Liberty

It's not to lose weight, but I'm currently in the process of switching to a standing desk. Might even buy one of these: http://www.geekdesk.com/default.asp You can read the media pieces linked near the bottom for more context on health benefits.

http://online.wsj.com/article/SB10001424053111904836104576558600549181370.html Google buys Zagat.

Indeed, Mankap. And the beauty is that they haven't overpaid for any of those. To paraphrase a Buffett story, Raina is the guy who counts the squares on the toilet paper rolls.

Indeed. What's the problem? It's money they were planning to spend to retire stock anyway, so no harm done, no? Just in Q2 of this year plus part of Q3 (the announcement was a month ago, so they've probably bought a lot more since then) they spent over 46mm in buybacks (and that's not counting the ±6mm convertible that they retired from the Rennes Foundation). Another 22.5m isn't going to break their stride, especially since they can see it coming. Notice that those buybacks were mostly around $19. Buying back 22.5m of shares at 15.11 would be much better.

Easy. They have a 100mm share buyback plan (which they want to increase to 160mm). Buying back shares from EZ at such a low price fits perfectly in what they're already doing. Worse case they're paying above current market value on that day, but it would still be a couple bucks lower than even what Raina bought for himself (he bought $500k worth of shares at 17.23, IIRC). I bet Raina structured the deal this way because he knew that 25 months later the probability was very, very high that he would be more than happy to buy back those shares around $15. As a shareholder, I'd be glad if they retired such a large block of stock at that price.

btw, since there seems to be a regain of interest in EBIX lately, members of the VIC should know that there are 3 writeups about EBIX in the archives there (pointing it out in case you hadn't thought of looking there).

Chances are it's on November 1st at midnight + 1 second or something like that, which in practice is the same as October 31st. (EZ was acquired on Oct 1, and the puts are for 25 months, so that should be oct 31st/nov 1) I believe that the puts are the "stock" part of the price paid for EZ Data, not something additional.

The puts were mentioned in a recent interview: I don't remember if they've mentioned the credit line specifically, but I imagine that since they can borrow pretty cheaply, it's good to have if they ever need to do a big acquisition and don't want to issue stock at current prices. As the company grows, I think it's normal for their credit line to grow (doesn't mean they have to use it - in fact they've been reducing debt lately - but it's always good to have a safety net).

Let's see quickly: BS on slash & burn and imminent collapse of value. Their acquisition strategy has been detailed elsewhere and makes a lot of sense and generates lots of sustainable value in a way that can easily be built on organically (especially via cross-selling, but also launching greenfield exchanges and such). BS. Depending on how you define things and how long you exclude acquisitions, the numbers will be different, but what matters to me is that almost all the growth at acquirees post-acquisition is generated by cross-selling in both directions and costs synergies, things that the acquired company couldn't do on its own, so it is very much EBIX-originated growth. Also, the exchanges that aren't part of acquired companies are growing very rapidly, which is a very positive sign. BS on so many levels. Halls of mirrors distortions and BS, as the facts are demonstrating this year. Total BS. EBIX doesn't move IP outside of the US and there's nothing superficial about its offshore presence. BS based on other BS in the report. More BS. Audit fees are in line with industry (even a bit higher than average, actually). Auditors did change more often than what is usual, but I haven't seen anything verifiable (there's a quote in the CR report that nobody found in the actual docs) to convince me that something terribly bad was going on back then, and many years have passed since without problems. More ad hominem BS. High-on-drugs BS. If Copperfield was shorting Microsoft, he'd probably say that they can't be in the OS business because the pattern of their revenues is different from Red Hat's. Drilling down into sub-claims for each section leaves the ±90% ratio pretty much intact.

Mr. Market is so strange sometimes. Alderon is barely up and Altius is actually down. I kind of expected it for ALS, but thought ADV would move more on this kind of news.

Wonder what kind of NPV North Rose and Mills Lake have. Anywhere close to Rose Central, or just a small faction? I don't remember seeing anything preliminary on those, but maybe I missed it.

I totally agree with that. Some people might not think I do because a company I like is heavily shorted, but I think that while they're wrong in that case (which created the opportunity for me to buy a good business at a low price), I agree that they're often right and can be more motivated to find bad businesses than anyone else. So I'm cool with shorts, as long as they don't make stuff up and put their real names on their reports.

I wasn't precise enough with my word-choice. I meant that he probably doesn't have tens of millions in an eggs nest like many other CEOs who have built and sold businesses for hundreds of millions or been paid rockstar CEO salaries for years. Raina is relatively young and his current cash salary is a recent thing, and while he has a lot of wealth on paper, afaik he hasn't really sold any significant amount of his EBIX shares (those that he disposed of were mostly given to his foundation, afaik). After taxes, charitable donations (which in his case are probably significant) and living expenses (I don't know what kind of lifestyle he leads), that 2.4m becomes smaller. Raina made a $500k purchase on the open market. That seems proportionally significant.

If you think the credibility of management or of the source of a report is irrelevant, that's your prerogative, but I don't. EBIX isn't a Chinese company listed in a foreign country, with products that you can't go see or customers that you can't talk to, btw, so context there is very different. What matters are facts, and analyzing a business isn't just about accounting. When you have to make a judgement call about people, facts about these people matter even if you'll never get a mathematical equation that shows you someone is trustworthy or not. I don't have anything against shorts in general, but I do dislike market manipulators who just make stuff up and post it anonymously to create panic. Laugh all you want, but it's kind of a jerk thing to say, and I didn't even go into detail about what I consider claims and why I think they are wrong except for a quick parenthesis, so don't pretend like you know my reasoning. This makes me glad I didn't go to more trouble for you. The increases in R&D and SGA aren't that big (actually, SGA is down the last Q, and R&D is only up a little) and are due to them reinvesting any margin above 40% in hiring (senior level salespeople, mostly, but afaik also engineers, as always - they have a very high ratio of engineers to total employees). Results from the increased salesforce should be seen over the next year, as these types of deals don't happen overnight. I'd worry if they were up enough to drop margins below 40%, which is the company's current target, but since they aren't, things appears to be going according to plan. I think part of the increase is also due to something that was addressed in the last call, something about yearly bonuses being paid or something like that, but I can't remember exactly (you'll have to look it up). But to pretend that any increase in those areas are a validation of CR's thesis is ridiculous. When a report claims that R&D levels are too low to sustain a business and you show that they can in fact be high enough to sustain it because of the model employed, that can also be called proving a claim false. You might not agree with me, but what I addressed wasn't just an entirely subjective opinion that couldn't be countered. The changes are fact, but the circumstances surrounding them are important, and it appears that the picture that CR is trying to paint is based on made up quotes and weak circumstantial evidence at best (and old, to boot). There isn't a limitless number of accretive strategic acquisitions out there, and the valuation of potential aquirees isn't always going to be attractive. This appears to leave plenty of cash for other things, and the company doesn't have much debt, so it could easily lever itself some if it needed even more than operating cash flow can provide. It also doesn't need to keep acquiring, it could just consolidate in the sectors where it already operates (P&C in Australia/New Zealand, Life in USA, etc..), but they probably won't stop yet since they see a big first-mover advantage in the area of exchanges and want to grab as much of that as possible before others move in. Why don't you think customers are sticky? Also, what do you think of the claim that 'EBIX isn't a Saas' company? Have you read the Crystal Equity report? What did you think?

Thank you! That should keep me busy for a little while ;)

Something else I've been meaning to post here, about EBIX's acquisition strategy: Anyone who did their due diligence (listen to all the available conference calls on the official site, read all the 10Ks and 10Qs, interviews, customers of EBIX, etc) should know all this, but since many don't seem to do DD, here's a summary of how EBIX's strategy is different from what most people expect: The shorts imply that EBIX acquires businesses to kind of keep running them as they are, and since they often make cuts when they acquire, they say "how can they possibly grow those businesses and keep them healthy?". What they don't understand (possibly on purpose because it suits them) is that EBIX makes acquisitions first to acquire customers, and then second to acquire technology (EBIX has technology that is as good if not better as anyone else, so that's not their limiting factor). In insurance, it's all about relationships, and things move very slowly. This has pros and cons. The pros are that once you have a customer, chances are they'll stick with you almost forever if you do a good job. Cons are, it's very hard to get new customers unless you are an established player in that sector, and even then, companies don't switch back-end systems or join an exchange every day. It's especially hard lately because the insurance industry isn't spending too much on back-end systems (soft market). Now maybe EBIX could have decided to chip away at that problem slowly, taking years to get a beachhead into a new market. But what they've decided to do is get a foot in the door much more rapidly and decisively with strategic acquisitions of companies that already have thousands of customers in the desired market. (Raina has said on calls that EBIX will only acquire companies that position them to be #1 or #2 in a desired sector, and they only launch a new exchange after they've got on board a couple of the top carriers and/or brokers who they've identified as key 'pressure points' to generate the strongest network effect.) Why do these acquisitions make financial sense for EBIX? It's simple: Because the customers are worth more to EBIX than to the acquired company. Here's how it works: Let's say that a customer of EZ Data is worth X dollars to EZ Data. To EBIX, that same customer is worth at least X if they just continue running the business as is, but what EBIX does is 1) cross-sell many other EBIX products to those customers, such as exchanges (this can be done transparently by plugging in the exchange directly in the existing CRM software), carrier or broker systems, BPO services. This makes each customer be worth much more than X dollars to EBIX. They also 2) have lower costs than EZ Data because they can do new product development in India and benefit from lower tax rate (they don't move US IP outside the country, but they do rewrite some software from scratch in India and make new products there), which means an even higher multiple of X per customers. And they also do 3) they can take EZ Data's products, and cross-sell them to other EBIX existing customers. (that's one reason why EBIX's sales and marketing costs are so low -- they know who their potential customers are, and most of them are already customers, they just try to cross-sell them new products. They basically do zero mass-marketing or trade show stuff, the kind of expensive stuff that Salesforce.com must do. They also have lower costs because of great centralized cost controls (using a software they want to eventually sell as a product, btw), but that's a whole other post...). These three things taken together means that each customer of EZ Data is worth many multiples of X to EBIX on top of giving them entrance to a market where they can now much more easily acquire new customers organically because they are seen as "big enough" in that market to be worth dealing with (we can already see this with EBIX hiring more salespeople and being in the running for more big deals). The beauty is that those customers almost never leave and revenues are highly recurrent, and the short billing cycles leave EBIX with pricing power if they ever need it. Wells Fargo does something similar with cross-selling. It's a beautiful strategy, and they've shown it works. One last thing to consider. The customer list of EBIX is basically a who's who of big insurance and financial companies (Wells Fargo, Allstate, Merrill Lynch, etc), and the products that EBIX sells are very intimate to these companies. It directly touches how they make money and manage their own sales and customers. Each and every one of these hundreds of the savviest of companies has the ability to do thorough due diligence and make EBIX jump through all kinds of hoops to get a deal, and I'm pretty sure that they do exactly that. No company wants to take a gamble with its financial future by replacing its backend systems or committing to an insurance exchange with a company that hasn't been fully vetted first. In fact, that's another opportunity for EBIX: Nobody wants to give a 20m contract to a 100m dollar company, so as EBIX becomes bigger, the size of the contracts that they compete for (and hopefully win) should also become bigger.

Pretty much everything, but I won't write a 10-page essay here. Lol, ok. ;D I won't spend hours to write a detailed dissertation for you, but I can go up one meta-level so it's clearer what my process was. When I first read the Copperfield report, I was pretty scared. Whatever the factual merits of the thing are, it does what it was intended to do, which is to scare EBIX shareholders. All the right keywords are there (they even found a way to fit "fraud" and "chinese" in the title!), they attack from all angles, throwing everything but the kitchen sink at the company, hoping something will stick. Even though 95% of people who saw it probably didn't read past the introductory summary, it also had to be long and detailed, with tables and numbers to make it appear as authoritative and overwhelming as possible (who has the time to fact-check all of that quickly? better just sell now and think later!). It was well designed as a short attack. But over the past few months I've read that report over a dozen times, I almost feel I know it by heart at this point. Every subsequent read made it less scary, until it wasn't scary at all and became very transparent. In between each of these readings I learned more about the company and did what scuttlebutt I could... The more I researched, the more convinced I became that Raina and EBIX were the real deal and the more I liked their model, and I also became more convinced that whoever Copperfield is (I'm guessing hired by a competitor of EBIX, but who knows?) has no idea how EBIX operates and why it does what it does, or if they know, they didn't put any of it in the report because it wasn't convenient. Over time, I became convinced that about 90% of the claims in the report were false, and the remaining ones that I couldn't completely eliminate were of the "this guy's word against that guy's word" variety. So I had to make a judgement call: Either believe an anonymous source that had boldly lied about 90% of the things they have talked about (I mean, 'EBIX isn't a real SaaS vendor because they don't bill customers on the same model as Salesforce.com'? (to preserve pricing power and because their product is even stickier than SF CRM, btw) Who came up with that one? How about just checking EBIX's products or asking a customer? And how about claiming that R&D is too low when indian engineers housed in wholly-owned buildings are a lot less expensive than US engineers, and when acquiring technologies can be a substitute for developing in-house, and when EBIX's model of sharing code base across countries and products makes their R&D efforts very efficiently leveraged.. anyways), or I could believe the named managers of a audited US public company (not a Chinese RTO, as Copperfield subliminally implied) that have everything to lose (money, reputation, personal relationships, and in the case of Raina who's a minor celebrity in India and has around 90k followers on Facebook alone, how the public in his native country sees him), and who seem to have told the truth over the past decade as far as can be verified from documentation. It wasn't a very tough choice for me on that last part. Whenever we invest we must place some trust in management, and so far I don't have any reasons to doubt EBIX management. Others should make their own choices and do their own DD, though...

IMO the words aren't as important as what was meant by them. In the mouth of some CEOs, referring to the company as a "growth stock" could definitely be a red flag. But in the context of the mental model of Raina that I have, I sincerely believe that he meant "we see a lot of opportunities to keep growing the company" and nothing more. Heck, I had started studying BRLI a few months ago and just the fact that the CEO provided guidance on revenue and income and seemed a bit too obsessed about the stock turned me off the company, so if I felt Raina was anything like that I'd be heading off.

Wow, what you describe is basically the opposite of my impression of Raina. Most of his moves are very long-term oriented, he constantly talks about the long-term and growing the fundamentals of the business and a strategy that unfolds over years, and how the story is the business, not the stock, and he almost never gave guidance over the past 10 years, never had shiny annual letters, rarely had analyst conferences, doesn't take calls from individual analysts afaik, etc. Have you listened to all the conference calls on the site? After listening to a man speak for tens of hours and over half a decade, you get a pretty good idea of what he says, and if what he says one year happens the next, and I certainly haven't heard any of what you mention.

Isn't another benefit of not going private that the stock is liquid, so that makes it much easier to incentivize employees with stock and to make acquisition with stock (preferably when it's over-valued, and always when you're getting something more valuable than what you're giving away)? Going private would remove that flexibility.

Any idea if it's the right kind of mill for DP?

I didn't mean that they're sitting around and going "omg I hope the stock goes back up soon or we're screwed". I meant more like: When the stock takes a dive for what you consider to be no good reason, your first reflex isn't "let's go fill some paperwork to take this baby private" but rather something like "wow, that probably won't last long, look at how strong the business is doing.. guess it's a good opportunity for some buybacks". They win either way: Stock down, buybacks. Stock up, use it as currency (a la Teledyne and Berkshire). I still disagree with the dividend, I'd rather have seen more buybacks because it's a more efficient way of returning capital to shareholders, but the buybacks will still be much bigger than the dividend, and the dividend is not bad per se, it's just sub-optimal.

I don't think he's a wealthy man. He bought his 4 million EBIX shares for pennies, and I don't think he has much money outside of that. A lot of his cash seems to go to his foundation. Maybe they'll consider going private at some point, but it's also possible that they've been sitting there and going "this crazy undervaluation will end any day now..". Maybe if it continues for long enough they'll make that move. I hope not, but we'll see. As for the dividend, I agree it's not the best decision, but it's definitely not crazy, and far from anything as bad as the average company does day-in and day-out... Another possibility is that Raina is looking ahead and seeing acquisitions slow down because he'll have bought his way into most of the sectors he wants to be in, and growing into these beachheads organically and opening new offices in greenfields markets where there is no strategic players to acquire (ie brazil) will be less expensive than doing it by acquiring, so that would free up lots of cash, meaning a dividend would make more sense.

They've increased buybacks from 15m to 100m (and they said they're going to push it to 160m when they reach 65m) and Raina spent half a million of his own money to buy stock back. It's not like the small dividend is the first thing they did... They might not have the resources to take it private, and personally, I hope they don't.

Pretty much everything, but I won't write a 10-page essay here. Lol, ok buddy. ;D Sorry, I don't feel I have to convince you, and it took me many dozens of hours to get familiar with EBIX management and business model (yes, it's a complex business to understand, which can be dangerous, but it also gives an edge to the people who take the time to do their homework), and I can't easily replicate that gestalt of information for you, so I don't feel it's worth the effort. But the two links posted by Alpha above are a good starting point.