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

Ebix 2Q22 results, Akoustis 5G sample, and more ?3

12:24 09-Aug-22

As shorter than usual Ebix conference call has just concluded.  Tellingly, management offered metrics that exclude the pre-paid gift card business, which speaks to its shifty reporting and the reputational damage that has been done.  Operationally, the business is on the way back to pre-pandemic levels, and the CEO thinks such a goal could take another six months.  New announcements in travel are expected in the coming weeks, but management flat out declined to provide guidance of any kind at all.

What I care more about is that the company has $96.7M of liquidity as of June 30th, and current interest costs are a full point higher, resulting in higher absolute expense YoY.  That is expected to continue for the rest of the year, and I will add that the trend will almost certainly worsen.  Management did admit it is watching the debt and evaluating alternative sources of financing to the IPO, but it can't talk about either.  In light of that, there were very few analyst questions, of most of those that were taken seemed come from investors who were now underwater.  The answers that were given seemed to imply that management may wait for further improvement in the business in an effort to get less onerous terms.  I view that as an extremely dangerous strategy.

In such an environment I find it amazing that management still talks about being able to do new acquisitions at distressed levels once the EbixCash IPO is complete.  That's distressing since, as I feared, inflation is hurting the Indian economy.  Given the country's abysmal record with foreign direct investment, there is no telling how deep the pain may go as the RBI is in a far worse situation than the FOMC.  I'll further note that my view is in marked contrast to the CEO's economic comments.

In summary, it seems clear to me that the business will ultimately survive its current travails.  However, the short attack may still be correct in asserting that a liquidity event will come first, and the bad taste in my mouth from management's reporting and plans has only worsened.  EBIX is currently down 15% to trade below $21 validating the caution I voiced about any rebound.  I doubt it will decline back to the $15 low we saw then, but I have little interest in the stock above the teens when there are better, safer options out there. 

These include CWEN(A) for the long term and LUMN trading below $11 for the short term, as Lumen's security division proves its worth by defending against a VERY large DDoS attack with the client experiencing no downtime.  AKTS is another, as Biden signs CHIPS+ into law, but I think MTSI priced out the opportunity when it climbed above $60. 

Ebix has announced its second quarter results:

• 75 cents of EPS beats by 18 cents
  
• from $250.8M of revenue, which misses by $22.2M
  

EBIX traded up fractionally in the pre-market, but the bid and ask seem indicative of at least a minor decline.  $9.4M of the of top line miss was from FX, but current assets on the balance sheet declined by almost $12M to $354.6M.  Current liabilities have ballooned to $827.7M with the $439.4M revolver coming due.  The conference call is at 11am.  Management will be constrained about what it can say on the EbixCash IPO, but it had better address the debt situation somehow.

Akoustis also announced that it has completed the second design iteration of its 5G filter using wafer level packaging and shipped samples to its second mobile customer.  The first is expected to progress into production around the turn of the year, with this one hopefully following in the second half of 2023.  AKTS has traded so far pre-market, and while the progress is good to see, this was expected.  The next quarterly report is due around the end of the month.

It's also worth noting the following points in advance of this week's upcoming earnings...

China and Taiwan have continued military drills, prompting speculation on what the response would be if the former were to blockade the latter.  None of this affects my stance on HIMX, though it's possible such displays of tension could continue sporadically through November, when the 20th National Congress is expected to conclude, resulting in an unprecedented 3rd term for Xi.

I think Kinetik investors should also note that permitting reform failed to get into scaled back better, much to the chagrin of the oil industry.  This makes Kinetik's existing infrastructure all the more valuable, in my view.

Topics:

• none