Neil, I think you are taking a more mature view of ELLI than I was. I guess I had just lost patience with them. Down earnings three quarters in a row didn’t make me happy, especially when they forecast the same thing for next quarter too.
On the other hand, as I said, they have an impressively impregnable moat, and dominate their field. And they are forecasting year over year growing earnings for the last two quarters, which would mean greatly increased earnings from current levels.
But I’ve heard that before. Here’s what they said last August when they reported 2nd quarter results and were very enthusiastic in the conference call:
We are pleased to again raise our full year revenue guidance, despite the current expectations for a decline in mortgage origination volumes for the second half of this year. Also for the full year 2013, we are maintaining our adjusted EBITDA guidance and increasing our adjusted net income guidance. As a result of increased hiring of talent to support the growth of our business and the performance share awards granted, stock-based compensation expense was higher in the second quarter of 2013.”
For the third quarter:
Revenue - $34.0 million to $34.5 million.
Adjusted net income - $8.1million to $8.6 million, or
Adj EPS – 29 to 30 cents.
Adjusted EBITDA - $12.1million to $12.9 million.
For the year:
Revenue - $131.0 million to $132.5 million, up from the previously provided ranges of 127.5 to 129.0 and 130.0 to 131.5.
Adjusted net income – up to $30.7 million to $31.5 million, or $1.08 to $1.11 per diluted share.
Adjusted EBITDA –unchanged at $44.2 million to $45.4 million.
These were rosy estimates and they obviously expected to beat them handily. They were in August already and should have had a good handle on the third quarter, at least.
What actually happened was adjusted earnings of 25 cents for the quarter (down from 35 cents and down sequentially from 29 cents). The fourth quarter was worse at 18 cents and they finished with 99 cents for the year. They must have expected 1.15 to 1.20 themselves, although they didn’t say it.
I sure would like to see good results but I tend to feel I’ll believe it when I see it. As I mentioned in my end of the month positions, I’ve been reducing my ELLI to buy things where I think I have a clearer view, but I could be wrong, and if ELLI beats convincingly next quarter, they could fly away.