Description of Business— Ebix, Inc., and its subsidiaries, (“Ebix” or the “Company”) is a leading international supplier of on-demand infrastructure Exchanges to the insurance, financial, and healthcare industries. In the Insurance sector, the Company’s main focus is to develop and deploy a wide variety of insurance and reinsurance exchanges on an on-demand basis, while also providing software as a service ("SaaS") enterprise solutions in the area of customer relationship management ("CRM"), front-end and back-end systems, outsourced administrative and risk compliance. The Company's products feature fully customizable and scalable on-demand software designed to streamline the way insurance professionals manage distribution, marketing, sales, customer service, and accounting activities. With a "Phygital” strategy that combines physical distribution outlets in many Association of Southwest Asian Nations ("ASEAN") countries to an Omni-channel online digital platform, the Company’s EbixCash Financial exchange portfolio encompasses leadership in areas of domestic & international money remittance, foreign exchange ("Forex"), travel, pre-paid and gift cards, utility payments, lending, and wealth management in India and other markets. The Company has its headquarters in Johns Creek, Georgia and also conducts operating activities in Australia, Canada, India, New Zealand, Singapore, United Kingdom, Brazil, Philippines, Indonesia, Thailand and United Arab Emirates. International revenue accounted for 68.3% and 57.8% of the Company’s total revenue for the six months ended June 30, 2019 and 2018, respectively.

The Company’s revenues are derived from three product/service channels. The Company has determined that the Exchange channel should be split into its Insurance and EbixCash components, due primarily to the significant growth in EbixCash over the past year. The company has also determined that the RCS, Broker, and Carrier channels have become individually immaterial and has chosen to group those together under just RCS. The revenues for the three and six months ended June 30, 2018 shown below have been adjusted to reflect this change.

Basis of Presentation—The accompanying unaudited condensed consolidated financial statements and these notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") with the effect of inter-company balances and transactions eliminated. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP and SEC rules have been condensed or omitted as permitted by and pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These unaudited condensed consolidated financial statements contain adjustments (consisting only of normal recurring items) necessary to fairly present the consolidated financial position of the Company and its consolidated results of operations and cash flows. Operating results for the three and six months ended June 30, 2019 and 2018 are not necessarily indicative of the results that may be expected for future quarters or the full year of 2019. The condensed consolidated December 31, 2018 balance sheet included in this interim period filing has been derived from the audited financial statements at that date, but does not necessarily include all of the information and related notes required by GAAP for complete financial statements. These condensed interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Restricted Cash- The carrying value of our restricted cash was $22.6 million and $4.0 million at June 30, 2019 and 2018, respectively. The June 30, 2019 balance primarily consists of $8.6 million funds in an escrow account to acquire the remaining 10.06% publicly-held Weizmann Forex shares pending the lapse of a time bound public offer. Additionally in connection with a 2016 acquisition, there is upfront cash consideration and possible future contingent earn-out payments held in an escrow account contingent upon the acquired business achieving the minimum specified annual net revenue thresholds, which if not achieved would result in said funds being returned to Ebix. The Company also holds fixed deposits pledged with banks for issuance of bank guarantees and letters of credit related to India operations.

Fair Value of Financial Instruments—Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction. This guidance establishes a three-level hierarchy priority for disclosure of assets and liabilities recorded at fair value. The ordering of priority reflects the degree to which objective data from external active markets are available to measure fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable. The classifications are as follows:

Other financial instruments not measured at fair value on the Company's unaudited condensed consolidated balance sheet at June 30, 2019 but which require disclosure of fair values include: cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, accrued payroll and related benefits, financing lease obligations, and the revolving line of credit and term loan debt under the syndicated credit agreement facility with Regions Financial Corporation. The Company believes that the estimated fair value of such instruments at June 30, 2019 and December 31, 2018 approximates their carrying value as reported on the unaudited Condensed Consolidated Balance Sheet.



	Fair Values at Reporting Date Using*
Descriptions	Balance, June 30, 2019		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets
Commercial bank certificates of deposits ($10.9 million is recorded in the long term asset section of the consolidated balance sheets in "Other Assets")	$	15,763	$	15,763	$	—	$	—
Mutual funds (recorded in the long term asset section of the consolidated balance sheets in "Other Assets")	1,621		1,621		—		—
Total assets measured at fair value	$	17,384	$	17,384	$	—	$	—

Liabilities
Derivatives:
Contingent accrued earn-out acquisition consideration (a)	$	10,819	$	—	$	—	$	10,819
Total liabilities measured at fair value	$	10,819	$	—	$	—	$	10,819

(a) The income valuation approach is applied and the valuation inputs include the contingent payment arrangement terms, projected cash flows, rate of return, and probability assessments.
* During the six months ended June 30, 2019 there were no transfers between fair value Levels 1, 2 or 3.



	Fair Values at Reporting Date Using*
Descriptions	Balance, December 31, 2018		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets
Commercial bank certificates of deposits ($681 thousand is recorded in the long term asset section of the consolidated balance sheets in "Other Assets")	$	26,714	26,714		$	—	$	—
Mutual funds	5,159		5,159		—		—
Total assets measured at fair value	$	31,873	$	31,873	$	—	$	—

Liabilities
Derivatives:
Contingent accrued earn-out acquisition consideration (a)	$	24,976	$	—	$	—	$	24,976
Total liabilities measured at fair value	$	24,976	$	—	$	—	$	24,976

(a) The income valuation approach is applied and the valuation inputs include the contingent payment arrangement terms, projected cash flows, rate of return, and probability assessments.
* During the twelve months ended December 31, 2018 there were no transfers between fair value Levels 1, 2 or 3.

For the Company's assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3), the following table provides a reconciliation of the beginning and ending balances for each category therein, and gains or losses recognized during the six months ended June 30, 2019 and during the year ended December 31, 2018:



Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Contingent Liability for Accrued Earn-out Acquisition Consideration	June 30, 2019			December 31, 2018
	(In thousands)

Beginning balance	$	24,976		$	37,096

Total remeasurement adjustments:
Gains included in earnings **	(17,124		)	(1,391		)
Reductions recorded against goodwill	—			(13,718		)
Foreign currency translation adjustments ***	82			(1,620		)

Acquisitions and settlements
Business acquisitions	2,885			8,440
Settlement payments	—			(3,831		)

Ending balance	$	10,819		$	24,976

The amount of total (gains) losses for the period included in earnings or changes to net assets, attributable to changes in unrealized gains relating to assets or liabilities still held at period-end.	$	(17,124	)	$	(1,391	)

** recorded as a reduction to reported general and administrative expenses
*** recorded as a component of other comprehensive income within stockholders' equity

As presented in the table above, the significant unobservable inputs used in the fair value measurement of contingent consideration related to business acquisitions are projected revenue forecasts as developed by the relevant members of Company's management team and the probability of achievement of those revenue forecasts. Significant increases (decreases) in these unobservable inputs in isolation would result in a significantly higher (lower) fair value measurement. 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. During 2018 and 2019, certain of the Company's contingent earn out liabilities were adjusted because of changes to anticipated future revenues from these acquired businesses, or as a result of finalizing purchase price allocations that were previously provisional.

Revenue Recognition—The Company derives its revenues primarily from subscription and transaction fees pertaining to services delivered over our exchanges or from our application service provider (“ASP") platforms, fees for risk compliance solution services, and fees for software development projects including associated fees for consulting, implementation, training, and project management provided to customers with installed systems and applications. 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.

For arrangements that include multiple performance obligations, the Company allocates consideration based on their relative fair values.These types of arrangements include obligations pertaining to software licenses, system set-up, and professional services associated with product customization or modification. Delivery of the various contractual obligations typically occurs over periods of less than eighteen months. These arrangements generally do not have refund provisions or have very limited refund terms.

For arrangements where control is transferred over time, such as software development arrangements involving significant customization, modification, or production, an input or output method is applied that represents a good faith depiction of the progress towards completion of the performance obligation. For arrangements that include variable consideration, the Company assesses whether any amounts should be constrained.

Financial exchange revenue consists largely of transaction-based fees and fees from corporate and retail gift vouchers. The transaction-based fees are primarily based on a percentage of payment value processed for solutions such as retail and corporate payments, domestic money transfers, and general purpose reloadable cards. Transaction-based fees are recognized at the completion of the transaction. Gift voucher revenue is recognized at full purchase value at time of sale with the corresponding cost of vouchers recorded under direct expenses. The substantial majority of the financial exchange revenue results from single performance obligation transactions.



	Three Months Ended June 30,				Six Months Ended June 30,
	(In thousands)				(In thousands)
Revenue:	2019		2018		2019		2018
United States	45,068		48,400		$	91,143	$	98,302
Canada	1,258		1,456		2,309		3,056
Latin America	4,974		5,161		8,996		10,555
Australia	8,730		8,740		17,355		18,227
Singapore*	2,015		1,924		4,144		4,140
New Zealand	488		526		1,010		1,013
India*	73,909		51,351		146,817		83,354
Europe	3,634		3,841		7,421		7,872
United Arab Emirates*	225		154		335		375
Indonesia*	2,627		1,828		5,172		3,369
Philippines*	1,347		1,245		2,497		2,593
	$	144,275	$	124,626	$	287,199	$	232,856

*India led businesses, except for $1.2 million and $2.3 million in the three months and six months ended June 30, 2019, respectively, of revenues for pre-existing Singapore operations which is not part of EbixCash, and $1.2 million and $2.6 million in the three months and six months ended June 30, 2018, respectively. Total revenue for Indian led businesses in the three months and six months ended June 30, 2019 was $78.9 million and $156.7 million, respectively, and $55.2 million and $91.3 million in the three months and six months ended June 30, 2018, respectively. See Note 7 for additional geographic information.

The Company capitalizes certain costs in order to maintain the ability to obtain and fulfill new contracts and contract renewals. These costs are primarily related to the setup and customization of our SaaS based platforms and such costs are amortized over the benefit period. As of June 30, 2019, the Company had $744 thousand of contract costs in “Other current assets” and $1.3 million in “Other Assets” on the Company's Condensed Consolidated Balance Sheets.

The Company records contract liabilities when it receives payments or invoices in advance of the performance of services. A significant portion of this balance relates to contracts where the customer has paid in advance for the use of our SaaS platforms over a specified period of time. This portion is recognized as the related performance obligation is fulfilled (generally less than one year). The remaining portion of the contract liabilities balance consists primarily of customer-specific customizations that are not distinct from related performance obligations that transfer over time. This portion is recognized over the expected useful life of the customizations.



(In thousands)	June 30, 2019			December 31, 2018
Balance, beginning of period	$	44,660		$	38,030
Revenue recognized from beginning balance	(30,374		)	(21,697		)
Additions from business acquisitions	—			16,273
Additions, net of revenue recognized and currency translation	24,244			12,054
Balance, end of period	$	38,530		$	44,660

Accounts Receivable and the Allowance for Doubtful Accounts—Reported accounts receivable include $148.4 million of trade receivables stated at invoice billed amounts and $26.9 million of unbilled receivables (net of the estimated allowance for doubtful accounts receivable in the amount of $10.0 million). The unbilled receivables pertain to certain projects for which the timing of billing is tied to contractual milestones. The Company adheres to such contractually stated performance milestones and accordingly issues invoices to customers as per contract billing schedules. Approximately $7.3 million of contract liabilities is included in billed accounts receivable at June 30, 2019. The Company recognized bad debt expense(credit) in the amount of $(1.4) million and $(1.3) million for the three and six-month periods ended June 30, 2019 and $1.1 million and $2.1 million for the three and six-month periods ended June 30, 2018, respectively. Accounts receivable are written off against the allowance account when the Company has exhausted all reasonable collection efforts. During the six months ended June 30, 2019 and 2018, $( 1.7) million and $40 thousand, respectively, of accounts receivable, which had been specifically reserved for in prior periods, were written off (recovered). In addition the Company has $35.2 million of receivables that are due from a public sector entity in India. Payment of these receivables is dependent on the approval of funding. The Company believes the accounts are fully collectible as of June 30, 2019.

Goodwill and Other Indefinite-Lived Intangible Assets—Goodwill represents the cost in excess of the fair value of the identifiable net assets from the businesses that we acquire. In accordance with the relevant FASB accounting guidance, goodwill is tested for impairment at the reporting unit level on an annual basis or on an interim basis if an event occurred or circumstances change that would indicate that fair value of a reporting unit decreased below its carrying value. Potential impairment indicators include a significant change in the business climate, legal factors, operating performance indicators, competition, customer retention and the sale or disposition of a significant portion of the business. The Company applies the technical accounting guidance concerning goodwill impairment evaluation whereby the Company first assesses certain qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of any of our reporting units was less than its carrying amount. If, after assessing the totality of events and circumstances, we were to determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we would perform the two-step quantitative impairment testing described further below.

The aforementioned two-step quantitative testing process involves comparing the reporting unit carrying values to their respective fair values; we determine fair value of our reporting units by applying the discounted cash flow method using the present value of future estimated net cash flows. If the fair value of a reporting unit exceeds its carrying value, then no further testing is required. However, if a reporting unit’s fair value were to be less than its carrying value, we would then determine the amount of the impairment charge, if any, which would be the amount that the carrying value of the reporting unit’s goodwill exceeded its implied value. We perform our annual goodwill impairment evaluation and testing as of September 30 each year or when events or circumstances dictate more frequently.

Capitalized Software Development Costs—In accordance with the relevant FASB accounting guidance regarding the development of software to be sold, leased, or marketed, the Company expenses such costs as they are incurred until technological feasibility has been established, at and after which time those costs are capitalized until the product is available for general release to customers. Costs incurred to enhance our software products, after general market release of the services using the products, are expensed in the period they are incurred.

Finite-lived Intangible Assets—Purchased intangible assets represent the estimated acquisition date fair value of customer relationships, developed technology, trademarks and non-compete agreements obtained in connection with the businesses we acquire. We amortize these intangible assets on a straight-line basis over their estimated useful lives, as follows:



	June 30, 2019			December 31, 2018
	(Unaudited)
	(In thousands)
Finite-lived intangible assets:
Customer relationships	$	80,230		$	80,070
Developed technology	19,215			19,176
Airport Contract	4,794			4,752
Store Networks	828			821
Dealer network	6,371			6,315
Trademarks	2,676			2,677
Brand	872			864
Non-compete agreements	764			764
Backlog	140			140
Database	212			212
Total intangibles	116,102			115,791
Accumulated amortization	(69,646		)	(64,343		)
Finite-lived intangibles, net	$	46,456		$	51,448

Indefinite-lived intangibles:
Customer/territorial relationships	$	42,055		$	42,055

Foreign Currency Translation—The functional currency for the Company's foreign subsidiaries in Dubai and Singapore is the U.S. dollar because the intellectual property research and development activities provided by its Dubai and Singapore subsidiaries, and the product development and information technology enabled services activities for the insurance industry provided by its India subsidiary, both in support of the Company's operating divisions across the world, are transacted in U.S. dollars.

The functional currency of the Company's other foreign subsidiaries is the local currency of the country in which the subsidiary operates. The assets and liabilities of these 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 accumulated other comprehensive income in the accompanying consolidated balance sheets, and are included in the condensed consolidated statements of comprehensive income. Foreign exchange transaction gains and losses that are derived from transactions denominated in a currency other than the subsidiary's functional currency are included in the determination of net income.

Income Taxes—Deferred income taxes are recorded to reflect the estimated future tax effects of differences between the financial statement and tax basis of assets, liabilities, operating losses, and tax credit carry forwards using the tax rates expected to be in effect when the temporary differences reverse. Valuation allowances, if any, are recorded to reduce deferred tax assets to the amount management considers more likely than not to be realized. Such valuation allowances are recorded for the portion of the deferred tax assets that are not expected to be realized based on the levels of historical taxable income and projections for future taxable income over the periods in which the temporary differences will be deductible.

The Company also applies the relevant FASB accounting guidance on accounting for uncertainty in income taxes positions. This guidance clarifies the accounting for uncertainty in income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. In this regard we recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 is intended to improve the effectiveness of ASC 820’s disclosure requirements. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The Company has yet to assess the impact that the adoption of this ASU will have on Ebix's consolidated income statement and balance sheet.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718) Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of ASU 2018-07 did not impact our consolidated financial position, results of operations or cash flows.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The ASU provides that the stranded tax effects from the Tax Act in accumulated other comprehensive loss may be reclassified to retained earnings. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The adoption of ASU 2018-02 did not impact our consolidated financial position, results of operations or cash flows.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities). Instead, under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A public business entity filer should adopt the amendments in this ASU for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company has yet to assess the impact that the adoption of this ASU will have on Ebix's consolidated income statement and balance sheet.

In January 2017 the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business which amended the existing FASB ASC. The standard provides additional guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill, and consolidation. ASU 2017-01 is effective for fiscal 2019 with early adoption permitted. The adoption of ASU 2018-01 did not impact our consolidated financial position, results of operations or cash flows.