Bought Ebix at 44.50 now at 38.00 thought it had bottomed out-thoughts?

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Cheers, PB.



EBIX is currently at a 3 year low for the stock. I just add some shares yesterday. I am still continuing to learn and research the stock. It is a very complicated company and honestly I think a bit of a story stock to become a high growth company so it currently does not fit Saul’s investing criteria. Your probably not going to find much interest about it on this board. Although since I brought it up in a post a few weeks ago, I feel obligated to at least reply to some that maybe new investors on this board.

Company Headquarter is located in Johns Creek, GA (Altanta area). They have 100+ offices around the world. They are a worldwide company. They employee ~9200 people. Current market cap ~1.23B. Stock price is currently at 3 yr low. Revenue is growth y/y at 16%. EBIX mission is to be the largest FinTech company in the world that can converge all Insurance and Finance services.

The company has been featured on the Fortune Magazine’s 100 Fastest Growing Company List 5 times in the last decade. Ebix also has an history of producing 18 years of sequential growth in terms of top line and bottom line both. Under the present management, Ebix stock has shown shareholder return of more than 16,000% growth in terms of stock value. The client base includes 80 of the Fortune 500 clients.

Key Company Goals
Margins of 30-35%
SaaS recurring revenue streams

Robin Raina Chairman, CEO & President. Largest stockholder—has held stock since 1999. He takes all his salary in stock. Make no mistake this is Mr. Raina’s company. He runs like he owns 100%, he speaks like he owns 100%.

The more I research the company, the more I think it comes down to do you believe in Mr. Raina’s business acumen. I personally am becoming a fan. When you listen to what his goals are they are big but he has a plan. The companies stock is up 16000% since he took over leadership of the company.

I personal own a handful of companies (not stocks, my own companies), Mr. Raina is a entrepreneur thru and thru. I deal with entrepreneurs every day and I am one. I takes a certain personality type, they like to create new things. He has huge goals. A quote from the most recent earnings call “What we are creating is an international giant. I think time will tell what we are doing”.

Ebixcash is the fast growth vehicle of the overall 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. They have a network presence across India comprising of 75,000+ EbixCash World Outlets across 3,000+ Tier I to IV cities, helps us reach our customers better.

Ebixcash y/y revenue dropped to 43% from 116% the quarter before. This was why the market was not excited about the earnings call in my opinion. However I found this tid bit from the earnings call interesting.

Jeffrey Lee Van Rhee Craig-Hallum Capital Group LLC, Research Division - Partner & Senior Research Analyst

And so, yes, then just to complete the question, the thinking on the forward quarters, I mean, is it your expectation will get back to a 5%-plus type sequential run, some better, some worse, but something that maps to that 20%-plus growth right there?

Robin Raina Ebix, Inc. - Chairman, CEO & President

Well, look, really I couldn’t tell you. I haven’t run the math. I’m telling you whether it’s a 5% or it’s a 3% or whether it’s a 7% growth. I think a lot will depend on how we, on some of these businesses, how we move forward. Part of it is all of these businesses demand GMV funding. So our attempt, we can grow this business as fast as we want to. But you have to also remember, Ebix as a company has to also make sure of 2 things. We don’t have the luxury of doing what other companies can, which is to bring free money and basically not worry about profits. What we are doing, we are generating our own money. We have to fund the GMV and that’s not very easy. I will give you a simple example.

If I have to get $10 million of new ForEx revenue, I need to fund close to $100 million of ForEx transactions, right? That means I need more GMV. So we have a lot of business opportunities in front of us. This is part of the reason we’re going for an IPO because we do want to raise and raise money because we see the value of what we can do with this business, but we’re also being very calculated because we can’t go crazy on funding GMV.

So when you look at the growth in the financial business, you have to grow in a bit of a cautious manner in the sense because you’re also funding, you’re going to have to put that much extra money on the table to fund your GMV.

So for example, this quarter, you’re seeing the cash flow was basically 0. And the reason was, first of all, we made that $20.8 million. But then beyond that, you got to look at all the funding we had to do. Any business that we are growing right now, we’re going to fund many times over for that business to be funded in terms of GMV. For example, we grew our travel business. For example, we have the Routier business where the cycle of money is 70 days. For example, we added the bus exchange business, where initially the cycle of money is 90 days, right?

So we have to be very calculated with respect to the usage of our money as to how we grow this business. Can we manage our cash properly? So we’re trying to keep our feet on the ground and not get carried away because growth in EbixCash, if we’ve had substantial amount of money, you could basically see way higher growth rates in terms of year-over-year, way more than 20% in this business. So I know I gave you a long answer, Jeff, but this is very critical to understand that in the financial services business, and when you have to be very careful with your money spending to ensure that you don’t – you have to be careful with respect to – we do want to grow our business and we are sequentially going to continue to grow our business. But we have to be a bit careful and cautious to ensure that we are spending money wisely, to ensure that we are not taking extra debt that we can’t handle, right?

So this is a little bit of a balance you have to arrive when you’re funding GMV because I don’t have a private equity group today coming in, funding me the way my competitors have it. So we are today funding in all from within as a company.

The plan is to IPO Ebixcash Q2 of 2020. The reason for this is to generate cash to fuel growth of the Ebixcash business. Basically they could be growing revenues much more quickly but they are limited by cash flow. They do not want to take on any more debt to fund growth. I personally believe the IPO will be huge for the company, but I could be wrong. This is just a scratch of the surface of the moving parts of the company, one needs to research for themselves. I consider this a risky investment with what I believe could be a large payoff (otherwise why would one invest in it?).

I think it is also easy to make a short or bear case.

They have acquired A LOT of companies the last few years, many feel they are buying growth without an organic growth. They have taken on a larger amount of debt than before (although many purchase are paid by revenues). They have many, many different types of businesses. It comes off as not focused. They recently shifted away from an U.S. CPA auditing firm to an Indian based auditing firm, this greatly spoked the market on their stock. I think these are all legitimate reasons for concern.

Short Case

2015 accounting red flags; some feel the same; change in auditing firm from US to India company

3.5x net EBITA leverage —-they may not understand the EBIXcash and the requirements by EBIX to fund that business

US business growth is deterating

Management turnover supposedly occurring

Hopefully this was of help for you.