an example of AllRegs this past year and more recently on the Mortgage Returns CRM which will help increase that number in 2016.

Jonathan H. Corr - President, Chief Executive Officer & Director

And the other thing that continues to drive that is just this continued adoption across the industry in terms of doing things electronically. So kind of the tide rising where more and more categories of services – obviously credit and flood and some of the others that have been highly adopted. Other categories, appraisal, title, different types of verification services, et cetera, just continue on their trajectory kind of like the tide is rising, and being a big ship on that tide, we're benefiting. So, that just continues to grow every month, every quarter and that contributes to that revenue per loan growth as well.

Ross MacMillan - RBC Capital Markets LLC

So consistent in that 20% type of range is the way we should think about that? Is that a fair statement?

Jonathan H. Corr - President, Chief Executive Officer & Director

Yeah. That's fair.

Edgar A. Luce - Chief Financial Officer & Executive Vice President

Yeah. We think it's reasonable.

Ross MacMillan - RBC Capital Markets LLC

Okay. That's great. And then one of the fears has been that post the RESPA-TILA deadline, that we would see some slowdown in new seat bookings. And of course, you've been vocal that, that was not happening and you've been very vocal about the pipeline. Can you just maybe frame less about the conversions from out of the base and more about either new customers or existing add-ons? Now that we're past RESPA-TILA, what is the sort of real driver for that now? Is it other regulatory events on the horizon, or is it that there was a lot of band-aiding to get compliant to RESPA-TILA and now, there are real platform decisions maybe that still need to be made, I thought to get color?

Jonathan H. Corr - President, Chief Executive Officer & Director

I think there's a couple of things. One obviously you saw Q4 nearly 9,000 new seats, just way beyond anything we've done in the past, which is again, just showing the momentum is – RESPA-TILA happened before that. What we're seeing is ongoing demand from the market as we've gained more success, as they see clearly we're the market leader, as they are – their mindset is more and more automation because it really has compliance and quality demands have gotten them to a place, where it's not a nice-to-have, it's a necessity.

Those are all what drove the benefit in Q4 and what is feeding our pipeline as we come into 2016. There is a lot of compliance that is going to keep coming or agency changes, so we're going to see things from the Home Mortgage Disclosure Act that will hit in the back half of 2017 into 2018. There's going to be major changes that come from Fannie and Freddie in terms of the loan applications.

Those are the major things and then there's always a bunch of other things, we've been there. So there's this underlying kind of continued shift of demands from the industry on regulation and agency. But there is this broad just movement and we're seeing it accelerate, to just embrace automation, and pushing more and more capability to the consumer who wants to do more on a self-service fashion.

And so that's really what's going on. It's this kind of combinations of success breeding success, of success in different segments breeding more success, and then the ongoing feeling that for the customers that didn't make the move this year, already feeling the pain, and our phones really ringing off the hook to talk with us and figure out how they can embrace Encompass and automate and remove some of the human spackle they've thrown at the problem to fill the cracks in the short-term.

Ross MacMillan - RBC Capital Markets LLC

That's great. Maybe one quick one for Ed. Just historically you've talked about exiting 2017 at around your target EBITDA range. Is that still very much in your line of sight right now? Are you still thinking that exiting 2017 you'll be at roughly your target EBITDA margin?

Edgar A. Luce - Chief Financial Officer & Executive Vice President

Yeah, absolutely. You may even see us hit those targets later this year, second quarter, third quarter is usually our strongest period. But for the year, exiting 2017 we should have those – we should be right up against it.

Ross MacMillan - RBC Capital Markets LLC

Thanks so much. Congrats.

Edgar A. Luce - Chief Financial Officer & Executive Vice President

Sure.

Jonathan H. Corr - President, Chief Executive Officer & Director

Thank you.

Operator

Thank you. We'll go next to Brian Schwartz with Oppenheimer. Please go ahead.

Brian Schwartz - Oppenheimer & Co., Inc. (Broker)

Hi. Thank you for taking my questions this afternoon and I too add my congratulations on the terrific year for you, guys.

Jonathan H. Corr - President, Chief Executive Officer & Director

Thanks, Brian.

Brian Schwartz - Oppenheimer & Co., Inc. (Broker)

I just have one question. Jonathan, I kind of want to put 2015 behind and my question is really on the year ahead and specifically what's going on in the environment here in the U.S. and relating to the operating model pressures that the banks are currently under right now. I think in your introductory comments, you talked about operational efficiency as one of the growth drivers for the business.

And if we think about what's happened since the start of this year, there was a clear consensus expectation that the banks would be seeing substantial new revenues from the higher net interest margins, and unfortunately we all know now that new revenue source for the banks is unlikely to develop anytime soon.

Just wondering is the read-through of interest rates not rising as fast as everyone expected that the banks will be forced to quickly look at software solutions for cost savings to bring their operating models in line with last net interest revenues, which for your business could end up accentuating the operational efficiency spending driver in the end market as we work our way through 2016. Curious to get your thoughts on that development? Thanks.

Jonathan H. Corr - President, Chief Executive Officer & Director

Brian, that is an excellent point. And I do think that the environment as we're now seeing it is further accentuated there. We've already seen, we've talked about, how costs have gone up dramatically over the last four or five years based on all the demands from compliance and regulation and those costs have more than doubled to get a loan done for a consumer. And so, they're already embracing automation. I think the fact that, there is more squeeze in terms of profitability makes it even that much more attractive to embrace software solutions like ours to automate and take out as much inefficiency as they possibly can. So I think that, that is a very good thesis.

Brian Schwartz - Oppenheimer & Co., Inc. (Broker)

Thank you.

Operator

Thank you. We'll go next to Richard Baldry with ROTH Capital Partners. Please go ahead.

Richard Kenneth Baldry - ROTH Capital Partners LLC

Thanks. Looking longer term, is it possible we could actually see your revenue growth somewhat disconnect from either (33:03) ARPU growth, and what I'm thinking is, the biggest banks to me seemed at risk of falling behind the compliant side of the table, with so many changing regulations, and you're providing those kind of services coming at something like 100,000, 150,000 seats which, the cost to build versus outsource starts to favor you guys.

So could you see strategic deals someday where they aren't buying sort of your traditional seat, but maybe doing more of the strategic deal only on something like a compliance product or is that really not a model you'd want to pursue?

Jonathan H. Corr - President, Chief Executive Officer & Director

No. I think, Richard, you're absolutely correct. It actually is something that we are doing, to some extent right now. So, our compliance engine although it's embedded in Encompass and all our customers take advantage of it, we also sell it under the Mavent brand and there are a number of the largest lenders and investors in the country leveraging it right now.

That's also true of some of the things we've done around some of the AllRegs solutions. And clearly, our goal is to get everybody on to Encompass but we have – we use hooks or entry points with some of the largest investors as well. And I can see more and more of that. I think, it's a great point and we're already doing a bit of that today.

Richard Kenneth Baldry - ROTH Capital Partners LLC

Okay. And it was nice to see the more aggressive push on the buyback in a pretty weak market. So maybe, from an overall perspective, could you talk about just thoughts on how to pursue that in a down market whether that would be something you'd really look at using it from a free cash flow and maintain the balance sheet where it is, or maybe conversely be willing to put some of – more of the balance sheet to work on that avenue, kind of given the visibility, you've got long-term into the cash flows you've got to sort of depend that balance sheet over time?

Edgar A. Luce - Chief Financial Officer & Executive Vice President

Rich, as you know, we have a lot of options with this balance sheet. There is no debt on the balance sheet right now. We're generating good cash every quarter. So we've got a lot of options open, as far as how we do that.

Jonathan H. Corr - President, Chief Executive Officer & Director

And again I think, the stock buyback we did in Q4 is a reflection of where we saw the stock and kind of what value we saw and the value of the current shares and we took that as an opportunity. But more broadly, we obviously have been very acquisitive over the years. We're always looking at opportunity strategically and we want to make sure we have that available at our – quickly, if the opportunities come up. So, we obviously are in a nice situation where we can look at all the adoptions and to see how to best grow the company and deliver value to the shareholders.

Richard Kenneth Baldry - ROTH Capital Partners LLC

And the last one, within that new seat bookings total, because it was startlingly high. Was it a broad-based step-up in the number of deals or were there some very significant sort of one-off deals that maybe – or small handfuls that really influenced that number? What would help us maybe understand the repeatability of that or how much it might have been a one-time outlier or not? Thanks.

Jonathan H. Corr - President, Chief Executive Officer & Director

There was still strength across all the segments on that. Some good solid deals in the enterprise segment, that were at the thousands seat level, small handful there. Lots of deals in the large segment and the mid-market. And I think that again it was a very strong quarter but the pipeline looks very robust and I think we'll continue to see that. No one big deal, that really brought that in, it was just a great performance across the board and good solid deals across each of the segments.

Richard Kenneth Baldry - ROTH Capital Partners LLC

Okay. Thanks.

Jonathan H. Corr - President, Chief Executive Officer & Director

Thanks, Rich.

Operator

Thank you. We'll go next to Brandon Dobell with William Blair. Please go ahead.

Brandon B. Dobell - William Blair & Co. LLC

Hey. Afternoon, guys.

Jonathan H. Corr - President, Chief Executive Officer & Director

Hey, Brandon.

Edgar A. Luce - Chief Financial Officer & Executive Vice President

Hi, Brandon.

Brandon B. Dobell - William Blair & Co. LLC

Maybe, Jonathan, you kind of touched on it earlier, but I guess some color on how you think about, let's call it, top 20 lender, market share in 2016, 2017 versus what has been the past couple of years. Do you think they keep ceding share? Do you see the recent trends reverse and they're trying to grab some share? And I know the mix of your volume is going to be different than what the market shows but as you think about the big buckets of lender groups how do you think about share shifts the next couple of years?

Jonathan H. Corr - President, Chief Executive Officer & Director

Well, I think we'll continue to see penetration across all the channels. As we've said in the past and obviously on our investor deck, we have at least one channel in seven of the top 25. So we have an entry point there. There is overall trend as you just mentioned. The very top lenders are seeing a shift away from them in terms of retail origination volume. And it's been pretty steady over the last few years. I don't know if that continues or not, but again our efforts cut across all the segments. We've seen great growth in all the segments and I don't foresee that changing anytime soon.

Brandon B. Dobell - William Blair & Co. LLC

Okay. And then as you think about the direct-to-consumer channel opportunity, any sense of what the contributions from that other from the bookings perspective or revenue perspective should look like in 2016?

Jonathan H. Corr - President, Chief Executive Officer & Director

I really don't know in terms of particular details, Brandon. Across the board what we're seeing is that more and more lenders want to extend capabilities to their consumer in a self service basis for parts of the process. And they're not looking to completely change their process but rather respond to the needs of different consumers based on how much they're willing to perhaps do on their own. But almost in all cases, you really see this combination of what I'll call high tech and high touch.

So it really is still a combination, and I don't think that's going to change anytime soon of consumers wanting to do some themselves but expecting a lender to help them in part of that process, because it is such a big transaction that happens so infrequently, and lenders really adapting to that. So we look at it as just another extension of the capabilities we provide our lenders to best provide the kind of service, the kind of capabilities their borrowers want.

Brandon B. Dobell - William Blair & Co. LLC

Okay. And then final one from me. Maybe, Ed, if you look at the customer list, maybe give us a range or just maybe what the top couple of deciles in terms of what the customers are doing from a closed loan per month. You mentioned that 1.2 figure. Do you have people out there doing three loans per user per month, is it five loans? I guess I'm trying to get a figure or an idea of how much or more headroom you have on that, let's call it, productivity per user curve?

Jonathan H. Corr - President, Chief Executive Officer & Director

In the top quartile, you've got folks that somewhere between three and four loans per user per month. So it's a fairly broad distribution, as folks are adopting the technology and moving up the curve. But also some of it's reflective of how well an operator the lender is. So that gives you some sense.

Brandon B. Dobell - William Blair & Co. LLC

Okay. Great. Thanks. Appreciate it.

Jonathan H. Corr - President, Chief Executive Officer & Director

Sure.

Edgar A. Luce - Chief Financial Officer & Executive Vice President

Thanks, Brandon.

Operator

Thank you. We'll go next to John Campbell with Stephens. Please go ahead.

John Campbell - Stephens, Inc.

Hey, guys, congrats on a great quarter and congrats for the sales teams for driving that impressive net new logo, c-clip (41:54).

Edgar A. Luce - Chief Financial Officer & Executive Vice President

Thanks, John.

Jonathan H. Corr - President, Chief Executive Officer & Director

Thanks, John.

John Campbell - Stephens, Inc.

Yeah, absolutely. On guidance, you guys obviously have really good visibility into the revenue trends but just curious have you guys stress-test the guidance or running scenarios (42:07) kind of different origination markets in 2016, like how low origination market would you have to encounter this year to maybe go below the low end of your range?

Edgar A. Luce - Chief Financial Officer & Executive Vice President

We do our stress tests all the time. Frankly, we would have to get to almost ridiculous level of volumes out there to drop down that low, John. You're talking well below $1 trillion worth of volume.

John Campbell - Stephens, Inc.

Great. That's good to hear. And then on the head count. You guys have obviously ramped organic head count a good bet (42:44) and then you've got the acquired heads coming in and – I might have missed this but I'm assuming you guys probably got to your 900-or-so head count target. But just curious, a, is that right; and then, b, maybe what your plans are from the near- to medium-term? Are you close to where you need to be?

Jonathan H. Corr - President, Chief Executive Officer & Director

We finished the year a little shy of the 900 with the acquisition we did. And obviously last year was a very robust year in terms of investment. We're still investing this year but at a little bit more modest pace. I would expect that we'll finish the year probably right around 1,100 folks.

John Campbell - Stephens, Inc.

Got it. Okay. That's helpful. And then as we think about again the commentary around the kind of target model hitting that 35% to 40% margin in 2017, I would assume maybe it's just kind of moderate pace-up from there just given your cost base is still fixed. Is that kind of how you achieve that margin lift into 2017?

Edgar A. Luce - Chief Financial Officer & Executive Vice President

Well, yes, but specifically this very intensive investment program that we've been – that we've had underway for about a year and a half now, that's already starting to taper off and it really, really tapers after this quarter, in fact. So the rest of this year and beyond, we expect to be on a more normal growth rate for costs and head counts. And that's where you see that margin continuing to grow.

John Campbell - Stephens, Inc.

Okay. Thanks for that additional color, and congrats on a great 2015.

Edgar A. Luce - Chief Financial Officer & Executive Vice President

Thank you.

Jonathan H. Corr - President, Chief Executive Officer & Director

Thanks, John.

Operator

Thank you. We'll go next to Patrick Walravens with JMP Securities. Please go ahead.

Patrick Walravens - JMP Securities LLC

Okay. Thank you. Hi, guys.

Jonathan H. Corr - President, Chief Executive Officer & Director

Hey, Pat.

Patrick Walravens - JMP Securities LLC

So Jonathan, it's really amazing to watch how this business is scaling. And what I'm curious about as CEO, right, what do you feel like you need to make sure that Ellie really gets right. You've gotten through your investment phase, what are you focused on most now, so like operations, security, hiring sales people, professional services, where are you really focused?

Jonathan H. Corr - President, Chief Executive Officer & Director

So I think the team has got – we've got a great strategy. We've got a solid core team that we've built up. And we're obviously continuing to add folks to that team. And so, it's really about making sure the team has the resources and the support they need to continuing to execute on the strategy that had been successful. And so I focus on really making sure that as we bring on folks, they fit into our culture, that we're enabling them to be successful very quickly. And then that we're continuing to push the organization to not be complacent, not be comfortable with current performance but always be having the minds open to new opportunities and keeping ourselves up in front of any possible competition. So that's my focus.

Patrick Walravens - JMP Securities LLC

Great. Thank you. And I just have to point out. Literally while we're talking I got an e-mail from my mortgage broker quick and saying, he can beat my rates. So that should work out for you guys over the next period of time. Thank you very much.

Jonathan H. Corr - President, Chief Executive Officer & Director

Thank you, Pat

Operator

Thank you. It appears we have no further questions at this time. I'll turn it back to our speakers for any additional or final remarks.

Jonathan H. Corr - President, Chief Executive Officer & Director

Well, thank you, guys very much for joining us today. Have a wonderful Valentines with your significant other. And we will talk to you next quarter. Thanks again.

Operator

Thank you. This does conclude today's conference. We appreciate your participation. You may disconnect at any time, and have a great day.

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