/C O R R E C T I O N - E-LOAN, Inc./ In the news release, E-LOAN,
Inc. (Nasdaq: EELN) Reports Third Quarter 2004 Results, issued
Thursday, November 4, by E-LOAN, Inc. over PR Newswire, the unit
and volume statistics in the text and the Loan Volume Table for the
fiscal quarter ended September 30, 2004, the corrected interest
income total for fiscal year ended December 31, 2003, and the
corrected revenue and net income (loss) detail for the fiscal
quarters ended March 31, 2003 and June 30, 2003 set forth in the
Comparison Table, were inadvertently incorrectly reported in the
original release. The financial statements included in the original
press release remain unchanged. The complete, corrected release
follows: PLEASANTON, Calif., Nov. 4 /PRNewswire-FirstCall/ --
E-LOAN(R) (NASDAQ:EELN), an online consumer direct lender, today
reported results for the third quarter ended September 30, 2004.
Overview of Results * Total revenue of $35.1 million, up 5% from Q2
2004. * Net income for the third quarter of 2004 was $0.7 million
or $0.01 per share on 65.5 million diluted shares. * Diversified
revenue -- comprising total revenue, excluding prime refinance
mortgage -- was $27.8 million, up 18% from Q2 2004, which accounted
for 79% of E-LOAN's total revenue in Q3 2004. * Home Equity revenue
was $14.2 million, up 46% from Q2 2004 and nearly double that of
mortgage refinance revenue. Home equity sold loan volume increased
22% in the quarter compared to Q2 2004. A 27% increase in revenue
per loan from Q2 2004 contributed to these results. * Diversified
mortgage revenue -- comprising purchase and non-prime mortgage --
was $8.3 million, down 15% from the second quarter of 2004.
Diversified mortgage sold loan volume and revenue per loan
decreased 6% and 8%, respectively, in the quarter compared to Q2
2004. * Auto revenue was $3.7 million, up 25% from Q2 2004. Auto
sold loan volume increased 9% in the quarter compared to Q2 2004. A
12% increase in revenue per loan from Q2 2004 contributed to these
results. * Refinance mortgage revenue was $7.3 million, down 26%
from Q2 2004. Refinance mortgage sold loan volume decreased 33% in
the quarter compared to Q2 2004. The decreased loan volume was
partially offset by a 9% increase in revenue per loan from Q2 2004.
* Direct margin -- defined as revenue minus variable and fixed
operations expense -- was $17.6 million, up 3% from Q2 2004. *
Marketing expense totaled $12.1 million, down 3% from Q2 2004. *
General and administrative expenses increased $169 thousand or 7%
to $2.5 million from Q2 2004. * E-LOAN's new subsidiary, Escrow
Closing Services, Inc. (ECS), generated $152 thousand positive
direct margin in Q3 2004. Approximately 53% of our home equity
loans used ECS in Q3 2004, up from 45% in Q2 2004. * Prior periods
presented in this release have been restated to correct the gain on
sale of loans and interest income and interest expense recognized
on loans sold subsequent to the date of sale (see discussion and
table below). "In the third quarter of 2004, we had a solid quarter
overall and made outstanding progress in growing our diversified
businesses," said Chris Larsen, Chairman and Chief Executive
Officer of E-LOAN. "Total revenue was up 5 percent and diversified
revenue was up 18 percent from the second quarter of 2004.
Diversified revenue hit a record high and for the first time
accounted for nearly 80 percent of total revenue, well ahead of
earlier projections." Larsen continued, "We also made good progress
in optimizing our three key leverage points: capital markets
revenue per loan, operations costs per loan, and marketing
conversion. By continuing to focus on these three core areas, while
at the same time maintaining a high level of revenue
diversification, we believe we are well positioned as we enter
2005." "Consistent with our last update, we continue to expect 2004
breakeven earnings," said Matt Roberts, E-LOAN's Chief Financial
Officer. "Adjusted only for the revenue reclassification, we expect
total 2004 revenues of approximately $134 million (or $139 million
on a pre-reclassification basis)." Key assumptions in the forecast
for 2004 are as follows: * 10-year Treasury rates of 4.0 to 5.0 %
for the remainder of the year. * E-LOAN total 2004 sold loan volume
of approximately $5.3 billion. * Marketing spend of approximately
$48 million. * Combined technology and G&A expense of $20.5
million. * Average diluted shares outstanding of 66 million.
Operating and Financial Tables Revenues E-LOAN's revenues are
primarily from the gain on sale of first mortgage, home equity and
auto loans that we originate, fund and then sell. We also earn
interest income on mortgage and home equity loans from the time of
funding through the time of sale. Components of Revenue Q3 2004 Q2
2004 Q3 2003 ($ in thousands) % of % of % of $ Total Revenue $
Total Revenue $ Total Revenue Refi Mortgage $6,823 19% $8,430 25%
$17,020 39% Interest Income on Refi Mortgage 472 1% 1,393 4% 2,324
5% Diversified Mortgage(1) 7,598 22% 8,659 26% 10,286 23% Interest
Income on Diversified Mortgage 688 2% 1,035 3% 2,211 5% Home Equity
13,216 38% 8,738 26% 7,637 17% Interest Income on Home Equity 930
3% 943 3% 1,079 2% Auto(2) 3,665 10% 2,921 9% 2,927 7% Closing
Services(3) 1,407 4% 985 3% -- -- Other(4) 299 1% 295 1% 382 1%
Total Revenue $35,098 100% $33,400 100% $43,866 100% Total
Diversified Revenue(5) $27,802 79% $23,578 71% $24,522 56% (1)
Diversified Mortgage comprises purchase and non-prime mortgage
loans. (2) Auto Revenues include interest income from the retained
interest asset, which was previously reported in Other Income, net.
(3) Closing Services Revenues are from Escrow Closing Services,
Inc., a wholly-owned subsidiary, which provides mortgage closing
services, including HUD-1 Settlement Statement and document
preparation, signing, disbursement and recordation services for a
portion of our Home Equity business. (4) Other Revenue comes from
credit monitoring services and credit card, personal loan and
student loan referrals. (5) Diversified Revenue is comprised of
total revenues excluding prime refinance mortgage and its related
interest income. Loan Volume The following table provides a
comparison of unit and volume statistics: Q3'04 Q2 '04 Q3 '03 $
Millions Loans $ Millions Loans $ Millions Loans Sold Loans
Refinance Mortgage $332 1,568 $496 2,105 $650 3,144 Diversified
Mortgage 378 1,948 403 2,049 640 3,206 Home Equity 404 7,954 332
6,674 275 6,077 Auto 177 10,780 162 9,606 194 10,670 Total Sold
Loans $1,291 22,250 $1,393 20,434 $1,758 23,097 Closed Loans
Refinance Mortgage $340 1,599 $460 1,951 $497 2,492 Diversified
Mortgage 388 2,015 387 1,967 573 2,931 Home Equity 408 8,049 328
6,590 259 5,682 Auto 177 10,773 161 9,568 194 10,701 Total Closed
Loans $1,312 22,436 $1,336 20,076 $1,523 21,806 Direct Margin
Direct margin is defined as revenue minus variable and fixed
operations expense. The following table provides detail of direct
margin classified by revenue-related categories, both in dollars
and expressed as a percentage of its related revenue. Direct
Margins Q3 2004 Q2 2004 Q3 2003 ($ in thousands) % of % of % of $
Total Revenue $ Total Revenue $ Total Revenue Mortgage $7,353 51%
$10,212 60% $18,048 66% Mortgage Interest Margin 584 50% 1,424 59%
2,386 53% Home Equity 7,148 54% 3,491 40% 3,754 49% Home Equity
Interest Margin 430 46% 509 54% 559 52% Auto 1,673 46% 1,085 37%
384 13% Closing Services 152 11% 119 12% -- -- Other 299 100% 295
100% 382 100% Total $17,639 $17,135 $25,514 Conversion Statistics
We release conversion rates on a one-quarter lagged basis because
of the lag time that exists 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. Conversion % Q3 '03 Q4 '03 Q1 '04 Q2 '04 Mortgage
Pre-Approval 6% 6% 6% 7% Purchase 19% 17% 20% 13% Refinance 21% 21%
22% 19% Total Mortgage 14% 13% 16% 13% Home Equity 29% 36% 34% 35%
Auto 19% 26% 28% 27% Restatement of Prior Period's Gain on Sale of
Loans E-LOAN's historical practice has been to continue to
recognize interest income and interest expense on loans sold under
its Purchase and Sale Agreement with Greenwich Capital (see
description of agreement below) in the period from the time of sale
until the time of settlement with the committed loan purchaser. The
Company has determined that this interest income and interest
expense should have been included in the calculation of the gain on
loans sold rather than to be recognized as additional interest
income and interest expense in the period subsequent to the sale of
the loans. To correct this accounting error, the Company will
restate its previously issued financial statements for the year
ended December 31, 2003, and the interim periods within the year as
well as for the quarters ended March 31, 2004 and June 30, 2004.
All amounts included in this release have been restated accordingly
and the impact of the restatement is reflected in the table below.
The cumulative impact of this error was an understatement of income
of $615,000 during a period in which the company earned $22
million. Comparison Table The impact of the error and
reclassification to prior periods is shown in the following table:
Summary Reported Corrected Reported Corrected Reported Corrected 3
Months 3 Months Total Total 6 Months 6 Months Q3 2003 Q3 2003 2003
2003 Q2 2004 Q2 2004 Interest Income $6,480 $5,614 $22,693 $18,475
$10,526 $5,110 Total Diversified Revenue 24,541 24,522 80,737
80,200 46,877 45,169 Total Revenue 44,057 43,866 154,052 152,707
66,675 64,030 Interest Expense 3,082 2,669 11,199 9,151 4,882 2,324
Total Operating Expense 35,023 34,610 130,410 128,362 67,550 64,992
Net Income 8,018 8,240 22,634 23,337 (850) (937) EPS 0.12 0.12 0.34
0.35 (0.01) (0.01) Detail Reported Corrected Reported Corrected
Reported Corrected Q1 2003 Q1 2003 Q2 2003 Q2 2003 Q3 2003 Q3 2003
Refi Mortgage $17,938 $18,242 $21,410 $21,625 $16,871 $17,020
Interest Income on Refi Mortgage 3,015 2,731 3,258 2,997 2,646
2,324 Diversified Mortgage(1) 5,913 6,146 10,096 10,140 9,985
10,286 Interest Income on Diversified Mortgage 1,849 1,691 1,894
1,761 2,492 2,211 Home Equity 3,939 4,051 5,334 5,398 7,412 7,637
Interest Income on Home Equity 424 323 683 608 1,342 1,079 Mortgage
Interest Expense 2,398 2,178 2,506 2,314 2,435 2,149 Home Equity
Interest Expense 288 220 531 473 647 521 Total Diversified Revenue
$15,265 $15,351 $21,434 $21,335 $24,541 $24,522 Total Revenue
36,219 36,324 46,102 45,956 44,057 43,866 Total Operating Expense -
w/ Int Exp 29,103 28,815 37,056 36,806 35,023 34,610 Net Income
6,332 6,726 8,076 8,180 8,018 8,240 EPS 0.10 0.11 0.12 0.12 0.12
0.12 Detail Reported Corrected Reported Corrected Reported
Corrected Q4 2003 Q4 2003 Q1 2004 Q1 2004 Q2 2004 Q2 2004 Refi
Mortgage $6,663 $7,356 $7,856 $8,458 $7,888 $8,430 Interest Income
on Refi Mortgage 1,514 213 1,442 582 2,611 1,392 Diversified
Mortgage (1) 6,372 6,513 6,679 7,050 8,118 8,659 Interest Income on
Diversified Mortgage 1,879 1,549 1,494 677 1,851 1,036 Home Equity
6,671 7,063 9,251 9,555 8,328 8,738 Interest Income on Home Equity
1,697 988 1,473 480 1,654 944 Mortgage Interest Expense 1,517 786
1,404 602 1,847 1,004 Home Equity Interest Expense 876 510 868 283
763 435 Total Diversified Revenue $19,497 $18,992 $22,726 $21,592
$24,151 $23,577 Total Revenue 27,674 26,561 32,024 30,631 34,651
33,399 Total Operating Expense - w/ Int Exp 29,228 28,132 33,159
31,772 34,391 33,220 Net Income 208 191 (1,120) (1,125) 270 189 EPS
0.00 0.00 (0.02) (0.02) 0.00 0.00 Purchase and Sale Agreement with
Greenwich Capital On June 17, 1999, the Company entered into a
Mortgage Loan Purchase and Sale Agreement with Greenwich Capital
Financial Products, Inc. ("Greenwich"). Under the terms of this
agreement, mortgage and home equity loans that are allocated to a
mandatory sell forward commitment between the Company and a loan
purchaser, but have not yet been settled, may be sold to Greenwich
Capital with the accompanying trade assignment. The Company
accounts for these transfers as sales, in accordance with Statement
of Financial Accounting Standards No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" (FAS 140). Conference Call and Webcast Chris Larsen,
Chairman and CEO of E-LOAN, will host a conference call to discuss
the company's third quarter results today, November 4 at 7:30 a.m.
(PST). Please dial (712) 257-0021 at 7:25 a.m. (PST) and reference
pass code "E-LOAN." A replay of the call will be available after
9:00 a.m. (PST) on November 4, 2004 until 11:59 p.m. (PST),
November 11, 2004. The replay may be accessed by dialing (402)
220-9119. A live webcast and replay of the conference call will be
available via the investor relations section of the company's
website at http://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 is an online consumer direct lender
dedicated to providing borrowers across the credit spectrum with a
more enjoyable and affordable way to obtain mortgage, auto and home
equity loans. By making credit scores freely available to consumers
and integrating them with a suite of sophisticated advice tools,
E-LOAN is pioneering the nascent debt management advice category --
helping consumers proactively manage their loan portfolios to lower
their overall borrowing costs. The company relentlessly advocates
eliminating the unnecessary processes, fees, hassle, haggle and
lack of transparency traditionally associated with the consumer
loan experience. Protecting consumers' financial privacy is a
paramount concern, prompting E-LOAN to implement industry leading
privacy practices and advocate strong consumer financial privacy
protection laws. In June 2004, an independent study conducted by
TRUSTe and The Ponemon Institute ranked E-LOAN as one of the top 20
most trusted companies for privacy in America. E-LOAN was the
highest ranked online financial services company to make the top
20. Consumers can log onto http://www.eloan.com/ or call
1-888-E-LOAN-22 to access E-LOAN's products, services and team of
dedicated loan and debt advice professionals. E-LOAN, Inc. is
publicly traded on the Nasdaq National Market under the symbol
EELN. From inception through September 2004, E-LOAN has originated
and sold over $22.8 billion in consumer loans. Press & Investor
Contact: Tiffany Fox 925/847-6314 E-LOAN, Inc. Statement of
Operations (in thousands, except per share amounts) Three Months
Three Months Ended Nine Months Ended Ended Sept. 30, Sept. 30,
Sept. 30, Sept. 30, June 30, 2004 2003 2004 2003 2004 Revenues
$35,098 $43,866 $99,128 $126,146 $33,399 Operating Expenses
Operations 17,459 18,352 48,664 54,796 16,264 Sales & marketing
12,105 11,890 35,744 31,815 12,506 Technology 2,271 2,205 6,528
6,559 2,091 General & administration 2,528 2,162 8,419 7,060
2,359 Total operating expenses 34,363 34,609 99,355 100,230 33,220
Income from operations 735 9,257 (227) 25,916 179 Other income, net
26 15 51 115 10 Income before taxes 761 9,272 (176) 26,031 189
Income taxes (51) (1,032) (51) (2,885) -- Net income/(loss) $710
$8,240 $(227) $23,146 $189 Net income/(loss) per share: Income per
share Basic $0.01 $0.13 $(0.00) $0.38 $0.00 Diluted $0.01 $0.12
$(0.00) $0.35 $0.00 Weighted average shares Basic 63,278 61,065
62,841 60,285 62,915 Diluted 65,458 67,142 62,841 65,972 65,784
E-LOAN, Inc. Consolidated Balance Sheet (in thousands) September
30, December 31, 2004 2003 ASSETS Current assets: Cash and cash
equivalents ($2,350 and $4,850 restricted cash) $46,110 $33,973
Loans held-for-sale 46,817 50,874 Accounts receivable, prepaids and
other current assets 24,494 28,990 Total current assets 117,421
113,837 Fixed assets, net 12,277 11,484 Retained interests in auto
loans - trading 13,852 11,658 Total assets $143,550 $136,979
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Warehouse
and other lines payable $43,849 $44,283 Accounts payable, accrued
expenses and other liabilities 15,526 10,366 Total current
liabilities 59,375 54,649 Total liabilities 59,375 54,649
Stockholders' equity: Common stock 63 62 Additional paid-in-capital
267,215 265,144 Accumulated deficit (183,103) (182,876) Total
stockholders' equity 84,175 82,330 Total liabilities and
stockholders' equity $143,550 $136,979 DATASOURCE: E-LOAN, Inc.
CONTACT: Tiffany Fox of E-LOAN, +1-925-847-6314, or Web site:
http://www.eloan.com/
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