UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

to

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

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

Commission file number 0-15946

EBIX, INC.

(Exact name of registrant as specified in its charter)

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

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

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

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

Title of each class

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

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

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

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

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

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

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

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

As of March 14, 2011, the number of shares of Common Stock outstanding was 39,708,750. As of June 30, 2010 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of Common Stock held by non-affiliates, based upon the last sale price of the shares as reported on the NASDAQ Global Capital Market on such date, was approximately $355,576,066 (for this purpose, the Company has assumed that directors, executive officers and holders of more than 10% of the Company’s common stock are affiliates).

 

 

EBIX, INC.

INDEX TO ANNUAL REPORT ON FORM 10-K

		Page
		Reference
PART I
Item 1. Business			4
Item 1A. Risk Factors			10
Item 1B. Unresolved Staff Comments			17
Item 2. Properties			17
Item 3. Legal Proceedings			17
Item 4. Submission of Matters to a Vote of Security Holders			17
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			18
Item 6. Selected Financial Data			20
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			35
Item 8. Financial Statements and Supplementary Data			36
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			66
Item 9A. Controls and Procedures			66
Item 9B. Other Information			70
PART III
Item 10. Directors, Executive Officers and Corporate Governance			70
Item 11. Executive Compensation			72
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			84
Item 13. Certain Relationships and Related Transactions, and Director Independence			86
Item 14. Principal Accountant Fees and Services			86
PART IV
Item 15. Exhibits and Financial Statement Schedules			87
Signatures			88
Exhibit 21.1
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

SAFE HARBOR REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

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

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

PART I

Item 1:		BUSINESS

Company Overview

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

Ebix, Inc. is a leading international supplier of software and e-commerce solutions to the insurance industry. Ebix provides a series of application software products for the insurance industry ranging from carrier systems, agency systems and exchanges to custom software development for all entities involved in the insurance and financial industries. As of 31st December 2010, approximately 71% of Ebix revenues came from on-demand insurance Exchanges.

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

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

Recently, we made a number of strategic acquisitions.

On February 7, 2011 we closed the merger of Atlanta, Georgia based A.D.A.M., Inc. (or “ADAM”) with a wholly owned subsidiary of Ebix. Under the terms of the merger agreement, ADAM shareholders received, at a fixed exchange ratio, 0.3122 shares of Ebix common stock for every share of ADAM common stock. Ebix issued approximately 3,650,914 shares of Ebix common stock pursuant to the merger. ADAM is a leading provider of health information and benefits technology solutions in the United States.

During the Company’s third quarter ending September 30, 2010, Ebix: (a) acquired all of the stock of Brazilian-based USIX Technology, S.A. (“USIX”), a provider of broker systems and related services for insurance carriers across Latin America; and, (b) acquired all of the stock of Singapore based E-Trek Solutions PTE Ltd, (“E-Trek”) a provider of underwriting and claims processing services for the insurance industry in Singapore. We paid a total of $8.5 million in cash consideration for these two business acquisitions and the former shareholders of these businesses retain the right to earn up to an additional $6.4 million if certain revenue targets are achieved over the two-year period subsequent to the effective date of the acquisitions. Ebix funded these acquisitions with internal resources using available cash reserves.

During the Company’s second quarter ending June 30, 2010, Ebix: (a) acquired all of the assets of Houston, Texas based Connective Technologies, Inc. (“Connective Technologies”) a premier provider of on-demand software solutions for property and casualty insurance carriers in the United States; and, (b) acquired all of the stock of Australian based Trades Monitor a provider of insurance related software services for the Australian insurance industry. We paid a total of $4.1 million in cash consideration for these two business acquisitions and the former shareholders of these businesses retain the right to earn up to an additional $4.5 million if certain revenue targets are achieved over the two-year period subsequent to the effective date of the acquisitions. Ebix funded these acquisitions with internal resources using available cash reserves.

During the Company’s first quarter ending March 31, 2010, Ebix acquired all of the stock of Brazilian based MCN Technology & Consulting (“MCN”) a provider of software development and consulting services for insurance companies, insurance brokers, and financial institutions in Brazil. We paid a total of $3.1 million in cash consideration for this business acquisition and the former shareholders of MCN retain the right to earn up to an additional $2.0 million if certain revenue targets are achieved over the two-year period subsequent to the effective date of the acquisition. Ebix funded this acquisition with internal resources using available cash reserves.

We acquired E-Z Data, Inc. (“E-Z Data”) effective October 1, 2009. E-Z Data was a leading industry provider of on-demand customer relationship management (“CRM”) solutions for insurance companies, brokers, agents, investment dealers, and financial advisors. We acquired the business operations and intellectual property of E-Z Data for an aggregate purchase price of $50.5 million paid to E-Z Data’s shareholders consisting of cash consideration in the amount of $25.5 million paid at closing and $25.0 million in shares of our common stock valued at the average market closing price for the three most recent days prior to September 30, 2009. We funded the cash portion of the purchase price for this business acquisition using the proceeds from the Company’s two convertible promissory notes issued in late August 2009.

We acquired Peak Performance Solutions, Inc. (“Peak”) effective October 1, 2009. Pursuant to the terms of the stock purchase agreement, we paid Peak’s shareholders $8.0 million in cash for all of Peak’s outstanding stock. Peak provides comprehensive, end-to-end insurance software and technology solutions to insurance companies and self-insured entities for workers’ compensation claims processing, risk management administration, and managed care tracking. We funded this acquisition with internal resources using available cash reserves. During 2010 the Company reversed the previously recorded $1.5 million contingent liability earnout obligation because during the subsequent 2010 earnout period the defined revenue targets were not achieved by the Peak operations.

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

We acquired ConfirmNet Corporation (“ConfirmNet”) on November 24, 2008. Pursuant to the terms of the plan of merger and agreement, Ebix paid ConfirmNet shareholders $7.4 million for all of ConfirmNet’s stock. The ConfirmNet shareholders earned an additional $3.1 million for meeting certain revenue objectives during 2008 which was paid in the first quarter of 2009, and earned an additional $3.0 million for meeting certain revenue objectives during 2009 which was paid in the second quarter of 2010.

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

Effective April 28, 2008 Ebix acquired Periculum Services Group (“Periculum”) a provider of certificate of insurance tracking services. The Company acquired all of the stock of Periculum for a payment of $1.1 million and Periculum’s shareholders earned, and the Company paid an additional $200 thousand for meeting certain revenue objectives. Ebix financed this acquisition using available cash.

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; Coral Gables, Florida; Pittsburgh, Pennsylvania; Park City, Utah; Herndon, Virginia; Dallas and Houston, Texas; Columbus, Ohio, and Pasadena, California. The Company also has offices in Australia, Brazil, China, Japan, 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 certifications for both its development and call center units in India.

The Company’s revenues are derived from four (4) product or service groups. Presented in tabular format below is the breakout of our revenue streams for each of those product or service groups for the year ended December 31, 2010 and 2009:

		For the Year Ended
		December 31,
(dollar amounts in thousands)		2010				2009				2008
Exchanges		$	94,212			$	60,764			$	42,711
Broker Systems		$	13,841			$	11,599			$	12,347
BPO		$	15,586			$	14,698			$	8,380
Carrier Systems		$	8,549			$	10,624			$	11,314
Totals		$	132,188			$	97,685			$	74,752

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

Industry Overview

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

Products and Services

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

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

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

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

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

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

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

Product Development

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

The Company has expended $13.6 million, $11.4 million, and $9.0 million during the years ending December 31, 2010, 2009, and 2008, respectively, on product development initiatives. The Company’s product development efforts are focused on the continued enhancement and redesign of the its Exchange, broker systems, carrier systems, BPO service lines to keep our technology edge in the markets, the development new technologies for insurance carriers, brokers and agents, and the redesign, coding, development of new services for international and domestic markets.

Competition

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

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

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

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

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

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

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

P&C Exchanges — Ebix operates two P&C exchanges in Australia and New Zealand, besides having entered the P&C Exchange market in the United States recently. All of these exchanges are targeted to the areas of personal and commercial lines, and facilitate the exchange of insurance data between brokers and insurance carriers. Ebix has distinct plans to deploy these exchanges in the United States, Asia, Europe and Africa. There are presently no competitors in the P&C exchange area in Australia and New Zealand, however, competition may eventually evolve in these markets. Ebix’s main competitor in P&C exchanges in United States is IVANS. Our competitive differentiation is by virtue of having an end-to-end solution offering in the market with our exchanges being interfaced with multiple broker systems.

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

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

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

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

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

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

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

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

Intellectual Property

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

Employees

As of December 31, 2010, the Company had 1,179 employees, distributed as follows: 72 in sales and marketing, 840 in product development, 165 in back-end operations, and 102 in administration, general management and finance. None of the Company’s employees is presently covered by a collective bargaining agreement. Management considers employee relations to be competitively good.

Executive Officers of the Registrant

Following are the persons serving as our executive officers as of March 14, 2011, together with their ages, positions and brief summaries of their business experience:

Name		Age		Position		Officer Since
Robin Raina		44		Chairman, President, and Chief Executive Officer			1998
Robert F. Kerris		57		Chief Financial Officer and Corporate Secretary			2007

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

ROBIN RAINA, 44, has been Ebix’s CEO since September 1999. He has been a Director at Ebix since 2000 and Chairman of the Board at Ebix since May 2002. Mr. Raina joined Ebix, Inc. in October 1997 as our Vice President—Professional Services and was promoted to Senior Vice President—Sales and Marketing in February 1998. Mr. Raina was promoted to Executive Vice President, Chief Operating Officer in December 1998. Mr. Raina was appointed President effective August 2, 1999, Chief Executive Officer effective September 23, 1999 and Chairman in May 2002. Mr. Raina holds an industrial engineering degree from Thapar University in Punjab, India.

ROBERT F. KERRIS, 57, joined the Company as Chief Financial Officer on October 22, 2007. Prior to joining the Company, Mr. Kerris was Chief Financial Officer at Aelera Corporation. He held this position from May 2006 to October 2007. Previously he was a Financial Vice President at Equifax, Inc. from November 2003 to April 2006, Corporate Controller at Interland, Inc. from September 2002 to October 2003, and held senior financial management positions at AT&T, BellSouth, and Northern Telecom. Mr. Kerris is a licensed certified public accountant and holds an accounting and economics degree from North Carolina State University.

Our principal executive offices are located at 5 Concourse Parkway, Suite 3200, Atlanta, Georgia 30328, and our telephone number is (678) 281-2020. Our official Web site address is http://www.ebix.com. We make available, free of charge, at http://www.ebix.com, the charters for the committees of our board of directors, our code of conduct and ethics, and, as soon as practicable after we file them with the SEC, our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K. We will also soon begin posting filings under Section 16 of the Exchange Act on our Web site. Any waiver of the terms of our code of conduct and ethics for the chief executive officer, the chief financial officer, any accounting officer, and all other executive officers will be disclosed on our Web site.

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

Item 1A.		RISK FACTORS

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

Risks Related To Our Business and Industry

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

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

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

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

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

Third-party insurance benefit administrators (“TPA’s”) demand for services from our health benefits exchange operating segment may be significantly reduced due to the diminished role of TPA’s envisioned as a result of the implementation of the Affordable Care Act.

We could potentially be required to recognize an impairment of goodwill.

Goodwill represents the excess of the amounts paid us to acquire subsidiaries and other businesses over the fair value of their net assets at the date of acquisition. At December 31, 2010, we had $180.6 million of assets representing goodwill. See Note 1 to the Consolidated Financial Statements. We test these assets at least annually for impairment. If it is determined that goodwill has been impaired, we must write down the goodwill by the amount of the impairment, with a corresponding charge to net income. These write downs could have a material adverse effect on our results of operations and financial condition.

We may have exposure to greater than anticipated tax liabilities

Our future income taxes could be adversely affected by earnings being lower than anticipated in jurisdictions where we have lower statutory tax rates and higher than anticipated in jurisdictions where we have higher statutory tax rates, by changes in the valuation of our deferred tax assets and liabilities, or due to changes in tax laws, regulations, and accounting principles in the domestic and foreign jurisdictions in which we conduct operations. We are subject to regular review and audit by both domestic and foreign tax authorities. Any adverse outcome of such a review or audit could have a negative effect on our operating results and financial condition. In addition, the determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment, and there are some transactions for which the ultimate tax treatment is uncertain. Although we believe our estimates are reasonable and appropriate, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made.

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

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

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

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

	•		potential incompatibility of business cultures;
	•		potential delays in integrating diverse technology platforms;
	•		potential difficulties in coordinating geographically separated organizations;
	•		potential difficulties in re-training sales forces to market all of our products across all of our intended markets;
	•		potential difficulties implementing common internal business systems and processes;
	•		potential conflicts in third-party relationships; and
	•		potential loss of customers and key employees and the diversion of the attention of management from other ongoing business concerns.

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

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

	•		rapidly changing technology;
	•		evolving industry standards;
	•		frequent new product and service introductions;
	•		shifting distribution channels; and
	•		changing customer demands.

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

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

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

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

	•		undertake more extensive marketing campaigns for their brands and services;
	•		devote more resources to website and systems development;
	•		adopt more aggressive pricing policies; and
	•		make more attractive offers to potential employees, online companies and third-party service providers.

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

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

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

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

We face risks in the transmittal of individual health-related information.

We face potential risks and financial liabilities associated with obtaining and transmitting personal account information that includes social security numbers and individual health-related information. Information may be accessed by outsiders by breaching our security systems or by inappropriate actions of our personnel. Our risks would include damage of our reputation, additional costs to address and remediate any problems encountered as well as litigation and potential financial penalties.

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

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

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

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

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

	•		the impact of recessions in foreign economies on the level of consumers’ insurance shopping and purchasing behavior;
	•		greater difficulty in collecting accounts receivable;
	•		difficulties and costs of staffing and managing foreign operations;
	•		reduced protection for intellectual property rights in some countries;
	•		seasonal reductions in business activity;
	•		burdensome regulatory requirements;
	•		trade and financing barriers, and differing business practices;
	•		significant fluctuations in exchange rates;
	•		potentially adverse tax consequences; and
	•		political and economic instability.

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

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

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

Risks Relating to Regulation and Litigation

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

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

Potential liabilities under the Foreign Corrupt Practices Act (whether currently existing or subsequently discovered) could have a material adverse effect on our business.

We are subject to the Foreign Corrupt Practice Act, or FCPA, which prohibits people or companies subject to United States jurisdiction and their intermediaries from engaging in bribery or other prohibited payments to foreign officials for the purposes of obtaining or retaining business or gaining an unfair business advantage. It also requires proper record keeping and characterization of such payments in reports filed with the SEC. To the extent that any of our employees, supplies, distributors, consultants, subcontractors, or others engage in conduct that subjects us to exposure under the FCPA, or other anti-corruption legislation, we could suffer financial penalties, debarment from government contracts and other consequences that may have a material adverse effect on our business, financial condition or results of operations.

Risks Related to Our Conduct of Business on the Internet

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

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

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

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

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

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

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

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

Risks Related To Our Common Stock

The price of our common stock may be extremely volatile.

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

	•		announcements of new services, products, technological innovations, acquisitions or strategic relationships by us or our competitors;
	•		trends or conditions in the insurance, software, business process outsourcing and internet markets;
	•		changes in market valuations of our competitors; and
	•		general political, economic and market conditions.

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

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

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

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

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

	•		The transaction is approved by the board of directors prior to the date the interested stockholder obtained interested stockholder status;
	•		Upon consummation of the transaction that resulted in the stockholder’s becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or
	•		On or subsequent to the date the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.

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

Item 1B:		UNRESOLVED STAFF COMMENTS

None

Item 2:		PROPERTIES

The Company’s corporate headquarters, including substantially all of our corporate administration and finance functions, is located in Atlanta, Georgia where we lease 39,831 square feet of commercial office space. In addition the Company and its subsidiaries lease office space of 5,500 square feet in Park City, Utah, 4,148 square feet in Dallas, Texas, 12,000 square feet in Herndon, Virginia, 10,800 square feet in Hemet, California, 2,156 square feet in Walnut Creek, California, 11,500 square feet in Pittsburgh, Pennsylvania, 5,300 square feet in Portland, Michigan, 7,000 square feet in San Diego, California, 2,826 square feet in Miami, Florida, 25,482 square feet in Pasadena, California, 4,384 square feet in Lynchburg, Virginia, 5,289 square feet in Columbus, Ohio, and 4,400 square feet in Houston, Texas. Additionally, the Company leases office space in New Zealand, Australia, Singapore, Brazil, Canada, Japan, and China for support and sales offices. The Company owns three facilities in India with total square footage of approximately 65,000 square feet and leases an additional two. The Indian facilities provide software development and call center services for customers. Management believes its facilities are adequate for its current needs and that necessary suitable additional or substitute space will be available as needed at favorable rates.

Item 3:		LEGAL PROCEEDINGS

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

Item 4:		Submission of Matters to a Vote of Security Holders

Not Applicable.

PART II

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

Market Information

At December 31, 2010 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 14, 2011, there were 101 registered holders of record of the Company’s common stock.

The following tables set forth the high and low closing bid prices for the Company’s common stock for each calendar quarter in 2010 and 2009. The 2009 per share prices have been retroactively adjusted to reflect the effect of the 3-for-1 stock split dated January 4, 2010.

Year Ended December 31, 2010		High				Low
First quarter		$	17.93			$	13.91
Second quarter			16.95				14.01
Third quarter			24.00				15.06
Fourth quarter			26.28				20.75

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

Holders

As of March 14, 2011, there were 39,708,750 shares of the Company’s common stock outstanding

Dividends

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

Securities Authorized for Issuance Under Equity Compensation Plans

The Company’s equity compensation is currently governed by the 2010 Ebix Equity Incentive Plan as approved by our stockholders. The table below provides information as of December 31, 2010 related to this plan.

Number

Number of Securities

of Securities

to be Issued Upon

Weighted-Average

Remaining Available

Exercise of

Exercise Price of

for Future Issuance

Outstanding Options

Outstanding Options

Under Equity

Plan Category

Warrants and Rights

Warrants and Rights

Compensation Plans

Equity Compensation Plans Approved by Security Holders:

—1996 Stock Incentive Plan, as amended and restated in 2006

3,340,476

$

2.22

1,050,792

—2010 Stock Incentive Plan

0

$

N/A

5,000,000

Total

3,340,476

$

2.22

6,050,792

Recent Sales or Issuances of Unregistered Securities

On October, 1, 2009, as part of the consideration for the purchase of E-Z Data, Inc. (“E-Z Data”), we issued at closing $25 million in shares of Ebix common stock valued at the average market closing price for the three most recent days prior to September 30, 2009. This resulted in the issuance of 1,488,984 shares of our common stock, 744,492 shares to each its two former shareholders, Dale Okuno and Dilip Sontakey, both “accredited investors” within the meaning of Rule 501 of Regulation D. The Company relied upon Section 4(2) of the Securities Act of 1933 and Regulation D promulgated there under in making this sale in a private placement to accredited investors who acquired the shares for investment purposes. Under the terms of the agreement the E-Z Data sellers hold a put option exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, which if exercised would enable them to sell the underlying shares of common stock back to the Company at a price of $15.11 per share, which represents a 10% discount off of the per-share value established on the effective date of the closing of Ebix’s acquisition of E-Z Data. Ebix was obligated to file with the SEC a registration statement for the underlying shares of our common stock and use our reasonable best efforts to cause the SEC to declare the registration statement effective. This registration statement, number 333-163459, became effective on February 26, 2010.

On August 26, 2009, we entered into an unsecured Convertible Note Purchase Agreement (the “Whitebox Agreement”) with Whitebox VSC, Ltd (“Whitebox” or the “Holder”). As a result of the transactions consummated by the Whitebox Agreement the Company issued a Convertible Promissory Note (the “Whitebox Note”) with a date of August 26, 2011 (the “Maturity Date”) in the original principal amount of $19.0 million, which is convertible into shares of Ebix common stock at a price of $16.00 per share, subject to certain adjustments as set forth in the Whitebox Note. The Whitebox Note had a 0.0% stated interest rate. In accordance with the terms of the Whitebox Note, as had been understood between the Company and the Holder, upon a conversion election by the Holder the Company had to satisfy the related original principal balance in cash and could satisfy the conversion spread (that being the excess of the conversion value over the related original principal component) in either cash or stock at option of the Company. During 2010 Whitebox VSC, Ltd elected to fully convert all of the August 26, 2009 Convertible Promissory Note. The Company settled this conversion election by paying $19.0 million in cash with respect to the principal component, paying $2.3 million in cash for a portion of the conversion spread, and issuing 275,900 shares of Ebix common stock for the remainder of the conversion spread.

On August 26, 2009, we entered into an unsecured Convertible Note Purchase Agreement (the “IAM Agreement”) with IAM Mini-Fund 14 Limited (“IAM” or the “Holder”), a fund managed by Whitebox. As a result of the transactions consummated by the IAM Agreement the Company issued a Convertible Promissory Note (the “IAM Note”) with a date of August 26, 2011 (the “Maturity Date”) in the original principal amount of $1.0 million, which is convertible into shares of our common stock at a price of $16.00 per share, subject to certain adjustments as set forth in the IAM Note. The IAM Note has a 0.0% stated interest rate. In accordance with the terms of the IAM Note, as understood between the Company and the Holder, upon a conversion election by the Holder the Company had to satisfy the related original principal balance in cash and could satisfy the conversion spread (that being the excess of the conversion value over the related original principal component) in either cash or stock at option of the Company. During 2010 IAM elected to fully convert all of the August 26, 2009 Convertible Promissory Note. The Company settled this conversion election by paying $1.0 million in cash with respect to the principal component, paying $221 thousand in cash for a portion of the conversion spread, and issuing 7,478 shares of Ebix common stock for the remainder of the conversion spread.

On August 25, 2009, we entered into an unsecured Convertible Note Purchase Agreement (the “Rennes Agreement”) with the Rennes Foundation (“Rennes” or the “Holder”). As a result of the transactions consummated by the Rennes Agreement the Company issued a Convertible Promissory Note (the “Rennes Note”) with a date of August 25, 2011 (the “Maturity Date”) in the original principal amount of $5.0 million, which is convertible into shares of Ebix common stock at a price of $16.67 per share, subject to certain adjustments as set forth in the Rennes Note. The Rennes Note has a 0.0% stated interest rate. In accordance with the terms of the Rennes Note, as understood between the Company and the Holder, upon a conversion election by the Holder the Company must satisfy the related original principal balance in cash and may satisfy the conversion spread (that being the excess of the conversion value over the related original principal component) in either cash or stock at option of the Company. Previous to this transaction Rennes has been and continues to be a beneficial owner of the Company, with a beneficial ownership percentage of approximately 8.6%. Rolf Herter, a member of our Board of Directors, is also a director of the Rennes Foundation.

Recent Purchases of Equity Securities

As provided for under previous Board authorized share repurchase plans, from January through August 2010 the Company repurchased 669,978 shares of our common stock for a total aggregate purchase price of $10.7 million. The Company did not repurchase any shares of its Common Stock during the period September through December 2010.

Item 6:		SELECTED FINANCIAL DATA

The following data for fiscal years 2010, 2009, 2008, 2007, and 2006 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
(In thousands except per share amounts)

		Year Ended				Year Ended				Year Ended				Year Ended				Year Ended
		December 31,				December 31,				December 31,				December 31,				December 31,
		2010				2009				2008				2007				2006
Results of Operations:
Revenue		$	132,188			$	97,685			$	74,752			$	42,841			$	29,253
Operating income			52,507				39,256				29,264				12,801				6,712
Net income		$	59,019			$	38,822			$	27,314			$	12,666			$	5,965
Net income per share:
Basic*		$	1.69			$	1.24			$	0.93			$	0.45			$	0.24
Diluted*		$	1.51			$	1.03			$	0.76			$	0.40			$	0.21
Shares used in computing per share data:
Basic*			34,845				31,398				29,514				27,917				24,912
Diluted*			39,018				38,014				36,780				31,604				28,233
Financial Position:
Total assets		$	303,300			$	262,167			$	141,167			$	108,510			$	47,352
Short-term debt			10,157				52,487				37,192				16,161				11,006
Long-term debt			25,000				—				15,000				20,486				934
Redeemable common stock			—				—				—				—				—
Stockholders’ equity		$	231,268			$	170,743			$	70,142			$	60,678			$	26,166

PERFORMANCE GRAPH

The line graph below compares the yearly percentage change in cumulative total stockholder return on our Common Stock for the last five fiscal years with the NASDAQ Stock Market (U.S.) stock index and the NASDAQ Computer Index. The following graph assumes the investment of $100 on December 31, 2005, and the reinvestment of any dividends (rounded to the nearest dollar).

Comparison of Five Year Cumulative Total Return

		12/31/05				12/31/06				12/31/07				12/31/08				12/31/09				12/31/10
EBIX, INC.		$	100			$	141			$	370			$	362			$	740			$	1,076
NASDAQ STOCK MARKET (U.S.)		$	100			$	109			$	120			$	72			$	103			$	120
NASDAQ COMPUTER		$	100			$	106			$	129			$	69			$	118			$	138

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.

OVERVIEW

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

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

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

The key performance indicators for the twelve months ended December 31, 2010, 2009, and 2008 were as follows:

		Key Performance Indicators
		Twelve Months Ended December 31,
(Dollar amounts in thousands except per share data)		2010				2009				2008
Revenue		$	132,188			$	97,685			$	74,752
Revenue growth			35	%			31	%			74	%
Operating income		$	52,507			$	39,256			$	29,264
Operating margin			40	%			40	%			39	%
Net Income		$	59,019			$	38,822			$	27,314
Diluted earnings per share *		$	1.51			$	1.03			$	0.76
Cash provided by operating activities		$	52,779			$	33,877			$	26,825

RESULTS OF OPERATIONS

		Year Ended				Year Ended				Year Ended
		December 31,				December 31,				December 31,
		2010				2009				2008
		(In thousands)
Operating revenue:		$	132,188			$	97,685			$	74,752
Operating expenses:
Costs of services provided			29,599				21,274				14,161
Product development			13,607				11,362				8,962
Sales and marketing			6,372				5,040				4,344
General and administrative			24,065				16,798				14,715
Amortization and depreciation			6,038				3,955				3,306
Total operating expenses			79,681				58,429				45,488
Operating income			52,507				39,256				29,264
Interest income (expense), net			(383	)			(871	)			(1,151	)
Other non-operating income			6,319				89				—
Foreign exchange gain			1,211				1,358				586
Income before taxes			59,654				39,832				28,699
Income tax expense			(635	)			(1,010	)			(1,385	)
Net income		$	59,019			$	38,822			$	27,314

TWELVE MONTHS ENDED DECEMBER 31, 2010 AND 2009

Operating Revenue

The Company derives its revenues primarily from professional and support services, which includes subscription and transaction fees pertaining to services delivered over our exchanges or from our ASP platforms, revenue generated from software development projects and associated fees for consulting, implementation, training, and project management provided to customers with installed systems, and business process outsourcing revenue. Ebix’s revenue streams come from four product channels. Presented in the table below is the breakout of our revenues for each of those product channels the years ended December 31, 2010 and 2009.

		For the Year Ended
		December 31,
(dollar amounts in thousands)		2010				2009
Exchanges		$	94,212			$	60,764
Broker Systems		$	13,841			$	11,599
BPO		$	15,586			$	14,698
Carrier Systems		$	8,549			$	10,624
Totals		$	132,188			$	97,685

During the twelve months ended December 31, 2010 our total revenue increased $34.5 million or 35%, to $132.2 million compared to $97.7 million in 2009. The increase in revenues is principally a result of the impact certain strategic business acquisitions made during 2010 and 2009 in our Exchange and BPO channels, and continued organic growth realized in our Exchange channels. Our ability to quickly integrate business acquisitions into existing operations enables the Company to rapidly leverage product cross-selling opportunities. The specific components of our revenue and the changes experienced during the past year are discussed further below.

Exchange division revenues increased $33.4 million or 55% primarily due to net increases of approximately $17.9 million in the life and annuity sector, $13.4 million in the property & casualty sector, and $2.6 million from the health insurance sector.

BPO division revenues increased $880 thousand or 6% due to greater demand for our insurance certificate creation and tracking services. The Company’s growth in this channel was strongly impacted by the downturn in the commercial and residential housing industry, which drove down the transaction volume derived from clients associated within the construction industry, which traditionally accounts for approximately 35% of the insurance certificates in the United States.

Broker Systems division revenue increased $2.2 million or 19% principally due to further expansion into the international markets, and the associated growth of our on-demand back-end systems designed for use by insurance brokers.

Carrier Systems division revenue decreased $2.1 million or 20% due to continued delays in capital spending decisions related to large investments in perpetually licensed back-end systems designed for use by large insurance companies as also Ebix changing its revenue model for new prospective clients, from a license based model to a subscription based recurring model. With improving domestic and world-wide economic conditions during 2011 we would expect these insurance carriers to deploy new technologies and increase their spending for system development, and that our revenues from this channel will increase as also become more recurring in nature during the forthcoming year.

Costs of Services Provided

Costs of services provided, which includes costs associated with customer support, consulting, implementation, and training services, increased $8.3 million or 39%, from $21.3 million in 2009 to $29.6 million in 2010. This cost increase is attributable to additional personnel, professional services, and facility costs associated with our 2009 acquisitions of E-Z Data and Peak, the 2010 expansion into the Latin America market, and the increased research & development efforts towards designing new futuristic on-demand based services.

Product Development Expenses

Product development expenses increased $2.2 million or 20%, from $11.4 million in 2009 to $13.6 million in 2010. The Company’s product development efforts are focused on the development new technologies for insurance carriers, brokers and agents, and the development of new exchanges for international and domestic markets. This cost increase is associated with the continued expansion of our technical operations in India and our intellectual property management operations in Singapore, both in support of the Company’s Exchange, Broker Systems, and Carrier Systems divisions.

This increase is primarily due to costs associated with new product development activities in support of our exchange and BPO channels.

Sales and Marketing Expenses

Sales and marketing expenses increased $1.3 million or 25%, from $5.1 million in 2009 to $6.4 million in 2010. This expense increase is primarily attributable to additional personnel, marketing, consulting, and facility related costs in support of the increased revenues generated by our Exchange and Broker Systems channels.

General and Administrative Expenses

General and administrative expenses increased $7.3 million or 43%, from $16.8 million in 2009 to $24.1 million in 2010. This increase primarily associated with additional personnel, increased health and business insurance costs, additional consulting services, increased business travel costs, and additional share-based and discretionary bonus compensation. Also a factor contributing the net increase to general and administrative expenses was the $822 thousand of potential bad expense that was recognized in connection with the Company’s decision to increase its reserve for doubtful accounts receivable. Partially offsetting these increases in general and administrative expenses was a $1.5 million benefit associated with the reversal of a previously recorded contingent liability earnout obligation associated with our October 2009 acquisition of Peak, because during the subsequent 2010 earnout period the defined revenue targets was not achieved by the Peak operations.

Amortization and Depreciation Expenses

Amortization and depreciation expenses increased $2.1 million, or 54%, from $3.9 million in 2009 to $6.0 million in 2010. This increase is due to $1.3 million of additional amortization expense incurred in connection with the customer relationship, developed technology, and non-compete intangible assets that were recognized in connection with our 2010 business acquisitions of MCN, Trades Monitor, and USIX, and our 2009 business acquisitions of E-Z Data, Facts, and Peak. We also incurred increased depreciation expense amounting to $795 thousand related to additional capital equipment expenditures in support of our growing businesses.

Interest Income

Interest income increased $320 thousand or 161% from $199 thousand in 2009 to $519 thousand in 2010 primarily due to earnings realized on funds invested in foreign banks.

Interest Expense

Interest expense decreased $168 thousand or 16% from $1.1 million in 2009 to $902 thousand in 2010. This decrease is primarily due to the full conversion of $20.0 million of convertible debt during the third and fourth quarters thereby ceasing further recognition of the imputed interest expense associated with these debt instruments.

Other Non-Operating Income

Other non-operating income of $6.3 million for the year ending December 31, 2010 consists of a $6.0 million gain recognized for the decrease in the fair value of the put option that was issued to the two former stockholders of E-Z Data whom received shares of Ebix common stock as part of the acquisition consideration paid by the Company, and a $262 thousand gain realized upon the sale of a building.

Foreign Exchange Gain

Net foreign exchange gains decreased $147 thousand or 11% from $1.4 million in 2009 to $1.2 million in 2010. This net decrease is due to the $949 thousand impact of re-measuring certain intercompany debt obligations largely offset by $802 thousand of gains recorded in connection with the changes in the fair value of the related derivative instruments the Company holds to hedge the impact of fluctuations in the exchange rates in the foreign jurisdictions in which we conduct our international operations.

Income Taxes

Income tax expense decreased $375 thousand, or 37%, from $1.0 million in 2009 to $635 thousand in 2010. Our effective tax rate was 1.1% for the twelve months ended December 31, 2010, down from 2.5% for the same period in 2009. Primarily affecting the decrease in income tax expense and our consolidated effective tax rate was the benefit recognized from the $2.3 million release of the remaining valuation allowance that had been held against cumulative legacy net operating loss (“NOL”) carryforwards in the United States. This valuation allowance was released as management believes that the uncertainties that had existed as to the performance of our health benefits exchange operating segment related to the potential adverse impacts associated with the than pending health care legislation are no longer relevant. Total income tax expense and the effective tax rate before the release of valuation allowance would have been approximately $2.9 million and 4.8% respectively. Also facilitating the relatively low consolidated world-wide effective tax rate are the advantages the Company realizes from conducting activities in certain foreign low tax jurisdictions.

TWELVE MONTHS ENDED DECEMBER 31, 2009 AND 2008

Operating Revenue

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

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

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

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

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

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

Carrier Systems division revenue decreased $690 thousand due to temporary delays in capital spending decisions as related to investments in back-end systems by large insurance companies. During 2011 we expect these insurance carriers to deploy new technologies and increase their spending for system development, and that our revenues from this channel will improve during the forthcoming year.

Costs of Services Provided

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

Product Development Expenses

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

Sales and Marketing Expenses

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

General and Administrative Expenses

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

Amortization and Depreciation Expenses

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

Interest Income

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

Interest Expense

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

Foreign Exchange Gain

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

Income Taxes

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

LIQUIDITY AND CAPITAL RESOURCES

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

The Company intends to secure the best possible returns from the use of its operating cash flows. Towards this end the Company believes that its available cash resources can generate much higher returns for its shareholders, by both reducing outstanding debt, and by investing in accretive acquisitions and organic growth initiatives, rather than by issuing dividends. While the Company does not completely rule out the possibility of issuing dividends in the future, at present it is more inclined to use its cash to generate further improvement in future earnings.

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

We continue to strategically evaluate our ability to sell additional equity or debt securities, to expand existing or obtain new credit facilities from lenders in order to strengthen our financial position. The sale of additional equity or convertible debt securities could result in additional dilution to our shareholders. We regularly evaluate our liquidity requirements, including the need for additional debt or equity offerings, when considering potential business acquisitions, development of new products or services, or the retirement of debt. During 2011 the Company intends to utilize its cash and other financing resources towards making strategic accretive acquisitions in the insurance data exchange arena. However, there are no assurances that such financing facilities will be available in amounts or on terms acceptable to us, if at all.

In February 2010 the Company entered into a new credit facility with Bank of America (“BOA”). The financing was comprised of a two-year, $25 million secured revolving credit facility, and a $10 million secured term loan which amortizes over a two year period with quarterly principal and interest payments that commenced on March 31, 2010 and a final payment of all remaining outstanding principal and accrued interest due on February 12, 2012. The interest rate applicable to the entire BOA credit facility is LIBOR plus 1.50%.

Our cash and cash equivalents were $23.4 million and $19.2 million at December 31, 2010 and 2009, respectively.

Our current ratio significantly improved during the past year and at December 31, 2010 it stood at 1.56 as compared to 0.62 at December 31, 2009. The Company finished the year with sufficient working capital to support our continued operating activities, which amounted to $21.7 million at December 31, 2010. The improvement in our short-term liquidity position is primarily the result of the conversion of $20.0 million of previously carried convertible debt and the refinancing of our financing facility with our commercial bank. We believe that our ability to generate sustainable significant cash flows from operations will enable the Company to continue to fund its current liabilities from current assets including available cash balances for the foreseeable future.

Operating Activities

For the twelve months ended December 31, 2010, the Company generated $52.8 million of net cash flow from operating activities compared to $33.9 million for the year ended December 31, 2009, representing a 56% increase. The major sources of cash provided by our operating activities for 2010 was net income of $59.0 million, net of $(8.0) million of net non-cash gains recognized on derivative instruments and foreign currency exchange, $(6.2) million of working capital requirements primarily associated with payments of trade payables and increased outstanding trade receivables, $6.0 million of depreciation and amortization, and $1.9 million of non-cash compensation.

For the twelve months ended December 31, 2009, the Company generated $33.9 million of net cash flow from operating activities which consisted of $38.8 million of net income net of $(10.2) million in working capital requirements, $3.9 million of depreciation and amortization, and $1.4 million of non-cash compensation.

Investing Activities

Net cash used for investing activities totaled $24.4 million for the twelve months ended December 31, 2010 of which $7.1 million was used for the September 2010 acquisition of USIX (net of $324 thousand of cash acquired), $1.0 million was used for the July 2010 acquisition of E-Trek (net of $62 thousand of cash acquired), $1.3 million was used for the May 2010 acquisition of Connective Technologies (net of $0 cash acquired), $2.7 million was used for the April 2010 acquisition of Trades Monitor (net of $0 cash acquired), and $2.9 million was used for the January 2010 acquisition of MCN (net of $172 thousand of cash acquired). Also during this past year $3.0 million was used to fulfill earn-out payment obligations to the former shareholders of ConfirmNet (a 2008 business acquisition), $4.5 million was used towards investments in marketable securities (specifically bank certificates of deposit), and $1.8 million was used for capital expenditures and the purchases of operating equipment to enhance the performance of our technology platforms and to support the continued growth of our businesses.

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

Financing Activities

Net cash used for financing activities during the twelve months ended December 31, 2010 was $25.7 million. This financing cash outflow was comprised of $22.5 million used for the settlement of previously issued convertible debt instruments, $10.7 million was used to complete open market repurchases of our common stock, and $804 thousand was used to service existing capital lease obligations. Partially offsetting these financing cash outflows was $5.2 million of proceeds (net of principal repayments) from our term loan facility with Bank of America, N.A. (“BOA”), $1.9 million of proceeds (net of $23.1 million of repayments) from our revolving credit facility with BOA, and $1.2 million from the exercise of stock options.

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

Commercial Bank Financing Facility

On February 12, 2010 the Company entered a credit agreement with Bank of America N.A. (“BOA”) providing for a $35 million secured credit facility which is comprised of a two-year, $25 million secured revolving credit facility, and a $10 million secured term loan which amortizes over a two year period with quarterly principal and interest payments that commenced on March 31, 2010 and a final payment of all remaining outstanding principal and accrued interest due on February 12, 2012. The credit facility has a variable interest rate currently set at LIBOR plus 1.50%. The revolving credit facility is used by the Company to partially satisfy working capital requirements primarily in support of current operations, organic growth, and accretive business acquisitions. The underlying financing agreement contains financial covenants regarding the Company’s annualized EBITDA, fixed charge coverage ratio, as well as certain restrictive covenants including the incurrence of new debt and consummation of new business acquisitions. The Company is in full compliance with all such financial and restrictive covenants and there have been no events of default.

At December 31, 2010 the outstanding balance on the revolving line of credit was $25.0 million and the facility carried an interest rate of 1.77%. This balance is included in the long-term liabilities section of the Consolidated Balance Sheet. During the twelve month period ending December 31, 2010 the average and maximum outstanding balance on the revolving line of credit was $18.7 million and $25.0 million respectively

At December 31, 2010 the outstanding balance on the term loan was $5.0 million and it also carried an interest rate of 1.77%. During the twelve months ended December 31, 2010 payments in the aggregate amount of $5.0 million were made against the term loan. The balance of the term loan is included in the current liabilities section of the Consolidated Balance Sheet.

On March 8, 2011 Ebix and Bank of America N.A. jointly executed a mutually binding commitment letter to amend and expand the existing credit facility. The amended credit facility, which has been expanded to $55 million, is comprised of a three-year $35 million secured revolving credit facility, and a $20 million secured term loan which amortizes over a three year period with quarterly principal and interest payments. The new $55 million credit facility replaces the former $35 million facility that had been with the same lender. The initial interest rate applicable to the credit facility is LIBOR plus 1.50%. The Company expects the closing date to formally execute the associated credit facility agreement documents will be on or before April 15, 2011.

Convertible Debt

In August 2009 the Company issued three convertible promissory notes raising a total of $25.0 million. Specifically on August 26, 2009 the Company entered into a Convertible Note Purchase Agreement with Whitebox in an original amount of $19.0 million, which amount is convertible into shares of common stock at a conversion price of $16.00 per share. The note has a 0.0% stated interest rate and no warrants were issued. The note is payable in full at its maturity date of August 26, 2011. Also on August 26, 2009 the Company entered into a Convertible Note Purchase Agreement with IAM Mini-Fund 14 Limited, a fund managed by Whitebox, in an original amount of $1.0 million, which amount is convertible into shares of common stock at a conversion price of $16.00 per share. The note has a 0.0% stated interest rate and no warrants were issued. The note is payable in full at its maturity date of August 26, 2011. Finally, on August 25, 2009 the Company entered into a Convertible Note Purchase Agreement with the Rennes Foundation in an original amount of $5.0 million, which amount is convertible into shares of common stock at a conversion price of $16.66 per share. The note has a 0.0% stated interest rate and no warrants were issued. The note is payable in full at its maturity date of August 25, 2011. The Company applied imputed interest on these convertible notes using an interest rate of 1.75% and discounted their carrying value accordingly. During the twelve months ending December 31, 2010 the Company recognized $328 thousand of interest expense. With respect to each of these convertible notes, and in accordance with the terms of the notes, as understood between the Company and each of the holders, upon a conversion election by the holder the Company must satisfy the related original principal balance in cash and may satisfy the conversion spread (that being the excess of the conversion value over the related original principal component) in either cash or stock at option of the Company. During 2010 Whitebox VSC, Ltd and IAM Mini-Fund 14 Limited elected to fully convert all of their August 26, 2009 Convertible Promissory Notes. The Company settled these conversion elections by paying $20 million in cash with respect to the principal component, paying $2.5 million in cash for a portion of the conversion spread, and issuing 283,378 shares of Ebix common stock for the remainder of the conversion spread.

The Company previously had a $15.0 million convertible note with Whitebox, originally dated July 11, 2008. On February 3, 2010, Whitebox fully converted the remaining principal on the $15 million note in the amount of $4.39 million and accrued interest in the amount of $62 thousand into 476,662 shares of the Company’s common stock.

Furthermore, the Company also previously had $20.0 million convertible note with Whitebox originally dated December 18, 2007. On October 7, 2009 the Company exercised its rights as provided in the Agreement and elected to exercise its mandatory conversion option. Accordingly the Company caused Whitebox to surrender the underlying 2.5% Secured Convertible Promissory Note due December 18, 2009, and to convert the remaining principal on said Note in the amount of $5.3 million together with accrued interest thereon in the amount of $105 thousand into 762,810 shares of the Company’s common stock at the conversion price of $7.09 per share.

As of December 31, 2010 the total remaining amount of convertible debt was $5.0 million which solely consists of a $5.0 million with Rennes Foundation. The unamortized discount was $56 thousand as of December 31, 2010

Contractual Obligations and Commercial Commitments

The following table summarizes our known contractual purchase obligations and other long-term obligations as of December 31, 2010. The table excludes commitments that are contingent based on events or factors uncertain at this time.

		Payment Due by Period
						Less Than												More than
		Total				1 Year				1 - 3 Years				3 - 5 Years				5 years
		(in thousands)
Short and Long-term Debt		$	35,157			$	10,157			$	25,000			$	—			$	—
Operating leases			8,612				2,820				4,275				1,510				7
Capital Leases			539				302				217				20				—
Total		$	44,308			$	13,279			$	30,969			$	1,530			$	7

Off Balance Sheet Transactions

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

Inflation

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

RECENT ACCOUNTING PRONOUNCEMENTS

The following is a brief discussion of recently released accounting pronouncements that are pertinent to the Company’s business:

In December 2010, the Emerging Issues Task Force of the FASB reached consensus regarding the disclosure of pro forma information for business combinations. This new guidance addressed the diversity in practice concerning the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. The guidance specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments affect any public entity that enters into business combinations that are material on an individual or aggregate basis. The new guidance is applicable to business combinations for which the acquisition date is on or after the first annual reporting period beginning on or after December 15, 2010. The Company is adopting this new guidance in the first quarter of 2011 and will apply this guidance to our recent acquisition of ADAM, completed in February 2011.

In January 2010, the FASB issued new guidance regarding disclosures about fair value measurements. The guidance requires additional disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in earlier related guidance. Specifically this new guidance now requires a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements. Also a reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. This new guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early application is permitted. The Company adopted and applied this pronouncement during its current year ending December 31, 2010.

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

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

In December 2007, the FASB issued new accounting guidance pertaining to the accounting for business combinations and related disclosures. This new guidance addresses the recognition and accounting for identifiable assets acquired, liabilities assumed, and non-controlling interests in business combinations. The guidance also establishes expanded disclosure requirements for business and improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. The guidance was effective for fiscal years beginning after December 15, 2008, and we applied this new pronouncement to each of our business acquisitions consummated during both the years ending December 31, 2010 and 2009.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

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

Revenue Recognition

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

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

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

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

Allowance for Doubtful Accounts Receivable

Management specifically analyzes accounts receivable and historical bad debts, write-offs, customer concentrations, customer credit-worthiness, current economic trends and changes in our customer payment terms when evaluating uncertainties and estimate as to the collectability of outstanding accounts receivable and the adequacy of the Company’s recorded allowance for doubtful accounts.

Valuation of Goodwill

Goodwill represents the cost in excess of the fair value of the identifiable net assets of acquired businesses. The Company applies the provisions of the FASB’s accounting guidance on goodwill and other intangible assets which addresses how goodwill and other acquired intangible assets should be accounted for in financial statements. In this regard we test these intangible assets for impairment annually or more frequently if indicators of potential impairment are present. Such potential impairment indicators include a significant change in the business climate, legal factors, operating performance indicators, competition, and the sale or disposition of a significant portion of the business. The testing involves comparing the reporting unit and intangible asset carrying values to their respective fair values; we determine fair value by applying the discounted cash flow method using the present value of future estimated net cash flows. The cash flow projections 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. The use of different estimates or assumptions for our projected discounted cash flows (e.g., growth rates, future economic conditions, discount rates and estimates of terminal values) when determining the fair value of our reporting units could result in different values and may result in a goodwill impairment charge. During the twelve months ended December 31, 2010, 2009, and 2008, we had no impairment of our reporting unit goodwill balances. For additional information about goodwill, see Note 1 of the Notes to Consolidated Financial Statements in this Form 10-K.

Income Taxes

We account for income taxes in accordance with FASB accounting guidance on the accounting and disclosure of income taxes, which involves estimating the Company’s current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheets. We then assess the likelihood that our net deferred tax assets will be recovered from future taxable income in the years in which those temporary differences are expected to be recovered or settled, and, to the extent we believe that recovery is not likely, we establish a valuation allowance. In this regard a valuation allowance in the amount of $6.6 million is being maintained to fully offset the deferred tax assets associated with cumulative NOL’s that were obtained in connection with previous business acquisitions and for which realization of these assets is not assured due to uncertainties principally associated with limitations on the usage of these acquired NOL’s posed by Section 382 of the U.S. internal revenue code.

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

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

Foreign Currency Translation

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

Quarterly Financial Information (unaudited):

The following is the unaudited quarterly financial information for 2010, 2009 and 2008:

		First				Second				Third				Fourth
		Quarter				Quarter				Quarter				Quarter
		(in thousands, except per share data)
Year Ended December 31, 2010
Total revenues		$	31,603			$	32,207			$	33,281			$	35,097
Gross Profit			24,540				24,780				25,863				27,406
Operating income			12,759				13,008				13,082				13,658
Net income			12,384				14,010				16,681				15,944
Net income per common share:
Basic		$	0.36			$	0.40			$	0.48			$	0.45
Diluted		$	0.32			$	0.36			$	0.43			$	0.42
Year Ended December 31, 2009
Total revenues		$	20,668			$	22,421			$	23,292			$	31,304
Gross Profit			16,367				17,889				18,827				23,328
Operating income			8,357				9,260				9,783				11,856
Net income			8,335				8,956				9,434				12,097
Net income per common share:
Basic *		$	0.28			$	0.29			$	0.30			$	0.36
Diluted *		$	0.23			$	0.24			$	0.25			$	0.31
Year Ended December 31, 2008
Total revenues		$	16,639			$	17,803			$	20,168			$	20,142
Gross Profit			13,703				14,578				16,228				16,083
Operating income			6,143				6,905				8,119				8,097
Net income			5,670				6,336				7,398				7,910
Net income per common share:
Basic *		$	0.18			$	0.22			$	0.26			$	0.27
Diluted *		$	0.16			$	0.18			$	0.21			$	0.22

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 to 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 those currencies. A majority of the Company’s operations are based in the U.S. and, accordingly, a large component of our business 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 those foreign currencies will not have a material adverse effect on the Company’s business, operating results, revenues or financial condition. During the years of 2010, 2009, and 2008 the net change in the cumulative foreign currency translation account, which is a component of stockholders’ equity, was an unrealized gain (loss) of $6.5 million, $11.5 million, and $(15.1) million, respectively. The Company considered the historical trends in currency exchange rates and determined that it was reasonably possible that adverse changes in our respective foreign currency exchange rates of 20% could possibly be experienced in the near term future. Such an adverse change in currency exchange rates would have resulted in reduction to pre-tax income of approximately $3.5 million, $2.6 million and $2.9 million for the years ended December 31, 2010, 2009 and 2008, 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, 2010 the Company had $35.2 million of outstanding debt obligations which consisted of a $25.0 million balance on our commercial banking revolving line of credit, a $5 million secured term loan, a $5.0 million convertible promissory note with Rennes, and a $157 thousand revolving line of credit with Banco Santander (Brazil) S.A. The Company’s major revolving line of credit bears interest at the rate of LIBOR + 1.50%, and stood at 1.77% at December 31, 2010. The Company is exposed to market risk in relation to this line of credit in regards to the potential increase to interest expense arising from adverse changes in interest rates. This interest rate risk is estimated as the potential decrease in earnings resulting from a hypothetical 30% increase in the LIBOR rate. Such an adverse change in the LIBOR rate would have resulted in a reduction to pre-tax income of approximately $23 thousand and $28 thousand for the years ending December 31, 2010 and 2009, respectively. The Company’s average cash balances during 2010 were $19.2 million and its existing cash balances as of December 31, 2010 was $23.4 million. The Company is exposed to market risk in relation to these cash balances in regards to the potential loss of interest income arising from adverse changes in interest rates. This interest rate risk is estimated as the potential decrease in earnings resulting from a hypothetical 20% decrease in interest rates earned on deposited funds. Such an adverse change in these interest rates would have resulted in a reduction to pre-tax income of approximately $104 thousand and $40 thousand for the years ended December 31, 2010 and 2009, respectively.

During the years ended December 31, 2010 and 2009, we entered into a series of one-year forward foreign exchange contracts to hedge the intercompany receivables originated by our Indian subsidiary that are denominated in United States dollars. These U.S dollars/Indian rupee hedges are intended to partially offset the impact of movement in exchange rates on future operating costs, and to reduce the risk that our earnings and cash flows will be adversely affected by changes in U.S dollars/Indian rupee currency exchange rate. As of December 31, 2010, the notional value of these contracts which are scheduled to mature in March and September 2011 is $23.3 million. Changes in the fair value of these derivative instruments are recognized in our consolidated income statement. We use these instruments as economic hedges, intended to mitigate the effects of changes in foreign exchange rates, and not for speculative purposes. These derivative instruments do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are do significantly offset gains and losses on the intercompany receivables being hedged. For the twelve months ended December 31, 2010 and 2009, we recognized a gain of $1.3 million and $498 thousand, respectively, included in “Foreign exchange gain” in the consolidated statements of income. Based upon a sensitivity analysis performed against our forward foreign exchange contracts at December 31, 2010 and 2009, which measures the hypothetical change in the fair value of the contracts resulting from 20% shift in the value of exchange rates of the Indian rupee relative to the U.S. dollar, a 20% appreciation in the U.S. dollar against the Indian rupee (and a corresponding increase in the value of the hedged assets) would lead to a decrease in the fair value of our forward foreign exchange contracts by $3.7 million and $2.2 million, respectively. Conversely, a 20% depreciation in the U.S. dollar against the Indian rupee would lead to an increase in the fair value of our forward foreign exchange contracts by $5.6 million and $3.3 million. We regularly review our hedging strategies and may in the future, as a part of this review, determine the need to change our hedging activities.

During the year ending December 31, 2009 in connection with the acquisition of E-Z Data the Company issued a put option to the sellers, with respect to the shares of Ebix common stock that were issued as part of the acquisition consideration, which is exercisable during the thirty-day period immediately following the two-year anniversary date of the business acquisition, which if exercised would enable them to sell the shares back to the Company at a price of $15.11 per share, which represents a 10% discount off of the per-share value established on the effective date of the closing of Ebix’s acquisition of E-Z Data. Using a Black-Scholes model we determined that the initial fair value for the put option was $6.6 million and that its fair value on December 31, 2010 and 2009 had decreased by $6.1 million and $89 thousand, respectively. The inputs used in the valuation of the put option include term, stock price volatility, current stock price, exercise price, and the risk free rate of return, with the volatility factor being the input subject to the most variation. Therefore, as pertaining to the put option, the Company is exposed to market risk as regarding the rate and magnitude of change of our stock price and corresponding variances to the volatility factor used in the Black-Scholes valuation model. We evaluated this risk by estimating the potential adverse impact of a 10% increase in the volatility factor and determined that such a change in the volatility factor would have resulted in an approximate $200 thousand and $700 thousand increase to the put option liability and a corresponding reduction to pre-tax income as of and for the years ended December 31, 2010 and 2009, respectively.

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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheets of Ebix, Inc. and subsidiaries (the Company) as of December 31, 2010 and 2009, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2010. We have also audited the accompanying consolidated financial statement schedule for the years ended December 31, 2010, 2009 and 2008 listed in the index at Item 15. These consolidated financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ebix, Inc. and subsidiaries at December 31, 2010 and 2009 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related consolidated financial statement schedule for the years ended December 31, 2010, 2009, and 2008 when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 16, 2011 expressed an unqualified opinion thereon.

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

Atlanta, Georgia
March 16, 2011

Ebix, Inc. and Subsidiaries

Consolidated Statements of Income

		Year Ended				Year Ended				Year Ended
		December 31,				December 31,				December 31,
		2010				2009				2008
		(In thousands, except per share amounts)
Operating revenue:		$	132,188			$	97,685			$	74,752
Operating expenses:
Costs of services provided			29,599				21,274				14,161
Product development			13,607				11,362				8,962
Sales and marketing			6,372				5,040				4,344
General and administrative			24,065				16,798				14,715
Amortization and depreciation			6,038				3,955				3,306
Total operating expenses			79,681				58,429				45,488
Operating income			52,507				39,256				29,264
Interest income			519				199				475
Interest expense			(902	)			(1,070	)			(1,626	)
Other non-operating income			6,319				89				—
Foreign exchange gain			1,211				1,358				586
Income before income taxes			59,654				39,832				28,699
Income tax provision			(635	)			(1,010	)			(1,385	)
Net income		$	59,019			$	38,822			$	27,314
Basic earnings per common share*		$	1.69			$	1.24			$	0.93
Diluted earnings per common share*		$	1.51			$	1.03			$	0.76
Basic weighted average shares outstanding*			34,845				31,398				29,514
Diluted weighted average shares outstanding*			39,018				38,014				36,780

Ebix, Inc. and Subsidiaries

Consolidated Balance Sheets

		December 31,				December 31,
		2010				2009
		(In thousands,
		except share amounts)
ASSETS
Current assets:
Cash and cash equivalents		$	23,397			$	19,227
Short-term investments			6,300				1,799
Trade accounts receivable, less allowances of $1,126 and $565, respectively			26,028				22,861
Other current assets			5,057				2,628
Total current assets			60,782				46,515
Property and equipment, net			7,806				7,865
Goodwill			180,602				157,245
Intangibles, net			22,574				20,505
Indefinite-lived intangibles			30,552				29,223
Other assets			984				814
Total assets		$	303,300			$	262,167
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	15,344			$	11,060
Accrued payroll and related benefits			4,536				3,634
Short term debt			5,000				23,100
Current portion of convertible debt, net of discount of $56 and $706, respectively			4,944				28,681
Current portion of long term debt and capital lease obligation			426				596
Deferred revenue			8,610				7,754
Other current liabilities			225				272
Total current liabilities			39,085				75,097
Revolving line of credit			25,000				—
Other long term debt and capital lease obligation, less current portion			205				671
Deferred tax liability, net			3,534				5,147
Put option liability			537				6,596
Deferred revenue			126				269
Deferred rent			554				679
Other liabilities			2,991				2,965
Total liabilities			72,032				91,424
Commitments and Contingencies, Note 7
Stockholders’ equity:
Convertible Series D Preferred stock, $.10 par value, 500,000 shares authorized, no shares issued and outstanding at December 31, 2010 and 2009			—				—
Common stock*, $.10 par value, 60,000,000 shares authorized, 36,057,791 issued and 36,017,282 outstanding at December 31, 2010 and 34,474,608 issued and 34,434,099 outstanding at December 31, 2009			3,602				3,443
Additional paid-in capital			153,221				158,404
Treasury stock* (40,509 shares as of December 31, 2010 and December 31, 2009 respectively)			(76	)			(76	)
Retained earnings			67,642				8,623
Accumulated other comprehensive income			6,879				349
Total stockholders’ equity			231,268				170,743
Total liabilities and stockholders’ equity		$	303,300			$	262,167

See accompanying notes to consolidated financial statements.

Ebix, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity and Comprehensive Income

																										Accumulated
		Common Stock*																								Other
										Treasury								Additional								Comprehensive
		Issued								Stock				Treasury				Paid-in				Retained				(Loss)								Comprehensive
		Shares				Amount				Shares				Stock				Capital*				Earnings				Income				Total				Income
		(In thousands, except share amounts)
Balance, January 1, 2008			30,656,106			$	337				(80,010	)		$	(149	)		$	114,771			$	(57,513	)		$	2,680			$	60,126
Net income																							27,314								27,314			$	27,314
Cumulative translation adjustment																											(15,108	)			(15,108	)			(15,108	)
Comprehensive income																															—			$	12,206
Proceeds from issuance of common stock (net of issuance costs)			1,530,000				17												12,502												12,519
Exercise of stock options			308,457				4												1,236												1,240
Restricted stock compensation			200,565																591												591
Compensation related to the vesting of stock options																			107												107
Repurchase of common stock			(3,631,500	)			(41	)			(99,225	)			(1,029	)			(24,216	)											(25,286	)
Conversion of principal and interest on Convertible promissory notes			1,217,691				29												8,610												8,639
Effect 3-1 stock split							635												(635	)											—
Other			(261,954	)															(1,325	)							1,325				—
Balance, December 31, 2008			30,019,365				981				(179,235	)			(1,178	)			111,641				(30,199	)			(11,103	)			70,142
Net income																							38,822								38,822				38,822
Cumulative translation adjustment																											11,452				11,452				11,452
Comprehensive income																															—			$	50,274
Exercise of stock options			302,163				10												1,555												1,565
Restricted stock compensation																			1,153												1,153
Compensation related to the vesting of stock options																			216												216
Repurchase of common stock			(48,672	)			(2	)			(31,950	)			(205	)			(298	)											(505	)
Retirement of treasury stock			(170,676	)							170,676				1,307				(1,307	)											—
Conversion of principal and interest on Convertible promissory notes			2,790,186				93												22,262												22,355
Effect 3-1 stock split							2,295												(2,295	)											—
Imputed interest on issuance of convertible debt																			534												534
Shares subscribed for business acquisitions			1,488,984				50												24,950												25,000
Vesting of restricted stock			93,258				16												(7	)											9
Balance, December 31, 2009			34,474,608				3,443				(40,509	)			(76	)			158,404				8,623				349				170,743
Net income																							59,019								59,019				59,019
Cumulative translation adjustment																											6,530				6,530				6,530
Comprehensive income																															—			$	65,549
Exercise of stock options			1,252,785				125												1,111												1,236
Restricted stock compensation																			1,406												1,406
Compensation related to the vesting of stock options																			444												444
Repurchase of common stock			(669,978	)			(67	)											(10,583	)											(10,650	)
Settlement on conversion of convertible debt			760,040				76												1,636												1,712
APIC adjustment for stock options																			828												828
Vesting of restricted stock			240,336				25												(25	)											—
Balance, December 31, 2010			36,057,791			$	3,602				(40,509	)		$	(76	)		$	153,221			$	67,642			$	6,879			$	231,268