See pg. 25 in the Gotham City report. So what huge mistake did Gotham make this time you ask? Well let me tell you. Check their Sources of Cash. For cash flow from operations, the correct number is $35m. Instead they took that and subtracted out acquisitions (excl. PlanetSoft) and capex of $15m to get to $21m. Why did they do this? Because they are incompetent. It should look like this:
Sources of Cash
Net Debt - $31m
CFFO - $35m
Cash - $0!!!
Total - $66m
Uses of Cash
Buyback - $9.4m
Other acquisitions + capex - $15m
PlanetSoft - $34m
Dividend - $3.3m
Total - $61.7m
There were some other minor adjustments, but one would expect EBIX’s balance sheet cash to go up during the time period as opposed to going down $8-9m as Gotham implies. So what does the balance sheet actually say? Well hey, we can actually look! Cash went up by $1.6m over the time period.
I haven’t found a single page in their report yet that is even remotely close to being accurate. Their whole Summary of Facts on pg. 4 is turning out to be a Summary of Falsities. These guys are clowns.
Regarding pg. 25 accusation of Gotham City report, I reached the same conclusion as Hockeyplyr12. Ebix did not run cash negative for Q2 2012. They also did not use any money from India either. The accusation is baseless. It is no way to figure out exact dates when they paid each items in Q2. The following table lists all cash in and out in Q2, 2012.
Cash flow in Q2, 2012 Items
7489000 Cash and ST in US on 5/7
45000000 term loan in Q2, 2012
24306100 CFFO based on 70% revenue from US
-785 purchase marketable securities
-406 capital expenditure
-1537000 Investment in MCN
-2000000 Investment in Curepet
-9396000 purchase common stock
1090000 Repayments on revolving line of credit
-15000000 term loan principal payments
50000 excess tax benefit
700000 proceeds from the exercise of stock options
-600000 debt obligation
-165000 payments of capital lease obligation
Add all items together, the total cash left is 4420909. Please note this result including acquiring Sydney Based Fintechnix. In Gotham City's calculation, they used some right information and some wrong information intently. Their goal is very clear and just want to benefit from the stock price drop.
The $35 million for CFFO is incorrect, as not all of Ebix's revenues are US based. 67-70% is us based, which is a good proxy for how much of the CFFO is US based. Also, the Planetsoft acquisition closed in early June, so they did not have the full period's cash flow. The $21 million for CFFO actually sounds right. If we substitute 21 million for the 35 million you have up there, Gotham's conclusion actually sounds right.
Floater, I think it is appropriate to actually use the entire CFFO for this type of Sources/Uses of Cash analysis. The company never claimed that it used U.S. CFFO to complete the purchase. It only claimed that it used "internal cash reserves and the Bank credit line." Not being able to access foreign cash reserves is a false construct created by Gotham because he insinuates that this must constitute a repatriation of funds. The defect in Gotham's argument is that he ignores the possibility of an inter-company loan structure (or assumes this must also be an illegal tax shelter).
The most plausible circumstance is that Ebix India (and/or other foreign subsidiaries) loaned Ebix U.S. the cash which was later paid back, or is in the process of being paid back. The only way to really disprove this would be to have access to contemporaneous financial statements for Ebix India (or other suspected foreign sources of cash) to see if there is a corresponding loan receivable. Considering Gotham does not have these financials, and considering that this inter-company arrangement would be eliminated for SEC consolidation, it renders the assertion by Gotham as highly speculative at best (or as I like to say, 'grasping at straws.')