Ebix Inc (EBIX) 2008 Q2 法說會逐字稿

Good morning. My name is Mae, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ebix Second Quarter 2008 Investor Call. (Operator Instructions) I will now turn the conference over to Mr. Robin Raina, President and CEO of Ebix. Sir, you may begin.

Thank you. Good morning, gentlemen. Thank you for attending Ebix 2008 Second Quarter Investor Conference Call. I have also here with me Ebix's CFO, Robert Kerris.

The last few days have seen a few important announcements from Ebix. Yesterday the acquisition of Pittsburgh-based Acclamation, Inc., and today the second quarter 2008 financial results followed by the 3-for-1 stock split announcement. In today's investor call, my intent would be to cover all these announcements from the Company.

Let us start with the financial results. Our Q2 2008 results were announced yesterday. Let me summarize those results for you from our perspective. Q2 results were yet again record results, the best ever in Ebix's 32 years young history in terms of diluted EPS. To look at these results and compare them to the same quarter last year or to the first quarter of 2008, would reveal to you that the Company has shown consistent growth over this period. Each of the last many quarters have been a record result with each quarter beating all the preceding quarters in our 32-year history of the Company, this being our tenth quarter of sequential growth in terms of net income, or EPS.

Q2 results were pleasing to us since there was nothing spectacular that accounted for these results. No large one-time deals were booked in this quarter that accounted for this growth. It was simply normal organic growth with each of our divisions contributing to the increased revenue in the quarter.

In the Ebix model of keeping a tight control on costs, increased revenue is likely to result in increased margins as is evidenced in this quarter. Revenues grew consistently in Q2 2008. If you were to compare it to Q1 2008 or Q2 2007, revenues grew to $17.8 million in Q2 2008 from $9.82 million in Q2 2007, an 81% growth. Or, if you were to compare it to Q1 of 2008, revenues grew 7%. As revenues grew, net margin in second quarter of 2008 grew to 36%, from 34% in the first quarter of 2008, and 26% in the second quarter of 2007.

Net income after taxes for the quarter rose 152% to $6.34 million, or $1.62 per diluted share, up from $2.5 million, or $0.75 per diluted share in the second quarter of '07, and earnings per share growth of 116%. Net income after taxes for the quarter, if we were to compare it to the first quarter of 2008, the net income after taxes for the quarter rose 12%, to $6.34 million, up from $5.67 million, basically an earnings per share growth of 16%.

The results for the second quarter of '08 were based on 3.99 million weighted average diluted shares outstanding, as compared to 3.37 million in the second quarter of '07, or 4.15 million in the first quarter of '08. The Company also reported basic earnings per share in the second quarter of '08 of $1.96 as compared to $0.85 in the second quarter of '07, and $1.66 in the first quarter of '08.

The Company also reported an accumulated net income at the end of six months of '08 grew by 168% to $12 million as compared to cumulative net income of $4.48 million at the end of six months of '07. The six months cumulative diluted EPS for '08 also grew by 121% to $3.01 as compared to cumulative diluted EPS of $1.36 at the end of six months of '07.

To put the Company's 2008 six-month performance in perspective, you could compare the six month performance of the Company in '08 to the 12-month performance of the Company in '07. That is, compare six-month income, or EPS numbers in '08 to the 12-month income, or EPS numbers in '07.

In 2007, the Company's net income for the full year was $12.67 million as compared to the net income number of $12 million for the first six months of '08. Similarly, in 2007, the Company's EPS for the full year was $3.61 as compared to Company's EPS of $3.01 for the first six months of 2008.

So, why are second quarter 2008 results better than first quarter results? I would like to say the quarter was rather uneventful, with nothing real noteworthy in terms of any special large deals that caused these improved results. The only noteworthy reason is that as in the case of all of our acquisitions, we keep improving the economics each quarter and we grow revenues and we keep integrating the businesses.

Our business is continuing to evolve and strengthen with each quarter. The Company business can be broken primarily into four main channels today -- the Insurance Company, the Broker channel, the Exchange channel, and the BPO channel. The second quarter saw the Exchange channel become 53% of our total revenues, while the BPO channel accounted for 10% of our revenues. Broker systems business accounted for 19%, and the Carrier channel accounted for 16% of our worldwide revenues. All these four channels showed growth this quarter in terms of revenues as compared to Q2 of '07. The Legacy support business as predicted earlier continues to decline and accounted for 2% of our revenues in the second quarter of 2008.

Our Exchange business continues to evolve. We conduct almost $36 billion in annuity premiums annually now on our annuity exchange. We conduct in excess of 12 million transactions annually on our life exchange. We conduct in excess of 80% of property and casualty eCommerce transactions in Australia now. We're deploying an exchange for property and casualty in New Zealand at present, etc. We need to evolve the Ebix eXchange name worldwide and deploy such exchanges in Europe, Asia, Africa, and increase our range of services in the United States related to the exchange sector.

Let me now talk about the announcement we made yesterday as regards the acquisition of Acclamation, Inc. Thinking about acquisitions, I'm reminded of what Warren Buffett reportedly once said, and again I'm going to quote Warren Buffett here. To quote him, "We simply attempt to be fearful when others are greedy, and to be greedy only when others are fearful."

As a pragmatic management team, we are strong believers in this code. We see the present hard economic times as an opportunity to make complementary accretive acquisitions at realistic prices that we can afford. Towards that extent, we have kept looking for the right mix of acquisitions that provide us entry into hard to enter regions or markets that we think are going to be lucrative for Ebix in the short- and long-term goals.

Yesterday we announced the successful acquisition of Pittsburgh-based Acclamation, Inc., marking our entry into the health benefit and claims processing industry.

Acclamation has been our leading provider of software in the service-based healthcare benefits and claims management software in the U.S. Since its inception in 1989, Acclamation has focused itself on providing benefit administration systems to some of the world's largest insurance carriers, third-party administrators, and self-administered organizations. Today, Acclamation is seen as a leading player in the health benefit software industry providing benefit services to an estimated 7 million insured lives through its customer base of approximately 80 clients encompassing health insurance companies, third-party administrators, etc.

The deal involved an upfront cash payment of $22 million to Acclamation shareholders, plus a potential earn-out cash payment of up to $3 million paid over a period of two years from the date of acquisition, provided that specific revenue target of the Health Benefits division of the Company are achieved.

The Company funded the acquisition through a mix of convertible debt and internal sources using our own cash reserves. No financial advisers were involved in the transaction from the Ebix side.

So, why did we choose Acclamation? Ebix is already a leading player in the life insurance exchange market. Because the life and health markets go hand-in-hand with a large number of health carriers selling life insurance products and vice-versa, we believe that this acquisition will open cross-selling opportunities for us on many fronts.

Also, we intend to deploy benefits and claim services across international markets, cross-selling these products using our existing presence in 50-plus countries through our existing customers, brokers and carriers in these continents.

Acclamation has a rather experienced and pragmatic management team that culturally fits well in the Ebix thought process.

On the economic front, we're excited about this acquisition on many accounts. Plus, it brings a revenue base to the Company that is 60% recurring. Secondly, it's a business that we expect to be accretive to Ebix earnings per share in the near or long-term future.

Let us talk now about our most recent announcement. Today morning we announced a 3-for-1 stock split. Each shareholder of record at the close of business on the 4th of August 2008 will receive two additional shares for each outstanding share held on the record date. Trading will begin on a split adjusted basis on August 14, 2008. From our perspective, this stock split is a step in the direction of improving liquidity and also to making our shares more accessible both to institutions and individual shareholders.

The question some of you might have is as to where we go from here? So, how do we at Ebix or I personally perceive the results? In the first quarter investor call, I addressed the same question. With the Company's recent inclusion in the Russell 2000 Index, we have a lot of new funds that are trying to understand the Ebix story, with many of them on this investor call, also. For their benefit, at the cost of being repetitive, I prefer to give them the answer that I gave in the first quarter investor call.

From my perspective, these results in the second quarter are just another step forward. As the CEO of this Company, I see my role as creating sustained long-term shareholder value. Towards that extent, this quarter is another small step forward. My belief is that long-term shareholder value can only be sustained if our business has a few key elements.

One, we need to fulfill a business need in a manner that makes us almost the engine that powers fulfillment of that need. This engine needs to be in the forefront -- this engine, sorry, let me correct myself. This engine need not be in the forefront, but it needs to be like a router on a network card in a network without which it is difficult to deploy a network.

While building a network, the focus is on deployment of the network. The router and Ethernet cards are never discussed too much, as they are necessities that do not warrant a discussion. We feel Ebix needs to power insurance transactions in a similar manner with the need for Ebix services ideally considered a sine qua non essentiality. That is where we would like to take Ebix in the insurance market as a B2B powerhouse of transaction. We obviously have a long way to go before we get anywhere close to that objective.

Two, our revenue streams need to be recurring as much as possible. Ideally, upwards of 90%. This goal is rather linked to the first goal. If we are a powerhouse of transactions, then recurring revenues will flow by itself. Again, we have lots of work to do before we can get to that mark.

Thirdly, our margins need to be consistently higher than 35%. On this criterion, we are doing well at present. We need to watch our costs rather carefully and balance that cost pressure with the right amount of aggression and investment in the future so that we are continuously investing in the future without taking huge risks.

Fourthly, we need to keep investing in innovation. We need to take our competition seriously and need to keep making consistent efforts to be a few years ahead of our competition in terms of technology, depth of functionality, and also in terms of how we provide these services. This goal is more of a journey rather than a destination.

Fifthly, the insurance markets worldwide are fragmented, disjointed and need increased standardization in terms of service offerings. That is a rather difficult goal, but in my view a huge opportunity. The fact remains that there is no one dominant player in the insurance service market worldwide, or for that matter in the United States. That is an opportunity that Ebix needs to go after by positioning itself as a player that can offer a wide range of services to the insurance market under one roof while converging services, regions and channels in insurance.

When I look at these five goals and evaluate Ebix today, it is a rather humbling feeling, as I realized that we have a long way to go and that we are just getting started. The good news, from my perspective, is that we realize how far we need to go and that we have made a rather good start.

Finally, let me address a few concerns that I have heard in recent times from funds that are new to the Ebix story. As a byproduct of the Russell 2000 Index inclusion, I am increasingly being asked by investors to provide future guidance. I am increasingly facing questions from investors about what the Company is doing as regards seeking analyst coverage or highlighting its margins, or highlighting the recurring nature of the business to the investor base.

I'm being asked about the reasons for a rather low forward P/E as compared to other large niche software players and what we are doing to highlight that to the investor base.

For those of you who are new to the Ebix story, let me answer all these questions by saying that this management team does neither believe in issuing future guidance nor believe in seeking analyst coverage, or focusing too much attention on the stock price. Our belief is that we need to be judged by our consistency and the past and present actions.

We believe that if we can be consistent and can build a fundamentally strong -- we believe that if we can be consistent and can build a fundamentally strong company, stock price will take care of itself.

Towards that, I am reminded of this quote from the Hall of Famer, retired New York Mets baseball pitcher, Tom Seaver, and I'll quote him. "In baseball, my theory is to strive for consistency, not to worry about the numbers. If you dwell on statistics, you get shortsighted. If you aim for consistency, the numbers will be there at the end."

As always, the audio transcript of this and any of our previous calls can be heard and downloaded from the investor home page on the Ebix site, www.ebix.com. Also, I would encourage you to visit the comprehensive Investor home page on the Ebix site with a view to providing a one-stop place to analyze Ebix from an investor perspective.

With that, I'm going to hand it over, back to the moderator to open the call for questions. Thank you.

(Operator Instructions) The question comes from the line of Mark [Rye].

Good afternoon, gentlemen. Congratulations on a good quarter. My first question has to do with your net operating loss carry-forward. I was wondering if you could tell me what you anticipate your tax rate is going to be when that is exhausted? And also you refer to an India tax holiday that you're benefiting from, and kind of some more background on that in the same context?

I'll let Bob talk to the NOL, the number we have. But I'll take your second part of the question, which is what happens after the NOL is dry. I think we, first of all, we have a sufficiently long time for the NOL to dry out. Because part of the rationale here is that the NOL is pretty much limited to the U.S. losses. And having said that, I think over the last few years we have implemented a tax strategy using outside consultants. And part of it is we have a tax holiday in India, a lower tax structure in India, and each of our companies base each other on a transfer pricing, an arm's length transaction basis. And that will help us for quite some time in terms of how we are structured.

And, again, I think as we go forward we will keep looking for opportunities in terms of maximizing shareholder value and making sure that we have offshore bases in places where we can do development and get good benefit, tax benefit from the government there.

Bob, do you want to answer the NOL question?

Yes, this is Bob Kerris. As to the NOLs, we believe the NOLs will be available to us in the near term or foreseeable future. In regards to our expected future effective tax rate, I'm not able to give guidance on that point right now, but I can tell you that we will continue to take advantage of various tax planning strategies to have a favorable effective tax rate as we go forward. (Inaudible) -- sorry.

(Inaudible) -- your current balance is in the NOL?

Excuse me?

Can you tell me what your current NOL balance is?

I would refer you to our Form 10-K, annual report in 2007, and that gives our figure at 12/31/2007.

Okay, thank you. One other question --

It's in excess of $40 million, if you go back and do it. I don't have the number in front of me. I apologize for that.

One other question, if I may. Can you describe the insurance exchange business model a little more for me? Talk about the existing competitors there, the growth rate, your market share, anything that you're comfortable commenting on?

Absolutely. I think in the insurance exchange business, this is a gain, a business where we are the only player who is in different channels. If you go back and look at it, we are into annuities. We have an annuity exchange, we have a life exchange, and we have a B&C exchange. There is nobody, no one single player other than us who is into more than one channel. So, our competition tends to be different in each channel. So, let's take one at a time.

If you talk about the life exchange, we call it WinFlex. WinFlex primarily is an exchange that connects almost 70 life insurance companies with hundreds of thousands of brokers in the United States. It conducts in excess of 12 million transactions. Every time a transaction happens in a pre-sale environment, what these brokers are doing, they're trying to prevent prices, they're trying to close a deal, a sale. And everything they require to close that sale happens through this exchange. And when they do a transaction each time, each time a broker does a transaction, we get some money. This money is paid to us by the insurance company rather than the broker.

Having said that, that exchange, WinFlex Exchange, we by far are the most dominant player in the market. The second closest company is probably one-fourth of our size today. They're a privately held company, so it is difficult to get all the data. But from what we know it seems that they're one-fourth of our size.

Having said that, we feel the opportunity is huge in that market. Life insurance is a large market and a lot of that business today happens on paper. And so our input is obviously to automate it and use the strength that we have today to expand that exchange across to all kinds of brokers across the United States. And possibly take this exchange into international markets, since we are an international player.

The second exchange we run is annuity exchange. The annuity exchange is called AnnuityNet. AnnuityNet primarily conducts close to $36 billion in premiums today. The market size is close to 230 billion. Our second closest competitor is a player I believe called Blue Frog, but they are relatively small in terms of the amount of premiums they conduct on the exchange. They're privately held, again, limited information that we have except what we know from market.

Again, the market, we believe the opportunity is huge on the annuity side of business, to keep expanding. Most of the business is today being done on paper. And so we have been kind of the pioneer in that sector, and we believe we can multiply that.

Again, we have launched newer life exchanges for a post-sale basis. Using pre-sale, I just talked about on the life side. But on a post-sale basis, we launched an exchange called LifeSpeed. And what LifeSpeed does, LifeSpeed will start where our previous exchange stopped. So, it becomes -- so, our market is, first of all, all the customers we already have.

And, second of all, all the other new carriers that we don't have are paper-driven. Now, this is a process that nobody has today, so we're trying to get that out into the market. Again, we'll be paid on a transaction basis.

What we also do is we define minimum, yearly minimum, and it again varies from each carrier to another, and that is competitive information which I can't share. But basically we have yearly minimums in terms of transactions where carriers have to commit a yearly minimum fee for us to bring them onto the platform.

Both these exchanges are very critical for the users purely because it's not a matter of that if we had a market for wider, also, which means if I am -- if I was a carrier, I look at this exchange as a way of reaching out to those agents. If I try to provide a solution outside this exchange directly to the hundreds of thousands of brokers, it probably sometimes is not as practical. The reason is, there are 69 other carriers for whom this broker can go on the Net and make one data entry and get results back for the 70th, as this broker is not going to be keen to do multiple data entries and double his amount of work.

So, it becomes an efficiency issue and a productivity issue, and a sensible issue as far as a broker is concerned, and a carrier is concerned. So, carriers actually like a platform on which there are more carriers, and so on.

The [current] exchange is a P&C exchange, the property and casualty exchange. We now own exchange in Australia which conducts close to 80% of property and casualty transactions on P&C. Again in that market, when I say P&C transactions, that is we are now expanding. The market size is large because we are now expanding that to new areas like billing, accounting. We are taking it to the smaller brokers who couldn't afford this exchange earlier. And so we are building technologies that are efficient, that they can pay for and can afford, and so on.

So, we'll continue expanding these channels. And, again, for example, in Australia we talked about if you were to ask me the competition, there really is none right now. But that's a good thing and a bad thing, because when you don't have competition, then you have to -- we are a teacher by ourselves. We teach the market what other things they could do on the exchange.

So, that's I think the rather long answer to your question.

That's a great answer. Thank you very much and I'll drop back in the queue.

Thank you.

Your next question comes from the line of John Bates.

Hi, John.

Hello. I'm a small investor. I only have a few thousand to invest, so I have some rather naive questions that I hope you'll address. The first one is regards to the dilution. Does that only involve the dilution of options or does it also involve the dilution that might come with the notes that could be converted?

I'll answer that question, this is Bob Kerris. The dilution comes about from three things -- the convertible debt, the restricted stock grants, and the stock option grants.

Okay. The next question I have is given the Company's high return on equity and consistency in high returned equity, I'm kind of puzzled as to why the Company would want to secure financing at a low interest rate giving away equity [kicker] of a conversion rather than paying a high interest rate and keeping the equity? Can you address that question?

Yes, I will address that question. I think it's a question of opportunity, it's a question of timing. And while that thinking that sometimes is great, I think it's a function of presently the banks are, as you know, what's happening with the banking sector. It's a bit more difficult to seek that at reasonable rates.

Again, presently the stage we are at, while we -- it is good to probably take that. At the same time, we also have liquidity issues. We want to keep increasing the liquidity of our stock, so we have to kind of balance this approach, meaning, it makes sense for us to have a decent amount of liquidity in the market. And I think in the long term that is in the interest of the long-term shareholder.

Okay. I have one more question. This is really the most valued one. I don't understand anything of the insurance business, and I'm wondering if you would care to explain your four channels, BPO, carrier, broker and insurance, kind of as you might to like a fifth grade class so you could explain it to people who don't understand insurance.

Well, John, this could be a rather long answer, but I'll try to be very brief. I'll try to be extremely brief and after that, if you still have questions on this, we can do a side conversation or something.

Having said that, there are four channels, one is a carrier channel. Carrier channel is an insurance company channel. What it means is all the products that we sell to insurance companies under that channel. What are the products we sell to insurance companies? We sell backend insurance company systems.

So, we have 32 insurance companies today worldwide who use our system. This is their -- what a backend system means, this is everything that an insurance company needs to run its business. It's the general ledger, it's the accounting system, it's the sales administration, it's the policy administration. At times it's reinsurance. It could be virtually anything at the backend of the need. At times it interfaces directly with consumers, at times they directly interface it with third-party administrators. At times they interface it with Lloyd's, interfaces for brokers and so on. That's the first channel, the carrier channel.

The second channel is the broker channel, we call it. The broker channel means selling services to brokers. We primarily sell services to the large superbrokers. Six of the top 10 brokers in the world are our customers. Now, these brokers tend to be larger than the largest of insurance companies. We deal with the AONs of the world, the Marsh's of the world, the [Willis] of the world, Hong Kong Shanghai Bank.

These are really large superbrokers, as we call them. They have operations in practically all continents and we basically provide their backend system. We provide them an end-to-end system. Everything they need to run their business. Again, everything we do for insurance companies we do for a broker. And this system is deployed across, in 50-plus countries. And we always have an [outer] base of 10 or 12 countries from these superbrokers.

These systems that we provide them are multilingual, they are multicurrency, they are available in German, French, Chinese, Japanese, Portuguese, Spanish, English, and so on. And that's the broker channel.

The third channel is the BPO channel. In the BPO channel, we're providing backend processing services to insurance companies at times, at times to the end customer. The kind of -- I can give you an example of the service is product certificate tracking. Every time insurance is bought or sold, an insurance certificate is created. That insurance certificate needs to be tracked, and that -- in that business we track the certificate of insurance for the largest of players, the Who's Who of the U.S. retail industry or consumption industry, which means the Home Depots of the world, the Lowes of the world, Sears, the Costco, The BJ's, the Harley Davidsons. I mean, it's a long list, I can go on and on.

So, we track their certificates of insurance and they have on a transaction basis for it as to how many certificates we track of them, how much time our people spend on handling them, and so on. So, that's the third line of profit, which we keep expanding. We're going to take that business, the BPO business, into claims processing BPO. We're going to take that business into billing inquiry and so on.

The fourth channel is exchange channel, which I just explained in the last question. So, when you put these four things together, you -- Ebix basically is the only player worldwide which does all four. We don't have a single competitor even in the United States who does even more than one channel. Even in that one channel does more than one functionality. So, it's very unique what we have, and that's what we're trying to do. We're trying to be the one-stop place where we can provide all the services under one window.

Now, why is that important and why is that key? That's very key, because imagine in any transaction you have -- there has to be a handshake. You can't keep doing data entry again and again and again. Imagine a consumer -- where does insurance start? Insurance starts with a consumer, or whether it's a corporate or whether it's a consumer buying insurance. Which means when insurance is bought, at someplace one data entry will happen. That data from there on is the basis which needs to continue flowing. It doesn't matter whether the insurance company is using it, it doesn't matter whether the broker is using it; it doesn't matter whether they're going through an exchange; it doesn't matter whether it is an ultimate consumer using it, which let's take Home Depot in that case. Or whoever is using it, everybody needs to -- the data just needs to flow.

In our terminology, we would call it convergence. One data entry and then data keeps flowing. That is extremely key because what that results in is efficiency, that results in reduction of paper in insurance. Insurance is an industry which is still unfortunately paper-driven. Which means if you go to previous numbers announced by the forester group, almost $59 billion is spent a year on paper-based processes just in commercial lines of insurance. Imagine if you can get that paper out, how much efficiency you bring to the process. That's what Ebix is after.

Thank you very much.

Thank you.

Your next question comes from the line of Tom [Tua]

Hi, guys. Congratulations on another very good and very consistent quarter.

Thank you, Tom.

My question is regarding the various segments of the insurance industry. It seems like it's a soft market out there for insurance in general, and I assume that transactions and sales volumes are a little bit weak. Can you give us some sense of how sensitive your business is to this fact and how much of a headwind this represents?

Well, first of all, you're absolutely correct, Tom, in terms of -- that the market is soft right now, the insurance market. However, it doesn't really -- hasn't had a huge impact on our business. And the part of the rationale for it is what are we doing? We're driving efficiency into the process. Every time the market becomes soft, if anything, insurance companies start looking inward and start looking for how do we get our margins -- how do we keep our margins intact? And they start having these internal meetings saying we've got to get more efficient. Because insurance company costs are always very high internally, and they're trying to figure out ways. So, chances are we're going to get -- we still get calls from them saying, well, can you help us do this or that, to drive the paper out of the process? Because ultimately what are we doing? We're driving paper out of the process.

So, when these insurance companies are bullish, they come back to us because they want to spend more money on their IT budgets have gone up. However, when the market goes soft, these guys start looking inward and start thinking about improving their efficiencies. So, chances are they'll still call us.

So, we haven't really -- I wouldn't say our business is cycling or seasonal related to how an insurance company does. And so part of it is because we're not really a -- you see, we're not a commissioned agent here. We're not really a -- our business model isn't built basically on being in the process of trying to make commissions. We do it in a very nonaligned way. Even the exchange that we run. Most of these exchanges are B2B exchanges, and they're already nonaligned. What that means is we're not seen as somebody who will make more commissions because they made more premiums or less premiums. We'll get the same transaction fee irrespective of is the premium higher or lower, and so on.

So, there will be some impact sometimes, when the market really goes soft and people are selling less life insurance policies. But at the end of the day I think insurance companies will keep making efforts to sell more life insurance policies in this example. And chances are, if they're having a hard time, they're going to keep calling us saying, well, can you help us become a bit more efficient at the backend and bring our costs down?

Because what do we bring ultimately to the table? We don't just bring these products that I just talked about. We bring the knowledge of understanding of this industry. We bring the domain knowledge. We bring the knowledge of knowing how to drive paper out of the process, and I think people call us for that rather than simply for one particular service. Am I making sense?

Yes, that does make sense. You commented on the fact that on the exchange side of the business by virtue of your arrangement with the carriers you have minimum annual fee requirements where the carriers have to commit to paying you a minimum fee. Can you comment on how much, I don't know how much detail you could go into this, but given how much downside protection this gives you with respect to your revenue [side] of the business?

Well, basically, what we do is, first of all, that's competitive information. I couldn't tell you what their value is. They call it a different for each carrier. It depends on the size of the carrier, it depends on the premium that the carrier does. We'll obviously have -- we'll -- it depends on the size, whether it's a global carrier, both meaning the trends and the number of brokers who are going to log into that carrier. There's one carrier who will have 30,000 brokers using his platform. And there will be another carrier who will have 700 brokers. You can't have the same pricing, yearly annual flat pricing for these two carriers. So, it is kind of defined based on their volume of transactions.

Having said that, the downside protection is very simple, meaning in a sense that whether they did zero transactions, if we have defined a minimum volume, it's better they did zero transactions, they'll be flat. There could be a flat. For example, for carrier X, they could be a slap from 0 to 100,000 transactions. And under that flat they would get charged an X fee. And from 100,000 upward they'll have a Y fee. Now, it varies.

And again, having said that, we also have -- meaning our downside biggest protection is very simple, that ultimately we're providing a market to that carrier. It's in the carrier's interest to be there and run that transaction. If he doesn't do it, he's going to lose the opportunity to be in front of that broker.

Because today, the market has become -- life insurance market has opened out. What it means is, these are independent agents. These are not necessarily captive agents. But this same agent, if this carrier doesn't reach out to this broker, this broker is going to go and deal with the remaining carriers. And so who loses? Well, he might lose some revenue if this carrier was to drop Ebix, but then the carrier loses access to that market completely, and some other carrier is going to pick up that business. So, that's I think part of our downside protection. It's been a gradation that we have built. I think that's one of -- that's our downside protection, too.

Got it, thank you.

Thank you.

Mr. Raina, there are no further questions. Do you have any further remarks?

I want to give another moment for people, if there are any other questions, just to make sure that we're not missing anybody. Since there are no more questions, I'm going to finish the investment call today by thanking all of you for joining our second quarter investment call, and we look forward to speaking you to next quarter. Thank you very much.

Thank you all for participating in today's conference call. Could you please hold the line so we can get your information from you.