Ebix, Inc. :EBIX-US: Earnings Analysis: 2016 By the Numbers : March 2, 2017

Ebix, Inc. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Ebix, Inc. – Ultimate Software Group, Inc., Majesco, Benefitfocus, Inc., Computer Sciences Corporation and Thomson Reuters Corporation (ULTI-US, MJCO-US, BNFT-US, CSC-US and TRI-US) that have also reported for this period.

Highlights

  • Gross margins narrowed from 68.71% to 67.86% compared to the same period last year, operating (EBITDA) margins now 37.59% from 36.98%.
  • Year-on-year change in operating cash flow of 72.02% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • One-time items weakened operating performance.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 298.29 265.48 214.32 204.71 199.37
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 93.85 79.53 63.56 59.27 70.57
Earnings Growth (YOY) 18 25.13 7.23 -16.01 -1.13
Net Margin 31.46 29.96 29.66 28.96 35.4
EPS 2.86 2.28 1.67 1.53 1.8
Return on Equity 22.14 18.91 15.04 15.29 20.81
Return on Assets 12.46 11.89 10.7 11.07 15.21

Access our Ratings and Scores for Ebix, Inc.

Earnings Growth Analysis

The company’s gross margins showed no year-on-year improvement. In spite of this, the company’s earnings rose, influenced primarily by the improvement in operating margins (EBITDA margins) from 36.98% to 37.59%. For comparison, gross margins were 68.71% and EBITDA margins were 36.98% in the last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

EBIX-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 113.63 days, compared to last year’s level of 68.49 days.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

EBIX-US‘s change in operating cash flow of 72.02% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The expansion in operating (EBIT) margins from 32.84% to 33.62% has also impacted the company’s earnings growth. However, one-time items have been a drag on the operating performance. As a result, the company’s pretax margins contracted from 32.63% to 32.16%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Ebix, Inc.

Company Profile

Ebix, Inc. is a supplier of software and e-commerce solutions to the insurance industry. It provides a series of application software products for the insurance industry ranging from carrier systems, agency systems and exchanges to custom software development for all entities involved in the insurance and financial industries. The company was founded in 1976 and is headquartered in Atlanta, GA.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of EBIX-US.