EBIX: Presentation of long-lived assets - 2010 vs.

2011
Responding to Gotham Analysis (Part 2)

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11 March 2013
spinvestor2003@yahoo.com

EBIX CEO Robin Rainer addressed the change in presentation of long lived assets
“Jeff, there is actually no variance in numbers. Just the presentation format changed between the two filings. The 2010 10K filing includes specific amounts for goodwill and intangibles and then a separate amount for fixed assets and certain other long-lived assets. The 2011 10K had just, uses a different format in which we lump all the above together under the heading ‘long-lived assets’, meaning, that we aggregated the sum total of goodwill, intangibles, fixed assets, and some other assets together. The number in the 2010 10K filing, when aggregated together, would be exactly the same as the 2011 10K filing. So the presentation changed, not the numbers.”
SOURCE: Craig Hallum EBIX update call Feb 26 2013

2

Gotham City Research Response:
“One of the main reasons we believe that Ebix’s financial statements remain materially unreliable, inaccurate, and incomplete is the very large differences in the 2010 longlived asset numbers. Namely: • Ebix’s 2010 long-lived assets don’t add up, between the 2010 and 2011 10Ks. The Singapore irregularity alone is $67 million. This variance is nearly equal to Ebix’s entire 2011 net income and over 10% of Ebix’s market cap.”

• •

SOURCE: Gotham City Research “EBIX: All Distraction, No Clarity” (emphasis added)

Gotham City Research Response (cont.)
“He claimed that the numbers did not change between the 2010 and 2011 filings; only the presentation format changed. As a matter of fact, Mr. Raina is incorrect, as we prove in great detail: • • There actually is a very large variance in the numbers, between the 2010 and 2011 10Ks. The presentation changed (but this is an irrelevant fact).”

SOURCE: Gotham City Research “EBIX: All Distraction, No Clarity”

Surely it can’t be that hard to check who’s correct…Let’s start with Robin’s statement
“we lump all the above together under the heading ‘long-lived assets’, meaning, that we aggregated the sum total of goodwill, intangibles, fixed assets, and some other assets together”

X Y Z
5

Lets check Goodwill and Intangibles (2010 presentation format)
“The number in the 2010 10K filing, when aggregated together, would be exactly the same as the 2011 10K filing. ”

Lets check if the Note 16 from 2010-10k match the 2010 for Goodwill and Intangible assets – They Match! Note 16 2010-10k

Y

From Slide #5

6

Lets check long-lived assets under the new 2011 presentation format
“The number in the 2010 10K filing, when aggregated together, would be exactly the same as the 2011 10K filing. ”
Lets check if the Note 16 from 2010-10k match the 2011 for 2010 for Long-tem assets under the new presentation format

First we have to add in the Fixed assets in Note 16 to the Goodwill and intangible assets and then finally add in the other assets from the balance sheet.

T

Other assets from Slide 5
7

Lets check long-lived assets under the new 2011 presentation format (cont.)
“The number in the 2010 10K filing, when aggregated together, would be exactly the same as the 2011 10K filing. ”

Now lets compare row of the 2010-10k Note 16 old format to the 2011-10k Note 16 new format for 2010 – They match!
Note 16 From 2011-10k for 2010

From Prior Slide

8

How are Gotham City Research tracking against their concerns so far?
Ebix’s 2010 long-lived assets don’t add up, between the 2010 and 2011 10Ks.

9

They add up just fine…
We have demonstrated that the 2010 presentation format of ‘Goodwill and intangible assets’ and the 2011 presentation format of ‘Long-lived assets’ can be reconciled.

Recast to 2011 presentation format

“Jeff, there is actually no variance in numbers. Just the presentation format changed between the two filings.” – Craig Hallum EBIX update call Feb 26 2013

How are Gotham City Research tracking against their concerns so far?
Ebix’s 2010 long-lived assets don’t add up, between the 2010 and 2011 10Ks.

11

How are Gotham City Research tracking against their concerns so far?
Ebix’s 2010 long-lived assets don’t add up, between the 2010 and 2011 10Ks. The Singapore irregularity alone is $67 million.

12

Examining Singapore’s Assets
The 2010 and 2011 Note 16 format of Singapore assets shows a large change between years.

“Jeff, there is actually no variance in numbers. Just the presentation format changed between the two filings.” – Craig Hallum EBIX update call Feb 26 2013
13

Is Robin Right? Does the Presentation format explain the large difference in Singapore assets?
Gotham Capital Research correctly notes that intangibles are essentially all the assets (94-96%) so we can agree that ‘Long-lived’ assets and ‘Goodwill and intangible’ assets are essentially the same.

14

Is Robin Right? Does the Presentation format explain the large difference in Singapore assets? (cont.)
Why the difference?

15

Is Robin Right? Does the Presentation format explain the large difference in Singapore assets? (cont.)
Lets examine Note 16 closely….. 2010-10k Disclosure

2011-10k Disclosure

16

Is Robin Right? Does the Presentation format explain the large difference in Singapore assets? (cont.)
Lets examine Note 16 closely…..

"The following information relates to geographic locations“ -2010-10K
V’s

"The following information relates to primary geographic locations in which the Company conducts its operations“ -2011-10k

What does this change in language indicate?
17

Is Robin Right? Does the Presentation format explain the large difference in Singapore assets? (cont.) “The following information relates to geographic locations“ in 2010 advises the reader that the presentation format is based on physical geographic ownership of assets. So for example Singapore has subsidiaries in Brazil, India, USA etc., but the ownership structure is via the Singapore subsidiary, most likely EBIX Singapore Pte Ltd.

18

Is Robin Right? Does the Presentation format explain the large difference in Singapore assets? (cont.)
In 2011 the language changes to "The following information relates to primary geographic locations in which the Company conducts its operations“. This alerts the reader that the presentation format has now changed.

This new presentation format is now based on where the primary operational activity occurs, not asset ownership as in 2010. So for example, Brazil activity is now put into Latin America.
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Is Robin Right? Does the Presentation format explain the large difference in Singapore assets? (cont.)
We can examine the subsidiaries of Ebix Singapore Pte Ltd to understand how moving from a geographic basis to an operational basis can dramatically change the presentation format of the numbers
“Jeff, there is actually no variance in numbers. Just the presentation format changed between the two filings.” – Craig Hallum EBIX update call Feb 26 2013
20

How are Gotham City Research tracking against their concerns so far?
Ebix’s 2010 long-lived assets don’t add up, between the 2010 and 2011 10Ks. The Singapore irregularity alone is $67 million.

21

How are Gotham City Research tracking against their concerns so far?
Ebix’s 2010 long-lived assets don’t add up, between the 2010 and 2011 10Ks. The Singapore irregularity alone is $67 million. This variance is nearly equal to Ebix’s entire 2011 net income and over 10% of Ebix’s market cap.

22

There is no Singapore Asset Variance
As demonstrated the prior slides, in 2011 the language change explains the shift in assets in the Singapore Note 16 Geographic Information disclosure. We also demonstrated initially that the total aggregate longlived assets reconcile between 2010 and 2011.

Hence there is no variance that is 10% of Ebix’s market Capitalization.

23

How are Gotham City Research tracking against their concerns so far?
Ebix’s 2010 long-lived assets don’t add up, between the 2010 and 2011 10Ks. The Singapore irregularity alone is $67 million. This variance is nearly equal to Ebix’s entire 2011 net income and over 10% of Ebix’s market cap. “One of the main reasons we believe that Ebix’s financial statements remain materially unreliable, inaccurate, and incomplete is the very large differences in the 2010 long-lived asset numbers.”
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Please note the following important disclosure
The Internal Revenue Service, The Australian Taxation Office, The Tax Department of India, The Inland Revenue Authority of Singapore, The Australian Investment and Securities Commission, The Securities Exchange Commission Enforcement Division; and The Securities Exchange Commission Office of the Whistleblower, have all been notified that Gotham City Research can’t add up or read disclosure notes…
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