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Ebix, Inc. (NASDAQ:EBIX)

Q1 2010 Earnings Call

May 7, 2010 11:00 a.m. ET

Executives

Neil van Helden - Corporate Manager, Marketing Communications & Media

Robin Raina - President & CEO

Robert Kerris - CFO

Analysts

Nick Phillips - Holden Asset Management

Mike Latimore - Northland Capital

John Bates - Individual Investor

Simon Baruch - Private Investor

Mark Rye - Singular Research

Mark Lemke - Wells Fargo

Vincent Coppazi - Kovack Securities

Presentation

Operator

Good day ladies and gentlemen, and welcome to the Ebix Inc. First Quarter 2010 Investor Call. At this time all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this program is been recorded. I'd now like to introduce your host for todays program Mr. Neil van Helden, Corporate Manager, Marketing Communications and Media. Please go ahead, sir.

Neil van Helden

Good morning everyone, and welcome to Ebix's Inc's first quarter 2010 earnings conference call. Joining me to discuss the quarter is Ebix's President and CEO, Robin Raina. Following Robin's remarks, we will open up the call for your questions to be addressed by Robin and Ebix CFO, Robert Kerris. Now let me take this time to remind you that the primary purpose of today's call is to provide you with information regarding our first quarter fiscal 2010 performance.

However, some of our discussion or responses to your questions may contain forward-looking statements. These statements are subject to risks, uncertainties and assumptions. Should any of the risks or uncertainties or materialize or should have assumptions prove incorrect, actual Company results could differ materially from these forward-looking statements. All these risks, uncertainties, and assumptions as well as other information on potential factors that could affect our financial results are included in our report filed with the SEC included our most recently reported Form 10-K for the year ended 31st of December 2009 particularly under the heading risk factors.

Our press release announcing our outstanding first quarter results was issued a few hours back. You can look at Ebix Financials beyond what has been provided in the release on our website at www.ebix.com. The audio and the text transcript of this call will be available also on the investor home page of the Ebix website after 2:00 p.m. EDT With that, let me turn you over to Ebix, CEO and President, Robin Raina.

Robin Raina

Thank you, Neil. Good morning gentlemen. We announced our first quarter 2010 results a few hours back, and I'm delighted to be able to share with you today our outstanding results. We started that year by delivering the biggest financial quarter in our history.

First quarter revenue rose 53% to $31.6 million, as compared to the first quarter of 2009. GAAP diluted EPS of $0.32 increased from $0.23 a year ago. That's an increase of 38% year-over-year. These are record results and mark the highest revenue net income and diluted EPS in anyone quarter that the Company has reported in its 34 year young history. First quarter net income was $12.4 million, an increase of 49% on a year-over-year basis, as compared to net income of $8.3 million in the first quarter of 2009.

To put these numbers in perspective, let me remind you that the net income of $12.4 million in the first quarter of 2010 is approximately equivalent to the net income of Ebix for the full year of 2007. For those of us who have been associated with Ebix for sometime this net income comparison of our quarterly results to the full year income results just two years back has a lot of special meaning.

This is also the first quarter where our U.S. income was taxed at an average rate of 33.2% due to partial NOI valuation allowance release in the fourth quarter of 2009. Our consolidated worldwide tax rate benefits from the majority of our manufacturing base and income being in low tax jurisdictions across the world. The exchange segment continued to be a largest revenue generator with 72% of our revenues coming from at this quarter.

11% of our revenues came from the BPO channel, 9% from the P&C back end systems broker channel and 8% from the P&C back end systems insurance company channel. The exchange channel grew 90% year-over-year. The BPO channel grew 4% year-over-year and the broker channel grew 19% year-over-year. The carrier channel dropped 17% year-over-year because of the relative freezing of IT budgets by insurance companies in 2009 in the area of procuring back end systems.

The insurance company market has since improved quite a bit in 2010, and we expect to get our carrier revenue going back again soon. in the first quarter of 2010, the Company continued its focus on organic growth by signing key named accounts like Sun Life, Universal Life, U.S. Bank Ameriprise, American General Life, National Western Life, Principal Financial Group, MetLife, Bechtel, Sea World, Lockton, Hillard Lyons, Port Authority of New York-New Jersey, and Avis amongst others etcetera.

This list of names is just a sample presentation of contract signed by the Company in the first quarter of 2010 with large accounts easily recognizable to the investor community and is by no means a comprehensive list of contract signed by Ebix in the first quarter of 2010.

Some of the other material contract signed previously in 2009 are still in implementation mode, and thus did not generate any transaction exchange revenue in the first quarter of 2010.

Some of these named accounts in implementation mode at present are Bank of America, Wells Fargo, Fidelity, U.S. Bank, Ameriprise, Marsh, Disney Consumer Products, John Hancock, Bechtel and Genworth etcetera. This is an addition to all the new contract signed by Ebix in the first quarter of 2010, which are also now in the implementation pipeline.

Today Ebix has emerged as the largest On-Demand insurance services exchange in the world. We intend to build on our success and deploy many new exchanges across the world. We continue to invest in research and development towards developing and deploying many of these key exchanges in 2010 itself. Some of these new initiatives targeted at drawing revenue organically are in the areas of servicing and annuity policy, portability of an annuity policy across multiple carriers, life insurance, e-policy delivery with Para-med exam, eSignatures etcetera.

On-Demand cloud computing infrastructure in Latin America to provide property and casualty insurance company systems on a utility service basis across multiple insurance company and an ambitious enterprise wide system code-named GR8 to provide a state-of-the-art On-Demand back end system for health, employee benefits, life enrollment, billing and the counting etcetera are some of the other key initiative that we're pursuing at present.

We believe that we're ready to enter certain markets that we had stayed away from in the United States still now. Noteworthy amongst them, is the property and casualty insurance exchange market in the United States presently dominated by one player IVANS. We believe we're ready to compete with IVANS in the United States BNC insurance markets now. You could expect us to make some announcement soon in that area.

We believe that at a present income rate, we expect to accumulate additional cash of approximately $50 million over the next 12 months. This is an addition to the Company's present cash balances of $23.5 million as of 3rd of May 2010. We intend to reinvest this cash towards growing our revenues organically and towards making accretive complimentary acquisitions in the short and long-term both. Accordingly, we're pursuing a number of opportunities in the areas of health, BMC exchanges, compliance exchanges that allow us to enter new markets like exchanges for mutual funds, SEC and FINRA Compliance for Bank Assurance, insurance companies etcetera.

A few days back, we unveiled our cloud computing strategy in the insurance markets. As an On-Demand solutions provider to the insurance marketplace, it's a natural progression for Ebix to grow into the cloud computing area as it aligns well with our current application development strategies.

Our cloud computing services are being designed to meet customer's critical needs to experience results quickly as they deploy their technical applications in traditional data center, modular data center or the cloud. We believe there is an opportunity in the insurance industry to offer infrastructure-based services on a utility model delivered over a cloud. This will allow insurance companies, insurance brokers, investment advisors, broker dealers, and other entities involved in the insurance industry to run multiple applications interfaced with each outside the confined of their own data centers.

This means clients will have the benefit of dealing with one infrastructure services provider. We believe Ebix is uniquely positioned to play a major role using cloud computing within the insurance industry. We're one of the only players who can deliver a multitude of services while process and end to end insurance transaction utilizing our suite of SAS-based products like Ebix Exchange, Ebix Advantage, SmartOffice and SmartIntegrator etcetera.

I'm often asked whether we can now grow our revenue exponentially since we're increasingly seen as a leader in the markets that we play in. I believe that the path Ebix needs to stick to is to grow revenue aggressively, but sensibly. Ebix can either choose the path of high growth, the low 10% to 15% operating margins, or the path of sensible growth with 40% of more in operating margins. We prefer to do the later, and thus remain focused on growing on working towards our goal of annualized revenue run rate of $200 million by fourth quarter of 2011 with 40% or more in operating margins.

Doing that while ensuring Ebix 70% plus recurring revenue stream and minimal customer attrition ratio is not likely to be easy. We've chosen our path, that's a lot harder that just growing revenue aggressively. Since we intend doing that with operating margins, that will hopefully set a new benchmark for the On-Demand sector in the United States. I'm often asked how we've made cross-selling as our mantra in the insurance markets.

Let me walk you through just one permutation example of how our examples lead into each other and how cross-selling can naturally be undertaken by our sales folks across the world. Our focus has been to provide a single window approach to a prospective client in terms of all the services that they might utilize from us. Towards that extent, we have a multi-national account strategy and a domestic account strategy providing single points of contact to our customers.

Let us take the example of a large insurance company who wants to improve its distribution, marketing and reach while trying to improve its time-to-market, its productivity in terms of time and cost both. To such a customer, to such a prospective customer, we're likely to suggest a number of On-Demand solutions all interfaced with each other and all naturally leading into each other while taking a transaction for one end to another through the insurance company and its entire food chain.

This could involve to walk you through the steps. This could involve providing one and On-Demand CRM system for the insurance company's direct producers. Two, it could involve providing a CRM system for its 1000s of agents, investment advisors, investment broker dealers etcetera to handle prospecting sales management, billing, commission, accounting etcetera. Three, by bundling the CRM into the Ebix Exchange survey and completely seamlessly interfacing it within the exchange, we can now get their agents, producers, investment advisors, investment broker dealers etcetera to enter the prospect data into the Ebix CRM system.

Take the data from the CRM system into Ebix life illustration exchange seamlessly, and in the background providing multiple quotes to them from multiple carriers. Four, we get the data from the Life Exchange to seamlessly flow back into the Ebix CRM system so that the agent never comes out of the system. If the agent wants to present this quoting data on this website or a portal to its consumers or sub-agents, we'll do that precisely by using another service of ours called [VitalTicket] while maintaining the look and feel of a particular agency.

Five, once that agency is ready to convert the quote into a policy, the agent can still continue using the Ebix CRM system and with one click can populate all the data from the Ebix CRM system into Ebix order entry exchange LifeSpeed. This LifeSpeed exchange takes the data directly into the insurance companies back end policy administration system. Along the way, LifeSpeed exchange delivers data for the Para-med exam to a third party gets the compliance check done, and get the carrier representative to issue a E-policy using Ebix eSignature process.

Six, Ebix Exchange for clearance transactions can hand over the policy to Clearing Houses like DDCC Seven, once this policy needs to be serviced, Ebix new maintenance exchange will process the transaction and when the policy needs to be transferred from one carrier to another, Ebix new portability exchange would process the transaction now. Eight, if this insurance company was also doing health insurance or workers compensation or risk management, the CRM could handover that data to Ebix Exchange seamlessly also.

In this example, just to elaborate it. The insurance company has the advantage of still using one vendor Ebix who could now cross our many of its services to the same insurance company in the above example given by me. Ebix would have sold Ebix CRM, WinFlex Life exchange, LifeSpeed exchange, Ebix eSignature service, Ebix VitalTicket Service, Ebix Maintenance exchange, Ebix Portability exchange, Ebix Compliance exchange, Ebix GRA service, Ebix Annuity exchange etcetera or while ensuring that 10s of 1000s of agents of this insurance company can do all this while never getting out of their Ebix CRM system.

At each point as the data moves for one Ebix service to another seamlessly in the background. Ebix continues to generate revenue based on each service being used and the counter keeps track of each of these chargeable movements. The insurance company gets 100% compliance, zero errors straight through processing, increase reach while servicing its agents and consumers efficiently, cost effectively and without using any paper in the process.

The example given by me captures how we cross-sell our services and sell this straight through processing vision to key accounts across the United States today. So to close, Q1 was a good start to fiscal 2010 with investing strongly in research and development while creating strong product offerings leading to straight through processing solution for the insurance industry. With insurance industries margins under pressure, this is a great time to be in the business of disintermediating paper.

We believe that no Company in the insurance software industry is better position for growth in this market than Ebix. I look forward to describing our progress than we release our second quarter 2010 results in the first week of August. With that, let me turn the call back to the operator so that we can take your questions. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions).Our first question comes from Nick Phillips from Holden Asset Management.

Nick Phillip - Holden Asset Management

Salesforce almost doubling and an increase in the amount of your marketing team as well, but this quarter we saw a decrease sequentially in that line item. I'm wondering what accounts for this and how these sales and marketing teams are compensated?

Robin Raina

Nick your voice broke in between. Could you please repeat that question? I'm sorry.

Nick Phillips - Holden Asset Management

Yes, no problem. On the last conference call, you noted that you had doubled your sales force and that you also increased the size of your marketing team, and now that explained the ramp-up in sales and marketing for that quarter. But this quarter, that amount is down sequentially, and I'm wondering what accounts for that and how your sales and marketing teams are compensated?

Robin Raina

Well, I wouldn't read too much into it. The sales staff still is there. The marketing staff still is there. We've actually grown in all of that, and I think its -- some of this are timing differences in terms of how we handle our conferences and stuff like tat and there they can be major conferences happening in the particular quarter which end up resulting in more marketing expenses and so. Having said that our sales and mark, our sales staff is incentive wise like any other organization based on -- we had a direct sales force and we incentive wise them on direct on sales directly to the insurance market based on a cash collected basis.

Nick Phillips - Holden Asset Management

Okay and a quick follow-up. Receivables were up a bit this quarter also. What accounted for that?

Robert Kerris

This is Robert Kerris, CFO. This is just the increase in receivables from recent acquisitions that we've made stricter timing issue. And we look to see quite a bit of collections and the reduction of AR during the coming quarter.

Nick Phillips - Holden Asset Management

All right, I'll get back in queue. Thanks.

Operator

Our next question comes from Mike Latimore from Northland Capital.

Mike Latimore - Northland Capital

Yes, good morning. On the -- just Robin, on your operating -- or on your guidance for $50 million in cash flow, I guess, first, is that operating cash flow? And second, what are kind of some of your general assumptions around working capital in that outlook?

Robin Raina

Well our general assumption is pretty basic meaning clearly we believe that our income streams are quite consistent. That's the first thing. We also believe that our cash flow generation is pretty strong. We're putting a very strong focus on improving our DSO's, continuing to collect on a fast forward basis. We've never had any issues with AR in the past and we don't believe we should have an issue in the coming days. So purely that $50 million number that you're looking at is purely -- if you really look at it, it's a number based on income streams. Again this number is based on where we are today. As we move forward we would like to get this number to improve actually.

Mike Latimore - Northland Capital

Got it and your CapEx is a little bit below kind of normal? What kind of CapEx levels do you think you'll see in 2010?

Robin Raina

I think you're going to see it consistent with what you have in the last year. We do not expect any major movements there.

Mike Latimore - Northland Capital

And your exchange business was up by I think $1.5 million sequentially, I believe. Can you talk a little bit about what drove that revenue line?

Robin Raina

Well I think it's a function of, with each and every quarter you're going to see as we get more and more players coming on our platform you're going to see transactions continue go up. Clearly as you know, our exchange business thrives on transactions. It thrives on the volume of transaction. It thrives on how many entities are conducting transactions. So I think that's a simple fact and so the pipeline that we have of implementation is pretty strong. It's the whole rule of the market.

When you have an implementation pipeline of names like Ameriprise and Banc of America and Wells Fargo and U.S Bank and so on, these are pretty strong names. We're not going to make, we're not going to get our exchange of real revenues from them until they really go live and are fully implemented. So as we go forward, as each one of these are implemented and more and more keep getting added to that pipeline, the transaction volumes will keep increasing and so will you exchange revenues keep increasing.

Mike Latimore - Northland Capital

Yes, I got it. Thanks.

Operator

(Operator Instructions). Our next question comes from John Bates, Individual Investor.

John Bates - Individual Investor

Yes. I'd like to know how important the healthcare, U.S. healthcare is to your exchange net income and I'm also interested in knowing how your exchange is different qualitatively from the exchanges that are going to be set up as a result of the healthcare legislation. I'd like any discussion of how that legislation is going to affect Ebix's products.

Robin Raina

Okay, well I think first of all, let's talk about the reform movement as it stands today and the good news is it's already passed. That from our perspective is very good news simply because whether one likes it doesn't like it, they sure is a lot of inertia in the health insurance market and the passing of that health reform at least made sure that that inertia will go away.

Now having said that, companies like us see everything as an opportunity. We see this is as a big opportunity for us to go out and establish our own health insurance exchanges. Now we do believe that as we move forward, what is going to get critical is that you finally; the country needs a nationwide health insurance exchange.

Today we're seeing more the beginning of 50 exchanges that could possibly emerge and even though 50 exchanges could be in multiple areas, you could see health exchanges in the area of electronic medical records. You could see health exchanges in the area of consumer quoting and so on. Now having said that, we believe ultimately, we're one country.

We'll have to, rather than have 50 exchanges, we'll need to have one common exchange countrywide and towards that extent the only player we believe who can succeed will be the one who looks at that issuer from our perspective which means we believe that a player who looks at the issue from a perspective backend system of health insurance companies looks at it from a perspective of evolving an exchange between these health insurance companies and insurance brokers, looks at a way to bring products from health insurance companies directly to consumers, knows, has -- understands the working of hospitals, understands electronic medical records, understands what goes in into our hospital in terms of indicating content data and so on.

It looks at, understands how claim adjudication works, understands how areas like employee benefits, billing, consolidating billing, enrollment, FSA, COBRA, all of that has to be understood for a real successful player in the exchange side of business to provide and end to end straight through processing exchange.

I will tell you today, that not many players who could even think of doing that because I could break my answer into 20 different services now but that's not going to work. So having that, Ebix looks at it holistically that we need to be, if we are going to be that player, if we're going to at least try to be, if we're going to endeavor to be that player then we must look at that whole issue from a perspective of getting in all these areas, not in just one of these areas.

So we have a comprehensive plan to do that. Now how successful we will be only time will tell. But I will tell you that rest assured that you will see Ebix getting in into many of these areas in coming days. So we do clearly see this as an opportunity, our present heath insurance business that we have is not impacted negatively in any manner from where we are today with respect to the health reform movement.

There is still confusion in the areas of FSA and so on. There is a bit of uncertainty and we're trying to work through that. However from a perspective of, as of today we are seeing health insurance companies approach us back again trying to now, the inertia is starting to go away. So we see that as a positive development.

Operator

Thank you. Our next question comes from Simon Baruch. He is a private investor.

Simon Baruch - Private Investor

Good morning, Robin. First of all, you mentioned that the implementation of some of your Q4 contracts is still in process. Is that typical for Ebix for previous quarter's sales or are these ramping up a little slower than you expected?

Robin Raina

Simon that's absolutely typical for Ebix, especially for these large clients. They're very large clients. They have very -- one of the values for them to be on this Ebix exchange has to be that they get exactly what they want. It has the transaction, the workflow. Everything has to be seamlessly integrated into their backend systems. It has to be integrated with everybody that they work with and its like, you have to be absolutely custom with what you do. And so that's what we are trying to do with them and so this is not, we're not behind schedule or anything like that.

Simon Baruch - Private Investor

Okay. Thank you. And also as far as the eight part example and the cloud computing, forgive me but I don't completely understand all the ins and outs of your business. So the follow questions are interrelated from a non expert point of view. Is the cloud computing initiative a part of the eight part example or is it a new one over and above that example.

Robin Raina

No this is in -- cloud computing basically overlaps everything. So you're not really saying cloud computing should only go into any one area. Cloud computing overlaps virtually everything we do today and as we see it, that's the way we want to proceed. So virtually in every area of our business, whether it is exchanges, whether it is back end systems, whether it is anything. I could give you another example of this to make it simple for you.

So take a market like lets say Latin America and lets say we want to provide On-Demand back end system to insurance companies, now we could provide that On-Demand back end system on a cloud anywhere across the world to them while providing them ISO 27000 kind of security levels as also now this particular lets say insurance company also wants to use a general ledger and that general ledger is not from Ebix. Let's say that is from Sun. Let's say that's from Great Plains. And this company also wants to use our exchange or wants to use an outside application provider. What Ebix can do now is put all of these applications, some of them might not really be even related to Ebix.

We will put all these applications on a cloud anywhere across the world with a disaster recovery virtually again across a cloud anywhere and now offer all these services on a utilities basis to this insurance company rather than saying we'll provide you hosting fees, so much and so and so. We say well, we're going to charge you as a utility for all these services. You don't have to worry about buying software. You don't have to worry about keeping licenses. You don't have to worry about hardware, hosting, IT manpower. We'll provide this complete end to end service across multiple applications and on a cloud to you on a utilities basis which means you could charge for transactions. You could charge on any basis which is more service based rather than anything.

Operator

Thank you. Our next question comes from Mark Rye from Singular Research.

Mark Rye - Singular Research

Good morning, Robin and Robert. You mentioned some key initiatives that you're looking to deploy this year and I wonder if you could tell us a little bit about the market opportunity for those and which of them you see as presenting the largest opportunity over the next two to three years.

Robin Raina

Thank you. That's a great question definitely and I think some of these, if I had to kind of look at the -- in terms of opportunities, I think servicing of an annuity policy; it's a large opportunity for us in the United States. We intend pursuing that this year itself. This is a need which has not been handled at all by anybody as of now.

So there is an absolute need. We're already teeming up. A weeks back we were in a meeting with, to give you some examples of how we have progressed on this, we had 78 carrier representatives sit in one room with us discussing how to launch this service in the year 2010 itself. So we are able to bring in the industry together in some manner.

So this will be a pretty strong initiative from us but then the GR8 initiative that I talked through, the GR8 is a code name for an enterprise wide system. Now that is a pretty -- over the next two to three years that will become a pretty large initiative for us because this is one of the most ambitious initiatives in the software industry, in the insurance software industry today in the United States.

Basically, what we are trying to do is, take any insurance company. Any insurance company today has, especially the large ones, they have P&C systems, they have LifeSystems. They have White system, they have (inaudible) system, employee benefit, workers comp, reinsurance and each of these times they're using different vendors. What we are trying to do, we're trying to put all of that into one enterprise wide system.

Now when you create, put all of that in enterprise wide system, you would have switch on and switch off features. One feature would switch on in a particular country and another one could be switched off in another country and so on. So it's a modular design. It is something that has never been tried. Now to complicate it, you put all the exchanges in the midst of it and provide all the other services that Ebix today provides but across one product.

Now that is a big deal in this industry where just in a simple area like property and casualty somebody like -- a large carrier like AIG for example has 500 plus backend systems around the world, just in the are of P&C. now you add to it the life, the health and all the other areas and you will know the extent of the problem. So that we believe is a large initiative for us. In coming days it's going to be a large initiative for us.

Mark Rye - Singular Research

Follow up on that. Is the GR8 part of your Carrier Systems business line?

Robin Raina

GR8 is part of our health business line to start with. It will have a modular design. We will keep launching it one by one by one but basically GR8 will start with consolidated billings, employee benefits, enrollment and then graduate into the Life arena, the P&C, the accounting on day one and so son. So it's kind of a comprehensive system. Before I lose my thought I want to add another thing to it. There is a third area which we believe can become a large opportunity and I hinted at it during my talk which is -- during my prepared talk which is the area of P&C exchanges in the United States which is presently dominated by one player, IVANS.

IVANS is a dominant exchange today run by -- it was started by a consortium of insurance companies and so on. I am not at this minute ready to into absolute details but I will tell you that we believe that's a big opportunity today and intend pursing that in coming days. So you could expect a few announcements in that area from us soon.

Operator

Thank you. Our next question comes from Mark Lemke from Wells Fargo.

Mark Lemke - Wells Fargo

Hi, Robin. In the release you referenced a desire to grow market share in On-Demand sector. And if I think about one competitor, Salesforce.com, much lower margin. Can you talk a bit about your strategy there and how you hope to maintain margins?

Robin Raina

Mark, thank you it's a great question actually. Salesforce for example, you named somebody who we highly respect. I think Salesforce has done a fantastic job in taking on the On-Demand market and delivering their CRM services across the load. So we look up to them.

Having said that, we are -- to tell you the facts in the life insurance industry, the life insurance industry in the CRM markets, we are by far the leader. We win deals against Salesforce virtual every -- I mean every other time when we walk in, into a deal typically nine out of 10 times we walk away with a deal and the reason is simply because in the example as I was explaining, I was giving the example of how we provide an end to end solution and so when Salesforce walks in and talks about a CRM solution, it's a great solution but it is not as insurance intensive and at times it is not straight through processing whereas a carrier ideally is looking for straight through processing and Ebix is able to offer all these exchanges and backend systems, interfaced today with the CRM which makes the deal a little bit more attractive to those players.

Now having said that, Salesforce is a good example for us all for us in terms of how to execute. We think that's somebody that we respect. However having said that, there are certain things that we don't necessarily want to learn from Salesforce. Meaning you talked about the margins there. Meaning look at our strategy versus the Salesforce strategy.

Salesforce strategy is they presently are at approximately $1.3 billion revenues or so or slightly more than that and with operating cash flow of $90 million or more versus Ebix thought process is that we want to generate the same kind of cash flows while doing $220 million in revenues.

So that's a completely different mindset and so we've taken two different paths there in terms of the level of margins that we want to work with, the amount of cash flow that we believe we can generate versus what Salesforce has tried to do. There is nothing wrong with what they're trying to do.

It's just a different way of working and that's, we believe we want to stick to our mode of trying to grow our business. So that makes our business growth a little bit more challenging simply because we're not just simply looking for just organic growth for the sake of organic growth.

We're looking for extremely healthy organic growth. We're looking for organic growth that accompanies 40% plus in operating margins and we believe that while we do that and I can walk you through some numbers because you gave a very good example and in terms of, when you look for example our collection efforts, how we run efforts in terms of DSO's in terms of collection of money for example.

If you compare our DSO for example to Salesforce and these are numbers available for everybody to see, you would see that our DSO number is a lot better, on an average 20% better than they have right now and I think the reason we have better DSO is simply because our attrition ratio is minimal in terms of customers. Our services are so highly entrenched in insurance companies and brokers and so on that we are able to -- that our customers are dependent on us as a infrastructure service, not just any other service. So Mark, I hope I answered your question.

Mark Lemke - Wells Fargo

Yes. It sounds like it's a difference between an industry-specific solution and a general solution?

Robin Raina

Yes absolutely.

Operator

Thank you. Our next question comes from Vincent Coppazi from Kovack Securities.

Vincent Coppazi - Kovack Securities

Yes. Hi, guys. Good quarter.

Robin Raina

Thank you Vincent.

Vincent Coppazi - Kovack Securities

I just want to ask you -- I guess I could look this up but without having to look it up, the convertible bonds that you have on the balance sheet, when is it due and what's the price of the conversion?

Robert Kerris

The convertible notes are due in August of 2011 and the conversion rates on those, just give me a moment please. I'll get that for you. The conversion rates are at $16 per share for the most part. $16 and 16.66. But the majority of it is $16.

Vincent Coppazi - Kovack Securities

I know you said August 2011. Are we talking about the $24 million that's on the short term…

Robert Kerris

Well the reason this is sounding short term is because as per the convertible notes, I think there was an election to convert. We have to pay the principal amount in cash.

Vincent Coppazi - Kovack Securities

You have to pay the principal amount in cash by August 2011?

Robert Kerris

They wanted to convert it at any point in time. We have to pay the principal portion in cash. The spread portion is payable in either stock or cash at the option of the company?

Vincent Coppazi - Kovack Securities

I see. The spread portion? Okay, all right. That's it. Thanks so much.

Robin Raina

Thank you, Vincent.

Vincent Coppazi - Kovack Securities

You're welcome.

Operator

Thank you. There are no further questions in the queue. At this time I'd like to turn the program back to you for any further remarks.

Robin Raina

Thank you. I think this has been a good investor call. Thank you all for joining in. I look forward to speaking to you again in the first week of August to talk about second quarter results. Thank you again.

Operator

Thank you ladies and gentlemen for you participation in today's conference. This does conclude the program. You may now disconnect. Good day.

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Source: Ebix, Inc. Q1 2010 Earnings Call Transcript
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