Business Combinations

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Business Combinations

Business Combinations

    The Company executes accretive business acquisitions in combination with organic growth initiatives as part of its comprehensive business growth and expansion strategy. The Company looks to acquire businesses that are complementary to Ebix's existing products and services. Since June 1, 2012 the Company has completed four business acquisitions including PlanetSoft, Inc. which is considered significant and is discussed further below.

A significant component of the purchase price consideration for many of the Company's business acquisitions is a potential future cash earnout based on reaching certain specified future revenue targets. The Company recognizes these potential obligations as contingent liabilities as reported on its Condensed Consolidated Balance Sheets. As discussed in more detail in Note 1, these contingent consideration liabilities are recorded at fair value on the acquisition date and are remeasured quarterly based on the then assessed fair value and adjusted if necessary. During the three and nine months ended September 30, 2013 these aggregate contingent accrued earn-out business acquisition consideration liabilities, were reduced by $4.1 million and $10.3 million, respectively, due to remeasurements as based on the then assessed fair value and changes in anticipated future revenue levels. As of September 30, 2013, the total of these contingent liabilities was $14.24 million, of which $10.07 million is reported in long-term liabilities, and $4.17 million is included in current liabilities in the Company's Condensed Consolidated Balance Sheet. As of December 31, 2012 the total of these contingent liabilities was $17.50 million, of which $14.23 million is reported in long-term liabilities, and $3.27 million is included in current liabilities in the Company's Condensed Consolidated Balance Sheet.

Consideration paid by the Company for the businesses it purchases is allocated to the assets and liabilities acquired based upon their estimated fair values as of the date of the acquisition. The excess of the purchase price over the estimated fair values of assets acquired and liabilities assumed is recorded as goodwill. Recognized goodwill pertains to the value of the expected synergies to be derived from combining the operations of the businesses we acquire including the value of the acquired workforce.

During the nine months ended September 30, 2012 the Company received a termination fee in connection with a failed business acquisition. In this regard the Company recorded a reduction to general and administrative expense in the approximate amount of $971 thousand (net of directly related internal operating costs incurred by the Company and a portion of the fee that was paid to our investment banker).

Effective June 1, 2012 Ebix closed the merger of California based PlanetSoft, Inc. ("PlanetSoft"). Under the terms of the merger agreement the former PlanetSoft shareholders received $35.0 million cash and 296,560 shares of Ebix common stock valued at $16.86 per share or $5.0 million in the aggregate. Furthermore, under the terms of the agreement the PlanetSoft shareholders were granted 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 per-share value established on the effective date of the closing of Ebix's acquisition of PlanetSoft. The initial fair value of this put option liability was determined to be $1.4 million. This put option is described in more detail in Note 7. Included in the Company's revenues as reported in its condensed consolidated statement of income for the nine months ended September 30, 2013 is $12.4 million of PlanetSoft's operating revenue. The revenue derived from PlanetSoft's operations is included in the Company's Exchange division. The Company accounted for this acquisition by recording $44.1 million of goodwill, $9.8 million of intangible assets pertaining to customer relationships, and $540 thousand of intangible assets pertaining to acquired technology. The former shareholders of PlanetSoft retain the right to earn up to an additional cash consideration if certain incremental revenue targets are achieved over the two-year anniversary date subsequent to the effective date of the acquisition. The Company has determined that the approximate fair value of this contingent consideration liability to be $992 thousand as of September 30, 2013.

The aggregated unaudited pro forma financial information pertaining to all of the Company's acquisitions made during the nine months ending September 30, 2012 and September 30, 2013, which includes the acquisitions of BSI, Taimma, PlanetSoft, Fintechnix, TriSystems, and Qatarlyst as presented in the table below is provided for informational purposes only and does not project the Company's expected results of operations for any future period. No effect has been given in this pro forma information for future synergistic benefits that may still be realized as a result of combining these companies or costs that may yet be incurred in integrating their operations. The 2013 and 2012 pro forma financial information below assumes that all such business acquisitions were made on January 1, 2012, whereas the Company's reported financial statements for the three and nine months ended September 30, 2012 only include the operating results from the businesses since the effective date that they were acquired by Ebix.

	Three Months Ending September 30, 2013				Three Months Ending September 30, 2012				Nine Months Ending September 30, 2013				Nine Months Ending September 30, 2012
	As Reported		Pro Forma		As Reported		Pro Forma		As Reported		Pro Forma		As Reported		Pro Forma
	(unaudited)				(unaudited)				(unaudited)				(unaudited)
	(In thousands, except per share data)
Revenue	$	50,293	$	50,293	$	53,804	$	54,806	$	153,863	$	154,772	$	145,347	$	160,266
Net Income	$	13,143	$	13,143	$	18,072	$	14,886	$	44,029	$	42,721	$	51,824	$	42,002
Basic EPS	$	0.35	$	0.35	$	0.49	$	0.40	$	1.18	$	1.14	$	1.41	$	1.14
Diluted EPS	$	0.34	$	0.34	$	0.46	$	0.38	$	1.14	$	1.10	$	1.32	$	1.06

In the above table, the unaudited pro forma revenue for the three months ended September 30, 2013 decreased by $4.5 million from the unaudited pro forma revenue during the same period in 2012 of $54.8 million to $50.3 million , representing a 8.2% decrease. The pro forma revenue decrease was due to two reasons, first being exchange rate changes which resulted in a decrease of $1.6 million, and secondly a $1.3 million reduction in PlanetSoft professional service revenues due to implementations being delayed for a few clients. Correspondingly, the reported revenue for the three months ended September 30, 2013 decreased by $3.5 million or 6.5% from the reported revenue during the same period in 2012. The unaudited pro forma revenue for the nine months ended September 30, 2013 decreased by $5.5 million from the unaudited pro forma revenue during the same period in 2012 of $160.3 million to $154.8 million, representing a 3.4% decrease. Correspondingly, the reported revenue for the nine months ended September 30, 2013 increased by $8.5 million or 5.9% from the reported revenue during the same period in 2012.