Ebix, Inc. (NASDAQ:EBIX), a leading international supplier of On-Demand software and E-commerce services to the insurance industry, today reported record financial results for the third quarter of 2011 and will host a conference call at 11:00 a.m. EST (details below)

Ebix delivered the following results for its third quarter, fiscal year 2011:

Operating Income: Q3 2011 operating income was $18.0 million, an increase of 37% on a year-over-year basis, as compared to Q3 2010 operating income of $13.1 million. The Company’s Operating income excluding any non-recurring gains was $16.8 million for the quarter.

Revenues: Total Q3 2011 revenue was $42.6 million, an increase of 28% on a year-over-year basis, as compared to Q3 2010 revenue of $33.3 million. During the nine months ended September 30, 2011 revenue increased $27.8 million or 29%, to $124.9 million compared to $97.1 million during the same period in 2010.

Expenses: The Company’s operating expenses for the quarter grew by 22.0% to $24.6 million as compared to $20.2 million for the third quarter of 2010.

Cash Flows: Net cash provided by the Company’s ongoing operations in Q3 2011 was $22.1 million, an increase of 120% year-over-year, compared to $10.0 million in Q3 of 2010. During the nine months ended September 30, 2011 the Company generated $51.9 million of net cash flow from operating activities, as compared to $33.8 million in the first nine months of 2010, an increase of 53%.

Margins: The Company reported an operating margin of 42% for Q3 2011 as compared to 39% for the same period during 2010. Excluding one-time gains, the operating margin in Q3 2011 was 39.4% as compared to Q3 2010 operating margin of 39.3%.

Net Income: Q3 2011 net income was $16.5 million, a decrease of less than 1% on a year-over-year basis, as compared to Q3 2010 net income of $16.7 million. Q3 2010 net income excluding the one time gain of $3.9 million associated with the E-Z Data puts was $12.8 million.

Earnings per Share: Q3 2011 diluted earnings per share declined 5% year-over-year to $0.41, as compared to $0.43 in the third quarter of 2010. However, Q3 2010 diluted EPS included a one time EPS gain of 10 cents resulting from the non-operating income of $3.9 million recognized in regards to the decrease in the fair value of the put option that was issued to the two former stockholders of E-Z Data who received shares of Ebix common stock as part of the acquisition consideration paid by the Company. For purposes of the Q3 2011 EPS calculation, there was an average of 40.4 million diluted shares outstanding during the quarter, as compared to 39.0 million diluted shares outstanding in Q3 of 2010.

Channel Revenues: The Exchange channel grew 40.5% year over year to $33.1 million or 77.5% of the Q3 revenues. The BPO channel decreased 13% year over year, to $3.58 million or 8% of the Q3 revenues. The Broker Channel grew 37% year over year, to $4.73 million or 11 % of the Q3 revenues. The Carrier channel decreased 43% year over year, to $1.27 million or 3% of the Q3 revenues.

Share Repurchases: During Q3 2011, the Company repurchased 2.01 million shares of our common stock at an average price of $17.28 per share for an aggregate amount of $34.80 million. Subsequent to September 30, 2011, the Company has purchased another 188,000 shares of its common stock at an average price of $14.14 for an aggregate amount of $2.66 million. Through November 7, the Company has repurchased 3.51 million shares of Ebix common stock in 2011, for an aggregate consideration in the amount of $63.66 million, representing an average price of $18.13 per share.

Q4 Diluted Share Count: Taking into account the share repurchases made by the Company to date, the Company expects the diluted share count for Q4 to be 39.42 million which would be 3% lower than the Q3 diluted share count used for EPS calculation. This diluted share count is likely to be even lower if the Company continues to repurchase its common stock from the market.

“We are very pleased with our record operating cash flow for the quarter, as they show that the company can grow its top line in a difficult industry environment, without sacrificing margins or compromising on price for our valued added Exchange products.” Ebix Chairman, President & CEO Robin Raina said, “Our results for the quarter validate our efforts to add additional sales force leadership and more sales people as we work to create a global institutional account management structure. We feel our greatest opportunity is to maximize the value of our existing relationships and we are making that investment with the rewards to be seen in 2012.”

Robin added, “We remain dedicated to generating shareholder value. In 3Q 2011 we used our free cash flow to repurchase our shares and announced our first dividend which is to be paid on November 30. Our long term strategy has not changed as we focus our team’s efforts daily towards growing the business organically, reviewing strategic accretive acquisitions, and utilizing our substantial operating cash flows to buyback our common stock. We believe that we can do all three resulting in an even higher return on invested capital for our shareholders.”

Ebix SVP and CFO Robert Kerris said, “The reported $22.1 million of operating cash flows generated during our 3rd quarter is a 13% improvement over Q2, and a 115% improvement over Q1. Furthermore, the $51.9 million of operating cash flow for the nine months ended September 30, 2011 essentially reflects a full recovery of the net income produced by the Company during the same period and demonstrates Ebix’s ability to quickly convert operating results into positive cash flows. The Company continues to grow efficiently, consistently producing favorable operating margins in the 40% range through the 3rd quarter of 2011 while revenues increased 29% over the same interim nine month period a year earlier.”

Investor Conference Call

Ebix will host a conference call to discuss its third quarter 2011 results at 11:00 a.m. Eastern Standard Time today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company's Investor Relations home page at http://www.ebix.com. In addition, an archive of the webcast can be accessed through www.ebix.com/webcast. Participants who choose to call in to the conference call can do so by dialing 1-(973) 409-9690. A replay of the audio and text of the investor call will be available through the company's Investor Relations home page at http://www.ebix.com

About Ebix, Inc.

A leading international supplier of On-Demand software and E-commerce services to the insurance industry, Ebix, Inc., (NASDAQ: EBIX) provides end-to-end solutions ranging from infrastructure exchanges, carrier systems, agency systems and BPO services to custom software development for all entities involved in the insurance industry.

With 30+ offices across Brazil, Singapore, Australia, the US, New Zealand, India and Canada, Ebix powers multiple exchanges across the world in the field of life, annuity, health and property & casualty insurance while conducting in excess of $100 billion in insurance premiums on its platforms. Through its various SaaS-based software platforms, Ebix employs hundreds of insurance and technology professionals to provide products, support and consultancy to thousands of customers on six continents. Ebix’s focus on quality has enabled it to be awarded Level 5 status of the Carnegie Mellon Software Engineering Institute’s Capability Maturity Model (CMM). With a recent ISO 27001-security certification, the Company also has a ISO 9001:2000 certification for both its development and BPO units in India. For more information, visit the Company’s website at www.ebix.com

Safe Harbor for Forward Looking Statements under the Private Securities Litigation Reform Act of 1995 — This press release contains various forward looking statements and information that are based on management's beliefs, as well as assumptions made by, and information currently available to management, including statements regarding future economic performance and financial condition, liquidity and capital resources, acceptance of the Company's products by the market and management's plans and objectives. The Company has tried to identify such forward looking statements by use of words such as "expects," "intends," "anticipates," "plans," "believes," "will," "should," and similar expressions, but these words are not the exclusive means of identifying such statements. Such statements are subject to various risks, uncertainties and other factors which could cause actual results to vary materially from those expressed in, or implied by, the forward looking statements. Such risks, uncertainties and other factors include the extent to which the Company's new products and services can be successfully developed and marketed, the integration and other risks associated with recent and future acquisitions, the willingness of independent insurance agencies to outsource their computer and other processing needs to third parties, the Company's ability to continue to develop new products to effectively address market needs in an industry characterized by rapid technological change, the Company's dependence on the insurance industry (and in particular independent agents), the highly competitive and rapidly changing automation systems market, the Company's ability to effectively protect its applications software and other proprietary information, the Company's ability to attract and retain quality management, and software, technical sales and other personnel, the potential negative impact on the Company's outsourcing business in India from adverse publicity and possible governmental regulation, the risks of disruption of the Company's Internet connections or internal service problems, the possibly adverse effects of a substantial increase in volume of traffic on the Company's website, mainframe and other servers, possible security breaches on the Company's website and the possible effects of insurance regulation on the Company's business. Certain of these, as well as other, risks, uncertainties and other factors, are described in more detail in Ebix’s periodic filings with the Securities and Exchange Commission, including the company’s annual report on form 10-K for the year ended December 31, 2010, included under "Item 1A. Business—Risk Factors." Except as expressly required by the federal securities laws, the Company undertakes no obligation to update any such factors or to publicly update any of the forward looking statements contained herein to reflect future events or developments or changed circumstances or for any other reason.

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(Financial tables follow)

   
Ebix, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2011   2010 2011   2010
Operating revenue $ 42,602 $ 33,281 $ 124,919 $ 97,091
Operating expenses:
 
Cost of services provided 8,710 7,418 24,931 21,908
Product development 4,964 3,294 14,385 10,228
Sales and marketing 3,440 1,685 9,553 4,759
General and administrative 5,785 6,249 18,240 16,914
Amortization and depreciation 1,749   1,553   5,617   4,433  
Total operating expenses 24,648   20,199   72,726   58,242  
 
Operating income 17,954 13,082 52,193 38,849
Interest income 100 163 429 378
Interest expense (218 ) (236 ) (592 ) (750 )
Other non-operating income (loss) 33 3,917 (785 ) 5,678
Foreign currency exchange gain (loss) (230 ) 523   2,635   859  
Income before income taxes 17,639 17,449 53,880 45,014
Income tax benefit (expense) (1,103 ) (768 ) 168   (1,939 )
Net income $ 16,536   $ 16,681   $ 54,048   $ 43,075  
 
Basic earnings per common share $ 0.44 $ 0.48 $ 1.41 $ 1.24
 
Diluted earnings per common share $ 0.41 $ 0.43 $ 1.31 $ 1.10
 
Basic weighted average shares outstanding 37,345 34,592 38,215 34,765
 
Diluted weighted average shares outstanding 40,449 39,020 41,400 39,218
 
 
Ebix, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

(In thousands, except share amounts)
   
September 30, December 31,
2011 2010
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 13,941 $ 23,397
Short-term investments 1,663 6,300
Trade accounts receivable, less allowances of $1,999 as of September 30, 2011 and $1,126 as of December 31, 2010 31,242 26,028
Deferred tax asset, net 3,127
Other current assets 4,410   5,057  
Total current assets 54,383   60,782  
 
Property and equipment, net 8,718 7,806
Goodwill 237,863 180,602
Intangibles, net 38,380 22,574
Indefinite-lived intangibles 30,493 30,552
Deferred tax asset, net 10,196
Other assets 974   984  
Total assets $ 381,007   $ 303,300  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 20,050 $ 15,344
Accrued payroll and related benefits 4,563 4,536
Short term debt 6,667 5,000
Convertible debt, net of discount of $0 as of September 30, 2011 and $56 thousand as of December 31, 2010 4,944
Current portion of long term debt and capital lease obligations 154 426
Deferred revenue 16,380 8,610
Current deferred rent 250 207
Put option liability 1,430
Other current liabilities 998   18  
Total current liabilities 50,492   39,085  
 
Revolving line of credit 10,250 25,000
Long term debt and capital lease obligations, less current portion 10,159 205
Other liabilities 3,635 2,991
Deferred tax liability, net 3,534
Put option liability 537
Deferred revenue 139 126
Long term deferred rent 1,012   554  
Total liabilities 75,687   72,032  
 
 
Stockholders’ equity:
Preferred stock, $0.10 par value, 500,000 shares authorized, no shares issued and outstanding at September 30, 2011 and December 31, 2010
Common stock, $0.10 par value, 60,000,000 shares authorized, 36,534,976 issued and 36,494,467 outstanding at September 30, 2011 and 36,057,791 issued and 36,017,282 outstanding at December 31, 2010 3,649 3,602
Additional paid-in capital 179,619 153,221
Treasury stock (40,509 shares as of September 30, 2011 and December 31, 2010) (76 ) (76 )
Retained earnings 121,690 67,642
Accumulated other comprehensive income 438   6,879  
Total stockholders’ equity 305,320   231,268  
Total liabilities and stockholders’ equity $ 381,007   $ 303,300  
 
 
Ebix, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)
 

 

Nine Months Ended
September 30,
2011   2010
Cash flows from operating activities:
Net income $ 54,048 $ 43,075
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,617 4,433
Share based compensation 1,737 1,376
Provision for doubtful accounts 747 341
Benefit for deferred taxes (5,870 ) (89 )
Debt discount amortization on convertible debt 21 303
Unrealized foreign exchange (gain) loss on forward contracts 909 (1,270 )
Unrealized foreign exchange gain (4,047 ) (277 )
(Gain) loss on put option 893 (5,416 )
Reduction of acquisition earnout accruals (3,048 )
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable (2,985 ) (5,020 )
Other assets 422 (1,219 )
Accounts payable and accrued expenses 1,916 (1,140 )
Accrued payroll and related benefits (959 ) (369 )
Deferred revenue 1,024 (859 )
Deferred rent (188 ) (70 )
Other current liabilities 1,696   41  
Net cash provided by operating activities 51,933   33,840  
 
Cash flows from investing activities:
Acquisition of ADAM, net of cash acquired 3,529
Investment in MCN, net of cash acquired (381 ) (2,931 )
Acquisition of Trades Monitor, net of cash acquired (2,749 )
Acquisition of Connective Technologies, net of cash acquired (1,337 )
Acquisition of E-Trek, net of cash acquired (1,011 )
Acquisition of USIX, net of cash acquired (6,844 )
Investment in ConfirmNet (184 ) (2,975 )
Investment in Facts (12 ) (11 )
Investment in Periculum (4 )
Maturities of marketable securities 7,600
Purchases of marketable securities (2,963 ) (4,952 )
Capital expenditures (1,863 ) (1,325 )
Net cash provided by/(used in) investing activities 5,726   (24,139 )
 
Cash flows from financing activities:
Repayments on revolving line of credit, (net of proceeds) (14,750 ) (2,100 )
Proceeds from term loan 16,250 10,000
Principal payments of term loan obligation (4,740 ) (3,751 )
Repurchases of common stock (56,548 ) (10,649 )
Settlement on conversion of convertible debt (6,761 ) (12,021 )
Proceeds from the exercise of stock options 14 231
Payments of capital lease obligations (253 ) (683 )
Net cash used in financing activities (66,788 ) (18,973 )
Effect of foreign exchange rates on cash (327 ) 1,308  
Net change in cash and cash equivalents (9,456 ) (7,964 )
Cash and cash equivalents at the beginning of the period 23,397   19,227  
Cash and cash equivalents at the end of the period $ 13,941   $ 11,263  
Supplemental disclosures of cash flow information:
Interest paid $ 579 $ 410
Income taxes paid $ 1,757 $ 1,589
 

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