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EBIX - Ebix Inc

Liberty

By Liberty
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siddharth18 Newbie

siddharth18

Posted
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In response to poster asking where i found the report.....

 

Aha. Thanks for the clarification. Any thoughts on the report? It appears to me to be yet another rehash, but I'm listening / scrutinizing / looking for blind spots yet again.

 

Well they are highly criticized by the few readers that actually responded to the Copperfield report on SeekingAlpha. (http://seekingalpha.com/instablog/890075-copperfield-research/1341841-ebix-if-the-sec-cometh-the-sec-will-findeth-or-so-we-suspect)

 

This one caught my eye

 

http://i.imgur.com/5YuAN.png

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  • 4 weeks later...
alpha231616967560 Newbie

alpha231616967560

Posted
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Thanks for sharing this. I hadn't seen it for some reason. It is a well-considered article and helpful to see the acquisitions put into context.

 

Robin Raina does fit the profile of many of the CEOs in the Outsiders book in some important ways (acquisitions and buybacks at the right time, laser focus on the right metrics, etc). The dividend not so much, but it still a relatively small dividend and hopefully will stay that way. The fact that he is willing to think for himself (to positive effect) without much concern about what onlookers think is the most important attribute that likens him to Singleton et al.

 

Decent margin of safety in EBIX stock at the moment...I have been buying over the past month or so.

 

Cheers,

alpha23

 

 

 

 

 

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LongTerm Newbie

LongTerm

Posted
Posted

SA article on EBIX. explains the acquisitions and numbers..

 

http://seekingalpha.com/article/1095511-understanding-ebix-s-growth-strategy

 

Thanks for highlighting the Seeking Alpha post, Martian. Somehow I missed it.

 

I, too, have recently added to a medium sized position at under 16. Given the round-trip the share price has made in the past 9 months I have been wondering whether perhaps I should have been looking at this as a 'trading' position. But I think at some point the share price will quickly break out from its previous range, and I am notoriously bad at timing my purchases, so I am content to keep increasing my position each time it trades under 16. This could be a long grind depending on the 'shorts' but I think holders will eventually be justly rewarded.

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CONeal Newbie

CONeal

Posted
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Can't help but wonder if after the last couple of days if the move has been due to the new health care rules (and Ebix will benefit) or if we are about to get slammed by another bs article.  At any rate the last couple of of days have been intreging.

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mankap Newbie

mankap

Posted
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I think that the increase in price was something to do with SEC letters.

Yesterday , SEC uploaded the letters that were exchanged between SEC and Ebix over last 2 years.(one is dated 1/16 on sec.gov)

The letters show that SEC asked Ebix to  add disclosures like tax rate in different countries and cash held in different countries.

Ebix complied with the ask and updated their 10K's.

There is no restatement of financial nos and there is no investigation.

The shorts were hoping that Ebix will have to restatement the financial nos. which did not happen.

SEC disclosures are weakening the case of shorts.

If all SEC asked Ebix was to add some disclosures, it is tap on wrist.

I had called Ebix IR yesterday and Steve Barlow explained these things in detail.

If you want more details, I will encourage you to call Ebix IR.

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PSDFinancier Newbie

PSDFinancier

Posted
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Hi all,

 

I've been following the EBIX saga from afar for the past few months, but finally decided to use the long weekend, coupled with the release of the SEC letters this week, to dig into the situation and try to see if I wanted to get involved.

 

The company's financials look fabulous, and at least mentally, the inherent competitive advantages of the Company make sense to me.

 

However, I wanted to give the short sellers (i.e., Copperfield) the benefit of the doubt to make sure that I had thought the situation through thoroughly. From the December Copperfield letter, the one part of it that I haven't been able to disprove to myself is his/her accusation that Ebix has misrepresented organic growth. To pull the words straight out of the report:

 

On its third quarter conference held on November 8, management was asked directly about organic growth in the Q&A segment:

 

I was wondering, how much of your revenue growth for the last three months and nine months were due to organic growth and how much was due to acquisitions?

 

While this benign question would seem to have a very straightforward answer, Mr. Raina's response was not only convoluted and circular, it also would appear to be a direct lie based on a specific disclosure in the 10Q. While lying may not necessarily be illegal, we do believe his public response directly contradicted and misrepresented the 10Q disclosures about the critical organic growth metric:

 

Well, I think we've answered that in the past that the way we run our business, and it's very different -- difficult for us to differentiate between what we get out of acquisition and what we get out internally. Part of it, we integrate these products very tightly, there is no -- Ebix, as I was just talking through the STP region, I actually talked about one product. What is going to happen if Ebix will become one product company. So every day, that's what we are doing. So we don't really -- everything that's so entangled in each other, that's so difficult for us to read. Our operations are integrated and that's -- our selling process is integrated, our products are integrated. It's very difficult for us to disintegrate and start breaking up that kind of revenue in that sum. So it's almost impractical for us to do it. And one of the reasons for Ebix's success is precisely this. This is one of the reasons why we produce better efficiency and better margins than anybody else because we integrate extremely tightly, we sell in a very tight manner and so on.

 

It is a challenge to understand exactly what Mr. Raina's answer meant, but his abundant usage of "integrated" (6 times) seems to suggest difficulty tracking and reporting organic growth. However, for the first time, the 10Q unequivocally states the actual organic growth rate. In the MD&A section on page 24 of the 10Q, Ebix states explicitly when discussing organic growth that they experienced "a 1.4% DECREASE in revenues associated with Ebix's legacy operations8 (emphasis ours). The 10Q was filed less than 30 hours after Mr. Raina stated that is was "difficult" and even "impractical" to calculate organic growth. As such, we believe that he was highly deceitful when answering the question regarding organic growth on the earnings conference call. In the past, the sellside has been quick to provide their own analysis of organic growth to justify silly price targets derived from random organic growth assumption. We believe there is no opportunity to "arrive" at some arbitrary growth number when the 10Q specifically states that organic growth is NEGATIVE.

 

What should be more disturbing to existing shareholders than negative growth is that it appears Ebix's most recent 10Q (Q3'12) implies they misrepresented organic growth in the 10Q's filed for Q1'12 and Q2'12. In Ebix's quarterly filings, they report pro-forma revenue disclosures that can be used to calculate organic growth. In our last report, we provided analysis showing why Ebix's "pro-forma revenue" disclosures were not a reliable proxy for organic growth (pro-forma growth will appear higher if Ebix acquires growing targets). However, until the 10Q for Q3'12 (which included the disclosure that the 3.5% pro-forma revenue growth consisted of NEGATIVE 1.4% organic growth and 4.9% acquired growth from seven acquisitions--ADAM, HealthConnect, BSI, Taimma, PlanetSoft, Fintechnix, and TriSystems--completed in 2011 and 2012), the pro-forma revenue was the only metric Ebix provided that was tangential to organic growth. IT IS OUR OPINION THAT SOMETHING MUST HAVE CHANGED THAT CAUSED EBIX TO FINALLY BEGIN DISCLOSING THE APPROPRIATE, ANEMIC GROWTH NUMBERS. FURTHER THE Q3'12 PRO FORMA DISCLOSURES FROM THE THIRD QUARTER 10Q DO NOT RECONCILE WITH 10Q DISCLOSURES FROM Q1 AND Q2.

 

When Ebix filed its original 10Q for Q1'12, we were unable to find pro-forma disclosures. In an odd turn of events, Ebix filed an amended first quarter 10Q on July 6, 2012 that included pro-forma revenue growth of 2.8% (see table below). On 8/9/12, Ebix filed its 10Q for the second quarter, which disclosed an implied pro-forma growth rate of 6.3%.

 

However, when Ebix filed its third quarter 10Q, it disclosed 3.5% pro-forma growth for the third quarter and only 1.3% for the first nine months of 2012. This effectively implies flat pro-forma revenue growth for 1H'12 (see table 2 below).12 This implied 1H'12 growth rate does not reconcile with the 6.3% growth that was reported in the second quarter 10Q for the first six months of 2012. Since Ebix only closed one small acquisition between the second quarter and third quarter filings, we believe that the apparent "disappearance" of 600 basis points of pro-forma revenue growth is a massive question that needs to be answered. As can be seen in our table below, Ebix claimed to have grown 6.3% in 1H'12 based upon their 10Q filing for Q2'12 ($98,216 of revenue vs. $92,399). However, using the third quarter 10Q, subtracting the reported pro-forma revenues for Q3'12 and Q3'11 from the nine months reported for 2012 and 2011 results in implied pro-forma revenue growth for the first six months of just 0.2% compared to the 6.3% they reported for that exact same period in the second quarter 10Q (1H'12 = $158,336 (9 mo's) - $54.197 (Q3'12) = $104,139 vs. $103,899 from 1H'11 using same exercise). This implied first half growth rate does not reconcile with the actual first half growth rate that was reported in the second quarter 10Q.

 

 

 

I know that there might be some complications with the pro forma numbers that I may be missing since I only just started looking at the situation this weekend and am still not 100% comfortable with the numbers, but does anyone here have a refutation of this point? Seeing declining revenue in the legacy businesses for YTD Q3 2012 vs. YTD Q3 2011 is a problem, no? And why don't the implied 1H 2012 vs. 1H 2011 growth numbers match up with what was reported in 1H?

 

Would appreciate thoughts on this. Clearly, if the shorter is just full of BS, then Ebix is a steal even after this week's run-up.

 

Best,

PSDFinancier

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PSDFinancier Newbie

PSDFinancier

Posted
Posted

Thanks for posting that link. But it doesn't answer the particular accusation that the PF 1H 11/12 numbers that EBIX reported in their Q2 report do not match the implied PF 1H 11/12 numbers from their Q3 report, an accusation that seems accurate when I spread the numbers. I'm just wondering if anyone knows why this discrepancy exists, as well as why "organic"/legacy revenue declined in 2012 vs. 2011. I'll probably try to reach out to IR to ask this question, but figured I'd put it up here to see if anyone has looked into this.

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cemadh Newbie

cemadh

Posted
Posted

Implied earnings and proforma earnings is shaky ground. I will stay away from it.

I looked at the SEC filings for EBIX and found that in general revenues are trenidng up.

3 months ending June 2012 - 47716 which is 13% higher than 3 months ending June 2011

6 months ending June 2012 - 91543 which is 11.2% higher than 6 months ending June 2011

 

Year after year revenues are trending up.

I am getting my dividend checks so cash flow is not fake as Copperfield appears to imply.

 

I could go on and on but all this has been covered already on this thread.

 

Earnings may be lumpy but I have 100% confidence in Raina.

I think that one of these days there is going to be a massive short squeeze.

 

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PSDFinancier Newbie

PSDFinancier

Posted
Posted

I totally hear you guys about the FCF. Clearly very difficult to lie about cash in the bank, and I've been able to successfully foot Net Income to FCF. Both are clearly growing nicely, which is nice because it alleviates concerns about BS accruals counting as net income. Additionally, AR growth and revenue growth are in line, which further illustrates the point, and ROE/ROIC has been fairly stable (with the exception of YTD Q3 2012, with the downturn apparently related to Raina's decision to increase sales/marketing expenditures). So I'm not disputing any of this, and I clearly think Copperfield has got these wrong. The FCF trends are great, and make me want to buy this stock.

 

Copperfield was also wrong in his March 2011 attack on the Company when he accused the Company of having negative organic growth.

 

BUT his accusation on PF organic growth revenue trends in 2012 was accurate. Organic growth was negative in 2012. This does concern me. I'm not accusing EBIX of fraud, and to state it bluntly, if someone can answer my question about organic growth, I'm all in on the stock, as I'm comfortable with disproving all the other accusations that Copperfield made. I'm just wondering about this organic growth revenue issue in 2012 because it does seem to be a legitimate point, and for a business like EBIX, you would not expect negative organic growth.

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mankap Newbie

mankap

Posted
Posted

 

This is from amended Ebix reports.It states that organic growth rate for 1Q was 4.8% and there was 2.0% decrease in revenue from acquired operations.For 2Q , organic growth rate was 2.8%.

Did you look at the amended 10Q and 10K filings?

 

With respect to business acquisitions completed during fiscal year 2011 through the first fiscal quarter of 2012 on a pro forma basis, as disclosed in the table in Note 3 “Business Combinations” to the enclosed consolidated financial statements, combined revenues increased 2.8% for the first fiscal quarter of 2012 versus the first fiscal quarter of 2011, whereas there was a 9.4% increase in reported revenues for the same comparative periods. The 2.8% increase in pro forma revenues is associated with a 2.0% decrease in first quarter 2012 versus 2011 revenues pertaining to the businesses acquired during these periods (i.e. ADAM and HealthConnect), offset by a 4.8% increase in revenues associated with Ebix’s legacy operations preceding these business acquisitions. The cause for the difference between the 9.4% increase in reported revenue for the quarter ended March 31, 2012 versus the quarter ended March 31, 2011, as compared to the 2.8% increase in pro forma revenue for the quarter ended March 31, 2012 versus pro forma revenue for the quarter ended March 31, 2011 is due to the effect of combining the additional revenue derived from those businesses acquired during these periods with the Company’s pre-existing operations.”

With respect to the business acquisitions completed during fiscal year 2011 through the second fiscal quarter of 2012 on a pro forma basis, as disclosed in the table in Note 3 “Business Combinations” to the enclosed consolidated financial statements, combined revenues increased 6.3% for the second fiscal quarter of 2012 versus the second fiscal quarter of 2011, whereas there was a 11.2% increase in reported revenues for the same comparative periods. The 6.3% increase in pro forma revenues is associated with a 3.5% increase in second quarter 2012 versus 2011 revenues pertaining to the businesses acquired during these periods (i.e. ADAM, HealthConnect, BSI, Taimma, PlanetSoft, and Fintechnix), combined with a 2.8% increase in revenues associated with Ebix’s legacy operations preceding these business acquisitions. The cause for the difference between the 11.2% increase in reported revenue for the quarter ended June 30, 2012 versus the quarter ended June 30, 2011, as compared to the 6.3% increase in pro forma revenue for the quarter ended June 30, 2012 versus pro forma revenue for the quarter ended June 30, 2011 is due to the effect of combining the additional revenue derived from those businesses acquired during these periods with the Company’s pre-existing operations.”

 

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