I don't think they have the ability to make a scene. The short attacks simply aren't working for EBIX, and Gotham's ability to take down stocks has weakened in general. You have a whole host of investors like me who are ready to plop $50k into any name these guys short / attack, and the fickle retail base has churned.
Their only exit is a big SEC judgement, period. And I have no doubt they continue lobbying for that to the best of their ability.
At this point I think we are fool proof unless the company has done something very wrong, or unless the rug gets pulled out from under equity markets in general....providing these guys with an easier escape.
No news + FCF generation = good news for EBIX. Longer the gov't takes, the less likely this is a wipeout / fraud (though you can't fake cash, so I am nearly 99% sure fraud risk is gone). Now it's just a matter of whether or not there is a tax hit, and how much for (remember, lots of NOLs).
Things are looking good to me.
It was an okay call. Nothing eventful...good to know that FCF generation is strong, company has a net cash position, and there are still big tickets in the sales pipeline. Also good to hear that any big wins will be announced via 8k so I don't have to hold my breath for the conf calls.
Unclear when and how the sales will materially hop, but we do have a nice 3-punch combo setup here: (1) file a 10k; (2) continue dividends to bleed the shorts, (3) resolution of the investigation.
Tons of eps adjustments. 10m of legal and settlement plus tax accruals. Assuming tax accrual is fair - there's still 20-25 cents of one time. Earn out is fair as it offsets targets that were not met.
Questions: guidance, uses of cash now that debt is cleared, only 3m of
Buybacks??? Of course the investigation but won't get anything:)
I agree but given the overhang of the investigation I doubt they'll retire more shares. Hell I'd like for them to borrow some debt and issue a div or run a massive repurchase - they have the revolver and are now in a positive cash position
Did you read press release fully? Net cash of 7m as of today. No more debt.
Agree that net debt reduction is great. Revenue guidance for 2014 and q1 traction are more important to me than q4 revenue. If there were no investigation an activist would be in here telling these guys to relever and return capital to shareholders. Let's see more buy backs!
I have to say that I honestly don't expect anything earth shattering out of this call.
It would be nice to be reassured of the free cash flow generation that is the backbone of the EBIX investment thesis...hopefully earnings are once again growing...but ultimately I don't see any of the shorts unwinding until there is resolution on the investigation...I'm no happier at 16 and chance than I was sad at 12ish...nothing has changed yet.
Stu if we had a completely innocent lovable plaintiff I'd say that's an interesting angle, but the fact is we have a company that tried to take the company private for a song...the reason this all happened is because EBIX has made itself attackable...the opacity of the product / end market and the taxes are tough enough...adding in the poor IR and the GS buyout made this the perfect storm of confusion and vulnerability.
I agree that hundreds of millions of dollars were lost by investors due to malicious, baseless attacks in this case. However, investors who charged the company with making fraudulent statements on growth also just got a $6.5 settlement. This one is murky.
Still long and strong though (and enormously overallocated at 16 and change)! I think there is some tax exposure at worst.
What are folks thinking re: 2014 EPS?
My long-range view is that I think EBIX is capable of generating 100m of levered FCF in the not too distant future....at a 15x multiple, this gives me a c.$40 share price, assuming all investigations are put to bed. What could disrupt this is bad acquisitions, slower growth, and/or a protracted sales cycle.
Overall I am confident that there is 60m of LFCF with this business..so Stuart's 25 does feel like fair value, if not slightly rich if sales and earnings don't start to tick back up.
This is a great buying opportunity for a business that generates solid free cash flow.
I know shorts are on the hook for dividends - but how does timing work? Is their obligation locked in at the ex-dividend date (I would think so)? If so, I wouldn't be surprised to see a squeeze going into the ex-date.