Disaggregation of Revenue
The following tables present revenue disaggregated by primary geographical regions and product channels for the years ended December 31, 2019 , 2018 and 2017:
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Year Ended December 31,
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2019
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2018
|
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2017
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|
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(In thousands)
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United States
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$
|
182,530
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|
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$
|
196,984
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|
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$
|
211,895
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Canada
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|
4,805
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|
|
5,611
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|
|
7,522
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Latin America
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19,755
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19,866
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|
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21,128
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Australia
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33,268
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35,770
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34,366
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Singapore*
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6,549
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7,674
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6,330
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New Zealand
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1,955
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|
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2,015
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1,933
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India*
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300,678
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196,372
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61,857
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Europe
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14,695
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15,387
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17,062
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Indonesia*
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9,706
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7,482
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1,055
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Philippines*
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5,991
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6,483
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623
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United Arab Emirates*
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683
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1,042
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200
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Mauritius*
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—
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3,140
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—
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$
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580,615
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$
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497,826
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$
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363,971
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*Primarily India led businesses for which total revenue was $320.0 million, $217.5 million and $64.3 million for the years ended December 31, 2019, 2018, and 2017, respectively.
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The Company’s revenues are derived from three product/service groups. Presented in the table below is the breakout of our revenue streams for each of those product/service groups for the years ended December 31, 2019, 2018, and 2017.
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For the Year Ended
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December 31,
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(In thousands)
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2019
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2018
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2017
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EbixCash Exchanges
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$
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319,953
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$
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217,457
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$
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64,324
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Insurance Exchanges
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190,067
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192,604
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200,508
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Risk Compliance Solutions
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70,595
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87,765
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|
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99,139
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Totals
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$
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580,615
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$
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497,826
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$
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363,971
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Costs to Obtain and Fulfill a Contract
The Company’s capitalized costs are primarily derived from the fulfillment of SaaS related setup and customizations from which the customer receives benefit through continued access to and use of the SaaS product platforms. In accordance with the guidance in ASC 340-40-25-5, we capitalize the costs directly related to the setup and development of these customizations which satisfy the Company’s performance obligation with respect to access to the Company’s underlying product platforms. The capitalized costs primarily consist of the salaries of the developers directly involved in fulfilling the project and are solely based on the time spent on that project. The Company amortizes the capitalized costs ratably over the expected useful life of the related customizations, matching our treatment for the related revenue, and the capitalized costs are recoverable from profit margin included in the contract. As of December 31, 2019, the Company had $734 thousand of contract costs in “Other current assets” and $1.2 million in “Other Assets” on the Company's Condensed Consolidated Balance Sheets.
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(In thousands)
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December 31, 2019
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December 31, 2018
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Balance, beginning of period
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$
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2,238
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|
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$
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2,401
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Costs recognized from beginning balance
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(708
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)
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(898
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)
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Additions, net of costs recognized
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367
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|
735
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Balance, end of period
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$
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1,897
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$
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2,238
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Contract Liabilities
The Company records contract liabilities when it receives payments or invoices in advance of the performance of services.A significant portion of this balance relates to contracts where the customer has paid in advance for the use of our SaaS platforms over a specified period of time. This portion is recognized as the related performance obligation is fulfilled (generally less than one year). Part of our performance obligation for these contracts consists of the requirement to provide our customers with continued access to, and use of, our SaaS platforms and associated customizations. Without continued access to the SaaS platform, the customizations have no separate benefit to the customer. Our customers simultaneously receive and consume the benefits as we provide access over time. The remaining portion of the contract liabilities balance consists primarily of customer-specific customizations that are not distinct from related performance obligations that transfer over time. This portion is recognized over the expected useful life of the customizations.
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(In thousands)
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December 31, 2019
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December 31, 2018
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Balance, beginning of period
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$
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44,660
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$
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38,030
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Revenue recognized from beginning balance
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(31,507
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)
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(21,697
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)
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Additions from business acquisitions
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769
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16,273
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Additions, net of revenue recognized and currency translation
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23,331
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12,054
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Balance, end of period
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$
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37,253
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$
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44,660
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Revenue Allocated to Remaining Performance Obligations
The following table presents our estimated revenue allocated to remaining performance obligations for contracted revenue that has not yet been recognized, representing our “contractually committed” revenue as of December 31, 2019 that we will transfer from contract liabilies and recognize in future periods:
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Estimated Revenue (In thousands):
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For the year ending December 31, 2020
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$
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4,758
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For the year ending December 31, 2021
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3,448
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For the year ending December 31, 2022
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2,132
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For the year ending December 31, 2023
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1,555
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For the year ending December 31, 2024
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454
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$
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12,347
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Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to service customer contracts with significant programming, setup, and implementation activities related to our SaaS offerings. Our contractually committed revenue amounts generally exclude, based on the following practical expedients that we elected to apply, remaining performance obligations for: (i) contracts with an original expected duration of one year or less; and (ii) contracts for which we recognize revenue at the amount for which we have the right to invoice for services performed.
Accounts Receivable and the Allowance for Doubtful Accounts Receivable—Reported accounts receivable as of December 31, 2019 include $118.3 million of trade receivables stated at invoice billed amounts and $35.3 million of unbilled receivables (net of a $21.7 million estimated allowance for doubtful accounts receivable). Reported accounts receivable at December 31, 2018 include $139.2 million of trade receivables stated at invoice billed amounts and $35.1 million of unbilled receivables (net of a $7.0 million estimated allowance for doubtful accounts receivable). The Company records a contract asset when revenue recognized on a contract exceeds the billings. The contract asset is transferred to receivables when the entitlement to payment becomes unconditional. These contract assets are primarily related to project-based revenue where we recognize revenue using the input method calculated using expected hours to complete the project measured against the actual hours completed to date. Management specifically analyzes accounts receivable and historical bad debts, write-offs, customer concentrations, customer credit-worthiness, current economic trends and changes in our customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. Bad debt expense was $12.3 million, $3.6 million, and $1.7 million for the years ended December 31, 2019, 2018, and 2017, respectively.
During the third quarter of 2019, the Company recorded a $12.1 million provision for doubtful account as a precautionary measure, against the receivables due from a public sector entity, BSNL, in India. Payment of these receivables has been delayed
due to liquidity issues at BSNL. The Government of India has recently approved funding to BSNL and the Company expects the accounts to be collectible once the Government funding reaches BSNL.
Costs of Services Provided—Costs of services provided consist of data processing costs, customer support costs including personnel costs to maintain our proprietary databases, costs to provide customer call center support, hardware and software expense associated with transaction processing systems and exchanges, telecommunication and computer network expense, and occupancy costs associated with facilities where these functions are performed. Depreciation expense is not included in costs of services provided.
Capitalized Software Development Costs—In accordance with ASC 350-40 “Internal-Use Software” and ASC 350-985 “Software” the Company expenses costs as they are incurred until technological feasibility has been established, at and after which time those costs are capitalized until the product is available for general release to customers. Costs incurred to enhance our software products, after general market release of the services using the products, is expensed in the period they are incurred. The periodic expense for the amortization of previously capitalized software development costs is included in costs of services provided.
Goodwill and Indefinite-Lived Intangible Assets—Goodwill represents the cost in excess of the fair value of the identifiable net assets from the businesses that we acquire. In accordance with ASC 350, “Goodwill and Other Intangible Assets"
and ASU No. 2011-08, “Testing Goodwill for Impairment”, goodwill is tested for impairment at the reporting unit level on an annual basis or on an interim basis if an event occurred or circumstances change that would indicate that fair value of our reporting unit decreased below its carrying value. Potential impairment indicators include a significant change in the business climate, legal factors, operating performance indicators, competition, customer retention and the sale or disposition of a significant portion of the business. The Company applies the accounting guidance concerning goodwill impairment evaluation whereby the Company first assesses certain qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of a reporting unit was less than its carrying amount. If after assessing the totality of events and circumstances, we were to determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we would perform quantitative impairment testing.
We perform our annual goodwill impairment evaluation and testing as of October 1st of each year or, when events or circumstances dictate, more frequently.
The Company has considered the guidance within ASC 350 “Goodwill and Other Intangible Assets” and ASC 280 “Segment Reporting” in concluding that Ebix effectively operates as one reporting unit. As of October 1, 2019, goodwill impairment testing was performed using a qualitative analysis which indicated that it was not more likely than not that the fair value the Company's one reporting unit was less than its carrying amount, thus there was no impairment indicated. During the years ended December 31, 2019, 2018, and 2017, no goodwill impairment was recognized. Additionally, there were no accumulated impairment losses from prior years.
This analysis consisted of an evaluation of financial and industry trends and the Company's market capitalization which exceeded its carrying value by approximately $700 million as of our measurement date.
Changes in the carrying amount of goodwill for the years ended December 31, 2019 and 2018 are as follows:
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December 31, 2019
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December 31, 2018
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(In thousands)
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Beginning Balance
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$
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946,685
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$
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666,863
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Additions for current year acquisitions
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17,931
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317,410
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Adjustments for final purchase accounting
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741
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(11,080
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)
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Foreign currency translation adjustments
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(12,953
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)
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(26,508
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)
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Ending Balance
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$
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952,404
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$
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946,685
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The Company’s indefinite-lived assets are associated with the estimated fair value of the contractual customer relationships existing with the property and casualty insurance carriers in Australia using our property and casualty ("P&C") data exchange and with certain large corporate customers using our client relationship management (“CRM”) platform in the United States. Prior to these underlying business acquisitions Ebix had pre-existing contractual relationships with these carriers and corporate clients. The contracts are renewable at little or no cost, and Ebix intends to continue to renew these contracts indefinitely and has the ability to do so. The proprietary technology supporting the P&C data exchange and CRM platform that is used to deliver services
to these carriers and corporate clients cannot feasibly be effectively replaced in the foreseeable future, and accordingly the cash flows forthcoming from these customers are expected to continue indefinitely. With respect to the determination of the indefinite life, the Company considered the expected use of these intangible assets, historical experience in renewing or extending similar arrangements and the effects of competition, and concluded that there were no indications from these factors to suggest that the expected useful life of these customer relationships would be finite. The Company concluded that no legal, regulatory, contractual, or competitive factors limited the useful life of these intangible assets and therefore their life was considered to be indefinite, accordingly, the Company expects these customer relationships to remain the same for the foreseeable future. Additionally, based on the final purchase price allocation valuation report for the EbixHealth JV (see Note 18 for further explanations), it was concluded that the customer relationship with our joint venture partner, to be by its nature, an indefinite-lived customer relationship.
Indefinite-lived intangible assets are not amortized, but rather are tested for impairment annually. We perform our annual impairment testing of indefinite-lived intangible assets as of October 1st of each year. During the years ended December 31, 2019, 2018, and 2017, we had no impairments to the recorded balances of our indefinite-lived intangible assets. We perform the impairment test for our indefinite-lived intangible assets by comparing the asset’s fair value to its carrying value. An impairment charge is recognized if the asset’s estimated fair value is less than its carrying value.
To estimate the fair value, we utilize cash flow projections. Projections of cash flows are based on our views of revenue growth rates, operating costs, anticipated future economic conditions, the appropriate discount rates relative to risk, and estimates of residual values and terminal values. We believe that our estimates are consistent with assumptions that marketplace participants would use in their estimates of fair value. The use of different estimates or assumptions for our projected discounted cash flows (e.g., revenue growth rates, future economic conditions, discount rates, and estimates of terminal values) when determining the fair value of our reporting unit could result in different values and may result in a goodwill impairment charge.
Purchased Intangible Assets—Purchased intangible assets represent the estimated fair value of acquired intangible assets from the businesses that we acquire. These purchased intangible assets include customer relationships, developed technology, informational databases, and trademarks. We amortize these intangible assets on a straight-line basis over their estimated useful lives, as follows:
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Life
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Category
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(years)
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Customer relationships
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7-20
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Developed technology
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3-12
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Airport contract
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9
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Store networks
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5
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Dealer networks
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15-20
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Brand
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15
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Trademarks
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3-15
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Non-compete agreements
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5
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Database
|
10
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Intangible assets as of December 31, 2019 and December 31, 2018, are as follows:
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December 31,
|
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2019
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2018
|
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(In thousands)
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Finite-lived intangible assets:
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Customer relationships
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$
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83,012
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|
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$
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80,070
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Developed technology
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19,979
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|
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19,176
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Dealer networks
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6,726
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|
|
6,315
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|
Airport Contract
|
4,635
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|
|
4,752
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Store Networks
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2,500
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|
|
821
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|
Trademarks
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2,689
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|
|
2,677
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Brand
|
918
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|
|
864
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Non-compete agreements
|
764
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|
|
764
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|
Backlog
|
140
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|
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140
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Database
|
212
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212
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Total intangibles
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121,575
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|
|
115,791
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Accumulated amortization
|
(74,620
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)
|
|
(64,343
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)
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Finite-lived intangibles, net
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$
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46,955
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|
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$
|
51,448
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Indefinite-lived intangibles:
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Customer/territorial relationships
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$
|
42,055
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|
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$
|
42,055
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Income Taxes— The Company follows the asset and liability method of accounting for income taxes pursuant to the pertinent guidance issued by the FASB. Deferred income taxes are recorded to reflect the estimated future tax effects of differences between the financial statement and tax basis of assets, liabilities, operating losses, and tax credit carry forwards using the tax rates expected to be in effect when the temporary differences reverse. Valuation allowances, if any, are recorded to reduce deferred tax assets to the amount management considers more likely than not to be realized. Such valuation allowances are recorded for the portion of the deferred tax assets that are not expected to be realized based on the levels of historical taxable income and projections for future taxable income over the periods in which the temporary differences will be deductible.
The Company applies the relevant FASB accounting guidance on accounting for uncertainty in income taxes positions. This guidance clarifies the accounting for uncertainty in income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. In this regard we recognize the tax benefit from
uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position.
Foreign Currency Translation—The functional currency is the U.S. dollar for the Company's foreign subsidiaries in Dubai and Singapore, and its product development and information technology enabled services activities for the insurance industry provided by its India subsidiary. For Dubai and Singapore, because both the intellectual property research and development activities provided by its Dubai and Singapore subsidiaries, and the product development and information technology enabled services activities for the insurance industry provided by its India subsidiary are in support of the Company's operating divisions across the world, which are primarily transacted in U.S. dollars.
The functional currency of the Company's other foreign subsidiaries is the local currency of the country in which the subsidiary operates. The assets and liabilities of these foreign subsidiaries are translated into U.S. dollars at the rates of exchange at the balance sheet dates. Income and expense accounts are translated at the average exchange rates in effect during the period. Gains and losses resulting from translation adjustments are included as a component of accumulated other comprehensive income in the accompanying consolidated balance sheets, and are included in the consolidated statements of comprehensive income. Foreign exchange transaction gains and losses that are derived from transactions denominated in a currency other than the subsidiary's functional currency are included in the determination of net income.
Advertising—With the exception of certain direct-response costs in connection with our business services of providing medical continuing education to physicians, dentists and healthcare professionals, advertising costs are expensed as incurred. Advertising costs amounted to $9.7 million, $7.5 million, and 6.1 million in 2019, 2018, and 2017, respectively, and are included
in sales and marketing expenses in the accompanying Consolidated Statements of Income. In 2017, reported sales and marketing expenses included $3.9 million of amortization of certain direct-response advertising costs associated with our medical education services, which had been capitalized in accordance with Accounting Standards Codification ("ASC") Topic 340. These costs were being amortized to advertising expense over periods ranging from twelve to twenty-four months based on the type of product the customer purchased. Deferred advertising costs amounted to $1.9 million at December 31, 2017.
Effective January 1, 2018 Subtopic 340-40 replaced that guidance to require the costs of direct-response advertising to be expensed as they are incurred or the first time the advertising takes place. The Company was required to recognize a cumulative effective change to opening retained earnings in the year of adoption of the standard. The Company recorded a one-time $1.9 million adjustment to retained earnings on January 1, 2018 and is expensing all future costs from this date forward. Under the new guidance Subtopic 340-40, the Company's expense decreased by $522 thousand during 2018 from what would have been recorded under legacy US GAAP 340-20.
Sales Commissions —Certain sales commission paid with respect to subscription-based revenues are deferred and subsequently amortized into operating expenses ratably over the term of the related customer subscription contracts. As of December 31, 2019, 2018, and 2017 $652 thousand , $661 thousand, and $574 thousand, respectively, of sales commissions were deferred and included in other current assets on the accompanying Consolidated Balance Sheets. During the years ended December 31, 2019 and 2018, the Company amortized $1.0 million and $1.0 million, respectively, of previously deferred sales commissions and included this expense in operating expenses on the accompanying Consolidated Statements of Income.
Property and Equipment—Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the assets' estimated useful lives. Leasehold improvements are amortized over the shorter of the expected life of the improvements or the remaining lease term. Repairs and maintenance are charged to expense as incurred and major improvements that extend the life of the asset are capitalized and depreciated over the expected remaining life of the related asset. Gains and losses resulting from sales or retirements are recorded as incurred, at which time related costs and accumulated depreciation are removed from the Company’s accounts. Fixed assets acquired in acquisitions are recorded at fair value. The estimated useful lives applied by the Company for property and equipment are as follows:
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|
|
Life
|
Asset Category
|
(years)
|
Buildings
|
39
|
Building Improvements
|
15
|
Computer equipment
|
5
|
Furniture, fixtures and other
|
7
|
Software
|
3
|
Land Improvements
|
20
|
Land
|
Unlimited life
|
Leasehold improvements
|
Shorter of asset life or life of the lease
|
Recent Relevant Accounting Pronouncements—The following is a brief discussion of recently released accounting pronouncements that are pertinent to the Company's business:
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): "Simplifying the Accounting for Income Taxes". ASU 2019-12 is expected to reduce the cost and complexity related to the accounting for income taxes by eliminating the need for an entity to analyze whether the following apply to a given reporting period:
• Exception to the incremental approach for intra period tax allocation;
• Exceptions to accounting for basis differences when there are ownership changes in foreign investments; and
• Exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses.
For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company not yet assessed the impact that the adoption of this guidance will have on its statement of financial position or its statement of income.
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): "Clarifying the Interaction between Topic 808 and Topic 606 (Revenues from Customers)". ASU 2018-18 clarifies the interaction between the guidance for certain collaborative arrangements and the Revenue Recognition financial accounting and reporting standard. A collaborative arrangement is a contractual arrangement under which two or more parties actively participate in a joint operating activity and are exposed to significant risks and rewards that depend on the activity’s commercial success. The ASU provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard. The ASU also provides comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. It accomplishes this by allowing organizations to only present units of account in collaborative arrangements that are within the scope of the revenue recognition standard together with revenue accounted for under the revenue recognition standard. The parts of the collaborative arrangement that are not in the scope of the revenue recognition standard should be presented separately from revenue accounted for under the revenue recognition standard. The amendments in ASU No. 2018-18 are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): "Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement". ASU 2018-13 is intended to improve the effectiveness of ASC 820’s disclosure requirements. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year.
In February 2018, the FASB issued 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income". The ASU provides that the stranded tax effects from the Tax Act in accumulated other comprehensive loss may be reclassified to retained earnings. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): "Simplifying the Test for Goodwill Impairment". To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities). Instead, under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A public business entity filer should adopt the amendments in this ASU for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): "Clarifying the Definition of a Business" which amended the existing FASB ASC. The standard provides additional guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill, and consolidation. ASU 2017-01 is effective for fiscal 2019 with early adoption permitted. The Company adopted this guidance in 2019 and it had an effect classification certain of its recent acquisitions.
In October 2016, the FASB issued ASU 2016-16, Taxes (Topic 740): "Intra-Entity Transfers of Assets Other Than Inventory". Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP. The amendments specified by ASU 2016-16 require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments eliminate the exception for an intra-entity transfer of an asset other than inventory. Two common examples of assets included in the scope of the amendments are intellectual property, and property, plant and equipment. The amendments do not include new disclosure requirements; however, existing disclosure requirements might be applicable when accounting for the current and deferred income taxes for an intra-entity transfer of an asset other than inventory. The amendments align the recognition of income tax consequences for intra-entity transfers of assets other than inventory with International Financial Reporting Standards. IAS 12, Income Taxes, requires recognition of current and deferred income taxes resulting from an intra-entity transfer of any asset (including inventory) when the transfer occurs. The amendments are effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities in the first interim period if an entity issues interim financial statements. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted this new standard and it not did have a material effect on its consolidated statement of financial position or statement of income.
In June 2016, the FASB issued ASU 2013-13. Financial Instruments - Credit Losses (Topic 326). The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable
and supportable forecasts that affect the collectibility of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. For public business entities that are U.S. Securities and Exchange Commission (SEC) filers, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company has receivables that are over one year old that will need to be evaluated under this new standard which the Company will adopt in 2020.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This new accounting guidance is intended to improve financial reporting about leasing transactions. The ASU affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment. The ASU will require organizations that lease assets referred to as “Lessees” to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. An organization is to provide disclosures designed to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements concerning additional information about the amounts recorded in the financial statements. Under the new guidance, a lessee is required to recognize assets and liabilities for leases with lease terms of more than twelve months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP which requires only capital leases to be recognized on the balance sheet, the new ASU requires both types of leases (i.e., operating and capital) to be recognized on the balance sheet. The capital lease is accounted for in substantially the same manner as capital leases are accounted for under existing GAAP. For operating leases, there now is the recognition of a lease liability and a lease asset for all such leases greater than one year in term. Public companies are required to adopt the new leasing standard for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We adopted Topic 842 effective January 1, 2019 using a modified retrospective method and will not restate comparative periods. As permitted under the transition guidance, we carried forward the assessment of whether our contracts contain or are leases, classification of our leases and remaining lease terms. See Note 20.
Note 2. Earnings per Share
The basic and diluted earnings per share (“EPS”), and the basic and diluted weighted average shares outstanding for all periods as presented in the accompanying Consolidated Statements of Income are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended
December 31,
|
|
|
(In thousands, except per share amounts)
|
Earnings per share:
|
|
2019
|
|
2018
|
|
2017
|
Basic earnings per common share
|
|
$
|
3.17
|
|
|
$
|
2.97
|
|
|
$
|
3.19
|
|
Diluted earnings per common share
|
|
$
|
3.16
|
|
|
$
|
2.95
|
|
|
$
|
3.17
|
|
Basic weighted average shares outstanding
|
|
30,511
|
|
|
31,393
|
|
|
31,552
|
|
Diluted weighted average shares outstanding
|
|
30,594
|
|
|
31,534
|
|
|
31,719
|
|
Basic EPS is equal to net income attributable to Ebix, Inc. divided by the weighted average number of shares of common stock outstanding for the period. Diluted EPS takes into consideration common stock equivalents which for the Company consist of stock options and restricted stock. With respect to stock options, diluted EPS is calculated as if the Company had additional common stock outstanding from the beginning of the year or the date of grant or issuance, net of assumed repurchased shares using the treasury stock method. With respect to restricted stock, diluted EPS is calculated as if the Company had additional common stock outstanding from the beginning of the year or the date of grant or issuance. Diluted EPS is equal to net income attributable to Ebix, Inc divided by the combined sum of the weighted average number of shares outstanding and common stock equivalents. At December 31, 2019, 2018, and 2017 there were 181,875, 42,000, and zero respectively of potentially issuable shares with respect to stock options which could dilute EPS in the future but which were excluded from the diluted EPS calculation because presently their effect is anti-dilutive. Diluted shares outstanding are determined as follows for each year ended December 31, 2019, 2018, and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended
December 31,
|
|
|
(In thousands)
|
|
|
2019
|
|
2018
|
|
2017
|
Basic weighted average shares outstanding
|
|
30,511
|
|
|
31,393
|
|
|
31,552
|
|
Incremental shares for common stock equivalents
|
|
83
|
|
|
141
|
|
|
167
|
|
Diluted shares outstanding
|
|
30,594
|
|
|
31,534
|
|
|
31,719
|
|
Note 3. Business Acquisitions
The Company’s business acquisitions are accounted for under the purchase method of accounting in accordance with ASC 805 ("Business Combinations"). Accordingly, the consideration paid by the Company for the businesses it purchases is allocated to the tangible and intangible assets and liabilities acquired based upon their estimated fair values as of the date of the acquisition. The excess of the purchase price over the estimated fair values of assets acquired and liabilities assumed is recorded as goodwill. Recognized goodwill pertains in part to the value of the expected synergies to be derived from combining the operations of the businesses we acquire including the value of the acquired workforce. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record significant adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in our consolidated statements of income.
The Company's practice is to immediately integrate all functions including infrastructure, sales and marketing, administration, product development after a business acquisition is consummated, so as to ensure that synergistic efficiencies are maximized, redundancies eliminated, and to leverage cross-selling opportunities. Furthermore, the Company centralizes certain key functions such as information technology, marketing, sales, human resources, finance, and other general administrative functions after an acquisition, in order to realize cost efficiencies. By executing this integration strategy, it becomes neither practical nor feasible to accurately and separately track and disclose the earnings from the business combinations we have executed after they have been acquired.
A significant component of the purchase price consideration for many of the Company's business acquisitions is a potential future cash earnout based on reaching certain specified future revenue targets. The terms for the contingent earn-out payments in most of the Company's business acquisitions typically address revenues achieved by the acquired entity over a one, two, and/or three year period subsequent to the effective date of their acquisition by Ebix. These terms typically establish a minimum threshold revenue target with achievement of revenues recognized over that target being awarded in the form of a specified cash earn-out payment. The Company applies these terms in its calculation and determination of the fair value of contingent earn-out liabilities for purchased businesses as part of the related valuation and purchase price allocation exercise for the corresponding acquired assets and liabilities. The Company recognizes these potential obligations as contingent liabilities as reported on its Consolidated Balance Sheets. As discussed in more detail in Note 1, these contingent consideration liabilities are recorded at fair value on the acquisition date and are remeasured quarterly based on the then assessed fair value and adjusted if necessary. During each of the years ending December 31, 2019, 2018 and 2017, these aggregate contingent accrued earn-out business acquisition consideration liabilities, were reduced by $16.5 million, $1.4 million, and $164 thousand, respectively, due to remeasurements as based on the then assessed fair value and changes in the amount and timing of anticipated future revenue levels. These reductions to the contingent accrued earn-out liabilities resulted in corresponding reduction to general and administrative expenses as reported on the Consolidated Statements of Income. As of December 31, 2019, the total of these contingent liabilities was $10.1 million, of which $1.5 million is reported in long-term liabilities, and $8.6 million is included in current liabilities in the Company's Consolidated Balance Sheet. As of December 31, 2018, the total of these contingent liabilities was $25.0 million of which $11.2 million was reported in long-term liabilities, and $13.8 million was included in current liabilities in the Company's Consolidated Balance Sheet.
2019 Acquisitions
Wallstreet Canada- Effective August 23, 2019, Ebix acquired Canada based Wallstreet Canada, a foreign exchange and outward remittance service provider for approximately $2.1 million inclusive of net acquired working capital. The valuation and purchase price allocation remains preliminary and will be finalized as soon as practicable but in no event longer than one year from the effective date of this transaction.
Essel Forex- Effective January 1, 2019, Ebix acquired the assets of India based Essel Forex, for approximately $8.7 million, plus possible future contingent earn-out payments of up to $721 thousand based on earned revenues. Ebix funded the entire transaction in cash, using its internal cash reserves. Essel Forex is a large provider of foreign exchange services in India with a wide spectrum of related products including sales of all major currencies, travelers’ checks, demand drafts, remittances, money transfers and prepaid cards primarily for corporate clients. The Company has determined that the fair value of the contingent earn-out consideration is $396 thousand as of December 31, 2019.
Zillious- Effective January 1, 2019, Ebix acquired an 80% controlling stake in India based Zillious for $10.1 million plus possible future contingent earn-out payments of up to $2.2 million based on agreed milestones in the acquisition agreement. Zillious is an on-demand SaaS travel technology solution in the corporate travel segment in India. The Company has determined that the fair value of the contingent earn-out consideration is $1.5 million as of December 31, 2019.
2018 Acquisitions
Weizmann- Effective December 1, 2018, Ebix entered into an agreement to acquire 74.84% controlling stake in India based Weizmann for $63.1 million. Ebix also made a 90-day time bound public offer to acquire the remaining 25.16% publicly-held Weizmann Forex shares for approximately $21.1 million to public shareholders. The $77.35 million reported in the consolidated statement of cash flows used for investing activities includes a decrease in previously reported cash acquired of $1.5 million and $12.7 million for an additional 15.1% of the publicly-held Weizmann Forex shares during 2019. As of December 31, 2019, Ebix has approximately 89.94% of the controlling stake in India based Weizmann.
Pearl- Effective December 1, 2018, Ebix acquired the assets of India based Pearl, a provider of a comprehensive range of B2B and B2C travel services, under the brand name ‘Sastiticket’, ranging from domestic and international ticketing, incentives travel, leisure products, luxury holidays, and travel documentation for $3.4 million and has been integrated with Ebix Travels’ operations, which has brought in operational synergies and certain redundancies for the acquired operations.
Lawson- Effective December 1, 2018, Ebix acquired India based Lawson, a B2B provider of travel services and international ticketing, for $2.7 million and has been integrated with EbixCash Travels’ operations to bring in operational synergies and wider country wide footprint.
AHA Taxis- Effective October 1, 2018, Ebix acquired a 70% stake in India based AHA Taxis, a platform for on-demand inter-city cabs in India for $382 thousand. Consideration of $71 thousand was paid during the fourth quarter of 2018, $214 thousand during the first quarter of 2019, and $72 thousand remains to be paid. AHA focuses its attention on Corporate and Consumer inter-city travel primarily with a network of thousands of registered AHA Taxis.
Routier- Effective October 1, 2018, Ebix acquired a 67% stake in India based Routier, a marketplace for trucking logistics for $413 thousand.
Business Travels- Effective October 1, 2018, Ebix acquired the assets of India based Business Travels for $1.1 million and same has been integrated with Ebix Travels’ operations to expand the wholesale travel and consolidation business. Consideration of $414 thousand was paid during the fourth quarter of 2018 and $689 thousand during the first quarter of 2019.
Miles - Effective August 1, 2018, Ebix entered into an agreement to acquire India based Miles, a provider of on-demand software on wealth and asset management to banks, asset managers and wealth management firms, for approximately $18.3 million, plus possible future contingent earn-out payments of up to $8.3 million based on earned revenues over the subsequent twenty-four month period following the effective date of the acquisition. The Company has determined that the fair value of the contingent earn-out consideration is $7.7 million as of December 31, 2019.
Leisure - Effective July 1, 2018, Ebix entered into an agreement to acquire India based Leisure for approximately $1.6 million, with the goal of creating a new travel division to focus on a niche segment of the travel market.
Mercury - Effective July 1, 2018, Ebix entered into an agreement to acquire India based Mercury Travels for approximately $13.2 million, with the goal of creating a new travel division to focus on a niche segment of the travel market. Mercury’s Forex business has been integrated into EbixCash’s existing forex business.
Indus - Effective July 1, 2018, Ebix entered into an agreement to acquire India based Indus, a global provider of enterprise lending software solutions to financial institutions, captive auto finance and telecom companies, for approximately $22.9 million plus possible future contingent earn-out payments of up to $5.0 million based on the agreed upon revenues and EBITDA milestones
achieved over the subsequent twenty-four month period following the effective date of the acquisition. The Company has determined that the fair value of the contingent earn-out consideration is zero as of December 31, 2019.
Centrum - Effective April 1, 2018, Ebix entered into an agreement to acquire India based Centrum, a leader in India’s Foreign Exchange Operation markets for approximately $179.5 million. This acquisition was completed in June 2018. Subsequently, Centrum has been renamed as EbixCash World Money and has been tightly integrated into the EbixCash Exchange in India and abroad, with key business executives of Centrum's foreign exchange operations becoming an integral part of the combined EbixCash senior leadership.
Smartclass - Effective April 1, 2018, Ebix entered into an agreement to acquire a 60% stake in India based Smartclass, a leading e-learning Company engaged in the business of education services, development of education products, and implementation of education solutions for K-12 Schools through its E-Learning Venture. Under the terms of the agreement, Ebix paid $8.6 million in cash for its stake in Smartclass.
Transcorp - Effective February 1, 2018, Ebix acquired the MTSS Business of Transcorp, for upfront cash consideration in the amount of $7.25 million, of which $6.55 million was funded with cash and $700 thousand assumed in liabilities. MTSS operations of Transcorp has been consolidated with EbixCash’s MTSS operations resulting in operational synergies and certain redundancies to the combined operation.
The following table summarizes the recognized intangible assets, goodwill and earn-out provisions, as a result of the cumulative valuation and purchase price allocations on effective date of acquisition, for the 2019 and 2018 acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company acquired
|
|
Date acquired
|
|
Goodwill
|
|
Intangibles Assets
|
Contingent Earn-Out Provision
|
|
|
|
|
(In thousands)
|
Transcorp
|
|
Feb-18
|
|
$
|
7,254
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Centrum
|
|
Apr-18
|
|
159,647
|
|
|
5,742
|
|
|
—
|
|
SmartClass
|
|
Apr-18
|
|
16,568
|
|
|
4,243
|
|
|
—
|
|
Indus
|
|
Jul-18
|
|
21,501
|
|
|
2,146
|
|
|
3,310
|
|
Leisure
|
|
Jul-18
|
|
1,699
|
|
|
202
|
|
|
—
|
|
Mercury
|
|
Jul-18
|
|
15,127
|
|
|
1,051
|
|
|
—
|
|
Miles
|
|
Aug-18
|
|
19,075
|
|
|
5,048
|
|
|
5,271
|
|
AHA Taxis
|
|
Oct-18
|
|
592
|
|
|
—
|
|
|
—
|
|
Business Travels
|
|
Oct-18
|
|
1,102
|
|
|
—
|
|
|
—
|
|
Routier
|
|
Oct-18
|
|
698
|
|
|
—
|
|
|
—
|
|
Lawson
|
|
Dec-18
|
|
4,437
|
|
|
—
|
|
|
—
|
|
Pearl
|
|
Dec-18
|
|
3,372
|
|
|
—
|
|
|
—
|
|
Weizmann
|
|
Dec-18
|
|
71,552
|
|
|
2,005
|
|
|
—
|
|
Total for 2018 acquisitions
|
|
|
|
$
|
322,624
|
|
|
$
|
20,437
|
|
|
$
|
8,581
|
|
|
|
|
|
|
|
|
|
|
Essel Forex
|
|
Jan-19
|
|
8,372
|
|
|
1,163
|
|
|
407
|
|
Zillious
|
|
Jan-19
|
|
9,489
|
|
|
1,875
|
|
|
1,515
|
|
Wallstreet Canada*
|
|
Aug-19
|
|
71
|
|
|
—
|
|
|
—
|
|
Total for 2019 acquisitions
|
|
|
|
$
|
17,932
|
|
|
$
|
3,038
|
|
|
$
|
1,922
|
|
|
|
|
|
|
|
|
|
|
*The valuation and purchase price allocation remains preliminary and will be finalized as soon as practicable but in no event longer than one year from the effective date of this transaction.
|
The following table summarizes the fair value of the consideration transferred, net assets acquired and liabilities assumed, as a result of the acquisitions, that were recorded during 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
(In thousands)
|
|
2019
|
|
2018
|
Fair value of total consideration transferred
|
|
|
|
|
Cash
|
|
$
|
105,391
|
|
|
$
|
250,769
|
|
Consideration payable upon certain conditions being met
|
|
—
|
|
|
72,933
|
|
Contingent earn-out consideration arrangement (net)
|
|
1,922
|
|
|
(5,137
|
)
|
Total consideration transferred
|
|
107,313
|
|
|
318,565
|
|
|
|
|
|
|
Fair value of equity components recorded (not part of consideration)
|
|
|
|
|
Recognition of noncontrolling interest of joint ventures
|
|
(10,258
|
)
|
|
23,500
|
|
Total equity components recorded
|
|
(10,258
|
)
|
|
23,500
|
|
|
|
|
|
|
Total consideration transferred and equity components recorded
|
|
$
|
97,055
|
|
|
$
|
342,065
|
|
|
|
|
|
|
Fair value of assets acquired and liabilities assumed
|
|
|
|
|
Cash, net of adjustment
|
|
$
|
(75
|
)
|
|
$
|
18,212
|
|
Other current assets
|
|
5,175
|
|
|
68,317
|
|
Property, plant, and equipment
|
|
231
|
|
|
2,176
|
|
Other long term assets
|
|
3,023
|
|
|
14,574
|
|
Intangible assets, definite lived
|
|
6,296
|
|
|
14,577
|
|
Capitalized software development costs
|
|
—
|
|
|
46
|
|
Deferred tax liability
|
|
12
|
|
|
854
|
|
Current and other liabilities, net of consideration transferred
|
|
63,721
|
|
|
(83,021
|
)
|
Net assets acquired, excludes goodwill
|
|
78,383
|
|
|
35,735
|
|
|
|
|
|
|
Goodwill
|
|
18,672
|
|
|
306,330
|
|
|
|
|
|
|
Total net assets acquired
|
|
$
|
97,055
|
|
|
$
|
342,065
|
|
The following table summarizes the separately identified intangible assets acquired as a result of the acquisitions that occurred during 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2019
|
|
2018
|
|
|
|
|
Weighted
Average
|
|
|
|
Weighted
Average
|
Intangible asset category
|
|
Fair Value
|
|
Useful Life
|
|
Fair Value
|
|
Useful Life
|
|
|
(In thousands)
|
|
(In years)
|
|
(In thousands)
|
|
(In years)
|
Customer relationships
|
|
$
|
3,042
|
|
|
7.5
|
|
$
|
7,342
|
|
|
11.7
|
Developed technology
|
|
851
|
|
|
7.0
|
|
3,726
|
|
|
5.0
|
Agent network
|
|
582
|
|
|
10.2
|
|
—
|
|
|
0.0
|
Airport contracts
|
|
—
|
|
|
0.0
|
|
4,896
|
|
|
9.0
|
Store networks
|
|
—
|
|
|
0.0
|
|
846
|
|
|
9.0
|
Brand
|
|
78
|
|
|
5.0
|
|
369
|
|
|
4.0
|
Branch network
|
|
1,743
|
|
|
10.0
|
|
—
|
|
|
0.0
|
Purchase accounting adjustments for prior year acquisitions
|
|
—
|
|
|
0.0
|
|
(2,602
|
)
|
|
0.0
|
Total acquired intangible assets
|
|
$
|
6,296
|
|
|
8.0
|
|
$
|
14,577
|
|
|
9.2
|
Estimated aggregate future amortization expense for the intangible assets recorded as part of the business acquisitions described above and all other prior acquisitions is as follows:
|
|
|
|
|
Future Amortization Expenses (In thousands):
|
|
For the year ending December 31, 2020
|
$
|
9,380
|
|
For the year ending December 31, 2021
|
8,558
|
|
For the year ending December 31, 2022
|
8,107
|
|
For the year ending December 31, 2023
|
6,116
|
|
For the year ending December 31, 2024
|
4,355
|
|
Thereafter
|
10,439
|
|
|
|
|
|
$
|
46,955
|
|
The Company recorded $10.2 million, $7.5 million, and $7.3 million of amortization expense related to acquired intangible assets for the years ended December 31, 2019, 2018, and 2017, respectively.
Note 4. Unaudited Pro Forma Financial Information (re: 2019 and 2018 acquisitions)
This unaudited pro forma financial information is provided for informational purposes only and does not project the Company’s results of operations for any future period.
The aggregated unaudited pro forma financial information pertains to all of the Company's acquisitions made during 2019 and 2018, which includes the acquisitions of Transcorp (acquired February 2018), Centrum (acquired April 2018), Smartclass (acquired April 2018), Indus (acquired July 2018), Mercury (acquired July 2018), Leisure (acquired July 2018), Miles (acquired August 2018), Routier (acquired October 2018), Business Travels (acquired October 2018), Aha Taxis (acquired October 2018), Pearl (acquired December 2018), Weizmann (acquired December 2018), Zillious (acquired January 2019), Essel (acquired January 2019), and Wallstreet Canada (acquired August 2019) as presented in the table below, and is provided for informational purposes only and does not project the Company's expected results of operations for any future period. No effect has been given in this pro forma information for future synergistic benefits that may still be realized as a result of combining these companies or costs that may yet be incurred in integrating their operations. The 2019 and 2018 pro forma financial information below assumes that all such business acquisitions were made on January 1, 2018, whereas the Company's reported financial statements for 2019 only includes the operating results from the businesses since the effective date that they were acquired by Ebix, and therefore includes twelve months of Zillious, twelve months of Essel Forex, and eight months of Wallstreet Canada. Similarly, the 2018 pro forma financial information below includes a full year of results for Transcorp, Centrum, Smartclass, Indus, Mercury, Leisure, Miles, Routier, Business Travels, AHA Taxis, Pearl, Weizmann and Lawson as if they had been had been acquired on January 1, 2018, whereas the Company's reported financial statements for the 2018 includes only eleven months of Transcorp, nine months of Centrum, nine months of Smartclass, six months of Indus, six months of Mercury, six months of Leisure, five months of Miles, three months of Routier, three months of Business Travels, three months of AHA Taxis, one month of Pearl, one month of Weizmann, and one month of Lawson.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Reported
2019
|
|
Pro Forma
2019
|
|
As Reported
2018
|
|
Pro Forma
2018
|
|
|
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
|
(In thousands, except per share amounts)
|
Revenue
|
|
$
|
580,615
|
|
|
$
|
581,134
|
|
|
$
|
497,826
|
|
|
$
|
576,950
|
|
Net income attributable to Ebix, Inc.
|
|
$
|
96,720
|
|
|
$
|
96,678
|
|
|
$
|
93,139
|
|
|
$
|
96,230
|
|
Basic EPS
|
|
$
|
3.17
|
|
|
$
|
3.17
|
|
|
$
|
2.97
|
|
|
$
|
3.07
|
|
Diluted EPS
|
|
$
|
3.16
|
|
|
$
|
3.16
|
|
|
$
|
2.95
|
|
|
$
|
3.05
|
|
In the above table, the unaudited pro forma revenue for the year ended December 31, 2019 increased by $4.2 million from the unaudited pro forma revenue for 2018 of $577.0 million to $581.1 million, representing a 0.7% increase. The reported revenue in the amount of $580.6 million for the year ended December 31, 2019 increased by $82.8 million or 16.6% from the $497.8 million of reported revenue for the year ended December 31, 2018.
The cause for the difference between the 16.6% increase in reported 2019 revenue versus 2018 revenue, as compared to the 0.7% increase in 2019 unaudited pro forma versus 2018 unaudited pro forma revenue is due to the effect of combining the additional revenue derived from those businesses acquired during the years 2019 and 2018, specifically Wallstreet Canada, Zillious,
Essel Forex, Transcorp, Centrum, Smartclass, Indus, Mercury, Leisure, Miles, Routier, Business Travels, AHA Taxis, Pearl, Weizmann, and Lawson with the Company's pre-existing operations. The 2019 and 2018 unaudited pro forma financial information assumes that all such business acquisitions were made on January 1, 2018, whereas the Company's reported financial statements for 2019 thusly includes twelve months of Zillious, twelve months of Essel Forex, and four months of Wallstreet Canada.
The above unaudited pro forma analysis is based on the following premises:
|
|
•
|
2019 and 2018 pro forma revenue contains actual revenue of the acquired entities before acquisition date, as reported by the sellers, as well as actual revenue of the acquired entities after acquisition. Growth in revenues of the acquired entities after acquisition date is only reflected for the period after their acquisition.
|
|
|
•
|
Revenue billed to existing clients from the cross selling of acquired products has been assigned to the acquired section of our business.
|
|
|
•
|
Any existing products sold to new customers acquired through the acquisition customer base, has also been assigned to the acquired section of our business.
|
|
|
•
|
The impact from fluctuations of the exchange rates for the foreign currencies in the countries in which we conduct operations also partially affected reported revenues. During each of the years 2019 and 2018 the change in foreign currency exchange rates decreased consolidated operating revenues by $(9.3) million and $(6.9) million, respectively.
|
Note 5. Commercial Bank Financing Facility
On February 21, 2018, Ebix, Inc. and certain of its subsidiaries entered into the Sixth Amendment to the Regions Secured Credit Facility, dated August 5, 2014, among the Company, Regions and certain other lenders party thereto (as amended, the "Credit Agreement"). The Sixth Amendment amends the Credit Agreement by increasing its existing credit facility from $450 million to $650 million, to assist in funding its growth. The increase in the bank line was the result of many members of the existing bank group expanding their share of the credit facility and the addition of BBVA Compass and Bank of the West to the Banking Syndicate, which diversifies Ebix’s lending group under the credit facility to ten participants. The syndicated bank group then comprised ten leading financial institutions that include Regions Bank, PNC Bank, BMO Harris Bank, BBVA Compass, Fifth Third Bank, KeyBank, Bank of the West, Silicon Valley Bank, Cadence Bank and Trustmark National Bank. Regions Bank continued to lead the banking group while serving as the administrative and collateral agent. PNC Bank and BMO Harris Bank were added as co-syndication agents, BBVA Compass and Fifth Third Bank as co-documentation agent, while Regions Capital Markets, PNC Capital Markets and BMO Harris Bank acted as joint lead arrangers and joint bookrunners. The new credit facility had the following key components: A five-year term loan for $250 million, with initial repayments starting June 30, 2018 due in the amount $3.13 million for the first eight quarters and increasing thereafter and a five-year revolving credit facility for $400 million. The new credit facility also allows for up to $150 million of incremental facilities.
On April 9, 2018, the Company and certain of its subsidiaries entered into the Seventh Amendment to the Regions Secured Credit Facility increasing the permitted indebtedness in the form of unsecured convertible notes from $250 million to $300 million.
On November 27, 2018, Ebix entered into the Eighth Amendment to the Regions Secured Credit Facility, dated August 5, 2014, among the Company, Regions and certain other lenders party thereto to exercise $101.25 million of its aggregate $150 million accordion option, increasing the total Term Loan Commitment to $301.25 million from $250 million, with initial repayments starting December 31, 2018 due in the amount of $3.77 million for the first six quarters and increasing thereafter. The revolving credit facility increased from $400 million to $450 million. The Credit Agreement carries a leverage-based LIBOR related interest rate, which currently stands at approximately 4.250%. The expanded credit facility will continue to be used to fund the Company's future growth and share repurchase initiatives.
On September 27, 2019, the Company and certain of its subsidiaries entered into the Ninth Amendment (the “Ninth Amendment”) to the Credit Agreement which amended the definition of “Consolidated EBITDA" to add back the derivative legal settlement, “Indebtedness” to disqualify equity interests to be issued regarding the Yatra Online acquisition, and modified the maximum consolidated debt leverage ratios allowed.
At December 31, 2019, the outstanding balance on the revolving line of credit with Regions was $438.0 million and the facility carried an interest rate of 4.25%. This balance is included in the long-term liabilities section of the Consolidated Balance Sheets. During 2019, the average and maximum outstanding balances on the revolving line of credit were $437.2 million and $438.0 million, respectively, and the weighted average interest rate was 4.90%. At December 31, 2018, the outstanding balance on the revolving line of credit was $424.5 million and the facility carried an interest rate of 4.88%.
At December 31, 2019, the outstanding balance on the term loan was $276.2 million of which $20.7 million is due within the next twelve months. This term loan also carried an interest rate of 4.25%. The current and long-term portions of the term loan are included in the respective current and long-term sections of the Condensed Consolidated Balance Sheets, the amounts of which were $20.7 million and $255.5 million, respectively, at December 31, 2019.
Note 6. Commitments and Contingencies
Contingencies—As the Company previously disclosed, in May 2013, twelve putative class action complaints were filed in the Delaware Court of Chancery against the Company and its board of directors challenging a proposed merger between the Company and an affiliate of Goldman Sachs & Co. On June 10, 2013, the Court entered an Order of Consolidation and Appointment of Lead Plaintiffs and a Leadership Structure consolidating the twelve actions and appointing lead plaintiffs (“Plaintiffs”) and lead counsel in the litigation, captioned In re Ebix, Inc. Stockholder Litigation, Consol. C.A. No. 8526-VCS (the “Litigation”).
In connection with the Litigation, on January 23, 2019, the parties entered into a Stipulation and Agreement of Settlement (the “Settlement Agreement”) pursuant to which the parties agreed, subject to approval by the Delaware Court of Chancery, to settle and resolve the Litigation pursuant to the terms set forth in the Settlement Agreement (the “Litigation Settlement”).
On April 5, 2019, the Delaware Court of Chancery determined that the Litigation Settlement was fair, reasonable, adequate and in the best interest of the plaintiffs, the class and the Company and awarded to plaintiffs’ counsel attorneys’ fees and expenses in the sum of $19.65 million, payable by the Company within 20 days, and entered an Order and Final Judgment (the “Order”)
approving the Litigation Settlement. The Order provides for full settlement, satisfaction, compromise and release of all claims that were asserted or could have been asserted in the Litigation, whether on behalf of the class or the Company. The Order is publicly available for inspection at the Office of the Register in Chancery, and on the Court's online electronic filing system, File & ServeXpress.
The Settlement contains no admission of wrongdoing or liability, and may not be deemed to be a presumption as to the validity of any claims, causes of action or other issues. The Settlement was fully paid on May 2, 2019.
The Company is involved in various other claims and legal actions arising in the ordinary course of business, including labor related post-employment matters that in the aggregate amount to approximately $500 thousand. In the opinion of management, the ultimate likely disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.
Lease Commitments— See Note 20.
Business Acquisition Earn-out Contingencies—A significant component of the purchase price consideration for many of the Company's business acquisitions is a potential future cash earnout based on reaching certain specified future revenue targets. The terms for the contingent earn-out payments in most of the Company's business acquisitions typically address the GAAP recognizable revenues achieved by the acquired entity over a one, two, and/or three year period subsequent to the effective date of their acquisition by Ebix. These terms typically establish a minimum threshold revenue target with achievement of revenues recognized over that target being awarded in the form of a specified cash earn-out payment. The Company applies these terms in its calculation and determination of the fair value of contingent earn-out liabilities for purchased businesses as part of the related valuation and purchase price allocation exercise for the corresponding acquired assets and liabilities. As of December 31, 2019, the total of these contingent liabilities was $10.1 million, of which $1.5 million is reported in long-term liabilities, and $8.6 million is included in current liabilities in the Company's Consolidated Balance Sheet. As of December 31, 2018, the total of these contingent liabilities was $25.0 million of which $11.2 million was reported in long-term liabilities, and $13.8 million was included in current liabilities in the Company's Consolidated Balance Sheet.
Self -Insurance—For some of the Company’s U.S. employees the Company has a self-insured plan for its health insurance program and has a stop loss policy that limits the individual liability to $120 thousand per person and the aggregate liability to 125% of the expected claims based upon the number of participants and historical claims. As of December 31, 2019 and 2018, the amount accrued on the Company’s consolidated balance sheet for the self-insured component of the Company’s employee health insurance was $362 thousand and $232 thousand, respectively. The maximum potential estimated cumulative liability for the annual contract period, which ends in September 2020, is $2.9 million. During the years ending December 31, 2019 and 2018, the Company recognized $2.6 million, and $2.1 million of expense, respectively, associated with claims from its self-insured health insurance program.
Gratuity Leave—In accordance with Indian law, we pay gratuity to our eligible employees in India. Under our gratuity plan, an employee is entitled to receive a gratuity payment on the termination of his or her employment if the employee has rendered continuous service to our company for not less than five years, or if the termination of employment is due to death or disability. The amount of gratuity payable to an eligible employee is based on number of years of employment and is limited to a maximum of $28 thousand per employee. As of December 31, 2019 and 2018, the amount accrued on the Company’s consolidated balance sheet for gratuity leave was $3.2 million and $1.6 million, respectively.
Note 7. Share-Based Compensation
Stock Options—The Company accounts for compensation expense associated with stock options issued to employees, Directors, and non-employees based on their fair value, which is calculated using an option pricing model, and is recognized over the service period, which is usually the vesting period. At December 31, 2019, the Company had two equity based compensation plans. No stock options were granted to employees or non-employees during 2019, 2018, and 2017; however, options were granted to Directors in 2019, 2018, and 2017. Stock compensation expense of $537 thousand, $449 thousand and $433 thousand was recognized during the years ending December 31, 2019, 2018, and 2017, respectively, on outstanding and unvested options.
The fair value of options granted during 2019 is estimated on the date of grant using a Black-Scholes option pricing model. The following table includes the weighted- average assumptions used in estimating the fair values and the resulting weighted-average fair value of stock options granted in the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Weighted average fair values of stock options granted
|
$
|
12.68
|
|
|
$
|
11.80
|
|
|
$
|
15.38
|
|
Expected volatility
|
36.0
|
%
|
|
35.7
|
%
|
|
37.9
|
%
|
Expected dividends
|
.65
|
%
|
|
.70
|
%
|
|
.56
|
%
|
Weighted average risk-free interest rate
|
1.72
|
%
|
|
2.47
|
%
|
|
1.64
|
%
|
Expected life of stock options (in years)
|
3.5
|
|
|
3.5
|
|
|
3.5
|
|
A summary of stock option activity for the years ended December 31, 2019, 2018, and 2017 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted
Average
Exercise Price
|
|
Weighted
Average
Remaining
Contractual
Term (Years)
|
|
Aggregate Intrinsic
Value
|
|
|
|
|
|
|
|
(In thousands)
|
Outstanding at January 1, 2017
|
109,499
|
|
|
$
|
30.73
|
|
|
3.28
|
|
$
|
2,882
|
|
Granted
|
42,000
|
|
|
$
|
53.90
|
|
|
|
|
|
Exercised
|
(3,500
|
)
|
|
$
|
14.90
|
|
|
|
|
|
Canceled
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Outstanding at December 31, 2017
|
147,999
|
|
|
$
|
37.68
|
|
|
2.94
|
|
$
|
6,152
|
|
Granted
|
42,000
|
|
|
$
|
42.56
|
|
|
|
|
|
Exercised
|
(27,999
|
)
|
|
$
|
15.65
|
|
|
|
|
|
Canceled
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Outstanding at December 31, 2018
|
162,000
|
|
|
$
|
42.75
|
|
|
3.05
|
|
$
|
—
|
|
Granted
|
66,000
|
|
|
$
|
46.75
|
|
|
|
|
|
Exercised
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Canceled
|
(10,125
|
)
|
|
$
|
46.66
|
|
|
|
|
|
Outstanding at December 31, 2019
|
217,875
|
|
|
$
|
43.78
|
|
|
2.60
|
|
$
|
—
|
|
Exercisable at December 31, 2019
|
109,125
|
|
|
$
|
40.92
|
|
|
1.41
|
|
$
|
—
|
|
The aggregate intrinsic value for stock options outstanding and exercisable is defined as the difference between the market value of the Company’s stock as of the end of the period and the exercise price of the stock options. The total intrinsic value of stock options exercised during 2019, 2018, and 2017 was zero, $900 thousand, and $169 thousand, respectively.
Cash received or the value of stocks canceled from option exercises under all share-based payment arrangements for the years ended December 31, 2019, 2018, and 2017, was zero, $439 thousand and $52 thousand, respectively.
A summary of non-vested options and changes for the years ended December 31, 2019, 2018 and 2017 is as follows:
|
|
|
|
|
|
|
|
|
Non-Vested Number of Shares
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
Non-vested balance at January 1, 2017
|
74,625
|
|
|
$
|
36.35
|
|
Granted
|
42,000
|
|
|
$
|
53.90
|
|
Vested
|
(40,125
|
)
|
|
$
|
32.54
|
|
Canceled
|
—
|
|
|
$
|
—
|
|
Non-vested balance at December 31, 2017
|
76,500
|
|
|
$
|
47.99
|
|
Granted
|
42,000
|
|
|
$
|
42.56
|
|
Vested
|
(36,750
|
)
|
|
$
|
43.52
|
|
Canceled
|
—
|
|
|
$
|
—
|
|
Non-vested balance at December 31, 2018
|
81,750
|
|
|
$
|
47.21
|
|
Granted
|
66,000
|
|
|
$
|
46.75
|
|
Vested
|
(28,875
|
)
|
|
$
|
48.46
|
|
Canceled
|
(10,125
|
)
|
|
$
|
46.66
|
|
Non-vested balance at December 31, 2019
|
108,750
|
|
|
$
|
46.65
|
|
The following table summarizes information about stock options outstanding by price range as of December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
Exercise Prices
|
|
Number Outstanding
|
|
Weighted-Average Remaining Contractual Life (Years)
|
|
Weighted-Average Exercise Price
|
|
Number of Shares
|
|
Weighted-Average Exercise Price
|
$21.19
|
|
30,000
|
|
|
0.00
|
|
$
|
2.92
|
|
|
30,000
|
|
|
$
|
5.83
|
|
$28.59
|
|
6,000
|
|
|
0.01
|
|
$
|
0.79
|
|
|
6,000
|
|
|
$
|
1.57
|
|
$41.60
|
|
36,000
|
|
|
0.62
|
|
$
|
6.87
|
|
|
—
|
|
|
$
|
—
|
|
$42.56
|
|
36,000
|
|
|
0.66
|
|
$
|
7.03
|
|
|
9,000
|
|
|
$
|
3.50
|
|
$49.22
|
|
40,875
|
|
|
0.25
|
|
$
|
9.23
|
|
|
38,625
|
|
|
$
|
17.42
|
|
$52.92
|
|
30,000
|
|
|
0.61
|
|
$
|
7.29
|
|
|
—
|
|
|
$
|
—
|
|
$53.90
|
|
39,000
|
|
|
0.45
|
|
$
|
9.65
|
|
|
25,500
|
|
|
$
|
12.60
|
|
|
|
217,875
|
|
|
2.60
|
|
$
|
43.78
|
|
|
109,125
|
|
|
$
|
40.92
|
|
Restricted Stock—Pursuant to the Company’s restricted stock agreements, the restricted stock granted generally vests as follows: one third after one year, and the remaining in eight equal quarterly installments. The restricted stock also vests with respect to any unvested shares upon the applicable employee’s death, disability or retirement, the Company’s termination of the employee other than for cause, or for a change in control of the Company. A summary of the status of the Company’s non-vested restricted stock grant shares is presented in the following table:
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average Grant Date
Fair Value
|
Non-vested at January 1, 2017
|
123,654
|
|
|
$
|
31.17
|
|
Granted
|
56,251
|
|
|
$
|
56.75
|
|
Vested
|
(72,810
|
)
|
|
$
|
29.50
|
|
Forfeited
|
—
|
|
|
$
|
—
|
|
Non-vested at December 31, 2017
|
107,095
|
|
|
$
|
45.74
|
|
Granted
|
5,623
|
|
|
$
|
76.47
|
|
Vested
|
(68,788
|
)
|
|
$
|
40.67
|
|
Forfeited
|
(3,514
|
)
|
|
$
|
46.24
|
|
Non-vested at December 31, 2018
|
40,416
|
|
|
$
|
58.60
|
|
Granted
|
91,658
|
|
|
$
|
50.54
|
|
Vested
|
(24,120
|
)
|
|
$
|
57.14
|
|
Forfeited
|
—
|
|
|
$
|
—
|
|
Non-vested at December 31, 2019
|
107,954
|
|
|
$
|
52.08
|
|
In the aggregate the total compensation expense recognized in connection with the restricted grants was $2.9 million, $2.4 million, and $2.4 million during each of the years ending December 31, 2019, 2018, and 2017, respectively.
As of December 31, 2019, there was $3.9 million of total unrecognized compensation cost related to non-vested share based compensation arrangements granted under the 2006 and 2010 Incentive Compensation Program. That cost is expected to be recognized over a weighted-average period of 1.77 years. The total fair value of shares vested during the years ended December 31, 2019, 2018, and 2017 was $1.4 million, $2.8 million, and $2.1 million, respectively.
As of December 31, 2019, the Company has 5.2 million shares of common stock reserved for possible future stock option and restricted stock grants.
Note 8. Income Taxes
The income tax expense (benefit) consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
Current:
|
|
|
|
|
|
US federal
|
$
|
1,378
|
|
|
$
|
22,353
|
|
|
$
|
2,390
|
|
US state
|
909
|
|
|
847
|
|
|
1,153
|
|
Non US
|
12,861
|
|
|
15,212
|
|
|
8,266
|
|
|
15,148
|
|
|
38,412
|
|
|
11,809
|
|
Deferred:
|
|
|
|
|
|
US federal
|
(3,781
|
)
|
|
5,617
|
|
|
(5,558
|
)
|
US state
|
(3,107
|
)
|
|
(1,031
|
)
|
|
(976
|
)
|
Non US
|
(8,040
|
)
|
|
(10,497
|
)
|
|
(4,498
|
)
|
|
(14,928
|
)
|
|
(5,911
|
)
|
|
(11,032
|
)
|
|
|
|
|
|
|
Total
|
$
|
220
|
|
|
$
|
32,501
|
|
|
$
|
777
|
|
Income (loss) before income taxes includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
US
|
$
|
(47,574
|
)
|
|
$
|
(36,202
|
)
|
|
$
|
(13,355
|
)
|
Non US
|
138,365
|
|
|
161,784
|
|
|
116,715
|
|
Total
|
$
|
90,791
|
|
|
$
|
125,582
|
|
|
$
|
103,360
|
|
A reconciliation of the statutory federal income tax rate to the effective income tax rate consists of the following:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Statutory US federal income tax rate
|
21.0
|
%
|
|
21.0
|
%
|
|
34.0
|
%
|
US state income taxes, net of federal benefit
|
(2.3
|
)%
|
|
(0.3
|
)%
|
|
(0.8
|
)%
|
Non-US tax rate differential
|
(13.6
|
)%
|
|
(15.2
|
)%
|
|
(28.7
|
)%
|
GILTI Related
|
18.6
|
%
|
|
15.1
|
%
|
|
—
|
%
|
SubPart F
|
—
|
%
|
|
0.7
|
%
|
|
—
|
%
|
Tax holidays
|
(6.0
|
)%
|
|
(3.4
|
)%
|
|
(3.5
|
)%
|
Tax Credits
|
(15.0
|
)%
|
|
(10.6
|
)%
|
|
(1.4
|
)%
|
Passive income exemption
|
(1.2
|
)%
|
|
(0.9
|
)%
|
|
(2.1
|
)%
|
Acquisition contingent earnout liability adjustments
|
(4.0
|
)%
|
|
(0.2
|
)%
|
|
—
|
%
|
Nondeductible items
|
1.0
|
%
|
|
(0.1
|
)%
|
|
2.5
|
%
|
Effect of valuation allowance
|
1.2
|
%
|
|
(0.1
|
)%
|
|
(3.6
|
)%
|
Prior year Transition Tax and related true-ups
|
0.7
|
%
|
|
19.5
|
%
|
|
1.1
|
%
|
Uncertain tax positions
|
(0.1
|
)%
|
|
0.1
|
%
|
|
5.8
|
%
|
Rate change on deferred taxes primarily due to tax reform
|
—
|
%
|
|
—
|
%
|
|
(2.4
|
)%
|
Other
|
(0.1
|
)%
|
|
0.3
|
%
|
|
(0.1
|
)%
|
Effective income tax rate
|
0.2
|
%
|
|
25.9
|
%
|
|
0.8
|
%
|
The Company's effective tax rate decreased to 0.2% in 2019, compared with 25.9% in 2018. The effective tax rate was substantially higher in 2018 primarily due to the recording of a one-time tax liability of the transition tax resulting from enactment of the TCJA. Excluding this, the remaining decrease in the effective tax rate in 2019 is primarily related to prior year true-ups
Excluding one-time impact of Transition tax and related true-ups, the Company’s consolidated worldwide effective tax rate benefits from the effects of conducting significant operations in certain foreign jurisdictions, specifically India and Dubai, where certain units enjoys tax holidays or tax concessions which is partially offset by GILTI tax in the US.
Deferred tax assets and liabilities are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
|
Deferred
|
|
Deferred
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
|
(In thousands)
|
Depreciation and amortization
|
$
|
—
|
|
|
$
|
3,562
|
|
|
$
|
—
|
|
|
$
|
2,315
|
|
Share-based compensation
|
959
|
|
|
—
|
|
|
521
|
|
|
—
|
|
Accruals and prepaids
|
6,806
|
|
|
—
|
|
|
8,143
|
|
|
—
|
|
Bad debts
|
2,594
|
|
|
—
|
|
|
3,215
|
|
|
—
|
|
Acquired intangible assets
|
—
|
|
|
13,335
|
|
|
—
|
|
|
17,800
|
|
Net operating loss carryforwards
|
27,607
|
|
|
—
|
|
|
19,958
|
|
|
—
|
|
Tax credit carryforwards (primarily Minimum Alternative Tax ("MAT") in India)
|
50,210
|
|
|
—
|
|
|
43,656
|
|
|
—
|
|
|
88,176
|
|
|
16,897
|
|
|
75,493
|
|
|
20,115
|
|
Valuation allowance
|
(3,288
|
)
|
|
—
|
|
|
(2,031
|
)
|
|
—
|
|
Total deferred taxes
|
$
|
84,888
|
|
|
$
|
16,897
|
|
|
$
|
73,462
|
|
|
$
|
20,115
|
|
Amounts recognized in the consolidated balance sheets:
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
(In thousands)
|
Non-current deferred tax assets
|
69,227
|
|
|
54,629
|
|
ASU 2013-11 reclass, described below
|
—
|
|
|
—
|
|
Net deferred tax assets
|
69,227
|
|
|
54,629
|
|
|
|
|
|
Non-current deferred tax liabilities
|
1,235
|
|
|
1,282
|
|
The valuation allowance increased by $1.3 million and $2.0 million during the years ended December 31, 2019 and 2018, respectively. The presentation above has been modified to correctly show the valuation allowances that should have been recorded and to gross up the Company’s deferred tax assets for implied valuation allowances that were inherited through acquisitions.
We have US Federal, state and foreign operating losses and credit carryforwards as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
US Federal loss carryforwards
|
|
$
|
48,623
|
|
|
$
|
43,116
|
|
US state loss carryforwards
|
|
65,412
|
|
|
38,307
|
|
Foreign loss carryforwards
|
|
58,660
|
|
|
40,349
|
|
|
|
|
|
|
US Federal credit carryforwards
|
|
3,359
|
|
|
901
|
|
Foreign credit carryforwards
|
|
46,851
|
|
|
42,755
|
|
The US federal and state operating loss carryforwards expire at varying dates through 2027. The federal credits begin to expire in 2028. We also have non-US US tax credits (primarily MAT paid in India) carried forward of approximately $46.9 million as of December 31, 2019, which is available for set-off against the future tax liability of certain Indian operations on a staggered basis over a period up-to fifteen years.
On December 22, 2017, the TCJA was enacted, substantially changing the U.S. tax system and affecting the Company in a number of ways. Notably, the TCJA: establishes a flat corporate income tax rate of 21.0% on U.S. earnings; imposes a one-time tax on unremitted cumulative non-U.S. earnings of foreign subsidiaries (“Transition Tax”);imposes a new minimum tax on certain non-U.S. earnings, irrespective of the territorial system of taxation, and generally allows for the repatriation of future
earnings of foreign subsidiaries without incurring additional U.S. taxes by transitioning to a territorial system of taxation; subjects certain payments made by a U.S. company to a related foreign company to certain minimum taxes (Base Erosion Anti-Abuse Tax); eliminates certain prior tax incentives for manufacturing in the United States and creates an incentive for U.S. companies to sell, lease or license goods and services abroad by allowing for a reduction in taxes owed on earnings related to such sales; allows the cost of investments in certain depreciable assets acquired and placed in service after September 27, 2017 to be immediately expensed; and reduces deductions with respect to certain compensation paid to specified executive officers.
In March 2018, the FASB Issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. ASU 2018-05 was issued to incorporate into Topic 740 recent SEC guidance related to the income tax accounting implications of the TCJA. Due to the complexities involved in accounting for the enactment of the TCJA, the SEC Staff had issued SAB No. 118 which allowed the Company to record provisional amounts in earnings for the year ended December 31, 2017. ASU 2018-05 became effective immediately and permitted companies to use provisional amounts for certain income tax effects of the TCJA during a one-year measurement period. The Transition Tax is based on the Company’s total post-1986 earnings and profits that were previously deferred from U.S. income taxes. The Company completed its tax accounting for the TCJA during Q4 2018 and recorded an adjustment of $24.5 million related to the transition tax after taking into consideration carried forward NOLs and other tax attributes available for set-off.
The Company has not recognized a deferred U.S. tax liability and associated income tax expense for the undistributed earnings of its foreign subsidiaries which we consider indefinitely invested because those foreign earnings will remain permanently reinvested in those subsidiaries to fund ongoing operations and growth. Upon distribution of those earnings in the form of dividends or otherwise, we may be subject to income taxes and withholding taxes payable in various jurisdictions, which could potentially be partially offset by foreign tax credits. At December 31, 2019 the cumulative amount of the Company’s undistributed foreign earnings was approximately $740.5 million, inclusive of income previously taxed in the United States.
The following table summarizes the activity related to provision made by the Company in the books for uncertain tax positions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
|
(In thousands)
|
Beginning Balance
|
$
|
9,294
|
|
|
$
|
9,144
|
|
|
$
|
3,265
|
|
Additions for tax positions related to current year
|
—
|
|
|
150
|
|
|
—
|
|
Additions for tax positions of prior years
|
195
|
|
|
—
|
|
|
5,879
|
|
Reductions for tax position of prior years
|
(290
|
)
|
|
—
|
|
|
—
|
|
Ending Balance
|
$
|
9,199
|
|
|
$
|
9,294
|
|
|
$
|
9,144
|
|
The Company recognizes estimated interest accrued and penalties related to uncertain tax positions as part of the income tax expense provided for such positions. The Company accrued as of December 31, 2019 and 2018 approximately $1.0 million and $1.1 million, respectively, of estimated interest and penalties. These amounts are included in the December 31, 2019 and 2018 balances in the preceding table of $9.2 million and $9.3 million, respectively, which is included in other long term liabilities in the accompanying Consolidated Balance Sheet.
We file income tax returns in the US federal, many US state and local jurisdictions, and certain foreign jurisdictions. We have substantially resolved all US federal income tax matters for tax years prior to 2015. Our state and foreign tax matters may remain open from 2008 forward.
Note 9. Stock Repurchases
Effective February 6, 2017, the Company's Board of Directors unanimously approved and authorized a share repurchase plan of $150.0 million. The Board directed that the repurchases be funded with available cash balances and cash generated by the Company's operating activities. Under certain circumstances the aggregate amount of repurchases of the Company's equity shares may be limited by the terms and underlying financial covenants regarding the Company's commercial bank financing facility.
The Company's share repurchase plan’s terms have been structured to comply with the SEC’s Rule 10b-18, and are subject to market conditions and applicable legal requirements. The program does not obligate the Company to acquire any specific number of shares and may be suspended or terminated at any time. All purchases are made in the open market. Treasury stock is recorded
at its acquired cost. During 2019, the Company repurchased and retired 95,000 shares of its common stock under these plans for total consideration of $4.2 million. During 2018, the Company repurchased and retired 996,773 shares of its common stock under this plan for total consideration of $49.6 million.
As of December 31, 2019, the Company had $80.1 million remaining in its share repurchase authorization.
Note 10. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at December 31, 2019, and December 31, 2018, consisted of the following:
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
(In thousands)
|
Trade accounts payable
|
$
|
74,967
|
|
|
$
|
84,924
|
|
Accrued professional fees
|
2,247
|
|
|
1,152
|
|
Income taxes payable*
|
4,094
|
|
|
13,901
|
|
Share repurchases accrued
|
—
|
|
|
8,800
|
|
Sales taxes payable
|
3,385
|
|
|
2,749
|
|
Other accrued liabilities
|
42
|
|
|
369
|
|
Total
|
$
|
84,735
|
|
|
$
|
111,895
|
|
* Long term portion of income taxes payable pertaining to the 2017 Tax Cuts and Jobs Act one-time transition tax totaling $16.8 million is included in other liabilities in the Company's Consolidated Balance Sheets.
Note 11. Other Current Assets
Other current assets at December 31, 2019 and December 31, 2018 consisted of the following:
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
(In thousands)
|
Prepaid expenses
|
$
|
51,021
|
|
|
$
|
40,409
|
|
Other third party receivables
|
4,785
|
|
|
8,341
|
|
Sales taxes receivable from customers
|
6,499
|
|
|
6,409
|
|
Credit card merchant account balance receivable
|
796
|
|
|
939
|
|
Short term portion of capitalized costs to obtain and fulfill contracts
|
734
|
|
|
862
|
|
Accrued interest receivable
|
176
|
|
|
233
|
|
Other
|
3,063
|
|
|
2,081
|
|
Total
|
$
|
67,074
|
|
|
$
|
59,274
|
|
Note 12. Other Current Liabilities
Other current liabilities at December 31, 2019 and December 31, 2018 consisted of the following:
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
(In thousands)
|
Acquisition obligations (upfront purchase and contingent consideration)
|
$
|
6,762
|
|
|
$
|
77,594
|
|
Redemption liability to reacquire 10% equity stake from PML
|
—
|
|
|
4,925
|
|
Customer advances (deposits)
|
22,573
|
|
|
2,980
|
|
Other
|
—
|
|
|
180
|
|
Total
|
$
|
29,335
|
|
|
$
|
85,679
|
|
Note 13. Property and Equipment
Property and equipment at December 31, 2019 and 2018 consisted of the following:
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
(In thousands)
|
Computer equipment
|
$
|
15,899
|
|
|
$
|
15,734
|
|
Buildings
|
26,475
|
|
|
25,283
|
|
Land
|
10,479
|
|
|
10,479
|
|
Land improvements
|
7,195
|
|
|
7,195
|
|
Leasehold improvements
|
910
|
|
|
1,341
|
|
Furniture, fixtures and other
|
7,307
|
|
|
6,330
|
|
|
68,265
|
|
|
66,362
|
|
Less accumulated depreciation and amortization
|
(19,844
|
)
|
|
(18,402
|
)
|
|
$
|
48,421
|
|
|
$
|
47,960
|
|
Depreciation expense was $4.3 million, $3.7 million and $3.8 million, for the years ended December 31, 2019, 2018, and 2017, respectively.
Note 14. Cash Option Profit Sharing Plan and Trust
The Company maintains a 401(k) Cash Option Profit Sharing Plan, for our U.S. based employees, which allows participants to contribute a percentage of their compensation to the Profit Sharing Plan and Trust up to the Federal maximum. The Company matches 100% of an employee’s 1% contributed and 50% on the 2% contributed by an employee. Accordingly, the Company’s contributions to the Plan were $557 thousand, $536 thousand and $610 thousand for the years ending December 31, 2019, 2018, and 2017, respectively.
We maintain employee benefit plans in the form of certain statutory and incentive plans covering substantially all of our India based employees. In accordance with Indian law, all of our employees in India are entitled to receive benefits under the Employees' Provident Fund Scheme, 1952, as amended, a retirement benefit scheme under which an amount equal to 12% of the basic salary of an employee is contributed both by the employer and the employee in a government fund. For the years ending December 31, 2019, 2018, and 2017 the aggregate amount set aside or accrued by us to provide for pension or retirement benefits for all of our employees, which amount consists of the Provident Fund was $4.2 million, $4.0 million, and $1.5 million, respectively.
Note 15. Geographic Information
The Company operates with one operating and one reportable segment whose results are regularly reviewed by the Company's CEO, its chief operating decision maker as to operating performance and the allocation of resources. External customer revenues in the tables below were attributed to a particular country based on whether the customer had a direct contract with the Company which was executed in that particular country for the sale of the Company's products/services with an Ebix subsidiary located in that country.
The following enterprise wide information relates to the Company's geographic locations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
External Revenues
|
|
Long-lived assets
|
|
External Revenues
|
|
Long-lived assets
|
|
External Revenues
|
|
Long-lived assets
|
|
|
(In thousands)
|
United States
|
|
$
|
182,530
|
|
|
$
|
395,225
|
|
|
$
|
196,984
|
|
|
$
|
390,551
|
|
|
$
|
211,895
|
|
|
$
|
394,112
|
|
Canada
|
|
4,805
|
|
|
7,012
|
|
|
5,611
|
|
|
5,846
|
|
|
7,522
|
|
|
6,601
|
|
Latin America
|
|
19,755
|
|
|
17,176
|
|
|
19,866
|
|
|
16,348
|
|
|
21,128
|
|
|
22,300
|
|
Australia
|
|
33,268
|
|
|
3,541
|
|
|
35,770
|
|
|
1,485
|
|
|
34,366
|
|
|
1,174
|
|
Singapore*
|
|
6,549
|
|
|
18,282
|
|
|
7,674
|
|
|
17,805
|
|
|
6,330
|
|
|
17,475
|
|
New Zealand
|
|
1,955
|
|
|
578
|
|
|
2,015
|
|
|
158
|
|
|
1,933
|
|
|
247
|
|
India*
|
|
300,678
|
|
|
700,986
|
|
|
196,372
|
|
|
672,699
|
|
|
61,857
|
|
|
338,130
|
|
Europe
|
|
14,695
|
|
|
24,508
|
|
|
15,387
|
|
|
23,880
|
|
|
17,062
|
|
|
25,687
|
|
Indonesia*
|
|
9,706
|
|
|
117
|
|
|
7,482
|
|
|
98
|
|
|
1,055
|
|
|
110
|
|
Philippines*
|
|
5,991
|
|
|
729
|
|
|
6,483
|
|
|
448
|
|
|
623
|
|
|
616
|
|
United Arab Emirates*
|
|
683
|
|
|
59,531
|
|
|
1,042
|
|
|
54,249
|
|
|
200
|
|
|
53,629
|
|
Mauritius*
|
|
—
|
|
|
—
|
|
|
3,140
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
$
|
580,615
|
|
|
$
|
1,227,685
|
|
|
$
|
497,826
|
|
|
$
|
1,183,567
|
|
|
$
|
363,971
|
|
|
$
|
860,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Primarily India led businesses for which total revenue was $320.0 million, $217.5 million and $64.3 million for the years ended December 31, 2019, 2018, and 2017, respectively.
|
Note 16. Related Party Transactions
We consider Regions Bank ("Regions") to be a related party because Regions provides financing to the Company via a syndicated commercial banking facility (refer to Note 5 to these Consolidated Financial Statements), for which Regions is the lead bank, and because Regions is also a customer to whom the Company sells products and services. Revenues recognized from Regions were $193 thousand, $221 thousand, and $301 thousand for the years ended December 31, 2019, 2018, and 2017, respectively. Accounts receivable due from Regions were $13 thousand and $74 thousand at December 31, 2019 and 2018, respectively.
We also consider the BMO Bank ("BMO") to be a related party because BMO is a participating bank in the above cited syndicated commercial banking facility, and because BMO is also a customer to whom the Company sells products and services. Revenues recognized from BMO were $351 thousand for the year ended December 31, 2019, and the accounts receivable due from BMO were $29 thousand at December 31, 2019.
As discussed in Note 18 "Investment in Joint Ventures", Vayam Technologies Ltd ("Vayam") is also a customer of the Ebix Vayam Limited JV, and during the twelve months ending December 31, 2019 and 2018, the Ebix Vayam Limited JV recognized $1.4 million and $13.6 million of revenue from Vayam, respectively. As of December 31, 2019, Vayam had $22.8 million of accounts receivable with the Ebix Vayam Limited JV.
Also, as discussed in Note 18 "Investment in Joint Ventures", an in regards to the EbixHealth JV it was concluded that the customer relationship with IHC, our joint venture partner, to be by its nature, a related party.
Note 17. Quarterly Financial Information (unaudited)
The following is the unaudited quarterly financial information for 2019, 2018, and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
|
(In thousands, except share data)
|
Year ended December 31, 2019
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
142,924
|
|
|
$
|
144,275
|
|
|
$
|
147,233
|
|
|
$
|
146,183
|
|
Gross Profit
|
|
96,995
|
|
|
93,321
|
|
|
92,062
|
|
|
93,072
|
|
Operating income
|
|
54,131
|
|
|
41,282
|
|
|
26,007
|
|
|
34,253
|
|
Net income from continuing operations
|
|
$
|
25,710
|
|
|
$
|
28,851
|
|
|
$
|
20,509
|
|
|
$
|
21,650
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.84
|
|
|
$
|
0.95
|
|
|
$
|
0.67
|
|
|
$
|
0.71
|
|
Diluted
|
|
$
|
0.84
|
|
|
$
|
0.94
|
|
|
$
|
0.67
|
|
|
$
|
0.71
|
|
Year ended December 31, 2018
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
108,230
|
|
|
$
|
124,626
|
|
|
$
|
128,643
|
|
|
$
|
136,327
|
|
Gross Profit
|
|
68,639
|
|
|
81,067
|
|
|
85,680
|
|
|
94,025
|
|
Operating income
|
|
33,896
|
|
|
38,315
|
|
|
39,238
|
|
|
41,530
|
|
Net income from continuing operations
|
|
26,208
|
|
|
29,180
|
|
|
29,242
|
|
|
8,509
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.83
|
|
|
$
|
0.93
|
|
|
$
|
0.93
|
|
|
$
|
0.27
|
|
Diluted
|
|
$
|
0.83
|
|
|
$
|
0.92
|
|
|
$
|
0.92
|
|
|
$
|
0.27
|
|
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
79,103
|
|
|
$
|
87,387
|
|
|
$
|
92,800
|
|
|
$
|
104,681
|
|
Gross Profit
|
|
53,916
|
|
|
56,455
|
|
|
57,863
|
|
|
66,243
|
|
Operating income
|
|
25,690
|
|
|
26,539
|
|
|
27,911
|
|
|
33,081
|
|
Net income from continuing operations
|
|
26,427
|
|
|
23,434
|
|
|
24,184
|
|
|
26,573
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.83
|
|
|
$
|
0.74
|
|
|
$
|
0.77
|
|
|
$
|
0.84
|
|
Diluted
|
|
$
|
0.83
|
|
|
$
|
0.74
|
|
|
$
|
0.76
|
|
|
$
|
0.84
|
|
In some instances the sum of the quarterly basic and diluted net income per share amounts may not agree to the full year basic and diluted net income per share amounts reported on the Consolidated Statements of Income because of rounding.
Note 18. Investment in Joint Ventures
Effective February 7, 2016, Ebix and Vayam Technologies Ltd ("Vayam") formed a joint venture named Ebix Vayam Limited JV. This joint venture was established to carry out IT projects in the government sector of the country of India and particularly in regards to the implementation of e-governance projects in the areas of education and healthcare. Ebix has a 51% equity interest in the joint venture, and Vayam has a 49% equity interest in the joint venture. Ebix is fully consolidating the operations of the Ebix Vayam Limited JV into the Company's financial statements and separately reporting the Vayam minority, non-controlling, interest in the joint venture's net income and equity. Vayam is also a customer of the Ebix Vayam Limited JV, and during the twelve months ending December 31, 2019 and 2018, the Ebix Vayam Limited JV recognized $1.4 million and $13.6 million of revenue from Vayam, respectively. As of December 31, 2019, Vayam had $22.8 million of accounts receivable with the Ebix Vayam Limited JV, net of the estimated allowance for doubtful accounts receivable in the amount of $12.1 million recorded during 2019. In the third quarter of 2019, the Company recorded bad debt reserve as a precautionary measure, against the receivables due from a public sector entity, BSNL, in India. Payment of these receivables has been delayed due to liquidity issues at BSNL. The Government of India has recently approved funding to BSNL and the Company expects the accounts to be collectible once the Government funding reaches BSNL
Effective September 1, 2015, Ebix and IHC formed a joint venture named EbixHealth JV. This joint venture was established to promote and market a best practices administration data exchange for health and pet insurance lines of business nationally. Ebix has a 51% equity interest in the joint venture and IHC has a 49% equity interest the joint venture. IHC is also a customer of the EbixHealth JV, and during the twelve months ending December 31, 2019 and 2018, the EbixHealth JV recognized $2.8 million and $7.6 million of revenue from IHC, respectively. As of December 31, 2019, IHC had $335 thousand of accounts receivable with the EbixHealth JV. Furthermore, as a related party, IHC also has been and continues to be a customer of Ebix, and during the twelve months ending December 31, 2019 and 2018, the Company recognized $78 thousand and zero, respectively, of revenue from IHC. As of December 31, 2019 Ebix had $8 thousand of outstanding accounts receivable from IHC. The EbixHealth JV has a $1.8 million note due to IHC. Additionally, based on the final purchase price allocation valuation report for the EbixHealth JV it was concluded that the customer relationship with IHC, our joint venture partner, to be by its nature, an indefinite-lived customer relationship.
Note 19. Capitalized Software Development Costs
In accordance with ASC 350-40 “Internal-Use Software” and/or ASC 350-985 “Software” the Company has capitalized certain software and product related development costs associated with the Company’s continuing medical education service offerings, development of Property and Casualty (P&C) underwriting insurance data exchange platform servicing the London markets; development of EbixCash’s SaaS based Asset Management and Collection platforms having global application; development of EbixCash’s new single-sign on agent and customer portal including mobile application, and content development work related to E-Learning division of EbixCash. During the year ended December 31, 2019 and 2018, the Company capitalized $8.0 million and $8.1 million, respectively, of such development costs. As of December 31, 2019 and 2018, a total of $19.2 million and $14.1 million, respectively, of remaining unamortized development costs are reported on the Company’s consolidated balance sheet. During the year ended December 31, 2019 and 2018, the Company recognized $2.7 million and $2.2 million, respectively, of amortization expense with regards to these capitalized software development costs, which is included in costs of services provided in the Company’s consolidated income statement. The capitalized continuing medical education product costs are being amortized using a three-year to five-year straight-line methodology and certain continuing medical education products costs are immediately expensed. The capitalized software development costs for the property and casualty underwriting insurance data exchange platform are being amortized over a period of five years. The capitalized software development costs related to EbixCash products mentioned above shall be amortized over a period of five years once the platforms / products are rolled out in the market.
Note 20: Leases
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This new accounting guidance is intended to improve financial reporting about leasing transactions. The ASU requires organizations that lease assets referred to as “Lessees” to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. An organization is to provide disclosures designed to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements concerning additional information about the amounts recorded in the financial statements. Under the new guidance, a lessee is required to recognize assets and liabilities for leases with lease terms of more than twelve months. Consistent with current GAAP, the recognition,
measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike former GAAP, which requires only financing leases to be recognized on the balance sheet, the new ASU requires both types of leases (i.e., operating and financing) to be recognized on the balance sheet. The financing lease will be accounted for in substantially the same manner as capital leases were accounted for under the previous guidance. For operating leases, there is now the recognition of a lease liability and a lease asset for all such leases greater than one year in term.
The Company adopted Topic 842 effective January 1, 2019, using a modified retrospective method and did not restate comparative periods. The Company elected to adopt the package of practical expedients; accordingly, the Company retained the lease classification and initial direct costs for any leases that existed prior to adoption and we did not revisit whether any existing or expired contracts contain leases. The Company has operating and finance leases for office space, retail, data centers and certain office equipment with expiration dates ranging through 2029, with various renewal options. Only renewal options that were reasonably assured to be exercised are included in the lease liability. As of December 31, 2019, the maturity of lease liabilities under Topic 842 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Operating Leases
|
|
Financing Leases
|
|
Total
|
|
|
(In thousands)
|
2020
|
|
$
|
7,289
|
|
|
$
|
201
|
|
|
$
|
7,490
|
|
2021
|
|
5,293
|
|
|
190
|
|
|
5,483
|
|
2022
|
|
3,768
|
|
|
160
|
|
|
3,928
|
|
2023
|
|
2,900
|
|
|
99
|
|
|
2,999
|
|
2024
|
|
1,591
|
|
|
77
|
|
|
1,668
|
|
Thereafter
|
|
1,591
|
|
|
—
|
|
|
1,591
|
|
Total
|
|
22,432
|
|
|
727
|
|
|
23,159
|
|
Less: present value discount*
|
|
(3,281
|
)
|
|
(87
|
)
|
|
(3,368
|
)
|
Present value of lease liabilities
|
|
19,151
|
|
|
640
|
|
|
19,791
|
|
|
|
|
|
|
|
|
|
Less: current portion of lease liabilities
|
|
(5,955
|
)
|
|
(164
|
)
|
|
(6,119
|
)
|
Total long-term lease liabilities
|
|
$
|
13,196
|
|
|
$
|
476
|
|
|
$
|
13,672
|
|
|
|
|
|
|
|
|
* The discount rate used was the relevant incremental borrowing rate in each of the jurisdictions
wherein the leased properties are located
|
The company's net assets recorded under operating and finance leases were $19.8 million as of December 31, 2019. The lease cost recognized in our Condensed Consolidated Statement of Income in the category of General and Administrative, is summarized as follows:
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
(In thousands)
|
Operating Lease Cost
|
|
$
|
8,613
|
|
Finance Lease Cost:
|
|
|
Amortization of Lease Assets
|
|
121
|
Interest on Lease liabilities
|
|
36
|
Finance Lease Cost
|
|
157
|
Sublease Income
|
|
(654
|
)
|
Total Net Lease Cost
|
|
$
|
8,116
|
|
Other information about lease amounts recognized in our Condensed Consolidated Statement of Income is summarized as follows:
|
|
|
|
|
December 31, 2019
|
Weighted Average Lease Term - Operating Leases
|
3.90 years
|
|
Weighted Average Lease Term - Finance Leases
|
4.02 years
|
|
Weighted Average Discount Rate - Operating Leases
|
8.44
|
%
|
Weighted Average Discount Rate - Finance Leases
|
7.28
|
%
|
Commitments for minimum rentals under non-cancellable leases, under the legacy guidance in ASC 840 as of December 31, 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
Year
|
|
Operating Leases
|
|
Financing Leases
|
|
|
(In thousands)
|
2019
|
|
$
|
34,189
|
|
|
$
|
266
|
|
2020
|
|
32,093
|
|
|
96
|
|
2021
|
|
26,675
|
|
|
89
|
|
2022
|
|
23,355
|
|
|
67
|
|
2023
|
|
21,890
|
|
|
15
|
|
Thereafter
|
|
3,299
|
|
|
—
|
|
Total
|
|
$
|
141,501
|
|
|
$
|
533
|
|
Less: sublease income
|
|
(1,091
|
)
|
|
|
Net lease payments
|
|
$
|
140,410
|
|
|
|
Less: amount representing interest
|
|
|
|
(63
|
)
|
Present value of obligations under financing leases
|
|
|
|
$
|
470
|
|
Less: current portion
|
|
|
|
(239
|
)
|
Long-term obligations
|
|
|
|
$
|
231
|
|
As of December 31, 2019, our lease liability of $19.2 million does not include certain arrangements, which are primarily airport leases that do not meet the definition of a lease under Topic 842. Such arrangements represent further commitments of approximately $97.8 million as follows:
|
|
|
|
|
|
Year
|
|
Commitments
|
|
|
(In thousands)
|
2020
|
|
$
|
27,496
|
|
2021
|
|
25,831
|
|
2022
|
|
22,713
|
|
2023
|
|
21,734
|
|
2024
|
|
—
|
|
Thereafter
|
|
—
|
|
Total
|
|
$
|
97,774
|
|
The Company leases office space under non-cancelable operating leases with expiration dates ranging through 2028, with various renewal options. Finance leases range from three to five years and are primarily for office equipment. There were multiple assets under various individual finance leases at December 31, 2019 and 2018. Rental expense for office and airport facilities and certain equipment subject to operating leases during the year ended December 31, 2019 and 2018 was $37.8 million and $22.3 million, respectively.
Note 21: Working Capital Facility
The Company maintains working capital debt facilities with banks in India for working capital funding requirements to support our foreign exchange, travel and remittance businesses. We are required to extend short term credits to franchisee networks (B2B) and corporate customers. Additionally, we are required to maintain minimum levels of foreign currency inventory across branches and airport operations. Typically, these facilities carry interest rates 9% to 10% and are rupee denominated working capital lines and are collateralized against the receivables of these businesses and existing foreign currency inventory on hand.
As of December 31, 2019 and 2018, the total of these working capital facilities was $28.4 million and $10.5 million, respectively, and is included in current liabilities in the Company's Condensed Consolidated Balance Sheet.
Note 22. Concentrations of Credit Risk
Credit Risk
The Company is potentially subject to concentrations of credit risk in its accounts receivable. Credit risk is the risk of an unexpected loss if a customer fails to meet its contractual obligations. Although the Company is directly affected by the financial condition of its customers and the loss of or a substantial reduction in orders or the ability to pay from the customer could have a material effect on the consolidated financial statements, management does not believe significant credit risks exist at December 31, 2019. The Company had one customer whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable.
Major Customer
As previously disclosed in Note 18, effective February 7, 2016, Ebix and Vayam Technologies Ltd ("Vayam") formed a joint venture named Ebix Vayam Limited JV. This joint venture was established to carry out IT projects in the government sector of the country of India and particularly in regards to the implementation of e-governance projects in the areas of education and healthcare. Ebix has a 51% equity interest in the joint venture, and Vayam has a 49% equity interest in the joint venture. Vayam is also a customer of the Ebix Vayam Limited JV, and during the twelve months ending December 31, 2019 and 2018, the Ebix Vayam Limited JV recognized $1.4 million and $13.6 million of revenue from Vayam, respectively, and as of December 31, 2019, Vayam had $22.8 million of accounts receivable with the Ebix Vayam Limited JV, net of the estimated allowance for doubtful accounts receivable in the amount of $12.1 million recorded during 2019, the Company recorded as a bad debt reserve as a precautionary measure, against the receivables due from a public sector entity, BSNL, in India. Payment of these receivables has been delayed due to liquidity issues at BSNL. The Government of India has recently approved funding to BSNL and while the Company expects the accounts to be collectible once the Government funding reaches BSNL
Note 23. Subsequent Events
Dividends
The Company decleared its quarterly cash dividend to the holders of its common stock, whereby a dividend in the amount of $0.075 per common share will be paid on March 16, 2020 to shareholders of record on March 2, 2020.
Compensatory Arrangements of Certain Officers
On January 2, 2020, Mr. Raina proposed and the Compensation Committee accepted that Mr. Raina’s salary be paid in shares of common stock of the Company for his 2020 compensation. As a result, the Company has granted Mr. Raina 107,655 shares of restricted common stock, which represents his annual salary of $3.6 million divided by $33.44, the closing price of Ebix common stock on January 2, 2020. One third of the shares vest after one year, and the remaining in eight equal quarterly installments.