Ebix Inc. Q1 2023 Earnings Call
Hello, ladies and gentlemen, and welcome to the Ebix first quarter 2023 investor call.
Today's conference is being recorded in 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.
I would now like to turn the conference over to Darren Joseph Corporate Vice President you may begin.
Thank you.
Welcome everyone to Ebix Incorporated's 2023 first quarter earnings conference call.
Joining me to discuss the quarter is Ebix, chairman, President and CEO Robin Raina.
President Insurance services, North America, Ash, Sawhney, and Ebix CFO and that card.
In our remarks, we will open up the call for your questions now.
Now let me quickly cover the safe Harbor some of the statements that we make today are forward looking including among others statements regarding ebix as 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.
<unk> 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 revisions to these forward looking statements in light of new information or future events.
Additional information concerning factors that could cause actual results to materially differ from those in the forward looking statements made today are contained in our SEC filings, which list a more detailed description of the risk factors that may affect our results are.
Our press release announcing the Q1 2023 results was issued this morning. The audio of this investor call is also being also being webcast live on the web at Www Dot <unk> Dot com forward Slash webcast you can look at <unk> financials beyond what has been provided in the release on our website Www Dot ebix.
Dot com the audio and the text transcript of this call will be available also on the investor homepage of the Ebix website. After four P M eastern time today.
Let me now discuss the key metrics in our Q1 2023 results.
Our worldwide revenues, excluding prepaid gift card revenues increased 17, 6% year over year in the first quarter of 2023.
Our prepaid card revenues declined by 61 million year over year in spite of that Q1 2023 worldwide constant currency revenues declined by 25 million only.
Excluding prepaid cards, the company's share of year over year growth in nine of the 11 geographies.
GAAP operating income for Q1, 2023 was $30 5 million a sequential increase of two 4% over Q4 2020 to operating income of $29 8 million.
Our GAAP operating income.
Excluding the low margin prepaid card business was a healthy 28%.
Our most negatively impacted businesses from COVID-19, with and in this cash limited experienced solid year over year growth in the first quarter of 2023.
All COVID-19 affected areas in total our travel and foreign exchange combined revenues grew by 64% year over year. During the first quarter of 2023 <unk> revenues in India grew by 22% year over year and E learning revenues grew by 104% year over year.
Overall, EBIT cash GAAP revenues, excluding the prepaid card business grew 44% year over year, we are encouraged by that trend.
Our insurance worldwide revenues on a constant currency basis declined by 1% year over year, mainly because of a record quarter for Ebix, Australia in Q1 2022.
On a GAAP basis, the insurance revenues declined 3% year over year in Q1 2023, primarily on account of the U S dollar strengthening considerably as compared to a year back.
Our risk compliance solutions Rcs revenues grew 13, 9% year over year, due mainly to 39% year over year growth in Latin America, and 22% growth in our PPO business in India.
Exchanges, including the EBIT cash in our worldwide insurance exchanges continue to be Ebix is largest channel accounting for 94% of Q1 2023 revenues.
Our first quarter revenues and operating income traditional are traditionally lower than the fourth quarter of the preceding year, primarily because of our continuing medical education business in the U S. Having a seasonal increase in the fourth quarter Q1, 2023 was no different in terms of the U S revenue drop with CME revenues decreasing.
By approximately $3 million as compared to Q4 2022, despite that headwind, we still managed to grow our overall operating income sequentially by two 4% to $35 million as compared to $29 8 million in Q4, 2022, where we are very pleased with that I will.
I'll now turn the call over to our Chief Financial Officer, Amit Guard.
Thank you Dan we continue to operate in unprecedented times with the weakening of worldwide economy, including the United States inflationary pressures up considerably worldwide. The COVID-19 impact in there to some degree the Ukraine, one and of course, the resulting high increase in interest rates worldwide and more specifically the steep increase in the interest rate.
In the United States.
Also the metallo prices in terms of monthly wages going up considerably low light and more specifically in India has not obviously.
After that the impact of the dollar strengthening against most currencies and deducting effect of that on the revenues and income are global.
Headquartered in the United States.
These are unprecedented times.
Doing all that we had quite easily at our operating results in Q1, 'twenty Z with worldwide GAAP operating income growing by 4% and Peggy.
<unk> 5 million sequentially in Q1, 2020, while growing one 2% year.
Over the year as compared to Q1.
non-GAAP operating income for Q1 2020 fee increases by Ciba Sandy.
<unk> totaled $34 8 million as compared with $33 8 million in Q1.
The operating margin was 12, 6% in Q1 <unk>, an increase of 90 90 basis points compared to $11 seven in Q4, 'twenty, you're going to do and excluding the impact of debate gift card business Q1, you're going to see operating margins would have been 28, 7% compared to 26% in Q4 contributing.
And Bill 193, EBITDA plus noncash stock compensation.
<unk> to $36 1 million, which translate to approximately 30.8.
<unk> offline worldwide revenues, excluding the prepaid cards that speaks to the strength and the fundamentals of our business worldwide.
Our company's diversity of revenues, both by geography, and solutions and services and our customer stickiness and the recruiting and depicted nature of a large list and digital revenue. We ended the foundation that allows ebix to endo seasonality or a pandemic versus like COVID-19.
Net revenues, excluding the big gift card revenues increased $17 six was in Italy in the first quarter of <unk>.
Global inflationary pressures and recessionary conditions have resulted in the strengthening of the U S. Dollar against most currencies in the past 12 months for the first quarter of <unk> the negative impact from foreign exchange movements reduced reported revenues by $18 5 million that <unk> already discussed the revenue performance in detail. So let me talk about a definition mega.
Cost of services associated with customer support consulting and implementation and training services decreased $54 4 million or 26% to $156 5 million in the first quarter of 'twenty three as compared to $10 eight begins in the first quarter.
The decrease in the Companys cost of services provided as a person digital revenue is mainly due to the revenue mix changes.
Italy and the cost.
Decreases associated with the decrease in prepaid gift card revenues declined by approximately 32% year on year in the first quarter ended 30, plus <unk> and got a lower gross margin relative to other finishing that services offered by the company Robert will talk about our ongoing and future strategy with respect to the <unk> card business during his stock.
The agenda and administration expenses increased $10 6 million or 39% and $37 5 million in the first quarter of <unk> as compared with $26 9 million in the first quarter. Thank you Victor.
The year over year increase in the <unk> due to the increased legal implications cost related to the debt refinancing and increased expenses to support Dania IPO.
Interest expenses in the first 120 <unk> increased 117.1.
$170 into $22 3 million as compared to $10 3 million in the first quarter going to digital.
The company's interest rate increased by approximate six point, Boston six 5% year on year, the increased interest rate environment, coupled with the increased amortization of deferred financing costs in the first quarter of <unk> versus the comparable prior year quarter related and the increased interest expenses year to year of over $30 million.
During Q1 'twenty, we had the following major cash uses among other cash.
$17 5 million of cash interest paid $3 5 million of income related taxes globally, $17 5 million Paypal principal payments $2 6 million was used for capital expenditures and <unk> 9 million was useful software delivery.
We funded these initiatives from existing cash plus operating cash flow generated during the year. Despite the substantial payments, adding $41 9 million just on these items during the quarter. The company had strongly liquidity on hand with cash cash equivalents short term investments ended with cash of $108 9 million.
As of March 23.
Our total debt on March 30 <unk>.
71.
<unk> was $60 $621 7 million a reduction of $22 1 million from the total debt of $643 8 million as on December 20, <unk> and a reduction of $18 eight.
$8 million from total debt of $702 5 million as of 31 March 31 over the last few years, we have continued to pay our debt down using our operating cash flows. We are committed to the aspirational goal of a zero debt company in this year. It says Robert will provide more insight into that aspirational goal of doing that in stock.
Ebix continues to improve its financial result, despite the currency headwinds in a rising interest rate environment leaching brief over 19 operating level in the negatively impacted business is a global is a goal we are continuing to move towards we continue to believe in the incredible value proposition that ebix can provide to our stakeholders over the long term.
Finally, ebix Form 10-Q will be filed later today I would like to now turn the call over to <unk> President of our North American nature of the business Ash Sawhney for his remarks on our first quarter graduated efficient. Thank you.
Over to you.
Thank you Amit and Darren.
I will now talk about the Q1 2023 results in North America.
First quarter results traditionally are adversely affected sequentially by the cyclical spike in this CME business from.
In the fourth quarter of the preceding year.
As physicians tend to get those certifications towards the end of the year.
This year was no different but the medical certification revenues declining by $3 million sequentially in Q1, 'twenty 'twenty screen as compared to Q4 of 2022.
Spite this decrease of timberland in medical certification revenues, an overall sequential revenue decrease was only $2 5 million in North America, offset by half a million growth and other north American businesses.
Excluding the medical certification business North America was up 2% sequentially in Q1, 2023 as compared to Q4 2020 to.
Excluding the medical certification business, our insurance exchange business was up 2% sequentially compared to Q4.
According to.
On a year over year basis, the North America business was essentially flat, excluding the medical certification business, while the insurance exchange business was up 2% in Q1 'twenty granite suite.
As compared to Q1 2022.
All of the core North American insurance segment grew sequentially compared to Q4 of 2020 to the life and annuities unit, which is the largest of the insurance business segments was up 2% compared to Q4 of chronic vornado and 4% compared to Q1 of last year.
The annuities business was up 16% compared to the same quarter last year.
<unk> from the prior quarters, we saw strong volumes in Q1 of 2023 number of transactions were up 33% compared to the same quarter last year and the premium process was up 42%.
At the current pace, we could easily exceed 100 billion in premium process to the platform by the end of the current year.
In March we processed over 10 billion in monthly premium the highest monthly volume ever on the platform.
We have several in flight implementations, which will start to contribute towards revenue in future quarters.
The pipeline is healthy.
That includes carriers and distributors that are beyond boarded under the accelerated go to market program.
Inclusive of several consulting services.
The life insurance business was up 3% sequentially in Q1 three.
<unk> to Q4 of <unk> to all of the underlying businesses, including CRM illustration order entry and the underwriting division showed sequential growth.
Our footprint in the life segment of the market continues to expand we are presently running more than $13 million of loss patients on the platform supporting over 40 different carriers, the highest we have ever seen.
Across all of the products, we now support over 100 carrier relationships and several housing distributor relationships.
Have exceeded 50 billion of processed premium through our various systems. We are excited about the momentum we have in the life segment.
The health exchange business, excluding the medical certification business was up 3% compared to Q4 of <unk> compared to the same quarter last year. The health business was down 6%, mainly due to the drop in health content business and the decline in our legacy benefits enrollment platform the fund.
<unk> of this enrollment platform being embellished into a more modern health E Commerce exchange called Ebix enterprise going forward, we expect the decline in legacy enrollment platform will be offset by growth in Ebix enterprise.
We are working towards getting the worlds largest broker E on live on the platform later this quarter.
We expect an uptick in subscription revenue once we achieved that milestone.
The medical certification business was down by 3 million in Q1, <unk> compared to the same quarter last year.
In Q1 of last year, we had a sizable inclusion of deferred revenue from 2021 on account of Covid related delays in shipment of certain products.
We expect Q2 to be higher in revenue compared to Q1, and the remainder of the AR will follow the cyclical increase that we see in prior years.
P&C business in aggregate was flat in Q1 of 'twenty compared to the same quarter last year and up 5% sequentially compared to Q1.
Of last year the growth is coming from the division that manages the workers comp exchange and the risk management solution. The group, while flat compared to Q1 last year was up 15% sequentially compared to the last quarter and we added four new clients during the Q4.
Q1 of corn and corn seed.
There are several initiatives that are in various stages of go to market, which we believe will contribute towards accelerated growth.
Several of these initiatives were announced and.
And showcased at the Ebix Expo in Orlando earlier in March the.
The most significant initiative on the horizon is the new Ebix life and annuity exchange card superhighway.
The Super Highway is a digital platform that seamlessly connects all.
All the Ebix solutions to provide a uniform and rich user experience to the distributors to research court illustrate and sell life and annuity products. The platform will serve as a gateway to industry data sources and partner solutions to provide a one stop solution.
Hi, Ray will be cloud based and will utilize data enabled AI tools to provide an unparalleled user experience.
Goal is to launch life products on the Super Highway before the end of the year followed by annuity products in early 2024.
We are rolling out several analytics tools as add on modules through our exchanges.
<unk> of data flows through our various exchanges that is being analyzed to provide our carriers and distributors.
<unk> insights into buyer behavior and product benchmarking.
These analytic tools are being developed in collaboration with our customers. We have already secured beta clients and we expect over the next 18 to 24 months.
Have most of our exchange clients leveraging our analytics tools.
We believe the high demand and volume increase in annuity products with steps the processing capacity of our carrier clients.
We have not witnessed such amazing growth in volume in the recent past.
<unk> will need to automate their back office operations to process. This high volume.
Ebix announced and annuities case management solution designed for carriers.
Solution automates, all the internal processing functions, including suitability compliance management and processing of 10 75 exchange policies the.
The case management platform is being implemented and will be in production in the coming months at which time, we will make it available to the industry at large.
As an add on to the order entry and case management solutions.
Richard address the front end selling process. We are also rolling out a post issue administrative platform for annuities card.
And automates all post issue changes to the policy, including both financial.
And non financial transactions.
Our solution is now in production and we expect this to be a major area of focus for carriers and distributors over the next few years.
We are enhancing our new business and underwriting platform with a more modern architecture that is API and micro services driven driven this.
This will allow the platform to coexist in a heterogeneous environment, enabling us to effectively modernize our platform.
The new low cord architecture will enable us to address the mid tier market.
And a much more cost effective manner, thereby expanding the universe of firms that we can target with a competitive and differentiated solution.
All of these initiatives will provide incremental revenue streams. We expect these will enable us to enhance our growth trajectory towards high single digits in aggregate and in the low teens for the life and annuity division.
This growth can be further augmented with inorganic growth through strategic.
Acquisitions.
Want to thank the teams at Ebix that support some of the largest industry exchanges and life annuity health and P&C market.
I will now turn this over to Robin for his comments.
Good morning, everyone.
I believe that Darren Amit and ash have covered the quarter analysis isn't quite a bit of detail Doug I will restrict my talk to some numerical highlights.
That appeal to me the IPO and of course the debt.
For me the following stood out in the first quarter of 2023, one worldwide revenues, excluding prepaid cards grew 17, 6% year over year to.
EBIT cash revenues, excluding prepaid cards.
32% year over year.
Our CNS revenues grew.
One 9% year over year.
Sure.
Revenues excluding <unk>.
Good God worldwide Google.
In nine of the 11 geographies.
Five insurance exchange revenue, excluding the seasonal <unk> business.
<unk> percent sequentially six GAAP operating income.
$35 million.
A sequential increase of two 4% over Q4 'twenty to operating income of 29 8 million.
It was one.
One 2% year over year.
Please.
Our GAAP operating income excluding the low margin prepaid cards business was a healthy 28%.
Which is quite close to the Companys operating income.
30% or above.
EBITDA plus noncash stock compensation.
$2, $36 1 million, which translates to approximately 98% of our worldwide revenues, excluding prepaid card.
Okay.
I am pleased with the Q1 2023 operating results.
And believe that we are on the way.
David.
How do you pull some GAAP operating income.
Yeah.
Our EBIT Scotch business continues to perform well as exemplified by the 32% year over year growth in Q1, 2023 revenues, excluding prepaid cards.
We are pleased with that.
In recent times, we have received.
Number of undertakings that could help us add substantial new revenue lines to EBIT cash for example.
Please find a cash management undertaking to collect double bills from consumers and another in another state of India.
The monthly payment to be collected.
Good good so $12 million power bills a month.
Yes.
Three circles in the state.
We will be handling this cash management project.
Using some of our digital payment solution products.
Utilizing the last mile distribution network that we already have we got.
On a per transaction on a.
Total basis.
On our insurance exchanges.
Project will go live over the next few quarters.
We are presently.
I think I'd be EMS system for how we're going to go back to.
In the state of Maharashtra.
Brought in approximately.
1 billion tickets are sold to consumers every year.
In the state.
Yeah.
The branding rights on the back of each of these 1 billion tickets.
Providing us an avenue to market that.
To any other company for branding services also promoting the Ebix cash brand at our discretion.
Again, we are getting paid on a per transaction basis like an insurance exchanges. This project will go live over the next one quarter.
We believe that we have a great asset in terms of cash and that we're looking forward to taking it public.
Uh huh.
<unk> recently received approval from Securities and Exchange Board of India.
Our investment bank guys are focused now on launching the IPO over the next few months.
Do you think the possible listing in third quarter of 2023.
And regarding disclosures are tight I cant talk much about the IPO listing except to tell you that.
That work is ongoing with a plan to possibly lift in the third quarter of 2023.
Yeah.
We are fully aware of.
That nonoperating costs like the cost of debt and advisory costs associated with it.
We need to hamper our overall financial results.
That if we were debt free company, our operating results will translate into strong net income and is that does.
Does that currently our shareholders would possibly discover substantially better.
From that investment.
Although Mike dual decade Johnny.
What are my two decade plus journey.
Ebix, we have a debt free company.
And we did that while repurchasing.
8% of our diluted share count back from the public markets.
Let me tell you.
That ebix is today again fully committed to the aspirational idea of a debt free company in 'twenty to 'twenty three itself.
We have various ultimately it ways.
To possibly get.
Including the Ebix cash IPO, a product asset carve out.
<unk>.
We.
We haven't moved forward on.
All these alternate paths with the stated goal of not having that debt overhand overhang beyond 2023.
We will report back to you on this topic.
Once we have something to report.
Let me assure you that as a guardian of your investment.
I'm committed to ensuring that ebix shareholders are not taken for granted in any manner, you ought to entrust Paramount to me and the independent Board.
Even beyond my own personal Inc.
Oh, I see everyone, winning if the shareholders meeting.
Over the last one, especially.
Yeah.
I have been quoted with opportunities that candidly could be exciting for me. However, I have a simple rule that I'd like to follow and it says that if EBIT shareholder is not winning strongly.
Winning done it can be an idea, let's put a ceiling.
Along with the independent Ebix Board is committed to maximizing value for each one of you.
See the IPO.
And the strategic asset carve out any sure Dave as possible ways to get through that pre position and in the process.
Joining substantially increased value for our shareholders. That's the chart.
Nothing will be done without seeking your express approval in closely pursue a callout for a value that fully paid off the debt. We believe that we can succeed on either front and thats the tools.
As expeditious and.
Interest of all of you.
We are clearly committed to exploration.
100% of our debt expeditiously.
You'll see it itself.
Lastly, let me add a cohort.
From anthem, St Maarten and I call it.
There may come a time when you believe you have reached the end of the road in the dark at night.
That will be the moment when it does.
Modeling new day dawns on your horizon.
Encore.
Hello.
I have been through a lot with ebix.
And have been through many panels, and then that dazzling new dawn.
I have seen the stock moved from 31 cents.
Got it.
Two nine.
And then $285.
I have been through and trust over the years, including a period where shareholders was.
27600%.
As I saw some low apps.
However, what has remained consistent throughout these grafts and crops.
Have been our operating results.
And my faith in the fact that fundamentals all will ultimately prevail.
I have also known that the light at the end of this.
And every other download.
Seems to be the guiding light.
The next Donald.
But rest assured.
That we will do everything possible to protect protect your interests and maximize value for each one of you I believe that the best is ahead of us with that I will open the call.
For you to ask questions.
Thank you.
Yeah.
At this time I would like to remind everyone. If you would like to ask a question. Please press star one on your telephone keypad.
We will pause for a moment to compile the Q&A roster.
Your first question comes from the line of Jeff Van <unk> with Craig Hallum.
Great. Thanks, Thanks for taking my questions Robin you you touched on the Ebix cash business and the aspiration to return to the pre COVID-19 levels as soon as possible can you just flesh that out a little deeper if you look at that business broken down travel FX, remittance and sort of general tack or underlying tax.
If you look at each of those groups like how do you think about the path to pre Covid, where are we now just I was trying to get a little better sense of the sub segment expectations around growth for Ebix cash.
Well somebody dumps, Jeff we are primarily around that 65% of pre COVID-19 levels. So we still have.
35% to cover and then we believe that there should be further growth in the market and that's where the market is headed right now.
For example, if you take areas like travel travel should be booming now in coming months, especially this is a season of time over the next few months for the travel business, especially in the events business. The events business is continuing to increase and we also believe that bits and Forex one of the things that has changed both school.
But for US is that we have emerged as the not just the single largest player, which we are already well, but we have emerged as the undisputed leader in the market and in the process.
We kind of I have started pioneering new new things in Forex and that by itself has opened up a lot of different opportunities for us in the technology area. There is still room for improvement for us in terms of look we've we've dealt with a lot over the over the last 12 months in terms of resource Crunch, we are getting around that.
I think there's a lot of stabilization that has started happening in the Indian market with respect to resource availability.
There was a complete.
I would say volatility for almost the last 12 months in terms of resource available at the wages going up by 70% to 100%, which is absolutely unsustainable clearly but.
A lot has changed I think things.
The economic slowdown across the world actually kind of has helped the resource caused at least so we do expect that those things to normalize or go over it affected some of the newer deals that were happening in the technology area. So now again, though.
Pipeline is filling up and <expletive> and fill the pipeline should keep coming through and that's how it really works in the technology field. So there is there's quite a bit of room for improvement in some of these sectors.
Is it safe to say you would think travel would be the first of those four to get back to pre Covid and tech would be the last is that is that what I'm hearing in those comments.
I think travel and Forex will be the what would be in tandem.
It should continue to go up and get to pre COVID-19 levels.
Chart technology will take a little bit more time and somebody has to be already past that level, which is for example, when you look at areas like bus exchange technology, meaning those areas actually pushed forward the bus market opened up pretty sizable evening.
And so.
So that part has already opened up new attendance started coming out in every new large tender that have come out, meaning we stand up pretty good chance of winning it that's how simple. It is because we are the only game in town with respect to large implementations with respect to bus roadways Corporation. So so I think that part of our business is continuing to grow weird I also see.
A big opportunity in coming days is our Bse ebix venture and turns up insurance look we have grown our employee count very sizable lead in that business area.
We are you know we started with that.
But please in five and 10 people and right now we added somewhere around I believe 60 people within that business say it yeah. So we think that's going to be a pretty hot area as we go.
As we move forward with respect to deploying some of our direct to consumer exchanges as also selling insurance.
Through the Bse Ebix platform through the agent the technologies like the integrations are alive, we have a very senior gentleman Sutton who came in from <unk>.
The managing director today running the Bse Ebix venture I. My overall goal ultimately is to carve out beef bse ebix into.
You know at some point it can stand on its own feet at all.
We have a lot of different plants will bse ebix.
I feel very bullish about that venture.
Great that's helpful and then.
I understand that you have some limitations obviously is with respect to what you can say about the risk cash IPO. It's clearly a focus here can.
Can you talk through the process I mean, I understand you can't predict certain things, maybe timelines and valuations and whatnot, but I think a lot of people, particularly in U S or I'm familiar with what that process looks like I'm sure. What you can about what the what we should think of here.
Look I don't want to go into the specifics of the process, meaning I will talk at a high level with respect for the process.
High level look there is a there is a process on marketing.
There is a process of filing.
To be honest, sometimes UDR H b.
Those are witches and subsequent to that there is a when you get into a listing process with a three to five day lifting a timeline.
We are aggressively moving forward in that direction.
It's also need and audit to be finished as of 31st March we added the fag end of that in terms of getting that done fully so all of that we have we are moving forward in virtually every direction. The markets have also improved considerably in India in the last 30 days.
A little bit of momentum in the markets you know, even if you ignore ebix cash for the time being and just look at the overall market, there's a little bit of momentum so the so I.
I believe the bank goes we'll want to hurry up F as quickly as they can.
In terms of launching the issue so I cant speak more than that and look at everything that happens you will it'll be public and people will be able to say it publicly yet.
That's helpful.
Shifting now.
Got it.
One last one for me Robin. The you know you talked about wanting to be debt free by the end of 'twenty three as an aspirational goal and just to be clear because you you put in some interesting detail here about potential carve outs.
One way to pay down some of that debt is the IPO or is the decision to do carve outs dependant on the IPO completing or completing at a particular price or is the decision to move with carve outs completely independent of what's going on with the IPO.
They're looking for a little bit more complex decision than that and I'm not at Liberty to right now talk through all of that at this minute, but I will tell you that we would be approaching both of these things possibly in parallel.
And then we will decide the independent board will decide.
What they want to do with the goal is rather simple we want to pay our lenders back expeditiously and we want to be that right. That's how it is and if that means it's a combination of both then we will do it if it's if just one of them will solve that issue. Then we will do that so that's a decision the independent board and will make an icon.
Weak for them, but I will tell you that we had opened two we are right now looking at every option to ensure that we are pretty clear on this that'd be want to be debt free.
As soon as possible.
Yeah sounds great. Good thanks for taking my questions.
You're absolutely welcome Seth.
Your next question comes from Chris Sakai with singular research.
Yes.
Hi, good morning Robin.
The main drivers of the gross margin increase year over year.
You want to take that Amit.
He is a real growth driver is the only volumes that are flowing through our business is now both globally and thats, helping us do and our ability to sustain our thoughts as we look at the cost minus the debt refinancing cost and interest cost. The company has been pretty flat on a cost block and has been very focused in.
Driving revenue so that's one of the fundamental.
Okay and then.
Going into the prepaid gift card revenue what are the goals and initiatives to help increase this revenue.
Candidly, we you know I have come to a stage, where I don't feel that I'm getting enough enough.
I'm getting enough brownie points.
To grow this prepaid card business at the end of the day, it's a low margin business for the company.
The rules are changing with respect to the principal agent relationship in coming days.
And they.
<unk> added some new circles that have come in place from Royal Bank of India, Mr convert that to an agent and actually convert into an age and a lot of this revenue will anyway that gets recognized on a net basis. The co branded card if the unit didn't God, which means a card where we saw where the bank then that revenue would be recognized.
On a gross basis.
Having said that we like no still see this as a huge a way of cross selling and we will continue to sell prepaid cards in niche areas at the same thing we are not really looking we're not really seeing this as a way to increase our top line what has what we have right.
Now what.
What we liked now extremely focused on is our operating margins and we believe I wanted to get back to the point, where I used to say, what a decade that I am at 30% or higher in operating margin I want to hit back at 30% operating margin level, which means that even if we continue we will continue to do a lot of grief.
Thank God business. So it's not like we're giving up on that business.
We would only but a lot of that a lot of that revenue might be incoming it'd be expressed on a net basis and if we do that you will that that revenue would be really will look very small in terms of if we started as we start picking it up on a net basis it will not have any.
As you know.
Medical income impact, but on a modest insight because if you're if you're recognizing it on a net basis you're.
Operating margin as a percentage will go up favorably and so that's that's candidly where we are headed with respect to that revenue and all of the lost one even especially one thing that I have learned that we can continue to do that business and we're extremely happy with that business at the same time we are.
Not really winning many brownie points with respect to that so what we're gonna do and we'll continue to do in that business as aggressively as we can at the same time.
But the news cycles that have happened and we would probably be recognizing some of that revenue on the cobranded cards on a net basis, which will mean, the materiality of that revenue will drop with respect to our investor base and so I think that's where we are meeting. So we will continue to use that for example.
You talked about the cash management project I will tell you prepaid card will be a very big part of that solution.
When I talk about these Boston all the way like best friend gone all the way there. We just won a deal where we will be deploying prepaid cards cobranded prepaid card with a best friend Al Roadways Corporation, that's an amazing opportunity, where we make money on a but that's actually a very high margin opportunity for us that particular, one so we're going to focus on some of these high.
Margin opportunities.
Besides that continue.
Continue to do that but it looks like material materiality wise. It may not look like a lot of revenue once we once we if we move though the revenue due on net basis.
April .
Those are the new surplus that have come through.
With respect to.
What it says.
Oh principal relationships.
Okay. Thanks, Thanks for the answers.
Thank you.
Yeah.
And ladies and gentlemen that is all the time, we have for questions. Today. This concludes today's conference call. We thank you for your participation you may now disconnect.
Yeah.
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