Transcript of the Ebix Q3 Investor
Call on 15th Nov. 2006 @10 am
Talk by Ebix CEO & President Robin
Raina:
Good
morning Gentleman. At the outset let me thank you for attending Ebix’s Q3’06
Conference call. I also have on the call Mr. Richard Baum, CFO Ebix.
You
must have all seen the Q3 Financial numbers by now. In summary, it is a
historic quarter for us with the company posting 53 cents in diluted EPS. Net
income after taxes for the quarter rose thirty five (35 %) percent to $1.66
million, or $0.53 per diluted share, up from $1.23 million, or $0.40 per
diluted share, in the third quarter of 2005--an earnings per share growth of
thirty three (33%) percent.
The company reported total revenue of
$7.30 million for the quarter, compared to $5.90 million for the third quarter
of 2005, marking a twenty-four (24%) percent increase in revenues. These
results do not include any revenue from Ebix's recent acquisition of Finetre
Corporation, since the acquisition was completed in the first week of October.
For the first nine months of 2006,
Ebix's total revenue rose 11 percent to $20.0 million, compared to $17.9
million in the first nine months of 2005. The Company's net income rose 27
percent to $4.3 million, or $1.37 per diluted share, in the first nine months of
2006, compared to net income of $3.4 million, or $1.08 per diluted share, in
the first nine months of 2005. For the
first nine months of 2006, Ebix has already matched its full-year net income of
$4.3 million, or $1.37 per share, for the full 2005 year.
I am often asked by investors and press
alike about the technology vision of the company. I can sum it up in one word –
convergence. Ebix remains committed to converging any islands that exist in
insurance today (consumers, brokers, insurance companies), converging B2C and
B2B processes in insurance, converging front end and back end processes in
insurance. Our goal remains to be the Cisco of the insurance industry – in
terms of powering transactions as a back-end player. Today our exchanges power
transactions between hundreds of brokers and carriers in P&C insurance, our
life exchange powers close to 10.2 million life sales illustrations every year,
we power an annuity exchange on which close to $15 billion in premiums are
presently conducted yearly. We are working on spreading our exchange in the
Australian markets aggressively and towards that have created a new division
with an ex- Computer Science insurance professional to head that effort in
I am often also asked to explain our
financial vision by investors. Let me say that we believe in letting our
numbers speak for themselves and thus have abstained from issuing any guidance
on numbers. If I was to simplify our financial vision, I would say - Selling
price must be substantially more than the cost price. We believe in growing the
company revenues and income proportionately and have abstained from going after
opportunities that provide us market share at the cost of profitability. We
intend to pursue acquisitions that help us sell or cross-sell our existing
products. For an acquisition to interest Ebix the acquisition must deliver
convergence with our technology, convergence with our existing platforms,
cross-selling opportunities, and clearly be accretive for our share holders
either immediately or in the near future.
For a company our size, we have a
rather large global reach and domain knowledge. We power businesses in more
than 50 countries today across all continents. We have in excess of sixteen
offices today world-wide. We provide a multi-national broker or carrier a
common code base world wide and frankly we do not know of a vendor who has our
geographical reach and can do that in our industry. Our systems are
multi-lingual, multi-currency and work in French, Portugese, Spanish, Japanese
and of course English. We have the domain knowledge of insurance that spreads
all across the world today. With our fully owned offshore facilities in
As a management team our effort in
coming days will be to make understanding of our financial results a bit easier
for our customers. For the purposes of this investor call, we decided to
analyze the numbers for you both from a third quarter and from a 9 month
numbers perspective. I am often asked how our core businesses are doing with
respect to our acquisitions. I will try to address that question in a bit of
detail for you today.
To start with, let me say that we made
our intentions rather known to our customers. We announced publicly that we
will let legacy support revenue decline and finally go away, while we focus our
efforts on revenue opportunities that allow us to run a high margin and high
growth business. While we kept investing in building new products and services,
we juggled our expenses to ensure that we could keep our head high and keep the
company afloat. Those common sense efforts translated into us taking Ebix
through three phases – the pre 2003 survival phase, the pre- 2005 consolidation
phase, and the post-2005 growth phase.
When this management team took over in
the year 2000, our core business was basically legacy support. We were basing
our future on the law of diminishing returns and thus we felt that we needed to
come of the crutches of legacy support. Along the way, we redefined the term
core business for Ebix. By 2004, our core business had become broker systems
while we announced our intention not to enhance any legacy systems as it did
not look to be a futuristic strategy for Ebix. We also started building the
building blocks of where Ebix is headed today – the carrier systems market, the
exchange market and the broker business market.
With our global reach and our efforts
to build end to end functionality for our customers, we have built a number of
products and services to provide a one window service shop to our insurance
customer base. It sometimes ends up confusing our investors in terms of keeping
an handle on our products and services. If I was to
club all these products and categorize them, you could primarily split our
revenue into three main channels – the insurance carrier channel, the broker
channel and the exchange channel.
In terms of evaluating growth along these channels in Q3 2006, the
largest %age growth came from the insurance company markets, where we grew 64%
year over year (2.32 vs. 1.42 million). The broker channel
accounted for 12% growth (3.24 vs. 2.90 million) while the exchange
channel accounted for 11% growth (1.74 vs. 1.57 million).
Any analysis of Q3 reveals that 65% of
our revenues originated from domestic
In terms of products driving growth in Q3 period of 2006, our core
business outpaces our acquisitions by a big percentage numbering terms of
percentage growth. Our core broker systems product grew by 27% in Q3 of 2006
vs. Q3 of 2005. ($1.64 million vs. $1.29 million). Our acquisitions EbixLife
grew by 13% as compared to Q3 of 2005 while Ebix Melbourne (formerly Heart)
grew by 18%. As predicted, our legacy numbers continue to decline
substantially. Legacy support declined 24% in the Q3 period of 2006 vs. the
same period in 2005.
The quarterly trends seen in Q3 are
quite indicative of the 9 month cumulative trends in 2006. Any analysis of the
9 month results reveals that 61% of our revenues originated from domestic
In terms of products driving growth in the nine month period of 2006, Again our core business outpaces our acquisitions by a big
percentage numbering terms of percentage growth. Our core broker systems
product grew by 34% in the nine months of 2006 vs. the same 9 months of 2005.
($5.14 million vs. $3.85 million). Our acquisitions EbixLife grew by 6% as
compared to the same period in 2005 while Ebix Melbourne (formerly Heart) grew
by 4%. As predicted, our legacy numbers continue to decline substantially.
Legacy support declined 23% in the 9 month period of 2006 vs. the same period
in 2005.
In terms of the cumulative 9 months channel market growth in 2006,
the largest %age growth came from the insurance company markets, where we grew 28%
year over year (4.92 vs. 3.84 million). The broker channel accounted for 10%
growth (10.02 vs. 9.12 million).
As you can tell from these numbers, our
core broker systems business continues to be the highest growth driver of our
business. We feel rather good about our core business since we have a committed
order base from large brokers with implementations to done across more than 15
countries in a staggered manner over the next few years. This is especially
pleasing since the acquisition of heart in
We are pleased with our ability to
integrate our acquisitions quickly, seamlessly and then grow them.
Ebixlife, formerly Lifelink had
repetitive quarterly revenue streams of around $1.30 million when we acquired
them (almost a 35% increase since our acquiring them). That had been achieved
over its existence of more than 15 years. In 2 plus years of our acquiring that
business, we have been able to grow that number to $1.75 million or so a
quarter.
Heart’s quarterly revenue at the time
we acquired them was around $750,000 a quarter and this had been achieved over
its history of 10 plus years. In Q3 that revenue number had grown to
approximately $1.07 million in the quarter (almost a 33% increase since our
acquiring them).
Our recent acquisition of Infinity has
gone on expected lines and we expect infinity to be a significant contributor
to the 2007 results.
Our Q3 results do not include any
revenue from Ebix's recent acquisition of Finetre Corporation, since the
acquisition was completed in the first week of October. We have not issued any
guidance on Finetre. We intend to integrate this company with EbixLife and thus
intend to make strategic decisions related to that. In the short term, we
intend to focus on integrating Finetre properly rather than focus on any short
term financial objectives. As conveyed earlier, we expect Finetre to be a
significant contributor to our results in 2007 and be accretive to our results
in the year 2007
Having said that, without any further
adu, I am going to hand it over back to the moderator to open the call for
questions.
Thank you.