Q3 2021 Ebix Inc Earnings Call
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Good day, and thank you for standing by welcome to EBITDAX Incorporation's third quarter 2021 Investor call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one on your telephone.
If you require any further assistance please press star zero I.
I would now like to hand, the conference over to your speaker today Dan.
Joseph Please go ahead.
Thank you.
Welcome everyone to Ebix Incorporated's 2021 third quarter earnings Conference call.
Joining me to discuss the quarter is Ebix, chairman, President and CEO Robin Raina EBIT.
EBIT Global CFO, Steve Hamil, and Ebix, North American Vice President Ash Sawhney.
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 for future investments.
Our long term growth and innovation.
The performance of our businesses and our use of cash.
These statements involve a number of risks and uncertainties that may cause actual results to differ materially from those projected in the forward looking statement. Please.
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 revisions 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 Q3 2021 results was issued this morning.
Audio of this investor call is also being webcast live on the web at Www Dot Ebix dotcom forwards last webcast.
You can look at Ebix financials Bill.
Beyond what has been provided in the release on our website www Dot <unk> dot com.
The audio and the text transcript of this call will be available also on the investor homepage of the Ebix website. After four P M eastern time today.
Let me now present, the key metrics in our Q3 2021 release.
Q2 diluted EPS GAAP was 50 and.
Non-GAAP diluted EPS was <unk> 72.
GAAP revenues of $191 7 million.
GAAP operating income of $28 1 million and non-GAAP operating income of $35 3 million.
We had a number of headwinds to deal with in Q3 2021.
Continued effects of COVID-19 on many of our businesses, including our U S product consulting businesses.
While business has not yet fully recovered from COVID-19 effects. Yes. We are we have restored the salaries of our employees in India decided besides increasing software developer salaries substantially as compared to the salary cuts we have put in place last year. During COVID-19, just this step resulting in a year over year increase.
Of approximately $3 million and personnel related costs.
Our bank interest costs were higher by $3 $7 million in Q3, 2021, as compared to Q3, 2020 and higher by 600000 sequentially for reasons beyond our control. So we have lowered our overall debt by $51 million year over year.
We had we had substantially elevated costs associated with banks legal and outside accounting firms in the quarter.
We had to meet a government guideline in India in terms of certain CSR social work spend in the quarter with approximately $1 3 million.
In spite of all of that we reported $18 2 million in operating cash flow in Q3, 2021, as compared to $13 1 million in Q2, 2021, and $28 1 million and operating income as compared to $27 3 million in Q2 2021.
On the revenue front, our Q3 2021 revenues increased 24% to $191 7 million as compared to $154 3 million in Q3 2020.
Our prepaid card revenues grew by 53% in Q3 2021 as compared to Q3 2020, while declining 38% sequentially as compared to Q2 2021, we expect this drops to be transitory and expect to grow these revenues back again in Q4, which traditional.
Season up sure upsurge in the fourth quarter.
Out of 10 major geographies worldwide revenues grew year over year and seven regions, while declining in three despite the impact of COVID-19, especially on our consulting revenue line insurance revenues worldwide were essentially flat year over year.
Our worldwide revenues, excluding prepaid cards grew 5% sequentially and 4% year over year in Q3 2021.
U S revenues grew one 5% sequentially, while EBIT cash revenues, excluding the prepaid card business grew 12% sequentially.
Our Rcs revenues grew 8% sequentially and 3% year over year in Q3 2021.
The EBIT cash financial exchange revenues increased 40% by $38 2 million from $96 $8 million in Q3, 2022 to $135 $3 million in Q3 2021 with.
With close to 1 billion people receiving their first vaccination already in India, we're starting to see signs of recovery in business is affected severely by COVID-19, our travel and Forex businesses have started to recover ground growing 63% and 51% respectively on a sequential basis in Q3 2021.
As compared to Q2 2021, we expect this trend to continue as the effects of COVID-19 continue to reduce.
Let me add that the exchanges, including EBIT cash in our worldwide insurance exchanges continue to be Ebix largest channel accounting for 93% of Q3 2021 revenue.
Now I'll turn the call over to Steve.
Thanks Darren.
Ebix is seeing early signs of a rebound in our most negatively affected businesses from the COVID-19, global pandemic, especially in our travel and foreign exchange operations.
Our remittance E learning and financial technologies businesses continue to operate at depressed levels versus pre COVID-19 operating conditions.
We're hopeful that these businesses will start to show the kind of rebound we are in the early stages of.
Within our travel and Forex businesses.
Additionally, we continue to see solid performance from our non U S. Non Indian geographies with growth and year to date revenues in all but one of our international geographies and double digit growth rates in the U K, Australia and New Zealand.
The U S and Brazil continued to be negatively impacted in professional services and consulting revenues due to a combination of less customer activity during the pandemic.
And development staffing challenges that we faced in the past few quarters.
The company continues to train recently hired development staffers and recover from a combination of reduced staff levels at the onset of the pandemic.
And unexpected turnover within our development staff in the past few quarters.
While we acknowledge the road to pre Covid normality will take some time our company is armed with very solid and predictable insurance exchange Rcs businesses globally.
<unk> substantial cash flow as.
As well as the collection of solutions and services and our Ebix cash operations in India that will provide us with both substantial short term growth opportunity.
As COVID-19 wanes.
And opportunities to grow long term, given India's economic growth projections. The continued development of the middle class.
And Indian government that is supportive of measures to digitize the economy over time.
Can you pivot to discuss some financial metrics for the third quarter.
Our gross margin in Q3, 2021 was 37% an increase sequentially from 28% in the second quarter of 2021, but the decline from 44% in Q3 2020.
Our gross margins continue to be diluted by our low margin prepaid gift card revenues in India.
GAAP operating income for Q3, 'twenty, one of $28 $1 million increased three 2% sequentially.
$27 3 million in Q2, 'twenty, one while declining 11, 8% year over year from $31 9 million in Q3 2020 and.
In addition to continuing effects of COVID-19 on our travel Forex remittance financial technologies.
E learning and consulting revenues Ebix had year over year product development personnel costs increased by.
Over $1 million in G&A personnel costs increase over $3 million in Q3, 'twenty one versus Q3 dollars 20.
The company reinstated 2020 salary reductions made at the onset of COVID-19.
During the fiscal year 2021.
Additionally, we continue to have higher than normal legal expenses in 2021 as a result of actions taken earlier this year.