Ebix(EBIX) - 2020 Q2 - Quarterly Report

Revenue Performance - Total operating revenues decreased by $33.0 million, or 23%, to $111.3 million for the three months ended June 30, 2020, compared to $144.3 million for the same period in 2019[199]. - International revenue accounted for 62.5% of total revenue for the three months ended June 30, 2020, down from 68.8% in the same period of 2019[201]. - Revenue from EbixCash Exchanges was $53.2 million for the three months ended June 30, 2020, compared to $78.9 million in the same period of 2019, representing a decrease of 32.8%[198]. - Revenue from Insurance Exchanges was $42.9 million for the three months ended June 30, 2020, down from $46.6 million in the same period of 2019, a decline of 7.0%[198]. - Revenue from Risk Compliance Solutions was $15.1 million for the three months ended June 30, 2020, compared to $18.7 million in the same period of 2019, a decrease of 19.0%[198]. - Subscription revenue as a percentage of total revenue increased to 39% for the three months ended June 30, 2020, up from 32% in the same period of 2019[198]. - Transaction-based revenue accounted for 44% of total revenue for the three months ended June 30, 2020, down from 53% in the same period of 2019[198]. - The adverse impact from foreign currency fluctuations reduced reported revenues by $6.1 million for the three months ended June 30, 2020[201]. Impact of COVID-19 - The company experienced a decrease in demand for services related to travel, foreign exchange, remittance, and consulting due to COVID-19[192]. - The Company is continually monitoring the impact of COVID-19 on its operations and internal controls[302]. Financial Position and Cash Flow - The company has implemented measures to strengthen its financial position, including amending its credit facility and reducing non-essential expenditures[194]. - Cash and cash equivalents were $77.3 million at June 30, 2020, compared to $73.2 million at December 31, 2019[231]. - The company anticipates that cash flows from operating activities will be sufficient to meet projected cash requirements for the foreseeable future[229]. - As of June 30, 2020, the total cash, cash equivalents, short-term investments, and restricted cash held by the company amounted to $126.1 million, with India holding $66.3 million and the United States holding $24.5 million[233]. - The current ratio increased to 1.66 at June 30, 2020, up from 1.55 at December 31, 2019, while working capital slightly increased to $129.9 million from $129.0 million[234]. - Net cash provided by operating activities was $58.4 million for the six months ended June 30, 2020, with net income contributing $48.2 million[244]. - Net cash used for investing activities during the six months ended June 30, 2020, was $36.5 million, primarily for acquisition-related payments and increases in marketable securities[246]. - Net cash used by financing activities was $33.9 million for the six months ended June 30, 2020, mainly due to a $19.8 million reduction in working capital facilities in India[249]. Expenses and Cost Management - Total operating revenues decreased by $38.0 million, or 13%, to $249.2 million for the six months ended June 30, 2020, compared to $287.2 million in the same period in 2019[214]. - Cost of services increased by $9.7 million, or 10%, to $106.6 million during the six months ended June 30, 2020, with cost of services as a percentage of total revenues rising to 42.8% from 33.7% year-over-year[218]. - Product development expenses decreased by $4.9 million, or 22%, to $17.8 million during the six months ended June 30, 2020, primarily due to reduced employee-related costs in India[219]. - Sales and marketing expenses decreased by $3.4 million, or 32%, to $7.3 million during the six months ended June 30, 2020, due to reduced business promotion and personnel expenses[220]. - General and administrative expenses decreased by $9.6 million, or 18%, to $44.7 million during the six months ended June 30, 2020, primarily due to reductions in personnel costs and rent expenses[221]. - Interest expense decreased by $5.2 million, or 24%, to $16.4 million during the six months ended June 30, 2020, primarily due to lower LIBOR interest rates[225]. Debt and Liabilities - As of June 30, 2020, the outstanding balance on the revolving line of credit was $439.4 million, with an interest rate of 3.50%[254]. - The company reported total contingent liabilities of $6.1 million as of June 30, 2020, down from $10.1 million as of December 31, 2019[242]. - The company has determined that the fair value of the contingent earn-out consideration for certain acquisitions is zero as of June 30, 2020[241]. - As of June 30, 2020, the Company had $708.9 million in outstanding debt obligations, including a $266.8 million term loan and a $439.4 million balance on its commercial banking revolving line of credit[297]. Revenue Recognition - EbixCash revenues are primarily derived from financial transaction services, with a significant majority recognized at a point in time[265]. - EbixCash Travel revenue includes commissions and transaction fees from travel providers, recognized at a point in time, with various revenue streams such as hotel rooms and airline tickets[269]. - For EbixCash Money Transfer, revenue is recognized upon completion of the service, which includes several steps such as customer acknowledgment and processing of the transfer[271]. - The Company recognizes revenue from foreign exchange and payment services when performance obligations are fulfilled, typically at the time of transaction completion[272]. - EbixCash's Insurance Exchanges revenues are derived from SaaS platforms, with revenue recognized over the contract duration, considering the significance of upfront fees[278]. - Revenue from professional services is recognized based on the time and materials or fixed fee basis, depending on the nature of the service provided[285]. - The Company’s contracts generally do not contain return or refund provisions, but may include variable consideration accounted for as overage fees or service level penalties[279]. Foreign Currency Impact - The Company reported unrealized foreign currency translation losses of $(54.1) million for the six months ended June 30, 2020, compared to gains of $7.9 million in the same period of 2019[296]. - An adverse change of 20% in foreign currency exchange rates could have reduced pre-tax income by approximately $6.1 million and $11.0 million for the six months ended June 30, 2020, and 2019, respectively[296]. - The Company’s functional currency for foreign subsidiaries in Dubai and Singapore is the U.S. Dollar, while other subsidiaries use their local currencies[292]. - The net change in the cumulative foreign currency translation account showed unrealized losses of $(54.1) million for the six months ended June 30, 2020, compared to gains of $7.9 million for the same period in 2019[296]. - An adverse change in foreign currency exchange rates of 20% could have resulted in a reduction to pre-tax income of approximately $6.1 million for the six months ended June 30, 2020[296]. Internal Controls and Legal Proceedings - The Company has not experienced any material changes to its internal controls over financial reporting despite remote work due to the COVID-19 pandemic[302]. - The Company is involved in various legal proceedings, but management believes these will not have a material adverse effect on its financial position or results[307]. - The Company has maintained effective disclosure controls and procedures as of June 30, 2020, with no changes that materially affected internal control over financial reporting[302].