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Ebix 3Q19 results ?3

12:10 12-Nov-19


The typically long-winded Ebix conference call has just concluded.  Please note that I have corrected the EbixCash YoY and YtD labels below, which were originally mislabeled sequential and YoY.  As usual, there are lots of moving parts, but the main ones are North American insurance and EbixCash.

In Insurance, management highlights a 2020 push, with a sales portal, partnership with a household name, and 2 carriers currently being on-boarded.  It is negotiating 18-20 new insurance deals to follow in the fourth quarter.  A Philippines deal also imminent, and the BSE JV is potentially much bigger.  The process on the latter initiative has 22 conditions to fulfill which management thinks it will complete in a month or so in order to start business and collecting commissions, which would then begin showing up in 1Q20.  It is also working on an exclusive access deal for a financial services firm for access to Ebix channels in India.

For EbixCash, management points out that the business grew 23% organically, and targets 50-80% growth to $500-600M in revenue within a year.  It is still targeting June or July for the IPO.  I think the real coup here would be getting a banking license to enable UPI.  Although this is not critical for the cross-border transactions that it specializes in, it would enable much broader access and services to the domestic economy.  Management's recent success in overturning a digital payments tax and securing approval for card services in association with the Wiezmann deal lends hope here.

The battle here is double-edged.  I've already mentioned India's problems in relation to Vodafone, but the other side is that investors are often unrealistic about India itself.  Management understands that 70% of the country has wealth but is still not computer literate and therefore not digitally accessible.  More acquisition and brand partnership awareness opportunities are still in the works, which could raise CapEx/margin concerns, as Ebix continues to pursue market share. To me, though, the reality is that Ebix has improved the balance sheet to $129M in cash, up $22M sequentially.

India's problems will require long-term solutions, and it is gradually opening up the economy in a process that should eventually benefit other companies like Amsc, and maybe Vodafone.  In the meantime, Ebix and its pending EbixCash IPO still look like the best chance at capitalizing.

On 11/12/19 8:47 AM, Esekla wrote:

Ebix has reported its third quarter results:

  • $1.03 of EPS misses by 6 cents
  • from $147.2M of revenue, which misses by $800K

Although the headline numbers look bad, I would describe this as a mixed report, at worst. Currency represented a 1% hit to revenue, which more than cancels out the revenue miss; the rupee has dipped below $0.014 on continued social and financial trouble.  Investors might be spooked by the bad debt write down for BNSL, which I flagged in the prior report, but management still expects that debt to be collectible once government funding arrives. 

While I wish India could get there through more of a secular movement, as an investor, my experience is that homogeneity is a prelude to long-term growth.  Nonetheless, India's bad governance is why Ebix and its payment services catering to the country's vast diaspora are the closest thing to an Indian pure play that I will invest in.

On that point, EbixCash grew revenue 36% YoY and 57% YtD.  Management still plans to add one more investment bank before proceeding with the IPO.  That remains my focus for this investment.  In the meantime, the company generated $40.8M of cash from operations and paid down $23M of debt in India.  With overall growth intact, I'm inclined to ignore the expected volatility.  The conference call is at 11am, and I will follow up with any relevant color that is available.