Commitments and Contingencies

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Contingencies — On February 22, 2021, Christine Marie Teifke, a purported purchaser of Ebix securities, filed a putative class action in the United States District Court for the Southern District of New York, captioned Teifke v. Ebix, Inc., et. al., Case No. 1:21-cv-01589-JMF, on behalf of herself and others who purchased or acquired Ebix securities between November 9, 2020 and February 19, 2021. The complaint asserts claims against the Company, Robin Raina, and Steven M. Hamil (“Defendants”), for purported violations of Section 10(b) of the Securities Exchange Act of 1934, alleging that Ebix made false and misleading statements and failed to disclose material adverse facts about an audit of the company's gift card business in India and its internal controls over the gift and prepaid card revenue transaction cycle. The complaint alleges that Ebix's stock price fell as a result of the revelation that Ebix's independent auditor, RSM US LLP (“RSM”), had resigned, citing concerns with the company's internal controls and disagreements over other accounting issues. The complaint also asserts a claim against Robin Raina and Steven M. Hamil for purported violations of Section 20(a) of the Exchange Act arising out of the same facts. The complaint seeks, among other relief, damages and attorneys' fees and costs. On May 11, 2021, the court issued an order appointing Rahul Saraf, another purported purchaser of Ebix, Inc. securities, as lead plaintiff in the action, and the caption in the action was changed to Saraf v. Ebix, Inc., et. al., Case No. 1:21-cv-01589-JMF (the "Class Action").

On July 26, 2021, Lead Plaintiff filed an amended complaint in the Class Action, alleging similar violations of Sections 10(b) and 20(a) of the Exchange Act. On September 24, 2021, the Defendants moved to dismiss the amended complaint. On October 15, 2021, Lead Plaintiff filed a second amended complaint in the Class Action. Defendants moved to dismiss the second amended complaint and briefing on Defendants’ motion concluded on November 19, 2021.

On September 30, 2022, the Court dismissed the second amended complaint in its entirety for failure to state a claim but granted plaintiff’s request for leave to file a third amended complaint on or before October 31, 2022. On October 31, 2022,

Lead Plaintiff filed a third amended complaint in the Class Action, once again alleging similar violations of Sections 10(b) and 20(a) of the Exchange Act. Defendants moved to dismiss the third amended complaint and briefing on Defendants’ motion concluded on December 22, 2022. The parties await a decision from the Court on the motion. Defendants deny any liability and intend to defend the action vigorously.

On May 14, 2021, Javier Calvo, a purported shareholder of the Company, filed a derivative action in the United States District Court for the Southern District of New York on behalf of Ebix captioned Calvo v. Raina, et. al., Case No. 21-cv-4380-JMF (the "Calvo Action"), against individual defendants Robin Raina, Steven M Hamil, Hans U. Benz, Rolf Herter, Neil D. Eckert, Pavan Bhalla, Hans Ueli Keller, and George W. Hebard, and nominal defendant Ebix asserting claims related to the RSM resignation. The complaint asserts claims of breach of fiduciary duty against all of the individual defendants, and also asserts claims under Sections 10(b) and 21D of the Securities Exchange Act of 1934 for contribution against Robin Raina and Steven M Hamil. On July 7, 2021, the court granted a stipulation and order staying the Calvo Action pending the resolution of any motion(s) to dismiss the Class Action.

On July 13, 2021, Peter Votto, another purported Ebix shareholder, filed an additional derivative action in the United States District Court for the Southern District of New York on behalf of Ebix, captioned Votto v. Raina, et. al., Case No. 21-cv-5982-JMF (the "Votto Action"), asserting claims against the same defendants as the Calvo Action. The complaint asserts claims relating to the RSM resignation against all of the individual defendants for breach of fiduciary duties, unjust enrichment, waste of corporate assets, and rescission under Section 29(b) of the Securities Exchange Act of 1934, and claims for contribution under Sections 10(b) and 21D of the Securities Exchange Act of 1934 against Robin Raina and Steven M Hamil. On July 23, 2021, the court granted a stipulation and order consolidating the Calvo and Votto Actions under the caption In re Ebix Shareholders Derivative Litigation, Case No. 21-cv-4380-JMF (the “Consolidated Derivative Action”). The July 7, 2021 order staying the Calvo Action pending the resolution of any motion(s) to dismiss the Class Action applied to the Consolidated Derivative Action. After the Court dismissed the Class Action but granted plaintiff leave to replead, the parties entered a stipulation agreeing to extend the stay of the Consolidated Derivative Action pending resolution of any motion to dismiss a third amended complaint in the Class Action. On October 20, 2022, the Court approved the stipulation staying the Consolidated Derivative Action.

On November 5, 2021, Daniel Lilienfeld, a purported shareholder of the Company, filed a derivative action in the United States District Court for the Northern District of Georgia on behalf of Ebix captioned Lilienfeld v. Raina, et. al., Case No. 1:21-cv-04590-ELR (the "Lilienfeld Action"), asserting claims against the same defendants as the Consolidated Derivative Action. The complaint similarly asserts a claim of breach of fiduciary duty related to the RSM resignation against all of the individual defendants. On January 17, 2022, the parties filed a joint motion to stay the Lilienfeld Action pending the resolution of the motion to dismiss the Class Action. On January 18, 2022, the court issued an order denying the motion in favor of administratively closing the case pending a ruling on Defendants’ motion to dismiss the Class Action. On October 19, 2022, the parties filed a motion asking the court to extend the administrative closure of the Lilienfeld Action pending resolution of any motion to dismiss a third amended complaint in the Class Action. On October 26, 2022, the Court approved the motion to extend the administrative closure of the Lilienfeld Action.

On December 29, 2021, Sunil Shah, a purported shareholder of the Company, filed a derivative action in the Superior Court of Fulton County of the State of Georgia on behalf of Ebix captioned Shah v. Raina, et. al., Civil Action File No. 2022-cv-358481 (the "Shah Action") against the same defendants as the Consolidated Derivative Action and Lilienfeld Actions. The complaint similarly asserts a claim of breach of fiduciary duty related to the RSM resignation against all of the individual defendants. On March 30, 2022, the court granted a joint motion to stay the Shah Action pending the resolution of the motion to dismiss the Class Action. On October 28, 2022, the parties filed a joint motion to extend the stay of the Shah Action pending resolution of any motion to dismiss a third amended complaint in the Class Action. On December 8, 2022, the Court approved the motion to extend the stay of the Shah Action.

On May 12, 2017, Ebix Software India Pvt. Ltd. (“EbixCash Parent Co”) entered into several agreements with the shareholders of Itz Cash Card Limited (“Itz”), the most relevant among these are a stock purchase agreement (the “SPA”), to purchase a majority ownership stake in Itz and a shareholders agreement between the then promoter shareholders of Itz and Ebixcash Parent Co. Further, as part of the overall purchase of Itz, a share purchase agreement between EbixCash Parent Co and individual ESOP holders of Itz was entered into on July 7, 2017 (the “ESOP SPA”) (with the SPA, the ESOP SPA, and the other purchase documents, collectively, the “Transaction Documents”). Part of the consideration for EbixCashParent Co's purchase of Itz consisted of two individual potential earn-out payments contingent on Itz achieving revenue targets, the first for the period for the year ended March 31, 2019 (the “First Earn-Out”) and the second for the following year, ending on March 31, 2020 (the “Second Earn-Out”). The target revenue was not achieved and neither the First Earn-Out nor the Second Earn-Out were required to be paid pursuant to the terms of the SPA.

After correspondence between the parties between September 2019 and May 2020, the former shareholders of Itz (“Sellers”) sent EbixCash Parent Co notices of arbitration (“NOAs”) under which they were availing themselves of the arbitration dispute provisions set forth in the Transaction Documents. Apart from the amounts claimed owed under the earn-out provisions, the Sellers also alleged in the NOAs other violations of the terms of the Transaction Documents, including, certain non-competition and restricted matter approval violations. The matter is under arbitration in accordance with the rules of the Singapore International Arbitration Centre.

In the proceedings, the Sellers have alleged that the EbixCash Parent Co breached their obligations under the Transaction Documents, including obligations relating to non-compete, non-approval of budgets, passing of resolutions pertaining to reserved matters and certain other obligations. On this basis, the Sellers have sought damages aggregating to approximately $38.4 million against EbixCash Parent Co.

The Company believes that the Sellers have raised frivolous allegations to attempt to show a purported breach of the Transaction Documents so as to claim the First Earn-Out and Second Earn-Out. EbixCash Parent Co denies any wrongdoing and has conducted its activities in accordance with the laws of India.

The pleadings and evidence in the arbitration is complete. The evidentiary hearing took place in Singapore from November 14, 2022 to December 1, 2022. The closing submissions in the matter occurred on February 1st and 2nd, 2023. The Company is awaiting the decision from the Singapore International Arbitration Centre.

The Company is involved in various other claims and legal actions arising in the ordinary course of business, which in the opinion of management, the ultimate likely disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

Lease Commitments — See Note 19.

Business Acquisition Earn-Out Contingencies — A significant component of the purchase price consideration for many of the Company's business acquisitions is a potential future cash earn-out based on reaching certain specified future revenue targets. The terms for the contingent earn-out payments in most of the Company's business acquisitions typically address the GAAP recognizable revenues achieved by the acquired entity over a one, two, and/or three year period subsequent to the effective date of their acquisition by Ebix. These terms typically establish a minimum threshold revenue target with achievement of revenues recognized over that target being awarded in the form of a specified cash earn-out payment. The Company applies these terms in its calculation and determination of the fair value of contingent earn-out liabilities for purchased businesses as part of the related valuation and purchase price allocation exercise for the corresponding acquired assets and liabilities. As of December 31, 2022, the total of these contingent liabilities was $2.3 million, which was included in long-term liabilities in the Company's consolidated balance sheet. As of December 31, 2021, there was $2.6 million outstanding contingent earn-out liability in the Company's consolidated balance sheet.

Self-Insurance — For some of the Company’s U.S. employees the Company has a self-insured plan for its health insurance program and has an individual specific stop loss policy that limits the liability on each covered individual to $150 thousand per person with an additional aggregating specific of $45,000. There is an overall aggregate liability policy covering all claims in excess of 125% of the expected claims based upon the number of participants and historical claims. As of December 31, 2022 and 2021, the amount accrued on the Company’s consolidated balance sheets for the self-insured component of the Company’s employee health insurance was $516 thousand and $498 thousand, respectively. The maximum potential estimated cumulative liability for the annual contract period, which ends in September 2023, is $6.2 million. During the years ended December 31, 2022 and 2021, the Company recognized $3.9 million, and $2.5 million of expense, respectively, associated with claims from its self-insured health insurance program.

Gratuity Leave — In accordance with Indian law, we pay gratuity to our eligible employees in India. Under our gratuity plan, an employee is entitled to receive a gratuity payment on the termination of his or her employment if the employee has rendered continuous service to our company for not less than five years, or if the termination of employment is due to death or disability. The amount of gratuity payable to an eligible employee is based on number of years of employment and is limited to a maximum of $28 thousand per employee. As of December 31, 2022 and 2021, the amount accrued on the Company’s consolidated balance sheets for gratuity leave was $3.6 million and $3.8 million, respectively.