Ebix, Inc.

Q1 2023 GAAP operating income was $30.5 million, up 2.4% sequentially from $29.8 million in Q4 2022 and up 1.2% year over year. Non-GAAP operating income was $34.8 million versus $33.8 million in Q1 2022. Operating margin was 12.6%, up 90 basis points from 11.7% in Q4 2022; excluding prepaid gift cards, operating margin was 28.7% versus 26.3% in Q4 2022. EBITDA plus non-cash stock compensation was $36.1 million, or about 30.8% of worldwide revenues excluding prepaid cards. Worldwide revenues excluding prepaid gift card revenues increased 17.6% year over year, while FX movements reduced reported revenues by $18.5 million. EbixCash revenues excluding prepaid cards grew 32% year over year; total worldwide revenues excluding prepaid cards were up 17.6%; travel and FX combined grew 64%; BPO in India grew 22%; e-learning grew 104%; RCS revenues grew 13.9%. Cash, cash equivalents, short-term investments and restricted cash were $108.9 million as of March 31, 2023, and total debt was $621.7 million, down $22.1 million from $643.8 million at December 2022. Management did not provide formal next-quarter or full-year financial guidance; instead, it said Q2 medical certification revenue should be higher sequentially, EbixCash IPO work is ongoing with a possible listing in third quarter of 2023, and the company remains committed to becoming debt-free in 2023.

Robin Raina said the quarter showed progress toward the company’s long-running goals, highlighting 17.6% growth in worldwide revenues excluding prepaid cards, 32% growth in EbixCash excluding prepaid cards, and operating income near the company’s 30% goal when prepaid cards are excluded. He framed EbixCash as a key asset and discussed multiple potential revenue opportunities, including cash management, ticketing, and insurance-related platforms, while repeating that the company wants to reduce or eliminate debt as quickly as possible. His tone was upbeat and determined, with repeated emphasis on shareholder value and an ongoing IPO process for EbixCash.

Amit Garg emphasized the difficult macro backdrop: global weakness, inflation, COVID residual effects, the Ukraine war, higher rates, manpower cost inflation, and a stronger U.S. dollar. He said GAAP operating income rose to $30.5 million, non-GAAP operating income to $34.8 million, and operating margin to 12.6%, or 28.7% excluding prepaid cards; EBITDA plus non-cash stock compensation was $36.1 million. He also cited $17.5 million of cash interest paid, $3.5 million of taxes, $17.5 million of principal payments, $2.6 million of capex, and $0.9 million of software development, while noting liquidity of $108.9 million and total debt of $621.7 million.

Analysts pressed for more detail on how EbixCash gets back to pre-COVID levels, and Robin said the business is around 65% of pre-COVID levels, with travel and foreign exchange expected to recover first and technology taking longer. On the EbixCash IPO, he said the company is moving through the marketing and filing process and that the listing could happen in the third quarter of 2023, subject to the usual steps. On margins and prepaid cards, management said the gross margin improvement was driven by higher volumes and cost discipline, while Robin explained that prepaid card revenue is low margin and may increasingly be recognized on a net basis under new RBI-related rules.