--- the subscriber area has no ads and those above are not selected or endorsed by this site ---


Ebix 4Q21 schedule ?4

15:49 03-Mar-22


Ebix has scheduled its fourth quarter report for the morning of March 9th.  Only one analyst still covers the company, estimating 72 cents of EPS from $159M of revenue, declining seasonally to $140M this quarter.  These lowered figures would represent a hybrid P/E of 10 at the $27 price tag that the stock has risen to after my valuation call this morning.  However, I feel a responsibility to reiterate the debt risk.  Per the latest 10-Q:
As of September 30, 2021, the Company had $657.9 million of outstanding debt obligations under its corporate syndicated credit facilities, which consisted of a $218.5 million term loan, and a $439.4 million balance drawn on our commercial banking revolving line of credit. The Company's term loan and revolving line of credit carries a leverage-based LIBOR related interest rate, and stood at 5.50% at September 30, 2021.
The debt matures in February, 2023 and we can be sure that interest rate is going up.  More importantly, to update the calculations done here, I estimate that the company would need to generate at least $30M of cash from operations in the fourth quarter on top of what's on it's balance sheet to avoid violating the 4.5x leverage ratio that was originally targeted for this quarter.  Cash from operations has been increasing sequentially throughout the year, to $39.8M last quarter and it was upward of a $100M in 4Q20.  So, I doubt there will actually be a violation or going concern warning, especially since the company further amended its credit facilities on April 9th, 2021, but all we know is that this
modified the applicable margin that applies from the date of the amendment forward, modified certain mandatory prepayment provisions, as well as certain other covenants related to restricted payments, investments and certain reporting requirements.
In all likelihood, further debt reduction and/or amendments will be detailed with the 10-K, but I feel a responsibility to spell out the situation and risk for a management team that can't even make sure its website is updated in timely fashion.

Furthermore, the geopolitical risk should not be ignored.  India relies on Russia for energy and weapons, which is leading to a risk of sanctions.  Russia seems to be providing more of a carrot in contrast to the American stick, and India has sought to walk the line between the two nations so far.  Ultimately, though, actions speak louder than words and I expect the country's antipathy for China will wind up outweighing its economic ties to Russia.  I'll update this note if I see further developments between now and earnings, but with Ukraine set to get worse before it gets better, I can't say that's likely to happen.