EBIX

I bring up to the board for consideration EBIX. This company recently came up on an old screener I used. I have been researching it the last week or two. I bought a small position ~1% of my portfolio. I am hesintate to bring it up as I feel I have not fully vested this investment. However, I will be posting my monthly portfolio soon and my stock purchase will show up .

My understanding is EBIX was Delphi which I remember hearing about on the boards a long time ago. The CEO Rob Raina came to work for them in 1997 when it was in bad shape and turned the company around.

Who is EBIX? From their website: Ebix is a leading international supplier of on-demand infrastructure exchanges to the insurance, financial, and healthcare industries. In the Insurance sector, the Company’s main focus is to develop and deploy a wide variety of insurance and reinsurance exchanges on an on-demand basis, while also, providing Software-as-a-Service (“SaaS”) enterprise solutions in the area of CRM, front-end & back-end systems, outsourced administrative and risk compliance.

After some research EBIX has been acquiring companies which is fueling their revenue growth.


EBIX					
	        2018	2017	2016	2015	2014
Revenue	        497826	363971	298294	265482	214321
Change Rev	36.8%	22.0%	12.4%	23.9%	
O.M.	        31%	31%	34%		

You say, Retirementdough 30%+ growth is not that exciting for this board, especially if on acquistions. Well I would agree. However they have a huge presence it seems in India.

From the companies most recent earnings c.c.;

Our explosive growth in the India market continued in Q1 2019. Excluding e-governance ventures, the India-led EbixCash Ventures, including India EbixCash products built in other Asian countries showed a 152% year-over-year growth in Q1 2019 by growing to $77.9 million from $30.8 million in the same period in 2018.

Also from the company:

“EbixCash” has evolved from being India’s first and largest non-bank entity to offer Prepaid Cash cards to becoming the leading holistic payments’ solutions company.Our network presence across the country comprising of 75,000+ EbixCash World Outlets across 3,000+ Tier I to IV cities, helps us reach our customers better. Our Prepaid Cards serve the consumers who are not currently in the financial mainstream.

Watching video on the CEO Rob Raina quoted.

“We believe we can create the largest financial exchange the world has seen. We can create this out of India”

That is a long term goal.

A near term goal is;

I believe that we can target Ebix worldwide revenues to be at $800 million plus in annualized revenues by fourth quarter of 2019. I’m poised by the growth we have experienced in our various businesses that I will talk through in this talk play. This growth has been specifically aided by cross-selling and market leadership in various functional areas that we have entered.

EbixCash revenues in the first quarter of 2019 were approximately above $92 million.

Ebix has the state goal of being “the largest FinTech company in the world that can converge all the Insurance and Finance services”

Now things that make me somewhat uncertain are the use of debt for acquistions. Although the are using substantial amount of cash flow in these purchase, additionally they pay a small dividend.

They have recently bought up large amount of businesses that have expertise in different spaces. The company says its strategic but I wonder if focusing on a narrower business path would be more beneficial. They seem a bit spreadout (however so did/does Amazon historically and it worked out pretty well for them).

They are headquartered in Georgia, but are a worldwide company. Obviously India is where the extreme growth is occurring. The CEO was born and raised in India. They have plans to offer an Ebix cash IPO in India in about 9 months. I am making assumption that the monies raised would be good for the parent company, but I am not 100% sure.

I have been trying to study and read up on the company, however there are A LOT of moving parts. The operating margins and revenue growth seem good. The India growth seems awesome. It reminded me a little of MDB with Atlas. Now I could be totally wrong with that analogy. Feel free to disect.

30 Likes

Hi Retirementdough!

I bought EBIX years ago. At the time they were supposed to consolidate the software that was used by independent insurance agents. But all I remember about them is that they were a serial acquirer and bought company after company after company. Sometimes they purchased goodwill. Sometimes those acquisitions were accretive to sales. The problem was simple ole me couldn’t figure out what the main company was doing. Was there any organic growth or not? I just couldn’t tell, so I sold them and moved into something that was easier to figure out (Starbucks).

Recently I read that they bought Yatra, which is the second largest travel agency in India. That is all great and good, but what does a travel agency have to do with insurance? Maybe it’s that the EBIX CEO is Indian…I don’t know.

And now you say Ebix has the state goal of being “the largest FinTech company in the world that can converge all the Insurance and Finance services”? Jeez, that’s some mighty big talk. Again, I don’t know.

My opinion of them is the same as it was when I sold. I just don’t have enough visibility into what they are doing to own them.

Or as my Magic 8 Ball would say: Answer hazy. Ask again.

Good luck with your investment.

Jeb

12 Likes

Hi Retirementdough (et al).

I have been an Ebix shareholder for more than a decade and its return to me has roughly doubled the S&P 500’s return in that time frame. Doubling the S&P 500 for more than a decade is noteworthy, in my opinion. There was a time when I studied the company VERY carefully, but that was a few years ago now. Here are a few quick observations:

  • Robin Raina (the CEO) has a very good head for business, but he is also a bit of a character.

  • India always seems to have a lot of promise because of its large population. It is a difficult place to make money, in my experience.

  • The analogy to MongoDB seems stretched, in my opinion, but I’m happy to hear you out if want to go into more detail.

  • I am aware of the IPO plans, but would want to research them MUCH more deeply before presenting anything on this board.

  • If there is real interest in Ebix on this message board, I will take the time to regain deep knowledge of it.

  • There have been times when I disagreed with an Ebix assertion that an acquisition was “immediately accretive to earnings”. Nonetheless, I thought highly enough of the company to remain invested.

  • Ebix is an incredible bargain compared to where it was trading a year or two ago. Of course, that says virtually nothing about whether it will be a bargain today compared to where it will be trading a year or two from now.

  • At least historically, Ebix has been prone to short attacks. Of course, that cuts both ways… Sucks if you buy just before one; great if you buy during maximum FUD.

Really… If there’s interest here, please say so. This is a company I’d be quite game to dig deeper into. If there isn’t interest, that’s OK; that time can be profitably spent elsewhere…

Fool on!
Thanks, and best wishes,
TMFDatabaseBob (long: EBIX, MDB)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

Please note: I am not a member of any newsletter team. My opinions are my own and do not necessarily reflect those of the TMF advisers. I want to share my research with you since we’re all part of the larger TMF Community.

22 Likes

Really… If there’s interest here, please say so. This is a company I’d be quite game to dig deeper into.

Hi Bob,
I too used to be invested in Ebix and exited them, so this interested me. A quick look at the latest quarter provided the following:


**Acquisition of Weizmann, net of cash acquired	               (64,624)**
**Acquisition of Pearl	                                        (3,372)**
**Acquisition of Lawson	                                        (2,726)**
**Acquisition of Miles	                                          (982)**
**Acquisition of Business Travels	                                  (689)**
**Cash paid for acquisition of Wahh taxis	                          (214)**
**Cash paid for acquisition of Zillious, net of cash acquired	(9,816)**
**Cash paid for acquisition of Essel Forex	                (7,935)**

To me that looks as if they acquired eight companies this quarter, including a travel company and a taxi company and six others including Zillious which was an Indian travel technology provider, and Essel Forex and Weizmann Forex, which were Indian foreign exchange companies, Pearl and Lawson which were two Indian Travel and Touring companies, and Miles Software which provided Asset and Wealth Management Software. WOW! And this is a company which was primarily into Health Industry stuff and insurance exchanges as I remember it.

Bob, if you have the time and interest I’d love to read what you can glean. about the company, and whether the company is really taking over the world, or whether the CEO has just not been taking his medicine to control his hypomanic condition.:grinning: (Only half joking there. Foreign exchange, taxis, Asset and Wealth Management, Travel and Touring companies, as well, etc, etc,… in a company that at a cursory glance at its press releases is also doing Ebix Cash (sending money by phone), Health Services, Life Insurance and Annuity Exchanges, a Trucking Logistics Exchange, etc, etc). In other words, is this company really on the way to becoming a financial behemoth, or is it mostly hype, craziness and smoke and mirrors.

From the website here are the channels they are trying to be in simultaneously:

Insurance Channel
» Exchange
» Insurer
» Broker

Finance Channel – EbixCash
» EbixCash Wallet
» Prepaid Gift Card
» Travel - Via.com
» Luxury Travel - Mercury
» Outstation Taxis
» Logistics
» Forex
» Remittance
» Wealth Management Solutions
» Lending Solutions

Risk Compliance Channel

Education Channel

Consulting Channel

e-Governance

Enterprise Products for
» P & C Insurance
» Life Insurance & Annuity
» Health Insurance
» Risk Management Information Systems
» Certificate of Insurance Management
» Benefits Administration and Wellness
» Ebix Life Sciences

Travel Solution Channel


The above is my contribution to get you going!

Best,

Saul

36 Likes

From the website here are the channels they are trying to be in simultaneously:

Insurance Channel
» Exchange
» Insurer
» Broker

Finance Channel – EbixCash
» EbixCash Wallet
» Prepaid Gift Card
» Travel - Via.com
» Luxury Travel - Mercury
» Outstation Taxis
» Logistics
» Forex
» Remittance
» Wealth Management Solutions
» Lending Solutions

Risk Compliance Channel

Education Channel

Consulting Channel

e-Governance

Enterprise Products for
» P & C Insurance
» Life Insurance & Annuity
» Health Insurance
» Risk Management Information Systems
» Certificate of Insurance Management
» Benefits Administration and Wellness
» Ebix Life Sciences

Travel Solution Channel

One of the rules of a successful business is to be number one or number two in your market. How can EBIX possibly accomplish that? One of Jack Welsh’s methods was to sell any GE division that as not number one or number two in their business.

Denny Schlesinger

3 Likes

Hi Bob,

Thanks for the reply. I guess what I was trying to say with the MDB atlas comparison is this; is there a smaller subset of the company that is growing very rapidly and becoming increasing a larger percentage of overall revenue in the future. Is it possible that EBIX has a hidden growth story?

Honestly I am not sure yet, because they purchased so many companies recently and the timing of those acquisitions and the timing of those accrued revenues. That is some of what I am trying to “flesh” out with deeper study.

2 Likes

The glue holding together all the Ebix acquisitions in India is in consolidating the backend transaction processing, cross-selling retail travel and financial services through their agent network, or cross-selling corporate travel and logistics to business clients. On its face, there’s a lot going on in many different verticals, but it’s all founded on the same core business principles that made the Ebix legacy business a success.

10 Likes

It looks like deworsification, augmented by easy access to cash. I prescribe asset stripping, liquidation, and bed rest.

Saul wrote: “Bob, if you have the time and interest I’d love to read what you can glean.

Thanks for the vote of confidence, Saul, and for the extensive list of channels. Some date back to the time that I knew the company better, and some are of more-recent vintage.

For me right now, the big problem, as you alluded to, is the “if you have the time” factor. We are in earnings season, and I’ll be busy with that for a while. Once I emerge from that (mid-August?), I should have better bandwidth.

For now, though, let me make a couple of quick observations based on people’s comments. I think the health-related stuff is a sideline. a.d.a.m. was a division within a company Ebix acquired. I thought they were likely to divest it since it seemed so far from their core business. But they didn’t, and that is probably an early example of the channel proliferation we see today. The insurance exchanges are where Ebix started.

I think fhdfhfhfgh’s “glue” comment is very astute. It may be facile to look at Ebix and think that their core skill is insurance exchanges. That was a very paper-intensive and people-contacting-people-intensive business when Ebix entered the market, and their exchanges helped automate that. Of course, they had to develop deep domain expertise to build robust systems and to sell their product to decision-makers in that industry. But I don’t think they view insurance as more than an application. Instead, I think Ebix’s key skills are software development, identifying inefficient processes, and integrating acquisitions. Insurance exchanges were just the first applications that Ebix tackled.

Fool on!
Thanks, and best wishes,
TMFDatabaseBob (long: EBIX)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

Please note: I am not a member of any newsletter team. My opinions are my own and do not necessarily reflect those of the TMF advisers. I want to share my research with you since we’re all part of the larger TMF Community.

11 Likes

Yes fhdfhfhfgh is right. Don’t think of EBIX as an insurance industry company. It is a backend IT service provider primarily (tho not entirely) for exchanges, historically insurance exchanges but moving into financial and other transactional exchanges in India. Their continued expertise and track record at back-end insurance exchanges is shown by the London Market’s PPL success over last 5 years. EBIX acquires companies and aims for 30+% margins from moving to efficient use of own backend infrastructure. Raina has seen a huge opportunity in high-growth India and is betting the company. Short attacks created a huge profit opportunity for investors in the first half of 2010s, and that is happening again. Debt is a concern, but EBIX throws off cash like crazy, so debt service has not been a problem. Biggest weakness is communication with market and opaqueness, making the sustained short attacks possible. But eventually, you can’t argue with cash flow.

6 Likes

TMFDatabasebob, I do hope you do a deep dive bc I would love to hear your well-considered thoughts.

I am overweight EBIX bc I think it is a rare opportunity.

1 Like

Now there is a blast from the past!

I made some money in EBIX when it was a Pro or Options rec, and as I recall I sold in the second half of 2010 after this thread (for those of you with access to the Premium Boards - SA or RB subscription will suffice):
https://discussion.fool.com/4056/thought-i-needed-to-share-this-…

Basically, I had become tired and suspicious of the CEO’s antics, and found that the financials - particularly the BS as I recall - were not developing as one would expect with a rapidly growing SaaS technology business back then. I also asked several of my colleagues in the insurance business about EBIX … and they had never heard of them, so the sniff test started to fail and the article above was the final straw.

If I had to choose between the CEOs of EBIX and BOFI to trust, I would choose Garrabants and it’s not even close!

However, Bob, you do great work and I will happily bring an open mind to what you bring based on nearly 10 years more experience in the market.

Cheers

Cham

4 Likes

Given all the category dominators out there why would someone want to speculate in something like EBIX. Heck, I think their headquarters are or use to be in my building. Lower floor then me :wink: .

Anyways, here is the 5 year chart:

https://finance.yahoo.com/quote/E?p=E&.tsrc=fin-srch

During no period of time from 6 months, to 1 year, 2 year, 5 year, 14 years, did anyone make any money just buying and holding EBIX. It all depended on your buy in point. There seems to have been little economic value created by EBIX over the last 14 years. And this is while the stock market has been in a long-term bull, but EBIX a long-term dud.

One of my prime rules is relative price strength. EBIX does not have it, and it is particularly glaring given the opportunity costs.

Tinker

24 Likes

That (EBIX) is an ugly chart. Dividend not bad but this is not a dividend investing board.

2 Likes

Hi Tinker.

Please feel free to ignore EBIX since it doesn’t meet your criteria. But please don’t unjustly denigrate it. Someone who bought 14 years ago paid (split-adjusted – a couple of 3:1s, if I recall correctly) less than $2 per share. It trades in the high $40s today.

My shares were bought in September 2008 and my cost basis is under $12. That was not exactly the sweetest of times. I would have done better had I waited six months. The day I bought, the S&P 500 was a little under 1200. As I stated earlier, my returns from EBIX (roughly a 300% gain) are much better than the S&P 500’s return. Ebix has created long-term value.

Yes, the five-year chart isn’t pretty. I haven’t carefully followed this company for a while, and I’m hoping to piece together WHY 2018 was as bad as it was for Ebix. That’s part of why I was excited by retirementdough’s post and this board’s general interest. It is possible that what I learn will cause me to bail out. Or maybe not. My risk tolerance is probably as different from yours as my interpretation of 14-year price charts.

Good luck with your investing, and many thanks for your copious contributions to this message board. But please save your derision for companies where it is truly warranted. Ebix is a huge “dud” over the past couple of years, but not a long-term dud. Are you sure you were factoring in the effective 9:1 split?

Hi Cham.

Thanks for your extremely kind words. I really enjoyed posting on the Pro boards and always felt that I was warmly welcomed there. I miss Pro. I’m glad to see you here. One thing I should mention regarding your “sniff test”. If Ebix built a system sitting between an insurer and its brokers (captive and/or independent), do you think that the system would be Ebix-branded, or branded by the insurer? It is possible that you read too much into “lack of brand recognition” at the time. I don’t want to say for sure, but to alert you that the possibility exists.

To the entire board…

One thing I forgot to mention with Ebix that really stuck in my craw… Ebix came close to being taken private, but the investment bank backed down late in the game. We’ll never know all the sordid details, but it is my distinct recollection that CEO Raina would have profited from that deal far more than the average shareholder. I don’t recall the details. Maybe my notes from years ago will help me remember. But it was one more item that added to my keeping my Ebix position relatively small and not life-altering. When I’m able to take the time to re-research the Ebix story, I’ll try to include more details around that event. To say that I felt “thrown under the bus” definitely overstates things. I was glad that the deal didn’t go through, and I’m happy that Ebix has grown since then. But it was a wedge in my trust of Ebix’s management.

Fool on!
Thanks, and best wishes,
TMFDatabaseBob (long: EBIX)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

Please note: I am not a member of any newsletter team. My opinions are my own and do not necessarily reflect those of the TMF advisers. I want to share my research with you since we’re all part of the larger TMF Community.

16 Likes

If you wish to invest in companies whose share price falls or stays the same during a huge bull market…it’s a methodology followed by many I am sure.

No reason has been given why we should not expect more of the same going forward.

Each to their own. This I stand by. But no one has refuted my point that is EBIX has really been awful over the last 5 years while the market has reached record gains, and why should Ebix do any better now than before?

Investing is not about what something was bought for 15 years ago and the glory days. If it was I’d still be holding Qualcomm that I sold for a triple in 2006 after selling it for an 8x in 2000. Still be bragging about those returns while ignoring that since then my returns have been zilch.

But each is free to invest how they will. Even if they cannot tell me “why it is different now” for EBIX.

Tinker

6 Likes

Tinker, the chart you linked to above is for a different company entirely. There is a lot to debate about Ebix but the long term stock performance is not one of those things. It hasn’t been kind to shareholders the past 12 months but has been a longterm winner versus the market. 5 years ago it was trading in the teens and now hovers around $50.

3 Likes

Fhd,

Not sure how you are as I see three total posts listed on your profile. But you are correct, Yahoo! Gave me the wrong link. Still, during the bull market from 2016, when TTD, MDB, ANET, NVDA, SHOP, OKTA…et al have given us multiple hundreds of percent returns, EBIX has not.

One thing I have noticed is that “fallen angels” only come back when something changes. What has changed with EBIX to give it the ability to reignite its previous shareholder value creation?

Being acquisitive like this, and not primarily organic, does not appeal to me. It is the perfect ground for fraud, and misleading results. But some companies have pulled it off.

I can restate what I stated from that perspective, why invest in an EBIX that appears to have organic growth issues along with difficulty tracking what actually is happening to the business when it relies on such a high preponderance of acquisitions?

Does not mean it won’t do well, but does mean it is impossible for me, with my limited abilities, to properly track and assess what the business really is, why it will outperform its current valuation, and why I should trust the numbers they give us.

Tinker

11 Likes

I would put this one in my “too hard” pile.

1 Like

Recently I read that they bought Yatra, which is the second largest travel agency in India.

Jeb

They have been trying to purchase it but have been unsuccessful.

Retirementdough mentioned the IPO in 9 months. The IPO is for about 30% of EBIX’s operations in India. EBIX will retain about 70% of the company’s Indian operations. It will be listed on the BSE, Bombay exchange. Initially the CEO hopes to get a PE firm to buy in to establish a pre-IPO valuation benchmark, maybe at a 5% level of EBIX’s India operations expected market value.

Here is a link to some notes I took from the Q1 call. They are not extensive. https://discussion.fool.com/ebix-q1-2019-report-34205175.aspx

I have had a position in EBIX for a long time. I thought of bringing it here to the board but EBIX is more a special situation stock. Not really fitting in with what is discussed here. Some of the reasons its value is so compressed I believe are,

-It is a serial acquirer. Serial acquirers automatically get a lower valuation even though this CEO seems quite good at it.

-Operations in India are growing incredibly fast but rest of world (RoW) is in the single digits.

-Exposure to the Rupee. Indian operations are now 54% of revenue. They had no exposure 2 1/2 years ago.

-I think, most importantly, EBIX is again under massive short attack. https://www.nasdaq.com/symbol/ebix/short-interest Over the last year shares sold short have steadily doubled. According to Yahoo, short % of float is 50.5%. Shares outstanding is at 26.5% short. This is what makes it most inappropriate for this board. We have all seen how share price gets whipped around in a heavily shorted situation. Some of you bitterly remember this with EBIX 8 years ago…or at least I remember it bitterly. Thing is this is what makes EBIX seemingly a great special situation candidate. With this high a short interest and a very compressed valuation if a PE firm buys in to EBIXcash pre-IPO at a nice valuation EBIX pays off all its debt and has money to continue growing operations. Investors could see really nice returns.

-Debt has grown considerably in the last few years. Total cash is $96M, debt is $764.5M. Part of that is a result of share repurchase activity. In the last 4.5 years they have repurchased over 6M shares. Ten years ago I dimly recall there being close to 40M shares in EBIX now just over 30.5M shares. One benefit to a short attack. CEO is taking his salary in stock only until SP is $150.

Repurchases
-2015 2.924M shares for $28.21 per share
-2016 1.479M shares for $44.14 per share
-2017 .687M shares for $57.35 per share
-2018 0.966M shares almost all in Q4 when SP was at its lowest for the year, $49.03

Current SP is $48.21, P/S of 2.76, trailing PE of 16.3, forward PE of 9.2

Trump tax hit in 2018 to be paid over the next 8 years interest free. So as low as the PE is it seems misleading. But again this is all building a value case it seems.

Reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share

  	              Q4 2018 	Full Year 2018

Diluted EPS 	        $0.27 	$2.95
Transition Tax effect 	$0.79 	$0.78
Non-GAAP Diluted EPS 	$1.06 	$3.73

In the next few days I will compile a list of their India acquisitions over the last 2 years and compare that cost to the ARR, annual revenue run rate, they are targeting for Q4 this year of 800M for all operations. They have exceeded their targets in each of the last two years. At this point India is 54% of revenue.

I am a novice at this with pedestrian returns so double check anything I say, please.

Darrell

16 Likes