Q4 2022 Ebix Inc Earnings Call
Q4, 2020 to your revenue decreased 4% to $255 2 million compared to $266 8 million in Q4 of 2021. The decrease is primarily due to the negative effect of the substantial strengthening of the U S. Dollar on our revenues in Q4 and 2022 as compared to.
The previous year.
On a constant currency basis, Q4, 2022 revenues increased 5% year over year and would have been $23 8 million higher in the quarter, but for foreign exchange rate changes during the quarter.
On a constant currency basis eight of the 11 major geographies worldwide had year over year revenue growth in Q4 of 2022 in Q4 of 2022 insurance exchange revenues worldwide decreased year over year by 2%, but grew around 1% on a constant currency basis, while risk compliance solutions revenue.
Increased 14% year over year in the fourth quarter of 2022, and EBIT cash revenue increased 7% year over year in the fourth quarter of 2022.
Excluding the prepaid gift card revenues EBIT cash revenues increased year over year by 30%.
Exchanges, including EPS cash and the insurance exchanges worldwide continue to be Ebix is largest channel accounting for 92% of our fiscal year 2022 revenues.
For the 2022 fiscal year on a constant currency basis nine of the 11 major geographies experienced year over year growth in revenues with a full year of 2022, EBIT cash GAAP revenues grew 6% or so.
<unk> revenues grew 10%, while the insurance exchange revenues were essentially flat on a year over year basis on.
On a constant currency basis insurance exchange revenues increased by 2% in 2022 as compared to 2021.
On a constant currency basis Rcs revenues for fiscal year 2022 increased by 11% as compared to 2021, while EBIT cash as revenues increased 14% year over year.
On a constant currency basis fiscal year 2022 worldwide revenues grew 11, 3% over 2021 revenues I will now turn the call over to Steve.
Yeah.
Thanks Darren.
The U S dollar strengthened against most currencies during 2022 is pretty much everyone on this call knows.
After experiencing the largest quarterly negative impact from foreign exchange movements in the third quarter of 2022.
The fourth quarter of 'twenty two.
Actually eclipsed two.
Q3, 2022 for the fourth quarter and fiscal year 2022, the negative impact from foreign exchange movements reduced our reported revenues by $23 8 million.
And 57 6 million respectively.
Q4, and full year 2022 have been the largest quarterly and year to date negative impact from foreign exchange movements.
And at least the past eight fiscal years for Ebix.
Aaron has already discussed the Q4 and fiscal year revenue figures. So let me focus a little bit on the numerical drivers of those results.
In 2022, the five 5% revenue growth year over year was driven by growth in EBIT cashes travel foreign exchange, an outward remittance businesses, which on a combined basis grew 118% year over year.
The bto in it services revenues in India grew 47% in 2022 versus 2021.
Our EBIT cash E learning revenue growth was 160% in 2022.
And in Latin America, our year over year revenue growth was 42%.
These strong growth results were offset in part by the prepaid gift card business in India, which declined three 5% year over year and I will note generates little profit for Ebix.
Australia had a revenue decline of 15% in 2022.
About half of that was FX.
Related.
Just on changes in currency rates.
U S revenues for the year decreased less than 1%.
While our core life and annuity exchange revenues increased 5% year over year, our consulting health exchange and <unk> revenue declines offset the solid growth.
And those core life and annuity exchanges.
Our operating income in Q4, 2022 was $29 $8 million, that's an 8% decrease from Q4, 'twenty, one operating income of $32 $4 million.
And 2% lower than Q3, 2022 operating income of $34 million.
Our operating margin of 11, 7% in Q4 compares to 11, 8% in Q3, 2022 and 12, 2% in Q4 2021.
The decrease year over year, and our operating income relates primarily to increased personnel costs and rent expense both.
Primarily in India, as well as incremental sales and marketing expenses to continue to build.
<unk> cash brand in India.
Employee related expenses for salary and benefits increased $4 1 million in Q4, 2022 versus Q4 2021, while rent expense increased $3 $5 million year over year in Q4 2022.
The company continues to reopen international airports and ports of entry locations as the negative impacts from COVID-19 subsides.
In India, our sales and marketing expenses increased by over $2 $5 million in Q4 2022.
As compared to Q4 2021.
Excluding the impact of the prepaid gift card business Q4, 2022 operating margin was 26, 4%, which.
Which compares to 26, 3%.
In the sequential Q3 2022 quarter.
And 39% in Q4 of 2021.
For fiscal year 2022 in total our operating income was $123 million versus 119.
In 2021, an increase of one 1%.
But on a constant currency basis, our operating income grew by approximately 5% year over year for the full year of 2022.
During the year to date period.
<unk>, we had the following major cash uses 30.
$33 $2 million of cash interest paid.
$24 million for income related taxes paid globally.
A combined 21 $5 billion expended on capital expenditures and software development costs.
$43 $5 million used to reduce the principal outstanding on our corporate credit facility.
And $9 3 million for dividend payments.
The company had liquidity on hand, which I.
Which includes cash cash equivalents short term investments and restricted cash of $136 3 million as of December 31, 2022.
Versus $125 2 million at $23 21.
However, I want to note that at December 31, two.
2022 on that date.
The company had interest and principal repayments under our credit facility due of $22 $9 million.
And a half a million dollars of which was principal repayment under the term loan.
Because of an oversight and our agent bank. This payment was not taken from our account until the first business day of January 2023, thus our liquidity on hand at 12 31, 'twenty two would have been $113 4 million at the payment then affected as of 12, $31 22, and that would compare to the 125.
$2 million at.
At 12 31 2021.
Our total debt on December 31, 2022 was $647 $3 million.
And a $13 million from total debt of $662 million.
As of 12 31 'twenty one.
And as I, just mentioned that that would have been $7 $5 million lower at 231 'twenty to have that principal payment.
Been processed timely.
The company also paid down $5 million of principal on our debt in February of 2023 is part of the recent extension of our credit facility.
Mature in May 2023, and we will repay an additional $5 billion under that facility on March 31 2023.
Our current corporate credit facility contains two financial covenants, our consolidated net leverage covenant and our fixed charge coverage covenant.
Our consolidated net leverage ratio was approximately three six times at 12, 31 22 versus four two times at 12 31 21.
So during 2022, we de Levered <unk>.
Approximately six turns Arkansas.
Our consolidated net leverage covenant at 12, 31, 22 was four five times.
So we were comfortably under that covenant level, our fixed charge.
<unk> coverage ratio was approximately one five times at 12, $31 22 versus our covenant level of 125 times.
We were in compliance with our credit facility financial covenants at 12 $31 22.
Robyn will provide a further update on the efforts that are ongoing.
To address the impending maturity of the credit facility in May 2023 during his remarks.
We are appreciative of the syndicate of banks that are working with us as we continue to pursue the refinancing of our credit facility into a capital structure that is both longer in tenor and with more globally oriented investors.
EBIT continues to generate significant adjusted EBITDA, despite global economic stress, including inflation in a rising rate environment.
Lingering impacts from the COVID-19 pandemic.
In 2022, the company generated $142 $8 million of EBIT plus.
Plus noncash stock comp expense, that's an increase of $3 2 million or 2% over 2021 levels.
Reaching pre COVID-19 operated operating levels and negatively impacted businesses is a goal we are continuing to move towards.
While we saw a rebound in activity in most of these businesses beginning late in 2021.
Q4, 2022 revenues remain depressed.
Pre COVID-19 levels.
Q4, 2022 revenues from travel foreign exchange Remittance financial technologies and E learning businesses at Ebix cash were 27% lower.
And then Q4 2019 revenues, which is the last quarter prior to the beginning of the negative.
Impact from COVID-19 on our company.
However, just one year ago. These business lines were approximately 53% lower than Q4 2019 revenues in 2022, we made significant progress in returning to pre COVID-19 operating levels.
And our goal is to return quarterly revenues for these businesses to those pre buy teen pre COVID-19 levels in late 2023 or early 2024.
While we have some important hurdles to clear in the coming months.
Most notably changing our capital structure to address the corporate credit facility maturity.
We continue to believe that the market positions, we have obtained through years of service to our customers will over the long term lead to a strong and successful company that will provide value to all of our stakeholders.
Our employees work hard every day to deliver for our customers and I want to thank the over 10000 folks that really define ebix to the marketplaces that we serve.
Finally.
<unk> Form 10-K will be filed later today.
I'd like to now turn the call over to the President of our North American insurance businesses Ash Sawhney for his remarks on our fourth quarter and fiscal year 2022 operations.
Thank you Dan and Steve.
I will now talk about the Q4 2022 and full year 2022 analysis of the North American business.
The Q4 2022 revenue was up 6% compared with Q3 of 2022 for North America.
This was enabled by a cyclical increase in our medical certification business.
Strong performance of our life and annuity exchanges on.
On a full year basis for 2022 revenue for North America was relatively flat compared to 2021.
While our worldwide insurance exchange business grew by around 2% in 2022 as compared to 2021.
In 2022, our core insurance exchanges.
Which constitute roughly 70% of our revenue.
Continued to grow to show steady growth the life annuity and property and casualty and health exchanges were up three 5% in aggregate.
With Q4 revenue in aggregate was down 3% compared to Q4 of 2021.
Largely on account of softening in the medical certification Division.
This group was up 50% sequentially in Q4, but down 11% over the same quarter in 2021.
I will now provide a more granular analysis of our various business units.
The life and annuity exchanges, including life and annuity order entry illustration CRM and underwriting exchanges were up 4% in Q4 compared to Q3 up 7% in Q4 compared to the same quarter in 'twenty one.
5% on a full year basis, comparing 2022 through 2021.
The annuity exchange, which is the largest of all our exchanges continued its strong run.
Revenues were up 8% in Q4 22 sequentially.
Up 23% compared to Q4 of 21 and on a full year basis, the revenue was up 20%.
Q4, 2002 was the highest revenue quarter on record.
<unk> was the highest year on record.
In November 2022 was the highest month on record.
With a number of carriers now exceeds 57.
Total transactions processed exceeded 580000.
And the total premiums process for the platform now exceeds 98 billion in 2022.
These were all record numbers.
Approximately half of the annuity growth in 'twenty two came from increased business from our existing customers and the other half came from new clients onto the platform over the past 18 months, yes.
We added CMO and Ohio, Nashville to our client list in Q4.
Our life exchanges comprised of life order entry illustration and CRM were collectively up 2% in Q4 compared to Q3 and also up 2% for the year the platforms collectively processed over $50 billion in premiums.
The number of carriers in our various life platform now exceeds 100.
And the number of distributors exceeds the 100000.
We ran over 30 million illustrations on the life platform in 2022 and processed over $1 3 million applications. These are all record numbers.
The underwriting division was flat in Q3 compared to Q, sorry in Q4 compared to Q3.
On a full year basis, the business was down 5%.
We are seeing signs of the division starting to recover from the resource constraints discussed previously we have added several new capabilities to the platform, which will provide incremental revenue streams in the future. These.
These include our reinsurance module.
Processing for annuities and processing capabilities for Bermuda, and Singapore businesses.
Last year, we embarked on an effort to restructure and reposition the Ebix CRM Division.
Specifically, we increased our focus on the retail market segment, particularly in the <unk> segment.
We repositioned our platform as a one stop gateway for advisors to conduct all of their business, such as managing customer data and communication submitting new business getting case status updates managing commissions and conducting other day to day functions.
Our platform is now tightly integrated with all EBIT tools, including coating illustration in order entry.
In addition, the Broadcom provides integration with over 10, 74 third party systems, enabling a vast ecosystem accessible through a single gateway yes.
We are starting to see a turnaround in this business.
<unk> sales were up 21% and 22 compared to 2021.
New was up 3% and attrition rates were reduced by 50% during the same period.
Ill health benefit administration business was down 8% sequentially in Q4 of 2002, largely because Q T left the high water Mark in terms of quarterly revenue.
The business was flat in Q4 compared to the same quarter of the year before and on a full year basis was up three 5% delivering the highest yearly revenue the scope has ever recorded.
<unk> continues to generate steady revenue with over 77 large payer customers servicing over 43000 employer groups and covering over 9 million lives.
We are on track to rebound to onboard.
Q2 of this year, which will provide an uptick in our subscription revenue.
Our medical certification business <unk> was up 50% sequentially in Q4 compared to Q3 of 2022.
The cyclical Spike was expected as the division that is approximately a third of its business in Q4.
Q4, 'twenty one the revenue was down 11%.
The decline was partly due to the changing dynamics on the gift card incentives that are bundled with our subscription offers and partly due to the lifecycle decline of the audio content product.
Typically you get 60% of the revenue in the first half of a four year lifecycle.
That product happens to be in the second half of its lifecycle.
Working on several initiatives to increase revenue, including targeting products towards younger physicians and also adding new mobile enabled capabilities.
<unk> remains a strong brand in the continuing medical education space with over 50 years of history.
Two out of every 10 positions and quickly plus medical and dental specialties.
Our content is created in partnership with leading medical institutions, such as Harvard Medical Cleveland Clinic, Brigham and women's Dana Farber, John Hopkins and 20 other such institutions.
The consulting business was up 3% in Q4 compared to Q3 and down 2% for the full year.
As was outlined in Q3 of 'twenty two we're now packaging, our consulting services for our new and existing exchange customers.
Packaged under a program called accelerated go to market.
We now offer property product design Onboarding support testing and training services through our exchange customers.
Most new clients will be availing of the service, including CMO, and Ohio National who signed on in Q4.
We'll be receiving several of these services in the coming quarters.
We also signed new contracts with equitable the metro and RW Baird in Q4.
Our P&C business the smallest of our vertical business units was down roughly 6% and 22 compared to 21 in.
In Q4, we rolled out a new release of the risk envision product one of the main product lines. In this book, we are seeing a healthy pipeline and expect <unk> to show growth over 2022.
The risk compliance business was down 8% in Q3 and start in Q4 compared to Q3, which was a strong quarter for us on a full year basis, the business was up 3%.
This business continues to be a steady performer for us with a 28 year history, serving over 600 customers, including 70 of the largest fortune 500 companies.
Looking forward, we feel optimistic about the path we're on.
Several factors contribute to our optimism which are outlined as follows.
The current macroeconomic environment is favorable to several of our core units such as annuities. The high interest rates are providing a strong tailwind for the industry.
This is increasing the number of annuity transactions and also bringing new entrants to the market. Both these are favorable trends for our business. We are seeing an uptick in transactions continuing into the early months of 2018 more on this when we report our Q1 earnings.
The jobs market is continuing to cool off in our industry over the past few months, we have seen a marked progress in filling our backlog and have also seen a drop off in attrition rates.
We also reorganized our delivery organization that exchange Division in 2022, we were previously organized by product line, which had limitations and redundancies. We have now aligned ourselves with a centralized customer focused operating.
Organization, including client services product strategy and development and production support.
This structure will be important as we see ourselves selling and servicing comprehensive digital solutions that encompass several of our products.
We are excited about our new sales organization, we fully rebuilt our sales organization in 2022 with the majority of the sales organization, having been hired within the last 12 months.
These newly hired experts signed partners in our view by our clients our solution.
While helping them find the right fit for their technology needs.
Setup allows us to better serve our customers and optimizes the penetration of our products within our existing client base.
We are already seeing positive results the number of customers using C or more of our products and services has improved by 20% in the past year the pipeline going into 2020 say is healthy.
Ebix has always been at the forefront of product innovation in line with this legacy Ebix is launching the Super Highway, it's most advanced exchange and to support life and annuities processing.
Super Highway is designed to significantly unify and enhance the advisor experience.
Selling life and annuity products.
It is a well known fact.
Selling the.
Selling process across the industry is fairly disappointed when the advisor has been navigating through multiple sub system across the lifecycle of selling a policy.
Super Highway will solve that problem.
Customer needs analysis product research coating illustration order submission policy issuance and post issue policy maintenance, the advisor will be able to navigate through a unified and streamlined user experience.
An experience that will be aided by data artificial intelligence guided user activity machine learning and natural language processing.
The Super Highway was unveiled at the recent Ebix Exposition in Orlando.
We believe the expansion of the annuity sales will also increase the need for post issue policy servicing.
This includes both financial and nonfinancial transactions, such as policy changes withdrawals.
<unk> dollar cost averaging and asset rebalancing.
EBIT has already developed a solution called annuity maintenance.
Platform called <unk>.
We believe the adoption of ample increase considerably as the market for a new <unk> in general continues to expand.
Overall, we are excited about the outlook for our North American business at some companies brace for an uncertain economic environment, our business in North America continued to be resilient.
This stems from a wide array of products that collectively provide a natural hedge in any economic climate.
Our strength was also founded unabated by were set of customers, which includes hundreds of insurance companies and banks tens of thousands of advisors dozens of profit medical institutions and several of the top fortune 500 companies are pricing model, which is largely recurring in nature adds to the solidity of our.
Our business model.
We are mindful of the important part we play and running some of the largest exchanges in the industry.
This is a responsibility we take very seriously.
Im grateful to all the Ebix employees, who work hard to make it all happen.
I'll now pass it along to Robin for his comments.
Good morning.
This has been a record year for Ebix in terms of revenue.
With the company blocking approximately.
One point <unk> 5 billion and GAAP revenues for me a few things stand out as regards to annual performance.
Constant currency revenues.
One 1 billion.
With 11, 3% year over year growth.
On a constant currency basis, all three channels of the company showed a year over year.
Constant currency insurance exchange revenues increased by 2% in 'twenty two what it says 21.
On a constant currency basis, our CF revenues.
Creased by 11% as compared to 2021.
On a constant currency basis, Ebix cash revenue increased 14% year over year.
On a constant currency basis nine of the 11 major geographies experienced year over year growth in revenues.
In 2020, the company generated $142 8 million.
EBITDA plus noncash stock compensation expense.
An increase.
$3 2 million or 2% or 21 levels.
I compared the 2022 numbers to 'twenty 'twenty fiscal year numbers to get a perspective on the overall business.
Between 2020 and 2022 worldwide GAAP revenues have grown up have grown by 68%.
Between 2020 in 2022 ebix cash GAAP revenues have grown by 112%.
Comparing 2022 fiscal year numbers with 'twenty, one fiscal year numbers.
The performance of a few international operations.
In addition to the U S and India was especially noteworthy.
Latin America year over year.
Grew by 42%, Singapore year over year grew by 10%, Indonesia grew by 161% Philippines year over year.
By 91% Middle East year over year grew by 30%.
As regards to quarterly Q4, 'twenty two year over year performance.
Two things to note on a constant currency basis Q4, 'twenty two revenues increased 5% year over year and would have been $23 8 million higher in the quarter.
Foreign exchange rate changes during the quarter.
On a constant currency basis.
One major geographies worldwide.
Revenue growth in Q4 22.
In Q4, 'twenty two insurance exchanges worldwide increased 1% on a constant currency basis. This compliance solutions constant currency revenue increased 14% year over year.
In the fourth quarter of 'twenty two.
EBIT cash constant currency revenue increased 7% year over year in the fourth quarter of 'twenty two.
Excluding the prepaid.
Scott revenues.
EBIT cash revenues.
Grief, even over a year by 30%.
I'm also pleased with the operating cash flow performance in the quarter with the company reporting $32 $5 million of operating cash flow in the fourth quarter of 'twenty two.
We started the year.
With cash cash equivalents short term investments and restricted cash.
<unk> hundred $25 million Tony.
$5 2 million as of December 21, and as of 31 December 'twenty. Two we still had net cash of $114 4 million after accounting for the pointing to one $9 million late withdrawal by the bank.
This was after the company cumulatively spent.
$111 5 million in 'twenty, two just on a few key areas.
$32 2 million of cash interest paid $23 5 million used to reduce the principal outstanding on our corporate credit facility 24 million for income related taxes paid global globally.
A combined $21 5 million expanded in capital expenditures and software development cost and an additional $9 3 million for dividend payments.
We had $98 7 million of cash cash equivalents short term investments at a strictly cash as of September 22, and as of 30 <unk> December 'twenty two.
Still had net cash of $113 4 million.
All of that.
Speaks to the cash generation ability of the company.
At the present in minutes.
I have limited ability.
Pick on the finance refinancing front as the Golan by tight country confidentiality agreements with any and all entities and log management continues to work with the company's board of directors and outside financial and legal advisors to address the refinancing of its credit facility.
Which the company in cooperation with a syndicate of banks extended to May 23, 2023 in order to give the company time to continue to pursue alternate days that will refinance the credit facility.
The company has multiple options that you're exploring to ensure that.
Facility is largely or wholly refinance as quickly as possible.
Rest assured that we are fully aware that while our operating income continues to be strong.
Net income is getting negatively affected by the heart by the high cost of Bank and trust.
And associated legal and advisory fees associated with our refinancing and extend connect site.
We also believe that monster Ebix cash IPO is scattered out successfully.
It is expected to reduce our interest cost substantially in the Meanwhile, we are working with our financial advisors.
Definitely on a number of possible options. Our goal remains to seek a structure that is in the best interest.
All of our stakeholders.
Our business is timing and how the worldwide.
Our operating metrics are strong.
And our senior management.
About the opportunity ahead of us.
In the long term.
We are focused on resolving the non operating metrics like interest cost and some of the nonrecurring costs that we are presently in cutting on advisers et cetera associated with the refinancing.
Have a plan in place to grow our operating income.
And try and client reduced extraneous costs.
Our priority is to handle that debt refinancing in the short term and then have a cost structure that ultimately is set for income maximization.
We would like to get to that ultimate plan.
2023 itself and are working towards it.
Success success isn't always about greatness, it's about consistency at Ebix, we are firm believers in this quote from Lewis.
And we will continue to strive to deliver consistent revenue growth and resolve that we can be proud off after 23 years of consistency in terms of growth and other operations operating metrics Ebix has proven that it is completely committed to achieving great thats on the foundations.
Consistency we.
We are committed.
Committed to creating a capital structure that maximizes value for our stockholders.
In closing as always.
I want to thank our customers our partners.
Partners and our employees for their continued trust in us and for contributing to an outstanding fiscal 2022.
I will now pass the call over to the operator and open it up for questions. Thank you.
Thank you.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad if.
If you press star one a second time it will remove you from the queue and we will pause for just a moment to compile the Q&A roster.
Yeah.
We will take our first question from Jeff Van <unk> with Craig Hallum. Your line is open.
Great. Thanks for taking the question.
Robin with respect to the credit agreement.
There is a few lines and they were talking about Ebix is to provide a strategic plan on or before March 15 was that Don and with respect to communication with shareholders. What can shareholders expect to here as this process evolves.
Jeff first of all yes.
Absolutely it will be in time with respect to the 15th deadline list showed about it.
I didn't get the second question can you please repeat that.
The first was just whether or not you've provided that strategic plan on or before today and then the other one was.
In terms of shareholder communication, what is it that they can expect I mean, presumably in that communication to the Ford creditors et cetera, you evaluated options for all the way from selling parts or all of the business to various credit options too I would imagine a very wide range, but seemingly you presented that what does it look.
Like for the next three 612 months for shareholders in terms of.
What they are going to hear what they're going to know about what's going on.
Well our job is to our goal is to be as transparent as possible with that shareholder within the rules.
Having said that we have our next deadline as of May 20 <unk>.
An extension until May 23rd channel does that definitely going to have from us on the path. We undertake at that point of time I think between now and then it is extremely difficult.
Me too gave lay out all the possible options all the different things that we're working on simply because like I said in my talk we are governed by confidentiality provisions and it wouldn't be prudent.
All right for me to be able to speak about it.
Okay.
Hi, Jeff.
Yes, Steve Hamil, and just just to be totally clear that strategic plan was finalized a few days ago.
And will be delivered to our bank group today, whether it has been delivered as of $11 41 a M.
Not 100% sure that will be delivered through our advisors to the bank group. So yes, it will be delivered today.
Okay, Great I appreciate that.
And then with respect to the IPO I mean understanding your hands are tied in many ways to comment on this it's about a year since the filing <unk> appears to be a mass.
<unk> struggled to to move things forward at anywhere near the pace that used to kind of across the board, but clearly ebix is an outlier.
Youre not going to give me.
That timing, but.
Any observations about the overall market without talking to your specific instance that would be relevant for investors watching this process and wondering why safety is not moving.
I Couldnt really comment on why <unk> been moving look it's very hard for us to comment at the same time.
We would hope and believe that we should get at some point, we're going to get that approval sooner rather than later, having said that.
Some of it as you know Indian market stock markets have gone through a lot of turmoil in the left.
A month and a half, especially.
It could be that has something to do with the delay in terms of there's a lot of stuff happening in India and a lot of ipos have gotten delayed.
From an approval perspective from savvy right, because having said that.
We'd like to believe that we are going to get that approval sooner rather than later for our bank because as I've said earlier I fully.
Fully get up all five bank of already.
To pounce on it does that it has launched their marketing attempts and so on so we.
We it could happen anytime Jeff and it's impossible for me to give you tell you something.
Until we hear back until we have something called <unk>.
Okay two other questions.
Market share wise, if I break it up between EBIT and cash and then the North American business.
Obviously, COVID-19 is depressed and a lot of the ebix cash businesses, but would you say you've gained held or lost share since pre COVID-19 and I'd ask the same question separately about the North American business gained lost or or held share.
Well with respect to Ebix cash I can I can absolutely tell you. We are absolutely gained in market share in almost every market segment that we operate in.
The Covid became with all its negativity it ultimately became an opportunity for us because some of the smaller players just tied by the by the way side, meaning if you just look at I could go one by one and walk you through Forex and remittance swing.
Travel youre going to see that we've actually done quite well.
Percentage share in the market.
I'll take them, whether you count the number of airports we had.
Before.
When we started with as Covid started going away. If you look at the number of airports, we had for Forex and what we have now.
The number keeps increasing virtually by the by the day.
Meaning.
Almost a few days back we actually had one of the largest airport approval one of them.
Not that we didn't have Jeff.
<unk> came to us in the last three four days, having said that.
I could go on and Forex in terms of our corporate market share.
Airport market share report markets, yet and so on and similar provisions go on whether we talk about educational remittance market.
Market share has substantially increased.
It's a function of what is the overall market size. If you look at the overall market site and that gets depressed by Covid. Now. The question is are we gaining in market share with respect to what is the present market size and dancer.
Absolute resounding, yes, I could go into plastics J&J area, where we have kept announcing deals and hopefully we'll announce more deals in the coming days and so on so there is there's a lot of positive momentum and it gets reflected in the in the growth in revenues that we have shown with respect to Ebix cash ash you want to comment on the on the U.
Side of the business.
Certainly.
So Jeff you're not.
Looking at North America, you would have to look at the different sub segments of the market.
So as an example, our life and annuity exchanges.
I would say over the last credit months would have certainly increased market share and the way. We look at that is based on the number of transactions that are going through our platforms.
We have added more.
More carriers and more distributors on the platform and the lost appropriating months than we have done probably in the last five years before that.
On the life side, specifically we've added.
We've increased the number of carriers on our platform quite significantly and ultimately that's the key driver in terms of.
Leasing the market share.
Some of the other divisions like our health Division.
I would say, it's probably relatively flat.
<unk>.
But we are adding.
Big.
International brokers to the platform, which as you know are fairly significant.
Deal for Us, though we believe that that itself will also increase our.
Subscription revenue.
In certain other areas such as wellness.
Other areas such as our P&C business.
It's more or less flat to a slight decline these businesses now represent.
A much smaller part of our overall business, Jeff So our focus really is the core.
Side to find us.
Our life annuities.
The health business.
These are all businesses that are.
Fairly solid.
Okay.
Okay sorry.
Probably I would add the Odyssey certificate business or the core business, yes, yes, yes exactly.
And the Rcs business stayed steady and we do business with like I said over 70 of the largest.
Fortune 500 companies.
So we have continued to.
Keep a pretty pretty significant.
Place for ourselves in the industry.
Well recognized brand.
<unk> we are.
Probably one of the larger players in the CME business.
Market share, it's probably up or down a little bit but the key point is it's a it's a very.
Solid business for us.
And we expect to continue to grow some of these business units.
And Robin Robin handle rash.
You might want to add a little color around the EAA joint venture and how thats been a bit of a drag on revenues for the last couple of years.
Yeah, I think when you basically when you look at the overall revenue so sometimes.
<unk> Avenue has has it's it's it's mainly it's fallen as I've talked about in the previous call. It's our Tpa business and then the Tpa business. So when you look at the cumulative revenue.
The fall in that revenue gets reflected and it offset some of the increases that we show in some of the other businesses that have kept talking about and the PPA business. One of our main reasons, one joint venture partner basically decided to get out of health business completely and David one of the largest clients for us and that just went away from one day to another.
And that has obviously cost.
A bit of pain in terms of revenue. It is also it is it is one business where.
There's not many businesses EBIT would.
Wouldn't be saying that we lose any money and this is a business where we actually have a.
Have a bit of.
Negative.
Profitability.
But the losses out there, which we are trying to as we as we.
Figure that one out we are basically actively working on trying to figure that one out we're trying to figure out can we get to a JV partner completely out of the top things candidly in and if we can do that it actually means.
It means to make that business a lot much better.
By the fact that we have a JV partner, who is actually out of business and is not able to contribute.
We have some obligations are attached to that fine, which actually costs us a bit of money.
So theres a bit of room, there for us to gain in terms of.
Profitability.
How I see it but it's a fairly small business right now fairly miniscule for us right now.
Okay.
Last for me a couple of models specific questions.
I look at the GAAP net income, it's about a $6 million Miss versus my estimate and about $5 million of that becomes it comes below the operating line. So I think I can model out the interest expense going forward.
It leaves and the other big variance this quarter, the two where interest expense primarily taxes. So.
Two specific questions how should we think about taxes in.
<unk> 23, and in specifically in Q1, but the year as well and then also G&A you touched on it I mean, obviously its run in fat here up considerably over really any any trailing periods.
You called out rent and a few things that seem like they will persist, but I'm wondering at this $36 million.
non-GAAP run rate.
Or actual print at $36 million.
G&A in Q4, if that's the right level to assume going forward, so really two questions or taxes and G&A.
Yes.
Yes, if you want to talk about G&A.
Yes.
And I'll add to it we will go ahead.
So Jeff at the beginning of 2021.
Our borrowing rate was 4%.
Through.
Rising interest rate environment.
Increased spreads.
As we had to.
Dean Amendment for Covid.
Our borrowing rate has increased pretty materially. So if you looked at the end of 2021, our borrowing rate was five 5%.
At the end of 2022, our borrowing rate was nine 6%.
Two years, we've gone from 4% to nine 6%.
Largely as a result of increase in <unk>.
The LIBOR rate.
And today.
Our borrowing rate is just under 12% as rates have continued to persist and we had a little bit of increase.
And our borrower.
Borrowing spread.
Additionally in 2022.
We had.
A couple of different payments to the bank group.
That were fees associated with.
Having not refinance the deal by certain measurement dates in 2022, we spent probably.
$2.65 million.
Out the door to these banks.
And those were capitalized as deferred financing costs, but.
If you think about.
Probably $2 1 million of that was amortized into expense.
During 2022 and in the fourth quarter that number was probably about $900000 of interest expense related to those onetime fees. So we've been hit by a rising rate environment.
An increase in our spreads.
And increased fees and out of pockets related to the bank group.
From a tax planning.
Yes.
From a go ahead go ahead I'm sorry.
From a tax standpoint, Jeff in our starting point for.
Pre tax book income wasn't materially different 'twenty, one to 'twenty two there's a couple of big.
Things that have caused that.
The effective tax rate to go from 9% to 13% during 2022.
Really.
The first one is just the amount of.
Warren related in.
In higher tax jurisdictions that has.
Generated and included.
Related to the guilty tax calculation and there.
Really the second one is.
Temporary differences around.
The Trump tax that there's a section 163, J provision, which limits your business interest expense deduction.
And I'm not going to quote absolute numbers, but it's about 30% of your.
The adjusted tax one com.
And given the increased amount of interest expense we had.
That.
Differential year over year from 2021 to 2022.
Increased our.
Tax one gone by.
Close to $8 million just that one item. So those two items were the two biggest ones that contributed to the effective tax rate increasing from 9% to 13%.
So would that would that suggest then we would normalize at that rate I mean, it doesn't seem like the tax act is going to change so does that how to think about the rate going forward.
Okay.
Steve You want me to answer that so yes go ahead.
Yeah. So let me answer both I'll add to what Steve desktop toward interesting I will talk about the taxes.
Expect that tax rate to be in the single digits.
For this year there are a number of reasons for it but we can go through it but basically I would expect that to be somewhere in the 6% to 8% kind of a bracket in terms of the tax rate.
Second question of Yours was when you talked about the interest rate and how do you.
Model all of this forward look.
I think the way to look at it.
David It's short term and then there is long term in the short term.
Obviously, we have cost in terms of your already Steve already talked you through the interest costs that we have clearly that is something we have to live with until the until we have paid back.
Now even if we refinance now the question becomes it all depends on the capital structure that we have chosen.
There are capital structures to give you a simple example, let's say we had a we had a successful IPO already had we launched our IPO now.
Our net interest costs are going to be relatively low simply because we would have raised money through equity, which doesn't have any costs associated with it and whether you'll keep that money in a bank, earning interest or whether you use that to pay back.
Did you feel that in any way, meaning it ultimately results in a net reduction in terms of pretty substantial net production in terms of interest costs.
On a long term basis.
It all comes down to how soon can we get that IPO done if we can get an IPO done.
Meaning a lot of these of course.
The reduced dramatically now having said that in the Meanwhile, we have delivered what we have and we have to make sure. We strive for every option out there to obviously pay up banks and refinance in the Meanwhile, and that's exactly what we are doing and for that you Steve already talked you through.
The.
<unk>.
The cost of interest that are presently being incurred.
Yes fair enough got it thanks for taking the questions.
Thank you Phil.
We'll take our next question from Christopher <unk> with singular research your line is open.
Yes, hi.
I just had a question on <unk>.
The annuity exchange.
What was the main driver for us.
The increase in carriers and distributors in 2022, and what can we expect in 2023.
Please go ahead.
I can take that.
No.
The.
The economic.
Climate, right now, especially with the high interest rates.
That is a big factor obviously because.
Annuities are paying.
Higher interest rates, there's more annuity sales.
Happening in the industry.
So more carriers that were not previously in the annuity space are jumping in.
Another big factor for us over the last.
Say appropriate in months was the Onboarding of J P. Morgan.
Who is one of the largest.
You know a new key players in the industry and when you bring somebody like that onto the platform.
All their carrier partners have to start participating.
Participating on the exchange so.
We're seeing higher volumes.
Across the board.
Because of the economic climate.
So seeing new entrants come in like our client.
The growth actually came from more volume from existing customers and the other half.
From from these new entrants.
Turning a corner three I would say.
We expect that as long as the interest rates stay where they are we're going to continue to see.
A fairly healthy growth in fact for the first two months of this year.
We have continued to see the same pattern that we saw.
In Q3 and Q4, so the volumes are way up there.
So Chris I want to add.
What <unk> said.
I think we would also add though are pivoting point what has happened is that.
Dominance.
<unk> dominance.
Has continued to grow in this field, we have continued to grow our market share.
And what that has done is when you have that when you have that kind of dominant market share at least still on <unk>.
Working effect and it leads to some of the larger distributors, who may not let's say there is a distributor AVC who might be on your competitor's platform.
There is every reason for now for that large distributor to come to you for many reasons one.
You have all the distributors do you have all the network sitting out there, which is the network they want to address.
On the second site, we have the volume since we have the volumes we can afford to do all this cutting edge development design, the latest and the greatest up products.
Mitch.
A smaller player who has a smaller market share cannot afford to do simply because they don't have the.
They don't have that appetite because they don't have that revenue stream. So it's impossible for them to put those kind of costs.
So the net result of that is that you get to a point in exchanges.
Yes.
People will approach you rather than you approaching them and we are seeing some of that phenomenon happening I would be very disappointed if in the next one year.
Candidly C. Some of the major some of the major clients that our competition has to.
To come to us, we would like to see that and we believe that has every reason to see that.
And I haven't even have to say it.
Thank you.
Okay. Thanks for that answer.
And then <unk>.
Paid card side of things.
What was the reasoning for the decline there.
Look we it's it's looking at the year to see the market size and what happened was during COVID-19.
Pretty big.
Growth in the prepaid card business, mainly because people didn't want to touch things and there was digitization dramatically increase. So this was a normal process that has that been in terms of.
The size of the market first of all the.
It was absolutely a rush to fall for prepaid cards. During Covid once COVID-19 became a thing of the past the Russia reduced a little bit secondly, candidly it has to do with it has to do with the.
The commissions associated with that business, so when we do that business.
Our commissions are shared with sub agents that we have and now if if if we it all depends on our business model. If we are prepared to share a larger part of our commission. This business revenue can be a lot higher than what we are reporting its just that were not prepared to do that we.
Like to run profitable businesses.
And a lot of our competition in this business segment.
Willing to is willing to pass on most of their commission.
They're sub agents and agents simply because it gives some topline growth and we chose not to do that and we decided that well.
We're going to we're going to live with the business model that we have on profitability.
And within that business model, we will continue to see how well we can do and that's the reason for what you see out there in the prepaid card business.
Let me just.
Also at add some perspective from a CFO standpoint.
Yes.
Honestly.
Business doesn't generate.
Material cash flow or income for us okay.
I don't really care, whether we do 600.
$1 billion of tail and the gift card business $400 million 800 million. All my biggest concern is the CFO and Robyn.
At the same degree is how much money are we right how much EBITDA return, how much net income or underwriting.
Never want.
The analyst community or investors to get caught up in the prepaid card business because of the way the way the competitive dynamics over there in India. Its just not.
Material generator of profit.
Yeah.
So Chris what we have now also trying to do now that we have the reach and the expanse as one of the largest non bank can play out in the prepaid card business. We're using that I'll give you. An example of a recent a recent example of where we are how we are deploying these prepaid card products.
One area and then a very profitable manner. One is we're trying to an agreement with divest pangle government.
Investment Paul every even all the way its bus we are providing.
The bus exchange system.
To basically variant every ticket that gets sold basically it's happening.
Smart technology using our technology. What we also did we worked with the government in there too to introduce all these prepaid cards for consumers and with the Ebix cash prepaid card.
Quickly the consumer the West Bengal Transport Department for example decided to offer a discount a slight discount on their pricing and that result is now you have.
Just for people who are traveling in those buses.
Using that prepaid card simply because it gets somewhat discount plus it gives them that there's still ability to use it on the bus and so on.
And so we've been able to position ourselves in this regard is just one opportunity. We are presently deploying it across we are trying to basically convince all the 16 states.
Do business to deploy this is another. Good example is the largest state of Indiana, which has looked up a ish, notably this is the largest state in population and metrics that some of the neighboring countries to India, whether it's <unk> or anybody out there and if you look at the.
What we are trying to do out there you'll be government distributes a lot of.
The rollout a lot of money to do.
The underprivileged.
The government program every every month actually we are trying to do that through working with another bank. We're trying to deploy all these cards that would be issued with the with the consumer picture on top of that card so that when the when the money any money is doled out it is.
On the basis of that comparing that picture comparing the biometric tumbling brands and from there having the ebix cash card whereby the government can now track the money that they doled out how long does it really use is it coming back into the economy are not so those are the kind of example.
Off of clients that we are now adding.
With respect to the prepaid card business. So it's a business that ultimately look we have we have a pretty substantial market share and we kind of feel now we are trying to make this into a good income opportunity also.
But we wanted to do it at that.
We're focused on income so we're not going to just you know going into the market.
And increased market share just by reducing commissions are passing on more commissions to agents, we wanted to maximize income while selling more cuts.
Does it make sense I just.
When I spoke to you about.
Chris.
Yes, yes, it does.
I think along with the bus the bus system.
Is that.
Coming as far as the.
The Tms.
As it as it is.
As you bring it out into new state bus system.
Yeah, we are continuing to deploy all the idms systems and all the deals that you that we've been announcing whether it be announced but rather that we announced that's been gall recently, we announced a large one of the largest deals we have done.
<unk> do you see Maharashtra state orderly, a soft ball corporation very and we have two phases. The first of all deploy ibms across I think 19000 buses than it is across approximately 38000 buses overall, so it's a very large state with 38000 buses flying that everybody would be able to use these smart guard and we.
You get paid on a per ticket basis, it's a very simple business model virtually every ticket we don't really care, whether it's you know of course, they will be able to use up they can use a prepaid card.
Whether they're using any upi, whether they're using.
Whether they're using third PMO, whether they're using literally.
Or anybody we're going to make money on every ticket that's our business model and that's how we are deploying we are in the midst of a few very large interesting deals right now with some of the states that we don't have and hopefully have something bothered.
Positive to report in the coming weeks and months on that front.
Okay, great. Thanks for the answers.
Thank you Sir.
Yeah.
And ladies and gentlemen that is all the time, we have for questions today and this will conclude today's conference call. We thank you for your participation and you may now disconnect.
Okay.
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Ladies and gentlemen, good morning, My name is Abby and I will be your conference operator today.
At this time I would like to welcome everyone to the Ebix incorporated annual results Investor Conference call.
Today's conference is being recorded and all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one once again.
Thank you and I will now turn the conference over to Darren Joseph Corporate Vice President you may begin.
Thank you.
Welcome everyone to Ebix Incorporated's 2020 to annual results earnings Conference call.
Joining me to discuss the <unk> annual results.
<unk>, Chairman, President and CEO Robin Raina, President Insurance services, North America Ash Sawhney.
And Ebix EVP and CFO , Steve Hamil.
In our remarks, we will open the call for your questions.
Now, let me quickly cover the Safe Harbor statement.
Statements that we make today are forward looking including among others statements regarding <unk> 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 may cause actual results to differ materially from those projected in the forward looking statements.
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.
And in our SEC filings, which list a more detailed description of the risk factors that may affect our results.
Our press release announcing the 2022 full year and Q4 2022 results was issued today this morning.
The audio of this investor call is also being webcast live on the web at Www Dot <unk> Dot com forward slash webcast.
You can look at Ebix as financials beyond what has been provided in this 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.
Now, let me discuss the quarter and the full year.
This has been a record year in terms of revenue performance for the company with the company reported more than $1 billion in annual revenue for the first time.
Fiscal year 2022, GAAP revenues increased 6% to one point.
Zero 5 billion as compared to $994 9 million in fiscal year 2021 on a constant currency basis fiscal year 2022 revenues grew to $1 1 billion, an increase of approximately $113 million or 11, 3% over 2021 revenues.
The increase was primarily due to growth in the EBIT cash business as well as our year over year growth in the Companys core life and annuity exchange platforms.
And.
Outsourced services originating in India Foreign exchange.
<unk> travel business E learning and financial technology businesses and growth in revenues and nine of the company is 11 major geographies.
These increases were offset primarily primarily by a decline in the EBIT cash prepaid card business.
Besides declines in revenue within our Europe U S based consulting.
Employee health and wellness and health exchange businesses.
And the negative effect of substantial strengthening of the U S. Dollar on our revenues in the year of 2022.
For 2020 to your revenue decreased 4% to $255 2 million compared to $266 8 million in Q4 of 2021.
<unk> is primarily due to the negative effect of the substantial strengthening of the U S. Dollar on our revenues in Q4, and 2022 as compared to the previous year.
On a constant currency basis, Q4, 2022 revenues increased 5% year over year and would have been $23 8 million higher in the quarter, but for foreign exchange rate changes during the quarter.
On a constant currency basis eight of the 11 major geographies worldwide had year over year revenue growth in Q4 of 2022 in Q4, 2022 insurance exchange revenues worldwide decreased year over year by 2%, but grew around 1% on a constant currency basis, while risk compliance solutions revenue.
<unk> increased 14% year over year in the fourth quarter of 2022, and EBIT cash revenue increased 7% year over year in the fourth quarter of 2022.
Excluding the prepaid gift card revenues EBIT cash revenues increased year over year by 30%.
Exchanges, including EPS cash and the insurance exchanges worldwide continue to be Ebix is largest channel accounting for 92% of our fiscal year 2022 revenues.
For the 2022 fiscal year on a constant currency basis, not only 11 major geographies experienced year over year growth in revenues for the full year of 2022, EBIT cash GAAP revenues grew 6%.
<unk> revenues grew 10%, while the insurance exchange revenues were essentially flat on a year over year basis on.
On a constant currency basis insurance exchange revenues increased by 2% in 2022 as compared to 2021.
On a constant currency basis Rcs revenues for fiscal year 2022 increased by 11% as compared to 2021, while EBIT cash as revenues increased 14% year over year.
On a constant currency basis fiscal year 2022 worldwide revenues grew 11, 3% over 2021 revenues I will now turn the call over to Steve.
Yeah.
Thanks Darrin.
The U S dollar strengthened against most currencies during 2022 is pretty much everyone on this call knows.
After experiencing the largest quarterly negative impact from foreign exchange movements in the third quarter of 2022.
The fourth quarter of 'twenty two.
Actually a quick Q.
Q3, 2022 for the fourth quarter and fiscal year 2022, the negative impact from foreign exchange movements reduced our reported revenues by $23 8 million.
And 57 6 million respectively.
Q4.
Full year 2022 have been the largest quarterly and year to date negative impact from foreign exchange movements.
And at least the past eight fiscal years for EBIT.
Aaron has already discussed the Q4 and fiscal year revenue figures. So let me focus a little bit on the numerical.
Drivers of those results.
In 2022 of the five 5% revenue growth year over year was driven by.
The growth in EBIT cash as travel foreign exchange, an outward remittance businesses, which on a combined basis grew 118% year over year.
The bto and IQ services revenues in India.
47% in 2022 versus 2021.
Our EBIT cash you're learning revenue growth was 160% in 2022.
And in Latin America, our year over year revenue growth was 42%.
These strong growth results were offset in part by the prepaid gift card business in India, which declined three 5% year over year.
You'll note generates little profit for Ebix.
And Australia had a revenue decline of 15% in 2022 about half of that was FX.
Related based on changes in currency rates.
U S revenues for the year decreased less than 1%.
While our core life and annuity exchange revenues increased 5% year over year, our consulting health exchange and <unk> revenue declines offset the solid growth.
Those core life and annuity exchanges.
Our operating income in Q4, 2022 was $29 $8 million, that's an 8% decrease from Q4 'twenty one operating income of $32 4 million.
And 2% lower than Q3, 2022 operating income of $30 4 million.
Our operating margin of 11, 7% in Q4 compares to 11, 8% in Q3, 2022 and 12, 2% in Q4 2021.
The decrease year over year, and our operating income relates primarily to increased personnel costs and rent expense growth.
Primarily in India.
As well as incremental sales and marketing expenses to continue to build.
Cash brand in India.
<unk> related expenses for salary and benefits increased $4 $1 million in Q4, 2022 versus Q4 2021, while rent expense increased $3 $5 million year over year in Q4 2022.
The company continues to reopen international airports and ports of entry locations as the negative impacts from COVID-19 subsides.
In India, our sales and marketing expenses increased by over $2 $5 million in Q4 2022.
As compared to Q4 2021.
Excluding the impact of the prepaid gift card business Q4, 2022 operating margin was 26, 4%.
Which compares to 26, 3%.
In the sequential Q3 2022 quarter.
And 39% in Q4 of 2021.
For fiscal year 2022 in total our operating income was $123 million versus 119.
In 2021, an increase of one 1%.
But on a constant currency basis, our operating income grew by approximately 5% year over year for the full year 2022.
During the year to date period.
We had the following major cash uses 30.
<unk> $33 $2 million of cash interest paid.
$4 million for income related taxes paid globally.
A combined 21 $5 billion expended on capital expenditures and software development costs.
$43 $5 million used to reduce the principal outstanding on our corporate credit facility.
And $9 3 million for dividend payments.
The company had liquidity on hand.
Which includes cash cash equivalents short term investments and restricted cash of $136 3 million as of December 31, 2022.
Versus $125 2 million at $23 21.
However, I wanted to note that at December 31.
2022 on that date.
The company had interest and principal repayments under our credit facility due of $22 $9 million.
And a half a million dollars of which was principal repayment under the term loan.
Because of an oversight and our agent bank payment was not taken from our account until the first business day of January 2023, thus our liquidity on hand at 12, $31 22 would have been $113 $4 million at the.
<unk> been affected as of 12, $31 22, and that would compare to the $125 2 million.
At 12 31 2021.
Our total debt on December 31, 2022 was $647 $3 million.
And a $13 million from total debt of $660 2 million.
As of 12 31 'twenty one.
And as I, just mentioned that that would have been $7 5 million lower at 12, 31, 'twenty to have that principal payment.
Been processed timely.
The company also paid down $5 million of principal on our debt.
February of 2023 is part of the recent extension of our credit facility.
Mature in May 2023, and we will repay an additional $5 million under that facility on March 31 2023.
Our current corporate credit facility contains two financial covenants, our consolidated net leverage covenant and our fixed charge coverage covenant.
Our consolidated net leverage ratio was approximately three six times.
At 12, $31 22 versus four two times at 12 31 21.
So during 2022, we de Levered <unk>.
Proximately six turns our consolidated net leverage covenant at 12, 3100, 22 was four five times.
So we were comfortably under that covenant level.
Our fixed charge coverage ratio was approximately one five times at 12, $31 22 versus our covenant level of 125 times.
We were in compliance with our credit facility financial covenants at 12 $31 22.
Robyn will provide a further update on the efforts that are ongoing.
To address the impending maturity of the credit facility in May 2023 during his remarks.
We are appreciative of the syndicate of banks that are working with us.
We continue to pursue the refinancing of our credit facility into a capital structure that is both longer in tenor and.
More globally oriented investors.
Ebix continues to generate significant adjusted EBITDA, despite global economic stress, including inflation in a rising rate environment.
And lingering impacts from the COVID-19 pandemic.
In 2022, the company generated $142 8 million of EBIT.
Plus noncash stock comp.
That's an increase of $3 2 million or 2% over 2021 levels.
Reaching pre COVID-19, operating operating levels and the negatively impacted businesses is a goal we are continuing to move towards.
While we saw a rebound in activity in most of these businesses beginning late in 2021.
Q4, 2022 revenues remain depressed.
From pre COVID-19 levels.
Q4, 2022 revenues from travel foreign exchange Remittance financial technologies and E learning businesses at Ebix cash were 27% lower than.
And then Q4 2019 revenues, which is the last quarter prior to the beginning of the negative.
Impact from COVID-19 on our company.
However, just one year ago. These business lines were approximately 53% lower than Q4 2019 revenues in 2022, we made significant progress in returning to pre COVID-19 operating levels.
And our goal is to return quarterly revenues for these businesses to those pre buy team pre COVID-19 levels in late 2023 or early 2024.
While we have some important hurdles to clear in the coming months most.
Most notably changing our capital structure to address the corporate credit facility maturity.
We continue to believe that the market positions, we have obtained through years of service to our customers will over the long term lead to a strong and successful company that will provide value to all of our stakeholders.
Our employees work hard every day to deliver for our customers and I want to thank be over 10000 folks that really define ebix to the marketplaces that we serve.
Finally <unk>.
<unk> Form 10-K will be filed later today.
And I would like to now turn the call over to the president of our North American insurance businesses Ash Sawhney for his remarks on our fourth quarter and fiscal year 2022 operations.
Thank you Dan and Steve.
I will now talk about the Q4 2022 and full year 2022 analysis of the North American business.
The Q4 2022 revenue was up 6% compared to Q3 or 442 for North America.
This was enabled by a cyclical increase in our medical certification business and the <unk>.
<unk> performance of our life and annuity exchanges on.
On a full year basis for 2022 revenue for North America was relatively flat compared with 23 one.
While our worldwide insurance exchange business grew by around 2% in 2022 as compared to 2021.
In 2022, our core insurance exchanges.
Which constitute roughly 70% of our revenue.
Continued to grow to show steady growth with life annuity and property and casualty and health exchanges were up three 5% in aggregate.
With Q4 revenue in aggregate was down 3% compared with Q4 of 2021.
Largely on account of softening in the medical certification Division.
This group was up 50% sequentially in Q4, but down 11% over the same quarter in 2021.
I will now provide a more granular analysis of our various business units.
Our life and annuity exchanges, including life and annuity order entry illustration CRM and underwriting exchanges were up 4% in Q4 compared to Q3 up 7% in Q4 compared to the same quarter in 'twenty one.
5% on a full year basis, comparing 2022 2021.
The annuity exchange, which is the largest of all our exchanges.
With its strong run.
Revenues were up 8% in Q4 22 sequentially.
Up 23% compared to Q4 of 'twenty, one and on a full year basis, the revenue was up 20%.
Q4 was the highest revenue quarter on record.
Good morning, Brian two was the highest year on record.
In November 2022 was the highest month on record.
The number of carriers now exceeds 47.
Corporate transactions processed exceeded 580000.
And the total premium process for the platform now exceeds 98 billion in 2022.
These were all record numbers.
Approximately half of the annuity growth in 'twenty two came from increased business from our existing customers and the other half came from new clients onto the platform over the past 18 months, yes.
We added CMO and Ohio, Nashville to our client list in Q4.
Our life exchanges comprised of life order entry illustration and CRM were collectively up 2% in Q4 compared to Q3 and also up 2% for the year the platforms collectively processed over $40 billion in premiums.
The number of carriers in our various life platform now exceeds 100.
And the number of distributors exceeds 100000.
We ran over 30 million illustrations on the platform in 2022 and processed over one 3 million applications. These are all record numbers.
The underwriting division was flat in Q3 compared to Q I'm, sorry in Q4 compared to Q3.
On a full year basis, the business was down 5% we.
We are seeing signs of the division starting to recover from the resource constrained as discussed previously we have added several new capabilities to the platform, which will provide incremental revenue streams in the future. These.
These include our reinsurance module.
Processing for annuities and processing capabilities for Bermuda, and Singapore businesses.
Last year, we embarked on an effort to restructure and reposition the Ebix CRM Division.
Specifically, we increased our focus on the retail market segment, particularly in the <unk> segment.
<unk> positioned the platform as a one stop gateway for advisors to conduct all of their business that is managing customer data and communication submitting new business getting case status updates managing commissions and conducting other day to day functions.
Our platform is now tightly integrated with all EBIT tools, including coating illustration in order intake.
In addition, the Broadcom provides integration with over.
74, third party systems, enabling a vast ecosystem accessible through a single gateway.
We are starting to see a turnaround in this business.
<unk> sales were up 21% and 22 compared to 2021.
Revenue was up 3% and attrition rates were reduced by 50% during the same period.
Ill health benefit administration business was down 8% sequentially in Q4 of 2002, largely because Q T left the high water Mark in terms of quarterly revenue.
The business was flat in Q4 compared to the same quarter of the year before and on a full year basis was up three 5% delivering the highest yearly revenues that were recorded this business continues to generate steady revenue with over 77 large payer customers servicing over 40.
<unk> thousand employer groups and covering over 9 million lives.
We are on track to rebound to onboard.
Q2 of this year, which will provide an uptick in our subscription revenue.
Our medical certification business <unk> was up 50% sequentially.
Q4, compared to Q3 of 2022.
The cyclical Spike was expected as the division that is approximately a third of its business in Q4.
Q4, 'twenty one the revenue was down 11%.
Decline was partly due to the changing dynamics in the gift card incentives that are bundled with our subscription offers and partly due to the lifecycle decline of the audio content product.
Typically you get 60% of the revenue in the first half of a four year lifecycle.
That product happens to be in the second half of its lifecycle.
We are working on several initiatives to increase revenue, including targeting products towards younger positions and also adding new mobile enabled capabilities.
<unk> remains a strong brand in the continuing medical education space with over 50 years of history.
Two out of every 10 positions and quickly plus medical and dental specialties.
Content is created in partnership with leading medical institutions, such as Harvard Medical Cleveland Clinic, Brigham and women's Dana Farber, John Hopkins and printing other such institutions.
The consulting business was up 3% in Q4 compared to Q3 and down 2% for the full year.
As was outlined in Q3 F. 'twenty two we're now packaging, our consulting services, where our new and existing exchange customers.
Under the program card accelerated go to market.
A M.
We now offer strategy product design, Onboarding support testing and training services to what exchange customers.
Most new clients will be a raising of the service, including D&O and Ohio National who signed on in Q4.
We will be receiving several of these services in the coming quarters.
We also signed new contracts with equitable symmetrical and RW Baird in Q4.
Our P&C business the smallest of our vertical business units was down roughly 6% and 22 compared to 21 in.
In Q4, we rolled out a new release of the risk envision product one of the main product lines. In this book, we are seeing a healthy pipeline and expect <unk> to show growth over 2022.
The risk compliance business was down 8% in Q3 and starting in Q4 compared to Q3, which was a strong quarter for us on a full year basis, the business was up 3%.
This business continues to be a steady performer for us with a 28 year history, serving over 600 customers, including 70 of the largest fortune 500 companies.
Looking forward, we feel optimistic about the poppy it on.
Several factors contribute to our optimism which are outlined as follows.
The current macroeconomic environment is favorable to several of our core units such as annuities the high interest rates, all providing a strong tailwind for the industry.
This is increasing the number of annuity transactions and also bringing new entrants to the market. Both of these are favorable trends for our business.
We're seeing an uptick in transactions continuing into the early months of 2014 and see more on this when we report our Q1 earnings.
The jobs market is continuing to cool off in our industry over the past few months, we have seen a marked progress in filling our backlog and have also seen a drop off in attrition rates.
We also reorganized our delivery organization that exchange division in 2022.
Were previously organized by product line, which have limitations and redundancies.
Have now aligned ourselves with a centralized customer focused operating.
Organization, including client services product strategy and development and production support this structure will be important as we see ourselves selling and servicing comprehensive digital solutions that encompass several of our products.
We are excited about our new sales organization, we fully rebuilt our sales organization in 2022 with the majority of the sales organization, having been hired within the last 12 months.
These newly hired experts find partners and are viewed by our clients that solution.
By helping them find the right fit for their technology needs.
Setup allows us to better serve our customers and optimizes the penetration of our products within our existing client base.
We are already seeing positive results the number of customers using C or more of our products and services has improved by 20% in the past year the pipeline going into 2023 is healthy.
Ebix has always been at the forefront of product innovation in line with this legacy Ebix is launching the superhighway, it's most advanced exchange and to support life and annuities processing.
Super Highway is designed with significantly unify and enhance the advisor experience.
Selling life and annuity products.
It is a well known fact, what's selling.
Selling process across the industry is fairly disappointed right.
The adviser has been navigating through multiple sub system across the lifecycle of selling a policy.
Super Highway will solve that problem.
Customer needs analysis product research coating illustration order submission policy issuance and post issue policy maintenance, the advisor will be able to navigate through a unified and streamlined user experience.
An experience that will be aided by data artificial intelligence guided user activity machine learning and natural language processing.
Superhighway was unveiled at the recent Ebix Exposition in Orlando.
We believe the expansion of the annuity sales will also increase the need for post issue policy servicing.
This includes both financial and nonfinancial transactions, such as policy changes withdrawals.
<unk> dollar cost averaging and asset rebalancing.
Ebix has already developed a solution called annuity maintenance.
Got it and.
We believe the adoption of ample increase considerably as the market for a new piece in general continues to expand.
Overall, we are excited about the outlook for our North American business as some companies, bringing despite an uncertain economic environment.
Business in North America continued to be resilient. This stems from wide array of products that collectively provide a natural hedge in any economic climate.
Our experience is also founded unabated by where several customers, which includes hundreds of insurance companies and banks.
Thousands of advisors dozens of profit medical institutions and several of the top fortune 500 companies are pricing model, which is largely recurring in nature adds to the solidity of our business model.
We are mindful of the important part we play and running some of the largest exchanges in the industry. This is a responsibility we take very seriously.
Grateful to all the Ebix employees, who work hard to make it all happen.
I will now pass it along to Robin for his comments.
Good morning.
This has been a record year for Ebix in terms of revenue with.
With the company clocking approximately.
One point <unk> 5 billion and GAAP revenues for me a few things stand out as regards to annual performance.
Constant currency revenues.
One 1 billion.
With 11, 3% year over year growth.
On a constant currency basis, all three channels of the company showed a year over year growth.
Constant currency insurance exchange revenues increased by 2% in 'twenty two what it says 21.
On a constant currency basis, our CF revenues.
Creased by 11% as compared to 2021.
On a constant currency basis, Ebix cash revenue increased 14% year over to you.
On a constant currency basis nine of the 11 major geographies experienced year over year growth in revenues.
In 2022, the company generated $142 8 million.
EBITDA plus noncash stock compensation expense and increased.
$3 2 million or 2% or 21 levels.
Yeah.
I compared the 2022 numbers to 2020 fiscal year numbers to get a perspective on the overall business growth.
Going into 2020 to 'twenty two.
<unk> GAAP revenues have grown up have grown by 68% between 2020 and 'twenty to 'twenty, two ebix cash GAAP revenues have grown by 112%.
While comparing 2022 fiscal year numbers with 'twenty, one fiscal year numbers.
The performance of a few international operations.
In addition to U S and India was especially noteworthy.
Latin America year over year.
<unk> grew by 42%, Singapore year over year grew by 10% Indonesia.
Grew by 161%.
Philippines year over year grew by 91% middle east year over year.
<unk> grew by 30%.
As regards to quarterly Q4, 'twenty two year over year performance, a few things to note on a constant currency basis.
422 revenues increased 5% year over year and would have been $23 8 million higher in the quarter, but foreign exchange rate changes during the quarter.
On a constant currency basis.
11 major geographies worldwide had year over year revenue growth in Q4 22.
In Q4, 'twenty two insurance exchanges worldwide increased 1% on a constant currency basis risk compliance solutions constant currency revenue increased 14% year over year.
In the fourth quarter, our 20, Ebix cash constant currency revenue increased 7% year over year in the fourth quarter of 'twenty two.
Excluding the prepaid gift card revenues.
Ebix cash revenues increased year over year by 30%.
I'm also pleased with the operating cash flow performance in the quarter with the company reporting $32 $5 million of operating cash flow in the fourth quarter of 'twenty two.
We started the year.
With cash cash equivalents short term investments and restricted cash of $125 million Tony offhand.
$25 2 million.
As of December 21, and as of 30 <unk> December 'twenty, two we still had net cash of $113 4 million after accounting for the 20 to one $9 million late withdrawal by the bank.
This was after the company cumulatively spent $111 5 million in 'twenty two just on a few key areas.
Turning to <unk> 2 million of cash interest paid $23 5 million used to reduce the principal outstanding on our corporate credit facility.
<unk> 4 million for income related taxes paid global globally.
A combined $21 5 million expanded in capital expenditures and software development costs and an additional $9 3 million.
Dividend payments.
Yeah.
We had $98 7 million of cash cash equivalents short term investments at a strictly cash as of September 22, and as of 30 <unk> December 'twenty. Two we still had net cash of $113 4 million.
All of that.
Speaks to the cash generation ability of the company.
At the minute I have limited ability to speak on that debt refinancing front as we are governed by tight confidence confidentiality agreements with any and all entities involved management.
And use to work with the company's board of directors and outside financial and legal advisors to address the refinancing of our credit facility.
Which the company in cooperation with a syndicate of banks extended to May 23, 2023 in order to give the company time to continue to pursue alternative that will refinance the credit facility.
The company has multiple options.
Florida to ensure that the credit facility is largely or wholly refinance as quickly as possible.
Rest assured that we are fully aware that while our operating income continues to be strong.
Net income is getting negatively affected by the heart by the high cost of banking trust and associated legal and advisory fees associated with our refinancing and extend connect site.
We also believe that once the ebix cash IPO is scattered out successfully.
It is expected to reduce our interest cost substantially in the Meanwhile, we are working with our financial advisors.
On a number of possible options. Our goal remains to seek a structure that is in the best interest of <unk>.
I'll stakeholders.
Our business is timing and how the worldwide.
Our operating metrics are strong.
And our senior management.
About the opportunity ahead of us.
In the long term.
We are focused on resolving the non operating metrics.
Interest cost and some of the nonrecurring costs that we are presently in cutting on advisers et cetera associated with the refinancing.
Have a plan in place to grow our operating income.
And cry and client reduced extraneous costs.
<unk> priority is to handle that debt refinancing in the short term.
And then have a cost structure that ultimately is set for income maximization.
We would like to get to that ultimate plan.
In 2023 itself and are working towards it.
Success.
Isn't always about greatness, it's about consistency at Ebix, we are firm believers in this quote from Lewis.
And we will continue to strive to deliver consistent revenue growth and resolve that we can be proud off after 23 years of consistency in terms of growth and other operations operating metrics.
<unk> has proven that it is completely committed to achieving great thats on the foundations of consistency we.
We are committed.
Committed to creating a capital structure that maximizes value for our stockholders.
In closing as always.
I want to thank our customers our partners.
Partners and our employees for their continued trust in us and for contributing to an outstanding fiscal 2022.
I will now pass the call over to the operator and open it up for questions. Thank you.
Thank you.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad if.
If you press star one a second time it will remove you from the queue and we will pause for just a moment to compile the Q&A roster.
Yes.
Yeah.
We will take our first question from Jeff Van <unk> with Craig Hallum. Your line is open.
Great. Thanks for taking the question.
Robin with respect to the credit agreement.
There is a few lines and they were talking about Ebix is to provide a strategic plan on or before March 15 was that Don and with respect to communication with shareholders. What can shareholders expect to here as this process evolves.
Jeff first of all yes, meaning we absolutely will be in time with respect to the 15th deadline list showed about it.
I didn't get the second question can you please repeat that.
The first was just whether or not you provided that strategic plan on or before today and then the other one was.
In terms of shareholder communication, what is it that they can expect I mean, presumably in that communication to the Ford creditors et cetera, you evaluated options for all the way from selling parts or all of the business to various credit options too I would imagine a very wide range, but seemingly you presented that what does it look.
Like for the next three 612 months for shareholders in terms of.
What they are going to hear what they're going to know about what's going on.
Well our job is to our goal is to be as transparent as possible with that shareholder within the rules.
Having said that we have our next deadline as you know on May 23rd that we added.
That extension is still may 23rd channel are definitely going to have from us.
On the path, we undertake at that point of time I think between now and then it's extremely difficult for me to give to lay out all the possible options all the different things that we're working on simply because like I said in my talk we are governed by confidentiality provisions that it wouldn't be prudent.
Alright for me to be able to speak about it.
On the <unk>.
Yeah.
Yes, Steve Hamil, and just just to be totally clear that strategic plan was finalized a few days ago.
And will be delivered to our bank group today, whether it has been delivered as of $11 41, a M. I am not 100% sure that will be delivered through our advisors to the bank group. So yes, it will be delivered to them.
Okay, Great I appreciate that.
And then with respect to the IPO I mean understanding your hands are tied in many ways to comment on this is about a year since the filing <unk> appears to be.
Yes.
They've struggled to to move things forward at anywhere near the pace they used to be kind of across the board, but clearly ebix as an outlier I realize youre not going to give me exact timing but.
Any observations about the overall market without talking to your specific instance that would be relevant for investors watching this process and wondering why safety is not moving.
I Couldnt really comment on why <unk> been moving look it's very hard for us to comment at the same time.
We would hope and believe that we should get at some point, we're going to get that approval sooner rather than later, having said that.
Some of it as you know Indian market stock markets have gone through a lot of turmoil in the left.
A month and a half, especially.
And.
It could be that has something to do with the delay in terms of there's a lot of stuff happening in India and a lot of ipos have gotten delayed.
From an approval perspective from savvy right, because having said that.
We would we'd like to believe that we are going to get that approval sooner rather than later for our bank because as I said earlier, our fully get up all five bank of already.
To pounce on it that it has launched their marketing attempts and so on so we.
We it could happen anytime Jeff and it's impossible for me to give you tell you something.
Till we hit back until we have something for me.
Okay. Two other questions then.
Market share wise, if I break it up between Ebix cash and then the North American business.
Obviously, COVID-19 is depressed and a lot of the ebix cash businesses, but would you say you've gained held or lost share since pre COVID-19 and I'd ask the same question separately about the North American business gained lost or or held share.
Well with respect to Ebix cash I can I can absolutely tell you. We are absolutely gained in market share in almost every market segment that we operate in.
The Colbert.
Kim with all its negativity it ultimately became an opportunity for us because some of the smaller players just tied by the by the way side, meaning if you just look at I could go one by one and walk you through Forex remittance, meaning.
Youre going to see that we've actually done quite well in terms of percentage share in the market.
Whether you count the number of airports, we had we have before.
We started with as Covid started going away. If you look at the number of airports, we had for Forex and what we have now.
The number keeps increasing virtually by the by the day.
Meaning we.
Almost a few days back we actually had one of the largest airport approval one of the airports that we didn't have.
Jeff came to us in the last three four days, having said that I mean.
I could go on and Forex in terms of our corporate market share.
Airport market share report markets, yet and so on and similar provisions go on whether we talk about educational remittance market.
Market share has substantially increased.
It's a function of what is the overall market size. If you look at the overall market site and that gets depressed by Covid. Now. The question is are we gaining in market share with respect to what is the present market say than downside.
Absolute.
Yes, I could go into bus exchange area, where we have kept announcing deals and hopefully we'll announce more deals in the coming days and so on so there is there's a lot of positive momentum.
It gets reflected in the in the growth in revenues that we have shown with respect to ebix cash.
Do you want to comment on the on the U S side of the business.
Certainly.
So Jeff you're not.
Looking at North America, you would have to look at the different sub segments of the market.
So as an example, our life and annuity exchanges.
I would say over the last you know credit months would have certainly increased market share and the way. We look at that is based on the number of transactions that are going through our platforms.
We have added more.
More carriers and more distributors on the platform and the lost appropriating months than we have done probably in the last five years before that.
On the life side, specifically we've added.
We've increased the number of carriers on our platform quite significantly and ultimately that's the key driver in terms of.
Facing the market share.
Some of the other divisions like our health Division.
I would say, it's probably relatively flat.
<unk>.
But we are adding a big.
International broker to the platform, which as you know are.
A fairly significant.
Deal for Us, though we believe that that itself will also increase our.
Subscription revenue.
In certain other areas such as wellness.
Other areas such as our P&C business.
It's more or less flat to a slight decline in all these businesses now represent.
A much smaller part of our overall business, Jeff So our focus really is the core <unk>.
<unk> defined as you know our life annuities.
On the health business.
These are all businesses that are.
You know fairly solid.
Okay.
Okay sorry.
Probably I would add the Odyssey certificate business or the core business, yes, yes, yes exactly.
And the Rcs business stayed steady and we do business with like I said over 70 of the largest.
Fortune 500 companies.
So we have continued to.
Keep up pretty pretty significant.
Place for ourselves in the industry.
Well recognized brand.
<unk>.
Sure.
Probably one of the larger players in the CME business.
Market share, it's probably up or down a little bit but the key point is it's a it's a very solid business for us.
And we expect to continue to grow some of these business units.
And Robin Robin handle rash.
You might want to add a little color around the UK joint venture and how thats been a bit of a drag on revenues for the last couple of years.
Yes, I think when you basically when you look at the overall revenue so.
We.
Revenue has has it's it's it's mainly it's fallen as I've talked about in the previous call. It's our Tpa business and then a tpa business. So when you look at the cumulative revenue.
The fall in that revenue gets reflected and it offset some of the increases that we show in some of the other businesses that has kept talking about.
The PPA business one of our main reasons well have joint venture partners basically decided to get out of health business completely and David one of the largest clients for us and that just went away from one day to another in a way and that has obviously cost.
A bit of pain in terms of revenue. It is also it is it is one business.
There's not many businesses, where ebix wouldn't be saying that we lose any money and this is a business where we actually have.
Have a bit of.
Negative.
Profitability.
Right.
Losses out there, which we are trying to as we as we.
Figure that one out we are basically actively working on trying to figure that one out we're trying to figure out can we get the JV partner completely out of the top things candidly in and if we can do that it actually.
That means to make that business a lot much better.
Doug.
By the fact that we have a JV partner, who is actually out of business and is not able to contribute and then.
We have some obligations attached to that client, which actually costs us a bit of money.
So theres a bit of room, there for us to gain in terms of <unk>.
Profitability is.
How I see it but it's a fairly small business right now fairly miniscule for us right now.
Okay.
Last from me a couple of models specific questions. The as I look at the GAAP net income, it's about a $6 million Miss versus my estimate and about $5 million of that becomes comes below the operating line. So I think I can model out the interest expense going forward.
That leaves then the other big variance this quarter, the two where interest expense primarily taxes. So two specific questions. How should we think about taxes.
In 'twenty, three and specifically in Q1, but the year as well and then also G&A you touched on it I mean, obviously, it's running fat here up considerably over really any any trailing periods.
You called out rent and a few things that seem like they will persist, but I'm wondering at this $36 million.
non-GAAP run rate.
Or actual print at $36 million.
G&A in Q4, if that's the right level to assume going forward, so really two questions or taxes and G&A.
Yes.
Yes, you want to talk about <unk>.
Yes.
And I'll add to it yes go ahead.
So Jeff at the beginning of 2021.
Our borrowing rate was 4%.
Through.
Rising interest rate environment.
Increased spreads.
As we had to.
Through an amendment for Covid.
Our borrowing rate has increased pretty materially. So if you looked at the end of 2021, our borrowing rate was five 5%.
At the end of 2022, our borrowing rate was nine 6%. So in two years, we've gone from 4% to nine 6% larger.
Largely as a result of increase in <unk>.
The LIBOR rate.
And today, our borrowing rate.
Just under 12% as rates have continued to persist and we had a little bit of increase.
And our.
Borrowing spread additionally.
Additionally in 2022.
We had.
A couple of different payments to the bank group.
That were fees associated with.
Having not refinance the deal by certain measurement dates in 2022, we spent probably.
Sure.
$65 million.
Out the door to these banks.
Those were capitalized as deferred financing costs, but if you think about.
Probably $2 1 million of that.
Was amortized into expense.
During 2022 and in the fourth quarter that number was probably about $900000 of interest expense related to those onetime fees. So we've been hit by a rising rate environment.
An increase in our spreads.
And increased fees and out of pockets related to the bank group.
From a tax.
From a from a go ahead go ahead I'm sorry.
From a tax standpoint, Jeff starting point for <unk>.
Pre tax book income wasn't materially different 'twenty, one to 'twenty two but there is a couple of big things that have caused that.
The tax rate to go from 9% to 13% during 2022.
Really.
First one is just the amount of.
Warren related earnings in higher tax jurisdictions that has.
Generated and included related to guilty tax calculation and then really the second one is.
Temporary differences around.
Tax that there's a section 163, J provision, which limits your business interest expense deduction.
And I'm not going to quote absolute numbers, but it's about 30% of your.
The adjusted tax one com.
And given the increased amount of interest expense we had.
That Jeff.
Differential year over year from 2021 to 2022.
Increased our.
Tax one gone by.
Close to $8 million just that one item for those two items are the two biggest ones that contributed to the effective tax rate increasing from 9% to 13%.
So would that would that suggest then we would normalize that that rate I mean, it doesn't seem like the tax act is going to change so does that how to think about the rate going forward.
Okay.
Steve You want me to answer that so yes go ahead.
Yeah. So let me answer both I'll add to what Steve just talked about interesting I'll talk about that backfill.
Expect that tax rate to be in the single digits.
For this year there are a number of reasons for it but we can go through it but basically I would expect that to be somewhere in the 6% to 8% kind of a bracket in terms of the tax rate.
Second question of Yours was when you talked about the interest rate and how do you.
Model all of this forward look.
I think the way to look at it is that as David short term and then there is long term in the short term.
Obviously, we have cost in terms of your already Steve already talked you through the interest costs that we have clearly that is something we have to live with until the until we have paid back.
Even if we refinance now the question becomes it all depends on the capital structure that we have chosen.
Our capital structure to give you a simple example, let's say we had a we had a successful IPO or rehab, we launched our IPO now.
Our net interest costs are going to be relatively low simply because we would have raised money through equity, which doesn't have any <unk>.
Costs associated with it and whether you'll keep that money in a bank, earning interest or whether you use that to pay back.
Did you feel that in any way, meaning it ultimately results in a net reduction in terms of pretty substantial net production in terms of interest costs.
On a long term basis.
It all comes down to how soon can we get that done if we can get an IPO done.
Meaning a lot of these costs.
The reduced dramatically now having said that in the Meanwhile, we have delivered what we have and we have to make sure. We strive for every option out there to obviously pay our banks and refinance in the Meanwhile, and Thats exactly what we are doing and for that you Steve already talked you through.
The.
<unk>.
The cost of interest that are presently being incurred.
Yes fair enough got it thanks for taking the questions.
Thank you Phil.
We'll take our next question from Christopher <unk> with singular research your line is open.
Yes, hi.
I just had a question on <unk>.
The annuity exchange.
What were the main drivers as far as the increase in carriers and distributors in 2022, and what can we expect in 2023.
Please go ahead.
Yes, I can take that.
So.
<unk>.
The economic.
Climate, right now, especially with the high interest rates.
That is a big factor obviously because.
Annuities are paying.
Higher interest rates Theres more.
Annuity sales.
Happening in the industry.
So more carriers that were not previously in the annuity space are jumping in.
Another big factor for us over the last I would say appropriating months was the on boarding of J P. Morgan.
Who is one of the largest.
And new key players in the industry and when you bring somebody like that onto the platform.
All their carrier partners have to start.
Participating on the exchange so.
We're seeing higher volumes.
Across the board.
You know because of the economic climate. We are also seeing new entrants come in and like our client about half of the growth.
I actually came from more volume from existing customers and the other half.
From from these new entrants.
Okay.
Lastly, I would say.
We expect that as long as the interest rates stay where they are we're going to continue to see.
Fairly healthy growth in fact for the first two months of this year.
We have continued to see the same pattern that we saw.
In Q3 and Q4, so the volumes are way up there.
So Chris I want to add to what <unk> said.
I think we're also pivoting point what has happened is that.
Dominance.
<unk> dominance.
Has continued to grow in this field, we have continued to grow our market share.
And what that has done is when you have that when you have that kind of dominant market share at least still.
Working effect and it leads to some of the larger distributors, who may not let's say there is a distributor AVC who might be on your competitors' platform.
There is every reason for now for that large distributor to come to you for many reasons one.
You have all the distributors that you have all the networks sitting out there, which is the network they want to address.
On the second site, we have the volume since we have the volumes we can afford to do all this cutting edge development design, the latest and greatest stock products.
Rich.
A smaller player who has a smaller market share cannot afford to do simply because they don't have the.
They don't have that appetite because they don't have that revenue stream. So it's impossible for them to put those kind of costs. So the net result of that is that you get to a point in exchanges.
Yes.
People will approach you rather than you approaching them and we are seeing some of that phenomenon happening I would be very disappointed if in the next one year.
Candidly C. Some of the major some of the major clients that our competition has to.
To come to us, we would like to see that and we believe that has every reason to see that.
And I haven't even to say it.
Thank you.
Okay. Thanks for that answer.
And then the <unk>.
Paid card side of things.
What was the reasoning for the decline there.
Look we it's it's looking at the you have to see the market size and what happened was during COVID-19.
Big.
Growth in the prepaid card business, mainly because people didn't want to touch things and there was digitization dramatically increase. So this was a normal process that has been in terms of.
The size of the market first of all that's the.
It was the absolute rush to fall for prepaid cards during Covid once COVID-19 became a thing of the past that.
Russia reduced a little bit secondly, candidly it has to do with it has to do with <unk>.
The commissions associated with that business. So when we do that business part of our commissions are shared with sub agents that we have.
And now if if if we it all depends on our business model. If we are prepared to share a larger part of our commission. This business revenue can be a lot higher than what we are reporting. It is just that we're not prepared to do that we like to run profitable businesses.
And a lot of our competition in this business segment.
Willing to is willing to pass on most of their commission.
They're sub agents and agents simply because it gives some top line growth and we chose not to do that and we decided that well.
We're going to we're going to live with the business model that we have on profitability.
And within that business model, we will continue to see how well we can do and that's the reason for what you see out there in the prepaid card business.
Let me just.
Also add add some add some perspective from a CFO standpoint.
Yes.
Honestly.
Doesn't generate.
Material cash flow or income for us okay.
I don't really care, whether we do 600.
$1 billion of tail and the gift card business 400 million 800 million. All my biggest concern is the CFO and Robin.
Same degree.
Much money are we right how much EBITDA, how much net income or <unk>.
Never want.
The analyst community or investors to get caught up in the prepaid card business because of the way the way the competitive dynamics over there in India, It's just not material.
Material generator of profit.
Yeah.
So Chris what we have now also trying to do now that we have the reach and the expanse as one of the largest non banking players in the prepaid card business. We're using that I'll give you. An example up on rates and a recent example of where we are how we are deploying these prepaid card products.
One area and in a very profitable manner. One is we are trying to an agreement with divestment golf government.
And in investment call every even all the way its bus we are providing.
The bus exchange system.
Basically we are in every ticket that gets sold basically it's happening.
Smart technology using our technology. What we also did we worked with the government in there too to introduce all of these prepaid cards for consumers and with the Ebix cash prepaid card basically the consumer divestments.
Transport Department for example decided to offer a discount a slight discount on their prices and that result is now you have it.
For people, who are traveling in those buses to start using that prepaid card simply because it gets somewhat discount plus it gives them that it's still a bit of data use it on the bus and so on and so we've been able to position ourselves in.
That's my goal is just one opportunity we are presently deploying it across we are trying to basically convince all the 16 states.
<unk> business to deploy this is another. Good example is the largest state of Indiana, which is locked up where there is notable there. She is the largest state in population and metrics that some of the neighboring countries to India, whether it's <unk> or anybody out there and if you look at the.
What we are trying to do out there you'll be government distributes a lot of.
Building out a lot of money due to.
The underprivileged.
The government program every every month actually we.
We're trying to do that through working with another bank. We're trying to deploy all these cards that would be issued with the with the consumers picture on top of that card so that when the when the money any money is doled out it is done on the basis of that comparing that picture comparing the biomet.
Theyre tumbling brands and from there, having ebix cash card whereby the government can now track the money that they're doled out how long does it rarely used is it coming back into the economy are not so those are the kind of examples of.
Clients that we are now adding.
With respect to the prepaid card business. So it's a business that ultimately look we have we have a pretty substantial market share and we kind of feel now we are trying to make this into a good income opportunity also.
But we wanted to do it at that.
We're focused on income so we're not going to just going into the market.
And increased market share just by reducing commissions are passing on more commissions to agents, we wanted to maximize income while selling more cuts.
Does it make sense I just.
When I talk to you about.
Chris.
Yes, yes, it does.
I think along with the bus the bus system.
Is that.
Coming as far as the.
The Tms.
As it is.
As you bring it out into new state bus system.
We are continuing to deploy all the idms systems and all the deals that you that we've been announcing whether it be announced but rather that we announced that's been gall recently, we announced a large one of the largest deals we have done.
<unk> do you see Maharashtra State Road Transport Corporation, very and we have two phases. The first of all deploy ibms across I think 19000 buses than it is across approximately 38000 buses overall, so it's a very large state with 38000 buses flying that everybody would be able to use these smart guard and we.
You get paid on a per ticket basis, it's a very simple business model virtually every thank god, we don't really care, whether it's of course, they will be able to use up they can use prepaid cards.
Whether they are using any upi, whether they are using.
Rather than using third PMO, whether they're using literally.
Anybody who's going to make money on every ticket that's our business model and Thats. How we are deploying we are in the midst of a few very large interesting deals right now with some of the states that we don't have and hopefully I'll have something bothered.
Positive to report in coming weeks and months on that front.
Okay, great. Thanks for the answers.
Thank you Sir.
Okay.
And ladies and gentlemen that is all the time, we have for questions today and this will conclude today's conference call. We thank you for your participation and you may now disconnect.