Case Study

Ellie Mae

Loan origination software for US residential mortgage lenders.
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‘’We have had regular interactions with TDM since our first meeting and continue to be impressed by their due diligence process and constructive feedback.’’

JONATHAN CORR FORMER PRESIDENT & CEO, ELLIE MAE

Ellie Mae is a leading provider of loan origination software to US residential mortgage lenders, previously listed on NYSE.

TDM initially invested in May 2013 as a supportive long-term shareholder with an ownership of c.4% of the company. Over time, TDM developed frequent and open communication with Ellie Mae’s management team in regards to strategic issues such as capital management, specifically in relation to their share repurchase program, as well as advice on their investor relations approach.

At the time of TDM’s investment, Ellie Mae was out of fashion with investors as approximately 30% of its revenue was linked to residential mortgage volumes, which were under significant pressure. This had created a short-term growth headwind and a clear value dislocation in the market. Our thesis was rooted in the undeniable long-term value creation potential of the dominant vertical market software provider, Ellie Mae’s unique culture and large long term growth runway.

Growth

Ellie Mae was opportunistically acquired by Thoma Bravo in March 2019 for $US3.7b. This represented a 6x growth in market capitalisation since we first invested in 2013. Just 15 months after this, Ellie Mae was sold to Intercontinental Exchange for US$11b. 

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People and Culture

We witnessed a great leadership team that had a significant personal investment who consistently demonstrated a long-term perspective on growing the business. The management team valued a supportive shareholder that could and did provide a long-term investor lens to value creation.

Competitive Advantage

Our primary framework for assessing competitive advantage is Hamilton Helmer’s 7 Powers. Find further details in our Four Pillars Framework.

The beauty of vertical software is it is winner takes most, and as the dominant player in the market, Ellie was a highly profitable category winner.

Given the specialisation of processing mortgage applications at scale and the compliance involved, Ellie’s SaaS product was incredibly sticky – logo retention was consistently above 95% annually and allowed Ellie Mae to grow its very dominant market

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