What went wrong with Ebix Inc (NASDAQ: EBIX) stock

Ebix Inc (NASDAQ: EBIX) stock plunged 12.56% on June 17th, 2019 (Source: Google finance) after news of regulatory tariffs being imposed by India on the United States. India said that it will impose tariffs on 28 U.S. products. The tariffs will be as high as 70% and are in response to Washington’s refusal to exempt Delhi from higher taxes on steel and aluminum imports. However, on this Ebix said in a press release that it is not aware of any news, events or tariffs that would negatively impact its financial and insurance exchanges and global operations. The company is confident in its growth outlook for 2018 and its ability to achieve its goal of reaching greater than $800 million in annualized quarterly revenues by the fourth quarter of 2019.

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Ebix’s full-year 2018 revenue grew 37% to $497.8 million, compared to $364.0 million in 2017. Operating income increases 35% to $153.0 million in 2018, compared to $113.2 million in 2017. Due to the impact of a one-time tax $24.5 million charge related to the implementation of the 2017 Tax Cuts and Jobs Act transition tax, Ebix’s GAAP diluted earnings per share were $2.95 in 2018.

Q1 2019 revenue rose 32% to $142.9 million compared to $108.2 million in Q1 2018 and increased 5% over Q4 2018 revenue of $136.3 million. The year over year revenue improvement reflected growth in the Company’s EbixCash channel. Non-GAAP net income rose 21% to $31.8 million after excluding certain items including the one-time earn-out reversal of $15.4 million, one-time legal expenses of $20.4 million and one-time acquisition-related expenses of $3.4 million.

Meanwhile, Block & Leviton LLP, which is a securities litigation firm representing investors nationwide, is investigating whether Ebix, Inc. and certain of its officers and directors violated federal securities laws. On March 1, 2018, Cherry Bekaert LLP, the Company’s outside auditor, expressed an adverse opinion about Ebix’s internal controls over financial reporting. On October 5, 2018, Ebix announced that it was replacing Cherry Bekaert LLP with a new outside auditor.  This news drove the price of Ebix shares down $14.18, or about 19.6%, to close at $57.94 on October 8, 2018. Then, on December 11, 2018, an investigative financial research group published a report focusing on Ebix’s M&A-related activity.  The group reported, in part, that it had found (a) numerous accounting discrepancies regarding recognition of goodwill and acquisitions, and (b) evidence it believes demonstrates that Ebix is perpetrating a scheme to incorrectly book revenue and earnings.


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