Ebix's (EBIX) CEO Robin Raina on Q2 2016 Results - Earnings Call Transcript

| About: Ebix Inc (EBIX)


Q2 2016 Earnings Conference Call

August 5, 2016, 11:00 AM ET


Darren Joseph - Corporate Vice President

Robin Raina - Chairman, President and Chief Executive Officer

Robert Kerris - Executive Vice President and Chief Financial Officer


Jeff Van Rhee - Craig-Hallum


Good day ladies and gentlemen and welcome to the Ebix Second Quarter 2016 Investor Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference call is being recorded.

I would now turn the conference over to Mr. Darren Joseph, Corporate Vice President. Please go ahead sir.

Darren Joseph

Thank you. Welcome everyone to Ebix Incorporated's 2016 second quarter earnings conference call. Joining me to discuss the quarter is Ebix’s Chairman, President and CEO, Robin Raina; and Ebix’s EVP and CFO, Robert Kerris. Following our remarks, we will open up the call for your questions.

Now, let me quickly cover the Safe Harbor. Some of the statements that we make today are forward-looking, including, among others, statements regarding Ebix's future investments, our long-term growth and innovation, the expected performance of our businesses and our use of cash. These statements involve a number of risks and uncertainties that might cause actual results to differ materially from those projected in the forward-looking statement.

Please note that these forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements made today is contained in our SEC filings, which list a more detailed description of the risk factors that may affect our results.

Our press release announcing the second quarter 2016 results was issued earlier this morning. The audio of this investor call is also being webcast live on the web on www.ebix.com/webcast. You can look at Ebix's financials beyond what has been provided in the release on our website, www.ebix.com. The audio and text transcript of this call will be available also on the Investor homepage of Ebix website after 4:00 PM Eastern Standard Time today.

Let's start by discussing the results announced today. Rob and I will talk about the Company from the financial prospective and Robin will summarize some added color in the quarter and the times ahead of us.

We are clearly excited by the momentum we have generated in our business, both in terms of top line and operating margins. Revenue in Q2 2016 increased 12% from a year ago to $72.6 million. On a constant currency basis, Ebix's second quarter 2016 revenue increased 14% year-over-year to $73.8 million as compared to $64.7 million in Q2 of 2015.

In Q2 2016 our exchange revenue continue to be the largest channel for Ebix, accounting for 68% of the company's revenues. The year-over-year revenues increased as a result of revenue growth from life annuity, underwriting, reinsurance, RCS, and Health e-commerce services in addition to revenue growth generated from the company's 2015 acquisition of PB Systems.

The Australian division continue to generate the same level of revenues as Q2 2015, in spite of the strengthen in U.S. dollar while the UK and any division showed very strong year over year growth. The Brazil, New Zealand and Singapore divisions continue to show reduced year over year revenue as a result of the strengthening U.S. dollar.

Reinsurance exchange revenue grew 162% underwriting exchange revenues grew 21%, annuity exchange revenues grew 2% year-over-year in Q2 of 2016 while life and health, e-commerce exchange revenues grew 4% the same year-over-year period.

RCS revenues were up 29%, because of the new e-governance revenues in India as also the acquisition of PB Systems business in 2015. Ebix's presence in life and annuity sector is presently annualized at approximately $115 million based on the Q2 2016 run rate.

The year-over-year international revenues in Q2 of 2016 were impacted negatively by the $1.2 million, because of the strengthening of the U.S. dollar. The companies of pharmaceutical have content and P&C carrier back in operations share decreased year over year revenue.

The company's health-content revenues were down 11% year-over-year affected by increased price competition in the sector and a decision of the company's scale down its life sciences division as part of its focus on increased margins resulting in the life sciences group revenues being 65% lower year-over-year.

I will now turn over the call to Bob.

Robert Kerris

Thank you, Darren, thank you to all on the call for your continued interest in and support of Ebix. Q2 2016 diluted earnings per share increased 29% to $0.70 as compared to $0.54 in the second quarter of 2015.

For purposes of the Q2 diluted EPS calculation, there was an average of 32 million diluted shares outstanding during the quarter compared to 35.3 million in second quarter of 2015 and 33.3 million in this previous quarter of Q1, 2015. As of today, the Company expects the diluted share count of Q3 will be approximately 32.7 million.

Operating income for the second quarter 2016, rose 13% to 23.6 million as compared to 20.4 million a year ago in second quarter of 2015. The operating margins in Q2 2016 were adversely impacted by the low margin associated with our substitute resulting and e-governance experience.

In that regard the Ebix consulting group and e-governance business combine had operating margin of approximately 16% while Ebix’s the business and other business generated strong margins of $0.37 in the aggregate. This spend translated into 13% operating margin that’s reported for the entire company for the second quarter 2016. Consistent with the same level while operating margins [indiscernible] a year ago in 2013.

We are pleased with the fact that the companies continue similar track of top line revenue growth, cash hold from our operating activities and our operating income along with operating margins consistent in this 30% to 35% range. An argue point. [indiscernible] of enterprises fundamental strength is its ability to generate sustainable cash flows from its operating activities.

In that regard cash provided from our operating activities rose 20.4 million in the second quarter of 2016 compared to 17.5 million in the second quarter a year ago of 2015 and improved significantly from the 10.5 million cash provided by operations during the first quarter of this year.

This was in spite of the fact that company made cash statements of around 2.7 million in the second quarter including 2.2 million of advanced minimum alternative tax payments in connection with our operations in India.

The company also used 1.1 million for the continued build out of our headquarters here in Johns Creek, Georgia and the build out of our new facilities in India in support of our continuing product development operations in that country.

That said the company closed the quarter with cash, cash equivalents and short-term cash in the aggregate of 80.9 million as of June 30, 2016, up by 9.6 million as compared to previous quarter at March 31, 2016 and up by 52.5 million as compared to the year ago at June 30, 2015.

In regards to our continuing initiatives targeted enhancing shareholder value, Ebix utilized 25.5 million of cash during the second quarter to repurchase 544,000 shares of our common stock. [indiscernible] and paying 18.5 million in quarterly dividends during the quarter. The share buybacks was $22.9 million expenditure.

On a year-to-date basis than since January 31, 2016 the occur has repurchased total 1 million shares of used common stock for 38.2 million compared to 5.9 million in dividends. Subsequent to June 30, and through August 5, 2016, the company has repurchased an additional 30,000 shares for cash consideration of 1.6 million.

With these additional share repurchases, the company has now repurchased approximately 6.2 million shares of its common stock for an aggregate amount of 135.5 million at an average price of $24.98 since August 1, 2014 when we announced the Ebix's Board decision to repurchase its own stock on a continuing basis over the next several years.

We expect to continue this share back utilizing our operating cash flow from the business as market conditions and strategic plans [indiscernible] From the liquidity perspective we have $80.9 million of cash. Short-term deposits and access to approximately 26 million of potential available capacity on our recently expanded syndicate credit facility with regions bank, which includes a $100 million accordion option.

This will be used to support the continuing profitable growth of the company both organically and through accretive acquisitions to efficiently integrate recent business acquisitions and to repurchase shares of our common stock as market conditions warm. The current interest rate on our credit facility further attracted 2.75%.

Furthermore, our balance sheet is healthy and our company's financial position remained strong at current ratio of 2.48, our working capital short-term liquidity position created $50 million. A DSO on 65 days our debt leverage ratio of 2.24 and debt-to-equity ratio of only 0.59 as of June 30, 2016. Finally, the company's Form 10-Q will be filed tomorrow Tuesday, August, 2016.

I will now pass the call onto Robin.

Robin Raina

Thanks Bob. Good morning to everyone listening on the call, over the phone and over the web. Bob and Darren have explained the quarter numerical. So I’ll try to give you an inside into what is behind these numbers and transparently layout our operating style and vision plan , so that you can be co-participate in this journey that lays ahead of us.

Over the last few quarters, we been trying to lay the foundation of a Company that has scaled and size in addition to a stability to deliver, consistent attracted operating income streams. When we started on this strategy of building an Ebix that could possibly be many times larger in the future then it sites today. We realized that Ebix had many basics already in place to get there, but it also have to update differently on many fronts to achieve fix scale and size.

Second quarter of 2016 had the anther quarter in that journey of building a much larger Ebix that can become one of the largest end-to-end insurance, finance, health care and e-governance players in the world, while trying to deliver profitability margins that could possibly be unprecedented for the company of that five.

Over the last six to seven year, Ebix has delivered operating margins that had been in a bunch mark in our industry. Our strategy had being to build Ebix brick-by-brick by adding customers on our on demand platforms through networking. This strategy has delivered very rich results in terms of consistently, high operating margins in the range of 35% of both plus minus a few points.

As a part of that exercise, we look at some of the high growth, large players, operating in different market segments, who’s stocks is also done well, in terms of multiple and shareholder aspect. We found that each one of these so called loved and high growth players has either no profitability or at best minimal profitability. And in many cases were delivering non-GAAP results to show the lack of profitability.

However, we came to a good conclusion that why we want them bridge and possibly strive to beat their growth rate, we are defiantly not going to do so, while embracing the lack of our stability. An analysis of our customer base and growth over the last decade, pointed to us that our growth has never been on the basis of very large individual deals, but on the bases of lots of every size side of deals, that has consistently high operating margin.

We realized that we would need to operate a big differently in future, if we have to built an Ebix that has scaled and lot bigger size. We decided we will need to follow a two strong strategy in terms of getting growth. One keep going to the same way as we did over the last decade, consistently by networking and picking up deals with [fully] (Ph) high operating margin, that can possibly go even higher than before.

Two, go after large side of deals at operating margins of 15% to 20%, which can allow us to deliver a much higher growth company with scale. We believe that if we can pursue both deal approaches then we can lay the foundation stone of a Company that can deliver high growth and profitability levels still in the range of around 30% operating margin. Q2 of 2016 was another step in that direction.

We continue to make investments in that direction and laying the foundation of that vision. Q2 of 2016 was a great quarter for Ebix as the company kept testing success in that direction. The company today is in the midst of growth initiative in three separate streams. One, we are in the midst of many large size value deal that will have operating margins in the 15% to 20% with revenue spread over a span of five to seven years.

Two, we will continue to grow our existing businesses through networking and direct sales contacts while trying to increase operating margins beyond our present level. Three, we are pursuing acquisition of various sizes at present in various geographies. We believe that we can convert these acquired companies into 30% margin businesses because of the to be acquired synergies and our ability to centralize functions and eliminate redundancies as also our ability to leverage our offshore development, back office processes and manpower capability.

In second quarter of 2016, we delivered record revenues that in constant-currency currency terms translated to 73.8 million with 32% operating margin. Our operating margins were strong at 37% but for the [Ebix] (Ph) and consulting segments that translated to an average of 16% operating margins. Cumulatively it translated to operating margins of 32%. Second quarter of 2016 had one-time expenses and one-time tax benefits that for the most part offset each other.

We picked out one-time expenses in many areas including amongst other things non-recurring interest cost associated with a [indiscernible] one-time bank and legal costs against setting up of the new expanded Bank credit facility, growing our bad debt reserves in second quarter of 2016, and other non-recurring costs associated with a one-time test initiative in Europe. On the flip side, the tax benefit was one-time associated with an initiative led by Ernst and Young which will further optimize our tax structure globally on a continued basis.

We are also presently in the midst of setting up a large operational base in the Middle East with a goal of targeting the growing insurance and healthcare segments in the Middle East with Dubai assuming IP rights for certain Ebix products that are either new or/and have value in that Middle Eastern market segment. Setting up that base will further rationalize our tax structure globally as Dubai has a zero percent rate. This initiative is presently been handled by E&Y along with KPMG.

Second quarter of 2016 net income was 23 million with EBITDA of $26.2 million. EBITDA excluding the stock based compensation expense was $26.7 million, which translated into annualized EBITDA excluding stock based compensation expense of 106.8 million. I'm pleased with that trend of reporting EBITDA consistently higher than $25 million a quarter. A reconciliation of any of these non-GAAP figures back to net income will also be available in the tax version of the investor script found on the Ebix's website.

As regards cash and associated operating cash flows, I'm pleased that second quarter of 2016 delivered strong operating cash flows at $20.4 million, that operating cash flow number looks even better, when you consider the fact, that the Company made tax payments of $3.7 million in the second quarter 2016. With approximately $260 million of bank credit line including the accordion facility and $80.9 million of cash and cash equivalent from the bank and a continued strong cash generation weight, we feel that we have ability to fund many of our growth initiatives.

We are presently perceiving a number of acquisition initiative that if accomplished can deliver an EPS of $1 or more in the short-term1. We have cite NDA in place and that at this point cannot share much, except to say that we are in serious discussions on two initiative in the US and aboard rest assured that we would use then right blend of cash or stock with the goal on maximizing EPS.

Stock is utilized will be to a minimal degree with a view to a line acquire Company’s management and shareholder interest. With regards to Patriot National, I can now disclose that the Company in conjunction with its advisors, E&Y expects to finish its due diligence into Patriot National by August 31, 2016 and accordingly communicate the next step to shareholder after that date in consultation with Patriot National.

We continue to be excited about the possibilities of this prospect in merger, it could create the world’s largest insurance services provider of straight through processing with a wide repertoire of end-to-end services under one roof, to via complementing the relative strengths of both parties in terms of products, services and client base.

We see substantial synergies, economies of scale and expanding growth potential for the combined business. We believe that our offshore and technology capabilities could serve to improve Patriot National operating income substantially, making it possibly at 30% operating margin business, that could result in delivering a highly accretive transactions for both side and short-term.

Darren talked about the effect of foreign exchange on our second quarter 2016 results. Over the last three year the US dollar has b got strengthening and that currency and that has obviously not have Ebix. It was reassuring that in spite of that, our results had continued to improve. Clearly, the Brexit vote is not going to have either and is continuing to have a material impact on revenues coming out of UK for all companies; we are no exception to that.

On the topic of London, we are excited by the possibility of a new exchange initiative in the area of accounting reconciliation. This is an area were the large brokers and carriers in UK at times have hundreds of accountants hired to simply do manual accounting reconciliation of accounts between the brokers and insurance carriers. We today have the technology to do the reconciliation automatically across thousands of carriers if required. We have successfully deployed the solution across one of the largest brokers in the world in London.

We believe that an end to end service that can automate this reconciliation for the most part as also can take up the man power required to administer this reconciliation function could save the industry, tons of millions of pounds. We intend to perceive this initiative building upon the successful launch of a BPL initiative in London.

A few quarters back we announced a contract with ISC to automate their DP operations and reinforce them with a power of our offshore manpower and processes. That initiative has progressed well and we are now ready to build upon those successes and go to the next level to catch scale implying even higher revenue income from these kind of initiatives. I will share more on that in coming months.

Darren already talked about our growth side within exchanges as also the areas where we need to turn the tide. In summary, we continue to build upon a network in continually while finding new contracts with clients in second quarter of 2016 in every facet of our business including RCF broker system, health e-commerce, health content exchanges, underwriting exchanges, annuity exchanges, backend systems, consulting contractor's etc.

I'm pleased that we have been able to weather the substantial effect headwinds in Brazil, Australia, Singapore, India and New Zealand etc., in spite of the fact that local currencies have devalued substantially over the last few years and it could have had a material impact on our global revenues. We have been able to weather that simply by performing better in each of these countries in local currency terms while allowing us to substitute the shortfall and a lot more through new contracts.

We are today focused on building a very large company that could have scale and margins both, some of our initiative both large acquisitions that can double our size in the short-term and transformational large value deals can help us possibly get there. Rest assured that we intend to get there while delivering at least 30% operating margins.

We don't have the liberty of following the footsteps of another company in our industry as no company has build for example a $600 million business with $180 million in operating income. That's what we would like to do. Let me emphasize that there are no guarantees that we would be able to do that but rest assured that we would use all our experience, discipline and past successes, to endeavor for that.

Lastly let me add that we remain focused on maximizing shareholder value. Bob talked about our continued dividends as also the continued share buybacks worth $22.9 million in the second quarter of 2016 and the 155.5 million of share buybacks since August of 2014 when we announced our buyback plan. We are presently endeavoring a broader outreach to prospective shareholders and analysts alike as there is lots of interest in the Ebix success story at present.

Our strategy is to worry less about the short-term holders and traders and instead be focused on maximizing value for the long-term shareholder. In that direction, we are confirmed to be participating at the [Deutsche] (Ph) Bank Global Tech Conference in Las Vegas on September 13, and the Credit Suisse Small Mid-Cap Conference on September 15th in New York.

That brings me to the end of my talk. I'll now hand it over to the operator to open it up for questions. Thank you.

Question-and-Answer Session


[Operator Instructions] And our first question comes from Jeff Van Rhee of Craig-Hallum, your line is now open.

Jeff Van Rhee

Great thank you. A handful of questions for you Robin so, and it will be a one more lines of the reconciliation opportunities that you touched on, can you explain just a bid on, that I’m curious a little bit of sense of magnitude of revenue opportunity there then any sort of bounce that you can put around the timing?

Robin Raina

So Jeff, let me give you simple example on that will submit up for you about the opportunity. Since I can’t into specifics here, one, I will give you an example of, one of the larger broker, any of the larger broker in UK at time. Just to do an accounting reconciliation could have anywhere between 500 to 600 people, whose job is ultimately just trying to reconcile what comes out of the carrier and what goes from them into the carrier side.

The reason for this is, at times the broker has 20 different broking systems and on the other side, most of the larger broker then reality, I will give an example of the larger one, they actually have systems around 180 different broker system at that time. Because, larger brokers have made a lot of acquisitions over the years.

So on one side of 180 broker systems, one the other side the carriers sending you data in different ways, different stream. There is an insurance policy for which, let’s say it is an combined insurance policy, which has five different elements to that policy, that five different element had to go into five different broking systems.

The data comes in from the carrier’s side and the first thing they do, they realize that the data doesn’t match, what they were expecting an installment or a commissions doesn’t match with their numbers.

So now, somebody has to do a manual reconciliation of both side, of the carrier or the broker side. In the U.S. most of the vendors, the larger once, have build this automation technology as a part of their broker system. In London, there is no such thing. So that by it sell, is an huge opportunity, because on one side, you have thousand plus carriers sitting out there and on the other side you have all these large brokers, who are spending, all these brokers have setup large offices in London or outside London.

The cost obviously are exorbitant to have these people in London. London doesn’t to you, so this is a very large opportunity, this is a lot bigger opportunity then what we have done till now will be below, mean it is by BPL itself has many faces. But we fail, but at the same time, what we just announced is a relatively small number when you look at that counting and so where do we go from here.

We have the technology, we just have to figure out the trying assimilate all these functions, of trying assimilate and bring brokers and bring them, these wings are larger one, on to the table with us, and if we can do that then the networking effect takes place. So far of the value that we want to offer is, one is doing the automation, providing the entire technology, taking data out of 180 broking systems into one broking system and then making sure that you can assimilate that data, reconcile it on one place, that pull the data back into 180 different broking system.

So that’s what we are trying to do, now have been said that, what we also believe is, this is a BPO opportunity, it’s also administration opportunity. So that is where for example our acquisition of, if we are in regard in acquiring Patriot National that’s where it comes it. They have all the knowledge and all the ability to that kind of administration, as also we have all the India man power to be able administer that likely do for ISC today, for there DP operation.

So we feel a common a solution that can provides the technology, the automation , the man power gives what we would like to do. The size of the opportunity is absolutely a normal. Nobody has touched it and that’s where we want to go next and we are going to be jumping into it in and our first step was making sure that we have build works, that we know now that it all works, because we have one large broker whose already using it with [indiscernible] 2,000 carriers.

So now it's more a question of evolving the business arrangements and client go to the next level and we will keep you informed as we go into more details on it. Right now, I feel there is too much competitive stuff there at stake. So, I don't want to go into more details beyond what I have said already.

Jeff Van Rhee

Just one clarification on the acquisitions you mentioned Patriot and that there was a second and you said it quickly but I want to make sure I heard it right that both can double in size. So giving a sense on magnitude of whatever this second acquisition of, certainly meaningful magnitude exists relative...

Robin Raina

I think maybe I misspoke, the second one is relatively smaller one, it's abroad and I was trying to cumulatively talk about both of them together. So, the other one is, we are looking at an opportunity outside the U.S. and that one it's got very high EBITDA margin and we will see where it goes from here. But it's not of the size of the other one.

Jeff Van Rhee

So, then I guess to the key of your prepared remarks, the discussion around the tradeoff between revenue growth and operating margins, can you expand a bit on that. there is 30% operating margin as a longer-term sort of framework of how to think about things, over what time period do you see the business transitioning to an operating margin more in that range?

And what kind of growth you think is the offset, when you think about hey, I'm already give up handful of points on the margin side. But I think we can grow the business X, any thoughts about either timing on the paths of that margin as well as what kind of when we see the impacts and to what magnitude on revenue growth?

Robert Kerris

So, just in some of the larger size deals, as we go into them and some of those will start coming and as we go along then this year in 2016. So you will start seeing the impact of those. Now our strategy is to try and if the counting allows, if the contract allow us we would like to defer revenue and be as conservative as we can, but we have to follow the accounting rules. And having said that if we defer it for longer time the impact is smaller; at the same time what we are trying to do, we believe that if we can convert this company into a much larger company, way bigger than what it is today and still end up with 30% operating margins or a little bit more.

I think it will work because we are talking about not a 10% or 15% growth company. We are talking about much larger number there. So, having said that what period - I think right now what we are doing in the short term, we are making a lot of investments also, we are going in into some of these areas, you don't get a large deal just like that. You have to go and make those investments. You have to make infrastructure investments and so on.

And we are continuing to make all of those. Some of it will - so you will over the next few quarters the only request I would make is that - we are going to be consistent, we will be relatively consistent, at the same time I wouldn't read anything into plus minus 2% here or there. I would let the company get to the point where it wants to be with - but we are trying to combine the mix of Ebix consistently high margin of structure and we are trying to mesh it up with a high growth company.

And to do that is relatively easy when you are small but as you become larger and larger to start giving those kind of returns is obviously harder. We believe we can do that. But at the same time I think my first goal is to ensure that we don't let 30% slip and that's what we are going to trying to do. Meaning, take this quarter for example, meaning, you take, if I take on masterly one deal out in this particular quarter, our margin numbers actually was a lot higher, but that particular deal had very low operating margin in this quarter, it has much higher operating margin last quarter.

Part of it was a mix or professional services and some of the, margin with that in this quarter was abnormally low for us. And that impacted our operating margin, so our operating margin would have been even higher than the 32% that you saw. So at the same time, I wouldn’t worry about that right, when you go ultimately Ebix has a very consistent business model.

What we are now trying to do, is we are trying to marry this business model with a high growth business model and so it will take a sometime to get there. I believe that if I can first build the 30% kind of structure and let’s say this Company - let’s assume for a minute, that we are able to get reach the goal of doubling this Company size and stability, 30% operating margin. I think there is a up room for us to go to the next level of increasing that margins some.

Because one of the values we have is once we get deep into things, we would able to bring the manpower from India, we are able to bring the power of our offshore dollar amenabilities and we gradually but surely, we are able to increase our margins. So I’m pretty confident, if we can first ensure that our 30% doesn’t slip, then we will absolutely get to the 32% and 33% and we will, I think our again, I’m not predicting that next quarter you are going to get 30%, that definitely not my goal or suggestion.

What I’m trying to say is lets all be patients is very big as ahead. Because what Ebix is trying, what I heard from shareholders again and again, I spoken to tons of institutions, large funds, I have heard again and again, everybody loves Ebix consistent returns and people had told me that we would be okay with you compromising those margins. A little bit here and there as long as you can create a high growth company and that’s what I’m trying to do, I’m trying to respond to their wishes.

Jeff Van Rhee

Got it, two last ones and I will let somebody else jump on [BEM] one briefly I guess, you had a suggested inspirational goals $250 million run rate by Q1 ’17, does that remain the inspirational goal?

Robert Kerris

[indiscernible] inspirational goal has increased quite a bit right now, with respect to -but it include the acquisition revenue. So let’s wait for another thirty days, and maybe we will redefine that whole inspirational goal…

Jeff Van Rhee

Has the underlying inspirational outside that changed, outside of the patriot has been underlying aspiration…

Robert Kerris

First of all Jeff, we are very serious about patriot and hopefully, we can complete this deal, we see the synergies, we see the value and we see that the value of putting these two all relations together, so that’s one. And if that happens by itself, changes the gamut of it. But beyond that, we have enough going on, organically right now, which can, we have lots of deals with that transformational, forgetting that relations.

So I think we have, we will redefine and we go forward and another few as we - I preferred to talk about it, again I have already to find that operational goal on 350. I would rather talk about it after delivering some real organic deals, some new organic deals then once we do that then we will redefine and talk more about it.

Jeff Van Rhee

Last one, with respect to the pipeline, I mean certainly nice organic top line growth acceleration this quarter features may be expand a bit on the pipeline in particularly interested in sort of the core business and your long time vision of strength through processing, if you are seeing accelerations sort of steady demand any notable changes from prior updates?

Robert Kerris

We are seeing two trends, one is in the annuity business, there is a little bit of a - it's not the same growth business that it was, there is many reasons for it. The rules are changing in annuity business but we will keep a very close watch on it. That's the one side, but another side, when you look at the life business, we are consistently going at that business. At the same time we see underwriting as one of our high growth areas and I believe we are going to continue based on the deals we already have in hand, based on the deals that we have already signed, we are going to continue see a revenue uptick going to Q3 and Q4 and these are substantial increases in revenue at least in that market segment, in that product segment.

With respective our core businesses, the health e-commerce is another area where we see - we can grow our revenue very substantially. We also believe that this is one of the reasons we liked the Patriot possible merger or acquisition. We believe that for a technology company if you can get into services, you can mesh your technology into the service angle and now when you do that you sell an end-to-end service.

It's easier to sell technology when you are the provider of a service, and I'm going to just make your business happen and I want a piece of your premium but only once you are successful. And that’s a different ballgame from walking and saying I'm selling you technology. So, we also believe that those are the kind of things we have to do. So, our core business from perspective of our pipeline we have a very strong pipeline.

In most areas, we have as you know, we have suffered in the area of life sciences which is our pharma sector but that was by choice, we decided to, it was a very - we were making enough money and we felt that was going to take our margins down. So we stepped out of that business more or less we are there, but we are on a lower scale right now.

Then when you look at some of the health content business, it's a very tight competitive business, we are trying to respond to it differently than try to sell a commodity product, what we want to do, we are trying to convert this entire solution into an end-to-end solution services. Those are the two areas where we have to continue to improve and do a much better job than we are at doing right now.

At the same time, when I look at the businesses like health e-commerce or life exchanges, or even the area of BMC exchanges or clearly the larger areas where we are entering now like e-governance or e-learning, these are all great areas for us. Meaning our core businesses of broker system that’s going to be always relatively small, we will keep growing.

But this is not a big focus area for us, we are not for example going in after broker systems in the U.S. today. At least not now, I mean international market sure. But it's never going to be the cause of Ebix's growth. It will keep growing but it'll be comparatively when you look at larger scheme things it's really going to get lost a little bit the growth.

Then we look at our carrier segment, that is I mean frankly as we go forward we will have to look at the carrier segment. From a PMC, we are not really a large PMC player. We never were. We don't think we can get the kind of margins we are looking for, for we will have to relook at that and see what focus area in that segment is and we continue to do that.

So I think the code exchange business continues to be very strong barring a few exceptions that I talked through and the new businesses that we are getting into continue to be very strong. Meaning, for example, the exchange business - the reinsurance business clearly that's something we have talked about at length over the last few calls and the London deal and some of the other things that we are pursuing, those are all great stuff.

And so advantage with exchanges is that one thing leads to another. One functionality leads to the next functionality, once you get entrenched, you are able to bring the new functionality and build upon that. But it’s a networking effect, you continually keep working attitude, you keep improving a margin, you keep finding new clients and at the same it’s a steady growth kind of a business.

Jeff Van Rhee

Got it, great. Thank you.

Robert Kerris

Thank you.


Thank you [Operator Instructions] And I’m showing no further questions at this time, I would like to turn the conference back over to Mr. Raina for closing remarks.

Robin Raina

I think that bring us to the end of the call, we look forward to speaking to you guys again at the end of the next call. Thank you ladies and gentleman, we will speak you again at the end of Q3. Thank you and with that, we will close the call.


Ladies and gentlemen thank you for participating in today's conference. That does conclude today's program. You may all disconnect. Have a great day, everyone.

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