UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-15946

EBIX, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation)		77-0021975 (I.R.S. Employer Identification Number)
5 Concourse Parkway, Suite 3200 Atlanta, Georgia (Address of principal executive offices)		30328 (Zip Code)

Registrant’s telephone number, including area code: (678) 281-2020

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:

Title of each class

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes o No þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of March 11, 2010, the number of shares of Common Stock outstanding was 34,949,450. As of June 30, 2009 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of Common Stock held by non-affiliates, based upon the last sale price of the shares as reported on the NASDAQ Global Capital Market on such date, was approximately $172,823,447 (for this purpose, the Company has assumed that directors, executive officers and holders of more than 10% of the Company’s common stock are affiliates).

 

 

EBIX, INC.

INDEX TO ANNUAL REPORT ON FORM 10-K

		Page
		Reference
PART I
Item 1. Business			4
Item 1A. Risk Factors			10
Item 1B. Unresolved Staff Comments			17
Item 2. Properties			17
Item 3. Legal Proceedings			17
PART II
Item 4. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			18
Item 5. Selected Financial Data			21
Item 6. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 6A. Quantitative and Qualitative Disclosures About Market Risk			35
Item 7. Financial Statements and Supplementary Data			36
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			65
Item 8A. Controls and Procedures			66
Item 8B. Other Information			68
PART III
Item 9. Directors, Executive Officers and Corporate Governance			69
Item 10. Executive Compensation			71
Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			82
Item 12. Certain Relationships and Related Transactions, and Director Independence			84
Item 13. Principal Accountant Fees and Services			85
PART IV
Item 14. Exhibits and Financial Statement Schedules			86
Signatures			87
Exhibit 3.1
Exhibit 21.1
Exhibit 23.1
Exhibit 23.2
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

SAFE HARBOR REGARDING FORWARD-LOOKING STATEMENTS

As used herein, the terms “Ebix,” “the Company,” “we,” “our” and “us” refer to Ebix, Inc., a Delaware corporation, and its consolidated subsidiaries as a combined entity, except where it is clear that the terms mean only Ebix, Inc.

This Form 10-K and certain information incorporated herein by reference contains forward-looking statements and information within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. This information includes assumptions made by, and information currently available to management, including statements regarding future economic performance and financial condition, liquidity and capital resources, acceptance of the Company’s products by the market, and management’s plans and objectives. In addition, certain statements included in this and our future filings with the Securities and Exchange Commission (“SEC”), in press releases, and in oral and written statements made by us or with our approval, which are not statements of historical fact, are forward-looking statements. Words such as “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “seeks,” “plan,” “project,” “continue,” “predict,” “will,” “should,” and other words or expressions of similar meaning are intended by the Company to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are found at various places throughout this report and in the documents incorporated herein by reference. These statements are based on our current expectations about future events or results and information that is currently available to us, involve assumptions, risks, and uncertainties, and speak only as of the date on which such statements are made.

Our actual results may differ materially from those expressed or implied in these forward-looking statements. Factors that may cause such a difference, include, but are not limited to those discussed in Part I, Item IA, “Risk Factors”, below, as well as: the willingness of independent insurance agencies to outsource their computer and other processing needs to third parties; pricing and other competitive pressures and the company’s ability to gain or maintain share of sales as a result of actions by competitors and others; changes in estimates in critical accounting judgments; changes in or failure to comply with laws and regulations, including accounting standards, taxation requirements (including tax rate changes, new tax laws and revised tax interpretations) in domestic or foreign jurisdictions; exchange rate fluctuations and other risks associated with investments and operations in foreign countries (particularly in Australia and India wherein we have significant operations); equity markets, including market disruptions and significant interest rate fluctuations, which may impede our access to, or increase the cost of, external financing; and international conflict, including terrorist acts.

Except as expressly required by the federal securities laws, the Company undertakes no obligation to update any such factors, or to publicly announce the results of, or changes to any of the forward-looking statements contained herein to reflect future events, developments, changed circumstances, or for any other reason.

Readers should carefully review the disclosures and the risk factors described in this and other documents we file from time to time with the SEC, including future reports on Forms 10-Q and 8-K, and any amendments thereto.

You may obtain our SEC filings at our website, www.ebix.com under the “Investor Information” section, or over the Internet at the SEC’s web site, www.sec.gov.

PART I

Item 1:		BUSINESS

Company Overview

Ebix, Inc. (“Ebix”, the “Company” “we” or “our”) was founded in 1976 as Delphi Systems, Inc., a California corporation. In December 2003 the Company changed its name to Ebix, Inc. The Company is listed on the NASDAQ Global Market.

Ebix, Inc. is a leading international supplier of software and e-commerce solutions to the insurance industry. Ebix provides a series of application software products for the insurance industry ranging from carrier systems, agency systems and exchanges to custom software development for all entities involved in the insurance and financial industries.

Our goal is to be the leading powerhouse of backend insurance transactions in the world. The Company’s technology vision is to focus on convergence of all insurance channels, processes and entities in a manner such that data can seamlessly flow once a data entry has been made.

Ebix strives to work collaboratively with clients to develop innovative technology strategies and solutions that address specific business challenges. Ebix combines the newest technologies with its capabilities in consulting, systems design and integration, IT and business process outsourcing, applications software, and Web and application hosting to meet the individual needs of organizations.

Recently, we made a number of strategic acquisitions.

We acquired E-Z Data, Inc. (“E-Z Data”) effective October 1, 2009. E-Z Data was a leading industry provider of on-demand customer relationship management (“CRM”) solutions for insurance companies, brokers, agents, investment dealers, and financial advisors. We acquired the business operations and intellectual property of E-Z Data for an aggregate purchase price of $50.53 million paid to E-Z Data’s shareholders consisting of cash consideration in the amount of $25.53 million paid at closing and $25.00 million in shares of our common stock valued at the average market closing price for the three most recent days prior to September 30, 2009. We funded the cash portion of the purchase price for this business acquisition using the proceeds from the Company’s two convertible promissory notes issued in late August 2009.

We acquired Peak Performance Solutions, Inc. (“Peak”) effective October 1, 2009. Pursuant to the terms of the stock purchase agreement, we paid Peak’s shareholders $8.0 million in cash for all of Peak’s outstanding stock. Peak provides comprehensive, end-to-end insurance software and technology solutions to insurance companies and self-insured entities for workers’ compensation claims processing, risk management administration, and managed care tracking. Peak’s shareholders also retain the right to earn up to $1.5 million of future additional cash compensation, if certain revenue targets are achieved during the 2010 calendar year. We funded this acquisition with internal resources using available cash reserves.

Effective May 1, 2009, we acquired Facts, Inc. (“Facts”) a leading provider of fully automated software solutions for healthcare payers specializing in claims processing, employee benefits, and managed care. Facts’ products are available in either an application service provider (“ASP”) or self-hosted model. We paid the Facts shareholders $7.0 million in cash for all of Facts’ stock. We financed this acquisition with internal resources using available cash reserves.

We acquired ConfirmNet Corporation (“ConfirmNet”) on November 24, 2008. Pursuant to the terms of the plan of merger and agreement, Ebix paid ConfirmNet shareholders $7.4 million for all of ConfirmNet’s stock. The ConfirmNet shareholders earned an additional $3.1 million for meeting certain revenue objectives which was paid in the first quarter of 2009, and retain the right to earn up to an additional $3.2 million at the one year anniversary date of the acquisition if certain revenue targets of the ConfirmNet division of Ebix are met.

We acquired Acclamation Systems, Inc, (“Acclamation”) on August 1, 2008. Pursuant to the terms of this agreement, on August 1, 2008, Ebix paid Acclamation shareholders $22 million for all of Acclamation’s stock. Acclamation’s shareholders also retain the right to earn up to $3 million in additional cash consideration over the two year period following the effective date of the acquisition if specific revenue targets of Ebix’s Health Benefits division are achieved. The Company financed this acquisition using a combination of available cash reserves and the proceeds from the issuance of convertible debt.

Effective April 28, 2008 Ebix acquired Periculum Services Group (“Periculum”) a provider of certificate of insurance tracking services. The Company acquired all of the stock of Periculum for a payment of $1.1 million and Periculum’s shareholders earned, and the Company paid an additional $200 thousand for meeting certain revenue objectives. Ebix financed this acquisition using available cash. The operating results of Periculum, which is a component of our BPO channel, have been included in the Company’s reported net income starting in the second quarter of 2008.

Effective January 2, 2008 Ebix completed the acquisition of Telstra eBusiness Services Pty Limited (“Telstra”), a premier insurance exchange located in Melbourne, Australia. The purchase price was $43.8 million and was financed with a combination of available cash reserves, proceeds from the issuance of convertible debt, proceeds from the sales of unregistered shares of the Company’s common stock, and funding from the Company’s revolving line of credit.

On November 1, 2007, Ebix completed the acquisition of IDS Jenquest, Inc. (“IDS”), a leader in the certificate of insurance tracking industry located in Hemet, California. The purchase price was $11.25 million and was primarily financed from internal sources using our own cash reserves. IDS shareholders retained the right to earn up to $1.0 million in additional payments over one year if certain revenue or operating income targets of the IDS division of Ebix were met. The earn-out of $1.0 million was achieved in the fourth quarter of 2008 and payment was remitted in the first quarter of 2009.

The Company has its headquarters in Atlanta, Georgia, and it also has domestic operations in Walnut Creek, San Diego and Hemet, California; Pittsburgh, Pennsylvania; Portland, Michigan; New York, New York; St Louis, Missouri; Park City, Utah; Herndon, Virginia; Pasadena, California; Columbus, Ohio; and Dallas, Texas. The Company also has offices in Brazil, Australia, New Zealand, Singapore, Japan, China, and India. In these offices, Ebix employs insurance and technology professionals who provide products, services, support and consultancy to more than 3,000 customers on six continents. Ebix’s focus on quality has enabled its development unit in India to be awarded Level 5 status of the Carnegie Mellon Software Engineering Institute’s Capability Maturity Model Integrated (CMMI). Ebix has also earned ISO 9001:2000 certifications for both its development and call center units in India.

The Company’s revenues are derived from four (4) product or service groups. Presented in tabular format below is the breakout of our revenue streams for each of those product or service groups for the year ended December 31, 2009 and 2008:

		For the Year Ended
		December 31,
(dollar amounts in thousands)		2009				2008
Carrier Systems		$	10,624			$	11,314
Exchanges		$	60,764			$	42,711
BPO		$	14,698			$	8,380
Broker Systems		$	11,599			$	12,347
Totals		$	97,685			$	74,752

Information on the geographic dispersion of the Company’s revenues, net income and fixed assets is furnished in Note 15 to the consolidated financial statements, included elsewhere in this Form 10-K.

Industry Overview

The insurance industry has undergone significant consolidation over the past several years driven by the need for, and benefits from, economies of scale and scope in providing insurance in a competitive environment. The insurance markets have also seen a steady increase in the desire to reduce paper based processes and improve efficiency both at the back-end side and also at the consumer end side. Such consolidation has involved both insurance carriers and insurance brokers and is directly impacting the manner in which insurance products are distributed. Management believes the insurance industry will continue to experience significant change and increased efficiencies through online exchanges and reduced paper based processes are becoming increasingly a norm across the world insurance markets. Changes in the insurance industry are likely to create new opportunities for the Company.

Products and Services

The Company’s product and service strategy focuses on (a) worldwide sale, customization, development, implementation and support of its property and casualty (“P&C”) back-end insurance carrier system platforms; (b) worldwide sales and support of P&C and management systems (c) expansion of connectivity between consumers, agents, carriers, and third party providers through its exchange family of products in the life, health, annuity and P&C sectors worldwide namely the EbixExchange family of products; and, (d) business process outsourcing services, which include certificate origination, certificate tracking, , claims adjudication call center, and back office support.

Ebix’s revenue is generated through four main channels in which the Company conducts its operations — specifically: Exchanges, Carrier Systems, Broker Systems, and Business Process Outsourcing. The revenue streams for each of these channels are further described below.

Exchanges: Ebix operates data exchanges in the areas of life insurance, annuities, employee health benefits, and P&C insurance. Each of these exchanges connects multiple entities within the insurance markets enabling the participant to seamlessly and efficiently carry and process data from one end to another. Ebix’s life, annuity, and employee health benefit exchanges currently operate primarily in the United States while the P&C exchanges operate primarily in Australia and New Zealand. Exchange revenue is primarily derived from transaction fees charged for each data transaction processed on an Ebix Exchange, with a transaction being defined as the exchange of data between any two entities using an exchange. These exchanges have been designed to completely adhere to industry and regulatory data standards. Accordingly, insurance companies work with Ebix or third party vendors to interface an exchange with their back-end systems. Since each exchange is built based on industry standards, the system/exchange interfaces can be built by Ebix or any other third party vendor, at the client’s option. If the interfaces are built by Ebix revenue, is derived in the form of professional services charged on time and materials basis.

Carrier Systems: Ebix’s exclusive focus in the area of carrier systems is on designing and deploying back-end end systems for P&C insurance companies Revenue from these services is derived from two main sources — specifically subscription revenues or license revenues from clients and time and material fees charged to customize these products to an insurance company’s specific functional requirements.

Broker Systems: Ebix’s exclusive focus in the area of broker systems is on designing and deploying back-end systems for P&C insurance brokers across the world. Ebix has three back-end systems in this area, namely — eGlobal, which targets multinational P&C insurance brokers; WinBeat, which targets P&C brokers in the Australian and New Zealand markets; and, EbixASP, which is a system for the P&C insurance brokers in the United States. Revenue from eGlobal is derived from two main sources — specifically license based revenues and time and material fees charged to customize the product to a broker’s specific functional requirements. Revenue from WinBeat is derived from monthly subscription fees charged to each P&C broker in Australia and New Zealand that has deployed the service. Revenue from EbixASP comes from monthly subscription fees charged to each P&C broker in the United States using the service. All these three products are presently being redesigned, coded and rebuilt on the most current technologies prevalent today.

Business Process Outsourcing (“BPO”): Ebix’s primary focus in this channel pertains to the creation and tracking of certificates of insurance issued in the United States and Australian markets. Ebix provides a software-based service service for issuance of certificates which the Company markets to its P&C broker clients in the United States, to issue certificates of insurance that fully adhere to industry standards such as ACORD. Ebix derives transaction-based revenues for each certificate that is issued by the broker for their client’s using the Ebix service. Ebix also provides a service to track certificates of insurance for corporate clients in the United States and Australia that generates transactional-based revenue based for each certificate tracked by the Company for its clients.

Ebix also provides software development, customization, and consulting services to a variety of entities in the insurance industry including carriers, brokers, exchanges and standard making bodies.

Product Development

The Company has consistently focused on maintaining high quality product development standards. Our India development facility is certified for Carnegie Mellon’s highest rating level, “CMMi 5”. Product development activities include research and the development of platform and/or client specific software enhancements such as adding functionality, improving usefulness, increasing responsiveness, adapting to newer software and hardware technologies, or developing and maintaining the Company’s websites.

The Company has expended $11.4 million, $9.0 million, and $7.6 million during the years ending December 31, 2009, 2008, and 2007, respectively, on product development initiatives. The Company’s product development efforts are focused on the continued enhancement and redesign of the its Exchange, broker systems, carrier systems, BPO service lines to keep our technology edge in the markets, the development new technologies for insurance carriers, brokers and agents, and the redesign, coding, development of new services for international and domestic markets.

Competition

Ebix is in a unique position of being the only company worldwide in insurance software markets that provides services in all four of its revenue channels. This also means that in each of these areas Ebix has different competitors. In fact, in most of these areas Ebix has a different competitor in each country in which we operate. In the area of insurance data exchanges Ebix has a different competitor on each line of exchange in each country.

Further in support of Ebix’s competitive advantage is the fact that the Company has centralized worldwide product management, intellectual property rights development, software and system development operations in Singapore and India. With its strong focus on quality, Ebix-India has consistently delivered on time for all customer needs across the world. India is rich in technical skills and the cost structures are significantly lower in India as compared to the United States. Ebix has continued to develop India as a learning center of excellence with a strong focus on hiring skilled professional graduates having recently obtained their masters degrees in computer application and training them on insurance systems and software applications. This focus on building a knowledge base combined with the ability to hire more professional resources at the lower cost structures in India, has helped Ebix consistently ensure a strong focus on protecting knowledge as well as delivering projects on time and in a cost effective fashion.

The following is a closer and more detailed examination of our competition in each of these four main channels.

Exchanges: Ebix operates a number of exchanges and the competition for each of those exchanges varies within each of the regions that Ebix operates in.

Life Insurance Exchange — Ebix operates two life insurance exchanges in the United States -namely Winflex and LifeSpeed. Winflex is an exchange for pre-sale life insurance illustrations between brokers and carriers, while LifeSpeed is an order entry platform for life insurance. Both of these exchanges are presently deployed only in the United States with the Company having distinct plans to deploy them in other parts of the world. Ebix has two main competitors in the life exchange area — namely Blue Frog and iPipeline. Ebix’s differentiates itself from its competitors by virtue of having an end-to-end solution offering in the market with its exchanges being interfaced with other broker systems and CRM services like EbixCRM. Ebix’s exchanges also have the largest aggregation of life insurance brokers and carriers transacting business in the United States.

Annuity Exchange — Ebix operates an annuity exchange in the United States — namely Annuitynet. This exchange is an order entry platform for annuity transactions between brokers, carriers, broker general agents (“BGA’s”), and other entities involved in annuity transactions. This exchange is presently deployed only in the United States with the company having distinct plans to deploy it in other parts of the world, such as Latin America. Ebix has one main competitor in the annuity exchange area — namely Blue Frog. Again, Ebix’s differentiates itself from its competitors by virtue of having an end-to-end solution offering in the market with its exchanges being interfaced with broker systems and CRM services like Ebix CRM. Ebix exchanges also benefit from transacting the largest amounts of premiums in annuity business on any single exchange in the United States.

Employee Benefits — Ebix currently provides employee benefit services through two of its platforms — namely Facts and LuminX. Collectively, these platforms service approximately nine million lives. These platforms are sold to health carriers and third party administrators. These platforms provide the full gamut of services such as employee enrollment, claims adjudication, accounting, and employee benefits administration accounting. Ebix has a number of competitors of varying sizes in this area. Trizetto is currently the largest player in the market while there are other similar size competitors, such as ADAM, Benefit Mall, and Health Axis. This service is presently deployed in the United States with the company already having started marketing it in other parts of the world such as Asia, the Middle East, Australia, New Zealand and the United Kingdom.

P&C Exchanges — Ebix operates two P&C exchanges in Australia and New Zealand. Both of these exchanges are targeted to the areas of personal and commercial lines, and facilitate the exchange of insurance data between brokers and insurance carriers. Ebix has distinct plans to deploy these exchanges in Asia, Europe and the United States. There are presently no competitors in the P&C exchange area in Australia and New Zealand, however, competition may eventually evolve in these markets. Our competitive differentiation is by virtue of having an end-to-end solution offering in the market with its exchanges being interfaced with broker systems such as eGlobal, WinBeat and Lumley.

Carrier Systems: Ebix has a number of carrier system offerings for P&C carriers namely Ebix Advantage and Ebix Advantageweb. Ebix Advantage is sold only in the United States and is designed primarily for this market. Ebix Advantage is targeted at small, medium and large P&C carriers in the United States that operate in the personal, commercial, and specialty line areas of insurance. Ebix Advantageweb is designed for the international markets and is targeted at the small, medium and large P&C carriers in the United States and international markets that operate in the personal, commercial, and specialty line areas of insurance. Ebix Advantage is designed to be multicurrency and multilingual and is deployed in United Kingdom and the United States. Competition to both these products comes from large companies, such as CSC, Guidewire, Rebus, PMSC, and specialty medical malpractice players like Delphi.

Broker Systems: Ebix has a number of broker system offerings for P&C brokers world-wide; namely eGlobal, WinBeat and EbixASP. The competition for these broker systems varies within each of the regions that Ebix conducts this type of business.

eGlobal is sold across the world and has a customer base that currently spans six continents. The product is multilingual and multicurrency and available in a number of languages such as English, Chinese, Japanese, French, Portuguese, and Spanish. eGlobal is targeted to the medium and large P&C brokers around the world. eGlobal competition tends to be different in each country with no single competitor having a global offering. eGlobal tends to compete with home grown systems and regional players in each country. Its uniqueness comes from of the fact that the product is multilingual, multicurrency and yet still has a common code base around the world with features that are easily activated and deactivated.

WinBeat is a back-end broker system that is currently sold in Australia and New Zealand. It is targeted at small P&C brokers in these countries. The product at present is available only in English and can be deployed in a few hours with minimal training. WinBeat’s competition in Australia and New Zealand comes from local vendors such as Lumley and Sirius, a international vendor. Ebix plans to deploy WinBeat in a number of emerging insurance markets such as India and China.

Between eGlobal and WinBeat, Ebix broker systems customer base in Australia spans 834 of the 960 P&C brokers in Australia giving it in excess of 85% of the customer base in this country. Ebix broker systems customer base in New Zealand spans 1,500 of the 1,875 P&C brokers in New Zealand giving it 80% of the customer base in this county.

EbixASP is Ebix’s P&C broker systems offering for the US markets. The service is designed around the ACORD insurance standards used in the United States. EbixASP has three main competitors in the US — specifically Vertafore, Applied and XDimensional.

BPO Services: Ebix has a number of BPO services that it offers in the insurance markets, each of which are enabled by the Company’s proprietary software. Ebix’s BPO service offerings are mainly in the areas of insurance certificate issuance and insurance certificate tracking. Ebix’s BPO service offerings currently cater to eighty-five of the Fortune 500 companies in the United States. Furthermore, internationally Ebix has recently launched its BPO services in Australia and New Zealand. Ebix intends to eventually take this offering to many other parts of the world.

Ebix’s BPO service offering in the insurance certificate issuance area has one main competitor in the United States, namely CSR 24. Due to the highly fragmented market, the EbixBPO service offering in the insurance certificate tracking area has a number of smaller competitors such as Datamonitor, CMS, and Exigis.

Intellectual Property

Ebix generally seeks protection under federal, state and foreign laws for strategic or financially important intellectual property developed in connection with our business. We regard our software as proprietary while adhering to open architecture industry standards and attempt to protect it with copyrights, trade secret laws and restrictions on the disclosure and transferring of title. Certain intellectual property, where appropriate, is protected by contracts, licenses, registrations, confidentiality or other agreements or protections. Despite these precautions, it may be possible for third parties to copy aspects of the Company’s products or, without authorization, to obtain and use information which the Company regards as trade secrets.

Employees

As of December 31, 2009, the Company had 958 employees, distributed as follows: 59 in sales and marketing, 651 in product development, 173 in back-end operations, and 75 in administration, general management and finance. None of the Company’s employees is presently covered by a collective bargaining agreement. Management considers employee relations to be competitively good.

Executive Officers of the Registrant

Following are the persons serving as our executive officers as of March 16, 2010, together with their ages, positions and brief summaries of their business experience:

Name		Age				Position		Officer Since
Robin Raina			43			Chairman, President, and Chief Executive Officer		1998
Robert F. Kerris			56			Chief Financial Officer and Corporate Secretary		2007

There are no family relationships among our executive officers, nor are there any arrangements or understandings between any of the officers and any other persons pursuant to which they were selected as officers.

ROBIN RAINA, 43, has been a director at Ebix since 2000 and Chairman of the Board at Ebix since May 2002. Mr. Raina joined Ebix, Inc. in October 1997 as our Vice President—Professional Services and was promoted to Senior Vice President—Sales and Marketing in February 1998. Mr. Raina was promoted to Executive Vice President, Chief Operating Officer in December 1998. Mr. Raina was appointed President effective August 2, 1999, Chief Executive Officer effective September 23, 1999 and Chairman in May 2002. Mr. Raina holds an industrial engineering degree from Thapar University in Punjab, India.

ROBERT F. KERRIS, 56, joined the Company as Chief Financial Officer on October 22, 2007. Prior to joining the Company, Mr. Kerris was Chief Financial Officer at Aelera Corporation. He held this position from May 2006 to October 2007. Previously he was a Financial Vice President at Equifax, Inc. from November 2003 to April 2006, Corporate Controller at Interland, Inc. from September 2002 to October 2003, and held senior financial management positions at AT&T, BellSouth, and Northern Telecom. Mr. Kerris is a licensed certified public accountant and holds an accounting and economics degree from North Carolina State University.

Our principal executive offices are located at 5 Concourse Parkway, Suite 3200, Atlanta, Georgia 30328, and our telephone number is (678) 281-2020. Our official Web site address is http://www.ebix.com. We make available, free of charge, at http://www.ebix.com, the charters for the committees of our board of directors, our code of conduct and ethics, and, as soon as practicable after we file them with the SEC, our annual reports on Form 10-K and our quarterly reports on Form 10-Q. We have not in the past posted current reports on Form 8-K, and amendments to these reports, however, we intend to do so in the near future. We will begin posting filings under Section 16 of the Exchange Act on our Web site. Any waiver of the terms of our code of conduct and ethics for the chief executive officer, the chief financial officer, any accounting officer, and all other executive officers will be disclosed on our Web site.

The reference to our Web site does not constitute incorporation by reference of any information contained at that site.

Item 1A.		RISK FACTORS

You should carefully consider the risks, uncertainties and other factors described below, along with all of the other information included or incorporated by reference in this prospectus, including our financial statements and the related notes, before you decide whether to buy shares of our common stock. The following risks and uncertainties are not the only ones facing us. Additional risks and uncertainties of which we are currently unaware which we believe are not material also could materially adversely affect our business, financial condition, results of operations or cash flows. In any case, the value of our common stock could decline, and you could lose all or a portion of your investment. See also, “Safe Harbor Regarding Forward-Looking Statements.”

Risks Related To Our Business and Industry

Because the support revenue that we have traditionally relied upon has been steadily declining, it is important that new sources of revenue continue to be developed.

We made a strategic decision approximately six years ago to eliminate our reliance on legacy products and related support services and instead focus on more current technology and services. As a result, our revenue from the support services we offer in connection with our legacy software products has been decreasing over the course of the past few years. This downward trend in our support revenue makes us dependent upon our other sources of revenue.

Our business may be materially adversely impacted by U.S. and global market and economic conditions particularly adverse conditions in the insurance industry.

For the foreseeable future, we expect to continue to derive most of our revenue from products and services we provide to the insurance industry. Given the concentration of our business activities in financial industries, we may be particularly exposed to economic downturns in this industry. U.S. and global market and economic conditions have been, and continue to be, disrupted and volatile, and in recently the volatility has reached unprecedented levels. General business and economic conditions that could affect us and our customers include fluctuations in debt and equity capital markets, liquidity of the global financial markets, the availability and cost of credit, investor and consumer confidence, the exchange rate between the U.S. dollar and foreign currencies, and the strength of the economies in which our customers operate. A poor economic environment could result in significant decreases in demand for our products and services, including the delay or cancellation of current or anticipated projects, or could present difficulties in collecting accounts receivables from our customers due to their deteriorating financial condition. Our existing customers may be acquired by or merged into other institutions that use our competitors or decide to terminate their relationships with us for other reasons. As a result, our sales could decline if an existing customer is merged with or acquired by another company or closed. All of these conditions could adversely affect our operating results and financial position.

Our business may be adversely affected by the impacts of proposed health care legislation in the United States.

Third-party insurance benefit administrators (“TPA’s”) demand for services from our health benefits exchange operating segment may be significantly reduced due to the diminished role of TPA’s envisioned as a result of pending health care legislation expected to be implemented in the United States during 2010.

We may not be able to secure additional financing to support capital requirements when needed.

We may need to raise additional funds in the future in order to fund more aggressive brand promotion or more rapid market penetration, to develop new or enhanced services, to respond to competitive pressures, to make acquisitions or for other purposes. Any required additional financing may not be available on terms favorable to us, or at all, particularly in light of current conditions in the credit markets. If adequate funds are not available on acceptable terms, we may be unable to meet our strategic business objectives or compete effectively, and the future growth of our business could be adversely impacted. If additional funds are raised by our issuing equity securities, stockholders may experience dilution of their ownership and economic interests, and the newly issued securities may have rights superior to those of our common stock. If additional funds are raised by our issuing debt, we may be subject to significant market risks related to interest rates, and operating risks regarding limitations on our activities.

Our recent acquisitions of E-Z Data, Peak, Facts, ConfirmNet, Acclamation, and Telstra, as well as any future acquisitions that we may undertake could be difficult to integrate, disrupt our business, dilute stockholder value and adversely impact our operating results.

The acquisitions of E-Z Data, Peak, Facts, ConfirmNet, Acclamation, and Telstra, and other potential future acquisitions, subject the Company to a variety of risks, including risks associated with an inability to efficiently integrate acquired operations, prohibitively higher incremental cost of operations, outdated or incompatible technologies, labor difficulties, or an inability to realize anticipated synergies, whether within anticipated timeframes or at all; one or more of which risks, if realized, could have an adverse impact on our operations. Among the issues related to integration such acquisitions are:

•

potential incompatibility of business cultures;

•

potential delays in integrating diverse technology platforms;

•

potential difficulties in coordinating geographically separated organizations;

•

potential difficulties in re-training sales forces to market all of our products across all of our intended markets;

•

potential difficulties implementing common internal business systems and processes;

•

potential conflicts in third-party relationships; and

•

potential loss of customers and key employees and the diversion of the attention of management from other ongoing business concerns.

We may not be able to develop new products or services necessary to effectively respond to rapid technological changes. Disruptions in our business-critical systems and operations could interfere with our ability to deliver products and services to our customers.

To be successful, we must adapt to rapidly changing technological and market needs, by continually enhancing and introducing new products and services to address our customers’ changing demands. The marketplace in which we operate is characterized by:

•

rapidly changing technology;

•

evolving industry standards;

•

frequent new product and service introductions;

•

shifting distribution channels; and

•

changing customer demands.

Our future success will depend on our ability to adapt to this rapidly evolving marketplace. We could incur substantial costs if we need to modify our services or infrastructure in order to adapt to changes affecting our market, and we may be unable to effectively adapt to these changes.

The markets for our products are highly competitive and are likely to become more competitive, and our competitors may be able to respond more quickly to new or emerging technology and changes in customer requirements.

We operate in highly competitive markets. In particular, the online insurance distribution market, like the broader electronic commerce market, is rapidly evolving and highly competitive. Our insurance software business also experiences competition from certain large hardware suppliers that sell systems and system components to independent agencies and from small independent developers and suppliers of software, who sometimes work in concert with hardware vendors to supply systems to independent agencies. Pricing strategies and new product introductions and other pressures from existing or emerging competitors could result in a loss of customers or a rate of increase or decrease in prices for our services different than past experience. Our internet business may also face indirect competition from insurance carriers that have subsidiaries which perform in-house agency and brokerage functions.

Some of our current competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial and marketing resources than we do. In addition, we believe we will face increasing competition as the online financial services industry develops and evolves. Our current and future competitors may be able to:

	•		undertake more extensive marketing campaigns for their brands and services;
	•		devote more resources to website and systems development;

•

adopt more aggressive pricing policies; and

•

make more attractive offers to potential employees, online companies and third-party service providers.

We regard our intellectual property in general and our software in particular, as critical to our success.

We rely on copyright laws and nondisclosure, license, and confidentiality arrangements to protect our proprietary rights as well as the intellectual property rights of third parties whose content we license. However, it is not possible to prevent all unauthorized uses of these rights. We cannot provide assurances that the steps we have taken to protect our intellectual property rights, and the rights of those from whom we license intellectual property, are adequate to deter misappropriation or that we will be able to detect unauthorized uses and take timely and effective steps to remedy this unauthorized conduct. In particular, a significant portion of our revenues are derived internationally including jurisdiction where protecting intellectual property rights may prove even more challenging. To prevent or respond to unauthorized uses of our intellectual property, we might be required to engage in costly and time-consuming litigation and we may not ultimately prevail. In addition, our offerings could be less differentiated from those of our competitors, which could adversely affect the fees we are able to charge.

If we infringe on the proprietary rights of others, our business operations may be disrupted, and any related litigation could be time consuming and costly.

Third parties may claim that we have violated their intellectual property rights. Any of these claims, with or without merit, could subject us to costly litigation and divert the attention of key personnel. To the extent that we violate a patent or other intellectual property right of a third party, we may be prevented from operating our business as planned, and we may be required to pay damages, to obtain a license, if available, to use the right or to use a non-infringing method, if possible, to accomplish our objectives. The cost of such activity could have a material adverse effect on our business.

We depend on the continued services of our senior management and our ability to attract and retain other key personnel.

Our future success is substantially dependent on the continued services and continuing contributions of our senior management and other key personnel particularly Robin Raina, our president and chief executive officer. Since becoming Chief Executive Officer of the Company in 1999, his strategic direction for the Company and implementation of such direction has proven instrumental in our profitable turnaround and growth. The loss of the services of any of our executive officers or other key employees could harm our business.

Our future success depends on our ability to continue to attract, retain and motivate highly skilled employees. If we are not able to attract and retain key skilled personnel, our business will be harmed. Competition for personnel in our industry is intense.

Our international operations are subject to a number of risks that could affect our revenues, operating results, and growth.

We market our products and services internationally and plan to continue to expand our internet services to locations outside of the United States. We currently conduct operations in Australia, New Zealand, and Singapore, and have product development activities and call center services in India. Our international operations are subject to other inherent risks which could have a material adverse effect on our business, including:

•

the impact of recessions in foreign economies on the level of consumers’ insurance shopping and purchasing behavior;

•

greater difficulty in collecting accounts receivable;

	•		difficulties and costs of staffing and managing foreign operations;
	•		reduced protection for intellectual property rights in some countries;

•

seasonal reductions in business activity;

•

burdensome regulatory requirements;

•

trade and financing barriers, and differing business practices;

•

significant fluctuations in exchange rates;

•

potentially adverse tax consequences; and

•

political and economic instability.

Furthermore, our entry into additional international markets requires significant management attention and financial resources, which could divert management’s attention from existing business operations.

Our financial position and operating results may be adversely affected by the changing U.S. Dollar rates and fluctuations in other currency exchange rates.

We will be exposed to currency exchange risk with respect to the U.S. dollar in relation to the foreign currencies in the countries because a significant portion of our operating expenses are incurred in foreign countries. This exposure may increase if we expand our operations in overseas. We currently have a series of forward hedges in place to hedge against adverse fluctuations in the currency exchange rates between the U.S. dollar and Indian rupee. We will monitor changes in our exposure to exchange rate risk that result from changes in our business situation.

Risks Relating to Regulation and Litigation

Federal Trade Commission laws and regulations that govern the insurance industry could expose us or the agents, brokers and carriers with whom we participate in our online marketplace to legal penalties.

We perform functions for licensed insurance agents, brokers and carriers and need to comply with complex regulations that vary from state to state and nation to nation. These regulations can be difficult to comply with, and can be ambiguous and open to interpretation. If we fail to properly interpret or comply with these regulations, we, the insurance agents, brokers or carriers doing business with us, our officers, or agents with whom we contract could be subject to various sanctions, including censure, fines, cease-and-desist orders, loss of license or other penalties. This risk, as well as other laws and regulations affecting our business and changes in the regulatory climate or the enforcement or interpretation of existing law, could expose us to additional costs, including indemnification of participating insurance agents, brokers or carriers, and could require changes to our business or otherwise harm our business. Furthermore, because the application of online commerce to the consumer insurance market is relatively new, the impact of current or future regulations on our business is difficult to anticipate. To the extent that there are changes in regulations regarding the manner in which insurance is sold, our business could be adversely affected.

Risks Related to Our Conduct of Business on the Internet

Any disruption of our internet connections could affect the success of our internet-based products.

Any system failure, including network, software or hardware failure, that causes an interruption in our network or a decrease in the responsiveness of our website could result in reduced user traffic and reduced revenue. Continued growth in internet usage could cause a decrease in the quality of internet connection service. Websites have experienced service interruptions as a result of outages and other delays occurring throughout the internet network infrastructure. In addition, there have been several incidents in which individuals have intentionally caused service disruptions of major e-commerce websites. If these outages, delays or service disruptions frequently occur in the future, usage of our website could grow more slowly than anticipated or decline and we may lose revenues and customers. If the internet data center operations that host any of our websites were to experience a system failure, the performance of our website would be harmed. These systems are also vulnerable to damage from fire, floods, and earthquakes, acts of terrorism, power loss, telecommunications failures, break-ins and similar events. The controls implemented by our third-party service providers may not prevent or timely detect such system failures. Our property and business interruption insurance coverage may not be adequate to fully compensate us for losses that may occur. In addition, our users depend on internet service providers, online service providers and other website operators for access to our website. Each of these providers has experienced significant outages in the past, and could experience outages, delays and other difficulties due to system failures unrelated to our systems.

Concerns regarding security of transactions or the transmission of confidential information over the Internet or security problems we experience may prevent us from expanding our business or subject us to legal exposure.

If we do not maintain sufficient security features in our online product and service offerings, our products and services may not gain market acceptance, and we could also be exposed to legal liability. Despite the measures that we have or may take, our infrastructure will be potentially vulnerable to physical or electronic break-ins, computer viruses or similar problems. If a person circumvents our security measures, that person could misappropriate proprietary information or disrupt or damage our operations. Security breaches that result in access to confidential information could damage our reputation and subject us to a risk of loss or liability. We may be required to make significant expenditures to protect against or remediate security breaches. Additionally, if we are unable to adequately address our customers’ concerns about security, we may have difficulty selling our products and services.

Uncertainty in the marketplace regarding the use of internet users’ personal information, or legislation limiting such use, could reduce demand for our services and result in increased expenses.

Concern among consumers and legislators regarding the use of personal information gathered from internet users could create uncertainty in the marketplace. This could reduce demand for our services, increase the cost of doing business as a result of litigation costs or increased service delivery costs, or otherwise harm our business. Legislation has been proposed that would limit the uses of personal identification information of internet users gathered online or require online services to establish privacy policies. Many state insurance codes limit the collection and use of personal information by insurance agencies, brokers and carriers or insurance service organizations. Moreover, the Federal Trade Commission has settled a proceeding against one online service that agreed in the settlement to limit the manner in which personal information could be collected from users and provided to third parties.

Future government regulation of the internet could place financial burdens on our businesses.

Because of the internet’s popularity and increasing use, new laws and regulations directed specifically at e-commerce may be adopted. These laws and regulations may cover issues such as the collection and use of data from website visitors and related privacy issues; pricing; taxation; telecommunications over the internet; content; copyrights; distribution; and domain name piracy. The enactment of any additional laws or regulations, including international laws and regulations, could impede the growth of revenue from our Internet operations and place additional financial burdens on our business.

Risks Related To Our Common Stock

The price of our common stock may be extremely volatile.

In some future periods, our results of operations may be below the expectations of public market investors, which could negatively affect the market price of our common stock. Furthermore, the stock market in general has experienced extreme price and volume fluctuations in recent months. We believe that, in the future, the market price of our common stock could fluctuate widely due to variations in our performance and operating results or because of any of the following factors:

•

announcements of new services, products, technological innovations, acquisitions or strategic relationships by us or our competitors;

•

trends or conditions in the insurance, software, business process outsourcing and internet markets;

•

changes in market valuations of our competitors; and

•

general political, economic and market conditions.

In addition, the market prices of securities of technology companies, including our own, have been volatile and have experienced fluctuations that have often been unrelated or disproportionate to a specific company’s operating performance. As a result, investors may not be able to sell shares of our common stock at or above the price at which an investor paid. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company. If any securities litigation is initiated against us, we could incur substantial costs and our management’s attention could be diverted from our business.

Quarterly and annual operating results may fluctuate, which could cause our stock price to be volatile.

Our quarterly and annual operating results may fluctuate significantly in the future due to a variety of factors that could affect our revenues or our expenses in any particular period. Results of operations during any particular period are not necessarily an indication of our results for any other period. Factors that may adversely affect our periodic results may include the loss of a significant insurance agent, carrier or broker relationship or the merger of any of our participating insurance carriers with one another. Our operating expenses are based in part on our expectations of our future revenues and are partially fixed in the short term. We may be unable to adjust spending quickly enough to offset any unexpected revenue shortfall.

Provisions in our articles of incorporation, bylaws, and Delaware law may make it difficult for a third party to acquire us, even in situations that may be viewed as desirable by our shareholders.

Our certificate of incorporation and bylaws, and provisions of Delaware law may delay, prevent or otherwise make it more difficult to acquire us by means of a tender offer, a proxy contest, open market purchases, removal of incumbent directors and otherwise. These provisions, which are summarized below, are expected to discourage types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to first negotiate with us. We are subject to the “business combination” provisions of Section 203 of the Delaware General Corporation Law. In general, those provisions prohibit a publicly held Delaware corporation from engaging in various “business combination” transactions with any interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:

•

The transaction is approved by the board of directors prior to the date the interested stockholder obtained interested stockholder status;

•

Upon consummation of the transaction that resulted in the stockholder’s becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or

•

On or subsequent to the date the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.

These provisions could prohibit or delay mergers or other takeover or change of control attempts with respect to us and, accordingly, may discourage attempts to acquire us.

Item 1B.		UNRESOLVED STAFF COMMENTS

None.

Item 2.		PROPERTIES

The Company’s corporate headquarters, including substantially all of our corporate administration and finance functions, is located in Atlanta, Georgia where we lease 15,422 square feet of commercial office space. In addition the Company and its subsidiaries lease office space of 5,500 square feet in Park City, Utah, 4,148 square feet in Dallas, Texas, 12,000 square feet in Herndon, Virginia, 10,800 square feet in Hemet, California, 2,156 square feet in Walnut Creek, California, 11,500 square feet in Pittsburgh, Pennsylvania, 673 square feet in St Louis, Missouri, 5,300 square feet in Portland, Michigan, 7,000 square feet in San Diego, California, 7,800 square feet in Miami, Florida, 25,482 square feet in Pasadena, California, 4,384 square feet in Lynchburg, Virginia, and 5,289 square feet in Columbus, Ohio. Additionally, the Company leases office space in New Zealand, Australia, Singapore, Canada, Japan, and China for support and sales offices. The Company owns four facilities in India with total square footage of approximately 65,000 square feet and leases an additional two. The Indian facilities provide software development and call center services for customers. Management believes its facilities are adequate for its current needs and that necessary suitable additional or substitute space will be available as needed at favorable rates.

Item 3.		LEGAL PROCEEDINGS

In the normal course of business, the Company is a party to various legal proceedings. The Company does not expect that any currently pending proceedings will have a material adverse effect on its business, results of operations or financial condition.

PART II

Item 4.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

At December 31, 2009 the principal market for the Company’s common stock was the NASDAQ Global Capital Market. The Company’s common stock trades under the symbol “EBIX.” As of March 16, 2010, there were 89 holders of record of the Company’s common stock. Effective January 29, 2007 the principal market for the Company’s common stock was changed to the NASDAQ Global Market.

The following tables set forth the high and low closing bid prices for the Company’s common stock for each calendar quarter in 2009 and 2008 and take into account the Company’s subsequent three-for-one stock split on January 4, 2010.

Year Ended December 31, 2009		High*				Low*
First quarter		$	8.57			$	5.91
Second quarter			11.33				7.71
Third quarter			18.45				10.41
Fourth quarter			21.92				14.89

Year Ended December 31, 2008		High*				Low*
First quarter		$	8.61			$	6.89
Second quarter			10.53				8.28
Third quarter			12.79				8.57
Fourth quarter			10.20				6.34

Holders

As of March 11, 2010, there were 34,949,450 shares of the Company’s common stock outstanding

Dividends

The Company has not paid any cash dividends on its common stock to date. The Company currently anticipates that it will retain any future earnings for the expansion and operation of its business. Accordingly, the Company does not anticipate paying cash dividends on its common stock in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

As of December 31, 2009, we maintained the 1996 Stock Incentive Plan as amended and restated in 2006, each of which was approved by our stockholders. We also maintained the 2001 Stock Incentive Plan, which was not approved by our stockholders. As discussed below, our Board of Directors has terminated the 2001 Stock Incentive Plan. The table below provides information as of December 31, 2009 related to these plans.

Number

Number of Securities

of Securities

to be Issued Upon

Weighted-Average

Remaining Available

Exercise of

Exercise Price of

for Future Issuance

Outstanding Options

Outstanding Options

Under Equity

Plan Category

Warrants and Rights

Warrants and Rights

Compensation Plans

Equity Compensation Plans Approved by Security Holders:

1996 Stock Incentive Plan as amended and restated in 2006

4,548,261

$

1.69

2,303,577

Total

4,548,261

$

1.69

2,303,577

Recent Sales or Issuances of Unregistered Securities

On October, 1, 2009, and as part of the consideration for the purchase of E-Z Data, Inc. (“E-Z Data”), we issued at closing $25 million in shares of Ebix common stock valued at the average market closing price for the three most recent days prior to September 30, 2009. This resulted in the issuance 1,488,984 shares of our common stock, 744,492 shares to each its two shareholders, Dale Okuno and Dilip Sontakey, both “accredited investors” within the meaning of Rule 501 of Regulation D. The Company relied upon Section 4(2) of the Securities Act of 1933 and Regulation D promulgated there under in making this sale in a private placement to accredited investors who acquired the shares for investment purposes. Under the terms of the agreement the E-Z Data sellers hold a put option exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, which if exercised would enable them to sell the underlying shares of common stock back to the Company at a 10% discount off of the of the average market closing price for the three most recent days prior to September 30, 2009. Pursuant to the acquisition agreement, Ebix was obligated to file with the SEC a registration statement for the underlying shares of our common stock and use our reasonable best efforts to cause the SEC to declare the registration statement effective. This registration statement, number 333-163459, became effective on February 26, 2010.

On August 26, 2009, we entered into an unsecured Convertible Note Purchase Agreement (the “Whitebox Agreement”) with Whitebox VSC, Ltd (“Whitebox”). As a result of the transactions consummated by the Whitebox Agreement the Company issued a Convertible Promissory Note (the “Whitebox Note”) with a date of August 26, 2011 (the “Maturity Date”) in the original principal amount of $19.0 million, which is convertible into shares of Ebix common stock at a price of $16.00 per share, subject to certain adjustments as set forth in the Whitebox Note. The Whitebox Note has a 0.0% stated interest rate. In accordance with the terms of the Whitebox Note, as understood between the Company and the holder, upon a conversion election by the holder the Company must satisfy the related original principal balance in cash and may satisfy the conversion spread (that being the excess of the conversion value over the related original principal component) in either cash or stock at option of the Company. Previous to this transaction Whitebox has and continued to be a beneficial of the Company, with a beneficial ownership percentage of approximately 9.8%.

On August 26, 2009, we entered into an unsecured Convertible Note Purchase Agreement (the “IAM Agreement”) with IAM Mini-Fund 14 Limited (“IAM” or the “Holder”). As a result of the transactions consummated by the IAM Agreement the Company issued a Convertible Promissory Note (the “IAM Note”) with a date of August 26, 2011 (the “Maturity Date”) in the original principal amount of $1.0 million, which is convertible into shares of our common stock at a price of $16.00 per share, subject to certain adjustments as set forth in the IAM Note. The IAM Note has a 0.0% stated interest rate. In accordance with the terms of the IAM Note, as understood between the Company and the holder, upon a conversion election by the holder the Company must satisfy the related original principal balance in cash and may satisfy the conversion spread (that being the excess of the conversion value over the related original principal component) in either cash or stock at option of the Company.

On August 25, 2009, we entered into an unsecured Convertible Note Purchase Agreement (the “Rennes Agreement”) with the Rennes Foundation (“Rennes” or the “Holder”). As a result of the transactions consummated by the Rennes Agreement the Company issued a Convertible Promissory Note (the “Rennes Note”) with a date of August 25, 2011 (the “Maturity Date”) in the original principal amount of $5.0 million, which is convertible into shares of Ebix common stock at a price of $16.67 per share, subject to certain adjustments as set forth in the Rennes Note. The Rennes Note has a 0.0% stated interest rate. In accordance with the terms of the Rennes Note, as understood between the Company and the holder, upon a conversion election by the holder the Company must satisfy the related original principal balance in cash and may satisfy the conversion spread (that being the excess of the conversion value over the related original principal component) in either cash or stock at option of the Company. Previous to this transaction Rennes has been and continues to be a beneficial owner of the Company, with a beneficial ownership percentage of approximately 9.9%. Rolf Herter, a member of our Board of Directors, is also a director of the Rennes Foundation.

On July 11, 2008, we entered into a secured convertible note purchase agreement with Whitebox in the amount of $15.0 million, with a maturity date of July 11, 2010, in the original principal amount of $15.0 million, which amount is convertible into our common stock at a price of $9.33 per share, subject to certain adjustments as set forth in the Note. The Company has the option to cause a mandatory conversion and the subsequent surrender of the Note at a Conversion Price of $9.33 per share, if the average price of the Company’s common stock on the trading market exceeds $18.67 for any consecutive 30 trading days. The Note accrues interest at the rate of 2.5% per annum, payable on an annual basis on July 11th of each year, each date of conversion (as to the principal amount being converted) and the maturity date. The Company relied upon Section 4(2) of the Securities Act of 1933 and Regulation D promulgated there under in making this sale to an accredited investor who acquired the Note for investment purposes. Through December 31, 2009 Whitebox converted $10.7 million of principal and accrued interest into 1,144,356 shares of the Company’s common stock. Furthermore, on February 3, 2010 Whitebox, in connection with the Note, converted the remaining principal in the amount of $4.39 million and accrued interest in the amount of $62 thousand into 476,662 shares of the Company’s common stock.

On April 18, 2008, we entered into a share purchase agreement pursuant to which Fisher Funds Management, acquired 180,000 shares of our unregistered common stock at $8.19 per share, for an aggregate offering price of approximately $1.5 million, for the benefit of several “accredited investors” identified in Footnote 5 of the table at “Selling Stockholders” in the prospectus which is a part of this registration statement. The Company relied upon Section 4(2) of the Securities Act of 1933 and Regulation D promulgated there under in making this sale in a private placement to accredited investors who acquired the shares for investment purposes. Pursuant to the share purchase agreements, Ebix was obligated to file with the SEC a registration statement for the underlying shares of our common stock and use our reasonable best efforts to cause the SEC to declare the registration statement effective. This registration statement, number 333-150371, became effective on February 18, 2009.

On April 7, 2008, we entered into a share purchase agreement pursuant to which Ashford Capital Management, Inc., a registered investment advisor, acquired 990,000 shares of our unregistered common stock at $8.10 per share, for an aggregate offering price of approximately $8.0 million, for the benefit of several “accredited investors” identified in the table at “Selling Stockholders” in the prospectus which is a part of this registration statement. The Company relied upon Section 4(2) of the Securities Act of 1933 and Regulation D promulgated there under in making this sale in a private placement to accredited investors who acquired the shares for investment purposes. Pursuant to the share purchase agreements, Ebix was obligated to file with the SEC a registration statement for the underlying shares of our common stock and use our reasonable best efforts to cause the SEC to declare the registration statement effective. This registration statement, number 333-150371, became effective on February 18, 2009.

On April 2, 2008, we entered into a share purchase agreement pursuant to which the Rennes Foundation, an “accredited investor” within the meaning of Rule 501 of Regulation D, acquired 360,000 shares of our unregistered common stock at $8.41 per share, for an aggregate offering price of approximately $3.0 million. Mr. Rolf Herter, a director of the Rennes Foundation, is a Director of the Company. The Company relied upon Section 4(2) of the Securities Act of 1933 and Regulation D promulgated there under in making this sale in a private placement to accredited investors who acquired the shares for investment purposes. Pursuant to the share purchase agreements, Ebix was obligated to file with the SEC a registration statement for the underlying shares of our common stock and use our reasonable best efforts to cause the SEC to declare the registration statement effective. This registration statement, number 333-150371, became effective on February 18, 2009.

Use of Proceeds from the Recent Sales of Unregistered Securities

The proceeds of the above cited recent sales of unregistered shares of our common stock and the issuances of convertible debt were used to finance our acquisitions of E-Z Data in October 2009, Acclamation in August 2008, and Telstra eBusiness Services in January 2008, and to repurchase shares of our common stock from Brit Insurance Holdings, Inc. in April 2008.

Repurchase of Common Stock from Brit

On April 16, 2008, the Company entered into a Stock Purchase Agreement with Brit Insurance Holdings PLC (“Brit”) for the repurchase of 1,200,000 shares of the company’s common stock held by Brit, and consummated the transaction on April 17, 2008. The price was $6.67 per share, for an aggregate purchase price of $24.0 million. The Company financed this share repurchase using a combination of the proceeds of its April 2008 sales of common stock ($11.0 million), cash on hand ($8.0 million) and additional borrowings under its revolving line of credit ($5.0 million).

Recent Purchases of Equity Securities

As authorized by our Board of Directors, during the year ended December 31, 2009, we repurchased 80,622 shares of our common stock for an aggregate total purchase price of $505 thousand.

Item 5.		SELECTED FINANCIAL DATA

The following data for fiscal years 2009, 2008, and 2007 should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with our consolidated financial statements and the related notes and other financial information included herein.

Consolidated Financial Highlights

		Year Ended				Year Ended				Year Ended				Year Ended				Year Ended
		December 31,				December 31,				December 31,				December 31,				December 31,
		2009				2008				2007				2006				2005
		(In thousands, except per share data)
Results of Operations:
Revenue		$	97,685			$	74,752			$	42,841			$	29,253			$	24,100
Operating income			39,256				29,264				12,801				6,712				4,650
Net income		$	38,822			$	27,314			$	12,666			$	5,965			$	4,322
Net income per share:
Basic*		$	1.24			$	0.93			$	0.45			$	0.24			$	0.17
Diluted*		$	1.03			$	0.76			$	0.40			$	0.21			$	0.15
Shares used in computing per share data:
Basic*			31,398				29,514				27,917				24,912				25,101
Diluted*			38,014				36,780				31,604				28,233				28,089
Financial Position:
Total assets		$	262,167			$	141,167			$	108,510			$	47,352			$	27,981
Short-term debt			52,487				37,192				16,161				11,006				969
Long-term debt			—				15,000				20,486				934				1,844
Redeemable common stock			—				—				—				—				1,461
Stockholders’ equity		$	170,743			$	70,142			$	60,678			$	26,166			$	17,501

Item 6.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As used herein, the terms “Ebix,” “the Company,” “we,” “our” and “us” refer to Ebix, Inc., a Delaware corporation, and its consolidated subsidiaries as a combined entity.

The information contained in this section has been derived from our historical financial statements and should be read together with our historical financial statements and related notes included elsewhere in this document. The discussion below contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties including, but not limited to: demand and acceptance of services offered by us, our ability to achieve and maintain acceptable cost levels, rate levels and actions by competitors, regulatory matters, general economic conditions, and changing business strategies. Forward-looking statements are subject to a number of factors that could cause actual results to differ materially from our expressed or implied expectations, including, but not limited to our performance in future periods, our ability to generate working capital from operations, the adequacy of our insurance coverage, and the results of litigation or investigation. Our forward-looking statements can be identified by the use of terminology such as “anticipates,” “expects,” “intends,” “believes,” “will” or the negative thereof or variations thereon or comparable terminology. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

OVERVIEW

Ebix, Inc. is a leading international supplier of on-demand software and e-commerce solutions to the insurance industry. Ebix provides a series of application software products for the insurance industry ranging from carrier systems, agency systems and exchanges to custom software development for all entities involved in the insurance and financial industries. Approximately 80% of the Company’s revenues are of a recurring nature. Rather than license our products in perpetuity, we typically either license them for a few years with ongoing support revenues, or license them on a limited term basis using a subscription hosting or ASP model. Our goal is to be the leading powerhouse of backend insurance transactions in the world. The Company’s technology vision is to focus on convergence of all insurance channels, processes and entities in a manner such that data can seamlessly flow once a data entry has been made. Our customers include many of the top insurance and financial sector companies in the world.

The insurance industry has undergone significant consolidation over the past several years driven by the need for, and benefits from, economies of scale and scope in providing insurance in a competitive environment. The insurance markets have also seen a steady increase in the desire to reduce paper based processes and improve efficiency both at the back-end side and also at the consumer end side. Such consolidation has involved both insurance carriers and insurance brokers and is directly impacting the manner in which insurance products are distributed. Management believes the world-wide insurance industry will continue to experience significant change and the need for increased efficiencies through online exchanges and streamlined processes. The changes in the insurance industry are likely to create new opportunities for the Company.

Management focuses on a variety of key indicators to monitor operating and financial performance. These performance indicators include measurements of revenue growth, operating income, operating margin, income from continuing operations, diluted earnings per share, and cash provided by operating activities. We monitor these indicators, in conjunction with our corporate governance practices, to ensure that business vitality is maintained and effective control is exercised.

The key performance indicators for the twelve months ended December 31, 2009, 2008, and 2007 were as follows:

		Key Performance Indicators
		Twelve Months Ended December 31,
		2009				2008				2007
		(Dollars in thousands,
		except per share data)
Revenue		$	97,685			$	74,752			$	42,841
Revenue growth			31	%			74	%			46	%
Operating income		$	39,256			$	29,264			$	12,801
Operating margin			40	%			39	%			30	%
Net Income		$	38,822			$	27,314			$	12,666
Diluted earnings per share *		$	1.03			$	0.76			$	0.40
Cash provided by operating activities		$	33,876			$	26,825			$	15,039

RESULTS OF OPERATIONS

Ebix, Inc. Subsidiaries

		Year Ended				Year Ended				Year Ended
		December 31,				December 31,				December 31,
		2009				2008				2007
		(In thousands)
Operating revenue:		$	97,685			$	74,752			$	42,841
Operating expenses:
Costs of services provided			21,274				14,161				7,114
Product development			11,362				8,962				7,609
Sales and marketing			5,040				4,344				4,116
General and administrative			16,798				14,715				8,602
Amortization and depreciation			3,955				3,306				2,599
Total operating expenses			58,429				45,488				30,040
Operating income			39,256				29,264				12,801
Interest income (expense), net			(871	)			(1,151	)			151
Other non-operating income			89				—				—
Foreign exchange gain			1,358				586				247
Income before taxes			39,832				28,699				13,199
Income tax expense			(1,010	)			(1,385	)			(533	)
Net income		$	38,822			$	27,314			$	12,666

TWELVE MONTHS ENDED DECEMBER 31, 2009 AND 2008

Operating Revenue

The Company derives its revenues primarily from professional and support services, which includes revenue generated from software development projects and associated fees for consulting, implementation, training, and project management provided to customers with installed systems, subscription and transaction fees pertaining to services delivered over our exchanges or from our ASP platforms, and business process outsourcing revenue. Ebix’s revenue streams come four product channels. Presented in the table below is the breakout of our revenues for each of those product channels the years ended December 31, 2009 and 2008.

		For the Year Ended
		December 31,
(dollar amounts in thousands)		2009				2008
Carrier Systems		$	10,624			$	11,314
Exchanges		$	60,764			$	42,711
BPO		$	14,698			$	8,380
Broker Systems		$	11,599			$	12,347
Totals		$	97,685			$	74,752

During the twelve months ended December 31, 2009 our total revenue increased $22.9 million or 30.7%, to $97.7 million in 2009 compared to $74.8 million in 2008. The increase in revenues is a result of both the impact of strategic business acquisitions made during 2009 and 2008 particularly in the area of exchanges, and in our BPO channel, as well as organic growth realized in our BPO and Exchange channels. We are able to quickly integrate business acquisitions into our existing operations and thereby rapidly leverage product cross-selling opportunities. The specific components of our revenue and the changes experienced during the past year are discussed further below.

Exchange division revenues increased $18.1 million, which was primarily due to net increases of approximately $9.2 million from the health insurance sector and $8.9 million from the life & annuity sector.

BPO division revenues increased $6.3 million primarily due to greater demand for our insurance certificate creation and tracking services. The Company was able to increase sales in this product channel in spite of the downturn in the housing industry which drove down the transaction volume derived from clients associated with the construction industry.

Broker Systems division revenue decreased $748 thousand which was primarily caused by a $943 thousand reduction in support and maintenance revenues associated with our legacy products as we continue to migrate customers off of these older platforms, and the strengthening of U.S. dollar against the Australian dollar which appreciated by 7.8% during the year and resulted in an approximate drop of $571 thousand of reported revenues from our broker systems operations in Australia. The revenue declines were partially offset by $335 thousand of sales growth from our in our broker system operations in New Zealand. The revenue decline largely can be associated to the overall downturn in the worldwide insurance markets in 2009, resulting in brokers spending less money on back end systems.

Carrier Systems division revenue decreased $690 thousand due to temporary delays in capital spending decisions as related to investments in back-end systems by large insurance companies. During 2010 we expect these insurance carriers to deploy new technologies and increase their spending for system development, and that our revenues from this channel will improve during the forthcoming year.

Costs of Services Provided

Costs of services provided, which includes costs associated with customer support, consulting, implementation, and training services, increased $7.1 million or 50.2%, from $14.2 million in 2008 to $21.3 million in 2009. This net cost increase is primarily attributable to approximately $6.1 million of additional personnel, professional services, and facility costs associated with our recent acquisitions of ConfirmNet, Facts, Peak, and E-Z Data. Also contributing to the increases in the costs of services provided was approximately $395 thousand of additional personnel related costs in support of existing operations.

Product Development Expenses

Product development expenses increased $2.4 million or 26.8%, from $9.0 million in 2008 to $11.4 million in 2009. The Company’s product development efforts are focused on the development new technologies for insurance carriers, brokers and agents, and the development of new exchanges for international and domestic markets. This increase is primarily due to costs associated with new product development activities in support of our exchange and BPO channels.

Sales and Marketing Expenses

Sales and marketing expenses increased $696 thousand or 16%, from $4.3 million in 2008 to $5.0 million in 2009. This increase is primarily attributable to additional personnel and marketing costs in support of the increased revenues being generated by our exchange and BPO channel amounting to $1.1 million, partially offset by approximately $347 thousand in reduced direct mailing, consulting, and travel costs.

General and Administrative Expenses

General and administrative expenses increased $2.1 million or 14.2%, from $14.7 million in 2008 to $16.8 million in 2009. This increase is the result of additional expenses associated with increased employee count, audit and legal fees, tax advisory services, share-based compensation, and discretionary bonuses amounting approximately $1.7 million in the aggregate.

Amortization and Depreciation Expenses

Amortization and depreciation expenses increased $649 thousand, or 19.6%, from $3.3 million in 2008 to $3.9 million in 2009. Additional amortization cost amounting to $507 thousand was recognized in connection with the amortization of acquired intangible assets associated with the business combinations completed during 2008 and 2009. Also the Company recorded $211 thousand of additional depreciation expenses incurred by Facts, Peak, and E-Z Data operations which were acquired during 2009.

Interest Income

Interest income decreased $276 thousand or 58.1% from $475 thousand in 2008 to $199 thousand in 2009 primarily due to a lower effective interest rate earned on deposited funds which dropped from 4.52% in 2008 to 1.45% in 2009.

Interest Expense

Interest expense decreased $556 thousand or 34.2% from $1.6 million in 2008 to $1.1 million in 2009. This decrease is primarily due to a reduction of $540 thousand in the average outstanding balance on our revolving line of credit in conjunction with a 2.36% drop in the interest rate on the credit facility from 4.00% to 1.64%, which together facilitated a $539 thousand reduction in interest expense.

Foreign Exchange Gain

Foreign exchange gains increased $772 thousand or 131.7% from $586 thousand in 2008 to $1.4 million in 2009. This improvement is primarily due to the $498 thousand increase in the fair value of the derivative instruments the Company put in place during 2009 to hedge the impact of fluctuations in the exchange rate between the U.S. dollar and the Indian rupee as pertaining to the U.S. dollar denominated invoices issued by our Indian subsidiary whose functional currency is the Indian rupee. The remaining $274 thousand of increase foreign exchange gains result from the settlement of transactions denominated in other than our subsidiary’s’ functional currency.

Income Taxes

Income tax expense decreased $375 thousand, or 27.1%, from $1.4 million in 2008 to $1.0 million in 2009. Our effective tax rate was 2.5% for the twelve months ended December 31, 2009, down from 4.8% for the same period in 2008. Primarily affecting the decrease in income tax expense and our consolidated effective tax rate was the $2.82 million release of a portion of the preexisting valuation allowance that had been held against cumulative legacy net operating loss (“NOL”) carryforwards in the United States, partially offset by a $2.04 million charge to increase the Company’s reserves for uncertain tax filing positions as evaluated by management. Also facilitating the relatively low consolidated world-wide effective tax rate was the utilization of $14.6 million of NOL’s to offset 2009 U.S. taxable income and advantages the Company realizes from conducting activities in certain foreign low tax jurisdictions.

TWELVE MONTHS ENDED DECEMBER 31, 2008 AND 2007

Operating Revenue

Total revenue—The Company’s revenues are derived primarily from the services sector with a smaller portion coming from the software licensing business. Service sector revenue includes transaction fees, hosting fees, implementation, software development and customization, maintenance, consulting, training and project management services provided to the Company’s customers using our data exchanges, ASP platforms, and other services. Software licensing revenue includes revenue derived from the licensing of our proprietary platforms and the licensing of third party software applications. During the twelve months ended December 31, 2008 our total revenue increased $31.9 million or 74%, to $74.8 million in 2008 compared to $42.8 million in 2007. The increase in operating revenue is a result of both organic and acquisitive growth with the effect of recently completed business combinations having greater impact. We have consistently demonstrated the ability to quickly integrate business acquisition into existing operations and thereby rapidly leverage product cross-selling opportunities. The specific components of our revenue and the changes experienced during the past year are discussed further below.

Services revenue increased $33.7 million or 86%, from $39.4 million in 2007 to $73.1 million in 2008. Essentially all divisions and sales channels achieved revenue increases during 2008, as further discussed below.

Carrier Systems division revenue increased $0.5 million due primarily to system development work being done for large insurance carrier customers of our EbixAdvantage division.

Exchange division revenues increased $23.0 million which includes revenue increases of approximately $15.7 million from the EbixExchange-Australia (formerly Telstra eBusiness Services; acquired in January 2008), $4.9 million from the EbixHealth (formerly Acclamation; acquired in August 2008). EbixExchange-U.S. (which includes our annuity and life insurance exchanges) achieved a $3.7 million increase in revenues during 2008.

BPO division revenues increased $7.1 million which includes revenue increases of approximately $5.5 million from EbixBPO’s-Hemet, CA operations (formerly IDS; acquired in November 2007), $596 thousand from the EbixBPO’s-Portland, MI operations (formerly Periculum; acquired in April 2008), and $1.1 million from EbixBPO’s-San Diego, CA operations (formerly ConfirmNet; acquired in November 2008). EbixBPO’s-Hemet, CA operation represents the headquarters of the newly formed EbixBPO division.

Broker Systems division revenue increased $1.3 million primarily from growth in our Australian operations. Partially offsetting these increases to our services revenue is a $412 thousand reduction in support and maintenance revenues associated with our legacy products. We expect that the support and maintenance services associated with the Company’s legacy products will continue to decrease due to our pronounced philosophy of finishing legacy support as an offering in the future.

Software licensing revenue decreased $1.8 million or 53%, from $3.5 million in 2007 to $1.6 million in 2008. This decrease is primarily associated with two significant contracts executed in 2007 by our Infinity division (an operating component of Carrier Systems division). The customer arrangements involved the sale of source code and application software licenses.

Costs of services provided

Costs of services provided, which includes costs associated with customer support, consulting, implementation, and training services, increased $7.0 million or 99%, from $7.1 million in 2007 to $14.2 million in 2008. This increase is related to the full year inclusion related costs incurred by IDS and Telstra (acquired in November 2007 and January 2008, respectively) which added $4.4 million to the costs of providing customer services, and to the recent acquisitions of Periculum, Acclamation and Confirmnet (acquired in April 2008, August 2008 and November 2008, respectively) which added $2.2 million to the costs of providing services to our customers. Overall our costs of services provided as a percentage of revenues increased to 18.9% in 2008 from 16.6% in 2007.

Product development expenses

Product development expenses increased $1.4 million or 18%, from $7.6 million in 2007 to $9.0 million in 2008. The Company’s product development efforts continue to be focused on the enhancement of the EbixExchange, EbixLife, Insurance Certificate- BPO, AnnuityNet, and LifeSpeed BRICS, and eGlobal, product and service lines, the development new technologies for insurance carriers, brokers and agents, and the development of new exchanges for international and domestic markets. During the year we experienced an $872 thousand increase in support of product development costs in our Exchange division, and a $211 thousand increase in product development costs in support of our Carrier Systems division. Overall our product development expenses as a percentage of revenues decreased from to 12.0% in 2008 from 17.8% in 2007.

Sales and marketing expenses

Sales and marketing expenses increased $228 thousand or 6%, from $4.2 million in 2007 to $4.3 million in 2008. This increase is attributable to $1 million of additional costs attributable to the recent acquisitions of Telstra and Acclamation, offset by approximately $775 thousand of cost reductions in our U.S. operations as a result of deploying more efficient means of reaching out to our market base and cost reductions in support of our legacy products. Overall our sales and marketing expenses as a percentage of revenues decreased to 5.8% in 2008 from 9.6% in 2007.

General and administrative expense

General and administrative expenses increased $6.1 million or 71%, from $8.6 million in 2007 to $14.7 million in 2008. Approximately $4.2 million of this increase is associated with payroll, communications, and facility costs attributable to the recent acquisitions of Telstra and Acclamation. We also experienced increases in general and administrative expenses in our U.S. headquarters aggregating to approximately $2.0 million, which were principally associated with increases in discretionary share-based compensation, travel related costs, audit and legal fees, and investor relations costs. Overall our general and administrative expenses as a percentage of revenue slightly decreased to 19.7% in 2008 from 20.1% in 2007.

Amortization and depreciation expenses

Amortization and depreciation expenses increased $707 thousand, or 27%, from $2.6 million in 2007 to $3.3 million in 2008. The increase is primarily due to the amortization of the customer relationship and developed technology intangible assets that were acquired in connection with our acquisitions of Telstra, Acclamation, and ConfirmNet which increased amortization expenses by $469 thousand, $97 thousand, and $43 thousand respectively.

Interest Expense (net)

Interest expense (net of interest income) increased $1.0 million, from $151 thousand in 2007 to $1.2 million in 2008. The increase is primarily due to additional borrowings on the Company’s revolving line of credit in the amount of $9.3 million at an average interest of 4.55% giving rise to approximately $423 thousand of additional interest expense, and the issuance of two convertible debt promissory notes in the aggregate amount of $35 million ($20 million in December 2007 and $15 million in July 2008) at an interest rate of 2.5% resulting in approximately $672 thousand of incremental interest expense.

Income Taxes

Income tax expense increased $852 thousand, or 160%, from $533 thousand in 2007 to $1.4 million in 2008. The Company’s effective tax rate was 4.83% for the twelve months ended December 31, 2008, down from 4.04% for the same period in 2007. Primarily affecting the increase in income tax expense and our consolidated effective tax rate was the impact of statutory tax rates associated with the change in the mix of taxable income amongst the various domestic and foreign tax jurisdictions in which the Company operated. Favorably impacting our consolidated effective tax rate is result of advantages the Company has from conducting activities in certain foreign low tax jurisdictions. Furthermore, in the United States, the Company utilized $9.3 million of available net operating losses to offset the current year’s U.S. domestic taxable income.

LIQUIDITY AND CAPITAL RESOURCES

Our ability to generate significant cash flows from operating activities is one of our fundamental financial strengths. Our principal sources of liquidity are the cash flows provided by our operating activities, our revolving credit facility, and cash and cash equivalents on hand. Due to the effect of temporary or timing differences resulting from the differing treatment of items for tax and accounting purposes and minimum alternative tax obligations in the U.S. and India, future cash outlays for income taxes are expected to exceed current income tax expense but will not adversely impact the Company’s liquidity position. We intend to utilize cash flows generated by our ongoing operating activities, in combination with renewing our revolving credit facility and the possible issuance of additional equity or debt securities to fund capital expenditures and organic growth initiatives, to make acquisitions, to retire outstanding indebtedness, and to possibly repurchase shares of our common stock as market and operation conditions warrant.

We believe that anticipated cash flows provided by our operating activities, together with current cash balances and access to our credit facilities and the capital markets, if required, will be sufficient to meet our projected cash requirements for the next twelve months, and the foreseeable future thereafter, although any projections of future cash needs, cash flows, and the general market condition for credit and equity securities may be subject to substantial uncertainty. In the event additional liquidity needs arise, we may raise funds from a combination of sources, including the potential issuance of debt or equity securities.

We continue to strategically evaluate our ability to sell additional equity or debt securities, to expand existing or obtain new credit facilities from lenders, and to restructure our debt in order to strengthen our financial position. The sale of additional equity or convertible debt securities could result in additional dilution to our shareholders. We regularly evaluate our liquidity requirements, including the need for additional debt or equity offerings, when considering potential business acquisitions, development of new products or services, or the retirement of debt. During 2010 the Company intends to utilize its cash and other financing resources towards making strategic accretive acquisitions in the insurance data exchange arena. However, there are no assurances that such financing facilities will be available in amounts or on terms acceptable to us, if at all.

In February 2010 the Company entered into a new credit facility with Bank of America (“BOA”). The new financing is comprised of a two-year, $25 million secured revolving credit facility, and a $10 million secured term loan which amortizes over a two year period with quarterly principal and interest payments commencing on March 31, 2010 and a final payment of all remaining outstanding principal and accrued interest due on February 12, 2012. The credit facility also includes an accordion feature providing for an expansion of $10.0 million with the participation of an additional commercial bank participating in the facility with BOA as administrative agent. The initial interest rate applicable to the entire BOA credit facility is LIBOR plus 1.75%.

Regarding the $20.0 million December 18, 2007 convertible note with Whitebox, on October 7, 2009 Ebix elected to exercise its mandatory conversion option. As specified by the applicable section of the convertible note agreement, since the price of the Company’s common stock remained above the $14.22 per share threshold price for 30 consecutive trading days the Company caused Whitebox to surrender the underlying 2.5% Secured Convertible Promissory Note due December 18, 2009, and to convert the remaining principal in the amount of $5.3 million together with accrued interest thereon in the amount of $105 thousand into 762,810 shares of the Company’s common stock at a conversion price of $7.09 per share.

Regarding the $15.0 million July 11, 2008 convertible note with Whitebox, through December 31, 2009 Whitebox converted $10.7 million of principal and accrued interest into 1,144,356 shares of the Company’s common stock. Furthermore On February 3, 2010 Whitebox fully converted the remaining principal on the Note in the amount of $4.39 million and accrued interest in the amount of $62 thousand into 476,662 shares of the Company’s common stock.

Our cash and cash equivalents were $19.2 million and $9.5 million at December 31, 2009 and 2008, respectively.

Our current ratio improved to 0.62 at December 31, 2009 as compared to 0.47 at December 31, 2008, although a working capital deficit in the amount of $28.6 million exists at the end of the year. The improvement in our short-term liquidity position is primarily the result of additional trade receivables generated by our increased revenue streams, and increased cash provided by our ongoing operating activities. The existing working capital deficit is essentially the result of an accounting reclassification, driven by two factors. Firstly, due to the current classification of our existing two-year revolving line of credit which was to mature in February 2010; and secondly, the current classification of the convertible notes issued in August 2009 and maturing in August 2011, but which are required to be classified as current due to the fact that the underlying shares are considered to be in the money given their respective conversion prices as compared to the price of the Company’s common stock on December 31, 2009 and the Company’s obligation to settle the principal amount of any conversion in cash. We believe that our ability to generate sustainable significant cash flows from operations will enable the Company to continue to fund its current liabilities from current assets including available cash balances for the foreseeable future.

Operating Activities

For the twelve months ended December 31, 2009, the Company generated $33.9 million of net cash flow from operating activities compared to $26.8 million for the year ended December 31, 2008, a 26.5% increase. The major source of cash provided by operating activities for 2009 was net income of $38.8 million, net of $(9.7) million in working capital requirements, $3.9 million of depreciation and amortization, and $1.4 million of non-cash compensation.

For the twelve months ended December 31, 2008, the Company generated $26.8 million of net cash flow from operating activities compared to $15.0 million for the year ended December 31, 2007, a 76% increase. The major source of cash provided by operating activities for 2008 was net income of $27.3 million, net of $(2.9) million in working capital requirements, $3.3 million of depreciation and amortization, and $703 thousand of non-cash compensation.

Investing Activities

Net cash used for investing activities totaled $47.4 million for the twelve months ended December 31, 2009 of which $7.9 million was used for the October 2009 acquisition of Peak (net of $187 thousand of cash acquired), $25.4 million was used for the cash consideration portion of the E-Z Data acquisition purchase price (net of $206 of cash acquired), $6.2 million was used for the May 2009 acquisition of Facts (net of $796 thousand of cash acquired), $1.0 million was used to fulfill earn-out payment obligations to the former shareholders of IDS (a November 2007 business acquisition), $3.3 million was used to fulfill earn-out payment obligations to the former shareholders of ConfirmNet (a November 2008 business acquisition), $3.1 million was used for purchases of operating equipment to enhance the performance of our technology platforms, and $263 thousand was used investments in marketable securities (specifically bank certificates of deposit).

Net cash used for investing activities totaled $73.3 million for the twelve months ended December 31, 2008, of which $43.0 million was used for the January 2008 purchase of Telstra (net of 1.3 million of cash acquired), $21.4 million was used for the August 2008 purchase of Acclamation (net of the $635 thousand of cash acquired), $1.1 million was used for the April 2008 purchase of Periculum (net of the 30 thousand of cash acquired), $7.3 million was used for the November 2008 purchase of ConfirmNet (net of $61 thousand cash acquired), $500 thousand was used to fulfill an earn-out payment to for shareholders of Infinity (a 2006 business acquisition) and $614 thousand was used for capital expenditures pertaining to the enhancement of our technology platforms and the purchases of operating equipment.

Financing Activities

During the twelve months ended December 31, 2009 the net cash provided by financing activities was $23.2 million. This financing cash inflow was comprised of $25.0 million from the proceeds two convertible debt issuances and $1.6 million from exercise of stock options. Partially offsetting these financing cash inflows was $1.8 million of payments against our line of credit (net of $27.1 million of draws), $1.0 million was used to service existing long-term debt and capital lease obligations, and $507 thousand to complete open market repurchases of our common stock.

Net cash provided by financing activities for the twelve months ended December 31, 2008 totaled $12.3 million. During the 2008 reporting period the Company borrowed $9.3 million from our revolving line of credit, received $15.0 million from the issuance of convertible debt, and received $12.5 million from unregistered sales of our common stock. The proceeds of these financing inflows were primarily used for operating and working capital needs, and to complete the acquisition of Acclamation in August 2008. Also, in April of 2008 the Company used $24.2 million to repurchase 1.2 million shares of our common stock, at $20.00 per share, from Brit. In addition during the year the Company used $1.0 million to repurchase shares of our common stock on the open market, $503 thousand to service existing long-term debt and capital lease obligations, and received $1.2 million from the exercise of stock options.

Revolving Credit Facility

As of December 31, 2009 the Company had a $25.0 million revolving line of credit facility with Bank of America Corporation. The line provides for a variable interest rate at Libor plus 1.3%, is secured by a first security interest in substantially all of the Company’s assets. The underlying Loan and Security Agreement was set to expire on August 31, 2009, however, as a result of further amendments to the Second Amended and Restated Loan and Security Agreement (the “amended loan agreement”) which was effective as of August 27, 2009, the revolving credit line facility was extended to February 15, 2010 at the same Libor plus 1.3% interest rate. The amended loan agreement also contains certain restrictive covenants concerning the incurrence of new debt and consummation of new business acquisitions. The Company was in full compliance with all such financial and restrictive covenants as of December 31, 2009. There are no outstanding events of default.

As of December 31, 2009 the outstanding balance on the line was $23.1 million and the facility carried an interest rate of 1.53%, thereby leaving $1.9 million available under that credit facility. During the year ending December 31, 2009 the Company borrowed $27.1 million from the revolving line of credit facility and repaid $28.9 million against the credit line.

In February 2010 the Company entered into a new credit facility with Bank of America. This arrangement is further described in Note 18 “Subsequent Events” to the accompanying Consolidated Financial Statements.

Contractual Obligations and Commercial Commitments

The following table summarizes our significant contractual purchase obligations and other long-term obligations as of December 31, 2009. The table excludes commitments that are contingent based on events or factors uncertain at this time.

		Payment Due by Period
						Less Than												More than
		Total				1 Year				1 - 3 Years				3 - 5 Years				5 years
		(in thousands)
Short and Long-term Debt		$	52,487			$	27,487			$	25,000			$	—			$	—
Operating leases			10,410				3,118				4,526				2,616				150
Capital Leases			1,267				596				574				97				—
Total		$	64,164			$	31,201			$	30,100			$	2,713			$	150

Off Balance Sheet Transactions

We do not engage in off-balance sheet financing activities.

Inflation

We do not believe that the rate of inflation has had a material effect on our operating results. However, inflation could adversely affect our future operating results.

RECENT ACCOUNTING PRONOUNCEMENTS

The following are recently issued accounting pronouncements that are pertinent to the Company’s business:

In October 2009, the FASB issued amended revenue recognition guidance for arrangements with multiple deliverables. The new guidance eliminates the requirement that all undelivered elements have Vendor Specific Objective Evidence (“VSOE”) or Third Party Evidence (“TPE”) before an entity can recognize the portion of an overall arrangement fee that is attributable to items that already been delivered. In the absence of VSOE or TPE of the standalone selling price for one or more delivered or undelivered elements in a multiple-element arrangement, the overall arrangement fee will be allocated to each element (both delivered and undelivered items) based on their relative estimated selling price.

In September 2009, FASB issued new guidance related to revenue arrangement with multiple deliverables which: (a) provides application guidance on whether multiple deliverables exist in an arrangement with a customer, and if so, how the arrangement consideration should be separated and allocated; (b) requires an entity to allocate revenue using estimated selling prices of deliverables if vendor-specific objective evidence or third party evidence of selling prices is not available; and, (c) eliminates the use of the “residual method” to allocate revenue. This guidance is to be applied on a prospective basis for revenue arrangements entered into in fiscal years beginning on or after June 15, 2010, with earlier application permitted. Alternatively, an entity can elect to adopt new guidance on a retrospective basis. The Company will adopt this new guidance in 2011 and currently is in process of assessing its impact.

Also in September 2009, the FASB issued new guidance related to certain revenue arrangements that include software elements which removes tangible products from the scope of previously issued authoritative guidance on software revenue recognition and provides guidance on determining whether software deliverables in an arrangement that include tangible products are within the scope of existing software revenue guidance. This guidance is to be applied on a prospective basis for revenue arrangements entered into in fiscal years beginning on or after June 15, 2010, with earlier application permitted. Alternatively, an entity can elect to adopt new guidance on a retrospective basis. The Company will adopt this new guidance in 2011 but does not expect its adoption to have a material impact on our consolidated financial position, results of operations or cash flows, as the sale of tangible products are not a significant component of the Company’s revenues.

In May 2009, the FASB issued new accounting guidance related to accounting and disclosure of subsequent events, which provides guidance to establish general standards of accounting for, and disclosures of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The new guidance is effective for interim or fiscal periods ending after June 15, 2009. Accordingly, the Company adopted the provisions of the guidance effective from June 30, 2009. The adoption of this guidance did not have a material impact on our consolidated financial position, results of operations or cash flows. The provisions of this new guidance will result in additional disclosures with respect to subsequent events.

In April 2009, FASB issued new accounting guidance related to interim disclosure about the fair value of the financial instruments. The guidance requires disclosures about fair value of financial instruments in interim as well as annual financial statements. This guidance is effective for periods ending after June 15, 2009. Accordingly, the Company adopted the guidance on September, 2009. The adoption of this guidance did not have a material impact on our consolidated financial position, results of operations or cash flows. However, the provisions of the guidance did result in additional disclosures with respect to the fair value of the Company’s financial instruments. See Note 11, Derivative Instruments, for these additional disclosures.

Furthermore in the April 2009 the FASB issued additional guidance regarding the determination of fair which provides clarification in order to make fair value measurements more consistent and reaffirms the objective of fair value measurements, specifically how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions and emphasizes the need to use judgment to ascertain if a formerly active market has become inactive and how to determine fair values when markets have become inactive. The Company has adopted this accounting guidance, and its adoption did not have material impact on our consolidated financial position and results of operations.

In December 2007, the FASB issued new accounting guidance pertaining to the accounting for business combinations and related disclosures. This new guidance addresses the recognition and accounting for identifiable assets acquired, liabilities assumed, and non-controlling interests in business combinations. The guidance also establishes expanded disclosure requirements for business and improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. The guidance was effective for fiscal years beginning after December 15, 2008, and we applied this new pronouncement to the 2009 acquisitions of EZ Data, Facts and Peak Performance.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”), as promulgated in the United States, requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in our Consolidated Financial Statements and accompanying notes. We believe the most complex and sensitive judgments, because of their significance to the Consolidated Financial Statements, result primarily from the need to make estimates and assumptions about the effects of matters that are inherently uncertain. The following accounting policies involve the use of “critical accounting estimates” because they are particularly dependent on estimates and assumptions made by management about matters that are uncertain at the time the accounting estimates are made. In addition, while we have used our best estimates based on facts and circumstances available to us at the time, different estimates reasonably could have been used in the current period, or changes in the accounting estimates that we used are reasonably likely to occur from period to period which may have a material impact on our financial condition and results of operations. For additional information about these policies, see Note 1 of the Notes to the Consolidated Financial Statements in this Form 10-K. Although we believe that our estimates, assumptions and judgments are reasonable, they are limited based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.

Revenue Recognition

The Company derives its revenues primarily from professional and support services, which includes revenue generated from software development projects and associated fees for consulting, implementation, training, and project management provided to customers with installed systems, subscription and transaction fees pertaining to services delivered over our exchanges or from our application service provider (“ASP”) platforms, and business process outsourcing revenue. Sales and value-added taxes are not included in revenues, but rather are recorded as a liability until the taxes assessed are remitted to the respective taxing authorities.

In accordance with Financial Accounting Standard Board (FASB) and Securities and Exchange Commission Staff Accounting (SEC) accounting guidance on revenue recognition the Company considers revenue earned and realizable when: (a) persuasive evidence of the sales arrangement exists, (b) the arrangement fee is fixed or determinable, (c) service delivery or performance has occurred, (d) customer acceptance has been received, if contractually required, and (e) collectability of the arrangement fee is probable. The Company typically uses signed contractual agreements as persuasive evidence of a sales arrangement. We apply the provisions of the relevant FASB accounting pronouncements related to all transactions involving the license of software where the software deliverables are considered more than inconsequential to the other elements in the arrangement. For contracts that contain multiple deliverables, we analyze the revenue arrangements in accordance with the appropriate authoritative guidance, which provides criteria governing how to determine whether goods or services that are delivered separately in a bundled sales arrangement should be considered as separate units of accounting for the purpose of revenue recognition. Deliverables are accounted for separately if they meet all of the following criteria: (a) the delivered item has value to the customer on a stand-alone basis; (b) there is objective and reliable evidence of the fair value of the undelivered items; and (c) if the arrangement includes a general right of return relative to the delivered items, the delivery or performance of the undelivered items is probable and substantially controlled by the Company.

The Company begins to recognize revenue from license fees for its ASP products upon delivery and the customer’s acceptance of the software implementation and customizations if applicable. Transaction services fee revenue for this use of our exchanges or ASP platforms is recognized as the transactions occur and are generally billed in arrears. Service fees for hosting arrangements are recognized over the requisite service period. Revenue derived from the licensing of third party software products in connection with sales of the Company’s software licenses and is recognized upon delivery together with the Company’s licensed software products. Training, data conversion, installation, and consulting services fees are recognized as revenue when the services are performed. Revenue for maintenance and support services is recognized ratably over the term of the support agreement. Revenues derived from initial setup or registration fees are recognized ratably over the term of the agreement in accordance with FASB and SEC accounting guidance on revenue recognition.

Deferred revenue includes maintenance and support payments or billings that have been received and recorded prior to performance and, in certain cases, cash collections; initial setup or registration fees under hosting agreements; software license fees received in advance of delivery, acceptance, and/or completion of the earnings process; and amounts received under multi-element arrangements in which objective evidence of the fair value for the undelivered elements does not exist. In these instances revenue is recognized when the fair value of the undelivered elements is determinable or when all contractual elements have been completed and delivered.

Allowance for Doubtful Accounts Receivable

Management specifically analyzes accounts receivable and historical bad debts, write-offs, customer concentrations, customer credit-worthiness, current economic trends and changes in our customer payment terms when evaluating the adequacy of the allowance for doubtful accounts.

Valuation of Goodwill

Goodwill represents the cost in excess of the fair value of the identifiable net assets of acquired businesses. The Company applies the provisions of the FASB’s accounting guidance on goodwill and other intangible assets which addresses how goodwill and other acquired intangible assets should be accounted for in financial statements. In this regard we test these intangible assets for impairment annually or more frequently if indicators of potential impairment are present. Such potential impairment indicators include a significant change in the business climate, legal factors, operating performance indicators, competition, and the sale or disposition of a significant portion of the business. The testing involves comparing the reporting unit and intangible asset carrying values to their respective fair values; we determine fair value by applying the discounted cash flow method using the present value of future estimated net cash flows.

These projections of cash flows are based on our views of growth rates, anticipated future economic conditions and the appropriate discount rates relative to risk and estimates of residual values. We believe that our estimates are consistent with assumptions that marketplace participants would use in their estimates of fair value. Our estimates of fair value for each reporting unit are corroborated by market multiple comparables. The use of different estimates or assumptions for our projected discounted cash flows (e.g., growth rates, future economic conditions, discount rates and estimates of terminal values) when determining the fair value of our reporting units could result in different values and may result in a goodwill impairment charge. During the twelve months ended December 31, 2009, 2008, and 2007, we had no impairment of our reporting unit goodwill balances. For additional information about goodwill, see Note 1 of the Notes to Consolidated Financial Statements in this Form 10-K.

Income Taxes

We account for income taxes in accordance with FASB accounting guidance on the accounting and disclosure of income taxes, which involves estimating the Company’s current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheets. We then assess the likelihood that our net deferred tax assets will be recovered from future taxable income in the years in which those temporary differences are expected to be recovered or settled, and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. In this regard a partial valuation allowance is currently set against some of our accumulated domestic net operating loss carryforwards because we believe it is more likely than not that a portion of this deferred tax asset may not be realizable due to uncertainty as to future taxable income being generated by our EbixHealth division as a result of the impact of pending healthcare legislation.

The Company has not provided deferred U.S. taxes on its unremitted foreign earnings because it considers them to be permanently re-invested.

The Company follows the provisions of FASB accounting guidance on accounting for uncertain income tax positions. This guidance clarified the accounting for uncertainty in income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The guidance utilizes a two-step approach for evaluating tax positions. Recognition (“Step 1”) occurs when an enterprise concludes that a tax position, based solely on its technical merits is more likely than not to be sustained upon examination. Measurement (“Step 2”) is only addressed if Step 1 has been satisfied. Under Step 2, the tax benefit is measured at the largest amount of benefit, determined on a cumulative probability basis that is more likely than not to be realized upon final settlement.

Foreign Currency Translation

Our reporting currency is the U.S. dollar. The functional currency of the Company’s foreign subsidiaries is generally the local currency of the country in which the subsidiary operates. The assets and liabilities of foreign subsidiaries are translated into U.S. Dollars at the rates of exchange at the balance sheet dates. Income and expense accounts are translated at the average exchange rates in effect during the period. Gains and losses resulting from translation adjustments are included as a component of other comprehensive income in the accompanying consolidated financial statements. Foreign exchange transaction gains and losses that are derived from transactions denominated in other than the subsidiary’s’ functional currency is included in the determination of net income.

Quarterly Financial Information (unaudited):

The following is the unaudited quarterly financial information for 2009, 2008 and 2007:

		First				Second				Third				Fourth
		Quarter				Quarter				Quarter				Quarter
		(in thousands, except per share data)
Year Ended December 31, 2009
Total revenues		$	20,668			$	22,421			$	23,292			$	31,304
Gross Profit			16,367				17,889				18,827				23,328
Operating income			8,357				9,260				9,783				11,856
Net income			8,335				8,956				9,434				12,097
Net income per common share:
Basic *		$	0.28			$	0.29			$	0.30			$	0.36
Diluted *		$	0.23			$	0.24			$	0.25			$	0.31
Year Ended December 31, 2008
Total revenues		$	16,639			$	17,803			$	20,168			$	20,142
Gross Profit			13,703				14,578				16,228				16,083
Operating income			6,143				6,905				8,119				8,097
Net income			5,670				6,336				7,398				7,910
Net income per common share:
Basic *		$	0.18			$	0.22			$	0.26			$	0.27
Diluted *		$	0.16			$	0.18			$	0.21			$	0.22
Year Ended December 31, 2007
Total revenues		$	9,018			$	9,816			$	11,807			$	12,201
Gross Profit			7,452				8,098				9,966				10,211
Operating income			2,238				2,298				3,712				4,553
Net income			1,962				2,513				3,693				4,498
Net income per common share:
Basic *		$	0.08			$	0.09			$	0.13			$	0.15
Diluted *		$	0.07			$	0.08			$	0.11			$	0.13

Item 6A:		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to certain market risks, including foreign currency exchange rates and interest rates. The Company’s exposure to foreign currency exchange rates risk is related our foreign-based operations where transactions are denominated in foreign currencies and are subject to market risk with respect to fluctuations in the relative value of currencies. Most of the Company’s operations are based in the U.S. and, accordingly, the majority of our transactions are denominated in U.S. dollars, however, the Company has operations in Australia, New Zealand, Singapore, and India, and we conduct transactions in the local currencies of each location. There can be no assurance that fluctuations in the value of foreign currencies will not have a material adverse effect on the Company’s business, operating results, revenues or financial condition. During the years of 2009, 2008, and 2007 the net change in the cumulative foreign currency translation account, which is a component of stockholders’ equity, was an unrealized gain(loss) of $11.5 million, $(15.1)million, and $1.8 million, respectively. The Company considered the historical trends in currency exchange rate and determined that it was reasonably possible that adverse changes in our respective foreign currency exchange rates of 20% could be experienced in the near term. Such an adverse change in currency exchange rates would have resulted in reduction to pre-tax income of approximately $2.6 million, $2.9 million and $122 thousand for the years ended December 31, 2009, 2008 and 2007, respectively.

The Company’s exposure to interest rate risk relates to its interest expense on outstanding debt obligations and to its interest income on existing cash balances. As of December 31, 2009 the Company had $52.5 million of outstanding debt obligations which consisted of a $23.1 million balance on our revolving line of credit, a $4.4 million promissory note from 2008 with Whitebox, a $20.0 million convertible promissory notes from 2009 with Whitebox and IAM, and a $5.0 million convertible promissory note with Rennes. The 2008 Whitebox convertible note, was subsequently exercised fully on February 3, 2010 and had an interest rate fixed at 2.5%, and the 2009 Whitebox, IAM, and Rennes convertible note’s are non-interest bearing, therefore these instruments present no risk as to exposures to financial market fluctuations. The Company’s revolving line of credit bears interest at the rate of LIBOR + 1.3%, and stood at 1.53% at December 31, 2009. The Company is exposed to market risk in relation to this line of credit in regards to the potential increase to interest income arising from adverse changes in interest rates. This interest rate risk is estimated as the potential decrease in earnings resulting from a hypothetical 30% increase in the LIBOR rate. Such an adverse change in the LIBOR rate would have resulted in a reduction to pre-tax income of approximately $28 thousand and $134 thousand for the years ending December 31, 2009 and 2008, respectively. The Company’s average cash balances during 2009 were $13.8 million and its existing cash balances as of December 31, 2009 was $19.2 million. The Company is exposed to market risk in relation to these cash balances in regards to the potential loss of interest income arising from adverse changes in interest rates. This interest rate risk is estimated as the potential decrease in earnings resulting from a hypothetical 20% decrease in interest rates earned on deposited funds. Such an adverse change in these interest rates would have resulted in a reduction to pre-tax income of approximately $40 thousand and $91 thousand for the years ended December 31, 2009 and 2008, respectively.

During the year ended December 31, 2009, we entered into a series of one-year forward foreign exchange contracts to hedge the intercompany receivables originated by our Indian subsidiary that are denominated in United States dollars. These U.S dollars / Indian rupee hedges are intended to partially offset the impact of movement in exchange rates on future operating costs, and to reduce the risk that our earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. As of December 31, 2009, the notional value of these contracts which are scheduled to mature in May and December 2010 is $13.7 million. Changes in the fair value of these derivative instruments are recognized in our consolidated income statement. We use these instruments as economic hedges, intended to mitigate the effects of changes in foreign exchange rates, and not for speculative purposes. These derivative instruments do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the intercompany receivables being hedged. For the twelve months ended December 31, 2009, we recognized a gain of $498 thousand included in “Foreign exchange gain” in the consolidated statements of income. Based upon a sensitivity analysis performed against our forward foreign exchange contracts at December 31, 2009, which measures the hypothetical change in the fair value of the contracts resulting from 20% shift in the value of exchange rates of the Indian rupee relative to the U.S. dollar, a 20% appreciation in the U.S. dollar against the Indian rupee (and a corresponding increase in the value of the hedged assets) would lead to a decrease in the fair value of our forward foreign exchange contracts by $2.18 million. Conversely, a 20% depreciation in the U.S. dollar against the Indian rupee would lead to an increase in the fair value of our forward foreign exchange contracts by $3.27 million. We regularly review our hedging strategies and may in the future, as a part of this review, determine the need to change our hedging activities. Either of the two possibilities is likely to be offset by the change in value of the corresponding accounts receivable against which these hedges were set up.

During the year ending December 31, 2009 in connection with the acquisition of E-Z Data the Company issued a put option to the sellers which is exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, which if exercised would enable them to sell the underlying shares of common stock back to the Company at a 10% discount off of the per-share value established on the effective date of the acquisition. Using a Black-Scholes model we determined that the initial fair value for the put option was $6.6 million and that its fair value on December 31, 2009 had decreased by $89 thousand. The inputs used in the valuation of the put option include term, stock price volatility, current stock price, exercise price, and the risk free rate of return, with the volatility factor being the input subject to the most variation. Therefore, as pertaining to the put option, the Company is exposed to market risk as regarding the rate and magnitude of change of our stock price and corresponding variances to the volatility factor used in the Black-Scholes valuation model. We evaluated this risk by estimating the potential adverse impact of a 10% increase in the volatility factor and determined that such a change in the volatility factor would have resulted in an approximate $700 thousand increase to the put option liability and a corresponding reduction to pre-tax income as of and for the year ended December 31, 2009.

Item 7.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See also the “Quarterly Financial Information” included under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Ebix, Inc.:

We have audited the accompanying consolidated balance sheets of Ebix, Inc. and subsidiaries (the Company) as of December 31, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the two years in the period ended December 31, 2009. We have also audited the accompanying consolidated financial statement schedule for the years ended December 31, 2009 and 2008 listed in the index at Item 15. These consolidated financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ebix, Inc. and subsidiaries at December 31, 2009 and 2008 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related consolidated financial statement schedule for the years ended December 31, 2009 and 2008, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009 and 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 16, 2010 expressed an unqualified opinion thereon.

/s/ Cherry, Bekaert & Holland, L.L.P.

Atlanta, Georgia
March 16, 2010

Report of Independent Registered Public Accounting Firm

We have audited the accompanying consolidated balance sheet of Ebix, Inc. and subsidiaries as of December 31, 2007, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for the year then ended. Our audit also included the 2007 financial statement schedule listed in the Index at Item 15. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ebix, Inc. and subsidiaries at December 31, 2007, and the consolidated results of their operations and their cash flows for year ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related 2007 financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As disclosed in Notes 1 and 9 to the consolidated financial statements, effective January 1, 2007, the Company adopted Financial Accounting Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”.

/s/ Habif, Arogeti & Wynne LLP

Atlanta, Georgia
March 28, 2008

Ebix, Inc. and Subsidiaries
Consolidated Statements of Income

		Year Ended				Year Ended				Year Ended
		December 31,				December 31,				December 31,
		2009				2008				2007
		(In thousands, except per share amounts)
Operating revenue:		$	97,685			$	74,752			$	42,841
Operating expenses:
Costs of services provided			21,274				14,161				7,114
Product development			11,362				8,962				7,609
Sales and marketing			5,040				4,344				4,116
General and administrative			16,798				14,715				8,602
Amortization and depreciation			3,955				3,306				2,599
Total operating expenses			58,429				45,488				30,040
Operating income			39,256				29,264				12,801
Interest income			199				475				509
Interest expense			(1,070	)			(1,626	)			(358	)
Other non-operating income			89				—				—
Foreign exchange gain			1,358				586				247
Income before income taxes			39,832				28,699				13,199
Income tax provision			(1,010	)			(1,385	)			(533	)
Net income		$	38,822			$	27,314			$	12,666
Basic earnings per common share*		$	1.24			$	0.93			$	0.45
Diluted earnings per common share*		$	1.03			$	0.76			$	0.40
Basic weighted average shares outstanding*			31,398				29,514				27,917
Diluted weighted average shares outstanding*			38,014				36,780				31,604

See accompanying notes to consolidated financial statements.

Ebix, Inc. and Subsidiaries
Consolidated Balance Sheets

		December 31,				December 31,
		2009				2008
		(In thousands,
		except share amounts)
ASSETS
Current assets:
Cash and cash equivalents		$	19,227			$	9,475
Short-term investments			1,799				1,536
Trade accounts receivable, less allowances of $565 and $453, respectively			22,861				13,562
Other current assets			2,628				951
Total current assets			46,515				25,524
Property and equipment, net			7,865				3,774
Goodwill			157,245				88,488
Intangibles, net			20,505				10,235
Indefinite-lived intangibles			29,223				11,589
Other assets			814				1,557
Total assets		$	262,167			$	141,167
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	11,060			$	8,245
Accrued payroll and related benefits			3,634				2,709
Short term debt			23,100				24,945
Current portion of convertible debt, net of discount of $706 and $0, respectively			28,681				11,518
Current portion of long term debt and capital lease obligation			596				912
Deferred revenue			7,754				5,383
Other current liabilities			272				142
Total current liabilities			75,097				53,854
Convertible debt			—				15,000
Other long term debt and capital lease obligation, less current portion			671				290
Other liabilities			2,965				941
Deferred tax liability, net			5,147				—
Put option liability			6,596				—
Deferred revenue			269				330
Deferred rent			679				610
Total liabilities			91,424				71,025
Commitments and Contingencies, Note 7
Stockholders’ equity:
Convertible Series D Preferred stock, $.10 par value, 500,000 shares authorized, no shares issued and outstanding at December 31, 2009 and 2008			—				—
Common stock*, $.10 par value, 60,000,000 shares authorized, 34,474,608 issued and 34,434,099 outstanding at December 31, 2009 and 30,019,365 issued and 29,840,130 outstanding at December 31, 2008			3,443				981
Additional paid-in capital			158,404				111,641
Treasury stock* (40,509 and 179,235 shares as of December 31, 2009 and December 31, 2008 respectively)			(76	)			(1,178	)
Retained earnings (accumulated deficit)			8,623				(30,199	)
Accumulated other comprehensive income (loss)			349				(11,103	)
Total stockholders’ equity			170,743				70,142
Total liabilities and stockholders’ equity		$	262,167			$	141,167

See accompanying notes to consolidated financial statements.

Ebix, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity and Comprehensive Income

																										Accumulated
		Common Stock*																								Other
										Treasury								Additional								Comprehensive
		Issued								Stock				Treasury				Paid-in				Retained				(Loss)								Comprehensive
		Shares				Amount				Shares				Stock				Capital*				Earnings				Income				Total				Income
		(In thousands, except share amounts)
Balance, January 1, 2007			25,714,602			$	286				(80,010	)		$	(149	)		$	94,914			$	(70,179	)		$	839			$	25,711
Net income																							12,666								12,666			$	12,666
Cumulative translation adjustment																											1,841				1,841				1,841
Comprehensive income																																		$	14,507
Proceeds from issuance of common stock (net of issuance costs)			4,472,298				48												18,895												18,943
Exercise of stock options			370,197				3												641												644
Restricted stock compensation			99,009																153												153
Compensation related to the vesting of stock options																			168												168
Balance, December 31, 2007			30,656,106				337				(80,010	)		$	(149	)		$	114,771			$	(57,513	)		$	2,680			$	60,126
Net income																							27,314								27,314			$	27,314
Cumulative translation adjustment																											(15,108	)			(15,108	)			(15,108	)
Comprehensive income																															—			$	12,206
Proceeds from issuance of common stock (net of issuance costs)			1,530,000				17												12,502												12,519
Exercise of stock options			308,457				4												1,236												1,240
Restricted stock compensation			200,565																591												591
Compensation related to the vesting of stock options																			107												107
Repurchase of common stock			(3,631,500	)			(41	)			(99,225	)			(1,029	)			(24,216	)											(25,286	)
Conversion of principal and interest on Convertible promissory notes			1,217,691				29												8,610												8,639
Effect 3-1 stock split							635												(635	)											—
Other			(261,954	)															(1,325	)							1,325				—
Balance, December 31, 2008			30,019,365			$	981				(179,235	)		$	(1,178	)		$	111,641			$	(30,199	)		$	(11,103	)		$	70,142
Net income																							38,822								38,822				38,822
Cumulative translation adjustment																											11,452				11,452				11,452
Comprehensive income																															—			$	50,274
Exercise of stock options			302,163				10												1,555												1,565
Restricted stock compensation																			1,153												1,153
Compensation related to the vesting of stock options																			216												216
Repurchase of common stock			(48,672	)			(2	)			(31,950	)			(205	)			(298	)											(505	)
Retirement of treasury stock			(170,676	)							170,676				1,307				(1,307	)											—
Conversion of principal and interest on Convertible promissory notes			2,790,186				93												22,262												22,355
Effect 3-1 stock split							2,295												(2,295	)											—
Imputed interest on issuance of convertible debt																			534												534
Shares subscribed for business acquisitions			1,488,984				50												24,950												25,000
Vesting of restricted stock			93,258				16												(7	)											9
Balance, December 31, 2009			34,474,608			$	3,443				(40,509	)		$	(76	)		$	158,404			$	8,623			$	349			$	170,743

See accompanying notes to consolidated financial statements.

Ebix, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

		Year Ended				Year Ended				Year Ended
		December 31,				December 31,				December 31,
		2009				2008				2007
		(In thousands)
Cash flows from operating activities:
Net income		$	38,822			$	27,314			$	12,666
Cumulative effect of adoption of FIN 48			—				—				(455	)
Adjustments to reconcile net income before cumulative effect of the adoption of FIN 48 to cash provided by (used in) operating activities:
Depreciation and amortization			3,955				3,306				2,599
Provision for doubtful accounts			321				298				121
Provision for deferred taxes			(2,615	)			(1,846	)			—
Unrealized foreign exchange gain on forward contracts			(500	)			—				—
Unrealized gain on put option			(89	)			—				—
Share-based compensation			1,369				698				317
Changes in current assets and liabilities, net of acquisitions:
Accounts receivable			(8,619	)			(163	)			(803	)
Other assets			(577	)			737				(1,952	)
Accounts payable and accrued expenses			1,127				(1,284	)			377
Accrued payroll and related benefits			587				84				(32	)
Deferred rent			27				(109	)			568
Other liabilities			109				60				1,491
Deferred revenue			(40	)			(2,270	)			142
Net cash provided by operating activities			33,877				26,825				15,039
Cash flows from investing activities:
Investment in Finetre, net of cash acquired			—				—				(15	)
Investment in Infinity, net of cash acquired			—				(500	)			(2,870	)
Investment in IDS, net of cash acquired			(1,000	)			—				(11,253	)
Investment in Telstra, net of cash acquired			—				(42,942	)			—
Investment in Periculum, net of cash acquired			(200	)			(1,067	)			—
Investment in Acclamation, net of cash acquired			(85	)			(21,388	)			—
Investment in Confirmnet, net of cash acquired			(3,279	)			(7,294	)			—
(Purchases)/maturities of marketable securities, net			(263	)			(507	)			280
Investment in Facts, net of cash acquired			(6,215	)			—				—
Investment in Peak Performance, net of cash acquired			(7,894	)			—				—
Investment in EZ Data, net of cash acquired			(25,362	)			—				—
Capital expenditures			(3,129	)			(615	)			(1,754	)
Net cash used in investing activities			(47,427	)			(74,313	)			(15,612	)
Cash flows from financing activities:
Proceeds from the issuance of common stock, net of issuance costs			—				12,519				18,945
Proceeds from / Repayment to line of credit, net			(1,846	)			9,295				16,400
Proceeds from the issuance of convertible debt			25,000				15,000				20,000
Payments to acquire treasury stock			—				(1,029	)			—
Payments on line of credit			—				—				(10,750	)
Repurchase of common stock			(505	)			(24,246	)			—
Payments of long term debt			(742	)			(500	)			(966	)
Payments for capital lease obligations			(293	)			(3	)			(3	)
Proceeds from exercise of common stock options			1,565				1,239				646
Net cash provided by financing activities			23,179				12,275				44,272
Effect of foreign exchange rates on cash and cash equivalents			123				(3,749	)			1,034
Net change in cash and cash equivalents			9,752				(38,962	)			44,733
Cash and cash equivalents at the beginning of the year			9,475				48,437				3,704
Cash and cash equivalents at the end of the year		$	19,227			$	9,475			$	48,437
Supplemental disclosures of cash flow information:
Interest paid		$	1,125			$	1,370			$	386
Income taxes paid			4,752				1,937				7