v2.4.0.8
Document and Entity Information Document
3 Months Ended
Mar. 31, 2014
May 09, 2014
Document and Entity Information [Abstract]    
Entity Registrant Name EBIX INC  
Entity Central Index Key 0000814549  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Document Type 10-Q  
Document Period End Date Mar. 31, 2014  
Document Fiscal Year Focus 2014  
Document Fiscal Period Focus Q1  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   38,384,445
v2.4.0.8
Condensed Consolidated Statements of Income (Unaudited) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Income Statement [Abstract]    
Operating revenue $ 51,404 $ 52,566
Operating expenses:    
Cost of services provided 9,612 9,891
Product development 6,693 7,035
Sales and marketing 3,301 3,912
General and administrative 9,841 9,971
Amortization and depreciation 2,552 2,452
Total operating expenses 31,999 33,261
Operating income 19,405 19,305
Interest income 135 93
Interest expense (247) (362)
Non-operating income (loss) - put options 454 82
Foreign currency exchange gain (loss) (119) (170)
Income before income taxes 19,628 18,948
Income tax expense (4,211) (1,604)
Net income $ 15,417 $ 17,344
Basic earnings per common share $ 0.40 $ 0.47
Diluted earnings per common share $ 0.40 $ 0.45
Basic weighted average shares outstanding 38,318 37,168
Diluted weighted average shares outstanding 38,600 38,779
v2.4.0.8
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Statement of Comprehensive Income [Abstract]    
Net income $ 15,417 $ 17,344
Other comprehensive income (loss):    
Total other comprehensive income (loss) 1,128 (518)
Comprehensive income $ 16,545 $ 16,826
v2.4.0.8
Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
Current assets:    
Cash and cash equivalents $ 57,728 $ 56,674
Short-term investments 845 801
Trade accounts receivable, less allowances of $1,143 and $1,049, respectively 42,210 39,070
Deferred tax asset, net 0 256
Other current assets 5,032 5,548
Total current assets 105,815 102,349
Property and equipment, net 8,309 8,528
Goodwill 341,744 337,068
Intangibles, net 49,744 50,734
Indefinite-lived intangibles 30,887 30,887
Deferred tax asset, net 14,237 12,194
Other assets 1,626 3,682
Total assets 552,362 545,442
Current liabilities:    
Accounts payable and accrued liabilities 17,827 17,818
Accrued payroll and related benefits 4,390 6,482
Short term debt 13,406 13,062
Current portion of long term debt and capital lease obligations, net of discount of $0 and $10, respectively 827 827
Current deferred rent 227 254
Contingent liability for accrued earn-out acquisition consideration 2,384 4,137
Estimated Litigation Liability, Current 0 4,226
Derivative Liability, Current 391 845
Deferred revenue 19,173 18,918
Deferred Tax Liabilities, Net, Current 64 0
Other current liabilities 110 106
Total current liabilities 58,799 66,675
Revolving line of credit 22,840 22,840
Long term debt and capital lease obligations, less current portion, net of discount of $38 and $38, respectively 17,319 20,124
Other liabilities 8,116 4,719
Contingent liability for accrued earn-out acquisition consideration 11,992 10,283
Deferred revenue 468 391
Long term deferred rent 2,030 2,185
Total liabilities 121,564 127,217
Commitments and Contingencies      
Temporary equity, Note 10 5,000 5,000
Stockholders’ equity:    
Preferred stock, $0.10 par value, 500,000 shares authorized, no shares issued and outstanding at March 31, 2014 and December 31, 2013 0 0
Common stock, $0.10 par value, 60,000,000 shares authorized, 38,424,596 issued and 38,384,087 outstanding at March 31, 2014 and 38,088,391 issued and 38,047,882 outstanding at December 31, 2013 3,838 3,805
Additional paid-in capital 163,107 164,216
Treasury stock (40,509 shares as of March 31, 2014 and December 31, 2013) (76) (76)
Retained earnings 270,095 257,574
Accumulated other comprehensive loss (11,166) (12,294)
Total stockholders’ equity 425,798 413,225
Total liabilities and stockholders’ equity $ 552,362 $ 545,442
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Condensed Consolidated Balance Sheets (Parentheticals) (USD $)
In Thousands, except Share data, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
Current assets:    
Allowance for doubtful accounts $ 1,143 $ 1,049
Unamortized debt discount, current 0 10
Unamortized debt discount, noncurrent $ 38 $ 0
Stockholders' Equity Note [Abstract]    
Common stock, shares issued 38,424,596 38,088,391
Common stock, shares outstanding 38,384,087 38,047,882
Treasury stock, shares 40,509 40,509
Preferred stock, shares outstanding 0 0
Common stock, par value (per share) $ 0.10 $ 0.10
Common stock, shares authorized 60,000,000 60,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares authorized 500,000 500,000
Preferred stock, par value (per share) $ 0.10 $ 0.10
v2.4.0.8
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock
Treasury Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Beginning Balance, Value at Dec. 31, 2013 $ 413,225 $ 3,805 $ (76) $ 164,216 $ 257,574 $ (12,294)
Beginning Balance, Issued Shares at Dec. 31, 2013 38,088,391 38,088,391        
Beginning Balance, Treasury Shares at Dec. 31, 2013     (40,509)      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income 15,417       15,417  
Cumulative translation adjustment 1,128         1,128
Repurchase and retirement of common stock, Shares   (137,071)        
Repurchase and retirement of common stock, Value (2,234) (14)   (2,220)    
Vesting of restricted stock, Shares   24,764        
Vesting of restricted stock, Value 0 2   (2)    
Exercise of stock options, Shares   450,000        
Exercise of stock options, Value 788 45   743    
Share based compensation 395     395    
Forfeiture of certain shares to satisfy exercise costs and the recipients income tax obligations related to stock options exercised and restricted stock vested, Shares   (1,488)        
Forfeiture of certain shares to satisfy exercise costs and the recipients income tax obligations related to stock options exercised and restricted stock vested (25) 0   (25)    
Dividends paid (2,896)       (2,896)  
Ending Balance, Value at Mar. 31, 2014 $ 425,798 $ 3,838 $ (76) $ 163,107 $ 270,095 $ (11,166)
Ending Balance, Issued Shares at Mar. 31, 2014 38,424,596 38,424,596        
Ending Balance, Treasury Shares at Mar. 31, 2014     (40,509)      
v2.4.0.8
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Cash flows from operating activities:    
Net income $ 15,417 $ 17,344
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 2,552 2,452
Benefit for deferred taxes (441) (7,538)
Share based compensation 395 511
Provision for doubtful accounts 353 0
Debt discount amortization on convertible debt 10 13
Unrealized foreign exchange (gain) loss 216 9
(Gain) loss on put option (454) (81)
Reduction of acquisition earnout accruals (1,762) (299)
Changes in assets and liabilities, net of effects from acquisitions:    
Accounts receivable (4,716) (2,234)
Other assets 576 357
Accounts payable and accrued expenses (65) 4,719
Accrued payroll and related benefits 1,029 (643)
Deferred revenue (2) (350)
Deferred rent (163) 44
Unrecognized tax benefits, period increase (decrease) 2,133 68
Loss Contingency Accrual, Period Increase (Decrease) (4,218) 0
Other current liabilities (56) (107)
Net cash provided by operating activities 10,804 14,265
Cash flows from investing activities:    
Maturities of marketable securities 0 208
Purchases of marketable securities (10) 0
Capital expenditures (413) (345)
Net cash used in investing activities (420) (707)
Cash flows from financing activities:    
Principal payments of term loan obligation (2,406) (4,125)
Repurchases of common stock (2,234) 0
Excess tax benefit from share-based compensation (3,200) 0
Proceeds from the exercise of stock options 788 553
Forfeiture of certain shares to satisfy exercise costs and the recipients income tax obligations related to stock options exercised and restricted stock vested (25) (564)
Dividend payments (2,896) (2,794)
Principal payments of debt obligations (9) (12)
Payments of capital lease obligations (56) (80)
Net cash provided used in financing activities (10,038) (7,022)
Effect of foreign exchange rates on cash 708 20
Net change in cash and cash equivalents 1,054 6,556
Cash and cash equivalents at the beginning of the period 56,674 36,449
Cash and cash equivalents at the end of the period 57,728 43,005
Supplemental disclosures of cash flow information:    
Interest paid 208 352
Income taxes paid 3,087 3,548
Curepet, Inc. [Member]
   
Cash flows from investing activities:    
Acquisition of business, net of cash acquired 3 0
USIX [Member]
   
Cash flows from investing activities:    
Investment in acquisition $ 0 $ (570)
v2.4.0.8
Condensed Consolidated Statements of Cash Flows (Unaudited) Supplemental schedule of noncash financing activities (Details) (USD $)
Jan. 27, 2014
Curepet, Inc. [Member]
Purchase Price of Business Acquisition, Cost of Acquired Entity $ 6,350,000
Derivative Liability 5,000,000
Noncash or Part Noncash Acquisition, Value of Assets Acquired $ 1,350,000
v2.4.0.8
Description of Business and Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2014
Accounting Policies [Abstract]  
Description of Business and Summary of Significant Accounting Policies
Description of Business and Summary of Significant Accounting Policies
Description of Business— Ebix, Inc. and subsidiaries (“Ebix” or the “Company”) is an international supplier of on-demand software and e-commerce solutions to the insurance industry. Ebix provides various application software products for the insurance industry ranging from data exchanges, carrier systems, and agency systems, to custom software development for business entities across the insurance industry. The Company's products feature fully customizable and scalable on-demand software applications designed to streamline the way insurance professionals manage distribution, marketing, sales, customer service, and accounting activities. The Company has its headquarters in Atlanta, Georgia and also conducts operating activities in Australia, Canada, China, India, New Zealand, Singapore, United Kingdom and Brazil. International revenue accounted for 32.3% and 31.1% of the Company’s total revenue for the three months ended March 31, 2014 and 2013, respectively.
The Company’s revenues are derived from four product/service groups. Presented in the table below is the breakout of our revenue streams for each of those product/service groups for the three months ended March 31, 2014 and 2013.

 
 
Three Months Ended
 
 
March 31,
(dollar amounts in thousands)
 
2014
 
2013
Exchanges
 
$
42,105

 
$
41,686

Broker Systems
 
4,486

 
4,722

Risk Compliance Solutions (“RCS”), fka Business Process Outsourcing (“BPO”)
 
3,425

 
4,164

Carrier Systems
 
1,388

 
1,994

Totals
 
$
51,404

 
$
52,566


Summary of Significant Accounting Policies
Basis of Presentation—The accompanying unaudited condensed consolidated financial statements and these notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") with the effect of inter-company balances and transactions eliminated. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP and SEC rules have been condensed or omitted as permitted by and pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These unaudited condensed consolidated financial statements contain adjustments (consisting only of normal recurring items) necessary to fairly present the consolidated financial position of the Company and its consolidated results of operations and cash flows. Operating results for the three months ended March 31, 2014 and 2013 are not necessarily indicative of the results that may be expected for the full year. The condensed consolidated December 31, 2013 balance sheet included in this interim period filing has been derived from the audited financial statements at that date but does not necessarily include all of the information and related notes required by GAAP for complete financial statements. These condensed interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.
Reclassification—The change in reserve for potential uncertain income tax return positions had been previously netted against the provision for deferred taxes line in the consolidated statements of cash flows, it is now shown separately. Also, beginning in 2014 the Company has applied the new provisions under FAS update No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, A Similar Tax Loss, or a Tax Credit Carryforward Exists and as more fully described in Note 6 "Income Taxes". A portion of potential uncertain income tax return positions previously reported in "Other Liabilities" on the condensed consolidated balance sheets are now netted against the "Deferred tax asset, net" line in the long term asset section of the condensed consolidated balance sheets.
Fair Value of Financial Instrument—The Company follows the relevant GAAP guidance concerning fair value measurements which provides a consistent framework to define, measure, and disclose the fair value of assets and liabilities in financial statements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction. This guidance establishes a three-level hierarchy priority for disclosure of assets and liabilities recorded at fair value. The ordering of priority reflects the degree to which objective data from external active markets are available to measure fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable.
Level 1 Inputs - Unadjusted quoted prices available in active markets for identical investments to the reporting entity at the measurement date
Level 2 Inputs - Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 Inputs - Unobservable inputs, which are used to the extent that observable inputs are not available, and used in situations where there is little or no market activity for the asset or liability and wherein the reporting entity makes estimates and assumptions related to the pricing of the asset or liability including assumptions regarding risk.

     A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

As of March 31, 2014 the Company had the following financial instruments to which it had to consider fair values and had to make fair assessments:
Common share-based put option for which the fair value was measured as a Level 2 instrument.
Short-term investments for which the fair values are measured as a Level 1 instrument.
Contingent accrued earn-out business acquisition consideration liabilities for which fair values are measured as Level 3 instruments. These contingent consideration liabilities were recorded at fair value on the acquisition date and are remeasured quarterly based on the then assessed fair value and adjusted if necessary. The increases or decreases in the fair value of contingent consideration payable can result from changes in anticipated revenue levels and changes in assumed discount periods and rates. As the fair value measure is based on significant inputs that are not observable in the market, they are categorized as Level 3.

Other financial instruments not measured at fair value on the Company's unaudited consolidated balance sheet at March 31, 2014 but which require disclosure of their fair values include: cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, accrued payroll and related benefits, capital lease obligations, and debt under the revolving line of credit and term loans with Citibank. The estimated fair value of such instruments at March 31, 2014 and December 31, 2013, approximates their carrying value as reported on the unaudited Condensed Consolidated Balance Sheet.
Additional information regarding the Company's assets and liabilities that are measured at fair value on a recurring basis is presented in the following tables:


 
 
Fair Values at Reporting Date Using*
Descriptions
 
Balance, March 31, 2014
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
 
 
(In thousands)
Assets
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
Commercial bank certificates of deposits
 
$
845

$
845

$

$

Total assets measured at fair value
 
$
845

$
845

$

$

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Derivatives:
 
 
 
 
 
Common share-based put option (a)
 
$
391

$

$
391

$

Contingent accrued earn-out acquisition consideration (b)
 
14,376



14,376

Total liabilities measured at fair value
 
$
14,767

$

$
391

$
14,376

 
 
 
 
 
 
(a) In connection with the acquisition of PlanetSoft effective June 1, 2012, Ebix issued a put option to the PlanetSoft's three shareholders. The put option, which expires in June 2014, is exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, which if exercised would enable them to sell the underlying 296,560 shares of Ebix common stock they received as part of the purchase consideration, back to the Company at a price of $16.86 per share. The inputs used in the valuation of the put option include term, stock price volatility, current stock price, exercise price, and the risk free rate of return.
(b) The income valuation approach is applied and the valuation inputs include the contingent payment arrangement terms, projected cash flows, rate of return, and probability assessments.
* During the three months ended March 31, 2014 there were no transfers between fair value Levels 1, 2 or 3.


 
 
Fair Values at Reporting Date Using*
Descriptions
 
Balance, December 31, 2013
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
 
 
(In thousands)
Assets
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
Commercial bank certificates of deposits
 
$
801

801

$

$

Total assets measured at fair value
 
$
801

$
801

$

$

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Derivatives:
 
 
 
 
 
Common share-based put option (a)
 
$
845

$

845

$

Contingent accrued earn-out acquisition consideration (b)
 
14,420



14,420

Total liabilities measured at fair value
 
$
15,265

$

$
845

$
14,420

 
 
 
 
 
 
(a) In connection with the acquisition of PlanetSoft effective June 1, 2012, Ebix issued a put option to the PlanetSoft's three shareholders. The put option, which expires in June 2014, is exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, which if exercised would enable them to sell the underlying 296,560 shares of Ebix common stock they received as part of the purchase consideration, back to the Company at a price of $16.86 per share. The inputs used in the valuation of the put option include term, stock price volatility, current stock price, exercise price, and the risk free rate of return.
(b) The income valuation approach is applied and the valuation inputs include the contingent payment arrangement terms, projected cash flows, rate of return, and probability assessments.
* During the twelve months ended December 31, 2013 there were no transfers between fair value Levels 1, 2 or 3.

For the Company's assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3), the following table provides a reconciliation of the beginning and ending balances for each category therein, and gains or losses recognized during the three months ended March 31, 2014 and during the year ended December 31, 2013:
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
Contingent Liability for Accrued Earn-out Acquisition Consideration
 
Balance, March 31, 2014
Balance, December 31, 2013
 
 
(in thousands)
 
 
 
 
Beginning balance
 
$
14,420

$
17,495

 
 
 
 
Total remeasurement adjustments:
 
 
 
       (Gains) or losses included in earnings **
 
(1,762
)
(10,253
)
       Foreign currency translation adjustments ***
 
104

730

 
 
 
 
Acquisitions and settlements
 
 
 
       Business acquisitions
 
1,614

9,425

       Settlement payments
 

(2,977
)
 
 
 
 
Ending balance
 
$
14,376

$
14,420

 
 
 
 
The amount of total (gains) or losses for the period included in earnings or changes to net assets, attributable to changes in unrealized (gains) or losses relating to assets or liabilities still held at period-end.
 
$
(1,762
)
$
(9,954
)
 
 
 
 
** recorded as an adjustment to reported general and administrative expenses
 
*** recorded as a component of other comprehensive income within stockholders' equity
 


Quantitative Information about Level 3 Fair Value Measurements
The significant unobservable inputs used in the fair value measurement of the Company's contingent consideration liabilities designated as Level 3 are as follows:
  
 
 
 
 
 
 
(in thousands)
 
Fair Value at March 31, 2014
 
             Valuation Technique
 
Significant Unobservable
Input
Contingent acquisition consideration:
(Taimma, TriSystems, Qatarlyst and CurePet acquisitions)
 
$14,376
 
Discounted cash flow
 
Projected revenue and probability of achievement

  
 
 
 
 
 
 
(in thousands)
 
Fair Value at December 31, 2013
 
             Valuation Technique
 
Significant Unobservable
Input
Contingent acquisition consideration:
(Taimma, Planetsoft, TriSystems, and Qatarlyst acquisitions)
 
$14,420
 
Discounted cash flow
 
Projected revenue and probability of achievement

Sensitivity to Changes in Significant Unobservable Inputs
As presented in the table above, the significant unobservable inputs used in the fair value measurement of contingent consideration related to business acquisitions are projected revenue forecasts as developed by the relevant members of Company's management team and the probability of achievement of those revenue forecasts. The discount rate used in these calculations is 1.75%. Significant increases (decreases) in these unobservable inputs in isolation would result in a significantly higher (lower) fair value measurement.
Revenue Recognition—The Company derives its revenues primarily from subscription and transaction fees pertaining to services delivered over our exchanges or from our ASP platforms, fees for risk compliance solution services, and fees for software development projects including associated fees for consulting, implementation, training, and project management provided to customers with installed systems and applications. Sales and value-added taxes are not included in revenues, but rather are recorded as a liability until the taxes assessed are remitted to the respective taxing authorities.
In accordance with Financial Accounting Standard Board (“FASB”) and SEC accounting guidance on revenue recognition, the Company considers revenue earned and realizable when: (a) persuasive evidence of the sales arrangement exists, provided that the arrangement fee is fixed or determinable, (b) delivery or performance has occurred, (c) customer acceptance has been received or is assured, if contractually required, and (d) collectability of the arrangement fee is probable. The Company uses signed contractual agreements as persuasive evidence of a sales arrangement. We apply the provisions of the relevant generally accepted accounting principles related to all transactions involving the license of software where the software deliverables are considered more than inconsequential to the other elements in the arrangement.
For contracts that contain multiple deliverables, we analyze the revenue arrangements in accordance with the relevant technical accounting guidance, which provides criteria governing how to determine whether goods or services that are delivered separately in a bundled sales arrangement should be considered as separate units of accounting for the purpose of revenue recognition. Generally these types of arrangements include deliverables pertaining to software licenses, system set-up, and professional services associated with product customization or modification. Delivery of the various contractual elements typically occurs over periods of less than eighteen months. These arrangements generally do not have refund provisions or have very limited refund terms.
Software development arrangements involving significant customization, modification or production are accounted for in accordance with the appropriate technical accounting guidance issued by FASB using the percentage-of-completion method. The Company recognizes revenue using periodic reported actual hours worked as a percentage of total expected hours required to complete the project arrangement and applies the percentage to the total arrangement fee.
Accounts Receivable and the Allowance for Doubtful Accounts Receivable—Reported accounts receivable include $32.5 million of trade receivables stated at invoice billed amounts net of the estimated allowance for doubtful accounts receivable in the amount of $1.1 million, and $9.7 million of unbilled receivables. The unbilled receivables pertain to certain projects for which the timing of billing is tied to contractual milestones. The Company adheres to such contractually stated performance milestones and accordingly issues invoices to customers as per contract billing schedules. Approximately $8.6 million of deferred revenue is included in billed accounts receivable at March 31, 2014. The Company recognized and recorded bad debt expense in the amount of $353 thousand and $0 for the three-month periods ended March 31, 2014 and 2013, respectively. Accounts receivable are written off against the allowance account when the Company has exhausted all reasonable collection efforts.
Goodwill and Other Indefinite-Lived Intangible Assets—Goodwill represents the cost in excess of the fair value of the net assets of acquired businesses. Indefinite-lived intangible assets represent the fair value of certain acquired contractual customer relationships for which future cash flows are expected to continue indefinitely. In accordance with the relevant FASB accounting guidance, goodwill and indefinite-lived intangible assets are not amortized but are tested for impairment at the reporting unit level on an annual basis or on an interim basis if an event occurs or circumstances change that would likely have reduced the fair value of a reporting unit below its carrying value. Potential impairment indicators include a significant change in the business climate, legal factors, operating performance indicators, competition, and the sale or disposition of a significant portion of the business. The impairment evaluation process involves an assessment of certain qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of any of our reporting units was less than its carrying amount. If after assessing the totality of events or circumstances, we were to determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company would not perform the two-step quantitative impairment testing described further below.
The aforementioned two-step quantitative testing process involves comparing the reporting unit carrying values to their respective fair values; we determine fair value of our reporting units by applying the discounted cash flow method using the present value of future estimated net cash flows. If the fair value of a reporting unit exceeds its carrying value, then no further testing is required. However, if a reporting unit's fair value were to be less than its carrying value, we would then determine the amount of the impairment charge, if any, which would be the amount that the carrying value of the reporting unit's goodwill exceeded its implied value. Projections of cash flows are based on our views of growth rates, operating costs, anticipated future economic conditions and the appropriate discount rates relative to risk and estimates of residual values. We believe that our estimates are consistent with assumptions that marketplace participants would use in their estimates of fair value. The use of different estimates or assumptions for our projected discounted cash flows (e.g., growth rates, future economic conditions, discount rates and estimates of terminal values) when determining the fair value of our reporting units could result in different values and may result in a goodwill impairment charge. We perform our annual goodwill impairment evaluation and testing as of September 30th of each year. This evaluation is done during the fourth quarter each year. During the year ended December 31, 2013 we had no impairment of our reporting unit goodwill balances.
Changes in the carrying amount of goodwill for the three months ended March 31, 2014 and the year ended December 31, 2013 are reflected in the following table. Goodwill increased during this period due to one business acquisition that was made in January, and as more fully described in Note 3 "Business Combinations".

 
March 31, 2014
 
December 31, 2013
 
(In thousands)
Beginning Balance
$
337,068

 
$
326,748

Additions
4,302

 
11,136

Foreign currency translation adjustments
374

 
(816
)
Ending Balance
$
341,744

 
$
337,068


Finite-lived Intangible Assets—Purchased intangible assets represent the estimated acquisition date fair value of customer relationships, developed technology, trademarks and non-compete agreements obtained in connection with the businesses we acquire. We amortize these intangible assets on a straight-line basis over their estimated useful lives, as follows:

Category
 
Life (yrs)
Customer relationships
 
7-20
Developed technology
 
3–12
Trademarks
 
3–15
Non-compete agreements
 
5
Database
 
10

The carrying value of finite-lived and indefinite-lived intangible assets at March 31, 2014 and December 31, 2013 are as follows:

 
March 31,
2014
 
December 31,
2013
 
(In thousands)
Finite-lived intangible assets:
 
 
 
Customer relationships
$
62,881

 
$
62,408

Developed technology
14,981

 
14,630

Trademarks
2,726

 
2,646

Non-compete agreements
538

 
538

Backlog
140

 
140

Database
212

 
212

Total intangibles
81,478

 
80,574

Accumulated amortization
(31,734
)
 
(29,840
)
Finite-lived intangibles, net
$
49,744

 
$
50,734

 
 
 
 
Indefinite-lived intangibles:
 
 
 
Customer/territorial relationships
$
30,887

 
$
30,887


Amortization expense recognized in connection with acquired intangible assets was $1.9 million and $1.7 million for the three months ended March 31, 2014 and 2013, respectively.
Foreign Currency Translation—The functional currency for the Company's foreign subsidiaries in India and Singapore is the U.S. dollar because the intellectual property research and development activities provided by its Singapore subsidiary, and the product development and information technology enabled services activities for the insurance industry provided by its India subsidiary. both in support of Ebix's operating divisions across the world, are transacted in U.S. dollars.
The functional currency of the Company's other foreign subsidiaries is the local currency of the country in which the subsidiary operates. The assets and liabilities of these foreign subsidiaries are translated into U.S. dollars at the rates of exchange at the balance sheet dates. Income and expense accounts are translated at the average exchange rates in effect during the period. Gains and losses resulting from translation adjustments are included as a component of accumulated other comprehensive income in the accompanying consolidated balance sheets, and are included in the condensed consolidated statements of comprehensive income. Foreign exchange transaction gains and losses that are derived from transactions denominated in a currency other than the subsidiary's functional currency are included in the determination of net income.
Income Taxes—Deferred income taxes are recorded to reflect the estimated future tax effects of differences between the financial statement and tax basis of assets, liabilities, operating losses, and tax credit carry forwards using the tax rates expected to be in effect when the temporary differences reverse. Valuation allowances, if any, are recorded to reduce deferred tax assets to the amount management considers more likely than not to be realized. Such valuation allowances are recorded for the portion of the deferred tax assets that are not expected to be realized based on the levels of historical taxable income and projections for future taxable income over the periods in which the temporary differences will be deductible.
The Company also applies FASB accounting guidance on accounting for uncertainty in income taxes positions. This guidance clarifies the accounting for uncertainty in income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. In this regard we recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
Recent Relevant Accounting Pronouncements—The following is a brief discussion of recently released accounting pronouncements that are pertinent to the Company's business:

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists". This accounting standard states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This accounting standards update applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The accounting standards update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. This pronouncement should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company adopted this new standard in during this current interim three-month reporting period ending March 31, 2014, and it effected how unrecognized tax benefits were accounted for and presented in the Company's balance sheet.

In February 2013 The FASB has issued Accounting Standards Update (ASU) No. 2013-02, "Comprehensive Income Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income", to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses may later reclassified out of accumulated other comprehensive income into net income. The amendments in this ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. The new amendments will require an organization to:
Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.
Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account instead of directly to income or expense.

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual).
The amendments were effective for reporting periods beginning after December 15, 2012 for public companies Early adoption was permitted. The Company adopted this new standard in 2013 and it did not have effect on its financial statements.
v2.4.0.8
Earnings per Share
3 Months Ended
Mar. 31, 2014
Earnings Per Share [Abstract]  
Earnings Per Share
Earnings per Share

A reconciliation between basic and diluted earnings per share is as follows (in thousands, except per share data):

 
Three Months Ended
 
March 31,
 
2014
 
2013
 
(In thousands, except per share data)
Net income for basic and diluted earnings per share
$
15,417

 
$
17,344

Basic Weighted Average Shares Outstanding
38,318

 
37,168

Dilutive effect of stock options and restricted stock awards
282

 
1,611

Diluted weighted average shares outstanding
38,600

 
38,779

Basic earnings per common share
$
0.40

 
$
0.47

Diluted earnings per common share
$
0.40

 
$
0.45



v2.4.0.8
Business Combinations
3 Months Ended
Mar. 31, 2014
Business Combinations [Abstract]  
Business Combinations
Business Combinations
    The Company executes accretive business acquisitions in combination with organic growth initiatives as part of its comprehensive business growth and expansion strategy. The Company looks to acquire businesses that are complementary to Ebix's existing products and services.
During the three months ended March 31, 2014 the Company completed one business acquisition, CurePet. Inc. ("CurePet") effective January 27, 2014. Previously Ebix had a minority investment in CurePet, which is more fully described in Note 9. Ebix acquired the entire business of CurePet in an asset purchase agreement with total purchase consideration being $6.35 million which includes a possible future one time contingent earnout payment of up to $5.0 million based on earned revenues over the subsequent thirty-six month period following the effective date of the acquisition. This contingent earnout liability is currently estimated to have a fair value of $1.6 million. The valuation and purchase price allocation for the CurePet is considered preliminary and will be finalized in the second quarter.
A significant component of the purchase price consideration for many of the Company's business acquisitions is a potential subsequent cash earnout payment based on reaching certain specified future revenue targets. The Company recognizes these potential obligations as contingent liabilities and are reported accordingly on its Condensed Consolidated Balance Sheets. As discussed in more detail in Note 1, these contingent consideration liabilities are recorded at fair value on the acquisition date and are remeasured quarterly based on the then assessed fair value and adjusted if necessary. During the three months ended March 31, 2014 and 2013 these aggregate contingent accrued earn-out business acquisition consideration liabilities, were reduced by $1.8 million and $299 thousand, respectively, due to remeasurements as based on the then assessed fair value and changes in anticipated future revenue levels. These reductions to the contingent accrued earn-out liabilities resulted in corresponding reduction to general and administrative expenses as reported on the Condensed Consolidated Statements of Income. As of March 31, 2014, the total of these contingent liabilities was $14.38 million, of which $11.99 million is reported in long-term liabilities, and $2.38 million is included in current liabilities in the Company's Condensed Consolidated Balance Sheet. As of December 31, 2013 the total of these contingent liabilities was $17.50 million, of which $10.28 million is reported in long-term liabilities, and $4.14 million is included in current liabilities in the Company's Condensed Consolidated Balance Sheet.
Consideration paid by the Company for the businesses it purchases is allocated to the assets and liabilities acquired based upon their estimated fair values as of the date of the acquisition. The excess of the purchase price over the estimated fair values of assets acquired and liabilities assumed is recorded as goodwill. Recognized goodwill pertains to the value of the expected synergies to be derived from combining the operations of the businesses we acquire including the value of the acquired workforce.

The aggregated unaudited pro forma financial information pertaining to all of the Company's acquisitions made during the three months ended March 31, 2013 and March 31, 2014, which includes the acquisitions of Qatarlyst and CurePet as presented in the table below is provided for informational purposes only and does not project the Company's expected results of operations for any future period. No effect has been given in this pro forma information for future synergistic benefits that may still be realized as a result of combining these companies or costs that may yet be incurred in integrating their operations. The 2014 and 2013 pro forma financial information below assumes that all such business acquisitions were made on January 1, 2013, whereas the Company's reported financial statements for the three months ended March 31, 2014 only include the operating results from the businesses since the effective date that they were acquired by Ebix.

 
Three Months Ended March 31, 2014
 
Three Months Ended March 31, 2013
 
As Reported
Pro Forma
 
As Reported
Pro Forma
 
(unaudited)
 
(unaudited)
 
(In thousands, except per share data)
Revenue
$
51,404

$
51,466

 
$
52,566

$
53,063

Net Income
$
15,417

$
15,407

 
$
17,344

$
15,405

Basic EPS
$
0.40

$
0.40

 
$
0.47

$
0.41

Diluted EPS
$
0.40

$
0.40

 
$
0.45

$
0.40




In the above table, the unaudited pro forma revenue for the three months ended March 31, 2014 decreased by $1.6 million from the unaudited pro forma revenue during the same period in 2013 of $53.1 million to $51.5 million , representing a 3.0% decrease. The pro forma revenue decrease was primarily due to exchange rate changes which resulted in a decrease of $1.9 million. Correspondingly, the reported revenue for the three months ended March 31, 2014 decreased by $1.2 million or 2.2% from the reported revenue during the same period in 2013.
v2.4.0.8
Debt with Commercial Bank
3 Months Ended
Mar. 31, 2014
Debt Disclosure [Abstract]  
Debt with Commercial Bank
Debt with Commercial Bank

On April 26, 2012, Ebix entered into a credit agreement providing for a $100 million secured syndicated credit facility (the “Secured Syndicated Credit Facility”) with Citibank, N.A. ("Citibank") as administrative agent and Citibank, Wells Fargo Capital Finance, LLC, and RBS Citizens, N.A. as joint lenders. The financing is comprised of a four-year, $45 million secured revolving credit facility, a $45 million secured term loan which amortizes over a four year period with quarterly principal and interest payments that commenced on June 30, 2012 and a final payment of all remaining outstanding principal and accrued interest due on April 26, 2016, and an accordion feature that provides for the expansion of the credit facility by an additional $10 million. The interest rate applicable to the Secured Syndicated Credit Facility is LIBOR plus 1.50% or currently 1.65%. Under the Secured Syndicated Credit Facility the maximum interest rate that could be charged depending upon the Company's leverage ratio is LIBOR plus 2.00%. The credit facility is used by the Company to fund working capital requirements primarily in support of current operations, organic growth, and accretive business acquisitions. The Company incurred $744 thousand of origination costs in connection with this new credit facility, and is amortizing these costs into interest expense over the four-year life of the credit agreement. As of March 31, 2014 the Company's consolidated balance sheet includes $388 thousand of remaining deferred financing costs. The underlying financing agreement contains financial covenants regarding the Company's annualized EBITDA, fixed charge coverage ratio, and leverage ratio, as well as certain restrictive covenants pertaining to such matters as the incurrence of new debt, the aggregate amount of repurchases of the Company's equity shares, dividend payments, and the consummation of new business acquisitions. The Company currently is in compliance with all such financial and restrictive covenants.
    
At March 31, 2014, the outstanding balance on the revolving line of credit was $22.8 million and the facility carried an interest rate of 1.65%. During the three months ended March 31, 2014, no payments were made against the revolving line of credit. This balance is included in the long-term liabilities section of the Condensed Consolidated Balance Sheets. During the three months period ended March 31, 2014, the average and maximum outstanding balances on the revolving line of credit were $22.8 million and $22.8 million, respectively.
    At March 31, 2014, the outstanding balance on the term loan was $29.5 million of which $13.4 million is due within the next twelve months. This term loan also carried an interest rate of 1.65%. During the three months ended March 31, 2014, $2.4 million of scheduled payments were made against the existing term loan. The current and long-term portions of the term loan are included in the respective current and long-term sections of the Condensed Consolidated Balance Sheets, the amounts of which were $13.4 million and $16.1 million respectively at March 31, 2014.
v2.4.0.8
Commitments and Contingencies
3 Months Ended
Mar. 31, 2014
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Contingencies-Between July 14, 2011 and July 21, 2011, securities class action complaints were filed against the Company and certain of its officers in the United States District Court for the Southern District of New York and in the United States District Court for the Northern District of Georgia. The complaints assert claims against (i) the Company and the Company's CEO and CFO for alleged violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder and (ii) the Company's CEO and CFO as alleged controlling persons. The complaints generally allege false statements in earnings reports, SEC filings, press releases, and other public statements that allegedly caused the Company's stock to trade at artificially inflated prices. Plaintiffs seek an unspecified amount of damages. The New York action has been transferred to Georgia and has been consolidated with the Georgia action, now styled In re: Ebix, Inc. Securities Litigation, Civil Action No. 1:11-CV-02400-RWS (N.D. Ga.). The parties have reached a mutually acceptable agreement to resolve this action for a cash payment of $6.5 million to be funded by both the Company and its insurance carrier. As previously disclosed, the Company recorded a contingent liability and recognized a charge against earnings in the amount of $4.23 million ($2.63 million net of the associated tax benefit) as part of this settlement. A hearing has been scheduled for June 5, 2014, to determine whether the proposed settlement should be finally approved by the Court.
In connection with this shareholder class action suit, there have been three derivative complaints brought by certain shareholders on behalf of the Company, which name certain of the Company's officers and its entire board of directors as Defendants. The first such derivative action was brought by an alleged shareholder named Paul Nauman styled Nauman v. Raina, et al., Civil Action File No. 2011-cv-205276 (Superior Court of Fulton County, Georgia), filed September 1, 2011. The second such derivative action was brought by an alleged shareholder named Gilbert Spagnola styled Spagnola v. Bhalla, et al., Civil Action No. 1:13-CV-00062-RWS (N.D. Ga.), filed January 7, 2013. The third such derivative action was brought by an alleged shareholder named Hotel Trades Council and Hotel Association of New York City, Inc. Pension Fund styled Hotel Trades Council and Hotel Association of New York City, Inc. Pension Fund v. Raina, et al., Civil Action No. 1:13-CV-00246-RWS (N.D. Ga.), filed January 23, 2013. These derivative actions are based on substantially the same factual allegations in the shareholder class action suit, but also variously claim breach of fiduciary duties, abuse of control, gross mismanagement, the wasting of corporate assets, negligence, unjust enrichment by the Company's directors, and violation of Section 14 of the Exchange Act. The Nauman case was stayed pending the completion of expert discovery in the shareholder class action suit. On April 12, 2013, the Court entered an Order consolidating the Spagnola and Hotel derivative cases under the style In re Ebix, Inc. Derivative Litigation, File No. 1:13-CV-00062- RWS (N.D. Ga.), appointing Hotel Trades Council and Hotel Association of New York City, Inc. Pension Fund as Lead Derivative Plaintiff, and appointing the law firm Cohen Milstein Sellers & Toll PLLC as Lead Derivative Counsel and The Law Offices of David A. Bain LLC as Liaison Counsel. Lead Derivative Plaintiff filed its Consolidated Shareholder Derivative and Class Action Complaint on May 20, 2013. Thereafter, the Court entered a Consent Order on June 4, 2013, setting a schedule for Lead Derivative Plaintiff to amend its Complaint in light of the anticipated preliminary proxy related to a proposed transaction announced on May 1, 2013 with affiliates of Goldman Sachs & Co. The parties in both the derivative actions are conferring regarding future case scheduling. The Company denies any liability and intends to defend the derivative actions vigorously.
On December 3, 2012, the Company received a subpoena and letter from the Securities and Exchange Commission (“SEC”) dated November 30, 2012, stating that the SEC is conducting a formal, non-public investigation styled In the Matter of Ebix, Inc. (A-3318) and seeking documents primarily related to the issues raised in the In re: Ebix, Inc. Securities Litigation. On April 16, 2013, the Company received a second subpoena from the SEC seeking additional documents. The Company has cooperated with the SEC to provide the requested documents.
On June 6, 2013, the Company was notified that the U.S. Attorney for the Northern District of Georgia had opened an investigation into allegations of intentional misconduct that had been brought to its attention from the pending shareholder class action lawsuit against the Company's directors and officers, the media and other sources. The Company is cooperating with the U.S. Attorney's office.
Following our announcement on May 1, 2013 of the Company's execution of a merger agreement with affiliates of Goldman Sachs & Co., twelve putative class action complaints challenging the proposed merger were filed in the Delaware Court of Chancery. These complaints name as Defendants some combination of the Company, its directors, Goldman Sachs & Co. and affiliated entities. On June 10, 2013, the twelve complaints were consolidated by the Delaware Court of Chancery, now captioned In re Ebix, Inc. Stockholder Litigation, CA No. 8526-VCN. On June 19, 2013, the Company announced that the merger agreement had been terminated pursuant to a Termination and Settlement Agreement. After Defendants moved to dismiss the consolidated proceeding, Lead Plaintiffs amended their operative complaint to drop their claims against Goldman Sachs & Co. and focus their allegations on an Acquisition Bonus Agreement between the Company and Robin Raina. On September 26, 2013, Defendants moved to dismiss the Amended Consolidated Complaint and briefing on the Motion is complete. A hearing on our Motion to Dismiss was held on February 20, 2014, and the Motion to Dismiss remains pending. The Company denies any liability and intends to defend the action vigorously.
The Company has been sued by Microsoft for alleged copyright infringement, breach of contract, and unjust enrichment. Microsoft Corporation and Microsoft Licensing GP v. Ebix, Inc., Case No. 1:13-CV-01655-CAP (N.D.Ga), filed May 15, 2013. Microsoft is seeking damages in excess of $75,000, but we have not yet been able to determine exposure as the case concerns alleged underlicensing of Microsoft software and an audit is underway. The Company filed a Motion to Dismiss on July 10, 2013. In response, Microsoft filed an Amended Complaint. The Company filed a Motion to Dismiss the Amended Complaint on August 29, 2013. On February 14, 2014, the Court denied the Company’s Motion to Dismiss. The Company is presently cooperating with Microsoft in an audit of all of the Company's Microsoft licenses.
The Company is involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate likely disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

Lease Commitments—The Company leases office space under non-cancelable operating leases with expiration dates ranging through 2019, with various renewal options. Capital leases range from three to five years and are primarily for computer equipment. There were multiple assets under various individual capital leases at March 31, 2014 and 2013. Rental expense for office facilities and certain equipment subject to operating leases for the three months ended March 31, 2014 and 2013 was $1.6 million and $1.6 million, respectively.
Self Insurance—For most of the Company’s U.S. employees the Company is self-insured for its health insurance program and has a stop loss policy that limits the individual liability to $120 thousand per person and the aggregate liability to 125% of the expected claims based upon the number of participants and historical claims. As of March 31, 2014, the amount accrued on the Company’s Condensed Consolidated Balance Sheet for the self-insured component of the Company’s employee health insurance was $302 thousand. The maximum potential estimated cumulative liability for the annual contract period, which ends in September 2014, is $2.9 million.

v2.4.0.8
Income Taxes
3 Months Ended
Mar. 31, 2014
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company's consolidated world-wide effective tax rate reflects the tax benefits of conducting operating activities in  certain foreign jurisdictions where earnings are taxed at rates lower than U.S. statutory rates and where certain components of the Company's income are exempt from taxation. Furthermore, the Company's world-wide product development operations and intellectual property ownership have been centralized into our India and Singapore subsidiaries. Our operations in India benefit from a tax holiday which will continue through 2015; and as such most of the income generated by our India operations, other than passive interest  income, is not taxed. After the tax holiday expires in 2015 all of the income generated by our India operations will be taxed at 50% of the normal 33.99% corporate tax rate for a period of five years. The Company also has a relatively low income tax rate in Singapore wherein our operations are taxed at a 10% marginal tax rate as a result of concessions granted by the local Singapore Economic Development Board for the benefit of in-country intellectual property owners. The concessionary 10% income tax rate will expire after 2015, at which time our Singapore operations will be subject to the prevailing corporate tax rate in Singapore, which is currently 17%, unless the Company reaches a subsequent agreement to extend the incentive period and the then applicable concessionary rate or possibly secure a lower concessionary tax rate.
The Company recognized total income tax expense in the amount of $4.21 million for the three months ended March 31, 2014. The Company's interim period income tax provisions are based on a calculated estimate of the effective income tax rate expected to be applicable to the corresponding annual period, after eliminating discrete items unique to the respective interim period being reported. The Company's interim period tax provision, exclusive of discrete items, for this three month period during 2014 was an expense of $2.37 million which is reflective of an 12.01% effective tax rate, as compared to the 8.32% for the same period during 2013. The effective rate increased primarily due to increased taxable income from jurisdictions with higher tax rates. The discrete items recognized during the three months ended March 31, 2014 were $2.13 million of tax expense recorded to increase the reserve for potential uncertain tax positions, partially offset by a $0.29 million benefit associated with the utilization of net operating loss carryforwards from our operations in the United Kingdom.
At March 31, 2014, the Company had remaining available domestic net operating loss (“NOL”) carry-forwards of approximately $46.1 million which are available to offset future federal and certain state income taxes. The Company reviews its NOL positions to validate that all NOL carry-forwards will be utilized before they begin to expire in 2020.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With the exception of NOL carry-forwards, the Company is no longer subject to U.S. federal or state tax examinations by tax authorities for years before 2007 due to the expiration of the statute of limitations. There is an open federal income tax audit for taxable years 2008 through 2011. In connection with this open audit, the Company has and continues to respond to information requests from the IRS, but there has been no identification of potential deficiencies or assessments to date. Regarding our foreign operations as of December 31, 2013, the tax years that remain open and possibly subject to examination by the tax authorities in those jurisdictions are Australia (2006 to 2013), Singapore and Brazil (2007 to 2013), New Zealand (2008 to 2013), India (2010 to 2013) and Great Britain (2012 and 2013).
Accounting for Uncertainty in Income Taxes—The Company has applied the FASB’s accounting guidance on accounting for uncertain income tax positions. As of March 31, 2014 the Company’s Condensed Consolidated Balance Sheet includes a liability of $14.88 million for unrecognized tax benefits which is included in other long term liabilities. During the three months ended March 31, 2014 there were $2.13 million of additions to this liability reserve. A reconciliation of the beginning and ending amounts of the Company’s liability reserves for unrecognized tax benefits is as follows:
`
 
March 31, 2014
 
December 31, 2013
 
(in thousands)
Beginning Balance
$
12,742

 
$
5,925

Additions for tax positions related to current year
263

 
6,546

Additions for tax positions of prior years
1,870

 
271

Reductions for tax position of prior years

 

Ending Balance
$
14,875

 
$
12,742


The Company recognizes interest accrued and penalties related to unrecognized tax benefits as part of income tax expense. As of March 31, 2014 and December 31, 2013 approximately $1.2 million and $1.05 million, respectively, of estimated interest and penalties is also included in other long term liabilities in the accompanying Condensed Consolidated Balance Sheet, and is part of the balance of the liability for unrecognized tax benefits in the above table.
         
The Company has applied the new provisions under FAS update No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, A Similar Tax Loss, or a Tax Credit Carryforward Exists. Under these provisions, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward in most cases. This provision has been applied and $7.13 million and $8.42 million of unrecognized tax benefits have been applied against NOL carryforward amounts as of March 31, 2014 and December 31, 2013, respectively.
v2.4.0.8
Derivative Instruments
3 Months Ended
Mar. 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
Derivative Instruments
    In connection with the acquisition of PlanetSoft effective June 1, 2012, Ebix issued a put option to PlanetSoft's three shareholders. The put option, which expires in June 2014, is exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, which if exercised would enable them to sell the underlying 296,560 shares of Ebix common stock they received as part of the purchase consideration, back to the Company at a price of $16.86 per share, which represents the per-share value established on the effective date of the closing of Ebix's acquisition of PlanetSoft. In accordance with the relevant authoritative accounting literature a portion of the total purchase consideration was allocated to this put liability based on its initial fair value, which was determined to be $1.4 million using a Black-Scholes model. The inputs used in the valuation of the put option include term, stock price volatility, current stock price, exercise price, and the risk free rate of return. At March 31, 2014 the fair value of the put option liability was re-measured and was determined to have decreased $454 thousand during the three months period then ended with this amount reflected as a gain and reported as a non-operating income in the accompanying Condensed Consolidated Statement of Income. As of March 31, 2014, the aggregate fair value of this derivative instrument, which is included in the current liabilities section on the Condensed Consolidated Balance Sheet, was $391 thousand. The Company has classified the put option, for which the fair value is re-measured on a recurring basis at each reporting date, as a Level 2 instrument (i.e. wherein fair value is partially determined and based on observable inputs other than quoted market prices), which we believe is the most appropriate level within the fair value hierarchy based on the inputs used to determine its fair value at the measurement date.
v2.4.0.8
Geographic Information
3 Months Ended
Mar. 31, 2014
Segment Reporting [Abstract]  
Geographic Information
Geographic Information
The Company operates with one reportable segment whose results are regularly reviewed by the Company's chief operating decision maker as to performance and allocation of resources. External customer revenues in the tables below are attributed to a particular country based on whether the customer had a direct contract with the Company which was executed in that particular country for the sale of the Company's products/services with an Ebix subsidiary located in that country.
The following enterprise wide information relates to the Company's geographic locations (all amounts in thousands):
As of and for the Three Months Ended March 31, 2014
 
United States
 
Canada
 
Latin America
 
Australia
 
Singapore
 
New Zealand
 
India
 
Europe
 
Total
External Revenues
$
34,800

 
$
1,437

 
$
1,482

 
$
9,729

 
$
1,144

 
$
650

 
$
110

 
$
2,052

 
$
51,404

Long-lived assets
$
304,070

 
$
8,442

 
$
11,282

 
$
785

 
$
68,693

 
$
99

 
$
24,795

 
$
28,381

 
$
446,547


As of and for the Three Months Ended March 31, 2013
 
United States
 
Canada
 
Latin America
 
Australia
 
Singapore
 
New Zealand
 
India
 
Europe
 
Total
External Revenues
$
36,232

 
$
1,657

 
$
1,303

 
$
10,518

 
$
724

 
$
526

 
$
218

 
$
1,388

 
$
52,566

Long-lived assets
$
317,727

 
$
9,467

 
$
12,840

 
$
1,195

 
$
69,878

 
$
235

 
$
17,364

 
$
11,223

 
$
439,929

v2.4.0.8
Minority Business Investment
3 Months Ended
Mar. 31, 2014
Investments, All Other Investments [Abstract]  
Minority Business Investment
Minority Business Investment

In 2012, Ebix acquired a minority 19.8% interest in CurePet for cash consideration in the amount of $2.0 million. CurePet is a developmental-stage enterprise that has completed an insurance exchange that connects pet owners, referring veterinarians, animal hospitals, academic institutes, and suppliers of medical and general pet supplies, while providing a wide variety of services related to pet insurance to each constituent including practice management, electronic medical records, and billing. CurePet has also been a customer of Ebix; during three months ending March 31, 2014 and 2013 the Company recognized $125 thousand and $600 thousand, respectfully, of revenue from CurePet, and as of March 31, 2014 and December 31, 2013 there were $0 and $1.4 million, respectfully, of outstanding receivable balances due from CurePet in the Company's reported trade accounts receivable. Ebix also had a revenue share arrangement with CurePet pertaining to certain customer revenues recognized by CurePet, and the Company had the option of forgoing said revenue share arrangement in exchange for an additional 20.0% equity interest. The Company had been accounting for its minority investment in CurePet using the cost method. Based on this independent evaluation it was concluded that the fair value of this minority business investment was greater than the Company's carrying value of the investment, and therefore the investment was not impaired as of December 31, 2013. Also as disclosed in Note 3 "Business Combinations," effective January 27, 2014 Ebix acquired the entire business of CurePet in an asset purchase agreement with the total purchase consideration being in the amount of $6.35 million of which includes a possible contingent earnout payment of up to $5.0 million based on earned revenues over the subsequent thirty-six month period following the date of the acquisition. This contingent earnout liability is currently estimated to have a fair value of $1.6 million.
v2.4.0.8
Temporary Equity
3 Months Ended
Mar. 31, 2014
Temporary Equity Disclosure [Abstract]  
Temporary Equity [Text Block]
Temporary Equity

The $5.0 million of temporary equity reported on the Company's condensed consolidated balance sheet as of March 31, 2014 and December 31, 2013 is in connection with the June 2012 acquisition of PlanetSoft. As part of the consideration paid for PlanetSoft in accordance with terms of the merger agreement the former PlanetSoft shareholders received 296,560 shares of Ebix common stock valued at $16.86 per share or $5.0 million in the aggregate. In regard to these shares of Ebix common stock, and as discussed in Note 7 "Derivative Instruments," the Company issued a put option to PlanetSoft's three shareholders. The put option, which expires in June 2014, is exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, and which if exercised would enable them to sell the underlying 296,560 shares of Ebix common stock they received as part of the purchase consideration, back to the Company at a price of $16.86 per share, which represents the per-share value established on the effective date of the closing of Ebix's acquisition of PlanetSoft. Furthermore as per the terms of the PlanetSoft merger agreement, if Ebix consummates a merger or acquisition agreement whereby it ceases to be a public reporting company as under the SEC Exchange Act, then the put option shall become immediately exercisable. Accordingly and in compliance with Accounting Standards Codification ("ASC") 480 "Accounting for Redeemable Equity Instruments," given that the common stock is redeemable for cash at the option of the holders and not within control of the Company, it is presented outside of the stockholders equity section of the Condensed Consolidated Balance Sheet, and is shown as a separate line referred to as "temporary equity" appearing after liabilities, and before the stockholder's equity section, and will remain so until July 2014 when either the put option is exercised or lapsed.
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Other Liabilities (Notes)
3 Months Ended
Mar. 31, 2014
Other Liabilities Disclosure [Abstract]  
Other Liabilities Disclosure [Text Block]
Other Liabilities

Other liabilities at March 31, 2014 and December 31, 2013 consisted of the following:

 
March 31, 2014
 
December 31, 2013
 
(In thousands)
Reserve for potential uncertain income tax return positions
$
14,875

 
$
12,742

Unfavorable lease liability, long term portion
369

 
394

Portion of an unrecognized tax benefit netted against deferred tax asset for a net operating loss carryforward
(7,133
)
 
(8,422
)
Other
5

 
5

Total
$
8,116

 
$
4,719

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Description of Business and Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2014
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation—The accompanying unaudited condensed consolidated financial statements and these notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") with the effect of inter-company balances and transactions eliminated. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP and SEC rules have been condensed or omitted as permitted by and pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These unaudited condensed consolidated financial statements contain adjustments (consisting only of normal recurring items) necessary to fairly present the consolidated financial position of the Company and its consolidated results of operations and cash flows. Operating results for the three months ended March 31, 2014 and 2013 are not necessarily indicative of the results that may be expected for the full year. The condensed consolidated December 31, 2013 balance sheet included in this interim period filing has been derived from the audited financial statements at that date but does not necessarily include all of the information and related notes required by GAAP for complete financial statements. These condensed interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.
Fair Value of Financial Instruments
Fair Value of Financial Instrument—The Company follows the relevant GAAP guidance concerning fair value measurements which provides a consistent framework to define, measure, and disclose the fair value of assets and liabilities in financial statements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction. This guidance establishes a three-level hierarchy priority for disclosure of assets and liabilities recorded at fair value. The ordering of priority reflects the degree to which objective data from external active markets are available to measure fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable.
Level 1 Inputs - Unadjusted quoted prices available in active markets for identical investments to the reporting entity at the measurement date
Level 2 Inputs - Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 Inputs - Unobservable inputs, which are used to the extent that observable inputs are not available, and used in situations where there is little or no market activity for the asset or liability and wherein the reporting entity makes estimates and assumptions related to the pricing of the asset or liability including assumptions regarding risk.

     A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

As of March 31, 2014 the Company had the following financial instruments to which it had to consider fair values and had to make fair assessments:
Common share-based put option for which the fair value was measured as a Level 2 instrument.
Short-term investments for which the fair values are measured as a Level 1 instrument.
Contingent accrued earn-out business acquisition consideration liabilities for which fair values are measured as Level 3 instruments. These contingent consideration liabilities were recorded at fair value on the acquisition date and are remeasured quarterly based on the then assessed fair value and adjusted if necessary. The increases or decreases in the fair value of contingent consideration payable can result from changes in anticipated revenue levels and changes in assumed discount periods and rates. As the fair value measure is based on significant inputs that are not observable in the market, they are categorized as Level 3.

Revenue Recognition
Revenue Recognition—The Company derives its revenues primarily from subscription and transaction fees pertaining to services delivered over our exchanges or from our ASP platforms, fees for risk compliance solution services, and fees for software development projects including associated fees for consulting, implementation, training, and project management provided to customers with installed systems and applications. Sales and value-added taxes are not included in revenues, but rather are recorded as a liability until the taxes assessed are remitted to the respective taxing authorities.
In accordance with Financial Accounting Standard Board (“FASB”) and SEC accounting guidance on revenue recognition, the Company considers revenue earned and realizable when: (a) persuasive evidence of the sales arrangement exists, provided that the arrangement fee is fixed or determinable, (b) delivery or performance has occurred, (c) customer acceptance has been received or is assured, if contractually required, and (d) collectability of the arrangement fee is probable. The Company uses signed contractual agreements as persuasive evidence of a sales arrangement. We apply the provisions of the relevant generally accepted accounting principles related to all transactions involving the license of software where the software deliverables are considered more than inconsequential to the other elements in the arrangement.
For contracts that contain multiple deliverables, we analyze the revenue arrangements in accordance with the relevant technical accounting guidance, which provides criteria governing how to determine whether goods or services that are delivered separately in a bundled sales arrangement should be considered as separate units of accounting for the purpose of revenue recognition. Generally these types of arrangements include deliverables pertaining to software licenses, system set-up, and professional services associated with product customization or modification. Delivery of the various contractual elements typically occurs over periods of less than eighteen months. These arrangements generally do not have refund provisions or have very limited refund terms.
Software development arrangements involving significant customization, modification or production are accounted for in accordance with the appropriate technical accounting guidance issued by FASB using the percentage-of-completion method. The Company recognizes revenue using periodic reported actual hours worked as a percentage of total expected hours required to complete the project arrangement and applies the percentage to the total arrangement fee.
Goodwill and Other Indefinite-Lived Intangible Assets
Goodwill and Other Indefinite-Lived Intangible Assets—Goodwill represents the cost in excess of the fair value of the net assets of acquired businesses. Indefinite-lived intangible assets represent the fair value of certain acquired contractual customer relationships for which future cash flows are expected to continue indefinitely. In accordance with the relevant FASB accounting guidance, goodwill and indefinite-lived intangible assets are not amortized but are tested for impairment at the reporting unit level on an annual basis or on an interim basis if an event occurs or circumstances change that would likely have reduced the fair value of a reporting unit below its carrying value. Potential impairment indicators include a significant change in the business climate, legal factors, operating performance indicators, competition, and the sale or disposition of a significant portion of the business. The impairment evaluation process involves an assessment of certain qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of any of our reporting units was less than its carrying amount. If after assessing the totality of events or circumstances, we were to determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company would not perform the two-step quantitative impairment testing described further below.
The aforementioned two-step quantitative testing process involves comparing the reporting unit carrying values to their respective fair values; we determine fair value of our reporting units by applying the discounted cash flow method using the present value of future estimated net cash flows. If the fair value of a reporting unit exceeds its carrying value, then no further testing is required. However, if a reporting unit's fair value were to be less than its carrying value, we would then determine the amount of the impairment charge, if any, which would be the amount that the carrying value of the reporting unit's goodwill exceeded its implied value. Projections of cash flows are based on our views of growth rates, operating costs, anticipated future economic conditions and the appropriate discount rates relative to risk and estimates of residual values. We believe that our estimates are consistent with assumptions that marketplace participants would use in their estimates of fair value. The use of different estimates or assumptions for our projected discounted cash flows (e.g., growth rates, future economic conditions, discount rates and estimates of terminal values) when determining the fair value of our reporting units could result in different values and may result in a goodwill impairment charge. We perform our annual goodwill impairment evaluation and testing as of September 30th of each year. This evaluation is done during the fourth quarter each year. During the year ended December 31, 2013 we had no impairment of our reporting unit goodwill balances.
Finite-lived Intangible Assets
Finite-lived Intangible Assets—Purchased intangible assets represent the estimated acquisition date fair value of customer relationships, developed technology, trademarks and non-compete agreements obtained in connection with the businesses we acquire. We amortize these intangible assets on a straight-line basis over their estimated useful lives, as follows:

Category
 
Life (yrs)
Customer relationships
 
7-20
Developed technology
 
3–12
Trademarks
 
3–15
Non-compete agreements
 
5
Database
 
10
Foreign Currency Translation
Foreign Currency Translation—The functional currency for the Company's foreign subsidiaries in India and Singapore is the U.S. dollar because the intellectual property research and development activities provided by its Singapore subsidiary, and the product development and information technology enabled services activities for the insurance industry provided by its India subsidiary. both in support of Ebix's operating divisions across the world, are transacted in U.S. dollars.
The functional currency of the Company's other foreign subsidiaries is the local currency of the country in which the subsidiary operates. The assets and liabilities of these foreign subsidiaries are translated into U.S. dollars at the rates of exchange at the balance sheet dates. Income and expense accounts are translated at the average exchange rates in effect during the period. Gains and losses resulting from translation adjustments are included as a component of accumulated other comprehensive income in the accompanying consolidated balance sheets, and are included in the condensed consolidated statements of comprehensive income. Foreign exchange transaction gains and losses that are derived from transactions denominated in a currency other than the subsidiary's functional currency are included in the determination of net income.
Income Taxes
Income Taxes—Deferred income taxes are recorded to reflect the estimated future tax effects of differences between the financial statement and tax basis of assets, liabilities, operating losses, and tax credit carry forwards using the tax rates expected to be in effect when the temporary differences reverse. Valuation allowances, if any, are recorded to reduce deferred tax assets to the amount management considers more likely than not to be realized. Such valuation allowances are recorded for the portion of the deferred tax assets that are not expected to be realized based on the levels of historical taxable income and projections for future taxable income over the periods in which the temporary differences will be deductible.
The Company also applies FASB accounting guidance on accounting for uncertainty in income taxes positions. This guidance clarifies the accounting for uncertainty in income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. In this regard we recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
Recent Relevant Accounting Pronouncements
Recent Relevant Accounting Pronouncements—The following is a brief discussion of recently released accounting pronouncements that are pertinent to the Company's business:

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists". This accounting standard states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This accounting standards update applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The accounting standards update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. This pronouncement should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company adopted this new standard in during this current interim three-month reporting period ending March 31, 2014, and it effected how unrecognized tax benefits were accounted for and presented in the Company's balance sheet.

In February 2013 The FASB has issued Accounting Standards Update (ASU) No. 2013-02, "Comprehensive Income Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income", to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses may later reclassified out of accumulated other comprehensive income into net income. The amendments in this ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. The new amendments will require an organization to:
Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.
Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account instead of directly to income or expense.

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual).
The amendments were effective for reporting periods beginning after December 15, 2012 for public companies Early adoption was permitted. The Company adopted this new standard in 2013 and it did not have effect on its financial statements
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Description of Business and Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2014
Accounting Policies [Abstract]  
Schedule of Revenue by Product/Service Groups
Presented in the table below is the breakout of our revenue streams for each of those product/service groups for the three months ended March 31, 2014 and 2013.

 
 
Three Months Ended
 
 
March 31,
(dollar amounts in thousands)
 
2014
 
2013
Exchanges
 
$
42,105

 
$
41,686

Broker Systems
 
4,486

 
4,722

Risk Compliance Solutions (“RCS”), fka Business Process Outsourcing (“BPO”)
 
3,425

 
4,164

Carrier Systems
 
1,388

 
1,994

Totals
 
$
51,404

 
$
52,566

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
Additional information regarding the Company's assets and liabilities that are measured at fair value on a recurring basis is presented in the following tables:


 
 
Fair Values at Reporting Date Using*
Descriptions
 
Balance, March 31, 2014
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
 
 
(In thousands)
Assets
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
Commercial bank certificates of deposits
 
$
845

$
845