2021 Second Quarter Revenues of $275.1 Million, up 23.6% year-over-year

Q2 Diluted Earnings Per Share (GAAP) of $0.81, up from $0.24 in Q2 of 2020

Q2 Adjusted Diluted Earnings Per Share (Non-GAAP) (1) of $1.14, up from $0.53 in Q2 of 2020

NEW YORK, July 29, 2021 (GLOBE NEWSWIRE) --  ExlService Holdings, Inc. (NASDAQ: EXLS), a leading operations management and analytics company, today announced its financial results for the quarter ended June 30, 2021.

Rohit Kapoor, Vice Chairman and Chief Executive Officer, said, “EXL generated revenue of $275.1 million, an increase of 23.6% compared to the second quarter of 2020. Analytics continued to lead our growth with a 36.4% revenue increase from the second quarter of 2020 and operations management revenue increased 16.2%. Adjusted diluted earnings per share for the quarter was $1.14, a 115% increase year-over-year. Our significant growth is attributable to the focus on our data-led strategy, wherein we are enabling better business decisions, embedding intelligence directly into operational workflows and increasing speed to action with cloud-based solutions. The market demand for our services remains favorable, positioning us well for continued growth in the second half of 2021.”

Maurizio Nicolelli, Chief Financial Officer, said, “Based on our strong first half of the year financial results, and the visibility we have for the remainder of the year, we are increasing our revenue guidance for 2021 to be in the range of $1.08 billion to $1.10 billion, from $1.04 billion to $1.07 billion, representing a 12% to 14% increase year-over-year on a constant currency basis.. Our adjusted diluted earnings per share guidance for 2021 is also increasing to $4.30 to $4.50, from $4.00 to $4.30, representing a 22% to 27% increase over the prior year.”

1. Reconciliations of adjusted (non-GAAP) financial measures to the most directly comparable GAAP measures, where applicable, are included at the end of this release under “Reconciliation of Adjusted Financial Measures to GAAP Measures”. These non-GAAP measures, including adjusted diluted EPS and constant currency measures, are not measures of financial performance prepared in accordance with GAAP.

Financial Highlights: Second Quarter 2021

  • Revenues for the quarter ended June 30, 2021 increased to $275.1 million compared to $222.5 million for the second quarter of 2020, an increase of 23.6% on a reported basis and 22.3% on a constant currency basis from the second quarter of 2020. Revenues increased by 5.2% sequentially on a reported basis and on a constant currency basis, from the first quarter of 2021.
     Revenues
  Gross Margin
     Three months ended
  Three months ended
Reportable Segments    June 30, 2021     June 30, 2020     March 31, 2021   June 30, 2021   June 30, 2020   March 31, 2021
      (dollars in millions)                  
Insurance   $ 94.7   $ 81.3   $ 91.1   37.3  %   27.3  %   38.5  %
Healthcare     28.3     25.0     30.3   37.4  %   21.4  %   42.5  %
Emerging Business     40.7     34.5     37.7   45.1  %   35.1  %   44.7  %
Analytics     111.4     81.7     102.3   36.0  %   29.9  %   37.0  %
Total Revenues, net    $ 275.1   $ 222.5   $ 261.4   37.9  %   28.8  %   39.2  %
  • Operating income margin for the quarter ended June 30, 2021 was 13.0%, compared to an operating income margin of 4.4% for the second quarter of 2020 and operating income margin of 15.9% for the first quarter of 2021. Adjusted operating income margin for the quarter ended June 30, 2021 was 17.9% compared to 9.4% for the second quarter of 2020 and 20.2% for the first quarter of 2021.

  • Diluted earnings per share for the quarter ended June 30, 2021 was $0.81 compared to $0.24 for the second quarter of 2020 and $0.93 for the first quarter of 2021. Adjusted diluted earnings per share for the quarter ended June 30, 2021 was $1.14 compared to $0.53 for the second quarter of 2020 and $1.18 for the first quarter of 2021.

Business Highlights: Second Quarter 2021

  • Won 16 new clients in the second quarter of 2021, with 10 in our operations management businesses and six in Analytics.
  • Joined the United Nations Global Compact as a Participant, acknowledging our commitment to operate in accordance with universal principles of corporate sustainability in human rights, labor, environment and anti-corruption.
  • Positioned as a Leader for the seventh consecutive year in the Everest Group Property & Casualty Insurance BPS PEAK Matrix® 2021.
  • Recognized as a Leader in three categories in the ISG Provider Lens™ Insurance BPO Services, U.S. 2020: Life & Retirement Services, Property & Casualty Insurance Services, and Third-Party Administration (TPA).
  • Recognized as a Leader in all six report categories in the NelsonHall NEAT report for Healthcare Payer BPS 2021.
  • Expanded our collaboration with Amazon.com, Inc.’s Amazon Web Service to help EXL clients operationalize AI, Analytics, Automation, and Cloud technologies within enterprise business processes.

2021 Guidance
Based on current visibility, and a U.S. Dollar to Indian Rupee exchange rate of 74.5, British Pound to U.S. Dollar exchange rate of 1.37, U.S. Dollar to the Philippine Peso exchange rate of 50.0 and all other currencies at current exchange rates, we are providing the following guidance:

  • Revenue of $1.08 billion to $1.10 billion, representing an increase of 13% to 15% on a reported basis, and 12% to 14% on a constant currency basis, from 2020.

  • Adjusted diluted earnings per share of $4.30 to $4.50, representing an increase of 22% to 27% from 2020.

Conference Call

ExlService Holdings, Inc. will host a conference call on Thursday, July 29, 2021 at 10:00 A.M. ET to discuss the Company’s quarterly operating and financial results. The conference call will be available live via the internet by accessing the investor relations section of EXL’s website at ir.exlservice.com, where an accompanying investor-friendly spreadsheet of historical operating and financial data can also be accessed. Please access the website at least fifteen minutes prior to the call to register, download and install any necessary audio software.

To listen to the conference call via phone, please dial 1-877-303-6384, or if dialing internationally, 1-224-357-2191 and an operator will assist you. For those who cannot access the live broadcast, a replay will be available on the EXL website ir.exlservice.com for a period of twelve months.

About ExlService Holdings, Inc.

EXL (NASDAQ: EXLS) is a leading operations management and analytics company that helps our clients build and grow sustainable businesses. By orchestrating our domain expertise, data, analytics and digital technology, we look deeper to design and manage agile, customer-centric operating models to improve global operations, drive profitability, enhance customer satisfaction, increase data-driven insights, and manage risk and compliance. Headquartered in New York, EXL has approximately 33,000 professionals in locations throughout the United States, the United Kingdom, Europe, India, the Philippines, Colombia, Canada, Australia and South Africa. EXL serves customers in multiple industries including insurance, healthcare, banking and financial services, utilities, travel, transportation and logistics, media and retail, among others. For more information, visit www.exlservice.com.

Cautionary Statement Regarding Forward-Looking Statements This press release contains forward-looking statements. You should not place undue reliance on those statements because they are subject to numerous uncertainties and factors relating to EXL's operations and business environment, all of which are difficult to predict and many of which are beyond EXL’s control. Forward-looking statements include information concerning EXL’s possible or assumed future results of operations, including descriptions of its business strategy. These statements may include words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. These statements are based on assumptions that we have made in light of management's experience in the industry as well as its perceptions of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. You should understand that these statements are not guarantees of performance or results. They involve known and unknown risks, uncertainties and assumptions. Although EXL believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect EXL’s actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. These factors, which include our ability to successfully close and integrate strategic acquisitions, our ability to respond to and manage public health crises, including the outbreak and continued effects of the coronavirus (COVID-19) pandemic, are discussed in more detail in EXL’s filings with the Securities and Exchange Commission, including EXL’s Quarterly Report on Form 10-Q and Annual Report on Form 10-K. These risks could cause actual results to differ materially from those implied by forward-looking statements in this release. You should keep in mind that any forward-looking statement made herein, or elsewhere, speaks only as of the date on which it is made. New risks and uncertainties come up from time to time, and it is impossible to predict these events or how they may affect EXL. EXL has no obligation to update any forward-looking statements after the date hereof, except as required by federal securities laws.

EXLSERVICE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except share and per share amounts)

  Three months ended June 30,   Six months ended June 30,
  2021   2020   2021   2020
Revenues, net $ 275,064     $ 222,473     $ 536,479     $ 468,463  
Cost of revenues(1) 170,701     158,401     329,522     321,057  
Gross profit(1) 104,363     64,072     206,957     147,406  
Operating expenses:              
General and administrative expenses 36,499     28,750     67,202     57,691  
Selling and marketing expenses 19,724     13,051     37,959     27,507  
Depreciation and amortization expense 12,310     12,405     24,411     24,855  
Total operating expenses 68,533     54,206     129,572     110,053  
Income from operations 35,830      9,866     77,385     37,353  
Foreign exchange gain, net 1,353     1,359     1,787     2,736  
Interest expense (2,520 )   (2,883 )   (4,994 )   (5,955 )
Other income, net 2,215     4,225     3,625     6,754  
Income before income tax expense and earnings from equity affiliates 36,878     12,567     77,803     40,888  
Income tax expense 8,865     4,072     17,823     9,927  
Income before earnings from equity affiliates 28,013     8,495     59,980     30,961  
Gain / (Loss) from equity-method investment 8     (66 )   (28 )   (121 )
Net income attributable to ExlService Holdings, Inc. stockholders $ 28,021     $ 8,429      $ 59,952     $ 30,840  
Earnings per share attributable to ExlService Holdings, Inc. stockholders:              
Basic $ 0.83     $ 0.24     $ 1.78     $ 0.90  
Diluted $ 0.81     $ 0.24     $ 1.75     $ 0.89  
Weighted-average number of shares used in computing earnings per share attributable to ExlService Holdings Inc. stockholders:              
Basic 33,571,074     34,486,202     33,652,146     34,443,884  
Diluted 34,389,768     34,597,688     34,353,593     34,659,146  

(1) Exclusive of depreciation and amortization expense.

EXLSERVICE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share amounts)

    As of
    June 30, 2021   December 31, 2020
         
Assets        
Current assets:        
Cash and cash equivalents   $ 150,211     $ 218,530  
Short-term investments   144,533     184,286  
Restricted cash   5,065     4,690  
Accounts receivable, net   182,111     147,635  
Prepaid expenses   12,060     11,344  
Advance income tax, net   13,567     5,684  
Other current assets   33,615     37,109  
Total current assets   541,162     609,278  
Property and equipment, net   86,511     92,875  
Operating lease right-of-use assets   83,280     91,918  
Restricted cash   2,260     2,299  
Deferred tax assets, net   24,132     7,749  
Intangible assets, net   52,853     59,594  
Goodwill   348,747     349,088  
Other assets   27,472     32,099  
Investment in equity affiliate   2,929     2,957  
Total assets   $ 1,169,346     $ 1,247,857  
Liabilities and stockholders’ equity        
Current liabilities:        
Accounts payable   $ 3,877     $ 6,992  
Current portion of long-term borrowings   15,000     25,000  
Deferred revenue   12,017     32,649  
Accrued employee costs   70,496     67,645  
Accrued expenses and other current liabilities   76,424     66,410  
Current portion of operating lease liabilities   18,039     18,894  
Income taxes payable, net   11,256     3,488  
Total current liabilities   207,109      221,078  
Long-term borrowings, less current portion   139,432     201,961  
Operating lease liabilities, less current portion   76,518     84,874  
Income taxes payable   1,790     1,790  
Deferred tax liabilities, net   902     847  
Other non-current liabilities   15,581     18,135  
Total liabilities   441,332     528,685  
Commitments and contingencies        
Preferred stock, $0.001 par value; 15,000,000 shares authorized, none issued        
ExlService Holdings, Inc. Stockholders’ equity:        
Common stock, $0.001 par value; 100,000,000 shares authorized, 39,283,853 shares issued and 33,249,709 shares outstanding as of June 30, 2021 and 38,968,052 shares issued and 33,559,434 shares outstanding as of December 31, 2020   39     39  
Additional paid-in capital   439,051     420,976  
Retained earnings   701,331     641,379  
Accumulated other comprehensive loss   (86,745 )   (74,984 )
Total including shares held in treasury   1,053,676     987,410  
Less: 6,034,144 shares as of June 30, 2021 and 5,408,618 shares as of December 31, 2020, held in treasury, at cost   (325,662 )   (268,238 )
Stockholders’ equity   728,014     719,172  
Total equity   728,014     719,172  
Total liabilities and stockholders’ equity   $ 1,169,346     $ 1,247,857  

EXLSERVICE HOLDINGS, INC.

Reconciliation of Adjusted Financial Measures to GAAP Measures

In addition to its reported operating results in accordance with U.S. generally accepted accounting principles (GAAP), EXL has included in this release certain financial measures that are considered non-GAAP financial measures, including the following:

(i) Adjusted operating income and adjusted operating income margin;
(ii) Adjusted EBITDA and adjusted EBITDA margin;
(iii) Adjusted net income and adjusted diluted earnings per share; and
(iv) Revenue growth on a constant currency basis.

These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles, should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. Accordingly, the financial results calculated in accordance with GAAP and reconciliations from those financial statements should be carefully evaluated. EXL believes that providing these non-GAAP financial measures may help investors better understand EXL’s underlying financial performance. Management also believes that these non-GAAP financial measures, when read in conjunction with EXL’s reported results, can provide useful supplemental information for investors analyzing period-to-period comparisons of the Company’s results and comparisons of the Company’s results with the results of other companies. Additionally, management considers some of these non-GAAP financial measures to determine variable compensation of its employees. The Company believes that it is unreasonably difficult to provide its earnings per share financial guidance in accordance with GAAP, or a qualitative reconciliation thereof, for a number of reasons, including, without limitation, the Company’s inability to predict its future stock-based compensation expense under ASC Topic 718, the amortization of intangibles associated with further acquisitions and the currency fluctuations and associated tax impacts. As such, the Company presents guidance with respect to adjusted diluted earnings per share. The Company also incurs significant non-cash charges for depreciation that may not be indicative of the Company’s ability to generate cash flow.

EXL non-GAAP financial measures exclude, where applicable, stock-based compensation expense, amortization of acquisition-related intangible assets, impairment charges of acquired long-lived and intangible assets including goodwill, provision for litigation settlement, non-cash interest expense on convertible senior notes, restructuring charges and other acquisition-related expenses or benefits. Acquisition-related expenses or benefits include, changes in the fair value of earn-out consideration liabilities, external deal costs, integration expenses, direct and incremental travel costs and non-recurring benefits. In addition to excluding the above items, our adjusted net income and adjusted diluted EPS also excludes the effect of any non-recurring other tax adjustments and income tax impact of the above pre-tax items, as applicable. The income tax impact of each item is calculated by applying the statutory rate and local tax regulations in the jurisdiction in which the item was incurred.

A limitation of using non-GAAP financial measures versus financial measures calculated in accordance with GAAP is that non-GAAP financial measures do not reflect all of the amounts associated with our operating results as determined in accordance with GAAP and exclude costs that are recurring, namely stock-based compensation and amortization of acquisition-related intangible assets. EXL compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP financial measures to allow investors to evaluate such non-GAAP financial measures.

The information provided on a constant currency basis reflects a comparison of current period results translated at the prior period currency rates. This information is provided because EXL believes that it provides useful comparative incremental information to investors regarding EXL’s true operating performance. EXL’s primary exchange rate exposure is with the Indian Rupee, the U.K. pound sterling and the Philippine Peso. The average exchange rate of the U.S. Dollar against the Indian Rupee decreased from 75.41 during the quarter ended June 30, 2020 to 73.67 during the quarter ended June 30, 2021, representing a depreciation of 2.3%. The average exchange rate of the U.S. Dollar against the Philippine Peso decreased from 50.28 during the quarter ended June 30, 2020 to 48.20 during the quarter ended June 30, 2021, representing a depreciation of 4.1%. The average exchange rate of the British Pound against the U.S. Dollar increased from 1.24 during the quarter ended June 30, 2020 to 1.40 during the quarter ended June 30, 2021, representing a depreciation of 13.0%.

The following table shows the reconciliation of these non-GAAP financial measures for the three months ended June 30, 2021 and June 30, 2020, and the three months ended March 31, 2021:

Reconciliation of Adjusted Operating Income and Adjusted EBITDA
(Amounts in thousands)

    Three months ended
    June 30,   March 31,
    2021   2020   2021
Net Income (GAAP)   $ 28,021     $ 8,429     $ 31,931  
add: Income tax expense   8,865     4,072     8,958  
add/(subtract): Interest expense, foreign exchange gain, net, loss from equity-method investment and other income, net   (1,056 )   (2,635 )   666  
Income from operations (GAAP)   $ 35,830     $ 9,866     $ 41,555  
add: Stock-based compensation expense   10,070     7,726     7,832  
add: Amortization of acquisition-related intangibles   3,397     3,430     3,361  
Adjusted operating income (Non-GAAP)   $ 49,297     $ 21,022     $ 52,748  
Adjusted operating income margin as a % of Revenues (Non-GAAP)   17.9   9.4   20.2 %
add: Depreciation   8,913     8,975     8,740  
Adjusted EBITDA (Non-GAAP)   $ 58,210     $ 29,997     $ 61,488  
Adjusted EBITDA margin as a % of revenue (Non-GAAP)   21.2 %   13.5 %   23.5 %

Reconciliation of Adjusted Net Income and Adjusted Diluted Earnings Per Share
(Amounts in thousands, except per share data)

    Three months ended
    June 30,   March 31,
    2021   2020   2021
Net income (GAAP)   $ 28,021     $ 8,429     $ 31,931  
add: Stock-based compensation expense   10,070     7,726     7,832  
add: Amortization of acquisition-related intangibles   3,397     3,430     3,361  
add: Non-cash interest expense related to convertible senior notes   691     654     673  
add: Non-recurring tax expense (a)       1,320      
subtract: Other non-recurring benefits (b)       (556 )    
subtract: Tax impact on stock-based compensation expense (c)   (2,074 )   (1,662 )   (2,358 )
subtract: Tax impact on amortization of acquisition-related intangibles   (766 )   (880 )   (758 )
subtract: Tax impact on non-cash interest expense related to convertible senior notes   (165 )   (162 )   (162 )
add: Tax impact on other non-recurring benefits       137      
Adjusted net income (Non-GAAP)   $ 39,174     $ 18,436     $ 40,519  
Adjusted diluted earnings per share (Non-GAAP)   $ 1.14     $ 0.53     $ 1.18  

(a) To exclude non-recurring tax expense related to certain deferred tax assets and liabilities.
(b) To exclude non-recurring benefits related to wind down of the Health Integrated business.
(c) Tax impact includes $97 and $23 during the three months ended June 30, 2021 and 2020 respectively, and $931 during the three months ended March 31, 2021, related to discrete benefits recognized in income tax expense on adoption of ASU No. 2016-09, Compensation - Stock Compensation.

Contact: Steven N. Barlow
Vice President, Investor Relations
(917) 596-7684
ir@exlservice.com


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