EBIX INC - Annual Report: 2007 (Form 10-K)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

to

EBIX, INC.
(Exact name of registrant as specified in its charter)

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 

Common Stock, par value $0.10 per share

        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 ý

        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 ý

        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 ý    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 ý.

        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 definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

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

        As of March 27, 2008, the number of shares of Common Stock outstanding was 3,424,079. As of June 30, 2007 (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 SmallCap Market on such date, was approximately $74,430,943 (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

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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.

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PART I

Item 1.    BUSINESS

Company Overview

        Ebix, Inc. (the "Company") 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.

        Ebix's 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.

        On November 1, 2007, Ebix completed the acquisition of Jenquest, Inc. ("Jenquest"), 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. The Company's consolidated financial statements for 2007 include the results of operations for Jenquest from November 1 through December 31, 2007.

        Effective May 2006 the Company completed the acquisition of Infinity Systems Consulting, Inc. ("Infinity") for an up-front payment of $2.9 million in cash and future potential payments not exceeding $4.5 million if certain revenue targets of the Infinity division were met. Effective October 2006, Ebix acquired Finetre Corporation ("Finetre") for a cash payment of $13.0 million and future potential payments not exceeding $3.0 million if certain future revenue and operating income targets of the Finetre division were met. The Company's consolidated financial statements for 2006 include the results of operations for Infinity and Finetre from the effective date of the acquisitions. For 2007, it includes the full twelve months of the results of operations for these acquisitions completed during 2006.

        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.

        The Company has its headquarters in Atlanta, Georgia, and it also has domestic operations in Walnut Creek and Hemet, California; Pittsburgh, Pennsylvania; Park City, Utah; Herndon, Virginia; and Dallas, Texas. The Company also has offices in Australia, New Zealand, Singapore, United Kingdom 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 certification for both its development and call center units in India.

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        Information on the geographic dispersion of the Company's revenues, net income and fixed assets is furnished in Note 11 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 the following four areas: (1) worldwide sale, customization, development, implementation and support of its insurance carrier system platforms "Infinity Systems" and "Business Reinsurance and Insurance Company System ("BRICS")" (2) worldwide sales and support of broker/agency management systems including EbixASP, eGlobal and Winbeat (3) expansion of connectivity between consumers, agents, carriers, and third party providers through its exchange family of products in the life, annuity and property & casualty sectors worldwide namely the EbixExchange family of products—WinFlex VitalSuite, AnnuityNet, LifeSpeed; and, (4) business process outsourcing services, which include certificate tracking, call center and back office support.

        Ebix revenue is derived primarily from the services part of our business that includes ASP services, transaction based exchanges, transaction based BPO services, professional and support services to the insurance companies, distributors, brokers and large corporate clients.

        Professional and support services include software development, and associated fees for consulting, implementation, training, and project management provided to customers with installed systems, subscription and transaction fees related to services delivered on an ASP basis, and for the maintenance of software licenses. The Company anticipates that future revenue growth will be principally provided by ASP services (EbixExchange, WinFlex, Vital Suite, AnnuityNet, and LifeSpeed), software development and customization services, licensing of the Infinity and BRICS systems, international broker system operations, and business process outsourcing ("BPO") services.

        Insurance carrier system products and services have centered around two system platform products: Infinity Systems and BRICS. Infinity Systems is a comprehensive, fully integrated, client server technology policy and claims administration system designed for small to medium sized property and casualty insurers. Infinity Systems sales have principally occurred in the United States. The BRICS product is a.NET based end to end carrier management system that includes key modules such as policy management, claims administration, underwriting, rating, and general ledger. The system is fully configurable for each customer and is provided in an ASP or client hosted mode as desired by the customer. BRICS is presently marketed internationally and in the United States.

        The broker/agency channel is served by several products and services, including EbixASP, eGlobal, and Winbeat. EbixASP is a web-enabled system for insurance agencies to manage their businesses. EbixASP is sold both as a hosted and a self-hosted product. The Company focuses on providing self hosted broker systems, under the name Winbeat to small and midsize brokers in the Australian market.

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        The Company licenses "eGlobal" its multi-lingual/multi-currency agency management software product line in the international markets to large brokers in a self hosted and hosted mode.

        The Company's exchange suite of products includes, WinFlex, Vital Suite, EbixExchange, AnnuityNet and LifeSpeed. WinFlex and Vital Suite are EbixLife services that provide sales illustrations and quote comparison services to insurance brokers, carriers and wholesalers operating in the life insurance, annuity and long-term care markets. EbixExchange is an Internet based service developed by the Company to facilitate connectivity for upload, download, and data exchange between carriers, agents and third party providers. The AnnuityNet platform is an exchange service that is designed to link annuity distributors and issuers. It provides workflow routing, compliance and application vetting for annuity products. The LifeSpeed platform is an exchange service designed to connect life insurance distributors and carriers, providing workflow automation, data collection and status of life insurance sales.

        The Company has developed a business process outsourcing service based in India that provides back-end call center services primarily for brokers and insurance carriers.

        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 been 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 $7.6 million, $5.2 million, and $3.3 million during the years ending December 31, 2007, 2006, and 2005 respectively on product development initiatives.

        The Company's product development efforts are focused on the continued enhancement of the EbixASP, BRICS, eGlobal, EbixLife, EbixExchange, IDS, AnnuityNet, and LifeSpeed 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.

Competition

        We operate in a number of geographic, product and service markets, which are highly competitive. In the area of exchange connectivity the Company competes with different entities in different sectors. The Company's life and annuity exchanges, such as Winflex, Vital sales suite, AnnuityNet and LifeSpeed are sold under the family name EbixExchange, and compete with internally developed systems and a few smaller entities operating in the insurance markets in the United States.

        In the area of agency management systems in the global markets outside the United States, Ebix competes with different local players in each country with no one common competitor across the world. In the United States, the Company's EbixASP broker system product competes primarily with three companies that provide similar software which is in competition with EbixASP.

        In the area of insurance company systems, the Company competes with established vendors such as Computer Science Corporation, Rebus and PMSC.

        In the area of software development, customization, and consulting services the Company competes with development, and software providers and in-house information technology departments in carriers and targeted clients.

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        Key differentiating factors for the Ebix's products and services include our superior product technology, features and functions, ease of use, common code base around the world, multilingual and multicurrency systems, end-to-end project management, reputation, reliability, adoption to insurance regulation, insurance industry expertise, technological expertise, and the quality of customer support and training.

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 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, 2007, the Company had 391 employees, distributed as follows: 22 in sales and marketing, 164 in product development, 161 in customer service and operations, 11 in call center operations, and 33 in 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 27, 2008, together with their ages, positions and brief summaries of their business experience:

        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, 41, 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. Prior to joining Ebix, from 1990 to 1997, Mr. Raina held senior management positions for Mindware, an international technology consulting firm, serving in Asia and North America. Mr. Raina holds an industrial engineering degree from Thapar University in Punjab, India.

        ROBERT F. KERRIS, 54, 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.

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Item 1A.    RISK FACTORS

        You should carefully consider the risks, uncertainties and other factors described below, along with all of the other information included in this annual report on Form 10-K, because they could materially and adversely affect our business, financial condition, operating results and prospects and/or the market price of our common stock. This risk factors section is written in response to the Securities and Exchange Commission's "plain English" guidelines. In this section, the words "we," "us," "our" and "ours" refer to the Company and not any other person.

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.

        The company made a strategic decision a few years back to finish reliance on legacy products and related support services and instead focus on more current technology and services. Our revenue from the support services we offer in connection with our legacy software products has accordingly 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.

Adverse insurance industry economics could adversely affect our revenues.

        We are dependent on the insurance industry, which may be adversely affected by economic, environmental and world political conditions.

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 or to make acquisitions. Any required additional financing may not be available on terms favorable to us, or at all. If adequate funds are not available on acceptable terms, we may be unable to meet our strategic business objectives or compete effectively. If additional funds are raised by our issuing equity securities, stockholders may experience dilution of their ownership 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 limitations on our activities.

Our recent acquisitions of Jenquest Inc. and Telstra eBusiness Services 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 Jenquest Inc. and Telstra eBusiness Services and other potential future acquisitions, may 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.

We may not be able to continue to develop new products or services necessary to effectively respond to rapid technological changes.

        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.

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        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. 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:

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undertake more extensive marketing campaigns for their brands and services;



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devote more resources to website and systems development;



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adopt more aggressive pricing policies; and



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

If we are unable to protect our intellectual property, our reputation and competitiveness in the marketplace may be materially damaged.

        We regard our intellectual property in general and our software in particular, as critical to our success. It may be possible for third parties to copy aspects of our products or, without authorization, to obtain and use information that we regard as trade secrets. Existing copyright law affords only limited practical protection, and our software is unpatented.

If we infringe on the proprietary rights of others, our business operations 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

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obtain a license, if available, to use the right or to use a non-infringing method, if possible, to accomplish our objectives.

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 chief executive officer. The loss of the services of any of our executive officers or other key employees could harm our business. We have no long-term employment agreements with any of our key personnel, nor do we maintain key man life insurance policies on any of our key employees.

        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. 27% of our 2007 revenues were generated from our foreign subsidiaries. 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, including:

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



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greater difficulty in collecting accounts receivable;



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difficulties and costs of staffing and managing foreign operations;



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reduced protection for intellectual property rights in some countries;



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seasonal reductions in business activity;



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burdensome regulatory requirements;



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trade and financing barriers, and differing business practices;



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fluctuations in exchange rates;



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potentially adverse tax consequences; and



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political and economic instability.

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

Our financial results may be adversely affected by the weakening U.S. Dollar and fluctuations in 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 have not entered into any hedging arrangements to protect our business against currency fluctuations. We will monitor changes in our exposure to exchange rate risk that result from changes in our business

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situation. If we do not enter into effective hedging arrangements in the future, our results of operations and financial condition could be materially and adversely affected by fluctuations in foreign currency exchange rates.

Risks Relating to Regulation and Litigation

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

        We perform functions for licensed insurance agents, brokers and carriers and are, therefore, required 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 and/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, earthquakes, acts of terrorism, power loss, telecommunications failures, break-ins and similar events. The controls implemented by our third-party service providers may not be to 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 be exposed to legal liability.

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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 proposed 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 users 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 years. 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:

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



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



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changes in market valuations of our competitors; and



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general political, economic and market conditions.

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        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 purchase 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. You should not rely on our results of operations during any particular period as an indication of our results for any other period. Factors that may 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.

The significant concentration of ownership of our common stock will limit an investor's ability to influence corporate actions.

        The concentration of ownership of our common stock may limit an investor's ability to influence our corporate actions and have the effect of delaying or deterring a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company, and may affect the market price of our common stock. At March 27, 2008 Brit Insurance Holdings PLC beneficially owned 730,163 shares representing 21% of our outstanding common stock and, together with our executive officers, directors, and owners of at least 5% of our common stock beneficially owned approximately 82% of our outstanding common stock. At December 31, 2007 institutional and mutual funds owed approximately 34% of our common stock. As a result, those stockholders, if they act together, are able to control all matters requiring stockholder approval, including the election of all directors and approval of significant corporate transactions and amendments to our articles of incorporation. These stockholders may use their ownership position to approve or take actions that are adverse to interests of other investors or prevent the taking of actions that are consistent with their respective interests.

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 9,800 square feet of commercial office space. Until December 31, 2006 the Company's corporate headquarters were located in Schaumburg, Illinois (a suburb of Chicago). 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, and 2,156 square feet in Walnut Creek, California. Additionally, the Company leases office space in the United States, New Zealand, Australia and Singapore for support and sales offices. The Company owns two facilities in India with total square

12

footage of approximately 29,000 square feet. 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.

Item 4.    SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS

        Not Applicable.

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PART II

Item 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

        At December 31, 2007 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 27, 2008, there were 58 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 2007 and 2006.

        As of March 27, 2008, there were 3,424,079 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.

Equity Compensation Plan Information

        As of December 31, 2007, we maintained the 1996 Stock Incentive Plan and our 1998 Non-Employee Directors Stock Option Plan, 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

14

below, our Board of Directors has terminated the 2001 Stock Incentive Plan. The table below provides information as of December 31, 2007 related to these plans.

Recent Sales of Unregistered Securities

        On June 1, 2007, the Company entered into a share purchase agreement (the "Share Purchase Agreement") to sell 400,000 shares (the "Shares") of unregistered common stock at $33.25 per share to Luxor Capital Partners, LP, a Delaware limited partnership, and Luxor Capital Partners Offshore, Ltd., a Cayman Islands exempted company. The purchase price represented a premium to the 30-day average closing price of Ebix common stock on the date of the sale. Under the terms of the Share Purchase Agreement, Luxor Capital Partners LP acquired 163,600 shares of the Company's common stock in exchange for $5.4 million in cash and Luxor Capital Partners Offshore, Ltd. acquired 236,400 shares of the Company's common stock in exchange for $7.9 million in cash, for an aggregate offering price of $13.3 million. As a result, at June 4, 2007, Luxor Capital Partners, LP owned approximately 5% of the Company's outstanding common stock and Luxor Capital Partners Offshore, Ltd. owned approximately 7% of the Company's outstanding common stock. Pursuant to the Share Purchase Agreement, Ebix was obligated to file with the SEC a registration statement, for the underlying shares of our common stock and to use our reasonable best efforts to cause the SEC to declare the registration statement effective, and take such action that is necessary to keep the registration statement effective. During the third quarter of 2007, while the company was clearing comments received from the Securities and Exchange Commission on the subject Form S-1 registration statement, the purchaser requested an additional 100,000 purchased shares be included in this filing. The respective Form S-1 registration statement was declared effective by the Securities and Exchange Commission on December 10, 2007.

        On December 13, 2007 the Company entered into a share purchase agreements (the "Share Purchase Agreements") to sell 38,462 shares and 38,461 shares of our unregistered common stock at $58.50 per share and for an aggregate offering price of $4.5 million to The Lebowitz Family Trust and Daniel M. Gottlieb, respectively, both "accredited investors" within the meaning of Rule 501 of Regulation D. The purchase price represented a premium to the 30-day average closing price of Ebix common stock on the date of the sale. Pursuant to the Share Purchase Agreements, Ebix is 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. The Company is in the process of preparing the subject registration statement.

        On December 18, 2007, the Company entered into a Secured Convertible Note Purchase Agreement with Whitebox VSC, Ltd. in the original principal amount of $20.0 million, which amount is convertible into shares of Common Stock at a price of $63.84 per share, subject to certain adjustments as set forth in the note. The Note is convertible, in whole or in part, into shares of Common Stock at the option of Whitebox, at any time and from time to time (subject to certain conversion limitations set forth in the Note), at the Conversion Price. Further, in the event of a change of control of the Company, as defined in the Note, in addition to any other rights Whitebox may have, Whitebox has the

15

right to put the then-outstanding principal amount of the Note (including any accreted interest) to the Company. Upon the exercise of this put right, the Company is required to pay to Whitebox an amount in cash equal to 110% multiplied by the greater (i) the then-outstanding principal amount of the Note (including any accreted interest) or (ii) the listed or quoted average price of the Common Stock on the trading market on which the Common Stock is then listed for trading for the 20 trading days preceding the change in control multiplied by the number of shares into which the Note is then entitled to be converted. The Company has the option to cause a mandatory conversion and the subsequent surrender of the Note at a Conversion Price of $63.84 per share, if the average price of the Company's Common Stock on the trading market exceeds $128.00 for any consecutive 30 trading days. Pursuant to the Secured Convertible Note Agreement, Ebix is 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. The Company is in the process of preparing the subject registration statement.

        On December 20, 2007 the Company entered into a share purchase agreements (the "Share Purchase Agreements") to sell 20,000 shares of our unregistered common stock at $58.50 per share and for an aggregate offering price of $1.17 million to The Morris M. Ostin 2006 Annuity Trust, an "accredited investors" within the meaning of Rule 501 of Regulation D. The purchase price represented a premium to the 30-day average closing price of Ebix common stock on the date of the sale. Pursuant to the Share Purchase Agreements, Ebix is 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. The Company is in the process of preparing the subject registration statement.

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 issuance of convertible debt were used towards to financing of our acquisitions of Jenquest Inc. in November 2007 and Telstra eBusiness Services in January 2008.

Recent Purchases of Equity Securities

        The Company did not purchase any of its equity securities during the fourth quarter of 2007.

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Item 6.    SELECTED FINANCIAL DATA

        The following data for fiscal years 2007, 2006, and 2005 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

Item 7.    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.

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OVERVIEW

        Ebix is focused on the convergence of all insurance channels, processes, and entities in order to facilitate the seamless flow of data. The Company designs products and services that are pioneering and ahead of our competition. The Company's marketing efforts are concentrated on the insurance company, broker, data exchange, and business process outsourcing channels. We offer solutions including an end-to-end insurance portal, exchanges for data transmission, agent management systems, and carrier systems (including end-to-end rating, quoting, policy processing, claims processing, and on-line risk binding).

        Our customers include hundreds of the top insurance and financial sector companies in the world. 4,500 brokers across 52 countries (including six of the world's top ten insurance brokers) and 45 of the top rated life insurance companies use Ebix systems and applications. Over 70% of Ebix's revenues are recurring. Rather than license our products in perpetuity, we either license them for a few years with ongoing support revenues, or license them on a transaction basis using a hosting or ASP model.

        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, 2007, 2006, and 2005 were as follows:

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RESULTS OF OPERATIONS

Ebix, Inc. Subsidiaries

TWELVE MONTHS ENDED DECEMBER 31, 2007 AND 2006

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 exchanges 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, 2007 our total revenue increased $13.6 million or 46%, to $42.8 million in 2007 compared to $29.3 million in 2006. $6.6 million of this revenue increase is attributable to the full year inclusion of revenues generated by Infinity and Finetre acquired in May and October of 2006 respectively, and $1.1 million is attributable the two months of revenue generated by Jenquest acquired in November 2007. The specific components of our revenue and the changes experienced during the past year are discussed further below.

        Services revenue increased $11.8 million or 43%, from $27.6 million in 2006 to $39.4 million in 2007. Virtually all divisions of Ebix showed an increase in revenue during 2007 (excluding the expected continued reduction in revenues derived from the support of our legacy product lines).

        Carrier systems division revenue increased $2.7 million which includes approximately $1.4 million resulting from full year inclusion of revenue generated by Infinity which we acquired in May 2006.

        EbixExchange division revenues increased $9.2 million which includes approximately $5.2 million resulting from the full year inclusion of revenue generated by our Finetre which we acquired in October 2006.

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        BPO division revenues increased $1.1 million primarily due to our recent acquisition of Jenquest (d.b.a. Insurance Data Services division and renamed to "EBIX BPO") which was acquired in November 2007.

        Partially offsetting these increases to our services revenue is a $480 thousand in 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. The Company will maintain the support of these legacy products as contractually required or for as long as we deem it is economically feasible to do so, after which we will discontinue further associated support services.

        Software licensing revenue increased $1.8 million or 109%, from $1.7 million in 2006 to $3.5 million in 2007. This increase is primarily associated with two significant long-term contracts executed by our Infinity division and involves the sale of source code, software licenses, and customization and implementation services.

        During 2007 approximately $1.7 million was recognized as services revenue from Brit Insurance Holdings PLC ("Brit") and its affiliates related to development projects. Revenue from Brit and its affiliates represented 4% of our revenues for 2007. The revenue from Brit relates primarily relates to the customization of BRICS for the London market, hosting services, software development services, and transaction processing fees. As of December 31, 2007, Brit held 730,163 shares of common stock, representing 22% percent of our outstanding common stock as of December 31, 2007.

Costs of services provided

        Costs of services provided increased $1.2 million or 20%, from $5.9 million in 2006 to $7.1 million in 2007. This increase is primarily caused by the full year inclusion of payroll and facility costs incurred in our Finetre and Infinity divisions, both of which were acquired during 2006, which added $1.1 million of expense in 2007, and $581 thousand of costs incurred in our recently added Insurance Data Services division acquired in November 2007. Overall our costs of services provided as a percentage of revenues were reduced to 16.6% in 2007 from 20.2% in 2006.

Product development expenses

        Product development expenses increased $2.4 million or 45%, from $5.2 million in 2006 to $7.6 million in 2007. Factors causing this increase in costs are the effect of including a full year of payroll and facility costs incurred by our Finetre and Infinity divisions, acquired during 2006 and which added approximately $2.0 million of operating costs during 2007. Overall our product development expenses as a percentage of revenues remained at 17.8% during the years of 2007 and 2006.

Sales and marketing expenses

        Sales and marketing expenses increased $1.1 million or 37%, from $3.0 million in 2006 to $4.2 million in 2007. The primary causes for this cost increase are the inclusion of twelve months of payroll, travel, and facility costs incurred by the Infinity and Finetre divisions, acquired in May and October of 2006 respectively and which added approximately $1.1 million to our operating costs during 2007, and $206 thousand of additional payroll related expenses due to headcount and compensation increases. Overall our sales and marketing expenses as a percentage of revenues were reduced to 9.6% in 2007 from 10.3% in 2006.

General and administrative expense

        General and administrative expenses increased $2.0 million or 30%, from $6.6 million in 2006 to $8.6 million in 2007. This increase is primarily caused by staff additions and increased payroll related

20

costs. Also contributing to the increase in general and administrative costs is the inclusion of a full year of payroll, facility, and communication costs incurred by the Finetre division, acquired in October 2006 and which added approximately $240 thousand to our operating costs during 2007. Overall our general and administrative expenses as a percentage of revenue were reduced to 20.1% in 2007 from 22.5% in 2006.

Amortization and depreciation expenses

        Amortization and depreciation expenses increased $804 thousand, or 45%, from $1.8 million in 2006 to $2.6 million in 2007. This increase is due primarily to the acquisitions of Infinity and Finetre in May and October of 2006, respectively, which resulted in $420 thousand of additional amortization costs with respect to the related acquired intangible assets, and our capital expenditures during year for equipment and facilities which caused a $195 thousand increase to depreciation expense.

Income Taxes

        Income tax expense decreased $147 thousand, or 22%, from $680 thousand in 2006 to $533 thousand in 2007. This reduction is primarily due to the recognition of certain deferred tax assets (net of the respective valuation allowances) as related to temporary timing differences associated with specific expense and revenue items that are treated differently for purposes of determining book and taxable income. Also affecting the decrease in income tax expense is the difference between the effective and statutory rates associated with the change in the mix of taxable income amongst the various domestic and foreign tax jurisdictions in which the Company operates. In the United States, the Company utilized $16.0 million of available net operating losses to partially offset our taxable income. Our effective tax rate was 4.04% for the twelve months ended December 31, 2007, down from 10.2% for the same period in 2006.

TWELVE MONTHS ENDED DECEMBER 31, 2006 AND 2005

Operating Revenue

        Total revenue increased $5.2 million or 21%, to $29.3 million in 2006 compared to $24.1 million in 2005, as discussed further below.

        Services revenue increased $4.7 million or 21%, from $22.9 million in 2005 to $27.6 million in 2006. This increase was primarily due to the 2006 acquisitions of Infinity and Finetre which accounted for $2.8 million and $1.8 million of the change respectively. Additionally, we experienced increases in international consulting revenues and continued growth in our EbixLife suite of products, generating $965 thousand of additional revenue. These increases were partially offset by decreases revenues associated with our legacy products.

        Support revenue associated with the Company's legacy products continued to decrease due to the trend of declining renewals for these older product lines. Support revenue decreased $593 thousand, or 22%, during 2006 to $2.1 million compared to $2.7 million in 2005.

        Software licensing revenue increased $441 thousand or 36%, from $1.2 million in 2005 to $1.7 million in 2006. This improvement was caused by increases in international software sales due primarily to market growth for our eGlobal software.

        During 2006 approximately $3.1 million was recognized as services revenue from Brit Insurance Holdings PLC ("Brit") and its affiliates related to call center and development projects. Revenue from Brit and its affiliates represented 11% of our revenues for 2006. As of December 31, 2007, Brit held 730,163 shares of common stock, representing 22% percent of our outstanding common stock as of December 31, 2007.

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Costs of services provided

        Costs of services provided during 2006 was $5.9 million which was approximately the same level of expense incurred in 2005. $112 thousand of increased payroll expenses associated with the 2006 acquisitions of Finetre and Infinity and increases in facility costs amounting to $34 thousand were partially offset by a $45 thousand decrease in product support expenses and a $99 thousand decrease in international support costs.

Product development expenses

        Product development expenses for 2006 increased $2.0 million or 61%, from $3.3 million in 2005 to $5.2 million in 2006. This increase was due to $1.5 million of additional salary and payroll related expenses associated with the 2006 acquisitions of Finetre and Infinity, an increase in facility costs of $413 thousand, an increase in consulting related expenses of $30 thousand and an increase in international payroll expenses of $33 thousand.

Sales and marketing expenses

        Sales and marketing expenses for 2006 increased $929 thousand or 45% from $2.1 million in 2005 to $3.0 million in 2006. This increase was primarily due additional salary and payroll related expenses, facility costs, travel related expenses, trade show expenses, and communication expenses which in the aggregate amounted to $798 thousand and are directly associated with the 2006 acquisitions of Finetre and Infinity.

General and administrative expenses

        General and administrative expenses for 2006 decreased $289 thousand or 4% from $6.9 million in 2005 to $6.6 million in 2006. The Company successfully controlled these costs irrespective of the acquisitions of Infinity and Finetre executed during the year.

Amortization and depreciation expenses

        Amortization and depreciation expenses for 2006 increased $474 thousand or 36% from $1.3 million in 2005 to $1.8 million in 2006. This increase was due primarily to the acquisitions of Infinity and Finetre in May and October of 2006, respectively. These acquisitions resulted in the increased amortization of intangible assets and additional depreciation of fixed assets.

Income Taxes

        Income tax expense for 2006 increased $386 thousand or 131% from $294 thousand in 2005 to $680 thousand in 2006. This increase was due to the increase in income before taxes and a difference between the effective and statutory rates associated with the change in the mix of taxable income amongst the various domestic and foreign tax jurisdictions in which the Company operates. In the United States, the Company was able to utilize net operating losses to partially offset taxable income.

LIQUIDITY AND CAPITAL RESOURCES

        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. Our ability to generate cash from operations is one of our fundamental financial strengths. We use and intend to continue using cash flows from operations, along with borrowings to fund capital expenditures and growth initiatives, make acquisitions, retire outstanding indebtedness, and purchase outstanding shares of our common stock.

        We believe that anticipated cash flows provided by our operating activities, together with current cash and cash equivalent balances and access to our credit facilities and the capital markets, if required,

22

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 and cash flows are subject to substantial uncertainty.

        We continue to evaluate our ability to sell additional equity or debt securities, expand existing or obtain new credit facilities from lenders and restructure our long-term debt for strategic reasons or to further strengthen our financial position. The sale of additional equity or convertible debt securities could result in additional dilution to our shareholders. We regularly evaluate potential acquisitions and from time to time, consider the acquisition of, or investment in, complementary businesses, products, services and technologies, and the retirement of debt, which might affect our liquidity requirements or cause us to issue additional equity or debt securities. Specifically during 2008 the Company will continue its strategy of executing synergistic acquisitions of business that complement our product offerings and facilitate data convergence. In order to support such activities, the Company may seek additional equity or debt funding, or issue equity or debt to the seller, or a combination of both, to finance these business acquisitions. There are no assurance that such acquisition transactions will be completed or that financing will be available in amounts or on terms acceptable to us, if at all.

        Our cash and cash equivalents were $49.5 million and $5.0 million at December 31, 2007 and 2006, respectively. A substantial portion of our available cash balances at December 31, 2007 were used to finance the acquisition of Telstra eBusiness Services on January 2, 2008.

Operating Activities

        For the twelve months ended December 31, 2007, the Company generated $14.5 million of net cash flow from operating activities compared to $4.2 million for the year ended December 31, 2006, a 246% increase. The major sources of cash provided by operating activities for 2007 was net income of $12.7 million, net of $2.6 million of depreciation and amortization and a $142 increase in deferred revenue.

        Our net cash flow from operating activities for the twelve months ended December 31, 2006 was $4.2 million compared to $5.5 million for the same period in 2005, a 24% decrease. The major sources of cash provided by operating activities for 2006 was net income of $5.9 million, net of $1.8 million and a $677 thousand increase in deferred revenue, partially offset by a $3.7 million increase in accounts receivable.

Investing Activities

        Net cash used for investing activities totaled $15.3 million for the twelve months ended December 31, 2007, of which $11.3 million was used for the November 2007 acquisition of Jenquest, Inc. (d.b.a. Insurance Data Services, "IDS") and $1.8 million was used for capital expenditures related to the enhancement or deployment of technology platforms, and the replacement or adding of operating equipment. The IDS shareholders retain the right to earn up to $1.4 million in additional payments over two years if certain revenue and operating income targets are generated from the IDS division. The Company also incurred approximately $70 thousand of direct expenses related to this acquisition. The IDS acquisition was financed primarily from available cash balances.

        For the twelve months ending December 31, 2006 net cash used for investing activities totaled $15.4 million, of which $15.1 million was used for business acquisitions and $537 thousand was used for capital expenditures related to the enhancement or deployment of technology platforms, and the replacement or adding of operating equipment. The Company completed two business acquisitions during 2006, as detailed below:

•

Effective October 2006, Ebix acquired Finetre Corporation ("Finetre"). The Company paid Finetre's shareholders $13.0 million and Finetre's shareholders retained the right to earn up to

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$3.0 million in additional payments over the two years subsequent to the acquisition date if certain future revenue and operating income targets of the Finetre division are met. To date no additional payments have been earned or paid. The Company also incurred approximately $365 thousand of direct expenses related to this acquisition. The Finetre acquisition was financed using $2.0 million of cash on hand and an $11.0 million short-term borrowing from our revolving line of credit facility.

•

Effective May 2006, Ebix acquired substantially all of the operating assets of Infinity Systems Consulting, Inc. ("Infinity"). The Company acquired these assets for an up-front payment of $2.9 million in cash and future potential payments not exceeding $4.5 million if certain revenue targets of the Infinity division are met. In December 2007 the first of the two potential earn-out payments in the amount of $2.8 million was remitted. The Company also incurred approximately $149 thousand of direct expenses related to this acquisition. The Infinity acquisition was financed primarily from available cash balances



•

For the twelve months ending December 31, 2005 net cash used for investing activities totaled $484 thousand, which was used for capital expenditures related to the enhancement or deployment of technology platforms, and the replacement or adding of operating equipment.

Financing Activities

        Net cash provided by financing activities for the twelve months ended December 31, 2007 totaled $44.3 million, compared with net provided from financing activities of $9.8 million during the same period in 2006, and the net cash used in financing activities of $(4.0) million during the same period in 2005. During 2007 net short debt borrowings of $16.4 million, $20.0 million of proceeds from the issuance of long-term convertible debt, and $18.9 million of proceeds from the sale of our common stock were undertaken to fund our acquisitions of Insurance Data Services and Telstra eBusiness Services.

        For the twelve months ending December 31, 2006 the $9.8 million of cash provided from our financing activities was primarily used to complete the acquisition of Finetre. The financing activity during 2006 primarily consisted of borrowings from our revolving credit facility and the proceeds from the exercising of stock options, partially offset by repayment of long-term debt and re-purchases of our common stock.

        For the twelve months ending December 31, 2005 the $4.0 million of net cash used in our financing activities resulted primarily from the Company's repurchase of a redeemable stock guarantee for $2.7 million and the payment of a long-term debt obligation of $960 thousand. The funding for these financing outflows was primarily derived from cash generated by our operating activities.

Revolving Credit Facility

        The Company has maintained a revolving line of credit facility with a major commercial banking institution. In December 2007 the credit facility agreement was amended and the line was increased from $15.0 million to $25.0 million. The interest rate on the credit facility remained unchanged at Libor plus 1.30%. At December 31, 2007 the balance on the line of credit was $15.7 million with an effective interest rate was 5.90%, thereby leaving $9.3 million available under the facility. The underlying loan and security agreement contains certain financial covenants related to profitability, current assets, and debt coverage to which the Company is in compliance. There have been no events of default.

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Contractual Obligations and Commercial Commitments

        The following table summarizes our significant contractual purchase obligations and other long-term obligations as of December 31, 2007. The table excludes commitments that are contingent based on events or factors uncertain at this time.

(1)

Includes interest imputed at the rate of 4% for the February 2004 LifeLink acquisition and represents the effective rate as of the date of acquisition.

Off Balance Sheet Transactions

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

Letters of Credit

        Under terms of the July 2004 Heart acquisition agreement $1.4 million of the purchase consideration was to payable by the Company under stand-by letters of credit issued by the Company's lender against the Company's revolving line of credit and payable in three equal annual installments on each of the first, second and third anniversaries of the closing of the Heart asset acquisition. In July 2007 the last and final installment payment of $570 thousand was made.

        Under terms of the lease agreement for our office space in Herndon, Virginia, the Company is required to maintain a stand-by letter credit in the amount of $150 thousand. Upon occupancy in November 2007 the letter of credit was reduced to $30 thousand.

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 December 2007, the FASB issued SFAS No. 141R, Business Combinations ("SFAS 141R"). SFAS 141R replaces SFAS No. 141, "Business Combinations," 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. SFAS 141R is effective for fiscal years beginning after December 31, 2007. The Company will adopt SFAS 141R during the 1^st quarter of 2009 and is currently assessing the impact that this pronouncement will have on our financial statements.



•

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115 ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial assets and financial liabilities at

25

fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company will adopt SFAS 159 during the 1^st quarter of 2008 and is in the process of assessing the impact that this pronouncement will have on our financial statements.

•

In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 157, "Fair Value Measurement" ("SFAS 157"), SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company will adopt SFAS 157 during the 1^st quarter of 2008 and is in the process of assessing the impact that this pronouncement will have on our financial statements.

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. The following accounting policies involve a "critical accounting estimate" 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 the presentation of our financial condition and results of operations. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results. For additional information about these policies, see Note 1 of the Notes to Consolidated Financial Statements in this Form 10-K. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.

Revenue Recognition

        The Company recognizes revenue in accordance with SEC SAB 104 "Revenue Recognition" and therefore we consider revenue earned and realizable when (a) persuasive evidence of the sales arrangement exists, provided that the arrangement fee is fixed or determinable, (b) delivery or performance has occurred, (c) customer acceptance has been received, if contractually required, and, (d) collectibility of the arrangement fee is probable. The Company uses signed contractual agreements as persuasive evidence of a sales arrangement.

        We apply the provisions of Statement of Position 97-2, "Software Revenue Recognition (SOP 97-2)," as amended by SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions" 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 Emerging Issues Task Force Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" (EITF 00-21), individual contractual deliverables are accounted for separately if (a) the delivered items has value to the customer on a stand-alone basis;(b) there is vendor-specific objective and reliable evidence ("VSOE") 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 in our control. Software development arrangements involving significant customization, modification or production are accounted for in accordance with

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Statement of Position 81-1, "Accounting for Performance on Construction-Type and Certain Production-Type Contracts, (SOP 81-1)" using the percentage-of-completion method. The Company recognizes revenue using periodic reported actual hours worked as a percentage of total expected hours required to complete the project arrangement and applies the percentage to the total arrangement fee.

        The Company begins to recognize revenue from license fees for its application software products upon delivery and the customer's acceptance of the software implementation and customizations if applicable. Revenue from third party software is 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 SEC Staff Accounting Bulletin ("SAB") 104, "Revenue Recognition." ASP transaction services fee revenue is recognized as the transactions occur and generally billed in arrears. Service fees for hosting arrangements are recognized over the requisite service period.

        Deferred revenue includes maintenance and support payments or billings that have been received or 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 the VSOE for the undelivered elements does not exist. In these instances revenue is recognized when the VSOE for the undelivered elements is established 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

        The Company applies the provisions of Financial Accounting Statement No. 142 "Goodwill and Other Intangible Assets (SFAS 142)" 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. These events or circumstances would include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors. The testing involves comparing the reporting unit and asset carrying values to their respective fair values; we determine fair value by using the present value of future estimated net cash flows.

        In analyzing goodwill for potential impairment, we use projections of future discounted cash flows to determine each reporting unit's fair value. 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 within 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, 2007, 2006 and 2005, we had no impairment of our reporting unit

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goodwill balances. For additional information about goodwill, see Note 13 of the Notes to Consolidated Financial Statements in this Form 10-K.

Income Taxes

        We account for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes (SFAS 109)." As part of the process of preparing our Consolidated Financial Statements, we estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our 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. A valuation allowance is currently set against certain net deferred tax assets because we believe it is more likely than not that these deferred tax assets will not be realized through the generation of future taxable income. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, and our future taxable income for purposes of assessing our ability to realize any future benefit from our deferred tax assets. The Company has not provided deferred U.S. taxes on its unremitted foreign earnings because it considers them to be permanently re-invested.

        Effective January 2007 the Company adopted the Financial Accounting Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 clarifies 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. FIN 48 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. As used in FIN 48, the term "more likely than not" means that the likelihood of an occurrence is greater than 50%. The Company adopted FIN 48 during 2007 and as a result recognized a $566 thousand liability for unrecognized tax benefits of which $455 thousand was accounted for as a reduction to the January 1, 2007, balance of retained earnings.

Foreign Currency Translation

        Our reporting currency is the U.S. dollar. The functional currency of the Company's foreign subsidiaries is 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.

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Quarterly Financial Information (unaudited):

        The following is the unaudited quarterly financial information for 2007 and 2006:

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Item 7A.    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. The majority 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 2007, 2006, and 2005 the net change in the cumulative foreign currency translation account, which is a component of stockholders' equity, was an unrealized gain(loss) of $1.8 million, $462 thousand, and ($510 thousand) 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 changes would have resulted in an adverse impact on income before income taxes of approximately $122 thousand, $70 thousand and $376 thousand for the years ended December 31, 2007, 2006 and 2005, 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, 2007 the Company had $36.7 million of outstanding debt obligations which consisted of a $15.7 million balance on our revolving line of credit, the $20.0 million convertible promissory note with Whitebox VSC, Ltd., and a $1.0 million balance on the note payable in connection with the 2003 acquisition of EbixLife. The Whitebox convertible note's interest rate is fixed at 2.5% and the EbixLife note is 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 5.9% at December 31, 2007. While the Company had interest rate risk related to this revolving line of credit, the exposure during year ending December 31, 2007 was minimal in that the debt was not incurred until December 26, 2007 and was mitigated by the interest income earned on the Company's existing cash balances. The Company's average cash balances during 2007 were $9.0 million and its existing cash balances as of December 31, 2007 was $49.5 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 pre-tax income resulting from a hypothetical 10% decrease in effective interest rates earned on the Company's cash balances. Such an adverse change would have resulted in an adverse impact on income before taxes of approximately $57 thousand for the year ending December 31, 2007. For the years ending December 31, 2006 and 2005 the Company determined that such adverse fluctuations in interest rates would not have had a material impact on its results from operations.

        The Company does not currently use any derivative financial instruments.

ITEM 8.    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.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Ebix, Inc.

        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 7 to the consolidated financial statements, effective January 1, 2007, the Company adopted Financial Accounting Interpretation No. 48, "Accounting for Uncertainty in Income Taxes".

Atlanta, Georgia
March 28, 2008

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Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Ebix, Inc.
Atlanta, GA

        We have audited the accompanying consolidated balance sheet of Ebix, Inc. as of December 31, 2006 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, 2006. We have also audited the schedule listed in the accompanying index. 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 audits.

        We conducted our audits in accordance with 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits 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 and schedule, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. 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. at December 31, 2006 and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

        Also, in our opinion, the financial statement schedules for 2006 and 2005, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

        As disclosed in Note 2 to the consolidated financial statements, effective January 1, 2006, the Company adopted the fair value method of accounting provisions of Statement of Financial Accounting Standard No. 123 (revised 2004), "Share Based Payment."

Chicago, Illinois
April 9, 2007

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Ebix, Inc. and Subsidiaries

Consolidated Statements of Income

See accompanying notes to consolidated financial statements.

33

Ebix, Inc. and Subsidiaries

Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.

34

Ebix, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Equity and Comprehensive Income

See accompanying notes to consolidated financial statements.

35

Ebix, Inc. and Subsidiaries

Consolidated Statements of Cash Flows