Thursday, March 17, 2011

Ebix ( Nasdaq - EBIX ) -- Follow-up Report

Ebix (EBIX $27.50) reported excellent on target Q4 results.  Revenues improved 12% to $35.1 million.  Adjusted earnings rose 14% to $.32 a share.  All of the improvement was generated internally.  Ebix completed a pair of large acquisitions in 2009 that bolstered comparisons in previous quarters.  Fourth quarter growth was largely organic.  Our income figure excludes non cash stock option expense ($1.85 million).  It also excludes tax loss carryforward benefits ($7.5 million).  Official earnings reported by the company were higher, as a result.  Aided by the acquisitions, full year revenues climbed 35% to $132.2 million.  Earnings jumped 29% to $1.19 a share.  Organic growth for the year equalled 11%.

The ADAM acquisition in February will open up the health insurance market to Ebix's exchange technology.  That transaction was paid for primarily with stock, moderating the immediate earnings leverage.  The new line promises to lift 2011 income by $.10 a share or more, nonetheless.  ADAM is well established in the small business market.  Ebix plans to enhance the technology to improve performance and lower costs, making its exchange more attractive to policy providers and business customers alike.  The technology also should attract additional brokers, reinforcing the momentum.  Longer term, volume could surge once the new national health insurance rules are implemented.

Meantime, Ebix is poised to sustain growth at superior levels.  We estimate 2011 sales will improve 10%-15% internally.  Combined with the ADAM contribution, revenues could reach $175 million.  Earnings likely will expand at a slower pace due to the additional shares issued to purchase ADAM.  Still, an 18% gain to $1.40 a share appears obtainable.  Further acquisitions are possible.  An in-house expansion into the property and casualty insurance exchange market is slated for this year, laying the groundwork for additional leverage in the future.

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