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Ebix 3Q21 results -4

12:12 09-Nov-21

The typically long-winded Ebix conference call has concluded, after relatively few questions.

Staffing problems in India continue; the company is having to train new developers and offer 45% salary raises.  I note that the CEO's own comments indicate that it is not keeping pace with market salary increases.  As with Amsc, analyst questions indicate concern over international businesses.  I will add that inflation can be far more harmful in developing economies, and that the company already had to renegotiate gift card business terms with multiple banks.  Furthermore, end of year trading in December represents an even more significant concern than usual for both stocks.

For the financial aspect, management claims that it sees early signs of improvement on the impact of the pandemic and expects dramatic improvement as those abate.  Although I acknowledge renewed travel, particularly in the rich world, I've been skeptical of that attitude from the beginning having always anticipated an unequal response between the rich and developing worlds.  The CEO does claim that fully vaccinated workers will begin returning to offices as of November 15th.  That doesn't outweigh my staffing concerns above.

The CEO also says the EbixCash IPO is likely to take place in early 2022, with a board decision expected "soon".  I would have preferred to hear this month, as originally projected, or at least year, but the CEO concedes it may slide until January.  Once filings are complete, there will be 135 days for it to actually happen.  I suspect the same staffing problems are hitting the auditors.  To this end, it was also commented that management is exploring refinancing existing debt.  That prospect is troubling.

For now, my fear of missing out is still outweighed by fear of volatility above $30.  EBIX got close to that level in the early going but has rebounded.  I'll keep an eye on it and wouldn't be surprised if analysts share my general concerns.

Correction, the Ebix conference call is at 11am, for those who may want to listen in.  I will report in real time if there are any big surprises, but full follow up may still have to wait.

On 11/9/21 9:51 AM, Esekla wrote:

Ebix has released its third quarter results:

• 72 cents of EPS beats by 9 cents
• from $191.7M of revenue, which misses by $29.3M

Virtually all growth was from India, and a big chunk of that was from the prepaid gift card business which was the source of prior trouble.  However, management says it recently filed the approved audit report for last year on the Ebix Payments subsidiary, which includes the prepaid gift card business, along with 9 other EbixCash subsidiary audits.  The 3-year audit for the remaining subsidiaries and the EbixCash consolidated entity, leading to the Draft Red Herring Prospectus (DRHP) is still in process. 

Amortization of acquired intangibles is excluded from the results above and represents a 9 cent hit to GAAP numbers, which some might take issue with.  The company also spent (and properly excluded) 6 cents per share in one-time fees for IPO preparation.  These are adding up, along with interest, but the balance sheet should begin looking that much better if/when they get the IPO done.

EBIX is down 16% and falling so far in the pre-market.  The conference call is at 10am, but having already noted volatility risk and the opportunity to take profits, I will prioritize others and follow up eventually.

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