Liberty Posted September 12, 2011 Author Share Posted September 12, 2011 I'm starting to think the put redemption could be a catalyst to the downside. In October, we know that over $20 million will leave the company (through repurchase to keep the share price up, or private placement). If it's a private placement, that will hit the quarterly bottom line, since they only have a $1.5 million liability as of the last Q. So the put redemption could result in a big miss of earnings expectations. Now I see why Raina wants to thwart the shorts. Have you missed the discussion above about this? If the strike price is reached, which isn't a given, the money spent on puts will just replace money spent on buybacks (and the stock being bought back at such a low price will be accretive to shareholders over time), and they're doing more than 22.5mm in buybacks every quarters. Even if they did it with debt, they could pay it back in a matter of months, and interests are low. This isn't a problem. I keep reading about the margins resulting from cross-selling, but I still don't see it yet after studying for a little while. I find the corporate website lacking. They have links to demos of their software that simply refer back to a sales contact, which always annoys me. Where can I demo exposure to the multiple offerings the company has for its clients? They are not Salesforce. They have a very specific list of customers whom they contact directly. In fact, a large fraction of big insurers and brokers are already clients, whom they only sell new products to. They aren't counting on customers randomly finding them on the internet and they don't have consumer level products. When a big insurance company decides to change its back end systems or join an exchange, it isn't because they saw a demo on a website or an ad in a magazine. They do demos in person. EBIX has such higher margins for many reasons: They are in the software business, so each new customer has very small marginal costs. The system they sell mostly substitutes paper processes, so they have a huge cost advantage over the legacy systems they replace (which is why they sell even in soft markets; they help insurers reduce costs and increase profits). When it comes to the exchanges, the network effect mostly means that the winner takes all, so there's very little competition pressuring their margins (which is why they make so many acquisitions - time is of the essence). And because of EBIX's low cost structure (India, Singapore), competitors probably have higher costs than they do, making it hard to undercut them. I fully expect EBIX's margins to keep growing as they get bigger, just as they have in the past 5 years. Link to comment Share on other sites More sharing options...
Liberty Posted September 16, 2011 Author Share Posted September 16, 2011 http://www.marketwatch.com/story/ebix-continues-focus-on-growth-with-seven-new-key-hires-2011-09-16 I like that health and financials are now being mentioned more often along with insurance. There are certainly nice opportunities in these sectors too. Link to comment Share on other sites More sharing options...
Liberty Posted September 27, 2011 Author Share Posted September 27, 2011 http://www.marketwatch.com/story/ebix-announces-addition-of-steven-n-barlow-as-vice-president-investor-relations-2011-09-27 Link to comment Share on other sites More sharing options...
tooskinneejs Posted September 27, 2011 Share Posted September 27, 2011 "to accompany the Company's revenue, cash and earnings growth story" more of that same type of language. Link to comment Share on other sites More sharing options...
Liberty Posted September 27, 2011 Author Share Posted September 27, 2011 "to accompany the Company's revenue, cash and earnings growth story" more of that same type of language. Indeed, and it's superficially bad. But beneath the surface, I think they have the right kind of thinking, and that's all that matters to me. Link to comment Share on other sites More sharing options...
mankap Posted October 4, 2011 Share Posted October 4, 2011 Ebix bought back 1.07 m shares since Aug 6 in last 2 months.Ebix ix taking full advantage of the low prices They have bought back 3.44 m shares YTD. As per the last press release on Aug 6 they had bought back 2.37 m shares. There is no slow down in the buy back. Link to comment Share on other sites More sharing options...
Liberty Posted October 4, 2011 Author Share Posted October 4, 2011 Here's the release: Ebix, Inc. EBIX -3.39% , a leading international supplier of On-Demand software and E-commerce services to the insurance industry, today announced that it has repurchased 3.444 million shares since its acquisition of ADAM, Inc. in February 2011, for a cost of $62.7 million. The Company announced that its strong cash flow generation in 2011 has enabled the company to repurchase almost all of the 3.625 million shares issued in February 2011 for the purchase of ADAM. In addition, the Company also disclosed that it repurchased this stock while reducing its net debt balance to approximately $26.9 million as of 30th September 2011, as compared to $35.3 million as of 31st December 2010. Taking into account the share repurchases made by the Company to date, the Company expects the diluted share count for Q3 2011 to be 40.4 million, and for Q4 2011 to be 39.5 million. This diluted share count is likely to be even lower if the Company continues to repurchase its common stock from the market. On April 1, 2011 Ebix announced its Board had increased its repurchase authorization to $45 million and subsequently increased its program on June 30 to $100 million. All share repurchases were and continue to be done in accordance with Rule 10b-18 of the Securities Exchange Act of 1934 as to the timing, pricing and volume of such transactions. Ebix plans to announce its 2011 third quarter earnings in early November. The Company will announce the date and investor call details soon. http://www.marketwatch.com/story/ebix-close-to-repurchasing-all-the-company-shares-issued-for-purchase-of-adam-inc-in-february-2011-2011-10-04 Based on what the CEO said in an interview, they should increase buybacks authorization to 160m soon. The ADAM shares were issued at Feb 7 2011 price, so over $24. Looks like they'll have bought back the whole company for probably around $16-17 Link to comment Share on other sites More sharing options...
DCG Posted October 4, 2011 Share Posted October 4, 2011 How much of their earnings beats have been driven by buybacks? Link to comment Share on other sites More sharing options...
Liberty Posted October 4, 2011 Author Share Posted October 4, 2011 How much of their earnings beats have been driven by buybacks? Not many, I think (they bought some in 2008, but less than a million iirc). When the stock was selling at a higher multiple, they issued a lot more shares than they bought back. They've only started gobbling millions of them after the huge drop at the end of Q1. And for the record, they don't issue earnings guidance, so the "beats" that you are talking about are for third party analyst projections, not for company targets. Link to comment Share on other sites More sharing options...
Liberty Posted October 6, 2011 Author Share Posted October 6, 2011 Charlie Munger said that you can learn a lot about people by knowing who their heroes are. Shortly after Steve Jobs' death, Robin Raina wrote on his facebook page a nice tribute to Jobs that started with "One of the two people I have admired, and looked up to, on my work side is no more today." Since I'm a curious guy, I asked him who the other person was. Within the hour, he replied (I guess it's true that he gets by with 4 hours of sleep per night) and said: "Hi. Steve Jobs and Warren Buffett are two people I have always looked up to in my work life - Buffett's ability to simplify things, grasp the economics, create wealth and yet give it all away are truly inspiring for me . Robin" He couldn't have picked better business heroes, IMHO! btw, a few weeks ago I sent him the Manual of Ideas podcast (http://goo.gl/L89wW) and 1979 Forbes article (http://goo.gl/ByBlI) about Henry Singleton, the ones that detail how Singleton made strategic acquisitions with stock when it was dear and repurchased a large fraction of the company when it was cheap. I figured he might find them interesting :) Link to comment Share on other sites More sharing options...
mankap Posted October 6, 2011 Share Posted October 6, 2011 Thanks for posting the Forbes article.Good reading material. Once I had sent a mail at IR address of Ebix .Robin replied himself within 30 mins. He has mentioned Buffett before also in calls. Around 3 years ago, I went to Ebix office for annual shareholder meeting and met Robin. After the shareholder meeting he spent time answering questions and explaining his charity . That time also he mentioned about Buffett many times for his views about charity. Link to comment Share on other sites More sharing options...
Liberty Posted November 1, 2011 Author Share Posted November 1, 2011 http://www.marketwatch.com/story/ebix-announces-expiration-of-put-option-2011-11-01 ATLANTA, Nov 01, 2011 (BUSINESS WIRE) -- Ebix, Inc. EBIX -8.24% a leading provider of On-Demand software and E-commerce services to the insurance industry, today announced that the put option for 1.49 million Ebix shares expired on October 31 without being exercised. The put option was issued to the owners of E-Z Data in October 2009 in connection of the acquisition of E-Z Data and if exercised would have enabled the put owners to sell the 1.49 million shares of Ebix common stock back to the Ebix at a price of $15.11 per share. Link to comment Share on other sites More sharing options...
enoch01 Posted November 1, 2011 Share Posted November 1, 2011 That's illogical. It traded for less than strike for a solid week. I'm obviously missing something. Link to comment Share on other sites More sharing options...
Liberty Posted November 1, 2011 Author Share Posted November 1, 2011 That's illogical. It traded for less than strike for a solid week. I'm obviously missing something. It makes sense if the puts were still in the hands of the 2 EZ Data shareholders (one of which still works for EBIX, afaik) and they prefer to stay EBIX shareholders. Technically, if they had perfect timing they could have exercised their option at 13.31, made money, and then rebought EBIX shares, but I doubt they could have bought back 1.5 million shares without moving the price up a lot, negating the option gain. But the stock didn't stay at 13 very long, and most of the rest of the time when it was below the strike price, it was still in the high 14s, not giving a big gain... Just my best guess. Link to comment Share on other sites More sharing options...
mankap Posted November 2, 2011 Share Posted November 2, 2011 The put holders probably had to pay tax on the exercise of put options.The two individuals are founders of E-Z data and their cost must be really low.Exercising at 14 or 14 would have triggered capital gains tax thus neutralizing any gains. This shows that they put holders are probably not interested in short term gains and want to keep the shares for long term. It is going to clean up the balance sheet taking out the put option liability. Link to comment Share on other sites More sharing options...
Liberty Posted November 2, 2011 Author Share Posted November 2, 2011 Indeed. I would kind of have liked for them to exercise it because it would be 1.5 million fewer shares at a very attractive cost, but they can now use the money for buybacks on the market and probably still get pretty low prices (especially with days like today - speaking of which, does anyone knows how long the 'blackout' period is before earnings are released during which a company can't do buybacks?). Link to comment Share on other sites More sharing options...
mankap Posted November 2, 2011 Share Posted November 2, 2011 I would have also liked that shares were put to Ebix. Buying back at $15.11 is a very good deal. My understanding regarding blackout date is that it is for the company to decide .Company has to decide what the blackout period is before and after the earning release.I have read somewhere that typically it is ten days. Link to comment Share on other sites More sharing options...
alpha231616967560 Posted November 8, 2011 Share Posted November 8, 2011 Decent+ quarter. Cash flow and margins remain strong and the stock remains undervalued. http://ebix.com/pressrelease_text.aspx?artid=217 I also like how Robin Raina uses Warren Buffett quotes in the conference call to explain the share repurchases: http://goo.gl/rUAK9 Link to comment Share on other sites More sharing options...
Liberty Posted November 8, 2011 Author Share Posted November 8, 2011 I like how for EBIX double digit growth is considered just 'decent'. :) On the conference call they mentioned that ADAM is on track to generate 0.25 cents/share over the 12 months after the acquisition, much higher than the initial 0.15 cents target that the skeptics claimed was wildly optimistic. Overall I'm quite please. Nice growth in revenue and FCF, margins still high despite all the senior sales hiring, we already knew about the repurchases but that's great too, same for debt reduction. I like how they're restructuring sales to more easily go after big clients globally, rather than country by country. Exchanges still strong, and I'll be curious to see how BPO and carrier channels will do when the headwind turns into a tailwind (who knows when that will be, though? But economy and insurance markets can't stay soft forever). Link to comment Share on other sites More sharing options...
alpha231616967560 Posted November 8, 2011 Share Posted November 8, 2011 Hey I said decent+ (to be read as "decent plus" - yes, my own little language I suppose) :) - the revenue and profit increased only a smidge from Q2. I think that they are on an excellent track overall, and I own a pretty substantial whack of shares - I've just seen better quarters. Link to comment Share on other sites More sharing options...
mankap Posted November 8, 2011 Share Posted November 8, 2011 I like the results.Margins and Ebix story is intact. Sales and marketing expenses have almost doubled in last year with no impact on margins. AR are also showing decline.FCF for 2011 could be approx $70m. I expect to see a acquisition in Q1 ' 2012. BPO sector is tied to construction.Once construction starts picking up , we can expect growth in BPO. Link to comment Share on other sites More sharing options...
Liberty Posted November 16, 2011 Author Share Posted November 16, 2011 New acquisition: http://www.marketwatch.com/story/ebix-acquires-online-health-exchange-healthconnect-systems-2011-11-16 Link to comment Share on other sites More sharing options...
Guest Hester Posted November 16, 2011 Share Posted November 16, 2011 New acquisition: http://www.marketwatch.com/story/ebix-acquires-online-health-exchange-healthconnect-systems-2011-11-16 I can't wait to find out how much Link to comment Share on other sites More sharing options...
Liberty Posted November 16, 2011 Author Share Posted November 16, 2011 Me too. But their track record is very good - they never overpaid afaik - so I'm not too worried. Link to comment Share on other sites More sharing options...
alpha231616967560 Posted November 16, 2011 Share Posted November 16, 2011 Seems like a fairly small acquisition. I don't know how accurate this site is, but it has yearly revenue at just 4.5M, so the total acquisition wouldn't have been more than $13M or so most likely. I'm interested to see where they are taking the healthcare exchange (between this and ADAM) - I wonder how much Obamacare has to do with their strategy here. Link to comment Share on other sites More sharing options...
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