EBIX (2020 - Q3)

*NEW* We are providing this transcript version in a raw, machine-assisted format and it is unaudited. Please reference the audio for any questions on the content. A standard transcript will be available later on the site per our normal procedure. Please enjoy this timely version in the interim.: Operator:

[00:00:00] Good morning, ladies and gentlemen, and welcome to the third quarter twenty twenty investor call at this time, all participants minds on a listen only mode. After the speakers presentation, they'll be a question and answer session to ask a question. During a session you would need to press Darvin one on your telephone. As a reminder today's conference may be recorded. I will now turn the conference over to your host, Darren Joseph, Ebix corporate Vice President. Please go ahead.

[00:00:29] Thank you. Welcome, everyone, to Ebix Inc.. Third quarter twenty twenty earnings conference call. Joining me to discuss the quarter is EBITDA chairman, president and CEO Robin Raina, EBITDA global CFO Steve Hamil and its North American president, Ash Sawhney. Bono remarks. We'll open up the call for your questions. Now, let me quickly cover the safe harbor, some of the statements that we make today are forward looking, including, among others, statements regarding Ebix future investments, our long term growth and innovation, the expected performance of our businesses and our use of cash. These statements involve a number of risks and uncertainties that might cause actual results to differ materially from those projected in the forward looking statement. Please note that these forward looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise or publicly released the results of any revisions to these forward looking statements in light of new information or future events. Additional information concerning factors that could cause actual results to materially differ from those in the forward looking statements made today contained in our FCC filings, which list a more detailed description of the risk factors that may affect our results. Our press release announcing the third quarter Twenty twenty results was issued this morning. The audio of this investor call is also being webcast live on the Web at WWT. Ebix dot com forward webcast. You can look at evictees, financials beyond what has been provided and released on our Web site www.youtube.com the audio. And the text transcript of this call will be available on the investor homepage of the Ebix website after 4:00 p.m. Eastern Time today. [00:02:14] Let me now present the key metrics and our Q3 twenty twenty release. Q Three diluted EPS gap with 80 cents and gap diluted EPS was ninety three cents, nine month year to date, operating cash flow of seventy one point eight million, revenues of one hundred and fifty four point three million, and constant currency revenues of one hundred sixty point two million. Gap operating income of thirty one point nine million and non-cash operating income of thirty five point eight million. For me, the highlight of the quarter were mainly three things. One is that despite the impact of covid-19 on our businesses worldwide and the foreign currency hits on account of the US dollar strengthening, we are still reporting Q3 Twenty twenty def EBITDA plus stock based compensation of thirty six point five million to our strong year to date operating cash flows of seventy one point eight million, which is 18 percent higher than the full year 2019 operating cash flows of sixty point eight million three. Despite covid-19 our two three twenty twenty worldwide revenues grew thirty nine percent sequentially over Q2 twenty twenty excluding revenues from areas directly impacted by covid-19, namely the foreign exchange travel, eLearning and remittance businesses. Our Q3 twenty twenty revenues fifty six percent as compared to Q3. Twenty nineteen exchanges, including the Ebix cash and our worldwide insurance exchanges, continue to be the largest channel, accounting for 90 percent of our Q3 twenty twenty revenues. ASX also played a substantial role on the quarter, with the US strengthening in light of covid-19 on a constant currency basis, EBITDA three twenty twenty of revenues would have been approximately five point nine million higher, while the nine month year to date revenues would have been approximately fifteen point nine million higher as compared to the gap revenue numbers reported, the endocast financial exchange revenues increased 18 percent by fourteen point seven million from eighty two point one million in Q3, two thousand nineteen to ninety six point eight million in Q3 twenty twenty. [00:04:34] However, that increase looks even more impressive when one looks at the temporary impact of October 19 on our travel, forex, e-learning and remittance businesses that were down by forty one point five million in Q3 twenty twenty as compared to Q3. Twenty nineteen. Excluding travel, forex remittance and the e-learning businesses, just cash revenues grew 260 percent in Q3. Twenty twenty versus Q3. Twenty nineteen. Beginning in March of Twenty twenty, our businesses in the area of On-Site Consulting, travel, foreign exchange, remittance and education were hit severely because of covid-19 once the pandemic led to a global shutdown and a virtual curfew was imposed on many countries. The effect of these business lines was natural. Considering that we feel good about the Q3 twenty twenty results and the resilience shown by our employers across the world to allow us to keep supporting our B2B clients. I'll now turn the call over to Steve.

[00:05:36] Thanks, Daryn. Good morning. I'd like to thank everyone for their interest in the Ebix as well as our employees for all that they do for the company. Every day, Ebix continues to navigate through Ropp covid-19 waters, but also continues to show that its global presence and diverse revenue streams allows the company to continue to generate solid revenues and cash flow. The company's foreign exchange travel, remittance and e-learning businesses experienced in approximately 70 percent decline in year over year revenues during the third quarter of Twenty twenty. But that's an improvement from an approximately 90 percent decline year over year in the second quarter of Twenty twenty. Despite that negative impact due to covid-19, the company delivered EBITDA plus non-cash stock of thirty six point five million dollars during the third quarter of Twenty twenty. Darran already provided an overview overview of the operating results for the quarter, so I'll focus on providing a bit more detail around those results. Gross margin in the third quarter of Twenty twenty was forty four point three percent, a decline from fifty five point nine percent in Q2, twenty and sixty two point five percent in Q3. Nineteen EPS cash continued to see strong revenue performance within its Payment Solutions business in India during Q3 twenty. As a result, increased demand for electronic payment products. [00:06:59] These revenues have lower margins and other Edik solutions and thus diluted our gross margins versus the prior year. We expect elevated levels of demand for our payment solutions products in India while the pandemic persists and possibly longer as consumers and businesses change their payment habits. EPS continues to manage its Gené and other costs as the pandemic lingers on, our Gené expense decline. Twenty six million and Q 320 versus Q3. Nineteen fifty five percent reduction year over year. The decline was primarily due to three items. First, a twelve point one dollars million bad debt reserve was taken in Q3 19 related to a public sector entity BSL in India, which impacts the year over year comparison. Second, the company's employee related costs, including travel expenses in Q3 20 were approximately 10 million dollars less than in the third quarter of nineteen. LASLEY due to covid-19 total rent expense for Ebix is over six million dollars less in Q3 20 versus Q3 12 19. The rent reduction originates from rent forgiveness at international airports as a result of lockdown's and significantly diminished air travel, particularly international travel into and out of India. The seventy one point eight million dollars of operating cash flow produced during the first nine months of Twenty twenty compares favorably to 60 million dollars of operating cash flow in the Q3 19 year to date period. [00:08:33] The increase in operating cash flow year over year was most impacted by trends and trading around Twenty twenty versus 2019, with covid-19 negatively impacting the world economy. Since March of Twenty twenty, our accounts receivable has decreased as a result of decreasing sales in our travel, foreign exchange, remittance and e-learning businesses, total cash and short term investments of one hundred twenty seven million dollars at 930 20, compared to one hundred and sixteen dollars million at December 31st, 2019. Our liquidity remains ample, even after the company incurred significant cash usages in the year to date period ended September 30th to only Twenty twenty, including investments of over 15 million dollars for acquisition activities, six million dollars for capital expenditures and software development, and seven million dollars for stock dividends, as well as thirty five million dollars used for debt repayment, 22 million dollars for debt service and eight million dollars in cash taxes. Paid working capital remains robust at one hundred and forty nine million dollars at September 30th Twenty twenty versus one hundred and twenty nine million at fiscal year in 2019. Ebix weighted average diluted shares outstanding was thirty point eight million in Q3 Twenty twenty. [00:09:54] And as of today, the company expects the diluted share count for Q4 twenty twenty will be approximately thirty point nine million dollars. The company's consolidated net leverage ratio, as defined in our corporate syndicated credit facilities, was just under four times at September 30th versus our covenant limit of five and a half times. The company continues to manage its leverage in the face of the global pandemic that has caused material negative impacts on some of our business lines. The Ebix cash IPO continues to be a goal, but will not happen prior to the second half of twenty twenty one based on current market conditions. Finally, Ebix this form Tensei will be filed later today. Ebix is no different than many companies in dealing with the covid-19 pandemic. We are working every day to stay close to our customers and provide world class software and business services solutions. Globally, EPS has a portfolio of solutions and services that is diverse, global and critical to our customer base. We will continue to execute on our operating strategy to enhance our position as a global insurance and financial technology leader. I'd like to now turn the call over to the president of our North American insurance businesses. Ask Sony for his remarks on the quarter.

[00:11:11] Thanks, Steve. And good morning, everyone. In Q3, our core businesses in life and annuities continue to stay strong. Measuring the quarterly run rate for Q3 twenty twenty compared to Q3 of 2019, the life and annuity exchange revenue was up 14 percent. [00:11:33] We also saw a four percent sequential growth in our core insurance consulting business. These gains were offset by losses in our general insurance consulting business. Primarily related to covid-19 as some of our core entertainment business times like this, the Fox network were affected. We also attribute that to loss of a CRM client and a temporary slowdown in our health exchange that related to covid-19. I will now talk about the initiatives in our business units. I am pleased to report that the JP Morgan annuity implementation is on track to go live this month with an initial set of carriers. According to the road map, we anticipate most of the other carriers will be on board by two to one of Twenty twenty and we will see a steady uptick in transaction volume. In Q3, we also initiated a crack on board J.P.Morgan to our life savings. This will be a powerful initiative with its own incremental revenue stream starting in Twenty twenty one in Q3, we also added some Macra and Brighthouse to our list of annuity maintenance clients. Our car insurance consulting business has started to turn around. This was enabled by new initiatives, including offering testing of the service to the J.P.Morgan platform, adding training services to our portfolio and expanding those capabilities that accounts like Orlean's Victorian and USA. We have also been working on a significant new outsourcing relationship with the cloud services solution provider. This relationship will give us new outsourcing revenue starting in Q4 to our existing insurance and banking clients. Cloud enablement of core platforms has been a high priority for our customers. [00:13:35] We believe Ebix is well positioned to help our customers with strategy, planning and migration towards cloud enabled solutions. More on this in the near future as we tried to make a formal announcement of this. Our underwriting exchange and illustration exchange divisions stayed relatively flat in Q3 compared to Q2. The underwriting unit has been flat, primarily because clients have reprivatized initiatives and put new long term strategic initiatives on temporary pause while they address short term business continuity projects in light of the covid impact. Are existing in climate initiatives stalled unabated, and we fully expect the new strategic initiatives to be back at the forefront of the industry in general, move towards moves towards normalization. We successfully hosted a remote user group meeting which was attended by all our major customers. We unveiled several new capabilities and initiatives, including direct to consumer marketers, we enablement. And advanced new features and automated underwriting. Overall, our employee benefits division was flat compared to Q2, certain offerings such as onsite health screening were significantly impacted in Q3 due to the impact of covid-19. These were offset by increased sales of our wellness content solutions. We are in the early stages of establishing with large new partners, including bass and integrity, help. We expect new opportunities to these partnerships in coming months. We were also able to renew our relationships with several large accounts, including Santurce, MetLife and BNP in the U.K., we launched a few new product offerings in this business area, and we expect this to yield positive results for us in Q4. The medical certification business showed a slight gain compared to the last quarter. [00:15:45] This was enabled by a timely redirection of this business towards a digital model which enabled us to keep this business fairly insulated from the covid impact and at the same time, we were able to reduce costs. Going forward, we are adding an exciting new service of virtual conference recording and digitization for our customers. We did a pilot with Harvard Medical School in Q2, which was a huge success. We are seeing similar opportunities that other than our medical institutions. Q4 traditionally is a strong quarter quarter for this business unit, and we are geared up for the same this year. A trucking business stayed steady during cutesie. This unit has held steady during the pandemic, even though we saw lockdowns and slowdowns in several industries. We added a total of eight new customers last quarter for our seats, some of the big names include BW Technologies, a leading supplier of nuclear components and fuel to the U.S. government. Had some group, one of the largest retailers in North America. And Marsico Limited, one of the largest print authorized retailers. Our risk management division grew four percent sequentially and 10 percent over the same quarter last year. Notable achievements were additions of nine new workers comp Ebbie customers, adding of three new clients to our risk and vision exchange platform and adding two new customers for Medicare compliance. I have e-commerce exchange saw a six percent decline. Primarily because of covid-19, this group was temporarily impacted because of the market conditions related to temporary spikes in unemployment and furloughs. [00:17:42] As they get paid on a per employee per month, Motter. As employment gets back to people with levels, we will see this division get back to normalcy. On a positive note, Ebix health has been pursuing new partnerships which will bring new revenue opportunities. New partnerships include to help a world class population health management firm that will provide both software and services to our client base for disease management, case management and utilization management. We are currently working on deals that large several large customers. We are also getting ready to roll out a new partnership between health care to provide a variety of pre adjudication services, including clearinghouse blatancy, SDI management, repricing, workflow management and fraud and abuse. We are also working on a partnership with a software firm that provides coding solutions to agents and brokers is the health insurance arena. Overall, we continue to stay bullish about the longer term outlook of the North American business. There are several drivers and initiatives that will propel our growth once covid-19 the Democrats are behind us. While most of Twenty twenty from Q2 onwards has been has seen as operating in a hunker down mode, we are planning to step up investments in sales. Particularly in those divisions where you have a leadership position and where the fundamentals of the businesses are strong. We will also benefit from the transaction revenue, which will start kicking in in two thousand twenty one from the JP Morgan Network of American Life, that is. We will see a steady uptick starting to one Twenty twenty one. We are excited about the earlier mentioned partnership and outsourcing deal, which we hope to announce soon. [00:19:45] This will create an incremental, differentiated and scalable opportunity. I would like to close by thanking our highly dedicated, highly talented employees who have enabled us to weather through a very difficult period. We are on track to come out a much stronger and healthier organization due to the measures taken during this period. Now, first round robin for his comments.

[00:20:14] Thank you. Thanks to all of you for joining this call. I hope that each one of you and your loved ones are keeping safe. Let me first just summarize a few highlights from the quarter for me, one year to date cash flow of seventy one point eight million is definitely something that I like considering the times we are in at present to EBITDA plus, stock based compensation stood at thirty six point five million for the quarter. If we excluded payment services from this analysis, EBITDA plus stock based compensation outside payment services was at 40 percent. Three on the revenue front are our overall revenues grew 39 percent sequentially in the quarter for our high margin international revenues in countries like Australia, Brazil, Singapore, U.K., India were impacted by the strengthening of the U.S. dollar that accompanied the covid-19 pandemic. It hurt our revenues by five point nine million in the quarter and fifteen point nine million in the nine month period. That is noteworthy as a high percentage of that number would have served to increase our operating income in the quarter and the nine month period. As I speak to you today, covid-19 is still continuing to have a terrible effect on businesses across the world of all businesses in obvious areas like travel, foreign exchange, e-learning, consulting and remittance continue to get affected by covid-19, though we saw substantial improvement sequentially over the second quarter of 2020. Even in technology intensive areas, clients have continued to delay implementations, sometimes on account of internal focus issues and sometimes because of cost pressures. Most of our employees across the world continue to still function from their home. [00:22:15] Travel to client sites is nonexistent, that travel clearly holding our consulting businesses across the world, considering all of this, our income operating cash and revenue numbers in the quarter, if anything, convey that inherent, consistent strength of the big story. covid-19 has impacted all across the world in a terrible manner. I have personally felt the impact of the pandemic in a devastating manner. I recently lost my beloved mother to the disease while having to deal with the pain of seeing my dad and my elder sister fight the disease in a covered hospital ICU. The last two months have been a humbling experience for me, conveying the fragility of the world we live in and a reminder of the value of love and affection over everything else that which is coming back to business. Ash and Steve have talked about the overall business and the US insurance business. So let me just. Talk about the international businesses and the new revenue area for Q4 and beyond. To counter the impact of covid-19 on international businesses readjusted their focus in the quarter sequentially, most of our regions internationally grew in Q3. Over Q2 of 2020, Australian revenues grew sequentially by 11 percent, New Zealand by 20 percent, Brazil and U.K. by two percent each and Singapore by 13 percent. Despite covid-19, the Ebix cash, financial exchange revenues increased 18 percent by fourteen point seven million from eighty two point one million in third quarter, nineteen to ninety six point eight million in third quarter, up Twenty twenty. [00:24:14] Excluding travel, forex, remittance and e-learning businesses that were impacted severely by covid-19 cash revenues grew 268 percent in third quarter, up Twenty twenty less in the third quarter of 2019 on a sequential basis through its overall revenues grew eighty two percent in the third quarter of Twenty twenty. Over the second quarter of Twenty twenty remittance revenues grew forty six percent sequentially, while foreign exchange revenues grew hundred and thirteen percent sequentially. Travel revenues grew three hundred forty six percent sequentially, while our technology based revenues grew eight percent sequentially in third quarter up Twenty twenty. I expect expect revenues to continue to grow in coming quarters with the gradual improvement in the travel of foreign exchange that e-learning areas besides the organic growth in other business areas. We are, for example, presently pursuing some large opportunities in the bus exchange arena that are highly recurring and income intensive. We are presently trying to draw a balance between our efforts to grow our margins and our attempts to be a leader in the financial markets. We discussed performance is particularly noteworthy when you compare it to its competitors with high valuations who collectively lost. A billion dollars last year in the Indian market and delivered much less top line growth than evicts cash. Let me now talk about the insurance business itself out of those. In the fourth quarter of Twenty twenty are expected to get boosted by the traditional Fiame top line growth, continuing medical education, top line growth in the fourth quarter of the year. Besides, we have a number of new homes in the area up insurance exchanges that should contribute to our results. [00:26:21] We have recently agreed on a cloud based venture in the United States that should give revenue upwards of 10 million dollars a year to us. More on that later. Ash talked about the number of new wells in Q2 and the healthy pipeline for the businesses in coming quarters. I expect that to be accompanied by support from our international US businesses, international businesses in Q4 and the future quarters. Australia expects a record quarter in the fourth quarter of Twenty twenty in local currency terms like Brazil, UK, Singapore, etc are expected to continue to be consistent in Q4 and beyond. In Twenty twenty one, contractually, we are expecting to see a 20 percent increase in UK revenues once the covid-19 impact reduces in 2021. Our wealth management, lending and insurance businesses internationally are expected to pick up substantially. Our growth in these areas can come out of selling our end to end products in the Middle East, Africa, Asia, Europe and India. Incidentally, we consistently net 40 percent plus margin in this business area today. 70 percent of our revenues in this business area come from the Middle East, Europe, Africa and Asia. Our Bombay Stock Exchange, Ebix joint venture is ready to go into the next year in 2021. While our technology base, just like the bus exchange initiative, are expected to show substantial growth in 2021. We have used the covid-19 period to substantially enhance our product offerings besides shoring up our technology in terms of scalability and end to end solutions, specifically in the BSEE insurance arena. [00:28:27] We recently agreed to acquire the call center business in India that is expected to provide fullfillment to all our cash and vote by businesses besides opening up new cross-selling opportunities for us. We expect this business to generate 30 percent EBITDA margins, besides providing 50 percent plus organic revenue growth in 2021. We have a pipeline to support that growth with infrastructure to support up to 2000 seats. From a branding and IPO perspective, Cash today is a household brand in India of Astudillo, partnership with Republic TV gets us a lot of eyeballs as a public network became India's largest TV network in terms of viewership this year. Last year, we announced a number of partnerships in the game of cricket targeted at getting in front of the 600 million people who watched cricket's largest league IPL on TV. England's cricket crazy, and it is estimated that more Indians watched IPL. Look at this year that the Indians will awarded in the general election eve branding, I first struck gold when the team, supported by Delhi capitals, got into the finals of the A-League a few days back, an estimated audience of 300 plus million people are expected to watch Delhi Capital's. We're Ebix gash on the back of their shirts playing the finals to be held a few days from now. With regards to the IPO, we are keeping our fingers crossed as we look at the overall IPO climate improve in India. We already have three top investment banks on our side with a fourth investment bank to be added to the investment banking team. [00:30:21] We already have the legal firms hired along with the big three from four subject matter analysis that goes into our IPO documents. The IPO effort is a very involved process that entails hiding of three to four sets of legal firms, multiple subject matter analysts from a credit rating from Ireland, PR firm auditors to approval numbers being filed across three years for all subsidiaries, et cetera. We think that it is prudent to let the covid-19 crisis blow or and let the markets normalize before we launch an IPO. Accordingly, we intend to work closely with all our investment bankers through this period and keep ourselves in ready for the IPO while we wait for this pandemic to pass. But keeping a close watch on the improving financial markets in India. The recent IPO in India have been heavily oversubscribed and there seems to be a pent up demand for a solid IPO. There are a number of big IPOs planned next year, and we hope that we will be one of them. We will keep you informed about that. We see the IPO as a possible opportunity for the shareholders of Ebix at. All other financial exchange sector companies in India with billions of dollars in valuation do not have the strong financial metrics that are operating in India has. If anything, the covid-19 period has further shown the strength of our business model. That brings me to the end of my talk, I will now hand it over to the operator to open it up for questions. Thank you.

[00:32:06] Thank you. As a reminder to ask the questions you need to press star, then one on your telephone to withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jeff Van Rhee with Craig-Hallum Capital. Your line is now open.

[00:32:30] Great. Thanks for taking my question. And Robin, I just want to offer my condolences and, you know, just couldn't couldn't agree more in your comments about focusing on what matters. So anyway, I just I just couldn't agree more. And my condolences to you and the family.

[00:32:45] Thank you, Jeff.

[00:32:48] So it is a milestone here. You've got a lot going on and it seems like a lot a lot is turning or doing very well. I'll try to focus on a few key areas. Can you talk about the U.S. business at a very high level? I mean, clearly, we're going to see seasonal strength in Q4 because of the silly business. But I'm wondering when you think about the business, maybe comparing to sort of what Q2 likely looks like, assuming it doesn't get better or worse, you sort of stay where we are. Have we put in a bottom for the fourth for the US insurance business, exclude Q4 and sort of think about the trajectory we're on towards towards Q2?

[00:33:29] Jeff, I'll just add I'll say something and then I'll I'll prefer that at first answer your question. So from my perspective, the U.S. insurance businesses have a few had a few negative things going against it. One of them was have been consulting with and we have obviously suffered over the last two years, though I think, Adam, we have pretty much bottomed out. So that's sort of our concern. So for me, the biggest concern in the U.S. business is not consulting simply because if I look back at my remaining businesses, they seem fairly consistent, fairly solid, and we are good at each team and all the new effort they have put in there, they have a very healthy pipeline. So when I come back to consulting in the consulting area, first of all, we were already taking hits and then Colvard happened, which kind of hurt us. So when I talk about consulting, I'll break it up into two parts. One is non product related consent consulting, which is and the other is our own product consulting. Both have been impacted because of obvious reasons. So when I come back to Speciale, the area of non product related consulting, that's where we were getting quite affected. And with covid it became worse in coming days. [00:34:59] You're going to we very recently we agreed on a deal which we will talk about in a little bit more detail. Once we have the ability to announce that we are, we expect close to 11 million dollars of new revenue to flow through in the consulting arena in Sochi. We so we think that's a positive direction. We are moving in. And from a consulting perspective, product consulting perspective, look, the key thing has to be that we go it clearly has an impact. We are obviously trying to convince our clients to get all that work done in our offshore facilities or within our offices. But some of it will get impacted simply because some of that work always needs to happen at client sites. Right. And it involves active involvement of our client and something that's subpar. And that ends up the project got delayed because of that area. So having said that to me, from my perspective, I do believe that the the my biggest worry for all of us perspective what I've been consulting and to do the what I see, I believe we're now in a position to start growing that back up again. And as you want to add to it, please go ahead.

[00:36:20] I think you've covered it well, Robyn, the few things I learned. You know, if you look at the consulting business, I think there's a new paradigm that is going to set in. I think even post covid this, you know, work from home paradigm or remote working is going to continue, you know, as some have some level and at some something. And I think that plays well into the Ebix trend, especially if you're going to work remotely. You could be, you know, working with teams in India. And I think longer term, the fact that we have a very established hybrid model of US and offshore services, I think that plays you quite well in our favor. [00:37:08] The second thing, Jeff, I would say is, you know, some of the slowdown has been, you know, just a redirection of the short term focus for these companies that we're all scrambling to take care of some of the basic. Once we see the covid impact behind us and it may be a quarter to quarter, we obviously can't predict accurately. I think you will see a lot of pent up demand, because these longer term initiatives are not just a nice to have, you know, project, these are very necessary for these companies to stay competitive. So we we remain bullish about the long term prospects. And in fact, if you look at some of the exchanges, I mentioned the annuity exchange that has been steadily growing even in the corporate era. So with the J.P. Morgan, you know, network effect, we see that contributing positively in 2012 and beyond.

[00:38:10] Ok, OK. And then secondly, I guess, Robert, as it relates to the to the payments business, the payments card service, digital payment solutions side to see very strong demand, can you put some a little more clarity around what was it in Q2? What was it Q3 kind of what's the trajectory in Q4? It sounds like you've seen strength. And I think you made a comment in the script that you sense that strength will continue and there will be a bigger part of the business. Obviously, it has substantial negative impacts on the gross margin side, but I'm sure has come up with EBITDA dollar side. So just talk about that business, if you can quantify that. And then the thinking around why it's surging and whether or not you want to continue to lean into that revenue stream.

[00:38:57] Well, first of all, I mean, look at our competition. I mean, I have I have a lot of competitors out there who only do payment solutions are presently and are presently getting value in, you know, between 10 and 20 billion dollars with Bidwill revenues, 450 million, 400 million dollars in revenue and 600, 700 million dollars in losses. [00:39:18] So, so clearly, market seems to still like the payments business. So having said that, from my perspective, being in businesses are very important because it makes us completely you know, it spreads our reach virtually across the country. It says this is amazing marketing for us. Besides, I take the point of lower gross margins. There's no question about it. At the same time, this takes us everywhere across the world. It allows it across the country. It allows us to cross-sell so many of our remaining products. So so when you consider all of that, when you put that into the mix, we think that's that's a good position to be in to continually. You know, there are high margin areas and then there are lower margin areas. So if you are lower margin areas, allow you to sell more of your high margin area, then you should continue with their lower margin area as long as you're not losing money on any one of those. And having said that, we expect the payments businesses to continue to improve. Part of it is what it has done. It has created a new thinking pattern where people now are, you know, especially in the payments business. People don't want to touch an IBM machine. Now, people you're going to see more and more of these machines go out of place. So people are wanting to do that where systems people are trying to buy more stuff online right now, but they know it's not going to change entirely overnight simply because India has a pretty good, you know, lower middle class and a very strong, you know, a very strong middle class. [00:41:03] So having said that, and a lot of them are illiterate, so it's not that easy to make everybody digital overnight. At the same time, there is a continuous move in that direction right now. And if you see some of the larger players that have entered the market, what has happened is if you see the lot right now, for example, Google has become the largest player in the market, the global, you know, between full pay and and Google Pay, they now have close to 70 percent of the market. And then you have players like PTM come in with much smaller market share because it's become a very important area of the business. So everybody feels the reason they want to play into this business area because this takes them everywhere. And then they will obviously cross-sell all the remaining products for obvious reasons when we do our payment services. But also we're also able to market our remaining product because everything is connected right where we become the brand. Who the only player who can not only do payment solutions, but incidently, we can handle we can conduct their products, their travel, you know, you bought by your bus tickets or whatever you want to do. We are virtually there with all those different little and incidentally, for all of those, we still need to use that as some kind of a card or something out there. So we feel it's a complete it shouldn't really well without all of our overall strategy.

[00:42:39] Can you are you able to put any dollars around it in terms of what it was, Q2, Q3 and sort of some some swag of what Q3 or Q4 sequentially looked like just a week from a modeling standpoint to figure out the impact and scope here?

[00:42:52] Look, I don't want to go into selective discussion here, but at the same time, I think I talked through the presentation of the overall growth in terms of how well we did in these business areas. [00:43:03] I think a statistic that was there which said that we grew our payments business almost if I if I can remember my number, it was 85 percent or 86 percent sequentially, something like that was the number of. So, yes, it's really done well overall. And the business.

[00:43:28] Yeah, OK, and then maybe two to last. This is one this this this cloud venture in the US that you referenced of 10 million plus a year, is that that 10 million plus a year that contractually committed? And if so, when does that start to impact?

[00:43:45] Well, we are basically dead on that venture, so we expect that it should kick start kicking in in Q4. That's a short answer. I I'm not at this point and deliberately because we have all the right conditions in place. So until I have the ability to speak about it, I won't speak about it. But it is expected to start in Q4 itself. [00:44:05] It's supposed to start in Q4 itself.

[00:44:10] Fair enough. And then, as you mentioned, an acquisition in the call center based space, can you expand on that? What's the what's the revenue contribution? What did you pay for it? How many has does it look at?

[00:44:22] So we will we will share all the details again at the right time pretty soon. But basically what it will do is it's it's not a very large business at present. We expect this to generate double digit revenues in 2021 with 30 percent margins. I think at this point, that's all I could talk about that.

[00:44:43] Ok, is it just to be clear, is that is that acquisition close and did that contribute at all to Q3?

[00:44:50] We just signed that acquisition. Yes. So just signed it, so it'll contribute in Q4, but did not contribute to Q3 and no, it did not contributing to you know, it had nothing to do with Q3. OK, OK.

[00:45:05] Ok, last last piece, though, just as it relates to the sales expansion, I think your message was a little bit of emphasis today around the U.S. business. And you're going to push on the sell side. You said you're going to invest in sales. So two questions. Can you quantify leptons now on where you think we'll be in 12 months? And then secondly, is there any way to quantify? I think you referenced a very healthy pipeline as a way to quantify the magnitude of the pipeline in the US insurance business now versus six, 12 months ago.

[00:45:37] Well, let's talk about the second part of the question in terms of quantification of the pipeline. I'll just answer the first one in terms of, you know, the than the reach of our sales team, I. I don't think I want to give you exact numbers on how many salespeople we presently have in the insurance business. But but I'll tell you at this point, meaning if I had to give you an answer on the question of expansion, we're not looking at just a numerical expansion of, you know, if we had 100 people that 100 people become 200. That's not how we're looking at it. We're looking at because of the way we do our business and because our focus is on the networking effect. When I was speaking, I specifically like to talk about the networking effect. See, our entire focus in the business today is not just on finding revenue deals in the US for the sake of revenue deals. We want to find revenue deals that can generate a network impact. [00:46:40] Now, a J.P. Morgan, a classic example of a deal that if you sign a J.P. Morgan and if you get all the carriers that they have, that by itself, the startup triggering action because it will bring in the carrier, the carrier will bring in some of their other agents and so on. It sets up. But to do a deal like that, you don't just need another sales guy. You need a very high quality enterprise salesperson who can work with four or five different departments and can work with all the different product. Then to walk in into a client like David Morgan and say, I can give you this end to end product set. So today we are more focused on the qualitative growth of our sales team rather than just the quantitative growth of our sales team. But having said that, I shall let you talk about the pipeline.

[00:47:37] Yeah, thanks, Rob. So like I said earlier, you know, the businesses that were impacted for us, mostly for services business, we see those, you know, bottoming out. [00:47:51] And, you know, whether it's one quarter to quarter, we can't predict, you know, the short term. But the fundamentals of our business, you know, once covid is behind us, are strong. We have a recurring revenue stream. Our pipeline, if you look at it more specifically, I would say there's a pent up demand. We have deals that certainly went on the back burner, primarily because companies had to realign the focus. The very definition of short term and long term really change. Long term was like six months, you know, during the Cold War days. So I expect that, you know, one that is confidence. You know, people are back to work and business starts to normalize. The pent up demand is going to be there in front of subsidies. And we want to get ahead and start investing in sales. In terms of your metrics, it's hard to sort of, you know, put absolute numbers. But I would be very much, you know, looking at high single digits, you know, once we start, you know, coming back to normalcy. And that's going to be a start. We expect to be progressively improving from there onwards.

[00:49:09] So, Jeff, I, I, I just wanted to say exactly what I said towards the end in the insurance business is if we can get into high single digits and the first goal, especially that the way the times we live in right now, that covid out there, you know, that'll be a good start. And then from there, we want to take it to the higher digit numbers and we feel we have all the basics right. Right now to do that with respect to our insurance business, because our businesses are fairly resilient. We know what our weak points are. We've been openly discussing those and we've been trying to, you know, trying to focus on how to get out or improve ourselves in those specific areas. And we feel the last 12 to 18 months, we have really focused in the U.S. on trying to trying to improve businesses where we felt we were in a weak spot. And and I feel those all those efforts are going to show results now.

[00:50:19] Got it. Great, thanks for taking my questions.

[00:50:20] Thank you.

[00:50:22] Thank you. My next question comes from the line of crystal tagged with singular research. Your line is now open.

[00:50:33] Hi, everyone. I just had a few questions, one question on the EPS cash business wanted to just see which segment was me was the worst performing? And what are you guys doing to improve on that?

[00:50:53] Well, that's a hard question because the performing we had a number of segments in the cast that got badly impacted by by covid-19 and the tools, specific areas where we actually had the biggest hit in the last few quarters has been have been traveling and foreign exchange. These are businesses, foreign exchange. We dominate, we do around on an annual basis. We do around five billion dollars of transactions on foreign exchange with a dominant standard in the market. And today with global happening and people not traveling, it's obviously impacted our entire business. We are everywhere. You walk into any international airport in India, there are 31 international airports and we are in twenty nine in twenty five year exclusive in foreign exchange. And we have hundreds of clients in the corporate sector. So it's a very solid business that we run across the country. But with covid there's very little we can do except know, try and hope that things will improve. We are obviously trying to see if there are other countries where there are opportunities, if there is another country where in covid has had a lesser impact, would like to see if we can open up opportunities there in the products area. But then the forex area, things have started changing as people have started traveling a little bit. It's not happening yet. [00:52:28] At least 10 to 15 percent of travel business starting to come back. It's nowhere near where it should be. So when people start traveling, foreign exchange automatically come. Then we're also seeing as educationalist, you start opening up. This is like in the U.S. as they should start opening up and allow international students to come back and study. You will see educational remittances start flowing in back again. We are a leader in the politics area and educational remittances. Right. And so those are the kind of things that I talked to my staff that sequentially we have seen a substantial improvement in foreign exchange problems due in Q3 or Q2. Same in travel. We saw a substantial improvement in travel. At the same time that you look at it here over the years, there's a dramatic difference in terms of the foreign exchange and travel area wherein we have seen a steep decline because of covid. So those are the two worst performing segments presently because of the impact of covid. But in those areas, we all we can do is minimize the costs and be ready in this year, because this is you have to deal with the pandemic. There's nothing else you could virtually do outside because we already are a leader. If the markets start coming back up, we're going to be there.

[00:54:02] Ok, great. And then one last point on your cost, I know Gené decreased a fair amount year over year this quarter when the pandemic subsides. What what is the normalized DNA look like?

[00:54:23] Well, joining us are going to go up, meaning once the pandemic subside, but then you on an overall margin basis, you will also have increased revenue. You'll have a lot more increased revenue. Remember, at this point are some other areas that I just talked to, whether it's politics, whether it does travel, whether it is e-learning, meaning whether it is remittance. These are very large opportunity. These are very large revenue area for us. And as we get revenue out of them, the margins will be there. And as our overall DNA graph, because we are we did make certain decisions which basically were targeted at the pandemic, could reduce our costs in those areas. For those, once the business areas come back, that cost will go up. But so will your revenues go up so accordingly or netnet your margins will go up substantially.

[00:55:21] Ok. All right, great, thanks.

[00:55:23] Thank you.

[00:55:23] OK, thank you. We have no further questions at this time. I would now like to turn the call back to Robin Marciano for closing remarks.

[00:55:35] Thank you. I think that brings us to the end of the call, since we don't have any other questions, I'll I'll close the call and I look forward to speaking to each one of you at the end of the year with our full year results. Thank you. Thanks for. Thanks to everyone for joining it.

[00:55:57] Ladies and gentlemen, ladies and gentlemen, conference call, thank you for participating, you may now disconnect.