Ebix Inc (EBIX) 2008 Q4 法說會逐字稿

Good morning. My name is David, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ebix.com 2008 fourth quarter investor conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions).

I would like to now turn the call over to the President of Ebix, Mr. Raina. You may begin your call, sir.

Thank you. Good morning, gentlemen. Thank you for attending Ebix's 2008 annual investor conference call. I have also with me today Mr. Robert Kerris, Ebix's CFO, on this investor conference call.

We announced the 2008 financial results on Friday last week, and all of you must have seen those numbers by now. I will take a few minutes to summarize these results for you.

Each of the last few years have been a record year for Ebix in terms of beating all its results in the last 33 years. This year was no different from the last few, to the extent that the financial results for the year 2008 are record results again -- the best ever in our 33-year-young history.

Ebix's total revenue rose 74% to $74.75 million in 2008 compared to $42.84 million in 2007. Ebix's operating income rose 129% to $29.26 million in fiscal 2008 compared to operating income of $12.8 million in 2007. In 2008, the Company's net income rose 116% to $27.31 million or $2.28 per diluted share compared to net income of $12.67 million or $1.20 per diluted share in 2007.

Our operating margins continued to improve, increasing to 39% for 2008 from 30% in 2007. Net margins for the full year of 2008 grew to 37% versus 30% in the full year of 2007. For the 12 months ended December 31, 2008, the Company generated $26.79 million of net cash flow from operating activities compared to $14.4 million for the year ended December 31, 2007 -- a 78% increase in operating cash flow year-over-year.

In 2008, the Company's basic earnings per common share rose to $2.78 as compared to basic earning per common share of $1.36 in 2007. The results for 2008 and 2007 were based on 9.81 million and 9.31 million weighted average basic shares outstanding, respectively.

Ebix's 2008 fourth quarter revenue rose 65% to $20.14 million compared to $12.2 million during the fourth quarter of '07. Q4 '08 net income rose 76% to $7.91 million or $0.66 per diluted share versus Q4 '07 net income of $4.5 million or $0.40 per diluted share. The results for Q4 '08 in Q4 '07 were based on 12.29 and 11.33 million weighted average diluted shares outstanding, respectively. Our net margins grew to 39% in the fourth quarter of 2008 versus 37% in the fourth quarter of 2007.

The sudden strengthening of the US dollar had a clear impact on our revenue numbers in Q4 of '08, since we convert all international results into US dollars for reporting purposes. For example, our Q4 2008 results would have been approximately $2 million higher if the exchange rates had not strengthened so appreciably since June 2008.

Our revenue in 2008 was split across the four channels that we focus on. The largest percentage was in the area of exchanges with a 57% share; broker channel had 19%; carrier channel had 12%; and the BPO channel had 11% of our 2008 revenues. We expect this composition to change a bit in 2009, with exchanges in BPO channel constituting a larger percentage of our revenue than '09.

In the year 2008, US accounted for 65% of the revenues, while international accounted for 35% of the revenues. This was very much on the lines predicted earlier.

I am often asked about our guidance in future quarters and years. We have always believed in letting our past performance and numbers speak for themselves, and thus, I'll abstain from issuing any guidance on numbers. For those of you who have been investors in Ebix's stock for some time, you have heard me say this many a times earlier -- I'm not going to depart from that thought process and issue a future guidance. Instead, I will lay out a few metrics from the past three years, as I do every year, for you to discover an answer for yourself.

Let's look at it three measures over the last few years -- revenue, net income, and diluted EPS. Ebix's 2008 fourth quarter revenue rose 65% to $20.1 million compared to fourth quarter revenue in '07 of $12.2 million; fourth quarter revenue in 2006 of $9.28 million; and fourth quarter revenue in 2005 of $6.16 million. Our revenues in 2008 grew 74% as compared to 2007; grew 155% as compared to 2006; and grew 210% as compared to 2005. Ebix's 2008 net income in 2008 grew 116% over 2007; 358% as compared to 2006; and 532% as compared to 2005.

Ebix's diluted EPS for 2008 grew 90% year-over-year to $2.28; 218% as compared to 2006; 341% as compared to 2005. If you look at the year 2008 itself, each sequential quarter was an improvement over the previous quarter in the year.

I am often asked whether the Ebix net margins of 35% plus are sustainable. Our belief has always been that a business in which the selling price is a lot higher than the cost price is a viable business. A few years back, we publicly announced our goal of getting to a net margin of 30% plus. Consequently, these margins today are a result of meticulous planning, centralized cost control processes, effective utilization of offshore resources, and a rather simple approach to business that requires income growth to be directly proportional to revenue growth.

Our net margins have continued to grow since -- in the last few years. Our net margins were 11% in 2004; 18% in 2005; 20% in 2006; 30% in 2007; and 39% -- and 37% in 2008. In the year 2008 itself, if you were to examine the quarters, our net margins were 34% in Q1; 36% in Q2; 37% in Q3; and 39% in Q4. These numbers speak for themselves. While we cannot guarantee that these margins are sustainable, yet our attempt is certainly going to be to live up to the benchmarks defined by us.

As a part of my job, I keep speaking to a broad spectrum of investors across the world. Based on interactions with them and the fact that we have a number of new investors on the call, I felt it important to proactively address some questions that you might have as regards to the Company. Some of these questions and answers might appear repetitive to some of our older investors, but as I said, we have quite a few new investors on the call and I thought it would be useful to have those questions.

So let's start with the first question. What is Ebix's vision plan?

Ebix's goal is to be the leading back-end powerhouse of insurance transactions in the world. The Company's technology vision is to focus on convergence of all insurance channels, processes and entities in a manner that data can seamlessly flow, once a data entry has been made. We intend to do that by designing products and services that are pioneering and are at least a few years ahead of our competition.

We believe that profitability and revenue growth must go hand-in-hand. We intend to do this in a transparent and sincere manner, while ensuring a highest level of satisfaction to all the entities that we deal with. Customers, employees, investors, and the society around us on whom we have -- we can possibly have a positive influence. In the year 2008, we took some strides towards our vision plan.

Second question -- Ebix is a rather complex company to understand. Can you sum up what Ebix sells in a few sentences?

Ebix is an insurance services player that provides four different services in the worldwide insurance markets -- one, B2B exchanges; two, insurance company back-end systems; three, broken systems; and lastly, four, BPO insurance services to insurance companies, brokers, large corporate, et cetera.

Third question -- over the years, Ebix has completely transformed itself from a broker system's services player to an end-to-end services player. Does that not de-focus Ebix? Who does Ebix compete with most of the time?

Answer -- yes, Ebix today is a complete end-to-end insurance services player. Our belief is that efficiencies and insurance can truly happen if a transaction can be electronically carried from one end to another with just one data entry. To do that, one has to drive paper out of the process and converge all the systems that power insurance transactions across all entities -- be it brokers, carriers, distributors, corporate, or consumers -- that is precisely what Ebix has set out to do.

Today, the need and complexity for this can be best expressed by the fact that outside Ebix, there is no one single entity that can boast of having tried to do this worldwide. That's a challenge and an opportunity by itself. In international markets, increasingly, we compete with local regional players or in-house IT departments of insurance companies. There is no one company that we face across the world or even across the United States on our different products.

Next question -- how key is Ebix to the insurance industry today? Are its solutions replaceable?

Ebix remains committed; committed to converging any island that exists in insurance today. Consumers, brokers, insurance companies -- converging B2C and B2B processes in insurance; converging front-end or back-end processes in insurance. Our goal remains to be the powerhouse of the insurance industry in terms of powering transactions as a back-end player.

Today, our exchange is power of transactions between hundreds of brokers and carriers in P&C insurance. Our life exchange power is close to 12 million life sales illustrations every year. We power an annuity exchange on which close to $36 billion in premiums are presently conducted yearly.

We run an exchange in Australia that powers all electronic property and casualty insurance transactions in that country. We recently launched an exchange in New Zealand, while teaming up with the top four property and casualty carriers who account for 90% of the property and casualty business in New Zealand.

We handle 7 million insured lives on our employee benefits exchange in the US. For a company our size, we have a rather large global reach and domain knowledge. We power businesses in more than 50 countries today across all continents. We have an excess of 20 offices today worldwide, with an employee base in excess of 650 employees.

We provide a multi-national broker on a carrier a common CodeBase worldwide; and frankly, we do not know of a vendor who has geographical reach and can do that in our industry. Our systems are multilingual, multi-currency, and can work in French, Portuguese, Japanese, Spanish, and, of course, English. We have the domain knowledge of insurance that spreads all across the world today.

With our fully-owned offshore facilities in India, we have the ability to make an acquisition, bring India to reduce their cost structure and make them more efficient. Our centers in India have Carnegie Mellon's highest CMMI 5 rating, and that establishes the quality of our operations to many of our prospective customers.

There are three kinds of companies today across the world -- companies that sell products; companies that sell services; and companies that provide -- companies that sell infrastructure services. With each passing day, Ebix is becoming an infrastructure company. In my early years with Ebix, I used to metaphorically ask our employees and the senior management as what they would want Ebix to be in coming days.

An example I used to give to them and the question I used to ask them -- would you like Ebix to be an airline or would you like Ebix to be an airport? And the reason for that question was, if you could choose when you're flying out anywhere, you could choose which airline to fly by, but you really don't get to choose an airport. Most of the times the choice of the airport is a given. Ebix's goal was and is to be the airport rather than be the airline. And that is why a lot of our business now is exchanges or infrastructure business.

We are one of the few companies in the insurance industry that can provide solutions across the world for a customer while keeping the CodeBase the same worldwide. That fact by itself, besides the fact that our retention rate of existing customers is something that everybody would like to have, and is almost perfect over the last five years in the international markets, coupled with the fact that our solutions are designed to be a few years ahead of our competition in terms of design, technology and functionality, have led Ebix to a position where we have a who's-who customer base and a decent auto base-spanning product implementations across many countries at any time.

Do we intend to pursue acquisitions in the near and long-term future?

Answer -- we believe in growing the Company revenue and income proportionately, and have abstained from going after opportunities that provide us marketshare at the cost of profitability. For us, a key criteria in an acquisition candidate is a chance -- chances of dominance in that area of the business. The current cash flows, profitability and accretiveness is a given in our book.

We intend to pursue acquisitions that help us sell or cross-sell our existing products. For an acquisition to interest Ebix, that acquisition must deliver convergence with our technology; convergence with our existing platforms; cross-selling opportunities; and clearly, be accretive for our shareholders, either immediately or in the near future.

We see the present economic time as an opportunity to make the right acquisitions at sensible cost. So we intend to make use of our cash to make a few acquisitions, besides paying down any debt on our balance sheet in this year.

Lastly, let me say that we have recently launched a new comprehensive investor home page on the Ebix site, with a view to providing a one-stop place to analyze Ebix on an investor perspective. The audio and the text transcript of this call will also be available on the investor home page at the Ebix website located on www.Ebix.com.

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

(Operator Instructions). Harry Long.

Hi, Mr. Raina. Fantastic numbers -- what a great quarter. It was great meeting with you down in Atlanta.

A couple of quick questions about your partners. Most of them seemed to have pretty self-explanatory, but I had a question about two. One of them was Morningstar and the other one was Communication Intelligence Corporation. Can you talk a little bit about that?

I couldn't. I'd prefer to not talk about any individual customers on this call, more so because of confidentiality we have with each of these customers.

Okay. Well, the only reason I bring it up is because you list them on your website as partners. But okay. If you don't feel comfortable, I won't push it. That's all I have.

[Vincent Capozi].

I'd like to ask you a few questions. First of all, your comprehensive income is quite a bit down from where it was. Can you explain what that's all about?

I'm not understanding that question. Where is it down?

I can answer the question. Hi, this is Robert Kerris, CFO. What you're looking at -- the only component of the comprehensive income is similar to foreign currency translation adjustment. And that reflects the deterioration in some of the currency that we operate in.

So, is it better for you to have a strong dollar or a weak dollar?

Weak dollar.

Weak dollar, okay. All right. Also, with the insurance companies having so much problems, especially the life and annuity companies -- I know that they still have to do business, but they have these subprime mortgages or bad investments, toxic assets, whatever -- do you find that that is hurting you in any way?

Well, meaning, you see the proof lies in the pudding. You can look at the Q4 numbers and see it. Meaning, at the end of the day, I made a comment about something that if the exchange rates had remained the same, our revenue would have been $2 million higher. So really the exchange rate brought the revenue down, in terms of -- it could have been a lot higher.

Having said that, there are areas in which there is an impact. Meaning, if you look at the back-end systems market where an insurance company is supposed to make a life-changing decision, let's say, changing a back-end system, those decisions are now being delayed. They're not making those kind of decisions.

However, on the exchange side of the business, we are not seeing any differences. We are continuing to see -- meaning, it depends on the business you are in. For example, on the annuity exchange, more and more people are now finding fixed annuities. So we're not really seeing -- we're seeing increases in volume on our exchanges virtually, many across the life and the annuity exchanges.

Again, I think you are not going to see insurance companies trying to stop doing business; meaning that's something that's their bread and butter. They will try and do cost cuts internally, but that cost cut doesn't mean they're going to cut their lifeline, which is their revenue.

So we are seeing, in fact, more in the area where an insurance company is supposed to make new decisions, which have a big impact on them. And those decisions are being delayed. But we're not necessarily seeing carriers or insurers or brokers cut off what they already do or what is driving business to them.

All right, another question. With your ambition to have more -- to acquire more companies and to pay down some debt at the same time, do you plan on issuing stock?

Well, the first issue is we are generating a decent amount of cash. We're generating now -- we're starting to generate close to $3 million in cash a month now and -- in terms of our run rate. So we are generating a decent amount of cash.

From that perspective, we have a few choices to make, meaning for the use of our own cash. One is to possibly pay down any debt that we have and two, is to make some acquisitions.

Now if we so decide to make a lot of acquisitions, there's a possibility that we might go and issue some new equity. But if we did, it would only be done if that deal immediately is accretive for our shareholders. So it would not be a dilutive transaction for our shareholders. We are not very keen to increase our debt at this point.

Do you know what your cost of capital is?

Right now, to give -- our debt is at -- we have a $25 million line, which is at LIBOR plus 130, which pretty much translates to close to 2%.

No, I'm not talking about just your debt. I'm talking about your equity and your debt combined -- your weighted average cost of capital.

We don't have the cost of capital right now to speak about on the conference call. That's not available at this point.

Is that something that I can call up and maybe find some better answer?

Yes, at a later --

Sure, you could, Vincent.

That'd be fine.

Okay. All right, I guess that's about all I have at this time. Thank you very much.

[Mark Bry].

I wonder if you could take us through your four lines of business and kind of talk about the revenue growth in each of those, the percentage of total net sales.

Okay. Again, you see, it gets a bit complicated because I -- if you go through the exchanges, the broker channel and the carrier channel and so on, you're going to see there are substantial changes in the percentage growth, per se, in each one of those. I think that the important factor to look at is if you are -- I think your question is also related to the margins in each of these businesses.

I will tell you that the margin is plus/minus 5% between all four channels. So it's not that any one channel is substantially higher than the other one. It all will vary somewhere in the range of 37% to 42% in terms of net margins. But it will go up and down, depending on what kind of investments we are making in a particular area in a particular quarter.

You see, the margins basically -- for Ebix, it's a matter of how we have structured our business. It's not just a function of their exchanges will generate more margins than the BPO and so on. Traditionally, BPO tends to be a lower margin business for most people; whereas we see BPO as an extremely high margin business, because of how we have structured is; because of how we run it; because we sell it more as a package, along with the service built in; along with the software built in.

So it's a function of how you service it and how you build [up] the functionality. For us, that really -- it comes down to the crux of it, that basically the margins are going to vary, plus/minus 5%, basically between 37% to 42% -- and I'm talking net margins here, after taxes.

And coming back to the revenue question of yours -- meaning, if you look at, in any local currency versus on any of our areas, exchanges have grown the most, but part of it, in the -- and again, it's a rather complicated answer. And the reason for exchanges to grow the most also is because, as you know, last year, we made an acquisition.

So it's almost not a fair comparison, in the sense that exchanges have grown the most, partly because if we made an acquisition, and also we, from the time we made that acquisition, we have grown revenue substantially in that acquisition. Whereas in reality, we have had each one of the four sectors virtually grow quite substantially.

Okay. Could you comment on whether or not you see any seasonality in any of these four lines of business?

We do not see any seasonality in any of these four lines of business. We do see -- you see, there could have been a possible impact related to, like I said, foreign exchange is the only outside factor that I look at. We're not seeing seasonality in any one of this.

You could possibly sometimes in a BPO business, you could sometimes see a few spurts in particular months. But that really gets balanced by something else that happened on some other line. What I mean is, for example, that if there's a real estate downturn in the economy, which for example, has happened at present, there are less of contractors who work on real estate; there are less of (inaudible) [insurers] that are issued to them.

And so logically, we should have less a number of transactions on real estate. However, there are 38 different industries that we address. And some of the industries start showing growth, which is what we have seen. So overall, we're not really seeing any seasonality to our business.

Okay. And let's see, moving on to a couple of your recent acquisitions -- can you comment on the performance of those? How they've done for you and how they've integrated the ConfirmNet and Acclimation systems?

We've been extremely happy with both of them, the two that you named, Acclimation and ConfirmNet.

Let me start with Acclimation. Acclimation is now called Ebix Health. It's a part of our EbixExchange and we power close to 7 million insured lives on that platform. Now, that is an area where we are kind of a beginner. What I mean is we're not a leader in that market. There are larger players than us, but we see that as a big opportunity.

Again, with President Obama's new healthcare plan and the focus on lots of health issues, we see that there's going to be quite a bit boom in that area. In any case, today, there is a [lack of need] in the market to have a world-class player. There is no real one employee benefit player who can give you a solution across the world.

And so what we are trying to do, that Acquisition has actually given us an opportunity to cross-sell employee benefits or claims that are related to health processing, let's say, in Europe or in Australia or in New Zealand and so on -- or in Singapore. And we are continuing to do that. We have completely integrated it in every form or fashion. And we're quite happy with where we're headed with that.

With respect to the other one that you talked about, ConfirmNet. ConfirmNet has been a tremendous acquisition for us. And one of the main reasons is today, with that acquisition, we have now reached a stage where we have a run rate of close to $13.5 million to $14 million a year on the BPO service side.

Now when you look at that run rate and you compare us to the next player in the certificate insurance arena, the second largest player has $350,000. So what that has done is, it has created a dominance in the market, where when a large deal comes out in the market, we will be one of the only players who probably will have a good chance of that.

The reason is a large player, a large customer is not going to throw a large deal at a small vendor who has never handled a deal that size. So they have [choices mainly] to do it in-house or to outsource it to us.

We are already seeing the impact of that acquisition. Meaning, I'm not at liberty to talk too much about it, but to say that we have seen some extremely encouraging results. Now, having said that, we have done the -- any time you make an acquisition, we make -- we put redundancies in place. We put synergies in place. We do costs. We put cost synergies in place. We put technology synergies in place. We put marketing synergies in place. We try and look at moving some of the technology to India and so on. And we have done all of these, as of now.

And in each quarter, you're going to see -- we see the margins from that business, ConfirmNet, improving simply because, as those synergies keep happening, there's -- as termination notices in the different vendors start taking place, our margins will continue to improve. So we're very pleased with both these acquisitions.

And is there any you can comment on the acquisition that you attempted of Health Access back in December? Did your offer simply expire? And whatever you can obviously disclose on that would be --

Well, that's one market is a dead issue for us. We're off the table completely. And the simple reason is we made an offer. They didn't like our offer. And there were various reasons why they didn't like it, but most of it was related to -- they had a few large investors who had clauses, which allowed them to veto any deal. And those investors also had good interest in not making the deal goes to Ebix, simply because Ebix was not going to offer them any new revenue. And they had also a revenue deal with this company and they were providing services.

So having said that, that was one of the issues. And they were -- the next [shell] of it was that their Board felt that our offer didn't ride up to their expectations. And we decided to get off the table at some point. And we are completely off it today. There are enough opportunities in the market that we like at this point in the same industry. And we would rather go with those at this point.

Okay. Moving on to your income statement. I wonder if you can comment on the -- we're seeing an increase in sales and marketing, and a decrease in your G&A over the previous quarter. Can you comment at all about some of the things that you're doing in the business in those two areas?

Well, I don't -- I wouldn't say that there is any big reason for any of that. Meaning we run a pretty lean and mean operation at this point. I wouldn't read too much into that virtually. Meaning it's a continuous exercise; meaning we have centralized cost control systems. They are changes that keep taking place from time to time. And some of them virtually take a bit of time. That's all that is all about.

Meaning there is really no -- I wouldn't read too much into whether our G&A costs are high or low at this point. At the end of the day, we think we are trying to keep it reasonably consistent. You might see a slight ups and blips a little bit here and there at different times, based on different needs that happen for a public company. But other than that, we think we have a pretty -- we've got it pretty nailed down in terms of a tightly knit model.

Okay. And then on the foreign currency impact, you mentioned you feel that had an impact on net sales. Is that primarily due to Australia?

Yes. Australia, New Zealand, Singapore, but Australia had a bigger role to play, meaning 35% -- the Australian currency has gone down 35%. Meaning, let's put it the other way -- the US dollar has strengthened 35% almost as compared to the Australian dollar, when you compare these two currencies over the last few months.

Okay. All right, and then if I just might ask a couple more questions on your balance sheet. We're seeing accounts payable increasing significantly over the previous quarter. Any thoughts on what might be driving that?

It's a timing issue. It's nothing. I wouldn't read anything into it. We don't have -- we don't know of any issues or any concerns on it whatsoever. It's a pure timing issue.

Okay, that's all I have. Thank you, gentlemen.

Harry Long.

Just going back to your cash flow statement for a second. Could you give a little bit of color on the $2.27 million in deferred revenue? That line there is probably decrease in deferred revenue.

You're talking about our deferred line on the --?

Yes, I can speak to that.

Yes, Bob, please.

Yes. That, again, is primarily a timing issue but our deferred revenue consists of two primary components. One in regards to long-term projects, long-term system and development projects; regards to maintenance and support services.

Okay. And then a couple of other quick things. Can you talk a little bit about labor rates in India and the trend there and how (multiple speakers) --?

Well, meaning, you see, labor rates in India are going down at this minute. And the prime reason, as you know, is some of it has to do with clearly, with the economy and then in the softer industry, obviously [soft terms] didn't help the cause. There's lots of companies who are using the time to put cost cuts in place.

Now, we are not one of them. We are not one of them who's trying to use the time to reduce costs. But I will tell you the largest of players in India have come out -- the big guys in India -- the software guys have come out and put 10%, 15% cost cuts in place for employees.

We do not like that strategy. We feel that -- we have done very well with retention in India. And we don't want to -- we kind of feel that that would be almost misusing the present times. We would rather stay with our employees and support them through this. They've done a phenomenal job. They've stayed with us when -- and we feel that this is not a time to misuse that time. And we will pretty much -- we're continuing to run business as usual. If they're a good employee, we give them a raise and so on, as usual.

So for us, nothing has really changed. But clearly, the opportunity -- there is more availability in India at this time. For example, if you wanted to hire a few hundred people, it's a lot easier now to do it versus [in] a year back.

And in terms of the dynamics that you just discussed, is it easier to pick up some especially talented people who, maybe before, competitors might have had, just given the dislocations?

Absolutely. It's a lot more easier as compared to a year back, with domain knowledge and so on, because there's lots of insecurity in the market at this time. And everybody wants to be with any company that's a bit more solid. And there's quite a bit of confusion in the market.

And as you know, some of the problem is that the Indian software industry model per se. So what has happened is when (inaudible) dies in the US, seven companies in India also start selling. And that's not a good business model. Meaning if you're going to be dependent on the health of another player. But that's been a learning for the Indian software companies.

And there's a lot of -- that's happened a lot with respect to in the insurance and finance industry. There are lots of players out there, lots of employees who would find -- who would like to get better opportunities out there at the present time.

And in terms of the current competitive situation, it's clear that you guys are dominant. But in terms of some of the bigger players who may or may not be entering this space -- maybe they're not at all -- I wanted to ask, who would be -- who, if shareholders should worry about certain larger competitors, who would they be? And what, if anything, can keep you up at night in terms of potential competitors?

Well, this is a lot of complicated answer. We don't know who's going to emerge out and suddenly try to become our competitor, because at the present time, it is a very fragmented industry. And that's what we are trying to undo. We're trying to undo the fragmentation in the industry.

I'll give you a simple example. We talked to four channels. Look at any one channel. Pick up an exchange. In each area in the -- on an exchange -- first of all, either there is no competition or there will be some player in the local market trying to do an exchange.

If you go into a carrier business market -- now there we are a smaller player. There are much larger player there. I mean, there's players like Computer Science Corporation there. There's [Rebus] out there. There's BMSC out there. These are large players -- much larger players, who have been there for a long time. Now we are a beginner in that market -- the back end computer -- the PNC back-end market.

That's a market where we need to take away their business. And we feel, as we gain in size, we will get more of that business. And part of the reason is the larger insurers like to deal with larger companies, because they feel their risk factor is lower.

And if you -- especially if they're going to give a next -- if they have to give a next $30 million deal, they don't want to give it to a company whose revenue is $40 million. They would rather give it to somebody whose revenue is $1 billion or is much higher.

So we think with each passing day, as our revenue goes up, our chances of getting that next back-end large deal increase. But clearly there are larger players in that market. Again, it gets complicated. In the broker business, each country -- in each country, we have a different competitor. We don't have any one competitor in the broker business at all. In the BPO market, I explained to you how complicated it is and how we are the dominant player and second largest is quite small.

So really there's no one player that I could tell you that who could come out and say, well, we'll basically go and target Ebix's business. Because Ebix more and more is continuing to become an infrastructure services player. We're more and more trying to become that airport that anybody would like to visit and not even think that Ebix is the airport.

That's the model and that's what we're trying to do. But then again, in the areas like back-end systems, there, we will have to struggle and beat the bigger players who are already there, like CSC's of the world.

Well, I certainly like your attitude. You know, it's the old joke -- the old-fashioned way of winning business is taking it from someone else. And good luck to you. You're doing a great job.

[Ron Graham].

A quick question about the change in auditors. Can you just kind of address what the rationale was? There's been a few changes, I guess, for auditors.

I could simplify that answer. Assuming, again, these issues, I can speak to in all. When we file these answers and 10-Ks and so on, we express that. It was simply a mutual decision, more of a decision where it becomes -- sometimes it becomes a pricing decision. Sometimes it's a decision where an auditor has to make a decision whether a business is worth it for a particular price or -- and so on.

So I couldn't really -- it's a difficult question for me to comment on. But all I can tell you is -- if your question is, did we have any differences of opinion and that's why they left? No, we did not have any differences of opinion, that's why they left.

That is absolutely clear -- we have gone on record, have said that in our 8-K and so on and that the auditors have given us concurrence. After the -- since they've left, the auditors have been very helpful to us in terms of giving us concurrence on the previous years and so on. So we have tremendous relations with them. So there's not a relationship issue at all.

I know you're -- I wasn't suggesting there was a difference in opinion; I was -- I know you're very tight on your costs. I was just wondering at what point does continuity kind of trump a lower price? That's all I was (multiple speakers) [asking].

Well, meaning, as you know, these are discussions that I would rather not have on the conference call, first of all. But having said that, we have been through a comprehensive study of, as the Company grows, what our needs are and who we should go with. And we chose our next auditor who we have chosen.

And we take this decision rather seriously, when we make any audit changes. It's not an easy decision for us. And we try and do a very thorough job on trying to make sure that we don't have to do these changes every other day.

Okay, thanks for your help.

Vincent Capozi.

I just wanted to follow up on a couple of things I just remembered. When will you be having to show taxes? I mean, in other words, when are your NOLs going to be coming off?

Well, that depends. Meaning, we have -- as you see, we have essential NOLs out there. And it depends on over a period of time. Meaning at the end of the day, it depends on where you're located and so on. It's a rather complicated answer to that.

But if you're -- meaning we have [ENY ex] Partners helping us work through it. And we'll, as we go further into that study, if there is anything meaningful that comes out, we'll share with the market; but right now, there is nothing that we know of that is changing where we are. Meaning you could see slight increases as we go forward, but that's all we know right now.

We are in low tax jurisdictions, which kind of helps us. Meaning, for example, we are in India, which is a $0 -- as you would have seen in our press releases. It's not something only unique to us. As you know, all software companies, any software work that happens in India, all the big players have their own software exports (inaudible) as we call them. And we have one too. And that gives us a tax-free status in India. And that's very helpful for any software company.

All right. Was one of the reasons why you wanted to buy that acquisition, that public acquisition, because they had substantial tax losses?

No, that was not the reason. We were going after -- we don't buy companies just because there are substantial tax losses. I must answer that question a bit more clearly.

Any time we look at an acquisition, we don't even make an acquisition just because they have lots of profits. I'll put it another way around -- buying of a company is a big decision. You've got to understand if one has to kind of [thoroughly] understand -- my first criteria in this company is, if we are looking at an acquisition, does this give us a chance to become a dominant player in the next two to three years? If the answer is no, we will not enter that business. It's as simple as that. That's the first criteria.

The second criteria after is are there recurring cash flows? The third criteria after that is what are the synergies that we can put in place? Where is it? Where is it going to lead us? What is the customer base they have? Is that a customer base that we want to have? And how does it fit in? Is the technology similar to us? Or if they have -- sometimes they might have old technology that we want to replace.

We feel that we have the current technology that can just fit in and maybe we can get more revenues from the same customers. So it is -- it's a rather more complicated answer.

We are far from a stage where we will just buy a company just because they have tax losses. Meaning, I -- at least in my time, that's not going to happen in Ebix. We're not going to make decisions just based on trying to make the financials look right.

We are a futuristic company. We want to make decisions that will help us not only in the short-term, but in the long-term and also give us something -- some dominance in some market, if you're going to make that acquisition.

Right. One of the things I noticed, from your third quarter to this quarter, I know that your net income was higher. But your cash flow, I believe, was quite a bit lower. Can you speak to that?

Of cash flow lower -- Bob, do you want to comment to that one?

I think your cash flow in the third quarter was about $8.7 million and your cash flow this time was like $7.1 million, or something like that?

Yes, I'll comment. The acquisition of ConfirmNet was done essentially by cash on hand. And that was the biggest reason for --

But I'm talking about cash flow from operations -- cash flow from operations was quite a bit lower.

I'll get back to you with an answer.

Okay, thank you.

I would like to tell you the answer probably would be no, but I'm going -- we're going to get back to you on that one.

All right, good. Thank you. Thank you very much.

[Simon Barouche].

I noticed the fourth quarter revenue was slightly lower than the third. Was that partly due to currency issues? Or if currency had stayed the same, would revenues have increased?

Totally because of the exchange. It would have been $2 million higher, if you look at it, basically. It's basically the exchange.

Right. So if currency had not changed from 3Q to 4Q, you're saying that there would have been an additional -- how much revenue in --?

There would have been additional revenue. Now, again, when I gave you the $2 million number, I was taking an average through the year. So I'll have to give you the exact math. But it will be anywhere between $1.5 million to $2 million, just between third quarter and fourth quarter.

I have it in front of me. It's $1.6 million.

$1.6 million.

Okay, thank you.

There are no further questions in the queue, sir.

Well, thank you very much for being here. We're hoping we'll see you guys in the next conference call. But having said that, I would end the conference call now. Thank you.

Thank you. This concludes today's conference. You may now disconnect.