EBIX - Ebix Inc

[Guest wellmont]

interesting ebix has only spent $2.5m on share repurchases in first half of 2013. It spent $9.4m in first half of 2012, when the price actually traded higher on average than in 2013. So far through june 30, it bought back around 250k, but issued via stock options, 136k. So shares outstanding barely budged in 6 months. Also of note is that there have been no insider buys in the 4 months since the price collapsed on june 20th. one of the first things I plan to look at in the next earnings report is how much stock ebix bought back.

[mankap]

I will prefer Ebix to settle the cases than buy back the stock right now. If Craig Hallum's report is true, Ebix is doing the right thing by settling the cases. They need to settle the cases and move on.

[siddharth18]

I will prefer Ebix to settle the cases than buy back the stock right now. If Craig Hallum's report is true, Ebix is doing the right thing by settling the cases. They need to settle the cases and move on.

 

+1

 

I assume cash accumulation may not be a bad idea because a settlement is more vital to reinvigorate investor confidence and to put these issues behind them rather than buybacks.

 

With the negativity surrounding EBIX (long before the termination of merger) and then the epic meltdown post termination, Raina probably believes he'll have plenty of time to buy back stock in the future as the stock isn't going to rise up anytime soon and hence wanted to lower the cost of his capital and pay down his revolver/debt. It's kinda hard to justify it, I know. It is us, investors, who believe that EBIX has a rare opportunity to retire a big % of its float at absurdly low prices and shouldn't pay down debt and forego buybacks at single digit share price.

 

As for the lack of insider buying  - Raina has plenty of $$$ in EBIX at this point, so him not buying shares right now in open market doesn't really concern me.

[meiroy]

 

siddharth18,

 

You have been following the stock for awhile... does that look like the start of a slow squeeze?

 

Hah not just follow...I'm obsessed with it :P

 

I really don't know the answer to that although everyone it's common knowledge that the short hit pieces have been lousy at best, yet it's the highest shorted stock in Nasdaq with over -40% borrow rebate rate.

 

Here's a fact to consider:

 

Between June 28th and September 30th, the short interest went from 10.5 million shares to 16.5 million shares. During that period, stock remained below the $12/share range. Which implies that once the shares go over $12/share, almost 40% of shorts are going to be under water! Also note that the rise in price has been on a low volume which means it ain't gonna be easy to cover those 6 million short shares easily that are under water in case the rise in price is either due to:

 

 

1. A self fulfilling prophesy implied by rising prices that the short thesis is weak/invalid  OR

2. Some/Extremely good news that attracts new buyers (those that were waiting for some type of outcome before buying) and the shorts to cover simultaneously.

 

Finally, I will say that no part of my thesis relies on holding my breath for a short squeeze. It may happen, or it may not. If the reaches my expectation of fair value by a short squeeze, or by dismissal/settlement of lawsuits or the closure of DOJ inquiry by the means of a slap on the wrist, it won't matter to me. Even if nothing happens between say - now and 3 years - the shorts will get tired of paying 40% annually, the company will be sitting on a huge pile of cash and/or buyback.

 

 

I used to own OUTR (formerly Coinstar) and the short interest was huge. There were these semi-annual panic selling bouts in the last three years from $60/share to high $40/share. People kept waiting and waiting for a short squeeze - it didn't happen. The lesson I suppose is that one ought to base their buying and selling decisions solely on their estimation of intrinsic value and not by synthetic intricacies of the market such as a squeeze.

 

 

 

That said, do you think this is the beginning of a squeeze?

 

Thanks for your reply and pardon my belated one.

 

I think it's interesting to have a [possibly] undervalued stock or a special situation together with high short.  To my knowledge momentum investing does work until it doesn't so if you layer it on [possibly] "value" stocks it can do miracles. Why ignore the market if we can get more out of it? Plenty of ways to make money in the world. It's a "free option" as oh the great one here tends to say.

 

[Guest wellmont]

ebix buys Zero shares back in q3 as cash flow declines. one of the main pillars of the bull's case was this company has immense fcf that that will be used to repurchase stock. capital allocation here was a strength they reminded. And they were even more hopeful that after the shorts "crushed" the stock with a series of articles on S/A, that management, who has bought back lots of stock at higher prices, would scoop up a lot of cheap shares. But management seems to have lost it's affection for the shares, buying none for the company, and none for themselves, even as the stock appears to sell at mouthwatering valuations. Of course since the company is not buying back stock, there has to be a good reason. Now to come up with one....

[siddharth18]

ebix buys Zero shares back in q3 as cash flow declines.

 

Yes cash flow declined. Let's all panic now, right?

 

And let's forget that they are putting their legal issues behind them by settling lawsuits and this:

 

"The Company signed new deals with accounts which included Walmart, Swiss Re, Sanofi US Services, Pershing LLC, TD Ameritrade, Ohio Cooperative Exchange, Purdue, Bayer, Pfizer, Glaxo SmithKline, Jazz Pharma, Northeast Utilities Service Co., Thai Re, HSBC, Zenith Insurance, Four Seasons Financial Group, LifeMark, American General, Mass Mutual Insurance, Federal Reserve Bank, Los Angeles County Office, eClinical Works, Security Life Insurance, Truven Health Analytics, Merrill Lynch, Consolidated Health Plans, AON, Sempra Energy Utility, Automobile Club of Southern California, QBE America, City of Roseville, MetLife, Guardian Life, Nationwide Insurance, Prudential, AIG, Wells Fargo and Omaha Insurance Company. This list of names is a sample representation of contracts signed by the Company in the third quarter of 2013. The Company also signed two material 5-year recurring revenue contracts with one of the largest brokers in the world. With the signing of these two contracts, this client has the potential to overtake Ebix's largest client at present, in terms of annual revenues generated for Ebix in future years."

[Guest wellmont]

why so many lawsuits to settle? if settling the lawsuits prevents the company from creating value with capital allocation, then the lawsuits are destroying shareholder value.

[siddharth18]

Today's price action (so far) elucidates exactly what happens when rock-bottom expectations meet mediocre results that leads to a net positive outcome. The hysterical shorts were certain that EBIX was going to be "halted" or that it was a "zero."

 

But OOPS! It's getting more clients and are settling lawsuits and moving on...now, who could see that coming?

 

Now let's all nitpick how they're choosing to pay down their debt instead of buying back shares and that their revenue is declining (never mind the exchange rate fluctuation). Let's all fixate on how Raina isn't buying EBIX for his personal account hence it's a red flag. Let's all conveniently forget how this thing is trading for a ridiculously low P/FCF multiple.

 

BTW - the shares are higher they have ever been since the termination of Goldman merger. Coming off of the heels of "lack of buybacks and flat revenue," that means something.

[siddharth18]

why so many lawsuits to settle? if settling the lawsuits prevents the company from creating value with capital allocation, then the lawsuits are destroying shareholder value.

 

Yes that's what lawsuits do. Destroy shareholder value by distracting the management from running the business. That's why it's cheaper to settle than to litigate.

 

Your incredulity is baffling.

[Guest wellmont]

your avoidance of my question is not baffling.

[Liberty]

I find the lack of buybacks very puzzling.

 

edit: Transcript URL: http://seekingalpha.com/article/1823562-ebix-management-discusses-q3-2013-results-earnings-call-transcript?part=single

 

Lastly, let me comment on 2 questions that are repeatedly asked by our investors. What about stock buybacks? What about dividend resumption?

 

As the CEO of Ebix, I see one of my most important responsibilities, as managing our capital allocation. Over the last decade or so, I have tried to do that by making opportunistic acquisitions and buybacks. With the recent temporary increase in legal and associated costs, the company had to ensure that it is in full compliance with its lending covenants in terms of areas ratios.

 

Accordingly, we chose not to buy back shares until we comfortably exceed those ratios. As our net income returns to past levels, we intend to resume the buyback plan.

[twacowfca]

Am I the only one who finds their recent "earnings call" bizarre?

 

The first bizarre action is that they held their "earnings call" before they released their 10Q, which they announced would be released after the call.

 

The second bizarre action was that one person was allowed to ask many questions one after another on and on and on.  None of the questions was pointed, and of course, they couldn't be pointed in respect to their recent 10Q that had not been released.  However, other topics cried out for probing questions and the only questions that were asked by the person who was allowed to monopolize the call were expressed as glittering generalities.  Robin's answers were also expressed as non specifically as possible.

 

Then it was announced that there were no other questions and the same guy was allowed to come back on and ask more powder puff questions.

[Guest wellmont]

ahh you caught the quarterly JVR of CH interview of RR I see. :)

[siddharth18]

I find the lack of buybacks very puzzling.

 

Me too. From a pure economical/numbers perspective, there should be nothing more compelling than buybacks. If anything, more money should be raised at low interest rates to buy even more shares, right?

 

But there are more forces at play and Raina wants to play it defensively. He noted on CC that he even though no covenant violations had occurred, he doesn't want to be in such a position in future, because a lower GAAP/reported income can trigger violations. Maybe his lawyers persuaded him to pay his debt off if any more negative news erupts that spooks the bankers. We will never know the precise reason.

 

However, if forced to choose, I too would like him to err on the side of conservationism. Better to forego the attractive buybacks rather than be forced to put in a harsher situation where you're at your banker's mercy. I trust that with a 4 million share stake, he will think about it long and hard before making a decision either way.

 

The repayment of debt should, nonetheless, refute the notion that the cash is fake - to an equal degree as buybacks, because both require free cash flow.

 

Given Raina's 10% ownership and his track record for the past 10 years, I want to give him a few more quarters.

 

Am I the only one who finds their recent "earnings call" bizarre?

 

The first bizarre action is that they held their "earnings call" before they released their 10Q, which they announced would be released after the call.

 

The second bizarre action was that one person was allowed to ask many questions one after another on and on and on.  None of the questions were pointed, and of course, they couldn't be pointed in respect to their recent 10q that had not been released.  However, other topics cried out for probing questions and the only questions that were asked by the person who was allowed to monopolize the call were expressed as glittering generalities.  Robin's answers were also expressed as non specifically as possible.

 

Then it was announced that there were no other questions and the same guy was allowed to come back on and ask more powder puff questions.

 

This is just me guessing here but I think they didn't want to spook the investors into thinking the top line shrank (even if it was just a couple of million and even if it was due to exchange rate fluctuations). There is already more than enough bad news/sentiment/headlines floating around that they wanted to talk about/explain the results before publishing them. That said, can you come up with a more sinister justification, of them doing this?

 

As for no one else asking questions - I'm not sure how the conference call process is being conducted. Isn't it the "operator" who moderates the call? Is that an EBIX employee?

 

There are far too many details/specifics in the case but as a shareholder I'm trying to focus on things that matter - that customers are not fleeing, company is generating real cash and is working to settle the outstanding issues. I may not agree with everything Raina does but as long as if those 3 things are taken care of, I'm happy to hold at this price.

[twacowfca]

I find the lack of buybacks very puzzling.

 

Me too. From a pure economical/numbers perspective, there should be nothing more compelling than buybacks. If anything, more money should be raised at low interest rates to buy even more shares, right?

 

But there are more forces at play and Raina wants to play it defensively. He noted on CC that he even though no covenant violations had occurred, he doesn't want to be in such a position in future, because a lower GAAP/reported income can trigger violations. Maybe his lawyers persuaded him to pay his debt off if any more negative news erupts that spooks the bankers. We will never know the precise reason.

 

However, if forced to choose, I too would like him to err on the side of conservationism. Better to forego the attractive buybacks rather than be forced to put in a harsher situation where you're at your banker's mercy. I trust that with a 4 million share stake, he will think about it long and hard before making a decision either way.

 

The repayment of debt should, nonetheless, refute the notion that the cash is fake - to an equal degree as buybacks, because both require free cash flow.

 

Given Raina's 10% ownership and his track record for the past 10 years, I want to give him a few more quarters.

 

Am I the only one who finds their recent "earnings call" bizarre?

 

The first bizarre action is that they held their "earnings call" before they released their 10Q, which they announced would be released after the call.

 

The second bizarre action was that one person was allowed to ask many questions one after another on and on and on.  None of the questions were pointed, and of course, they couldn't be pointed in respect to their recent 10q that had not been released.  However, other topics cried out for probing questions and the only questions that were asked by the person who was allowed to monopolize the call were expressed as glittering generalities.  Robin's answers were also expressed as non specifically as possible.

 

Then it was announced that there were no other questions and the same guy was allowed to come back on and ask more powder puff questions.

 

This is just me guessing here but I think they didn't want to spook the investors into thinking the top line shrank (even if it was just a couple of million and even if it was due to exchange rate fluctuations). There is already more than enough bad news/sentiment/headlines floating around that they wanted to talk about/explain the results before publishing them. That said, can you come up with a more sinister justification, of them doing this?

 

As for no one else asking questions - I'm not sure how the conference call process is being conducted. Isn't it the "operator" who moderates the call? Is that an EBIX employee?

 

There are far too many details/specifics in the case but as a shareholder I'm trying to focus on things that matter - that customers are not fleeing, company is generating real cash and is working to settle the outstanding issues. I may not agree with everything Raina does but as long as if those 3 things are taken care of, I'm happy to hold at this price.

 

What can I say?  Like Alice facing the Red Queen's logic, I must be wrong about my take on the earnings call.

[racemize]

Wow, that is really odd (re earnings call).  Either something shady is going on or this guy has no idea how to reinstill confidence.  Either way seems like a huge warning sign.

[wescobrk]

twocowcfa, this is more from the berkshire thread so I apologize if breaking etiquette here but just curious regarding the account for the family member you grew almost 6 fold buying berkshire short term calls, how much did you buy of in the money short term calls when berkshire went below buffett's buyback?

I'm assuming you held enough in cash in case you had to buy the shares in case the stock dropped?

Thanks.

[twacowfca]

twocowcfa, this is more from the berkshire thread so I apologize if breaking etiquette here but just curious regarding the account for the family member you grew almost 6 fold buying berkshire short term calls, how much did you buy of in the money short term calls when berkshire went below buffett's buyback?

I'm assuming you held enough in cash in case you had to buy the shares in case the stock dropped?

Thanks.

 

We had less than ten percent of that account in F&F preferreds and most of the rest in deep in the money BRK leaps as the year wound down. Then, BRK raised their buyback threshold to 120% of BV and they bought some stock on the open market when it went a little below that level. Then, around EOY the stock dipped a little below about $90.00, below what I calculated 120% of  EOY BV would be when they reported.  At that point, I took profits on some of the leaps and bought short term February calls that were ATM or slightly OTM but with a strike price below what I calculated 120% of EOY BV would be. As the calendar rolled into the new year, I kept taking profits on the short term calls as they went up and started to amount to about half the account 's worth. Then, I took maybe half those profits and bought ATM or slightly OTM calls dated the next month out. At some pointI sold the F&F preferreds for a big gain and threw that into the pot. After repeating two or three times , I closed out the short term calls when BRK got well above my estimate of 120% of forward BV and put most of the account assets into deeply ITM BRK leaps.

 

The icing on the cake was that this was all done in a ROTH account.  Very gratifying that there was no tax due on all the short term trading.  :)

[twacowfca]

Sanjeev. Is it possible to move my latest post answer to the Berkshire  Hathaway discussion ?

[siddharth18]

Someone, somewhere thought EBIX was a good buy!

 

http://www.sec.gov/Archives/edgar/data/814549/000144554614000075/sc13g_3.txt

[Vish_ram]

Someone, somewhere thought EBIX was a good buy!

 

http://www.sec.gov/Archives/edgar/data/814549/000144554614000075/sc13g_3.txt

 

Interesting, I've never heard of FIRST TRUST PORTFOLIOS LP. They have a 9% position.

 

 

[siddharth18]

Someone, somewhere thought EBIX was a good buy!

 

http://www.sec.gov/Archives/edgar/data/814549/000144554614000075/sc13g_3.txt

 

Interesting, I've never heard of FIRST TRUST PORTFOLIOS LP. They have a 9% position.

 

 

 

I've never heard of them (http://www.ftcapitalmarkets.com/default.asp) either. They have a lot of ETFs it seems. (https://www.google.com/finance?q=first%20trust&restype=company&noIL=1&ei=dkzMUsjQB-rZsAeIxwE)

 

 

Anyway, adding up the 8.94% of First Trust's position to the beneficial owners listed in the proxy (http://i.imgur.com/lRXaHY3.png) we get a total of 66%/25 million shares held by insiders & institutions. Add to that fact that 36%/14 million shares are sold short.

[siddharth18]

Blackrock bought 7.3%

 

http://www.sec.gov/Archives/edgar/data/814549/000108636414000802/ebix.inc..txt

[siddharth18]

Ebix Board Declares Quarterly Dividend of 7.5 Cents Per Share

 

 

http://www.nasdaq.com/press-release/ebix-board-declares-quarterly-dividend-of-75-cents-per-share-20140205-00261#ixzz2sTIhgm4I

 

 

Am I the only one following EBIX these days?

[Liberty]

Am I the only one following EBIX these days?

 

I keep an eye on it but haven't owned any in a long time.

 

Curious to see how it will all end..