Ebix Inc (EBIX) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ebix first quarter 2011 investor call. At that time all participates are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator instructions). As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host, Mr. Neil van Halden. Please go ahead.

Welcome, everyone to Ebix Inc.'s first quarter 2011 earnings call. Joining me to discuss the quarter is Ebix Chairman, President and CEO, Robin Raina. Following Robin's remarks we will open up the call for your questions to be addressed by Robin and the Ebix CFO, Robert Kerris.

Let me remind you that the primary purpose of today's call is to provide you with information regarding our first quarter fiscal year 2011 performance. However, some of our discussion or responses to your questions may contain forward-looking statements. These statements are subject to risks, uncertainties, and assumptions. Should any of these risks or uncertainties materialize or should our assumptions prove incorrect, actual Company results could differ materially from these forward-looking statements. All of these risks, uncertainties ands a assumptions, as well as other information or potential factors that could affect our financial results are included in our reports filed with the SEC, including our most recently reported Form 10-K, for the year ended December 31st, 20101, particularly under the heading "Risk Factors."

At times in our prepared remarks or in response to your questions today we may offer certain additional metrics to provide a greater understanding our business or quarterly results. Please be advised that we may or may not update these additional metrics in future calls. Our press release announcing the first quarter results was issued a few hours back, and the audio of this investor call is also being webcast live on the web at www.ebix.com/webcast. You can look at Ebix's financials beyond what has been provided in the release on our website, www.ebix.com. The audio and the text transcript of this call will be available on the investor home page of the Ebix website after 2PM Eastern Time. Robin will open today's call with a few prepared remarks, and then we'll open up the call for questions. Because we do want to address as many of you as possible, I do ask that you limit yourself to single question today. With that, let me turn the call over to Robin Raina.

Thank you, Neil. Good morning, gentlemen. I'm going to take this opportunity to discuss the results on the financial and quarterly fronts while giving you incite in to where Ebix would like to go from a future visions perspective. On the financial front, we're extremely pleased with the results. Our press release yesterday morning detailed these results. So I'll concentrate on talking about just a few financial metrics. Highlights of the quarter were total Q1 2011 revenue growth to a record $41 million an increase of 27% as compared to Q1 2010 revenue of $31.6 million. The Q1 2011 results include financial results from the A.D.A.M. acquisition for 53 days. $4.2 million in revenues, beginning 7th of February 2011. In the full quarter, Ebix would have received another $37 million of revenue from A.D.A.M. Two, the exchange channel grew 36% year-over-year to $31.1 million or 78% of Q1 2011 revenues. Reflecting the onetime acquisition of (inaudible) of $1.8 million

In the quarter, Ebix supported an operating margin of 39% for Q1 2011, as compared to 40% for Q1 of 2010. This implies that our operating margins would have been 43% in the quarter if we were to exclude the nonrecurring expenses directly associated with the A.D.A.M. acquisition, specifically the $1.4 million in investment banking fee, and the $0.4 million of employee severance costs. Based on the nonrecurring trends, we can see that we are well on target to achieve the $0.15 or more of accretion from the A.D.A.M. acquisition over a full-year period.

Operating cash flows continued to be strong at $10.3 million in Q1 of 2011, in spite of nonrecurring cash outflows of $4.1 million impacting it. Like the early payment of an (inaudible) amounting to approximately $1.6 million, $1.4 million associated with a one time payment of investment banking fees for the A.D.A.M. acquisition fee, $0.4 million of one time severance charges for A.D.A.M. , and approximately $0.7 million payments made by the Company ask the closing for A.D.A.M.'s pre-acquisition period expenses.

The only convertible debt remaining as of March 31s, 2011 was for $5 million. Subsequent to the close of Q1 2011, we have retired this remaining $5 million dollars in convertible debt for total consideration of $6.8 million. The payment represents the convertibles principal amount in a conversion gain of $1.8 million, related to the appreciation of Ebix common stock. We elected to redeem the convertible debt using cash, rather than common stock.

During Q1, 2011, the Company repurchased 106,483 shares of common stock at an average price of $22.49 per share for an aggregate amount of $2.4 million. Year to date, the Company has repurchased 377,573 shares of Ebix common stock in 2011 for an aggregate consideration in the amount of $8.5 million, representing an average price of $22.50 per share. If you were to add up the amounts used for purchasing stock from the market, and the amount used to redeeming the convertible debt in cash, rather than in stock, the Company has basically paid $14.3 million in 2011 to date towards reducing dilutive share count in the market.

The $39.3 million of bank deposits, $35.6 million in cash, and $3.6 million of fixed deposits for 90 days or more as of March 31st, 2011, $26.3 million additional borrowing capacity as of April 19th, 2011, and the continued growth in operating cash flows, Ebix is well positioned to use this cash to work supporting continued organic growth, developing products and services, and making strategic accretive acquisitions in the exchange arena.

In terms of new bookings, we continued our focus on signing contracts that are recurring in nature, we signed new contracts with named accounts like State of Ontario, NFU, QBE Holdings, MetLife, BanCorp Investment Services, AllState, Prudential, Penn Mutual, Guardian Life, Lincoln National, Fireman's Fund, Hartford, Capital Rock, HSBC, Great American Insurance, Catholic Health Initiatives, CBIZ, American Collectors Insurance Company, Assurant, United Airlines, Hines, Dollar General, Schneider Electric, BNSF Railway, Kroger, Betchel Jacobs, Signature Homes, City of Phoenix, and CB Richard Ellis. This list of names is a sample from the contracts signed by the Company with renowned names in the first quarter of 2011, and is by no means a complete list of contracts signed by the Company in the first quarter of 2011.

The Exchange channel grew 36% year over year to $31.1 million or 78% of the Q1 revenues. The BPO channel grew 4% year over year, to $3.6 million or 9% of the Q1 revenues. The Broker Channel grew 32% year over year, to $3.8 million or 10% of the Q1 revenues. The Carrier channel dropped 35% year over year, to $1.5 million or 3% of the Q1 revenues. In summary, we see this quarter as another step forward in our efforts to build a solid, cash-generating enterprise.

Let's now talk about Ebix at a qualitative level. I'll try to do so in a question and answer format. I'll try to address some of questions that we get asked often by our investor base.

Question, what is Ebix's cash growth record? Answer, if you were to look at the Company's operating cash flow record over the last five years, you will notice operating cash flow growth of 1,105% between 2006 and 2010. The operating cash flow over the last five years grew from $4.4 million in 2006, to $52.8 million in 2010. To examine cash flow and cash usage further, we could look at the Company's track record, beginning the year 2010. The Company began 2010 with a cash balance of $19.2 million. During 2010 and through today, the Company continues to generate strong cash flows. The Company has used its cash in a number of ways. The Company utilized $16.9 million of cash towards investing in business acquisitions. The Company used $29.3 million of cash to eliminate all outstanding convertible debt. $19.25 million of cash has been used to repurchase shares of our common stock since beginning 2010. After using approximately $64 million of our cash, the Company still has approximately $34 million of cash on hand as of today. We see this as a good measure of our ability to generate sustainable, strong, cash flows from our operating activities.

Question, why are the Company's sales and marketing expenses lower as compared to other SaaS vendors in the market? Answer, Ebix is focused on delivering relatively higher operating margins as compared to other SaaS vendors. Thus we cannot just blindly emulate other software players. Our goal is to create new benchmarks for ourselves on that front while ensuring that we maximize productivity from a sales and marketing stand. Ebix's focus, in terms of sales and marketing, is to reach out to the top 100 insurance carriers in the United States, along with the top 50 distributors of insurance products in the United States. But even for this rather focused approach to sales and marketing is due to the fact that these 100 top carriers account for more than 75% of insurance premiums in the U.S. Our sales and marketing attempts, therefore, are focused on selling our services to these top 100 carriers and software distributors. A majority of the top carriers and distributors are already users of one or more of our exchanges. This means that our sales and marketing efforts are primarily targeted at cross-selling to existing customers, rather than trying to open new accounts. As existing customers, we have that understanding the organizational structure, and knowing the major decision makers. Our sales and marketing focus accordingly is focused on nurturing that relationship by cross-selling new services to existing customers.

Ebix exchanges also provide for a networking effect, which allows us the luxury of not having to reach out and sign each and every broker on our exchange. When Ebix launches a new exchange, its marketing and sales attempts are focused on signing the top three distributors in the market, rather than immediately signing every potential client in that market. We believe if these three top distributors agree to join our exchange, they have the power, in turn, to bring all of their insurance companies with them to the exchange. Bringing the top distributors to our exchanges, creates a networking effect, whereby all their insurance carriers want to join the exchange. All of these carriers work with thousands of other brokers. Each of these carriers, in turn, can begin requiring the other smaller brokers to join the exchange. For example, signing a large distributor on our platform can result in thousands of agents and investment advisors joining our platform. Likewise bringing a large insurance carrier to our platform can bring thousands of agents to our platform. Accordingly, our sales and marketing attempts do not require us to advertise in magazines or other broad-based advertising methods.

Further, unlike other software providers, which pay sales commissions to their salespeople for the next three to five years after they are signed, Ebix primarily pays commissions for the first year only, and such commissions are based solely on actual cash collected. Our low commission structure is derived out of our excellent potential record. Our exchanges have a minimal annual client attrition rate. We expect each salesperson to cross our news services to the same client as opposed to the more difficult task of trying to hold on to an existing client. All of this translates in to lower sales and marketing costs, and also ensures that we have a highly targeted and productive sales force that focuses on a defined customer base.

Next question, is Ebix committed to SaaS? Can it produce cutting-edge, on-demand, SaaS products while keeping its R&D costs in check? Does meaning offshore mean compromising in quality? Does SaaS services translate in to large deferred revenue streams?

Answer, Ebix started building SaaS-based products a decade back. We started building anytime, anyplace, anywhere based SaaS products for PNC brokers in the year 2001 when no other software provider in the United States was doing that. At that time we took the decision of building a domain knowledge base and technology knowledge base offshore. We started building our offshore bases and learning centers where knowledge could be multiplied all the time at reasonable prices. We started building cross knowledge across all products to ensure that we could maximize productivity. We decided to focus on building software with a common code base worldwide with customizable administrative tools, with translation tables, with multi currency as added strength. We decided to invest in young, technical engineers, and computer application engineers, and teach them insurance and advanced technology. Today this pursuit has allowed us to create off-shore bases that have more than 60% of our employees worldwide. Our off-shore operations have received Carnegie Melon's highest quality ratings (inaudible) for a software company. Besides quality and assuring a common code base, our offshore operation also provide tremendous cost efficiencies that provide us a competitive edge.

We today stand completely committed to SaaS. All of our work being undertaken today is 100% focused on SaaS based, back-end systems, all exchanges that can generate recurring revenue streams. As a global software vendor, we prefer to be technology agnostic, though, most of our development work is being done on Microsoft.net, or JAVA, or JSP platforms. All of our code is written offshore, and all of our products have been created offshore since the last eight to ten years now. Putting all of our development offshore has allowed us to maximize cross-knowledge, deploy the same tool across multiple products, et cetera. That, again, is a big competitive edge to have.

As regards to question whether SaaS always mean live deferred revenue streams on the balance sheet? The short answer is no. In case SaaS services are sold over a multi-year period, and provided that these services books larger accounts receivables for such services, until they're actually provided, then deferred revenue streams are bound to be large. Ebix business model and billing practices are substantially different from these kind of SaaS vendors . We primarily bill for a fast-based transaction and subscription on a quarterly and monthly basis. We bill only a few points on an annual basis, and we do not bill for any of these revenue streams for a period of more than one year to any client. Accordingly, the Ebix deferred revenues tend to be in line with this billing pattern. This may be unlike some of the other SaaS providers who may carry large amount of deferred revenue streams, and they might tend to build for multiple years at the same time. High or low-deferred revenue streams have nothing to do with being a SaaS vendor.

Question, why does Ebix make acquisitions? Answer, Ebix makes acquisitions not to run the businesses of companies we acquire, but to obtain customer relationships, and (inaudible) our product, which fit in to our platform and make it easier to cross-sell new and existing products, to new and existing customers, which in turn drives organic growth. This is a fairly common practice amongst technologies, software driven service providers. This practice allows growing technology or software driven service providers to add to their product or service platforms without the expense of making large marketing expenditures to obtain new clients. The insurance industry is traditionally a relationship-based industry, and as such adverse to change.

With the view to us providing end-to-end seamless transactions across different channels, product, processes, and geographies, we decided to make opportunistic acquisitions that gave us access to these disparate strategic processes, channels and regions have also provided us a relationship entry point across niche client bases. As a result of these acquisitions, we have firmly established our footprint, establishing true value creation. In a sense, these products and customers are added to our existing platform providing for broader reach and leverage within our industry, allowing us to provide for broad end-to-end functionality because of these acquisitions.

A good example of one such strategic acquisitions would be our acquisition of Easy Data in October 2009. The acquisition of Easy Data provided Ebix access to tens of thousands of life and annuity users utilizing Easy Data fast-based CRM applications. The interfacing of Ebix to CRM in to our existing life and annuity exchanges made it possible for every Easy Day user to get quotes, illustrations, and research from multiple insurance companies, in addition to being able to electronically transmit commission, installments, accounting and policy data with any of these insurance companies for which they carried licenses. The acquisition of Easy Data also gave us an opportunity to cross-sell not only at exchanges to this large user base, but also cross-sell the new CRM applications to our pre-acquisition exchange clients.

Question, are Ebix operating margins sustainable? Answer, we believe that we can sustain and believe are grow are operating margins as we expand our reach across the global exchange market. We are pleased with our operating margins in Q1 2011, that would have been 43% if we were to exclude the one time acquisition related charges associated with A.D.A.M.

Question, what are Ebix key strategic initiatives at present?Answer, one of our key strategies is cross-selling different services to our existing clients. We already have relationships with some of the largest brokers, bankers, insurers in the world. Since they are using one or more of our services at anytime, our goal is to cross-sell them a broader spectrum of services and penetrate deeper in to each of these organizations. Over the coming quarters, we intend to focus sharply on ensuring that our attention is unwaveringly focused, specifically on these clients that represent solid, long-term client opportunity for the Company.

On the technology front we continue to be focused on a simple philosophy of being a few years ahead of our competition at all times. Today Ebix does not sell any legacy platform or service in any part of the world. All of our services are being delivered on cutting-edge software platform, the latest architecture. The Company continues to invest strongly in research and development initiatives, we are developing the next generation exchange for annuities, the project code name Brave New World, BNW is starting to replace our existing annuity exchange with this new highly scalable and flexible BNW exchange in 2011 itself. We are also building an end-to-end enterprise platform, Ebix Enterprise, to replace our existing employee benefit services in the first step, and then in a phase manner emerge as a central enterprise platform for the Company across all functional areas. This system will also start deploying in the year 2011 itself.

One of our initiatives, that we are quite excited about, is our deployment of end-to-end health exchanges. We have more pieces to the puzzle than any other player in the market and that puts us in a unique position. We are also looking at expanding our reach in to the physician's clinics, hospitals, et cetera, in terms of providing a much-broader range of functionality than we provide today. Our belief is that a prospect becomes an insured and then sometimes a patient, implying that there is sense in connecting the dots between the insurance and hospital and clinical space so that we're able to provide end to end services to any United States citizen needing healthcare.

We are developing new cutting-edge broker systems to replace our existing broker solutions. Some of the other initiatives being pursued at present are servicing an annuity policy, for the ability of an annuity policy across multiple carriers, life insurance e-policy deliver with (inaudible) E-signatures and on demand cloud computing infrastructure in countries like Latin America, to provide property and casualty service systems on a utility services basis. This list is just a partial list of initiatives that the Company is pursuing, and by no means represents a comprehensive list of an our R&D initiative.

We continue to believe we have an opportunity to be the largest insurance software player worldwide. Our belief has been further strengthened by continually being able to add new clients. Our ability to deploy end-to-end solutions, places us in a unique position with respect to our competition. For example, in the United States life insurance market, we compete against some large CRM Companies like Sales Force, Oracle, and Microsoft. None of them is able to offer a solution that would allow the end user to seamlessly use the CRM solution in conjunction with (inaudible), validate the policy correctness, second it to an R&D exchange, bind the policy, get an exam done, possibly issue a signature policy, service the policy, clear the transaction in terms of money transfer, et cetera, all while being logged in to the CRM solution. Only Ebix can offer a solution like that. And that by itself opens up a lot of opportunities for us. To maximize our opportunity and reach, we're working towards building a largest sales organization, targeting this very opportunity. However, we intend to pursue it in a staged manner related to success, rather than in a front-loaded manner.

In summary, are pleased with the developments announced today. We continue to believe in our ability to grow revenues organically and inorganically. We intend to remain focused on creating new benchmarks in operating margin and insurance technology leadership. We intend to remain focused on fundamentals.

On a personal note, as a shareholder, who is holding approximately 4 million shares with an average price of around $0.78, I understand the value associated with building a fundamentally strong cash-generating business. The senior management at Ebix, who has mostly held on to the stock over the years, seems to understand that too. We remain committed towards trying to build a cutting, insurance software business, software services business, that hopefully one day can be the leading insurance software services provider in the world. The talent we have taken on is to try to do so with our level of operating margins, rather than trying to do so at any cost. Finally, I look forward to describing our future progress when we lead our second quarter 2011 results in the early part of August.

With that, let me turn the call back to the operator. So that we may take your questions.

(Operator Instructions). Our first question comes from Mike Latimore of Northland Capital. Please go ahead.

Great. Thanks. Nice quarter there. In terms of the -- Robin you talked about operating margins, 43% in the quarter, and then separately you said you could grow operating margins. When you talk about growing operating margins, were you talking about from that 43% level?

I think what I basically said was I don't want to go in to the most aspects of things, saying 43% or 40%. I think we have always said -- as a standard practice, we have always said we are committed to growing operating margins beyond 40%. Now having said that, whether it's 43%, or 45%, I don't think I'm in a position right now to give you any guidance on that.

Got it. And how about -- what -- was there any influence from FX on revenues in the quarter. And if so, how much?

Well, I'm sure the FX did contribute a bit towards revenues coming out of Australia. However, I'm not so sure what that number is, I can specifically get back to you with that answer. It will be primarily related to Australia. I think the Australia dollar has been a lot more in the second quarter -- we'll say the first quarter. So I don't have specific numbers to answer your question.

Just last on that -- I mean, you reported $4.2 million over 53 days. If we kind of take that daily revenue number is that through the baseline we should think about in terms of A.D.A.M.'s contribution?

Yeah, I think approximately. You could kind of pro rate it, basically in terms of, you know, the revenue run rate, you see. But, I mean, at this point, we expect to start with, we expect A.D.A.M. to be running at a run rate of around $7 million or close to $7 million, and clearly we want to grow that, so we're kind of encouraged by the fact that since we acquired A.D.A.M., we have already seen sales momentum as reflected in the -- traditionally as you know (inaudible) the revenue run rate, since they are a public company. So we believe we're set to be at a revenue run rate of $7 million, or, you know, hopefully we'll be able to grow that.

Okay. Thanks a lot.

Thank you.

Our next question comes from Walter Ramsley of Walrus Partners. Please go ahead.

Thank you. Congratulations, great quarter, Robin, Robert. Got a couple of accounting related questions. The amortization of the acquired intangibles, do you have a number for that?

Yes. Actually let me get back --

I think (inaudible) Bob is that true? And you will see all of the numbers in that. So if you --

Oh, okay. I just (Overlapping speakers).

The Q will be filed and it has all of the details on that.

I'll get back to you with that. What is the other question, sir?

Some of the other non-cash and nonrecurring charges I just wanted to make sure I had them straight.

Sure.

The put option is recorded in the quarter for 354K.

Yes, that's the increase in the value of the general liability. Yes.

And that affected the earnings?

That's (inaudible) the put option to the former shareholders of Easy Data. Measured fair value at the end of the quarter. It just so happened that the liability increased in value this quarter which was the cause of the non-operating loss that you see there.

Okay -- Walter if your question is that -- was there an expense, of course it was an expense.

Okay. (Overlapping speakers).

And it can go either way, as you know --

Right.

-- depending on how (inaudible) on that.

You bet. And then $1.39 million for the investment banking fee, that was all in the quarter; correct?

Correct.

And the mention of an additional $700,000 of acquisition-related expenses is that part of that --

$700,000 of expenses that pertain to A.D.A.M.'s obligations pre-acquisition that were funded after the acquisition.

From a 1.39 or --

Walter let me answer that question. Basically if you are asking about what was expenses related to nonrecurring expenses. Outside of the $1.39 million of investment banking fees. The $700,000 number that you are talking about is related to operating cash flow. That's an additional number on top of $400,000. That's not an expense for Ebix, it's not an operating issue. However, these are pre-acquisition obligations that A.D.A.M. had. We had to make those payments and they affected our cash flow, though they are not related to our operation expenses since we acquired them -- however, since we had to pay for them, that's how it works, it comes out of operating cash flow. But it was not an expense.

I get it. That's a good explanation. Thank you. That's not so easily understood. The stock-option expense was $556,000?

The stock-option expense?

Yes, that's correct. Non-cash expense, correct.

All right. And just one last thing, the foreign exchange gain of $1.89 million. Can you just clarify where that came from, and how it fit in?

Sure. One second, please.

Okay. The foreign exchange gain, I think it is basically related to international obligations that are basically it -- you know, you apply FAS 52 related to any international receivables between countries, and that's basically what it pertains to, and currency -- it is related to all of the currency changes that have happened, and as the currency strengthens, sometimes it can go either way, and this time it had a positive influence.

Okay. But that was outside of the income statement.

It is outside the operating income, absolutely. It is below the line, and we as a Company, as the operator team don't pay much attention to any items below the operating line.

I'll get back to your earlier question on the amortization expense.

Oh, yeah.

Talking the acquisition of A.D.A.M., the acquired intangibles added $225,000 in amortization expense in the quarter, on a normalized basis it will be $335,000 for a full quarter. Okay?

Okay. And some of the other acquisitions from prior years, were there any amortizations charged against those?

Well, obviously for all of our acquired intangibles, but those disclosures are in our Form 10-K.

Right. Well, I'm just trying to get the quarter for the quarter. That's all. I came up with a -- kind of a modest --

You will find all of that the Q --

Okay.

Depreciation, amortization, fourth quarter is $1.877 million combined.

Right. Anyway, appreciate the call or taking the questions. I'll get back in to the queue. Thank you.

(Operator instructions). Our next question comes from Jeff Van Rhee of Craig-Hallum.

Thanks, several questions. Robin as you look at the four business segments as you define them, could you touch on each and give us a sense of the operating environment right now. You have discussed at some strength from time to time, carriers, and what is driving that segment, what the headwinds, what the tailwinds are. Same for brokers, BPO, and exchanges. You don't have to go in huge depths but I would just be interested if you could walk through each and give us a sense of the operating environment.

Absolutely. Let me start with the area we are struggling with, which is the carrier channel, which is basically selling PNC. When we say carrier channel, we mean providing back end PNC systems to insurance carriers. That is an area where we are still continuing to struggle, as you see with our revenues are down 35% year over year in that area and one of the reasons for that, and we -- clearly the PNC market is still continuing to struggle. There is -- there are more deals out there in the market, but that doesn't mean decisions are being made at the pace that we would like them to happen.

Secondly, our revenue model has changed. If we sign an insurance carrier now, you wouldn't even realize that, because earlier when we signed an insurance carrier, you would know because we would suddenly have a big license stop, we would have a big license booking because insurance carriers tend to pay you big license fees, however with the new recurring model that Ebix has built, because this was only business where we didn't have a recurring revenue model, the carrier channel, with the new recurring model, there are no license fees we are charging on a month to month basis, on a pure utility basis. Now we believe in the long run, this strategy is going to give us very good results because that's how we built Ebix our business over the last decade or so. However, in the short-term, what it is doing is that when we sign a carrier, we will get anywhere between $50,000 to $100,000 a month in revenue versus signing multi-million dollar deals and booking them in one year. However, these deals, they will be SaaS oriented, utilities basis, so revenue will happen for -- you know, we own the rights to the product and so on, and we will be able to build a client for a very long period of time.

So we believe this is a much better model than the license model, where you build the license up front, and after that you would struggle with what do you -- how do you make recurring sources of revenue from that client, except for professional services, and some amount of support which would be a minuscule portion of the license fee. Now -- so that's an area where we will have to continue to work, we're trying to convert -- with the change of this model in to a recurring-base model, and, you know, delivering services over the cloud and so on, we're testing success, but our success is mostly in the mid-tier market, in the mid-sized carrier market, the small and the mid-size. We are still not gotten a large insurance carrier to sign on to our PNC backend platform. So we'll continue working towards it, and we have some positive news there, we will definitely report it. Presently we don't have one in the carrier channel, except that we have signed a few -- you know, small and mid-sized carriers, which will give us revenue -- recurring business revenue, but nothing substantial that will change the -- any particular quarter revenue streams.

Now when you go in to the other channels, BPO. BPO is a channel where we are basically running flat right now. When you see the revenue growth, it's basically minimal. And that's primarily somewhat related to the -- to the slump in the construction industry. That slump continues. As you know, meaning the housing market is still not doing well. People are still trying to dispose of their old homes versus you are not going to see builders constructing newer and newer homes. Now why is that important? In the BPO -- what does the BPO mean to us. Our BPO is providing (inaudible) packing services on a SaaS platform. Now all -- approximately 35% to 40% of these service gates are created in the real estate industry. And if a real estate industry suffers, our service gate market suffers, and that is what is still happening.

So we're continuing to open up other sources, other industries, we're working on putting a few pretty large substantial deals, which can really impact BPO revenue substantially, but at the same time we have to face headwinds still now. Having said that, I feel -- we feel bullish about the BPO segment. There are a lot of larger deals out there in the market, and we believe if we sign one or more of these larger deals, it will change the BPO revenue dynamics, and (inaudible) channel is our broker channel. In the broker channel, there are two markets that you could really focus on. One, you could look at the U.S. market, and then you look at the outside market.

In the U.S. market, Ebix is not -- is not a top tier two player. Ebix is behind the top two players, and the top two players have been Waterford and Applied. They did a great job over the last decade of trying to deploy these broker systems to the market. However, we believe what we did differently at that time, was built -- in 2001, we started building these SaaS based services. At that time, we took a decision that we will try and focus more on exchanges, and we will focus more on the broker system SaaS market outside of the U.S. than in the U.S. And the reason for that rational was that until 2001, that's all Ebix did. Ebix's entire focus on deploying broker systems in the United States. And that business was not doing well. Ebix had $19 million in losses in the year 1999.

Now, that business -- I -- felt at that time as we analyzed it, we felt that our margins from that business cannot be anywhere closer to the margins that we were trying to dream of, and so we felt -- and the markets were highly fragmented, and the market was kind of shrinking at that time. And virtually 90,000 PNC brokers had become 45,000 brokers so in the U.S. we decided we were going to take a back seat. The broker system represents a fundamental of our Company, but we will deploy the system in the U.S. not make huge spends on them in terms of sales and marketing or in terms of, you know, huge technology expenses. We would rather focus on international markets. Today that has started to change.

Our belief today is that the way we have built the model, we have created a very -- we have built 100% of the recurring revenue base through this business. Through the broker-system business in the U.S. And 99% of the clients would like us to host them in a SaaS basis. There will be 1% who could basically -- some of the larger brokers might want to wholesale on a SaaS basis themselves, but in respective of that they pay for it on a utilities basis, the amount of money we make is a lot more, and the margins are consistent with the margins that we want, and the margins that we get from other services like exchanges.

So today the top process has changed, and we are gradually trying to build our sales force in the U.S. We do believe that a tremendous opportunity, especially considering that Ebix has not been one of the top two players, we feel there is such a big opportunity to replace majority of the market in the legacy systems in the U.S. today in the broker market, and we believe that -- and they can't afford to go on to the new license-based business model, which will cost them hundreds of thousands of dollars, brokers, and that is one of the reasons that brokers don't deploy broker systems so quickly, because they can't afford the cost of these. But now with the utilities model that Ebix has build, it makes the moment a lot more easier in the United States, where we feel the market that we want to go after, we see a lot of opportunities today that we are in to, and we feel very good about it.

To give you an example, recently we signed AAA. AAA, which is a large -- everybody knows AAA. And they -- we basically picked up one of their offices of AAA. Now that is -- and that deal is reasonably substantial and it has not yet been recognized in terms over any recurring revenue or any license revenue or anything like that. Now having said that, that deal itself has opportunity to multiply, simply because AAA is a national player with lots of offices, it will all depend on our delivery, how well we do the job, how well we execute, and, if we execute well, this itself could be a large deal. Now having said that we have multiple other deals like this in the U.S., which is remarkably different from what our focus used to be in the U.S. in the past.

Outside the U.S., our broker service systems have always done well, and our focus outside of the U.S. for the larger brokers, and the larger broker market, our product was seen like the Cadillac of the market. It was seen as the -- today what we're trying to do -- we're trying to take that up -- higher-end product and trying to provide it to the mid-tier brokers also abroad. So it's a market that is -- we believe that we can continue to grow outside of the U.S., meaning if you look at some other larger brokers in the world outside the U.S., some these brokers tend to be largest than the largest of insurance companies, and they have 15,000 employees at times at times, and at times 25,000 employees. When you look at players like (inaudible) or Lockton these are really large brokers. When you look at any one of these (inaudible) for example, all of these work with Ebix in international markets. We are in the midst of -- we at anytime have approvals from these large players to deploy our solutions in multiple countries. We at anytime have a clear order base from them. In recent times we have received go-aheads from some of what they call (inaudible) countries (inaudible) countries mean countries which have larger employee basis, and where the revenue for us would be a lot more. So we feel very good about our international revenue, the international opportunity in the broker market.

Now coming back to exchanges, which is the last channel. Exchange channel is primarily where our focus remains. We are -- we believe that the -- a market can be grown in the exchange market -- the exchange markets can continue to grow irrespective of whether the economy does well, or the economy does badly, meaning, one of the -- the factors remains that in the exchange market, when Companies are struggling, when you are in difficult times as an insurance company, one of the things you focus on is you want to reduce your costs. You want to maximize your income. You are looking for that one extra percent of profit. And exchange allows you to do that, exchange allows you to streamline your process, improve your distribution, improve your reach and reduce costs.

Exchanges continue to feel momentum. We feel very good about our exchanges across the world. We also believe there are very large opportunities that exist today in the area of health. We believe we have more pieces to the puzzle than anybody, especially with this A.D.A.M acquisition.

We believe -- I hinted at it during my talk, that we believe that there is another market out there -- you see when you go and buy insurance -- health insurance, you first buy that health insurance and at some point you end up in a hospital or a physician's office, and when you go in you need to get yourselves enrolled and whether you are eligible or not, you need to -- you know, it's finally -- the data flow continues from there, in terms of how the physician's office handles you, how the clinic handles you, how your claims are handled from there on and so on, and we believe you can correlate all of these markets, and create a new opportunity. So I think we feel pretty bullish about the exchange business. I gave you a very long answer, Jeff, sorry for that, but I thought the question was broad and I needed to give you a broad perspective on your question.

Okay. Thanks, and I had just two others, and these are fairly narrow, the Crumps signing was a tremendous signing you talked about at the analysts' day. How do you think about the benefit of Crumps continuing to flow in to revenue over the next handful of quarters and years.

I couldn't comment over the next few quarters. Crumps is a great player, one of the largest distributors of life insurance in the market. We feel very good about it, and again, we'll wait and watch, and see how this deal flows. I don't have anything else to report right now in terms of the impact of this deal and the short and long term. As I said it's a large distributor. They have a very big net to us. This deal could be substantial, but at the same time, you know, I'm not going to count chickens until the eggs have hatched. I'm going to wait for it, and I hate to issue any guidance on that.

Fair enough, and I guess last one for me. In your introductory comments you touched on a lot of wins, a lot of certainly not a lot of recognizable brand names in there, but if you look at the dollar amounts of bookings, you know, we don't see on balance sheet, you don't have a backlog along or anything along those lines. Can you quantitatively or qualitatively address the bookings environment now, and versus what you've seen over the trailing year and any commentary on what you're seeing in the environment as it relates to pipeline.

Well, I can talk a bit at a qualitative level. Clearly our booking volumes have increased. Quarter-over-quarter we continue to increase the amount of the booking and the size of the booking, and so on, and part of it is a sales people are increasing. As we are increasing our sales reach, our bookings are continuing to increase, and they will translate in to -- because of the way our business model is, you know, the revenue will flow as these clients go live. As they continue to go live, you'll continue to see more recurring revenue streams and so on.

I wish I could -- I can't give you a more quantitative answer, because we don't have a precedence of having reported the quantitative aspect of these deals, and again, a lot of these deals are transaction oriented, and so when you -- I think as we go into subsequent quarters, you are going to see the impact of it. But, overall, at the quantitative level, I can tell you with each and every passing quarter, the booking volumes continue to increase, the overall belief is continuing to be stronger in terms of being able to sell. Our sales team, I think we're continuing to add more salespeople, we are stealing salespeople from our competition, and some of the very renowned players and so on, and that is all helping, and a has reduced our sales cycle a bit, so we feel pleased about that.

Okay. Great. Thank you.

Thank you.

We do have a follow-up from Walter Ramsley of Walrus Partners. Please go ahead.

Thank you. Got a couple of metrics -- questions about metrics that maybe you have an answer to or not. The renewal rate, do you keep track of that?

Yeah, we do. Our renewal rate -- you see we actually keep track of who does not renew.

Right.

Because it is very rare that somebody does not renew. If you look at our different segments, it's extremely rare -- I could safely tell you that our non-renewal rate will be a lot less than 0.5% or something like that. It's a meaningless number right now. We don't get people joining our exchange and leaving us.

All right. Great. And organic growth, did you make that calculation for the quarter?

We have -- meaning did we -- this is a question that I would rather have you ask the analysts. We have four analysts on our staff. Some of them -- one on the call, and I'm sure you can address it, because we feel these answers should come from a very unbiased manner from outside parties, because in the past we have given answers and people have started to do organic calculations.

Yeah.

It depends on how you do your -- analysts do it in their own way, and we're very comfortable with that. All of the numbers are reported, as you know of all acquisitions, especially since 2010, they are all -- we have made filings with the past numbers, A.D.A.M. was a public company, everybody knows their numbers. We have filed a -- we have made a specific filing with their audited numbers for 2010. Any acquisitions we made in 2010, those numbers are there.

So we feel people should do their analysis independently on their own, or they should get analysts to do it, because in the past, like I said, we have done different ways and then some people say well, we would like to do organic growth, while if you make an acquisition for 12 months, don't even count their revenue, even after you have acquired them, and we find that a bit weird because if we made an acquisition in a country, ABC, and then in country ABC, if we made an acquisition, and the revenue was let's say $1.7 million a year, and now we grew that $1.7 million to $4 million. Clearly we are going to count $4 million, minus $1.7 million , $2.3 million as organic growth.

However, there are people who have told us that is wrong. They are saying you should not count the $2.3 million as organic growth for one year you should ignore that, so I'm going to respect their opinion. I'm not going to disagree with them. It's just another opinion -- it's another way of doing organic growth, so we really feel this answer should be best addressed by you yourself looking, doing your own math, or by asking the analysts, because each analyst could do it slightly differently, and I'm nobody to comment on it. So -- thank you.

Okay. That's great. Just one other one, I'm not sure if there is anyway to do this, but is there a same-store growth calculation that you can make at least in the exchange area --

Sorry, can you repeat that?

Kind of a retail metric, same-store growth, the growth rate of your existing customers.

I we -- I don't have a calculation and answer to give you right now --

Okay.

I don't understand that question, but --

I was just wondering --

We could take it off line if you could explain it later on better to us, we'll get you an answer.

I was just wondering if your existing customers are stable or growing --

Our existing customers are clearly stable and growing. It depends on their financial strength. Meaning if you see our exchange growth, or I think I talked about cross-selling, where is our EBIT growth coming from, our EBIT growth is coming out of cross-selling. We continue to go to the same client and sell them three different exchanges, meaning today in our investor presentation in NASDAQ, the exchange division had presented a slide showing how when you go look at any client, we might have sold two of our services but there are eight other services to be sold to that client, so clearly we see -- because we have a who's who of the financial client world, what percentage and metric, you know, I don't know how to calculate that to be honest.

Okay.

And if you have specific guidelines for us on how you calculate it. We will definitely give you an answer.

And just one last thing, I guess , is there any reason to expect the Company to not continue to grow on a sequential basis for the year?

That's a very open ended questioned but I can just tell you that we would be highly disappointed that this Company is not growing meaning on a sequential basis. But that's all I can answer. My answer doesn't mean there's a guarantee to Company growing or not growing sequentially. I think talk is cheap and results matter. I think over a period of time, Ebix has proven -- I think we have a 12-year history of having proven that we have been very consistent with what we do. At the same time there are no guarantees in life. We don't issue guidance, exactly for that purpose. We feel that as long as we are a fundamentally strong business we should continue to show growth, but, again, the results speak for themselves other than trying to give forward guidance to us.

All right. Thank you, Robin. To me I think you guys have always done well, and I think the A.D.A.M. acquisition that you recently made is going to be a tremendous success. So thanks again.

Thank you.

I'm showing no further questions at this time, and I would like to turn the call back over to management for any closing remarks.

Well, I'll close the call with thanking everybody for participating in the call today. We look forward to describing our future progress when we release our second quarter 2011 results in the early part of August. Thank you again.

Ladies and gentlemen, this does conclude today's conference. You may all disconnect. And have a wonderful day.