Press Release Archive - 2003
E-Loan, Inc. Reports Record Revenues and Profit in Fourth Quarter 2002
E-LOAN Raises Earnings And Revenue Guidance For 2003;
Total Revenue Up 70% From Q4 2001 And 16% From Q3 2002;
Diversified Product Revenue Up 164% From Q4 2001 and 19% From Q3 2002;
Record Purchase Mortgage and Home Equity Closed Loan Volume, Up 25% and 23% From
Q3 2002;
Results $0.01 Better Than the Top Range of Mid-December Guidance
Dublin, Calif. - January 22, 2003 - E-Loan, Inc. (Nasdaq: EELN), an online lending
company, today reported that it achieved record revenues and profit in the fourth quarter ended
December 31, 2002, made significant progress in diversified product revenue and marked its fifth
consecutive profitable quarter.
Revenues for the fourth quarter of 2002 were $33.1 million, up 70 percent from the $19.5
million reported in the fourth quarter of 2001. Net income for the fourth quarter of 2002 was $5.0
million or $0.08 per share basic and diluted on 59.3 million basic and 61.3 million diluted shares. This
compares with a net income of $1.9 million or $0.04 per share basic and $0.03 diluted on 54.0 million
basic and 59.7 million diluted shares during the fourth quarter of 2001. Revenues for the year ended
December 31, 2002 were $103.3 million, up 52 percent from the $68.0 million reported for the year
ended December 31, 2001. Net income for the year ended December 31, 2002 was $10.7 million or
$0.18 per share basic and diluted on 57.6 million basic and 60.4 million diluted shares. This compares
with a net loss of $39.5 million or ($0.73) per share basic and diluted on 53.8 million basic and diluted
shares during the year ended December 31, 2001.
"Our focus on growing diversified product revenue - comprised of purchase and non-prime
mortgage, home equity and auto loans - paid off in the fourth quarter," said Chris Larsen, E-LOAN's
Chairman and Chief Executive Officer. "We're particularly excited about the strong growth in our
purchase mortgage business, which demonstrates that more and more people are trusting E-LOAN to
provide them with a more enjoyable and affordable way to buy a home. We're also extremely pleased
with the growth in our home equity business - fourth quarter revenues grew 41 percent from the third
quarter of 2002 and 180 percent from the fourth quarter of 2001."
"Building on solid growth in our diversified product revenue and a stronger refinance
mortgage market than we had anticipated, I'm pleased to report that we are raising our financial
guidance for fiscal year 2003," said Matt Roberts, E-LOAN's Chief Financial Officer. "In 2003, we
now expect net income of approximately $14 million or $0.22 earnings per share versus prior guidance
of $0.17 earnings per share - representing a 31 percent improvement over 2002 net income. We expect
total 2003 revenue of approximately $125 million versus prior guidance of $110 million - representing
a 21 percent improvement over 2002 results."
Discussion of Q4 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. We also earn interest income on mortgage and home equity loans
from the time of funding through the time of sale.
Revenues totaled $33.1 million, an increase of 70 percent compared to revenues of $19.5 million in the
same period last year, and up 16 percent compared to revenues of $28.4 million in the prior quarter.
Prime refinance revenue was 58 percent of total revenue in the fourth quarter of 2002 compared to 59
percent in the prior quarter and 73 percent for the fourth quarter of 2001.
Components of Revenue Q4 2002 Q3 2002 Q4 2001
($ in thousands) $ Total % of $ Total % of $ Total % of
Revenue Revenue Revenue
Mortgage $ 19,889 60 % $ 16,773 59 % $ 12,769 65 %
Interest Income on mortgage 4,576 14 % 4,542 16 % 3,211 16 %
Home Equity 4,496 13 % 3,129 11 % 1,705 9 %
Interest Income on home equity 917 3 % 705 2 % 231 1 %
Auto 2,999 9 % 3,042 11 % 1,498 8 %
Other * 223 1 % 246 1 % 101 1 %
Total $ 33,100 100 % $ 28,437 100 % $ 19,515 100 %
* Other revenue comes from credit card monitoring service, personal loan and student loan referrals
During the fourth quarter, we sold 17,335 loans with a value of $1.2 billion. Closed loan volume from
mortgage refinance was 55 percent of total closed loan volume in the fourth quarter of 2002 compared
to 62 percent in the prior quarter and 69 percent in the fourth quarter 2001. The following table
provides unit and volume statistics for the fourth quarter of 2002.
Loan Volume# of Loans $ Volume of# of Loans $ Volume of
($ in millions) Closed Loans Closed Sold Loans Sold
Mortgage 4,504 $1,001 3,849 $ 863
Auto 8,935 $ 165 9,199 $ 170
Home Equity 4,028 $ 175 4,287 $ 184
Total 17,467 $1,341 17,335 $1,217
Operations expenses - the fixed and variable costs of processing loan transactions - totaled $16.4
million or 50 percent of revenue in the fourth quarter compared to $10.6 million or 54 percent of
revenue in the same period last year. Of the $16.4 million in total operations expenses, $8.7 million
was non-interest mortgage related expense, $2.1 million was mortgage interest expense, $2.5 million
was auto-related expense, $2.6 million was non-interest home equity related, and $0.5 million was
home equity interest expense.
Our direct margin is defined as revenue minus variable and fixed operations expense. The following
table provides detail of direct margin classified by revenue-related categories, both in dollars and
expressed as a percentage of its related revenue.
Direct Margins Q4 2002 Q3 2002 Q4 2001
($ in thousands) $ Total % of $ Total % of $ Total % of
Revenue Revenue Revenue
Mortgage $ 11,214 56% $ 8,951 53% $ 7,002 55%
Mortgage Interest Margin 2,436 53% 2,253 50% 1,393 43%
Home Equity 1,865 41% 796 25% 752 44%
Home Equity Interest Margin 424 46% 313 44% 61 26%
Auto 540 18% 612 20% (334) (22 %)
Other 223 100% 229 93% 58 57%
Total $ 16,702 $ 13,154 $ 8,932
Sales and marketing expenses totaled $7.6 million or 23 percent of revenue in the fourth quarter
compared to $4.4 million or 22 percent of revenue for the same period last year.
Technology expenses were $1.5 million or 5 percent of revenue in the fourth quarter compared to $1.4
million or 7 percent of revenue for the same period last year.
General and administrative expenses were $2.3 million or 7 percent of revenue in the fourth quarter
compared to $1.6 million or 8 percent of revenue for the same period last year.
Total assets at the end of the quarter were $452.0 million, which includes cash and cash equivalents of
$36.3 million of which $2.5 million is restricted, and loans held-for-sale of $393.4 million. Loans
held-for-sale grew substantially in the quarter as we funded $124 million more loans than we sold. As
we recognize revenue on sold loans, the current increase in our loans held-for-sale will benefit revenue
in future periods.
Total liabilities at the end of the quarter were $396.0 million and included $383.6 million in
borrowings related to mortgage, home equity and auto loans held-for-sale. Total stockholders' equity
at the end of the quarter was $56.0 million.
Prime Auto Facility
In June, E-Loan, Inc. created a qualified special purpose entity, E-LOAN Auto Fund One, LLC ("the
QSPE"), which purchases prime auto loans from E-Loan, Inc., and holds the loans. The QSPE
secured a new $540 million credit facility with Merrill Lynch to support prime auto loan production.
The credit facility mirrors common asset-backed financing structures for auto receivables. This
structure enables us to have greater control over the pricing, underwriting and operational processes
associated with our prime auto loan business.
The following are statistics on the loans sold to the QSPE in the fourth quarter. We sold $101.6
million to the QSPE during the quarter with $1.8 million in related gain on sale. In exchange for the
loans sold, we receive cash and a beneficial interest in the auto loans sold to the QSPE. The primary
variables used to calculate the fair value of the beneficial interest remained unchanged from those used
in the prior period and were (a) 12 percent discount rate, (b) 72 bps life of loan loss rate, and (c) 1.5
ABS prepayment speed. The average loan characteristics were $18,900 loan size, 734 credit score, 25
percent new car, and an average APR of 5.79 percent.
We continue to sell all of our subprime auto originations to various subprime auto loan purchasers
according to their underwriting guidelines. We do not retain any interest in subprime auto loans.
During the quarter we ended our subprime auto loan sales agreement with Americredit, which had a
negative impact on our auto loan volume in the quarter.
Conversion Statistics
We release conversion rates on a one-quarter lagged basis because of the lag time that can exist
between the time an application is submitted and the time the associated loan actually funds. Our
conversion rates are based on a static pool analysis calculated by dividing the number of qualified
applications received in the quarter by the number of funded loans that resulted from those
applications. The following table provides the conversion percentages for the third quarter of 2002.
Q3'02Conversion %
Mortgage
Pre-Approval 6%
Purchase 17%
Refinance 37%
Total Mortgage 25%
Home Equity 31%
Auto 15%
Financial Guidance
The following guidance and revenue growth targets are based on E-LOAN's current expectations as of
January 22, 2003 and do not reflect the potential impact of events that may occur after January 22,
2003. The company assumes no duty to update any forward-looking statements contained in this press
release.
We are pleased to increase our revenue and net income guidance for fiscal year 2003. We now expect
2003 total revenue of $125 million and net income of $14 million or $0.22 earnings per share.
The following assumptions support our 2003 financial guidance.
According to the most recent Mortgage Banker's Association forecast, refinance volumes are expected
to decline approximately 47 percent from 2002's record high level with the majority of the decline in
the back half of the year. We expect to grow our refinance market share during the year, resulting in a
lesser decline of 22 percent in our prime refinance loan volumes in 2003. Additionally, our revenue
per mortgage loan and interest spread is expected to trend down throughout 2003 toward historical
levels.
Home equity loan volume is expected to grow as consumers opt for that loan type versus a cash-out
refinance to meet their needs. Our auto loan assumption factors in continued manufacturer incentive
financing, and the impact of reduced liquidity in the subprime lending market.
Given the above assumptions, we expect 2003 total revenue to grow to approximately $125 million -
representing a 21 percent improvement over 2002 results on a substantially different revenue mix.
Prime mortgage refinance revenue is expected to account for 42 percent of our total revenue in 2003 -
down from 58 percent in 2002. Revenue from diversified products is expected to total approximately
$73 million in 2003 - by comparison, this amount is greater than our total revenue in 2001 of $68
million.
We expect 2003 net income of approximately $14 million or $0.22 earnings per share on
approximately 65 million diluted shares in 2003 - representing a 31 percent improvement over 2002
net income.
We expect the current quarter ending March 31st to be similar to our record performance in Q4 2002 -
revenue of $33 million and net income of $5 million or $0.08 earnings per share.
Over the next three years, our goal is to grow our diversified product revenues by 50 percent per year,
while increasing our share of the prime mortgage refinance market each year.
While the Mortgage Banker's Association has not provided any market forecast beyond 2003, we will
continue to measure our refinance market share progress against their forecasts over time.
A compounded 50 percent annual growth rate on our diversified product revenues over 2002 results
would produce approximately $150 million in revenue on these diversified products by 2005.
The following table provides a more detailed overview of our 2003 forward guidance:
E-Loan, Inc.
2003 Guidance
(in millions except loans and per share data)
Actual Actual Actual Actual Actual Guidance Guidance
Q1 '02 Q2 '02 Q3 '02 Q4 '02 2002 Q1 '03 2003
Loans Closed and Sold
Mortgage 4,507 3,540 4,043 3,849 15,939 4,673 16,775
Home Equity 2,283 3,008 2,983 4,287 12,561 4,583 23,131
Auto 7,506 8,172 9,174 9,199 34,051 7,269 34,602
Total Loans 14,296 14,720 16,200 17,335 62,551 16,525 74,508
Revenue
Mortgage $12.8 $11.7 $16.8 $19.9 $61.2 $19.5 $62.7
Mortgage Interest 3.0 3.0 4.5 4.6 15.1 5.8 23.2
Home Equity 2.3 3.3 3.1 4.5 13.2 4.4 23.0
Home Equity Interest 0.2 0.5 0.7 0.9 2.3 0.7 3.4
Auto 2.3 2.2 3.0 3.0 10.5 2.5 11.9
Other 0.1 0.2 0.2 0.2 0.7 0.2 0.8
Total Revenue $20.8 $21.0 $28.4 $33.1 $103.3 $33.1 $125.0
Mortgage Refinance
% of Total Revenue (1) 66% 51% 59% 58% 58% 56% 42%
Net Income $1.6 $0.9 $3.1 $5.0 $10.7 $5.0 $14.0
Diluted Weighted Average Shares 60.3 59.1 59.6 61.3 60.4 63.0 65.0
Earnings Per Share 0.03 0.02 0.05 0.08 0.18 0.08 0.22
Direct Margin (expressed as a % of component revenue)
Mortgage 54% 49% 53% 56% 54% 59% 54%
Mortgage Interest 49% 56% 50% 53% 52% 54% 44%
Home Equity 42% 44% 25% 41% 38% 37% 46%
Home Equity Interest 54% 54% 44% 46% 48% 44% 32%
Auto 12% 14% 20% 18% 16% 20% 29%
Other 74% 85% 93% 100% 89% 100% 100%
Total Direct Margin 48% 46% 46% 50% 48% 52% 48%
Other Expenses (expressed as a % of total revenue)
Sales & Marketing 25% 29% 23% 23% 25% 25% 25%
Technology 7% 6% 5% 5% 5% 5% 5%
G & A 8% 6% 6% 7% 7% 5% 5%
(1) Represents prime first mortgage refinance loans with associated interest income as a percent of Total
Revenue.
Conference Call and Webcast
Chris Larsen, Chairman and CEO of E-LOAN, will host a conference call to discuss the
company's fourth quarter results tomorrow, January 23 at 7:30 a.m. (PDT). Please dial (312) 470-7393
at 7:25 a.m. (PDT) and reference the pass code "E-LOAN." A replay of the call will be available after
9:00 a.m. (PDT) on January 23, 2003 until 11:59 p.m. (PDT), January 30, 2003. The replay may be
accessed by dialing (402) 998-1040. A live webcast, replay of the conference call and slideshow will
be available via the investor relations section of the company's website at www.eloan.com.
This news release contains forward-looking statements based on current expectations that involve risks
and uncertainties. E-LOAN's actual results may differ from the results described in the forward-
looking statements. Factors that could cause actual results to differ include, but are not limited to,
general conditions in the mortgage and auto industries, interest rate fluctuations, and the impact of
competitive products. These and other risk factors are detailed in E-LOAN's periodic filings with the
Securities and Exchange Commission.
About E-LOAN
E-Loan, Inc., an online lending company, offers consumer loans and debt management services
online at www.eloan.com or 1-800-E-LOAN-22. E-LOAN has reengineered the consumer loan
process by offering a broad choice of products from many lenders for mortgages, home equity loans,
and auto loans in a secure online environment, combined with comprehensive personal service from
dedicated loan consultants. From inception through December 2002, E-LOAN has originated and sold
over $13.0 billion in consumer loans. The company's loan processing centers are located in Dublin,
CA and Jacksonville, FL. E-Loan, Inc. is publicly traded on the Nasdaq National Market under the
symbol EELN.
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