Business Acquisitions

12 Months Ended

Dec. 31, 2019

The Company’s business acquisitions are accounted for under the purchase method of accounting in accordance with ASC 805 ("Business Combinations"). Accordingly, the consideration paid by the Company for the businesses it purchases is allocated to the tangible and intangible 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 in part 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. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record significant adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in our consolidated statements of income.

The Company's practice is to immediately integrate all functions including infrastructure, sales and marketing, administration, product development after a business acquisition is consummated, so as to ensure that synergistic efficiencies are maximized, redundancies eliminated, and to leverage cross-selling opportunities. Furthermore, the Company centralizes certain key functions such as information technology, marketing, sales, human resources, finance, and other general administrative functions after an acquisition, in order to realize cost efficiencies. By executing this integration strategy, it becomes neither practical nor feasible to accurately and separately track and disclose the earnings from the business combinations we have executed after they have been acquired.

A significant component of the purchase price consideration for many of the Company's business acquisitions is a potential future cash earnout 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 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 as reported on its 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 each of the years ending December 31, 2019, 2018 and 2017, these aggregate contingent accrued earn-out business acquisition consideration liabilities, were reduced by $16.5 million, $1.4 million, and $164 thousand, respectively, due to remeasurements as based on the then assessed fair value and changes in the amount and timing of anticipated future revenue levels. These reductions to the contingent accrued earn-out liabilities resulted in corresponding reduction to general and administrative expenses as reported on the Consolidated Statements of Income. As of December 31, 2019, the total of these contingent liabilities was $10.1 million, of which $1.5 million is reported in long-term liabilities, and $8.6 million is included in current liabilities in the Company's Consolidated Balance Sheet. As of December 31, 2018, the total of these contingent liabilities was $25.0 million of which $11.2 million was reported in long-term liabilities, and $13.8 million was included in current liabilities in the Company's Consolidated Balance Sheet.

2019 Acquisitions

Wallstreet Canada- Effective August 23, 2019, Ebix acquired Canada based Wallstreet Canada, a foreign exchange and outward remittance service provider for approximately $2.1 million inclusive of net acquired working capital. The valuation and purchase price allocation remains preliminary and will be finalized as soon as practicable but in no event longer than one year from the effective date of this transaction.

Essel Forex- Effective January 1, 2019, Ebix acquired the assets of India based Essel Forex, for approximately $8.7 million, plus possible future contingent earn-out payments of up to $721 thousand based on earned revenues. Ebix funded the entire transaction in cash, using its internal cash reserves. Essel Forex is a large provider of foreign exchange services in India with a wide spectrum of related products including sales of all major currencies, travelers’ checks, demand drafts, remittances, money transfers and prepaid cards primarily for corporate clients. The Company has determined that the fair value of the contingent earn-out consideration is $396 thousand as of December 31, 2019.

Zillious- Effective January 1, 2019, Ebix acquired an 80% controlling stake in India based Zillious for $10.1 million plus possible future contingent earn-out payments of up to $2.2 million based on agreed milestones in the acquisition agreement. Zillious is an on-demand SaaS travel technology solution in the corporate travel segment in India. The Company has determined that the fair value of the contingent earn-out consideration is $1.5 million as of December 31, 2019.

2018 Acquisitions

Weizmann- Effective December 1, 2018, Ebix entered into an agreement to acquire 74.84% controlling stake in India based Weizmann for $63.1 million. Ebix also made a 90-day time bound public offer to acquire the remaining 25.16% publicly-held Weizmann Forex shares for approximately $21.1 million to public shareholders. The $77.35 million reported in the consolidated statement of cash flows used for investing activities includes a decrease in previously reported cash acquired of $1.5 million and $12.7 million for an additional 15.1% of the publicly-held Weizmann Forex shares during 2019. As of December 31, 2019, Ebix has approximately 89.94% of the controlling stake in India based Weizmann.

Pearl- Effective December 1, 2018, Ebix acquired the assets of India based Pearl, a provider of a comprehensive range of B2B and B2C travel services, under the brand name ‘Sastiticket’, ranging from domestic and international ticketing, incentives travel, leisure products, luxury holidays, and travel documentation for $3.4 million and has been integrated with Ebix Travels’ operations, which has brought in operational synergies and certain redundancies for the acquired operations.

Lawson- Effective December 1, 2018, Ebix acquired India based Lawson, a B2B provider of travel services and international ticketing, for $2.7 million and has been integrated with EbixCash Travels’ operations to bring in operational synergies and wider country wide footprint.

AHA Taxis- Effective October 1, 2018, Ebix acquired a 70% stake in India based AHA Taxis, a platform for on-demand inter-city cabs in India for $382 thousand. Consideration of $71 thousand was paid during the fourth quarter of 2018, $214 thousand during the first quarter of 2019, and $72 thousand remains to be paid. AHA focuses its attention on Corporate and Consumer inter-city travel primarily with a network of thousands of registered AHA Taxis.

Routier- Effective October 1, 2018, Ebix acquired a 67% stake in India based Routier, a marketplace for trucking logistics for $413 thousand.

Business Travels- Effective October 1, 2018, Ebix acquired the assets of India based Business Travels for $1.1 million and same has been integrated with Ebix Travels’ operations to expand the wholesale travel and consolidation business. Consideration of $414 thousand was paid during the fourth quarter of 2018 and $689 thousand during the first quarter of 2019.

Miles - Effective August 1, 2018, Ebix entered into an agreement to acquire India based Miles, a provider of on-demand software on wealth and asset management to banks, asset managers and wealth management firms, for approximately $18.3 million, plus possible future contingent earn-out payments of up to $8.3 million based on earned revenues over the subsequent twenty-four month period following the effective date of the acquisition. The Company has determined that the fair value of the contingent earn-out consideration is $7.7 million as of December 31, 2019.

Leisure - Effective July 1, 2018, Ebix entered into an agreement to acquire India based Leisure for approximately $1.6 million, with the goal of creating a new travel division to focus on a niche segment of the travel market.

Mercury - Effective July 1, 2018, Ebix entered into an agreement to acquire India based Mercury Travels for approximately $13.2 million, with the goal of creating a new travel division to focus on a niche segment of the travel market. Mercury’s Forex business has been integrated into EbixCash’s existing forex business.

Indus - Effective July 1, 2018, Ebix entered into an agreement to acquire India based Indus, a global provider of enterprise lending software solutions to financial institutions, captive auto finance and telecom companies, for approximately $22.9 million plus possible future contingent earn-out payments of up to $5.0 million based on the agreed upon revenues and EBITDA milestones

achieved over the subsequent twenty-four month period following the effective date of the acquisition. The Company has determined that the fair value of the contingent earn-out consideration is zero as of December 31, 2019.

Centrum - Effective April 1, 2018, Ebix entered into an agreement to acquire India based Centrum, a leader in India’s Foreign Exchange Operation markets for approximately $179.5 million. This acquisition was completed in June 2018. Subsequently, Centrum has been renamed as EbixCash World Money and has been tightly integrated into the EbixCash Exchange in India and abroad, with key business executives of Centrum's foreign exchange operations becoming an integral part of the combined EbixCash senior leadership.

Smartclass - Effective April 1, 2018, Ebix entered into an agreement to acquire a 60% stake in India based Smartclass, a leading e-learning Company engaged in the business of education services, development of education products, and implementation of education solutions for K-12 Schools through its E-Learning Venture. Under the terms of the agreement, Ebix paid $8.6 million in cash for its stake in Smartclass.

Transcorp - Effective February 1, 2018, Ebix acquired the MTSS Business of Transcorp, for upfront cash consideration in the amount of $7.25 million, of which $6.55 million was funded with cash and $700 thousand assumed in liabilities. MTSS operations of Transcorp has been consolidated with EbixCash’s MTSS operations resulting in operational synergies and certain redundancies to the combined operation.

The following table summarizes the recognized intangible assets, goodwill and earn-out provisions, as a result of the cumulative valuation and purchase price allocations on effective date of acquisition, for the 2019 and 2018 acquisitions:



Company acquired	Date acquired	Goodwill		Intangibles Assets		Contingent Earn-Out Provision
		(In thousands)
Transcorp	Feb-18	$	7,254	$	—	$	—
Centrum	Apr-18	159,647		5,742		—
SmartClass	Apr-18	16,568		4,243		—
Indus	Jul-18	21,501		2,146		3,310
Leisure	Jul-18	1,699		202		—
Mercury	Jul-18	15,127		1,051		—
Miles	Aug-18	19,075		5,048		5,271
AHA Taxis	Oct-18	592		—		—
Business Travels	Oct-18	1,102		—		—
Routier	Oct-18	698		—		—
Lawson	Dec-18	4,437		—		—
Pearl	Dec-18	3,372		—		—
Weizmann	Dec-18	71,552		2,005		—
Total for 2018 acquisitions		$	322,624	$	20,437	$	8,581

Essel Forex	Jan-19	8,372		1,163		407
Zillious	Jan-19	9,489		1,875		1,515
Wallstreet Canada*	Aug-19	71		—		—
Total for 2019 acquisitions		$	17,932	$	3,038	$	1,922

*The valuation and purchase price allocation remains preliminary and will be finalized as soon as practicable but in no event longer than one year from the effective date of this transaction.

The following table summarizes the fair value of the consideration transferred, net assets acquired and liabilities assumed, as a result of the acquisitions, that were recorded during 2019 and 2018:



	December 31,
(In thousands)	2019			2018
Fair value of total consideration transferred
Cash	$	105,391		$	250,769
Consideration payable upon certain conditions being met	—			72,933
Contingent earn-out consideration arrangement (net)	1,922			(5,137		)
Total consideration transferred	107,313			318,565

Fair value of equity components recorded (not part of consideration)
Recognition of noncontrolling interest of joint ventures	(10,258		)	23,500
Total equity components recorded	(10,258		)	23,500

Total consideration transferred and equity components recorded	$	97,055		$	342,065

Fair value of assets acquired and liabilities assumed
Cash, net of adjustment	$	(75	)	$	18,212
Other current assets	5,175			68,317
Property, plant, and equipment	231			2,176
Other long term assets	3,023			14,574
Intangible assets, definite lived	6,296			14,577
Capitalized software development costs	—			46
Deferred tax liability	12			854
Current and other liabilities, net of consideration transferred	63,721			(83,021		)
Net assets acquired, excludes goodwill	78,383			35,735

Goodwill	18,672			306,330

Total net assets acquired	$	97,055		$	342,065

The following table summarizes the separately identified intangible assets acquired as a result of the acquisitions that occurred during 2019 and 2018:



	December 31,
	2019			2018
			Weighted Average				Weighted Average
Intangible asset category	Fair Value		Useful Life	Fair Value			Useful Life
	(In thousands)		(In years)	(In thousands)			(In years)
Customer relationships	$	3,042	7.5	$	7,342		11.7
Developed technology	851		7.0	3,726			5.0
Agent network	582		10.2	—			0.0
Airport contracts	—		0.0	4,896			9.0
Store networks	—		0.0	846			9.0
Brand	78		5.0	369			4.0
Branch network	1,743		10.0	—			0.0
Purchase accounting adjustments for prior year acquisitions	—		0.0	(2,602		)	0.0
Total acquired intangible assets	$	6,296	8.0	$	14,577		9.2

Estimated aggregate future amortization expense for the intangible assets recorded as part of the business acquisitions described above and all other prior acquisitions is as follows:



Future Amortization Expenses (In thousands):
For the year ending December 31, 2020	$	9,380
For the year ending December 31, 2021	8,558
For the year ending December 31, 2022	8,107
For the year ending December 31, 2023	6,116
For the year ending December 31, 2024	4,355
Thereafter	10,439

	$	46,955

The Company recorded $10.2 million, $7.5 million, and $7.3 million of amortization expense related to acquired intangible assets for the years ended December 31, 2019, 2018, and 2017, respectively.