Business Combinations

The Company seeks to execute accretive business acquisitions (which primarily targets businesses that are complementary to Ebix's existing products and services), in combination with organic growth initiatives, as part of its comprehensive business growth and expansion strategy.

During the nine months ended September 30, 2017, the Company completed three business acquisitions, as follows:

On August 18 2017 Ebix entered into an agreement to acquire Money Transfer Service Scheme ("MTSS") Business of YouFirst Money Express Private Limited ("YouFirst") for upfront cash consideration in the amount $8.0 million. The acquisition, effective September 1, 2017, was funded in October following the securing of requisite approvals for the closing. The valuation and purchase price allocation for the YouFirst acquisition remains preliminary and will be finalized as soon as practicable but in no event longer than one year.

Effective June 1, 2017 Ebix acquired the assets of beBetter Health, Inc., ("beBetter"), a technology enabled corporate wellness provider that provides end-to-end wellness solutions offering a variety of tools and programs, including interactive platforms, health screening, coaching, tobacco cessation, weight and stress management, health information, and numerous other products and services. Ebix acquired the assets and intellectual property of beBetter for $1.0 million plus possible future contingent earn-out payments of up to $2.0 million based on earned revenues over the subsequent twenty-four month period following the effective date of the acquisition. The valuation and purchase price allocation for the beBetter acquisition remains preliminary and will be finalized prior to December 31, 2017.

Effective April 1, 2017 Ebix entered into a joint venture with India-based Essel Group, while acquiring an 80% stake in ItzCash Card Limited ("ItzCash"), India’s leading payment solutions exchange. ItzCash is recognized as a leader in the prepaid cards and bill payments space in India. Under the terms of the agreement, ItzCash was valued at a total enterprise value of approximately $150 million. Accordingly, Ebix acquired an 80% stake in ItzCash for $120 million including upfront cash of $76.3 million plus possible future contingent earn-out payments of up to $44.0 million based on earned revenues over the subsequent thirty-six month period following the effective date of the acquisition. $4.0 million of the possible future contingent earn-out payments is being held in escrow accounts for the twelve month period following the effective date of the acquisition to ensure that the acquired business achieves the minimum specified annual gross revenue threshold, which if not achieved will result in said funds being returned to Ebix. The valuation and purchase price allocation for the ItzCash acquisition remains preliminary and will be finalized as soon as practicable but in no event longer than one year.

In addition to the acquisitions that closed during the nine months ended September 30, 2017, On August 17, 2017 the Company announced the acquisition of the MTSS Business of Wall Street Finance Limited ("WSFIN") along with the acquisition of its subsidiary company Goldman Securities Limited, pending shareholder and other requisite approvals being secured, for upfront cash consideration of $7.25 million, for which an escrow agreement was put in place. The funds were released to the seller in October, following WSFIN securing the requisite approvals for the closing. Additionally, the Company announced the acquisition of the MTSS business of Paul Merchants Limited ("PML") on September 21, 2017, pending shareholder and other regulatory/commercial approvals, for upfront cash consideration of $36.6 million, for which an escrow agreement was put in place. The completion of the acquisition occurred November 7, 2017. As a result of the escrow agreements being signed the Company recorded a liability which is reported in the "Acquisition Obligations" line in the short term liability section of the condensed consolidated balance sheets and an asset which is reported in the "Other Assets" line in the long term asset section of the condensed consolidated balance sheets.

During the year ended December 31, 2016, the Company completed three business acquisitions, as follows:

Effective November 1, 2016 Ebix acquired Wdev Solucoes em Technologia SA ("Wdev"), a Brazilian company that provides IT services and software development for the Latin American insurance industry. Ebix acquired Wdev for upfront cash consideration in the amount of $10.5 million, plus possible future contingent earn-out payments of up to $15.7 million based on earned revenues over the subsequent thirty-eight month period following the effective date of the acquisition. $2.9 million of the upfront cash consideration is being held in an escrow account for the thirty-eight month period following the effective date of the acquisition to ensure that the acquired business achieves the minimum specified annual net revenue threshold, which if not achieved will result in said funds being returned to Ebix. The valuation and purchase price allocation for the Wdev acquisition remains preliminary and will be finalized as soon as practicable but in no event longer than one year.

Effective November 1, 2016 Ebix acquired the assets of IHAC, Inc., d.b.a Hope Health ("Hope"), a Michigan corporation and publisher of health and wellness continuing education products. Ebix acquired the assets and intellectual property of Hope for $1.72 million.

Effective July 1, 2016 Ebix and Independence Holdings Corporation ("IHC") jointly executed a Call Notice agreement, whereby Ebix purchased additional common units in Ebix Health Exchange Holdings, LLC ("EbixHealth JV") from IHC constituting eleven percent (11%) of the EbixHealth JV for $2.0 million cash which resulted in Ebix holding an aggregate fifty-one percent (51%) controlling equity interest in the EbixHealth JV. Commensurate with additional equity stake in the joint venture a contemporaneous valuation of the business was completed. In accordance with the technical accounting guidance pertaining to step acquisitions the Company recorded goodwill in the amount of $13.2 million, intangible assets in the amount of $9.1 million, a non-controlling interest in the amount of $11.3 million, and recognized a $1.2 million gain on its previously carried 40% equity interest in the EbixHealth JV. This recognized gain is reflected as a component of other non-operating income in the accompanying Condensed Consolidated Statement of Income. Previously, effective September 1, 2015 Ebix and IHC formed a joint venture named EbixHealth JV. Ebix paid $6.0 million and contributed a license to use certain CurePet software and systems valued by the EbixHealth JV at $2.0 million, for its initial 40% membership interest in the EbixHealth JV.

A significant component of the purchase price consideration for many of the Company's business acquisitions is a potential subsequent cash earnout payment based on reaching certain specified future revenue targets. The terms for the contingent earn out payments in most of the Company's business acquisitions typically address the GAAP recognizable revenues achieved by the acquired entity over a one, two, and/or three year period subsequent to the effective date of their acquisition by Ebix. These terms typically establish a minimum threshold revenue target with achievement of revenues recognized over that target being awarded in the form of a specified cash earn out payment. The Company applies these terms in its calculation and determination of the fair value of contingent earn out liabilities for purchased businesses as part of the related valuation and purchase price allocation exercise for the corresponding acquired assets and liabilities. The Company recognizes these potential obligations as contingent liabilities and are reported as such on its Condensed Consolidated Balance Sheets. As discussed in more detail in Note 1, these contingent consideration liabilities are recorded at fair value on the acquisition date and are remeasured quarterly based on the then assessed fair value and adjusted if necessary. During the nine months ended September 30, 2017 and 2016, these aggregate contingent accrued earn-out business acquisition consideration liabilities were reduced by $3.6 million and $2.4 million, respectively, due to remeasurements based on the then assessed fair value and changes in anticipated future revenue levels. In the first nine months ended September 30, 2017 and 2016 these reductions to the contingent accrued earn-out liabilities resulted in a corresponding reduction of $164 thousand and $1.7 million, respectively to general and administrative expenses as reported on the Condensed Consolidated Statements of Income and a reduction of $3.4 million and $664 thousand, respectively to goodwill as reported in the enclosed Condensed Consolidated Balance Sheets. As of September 30, 2017, the total of these contingent liabilities was $39.18 million, of which $33.26 million is reported in long-term liabilities, and $5.92 million is included in current liabilities in the Company's Condensed Consolidated Balance Sheet. As of December 31, 2016 the total of these contingent liabilities was $8.51 million, of which $6.59 million was reported in long-term liabilities, and $1.92 million was included in current liabilities in the Company's Condensed Consolidated Balance Sheet.

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

The aggregated unaudited pro forma financial information pertaining to all of the Company's acquisitions that have an impact on the nine months ended September 30, 2017 and September 30, 2016, which includes the acquisitions of the EbixHealth JV (being fully consolidated effective July 1, 2016), Wdev (acquired November 2016), Hope (acquired November 2016), ItzCash (acquired April 2017), beBetter (acquired June 2017) and YouFirst (acquired September 2017) and as presented in the table below is provided for informational purposes only and is not a projection of the Company's expected results of operations for any future period. No effect has been given in this pro forma information for future synergistic benefits that may still be realized as a result of combining these companies or costs that may yet be incurred in integrating their operations. The 2017 and 2016 pro forma financial information below assumes that all such business acquisitions were made on January 1, 2016, whereas the Company's reported financial statements for the three and nine months ended September 30, 2017 only include the operating results from these businesses since the effective date that they were acquired by Ebix.



	Three Months Ended September 30, 2017				Three Months Ended September 30, 2016				Nine Months Ended September 30, 2017				Nine Months Ended September 30, 2016
	As Reported		Pro Forma		As Reported		Pro Forma		As Reported		Pro Forma		As Reported		Pro Forma
	(unaudited)				(unaudited)				(unaudited)				(unaudited)
	(In thousands, except per share data)
Revenue	$	92,800	$	93,817	$	74,608	$	88,857	$	259,290	$	273,996	$	218,248	$	266,225
Net Income attributable to Ebix, Inc.	$	24,184	$	24,269	$	24,067	$	24,103	$	74,045	$	75,095	$	69,218	$	67,859
Basic EPS	$	0.77	$	0.77	$	0.74	$	0.74	$	2.34	$	2.38	$	2.12	$	2.07
Diluted EPS	$	0.76	$	0.77	$	0.74	$	0.74	$	2.33	$	2.37	$	2.10	$	2.06

During the three months ended September 30, 2017 the Company's reported total operating revenues increased by $18.2 million or 24% to $92.8 million as compared to $74.6 million during the same period in 2016.

During the nine months ended September 30, 2017 the Company's reported total operating revenues increased by $41.0 million or 19% to $259.3 million as compared to $218.2 million during the same period in 2016.

With respect to business acquisitions completed during the years 2017 and 2016 on a pro forma basis, as disclosed in the above pro forma financial information table, combined revenues increased 5.6% and 2.9% for the three and nine months ending September 30, 2017 versus the same periods in 2016. The 2017 and 2016 pro forma financial information assumes that all business acquisitions made during this period were made on January 1, 2016, whereas the Company's reported financial statements for three and nine months ended September 30, 2017 only includes the revenues from these businesses since the effective date that they were acquired or consolidated by Ebix, being July 2016 for the EbixHealth JV, November 2016 for Wdev, November 2016 for Hope, April 2017 for Itzcash, June 2017 for beBetter and September 2017 for YouFirst.

The above referenced pro forma information and the relative comparative change in pro forma and reported revenues are based on the following premises:

•2017 and 2016 pro forma revenue contains actual revenue of the acquired entities before acquisition date, as reported by the sellers, as well as actual revenue of the acquired entities after acquisition, whereas the reported growth in revenues of the acquired entities after acquisition date are only reflected for the period after their acquisition.

•Revenue billed to existing clients from the cross selling of acquired products has been assigned to the acquired section of our business.

•Any existing products sold to new customers obtained through a newly acquired customer base are assigned to the acquired section of our business.

•Pro formas do not include post acquisition revenue reductions as a result of discontinuation of any product lines and/or customer projects by Ebix in line with the Company's initiatives to maximize profitability.