Ebix, Inc.
Q2 2010 Earnings Call Transcript

Published: 9 Aug 2010

[Operator:]

Good day ladies and gentlemen, and welcome to the Ebix Inc. second quarter 2010 investor call. [Operator Instructions] I'd now like to hand the conference over to Mr. Neil van Helden, corporate manager, marketing. Sir, you may begin.

[Neil van Helden:]

Good morning everyone, and welcome to Ebix's second quarter 2010 earnings conference call. Joining me to discuss the quarter is Ebix's chairman, president and CEO, Robin Raina. Robin is participating in this call from one our offices in Delhi, India. Following Robin's remarks today, we will open up the call for your questions to be addressed by Robin and the Ebix CFO, Robert Kerris. I want to take this time to remind you that the primary purpose of today's call is to provide you with information regarding our second quarter fiscal year 2010 performance. However, some of our discussion or responses to your questions may contain forward-looking statements. These statements are subject to risks, uncertainties and assumptions. Should any of the risks or uncertainties materialize, or should have assumptions prove incorrect, actual company results could differ materially from these forward-looking statements. All these risks, uncertainties, and assumptions, as well as other information on potential factors that could affect our financial results, are included in our report filed with the SEC including our most recently reported Form 10-K for the year ended 31st of December 2009, particularly under the heading "risk factors". At times in our prepared remarks or in response to your questions today, we may offer certain additional metrics to provide a greater understanding of our business or quarterly results. Please be advised that we may or may not update these additional metrics in future calls. Our press release announcing the record second quarter results was issued a few hours back. The audio of this investor call is also being web cast live on the web at www.ebix.com\webcast. You can look at Ebix’s financials beyond what has been provided in the release on our web site www.ebix.com The audio and the text transcript of this call will be available on the investor homepage of the Ebix website after 2

[Robin Raina:]

Thank you, Neil. Good morning. I’m joining into this call from one of our buildings in Noida. We have five offices spread across three cities in India and I’m presently dialing in from our new 50,000 square feet campus building in Noida. Our second quarter 2010 results were record results again for Ebix in terms of revenues, net income, earnings, and cash flows. I feel that it is befitting these record results that I’m doing this call from India, which has been at the center of our research and development efforts to get to this point in our journey. India is a fascinating power today that in another few years will have one of the youngest populations in the world. Imagine a country where in a few years from now approximately 840 million people will be below the age of 35 years. Incidentally, that is approximately three times the population of the United States. Add to this mix India’s strong focus on education and technology excellence, the restless desire of the youth to succeed, and the result is a highly diligent work force willing to learn, adapt, and then lead. At Ebix’s own facilities here in India, the average age of an employee is 25 years old, and 83% of our staff has an engineering degree. It is presently 8

[Operator:]

[Operator instructions.] We have a question from Mike Latimore of Northland Capital.

[Mike Latimore:]

Good morning. Great job on the cash flow on the quarter there. Robin, you note the number of contract signings in the quarter. Can you help us understand the incremental revenue benefit, maybe on a quarterly basis, from those, and then also looks like you acquired a company called Trade Monitor, if you can provide a little bit of additional detail on that it would be great.

[Robin Raina:]

Okay, let’s start from the first question that you asked regarding how much revenue. I don’t have that answer for you to be able to share [unintelligible]. I’m not ready for that answer. Part of it is these are deals that are just coming in [unintelligible] revenue recognition. We don’t really recognize revenue mid-year to date usually on deals. We still kind of have to do our math and come up with those answers. I’m not hopeful about end of third quarter when we come and discuss third quarter results. We’ll be in a better position to give you some numbers around some of these deals. On the second part of your question regarding Trade Monitor, Trade Monitor is a [unintelligible] deal that are relatively very very small company and basically it’s a futuristic insurance for a client to establish BPO business in Australia.

[Operator:]

Our next question comes from Harry Long from Contrarian Industries.

[Harry Long:]

Absolutely outstanding numbers and I wish you could be a little more ambitious. You want to be the biggest software services provider in the world, so it’s nice to see that you’re – But basically my question is in terms of your sales force, can you please give us a little bit more color? Are these people who are veterans in industry, or are you growing that capability organically? And also in terms of deals you’ve already done, at what point do you need to come in for CEO to CEO contact with some of the bigger institutions to close the deal, or is that all done with the sales force? If you could just give some more color on the sales staff.

[Robin Raina:]

I think this is a great question, Harry. Basically, we are selling, when we sell an exchange for example, we’re selling at the highest level and when you sell at the highest level the sales person needs to be extremely qualified and needs to be able to hold his or her own in front of all this – whether it’s the CEO or an executive vice president or the CIO. So I think what that - we hire highly intelligent people who are – who understand the industrial world. [Unintelligible] who understand for example what benefit does the exchange offer and so on. And so that’s our focus now. Beyond that, we – however at times couple them up with the retail team. We couple them up with people who are more retail oriented, people – we divide industry by – in vertically. You know, we’ll divide industry whether it’s by wealth management, or it is by any other field, we’re basically – when it’s health, [unintelligible] and so on. Our sales cycle tends to be at an extremely significant senior level, and that kind of can be – there is a multinational account program at times you need to follow. I’ll give you a simple example. Take a large insurance company. I don’t want to be giving names. [Unintelligible] large multinational insurance company. When you see us do one deal with them, what we are trying to do immediately – so we’re trying to deal with the company A in the U.S. in the life industry. What we are going to immediately do, we’re going to approach them in different other countries, in Asia, in Australia, and you know, we’ll reach out to Mexico counterparts, the Brazilian counterpart, and so on. So how do we handle all of this. It gets very critical for us to have a multinational account manager approach. What I mean by that is for that multinational carrier, insurer, we need to have one account manager. That account manager can then [unintelligible] that information across the world and becomes the leader on that account and makes sure that this customer first of all is handled with kid gloves, and handled in the proper manner. So if Mexico is trying to do a deal, we’re trying to approach Mexico, we also create pressure from the U.S. because corporate might reside in the U.S. and so on. So it is tag team effort ultimately in sales. But there will be one lead manager who will lead that account and that person has to be extremely good. Did I answer the question?

[Operator:]

[Operator instructions.] Our next question comes from Gregory Wilbur from Bay Area Micro Cap.

[Gregory Wilbur:]

Robin you briefly mentioned in your comments about your HMO business in Nigeria. Could you give us some perspective on what’s the – that’s a large country, lot of people, lot of potential. Could you give us a perspective on that please?

[Robin Raina:]

Basically, Nigeria has 60 HMOs that exist. We’ve done a deal with one of the leading HMOs, so our goal is - you see this is a – for us this is a very important deal and we feel extremely good about it and the deal is pretty simple. First thing what we have done is we have proven that our solutions, that the health solutions can be used in Africa. That by itself is a big deal, because for that we had to make sure that we ultimately have a system that every HMO – now when we go to the next HMO that HMO would know that hey there’s already a client, a user, and so on. And also what happened is once you have one client they are interested in making sure that there are other clients because that way they get better quality of support, which can hopefully set up local operations in Nigeria and so on. So we feel very good about it. In all these African countries, there is a very strong focus today on improving the health insurance aspects of their economy. To that extent we feel we’re well positioned today to try and target that market and we’ll have to do many more things. We actually feel that we need to have a real presence in terms of sales, support, and so on in the African sub-continent – in the African continent, and I think we will pursue that in coming days.

[Operator:]

[Operator instructions.] I’m showing no further questions at this time.

[Robin Raina:]

Thank you. Since there are no further questions, I’m going to close the call today. Thank you for participating in the call. I look forward to speaking to all of you in November when we announce the third quarter results. Thank you very much. Copyright policy