Ebix, Inc.

Good day and thank you for standing by. Welcome to IBEX Incorporation 3rd Quarter 2021 Investor Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Darren Joseph. Please go ahead.

Thank you. Welcome, everyone, to EBICS Incorporated's 2021 Third Quarter Earnings Conference Call. Joining me to discuss the quarter is EBICS Chairman, President, and CEO, Robin Reyna, EBICS Global CFO, Steve Hamill, and EBICS North American Vice President, Ash Sani. Following our remarks, we will open up the call for your questions. Now let me quickly cover the safe harbor. Some of the statements that we make today are forward-looking, including, among other statements, regarding EBICS's future investments, our long-term growth and innovation, the expected performance of our businesses, and our use of cash. These statements involve a number of risks and uncertainties that might cause actual results to differ materially from those projected in the forward-looking statement. Please note that these forward-looking statements reflect our opinions only as of the date of this presentation. and we undertake no obligation to revise or publicly release the results of any revisions of these forward-looking statements in light of new information or future events. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements made today is contained in our SEC filings, which list a more detailed description of the risk factors that may affect our results. Our press release announcing the Q3 2021 results was issued this morning. The audio of this investor call is also being webcast live on the web at www.evix.com forward slash webcast. You can look at Evix's financials beyond what has been provided in the release on our website, www.evix.com. The audio and the text transcript of this call will be available also on the investor homepage of the Evix website after 4 p.m. Eastern time today. Let me now present the key metrics in our Q3 2021 release. Q2 diluted EPS gap was $0.50, and non-gap diluted EPS was $0.72. Gap revenues of $191.7 million, gap operating income of $28.1 million, and non-gap operating income of $35.3 million. We had a number of headwinds to deal with in Q3 2021. Continued effects of COVID-19 on many of our businesses, including our U.S. product consulting businesses. While business has not yet fully recovered from COVID-19 effects, yet we have restored the salaries of our employees in India besides increasing software developer salaries substantially as compared to the salary cuts we had put in place last year during COVID-19. Just this step results in a year-over-year increase of approximately $3 million in personnel-related costs. Our bank interest costs were higher by $3.7 million in Q3 2021 as compared to Q3 2020, and higher by $600,000 sequentially for reasons beyond our control, though we have lowered our overall debt by $50.1 million year over year. We had substantially elevated costs associated with banks, legal, and outside accounting firms in the quarters. we had to meet a government guideline in India in terms of certain CSR social work spend in the quarter worth approximately 1.3 million. In spite of all of that, we were reporting 18.2 million in operating cash flow in Q3 2021 as compared to 13.1 million in Q2 2021 and 28.1 million in operating income as compared to 27.3 million in Q2 2021. On the revenue front, Our Q3 2021 revenues increased 24 percent to $191.7 million as compared to $154.3 million in Q3 2020. Our prepaid card revenues grew by 53 percent in Q3 2021 as compared to Q3 2020, while declining 38 percent sequentially as compared to Q2 2021. We expect this drop to be transitory and expect to grow these revenues back again in Q4, which traditionally sees an upsurge in the fourth quarter. Out of 10 major geographies worldwide, revenues grew year-over-year in seven regions while declining in three. Despite the impact of COVID-19, especially on our consulting revenue line, insurance revenues worldwide were essentially flat year-over-year. Our worldwide revenues, including prepaid cards, grew 5% sequentially, and 4% year-over-year in Q3 2021. U.S. revenues grew 1.5% sequentially, while EBIT's cash revenues, excluding the prepaid card business, grew 12% sequentially. Our RCS revenues grew 8% sequentially and 3% year-over-year in Q3 2021. The EBIT cash financial exchange revenues increased 40% by $38.2 million from $96.8 million in Q3 2020 to 135.3 million in Q3 2021. With close to 1 billion people receiving their first vaccination already in India, we are starting to see signs of recovery in businesses affected severely by COVID-19. Our travel and forex businesses have started to recover ground, growing 63% and 51% respectively on a sequential basis in Q3 2021 as compared to Q2 2021. We expect this trend to continue as the effects of COVID-19 continue to reduce. Let me add that exchanges, including EBICS Cash and our worldwide insurance exchanges, continue to be EBICS' largest channel, accounting for 93% of Q3 2021 revenue. I will now turn the call over to Steve.

Thanks, Darren. EBICS is seeing early signs of a rebound in our most negatively affected businesses from the COVID-19 global pandemic, especially in our travel and foreign exchange operations. Our remittance e-learning and financial technologies businesses continue to operate at depressed levels versus pre-COVID operating conditions, but we are hopeful that these businesses will start to show the kind of rebound we are in the early stages of within our travel and Forex businesses. Additionally, we continue to see solid performance from our non-U.S. and non-Indian geographies with growth in year-to-date revenues in all but one of our international geographies and double-digit growth rates in the U.K., Australia, and New Zealand. The U.S. and Brazil continue to be negatively impacted in professional services and consulting revenues due to a combination of less customer activity during the pandemic and development staffing challenges that we have faced in the past few quarters. The company continues to train recently hired development staffers and recover from a combination of reduced staff levels at the onset of the pandemic and unexpected turnover within our development staff in the past few quarters. While we acknowledge the road to pre-COVID normality will take some time, our company is armed with very solid and predictable insurance exchange and RCS businesses globally that generate substantial cash flow, as well as a collection of solutions and services in our EBICS cash operations in India, that will provide us with both substantial short-term growth opportunity as COVID-19 wanes and opportunities to grow long-term given India's economic growth projections, the continued development of the middle class, and an Indian government that is supportive of measures to digitize the economy over time. Let me pivot to discuss some financial metrics for the third quarter. Our gross margin in Q3 2021 was 37%. an increase sequentially from 28% in the second quarter of 2021, but a decline from 44% in Q3 2020. Our gross margins continue to be diluted by our low margin prepaid gift card revenues in India. GAAP operating income for Q3 2021 of $28.1 million increased 3.2% sequentially from 27.3 million in Q2 2021, while declining 11.8% year-over-year from $31.9 million in Q3 2020. In addition to continuing effects of COVID-19 on our travel, Forex, remittance, financial technologies, e-learning, and consulting revenues, ZBICS had year-over-year product development personnel costs increased by over $1 million, and G&A personnel costs increased over $3 million in Q3 2021 versus Q3 2020. as the company reinstated 2020 salary reductions made at the onset of COVID-19 during the fiscal year 2021. Additionally, we continue to have higher than normal legal expenses in 2021 as a result of actions taken earlier this year. Non-GAAP operating income for Q3 21 was $35.3 million. The company's operating margin was 14.7% in Q3 21, an increase sequentially from 11.1% in Q2 2021. Excluding the payment solutions business in India, we generated 30.9% operating margins in the third quarter of 2021, a figure in line with our goal of greater than 30% operating margins for our suite of solutions and services outside of the low margin gift card business. During Q3 2021, we had major cash uses of approximately $26.8 million. including $5.6 million used to reduce the principal on our corporate term loan, $9.7 million for cash interest related to our corporate credit facility, $2.4 million for income-related taxes paid globally, $1.7 million to reduce our working capital facilities in India, $2.3 million for dividends, and a combined $5.1 million expended on CapEx and software development costs. We funded these initiatives from existing cash plus operating cash flows generated during the third quarter of 2021. We've extended the quarter with a solid liquidity position with cash, cash equivalents, short-term investments, and restricted cash of $109.8 million versus $120.4 million at 9-30-2020. Our balance sheet remains healthy with current ratio of 1.97 times at September 30th through 2021. and working capital of approximately $176 million. In closing, while the overall results in Q3 2021 are not what we strive for long term, EVIX continues to manage its businesses in the face of the global pandemic. And we are encouraged by the early signs of a rebound in some of our more negatively impacted operations. And we will continue to improve our staffing model globally to address the demand from our customers regarding professional services and consulting needs. Finally, EVIX Form 10Q will be filed later today. I would like to now turn the call over to the president of our North American insurance businesses, Ash Sawney, for his remarks on our third quarter operations.