GlobeNewswire Inc | Apr 29, 2021 06:00AM EDT

April 29, 2021

2021 First Quarter Revenues of $261.4 Million, up 6.3% year-over-year

Q1 Diluted Earnings Per Share (GAAP) of $0.93, up from $0.65 in Q1 of 2020

Q1 Adjusted Diluted Earnings Per Share (Non-GAAP)(1) of $1.18, up from $0.81 in Q1 of 2020

NEW YORK, April 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 March 31, 2021.

Rohit Kapoor, Vice Chairman and Chief Executive Officer, said, EXL had a strong start to the year with first quarter revenue of $261.4 million. Analytics growth accelerated with a 10.7% revenue increase from the first quarter of 2020. Adjusted diluted earnings per share for the quarter was $1.18, a 46% increase year-over-year. Our data-led value creation framework is resonating well in the market and we are driving revenue expansion with our existing clients as well as signing new logos. While we are in a favorable demand environment with a strong pipeline of opportunities, we also face significant pandemic related challenges in our delivery geographies, particularly in India and the Philippines.

Maurizio Nicolelli, Chief Financial Officer, said, Based on our strong first quarter financial results, the growth momentum in the business and an expectation of continued fulfillment levels, we are increasing our revenue guidance for 2021 to be in the range of $1.04 billion to $1.07 billion, representing a 8% to 11% increase year-over-year on a constant currency basis, from 2020. Our adjusted diluted earnings per share guidance for 2021 is increasing to $4.00 to $4.30, representing a 13% to 22% increase over the prior year.

-- 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: First Quarter 2021

-- Revenues for the quarter ended March 31, 2021 increased to $261.4 million compared to $246.0 million for the first quarter of 2020, an increase of 6.3% on a reported basis and 5.5% on a constant currency basis from the first quarter of 2020. Revenues increased by 5.0% sequentially on a reported basis and 4.7% on a constant currency basis, from the fourth quarter of 2020.

Revenues Gross Margin Three months ended Three months endedReportable March 31, March 31, March 31, March 31,Segments 2021 2020 2021 2020 (dollars in millions) Insurance $ 91.1 $ 83.7 38.5 % 29.6 %Healthcare 30.3 27.0 42.5 % 27.5 %Emerging 37.7 42.8 44.7 % 40.5 %BusinessAnalytics 102.3 92.5 37.0 % 36.6 %Total Revenues, $ 261.4 $ 246.0 39.2 % 33.9 %net

-- Operating income margin for the quarter ended March 31, 2021 was 15.9%, compared to an operating income margin of 11.2% for the first quarter of 2020 and operating income margin of 15.4% for the fourth quarter of 2020. Adjusted operating income margin for the quarter ended March 31, 2021 was 20.2% compared to 14.8% for the first quarter of 2020 and 19.7% for the fourth quarter of 2020. -- Diluted earnings per share for the quarter ended March 31, 2021 was $0.93 compared to $0.65 for the first quarter of 2020 and $0.94 for the fourth quarter of 2020. Adjusted diluted earnings per share for the quarter ended March 31, 2021 was $1.18 compared to $0.81 for the first quarter of 2020 and $1.14 for the fourth quarter of 2020.

Business Highlights: First Quarter 2021

-- Won 14 new clients in the first quarter of 2021, with five in our operations management businesses and nine in Analytics.

-- Released LDS 2.0, EXLs digital new business and underwriting solution for life and annuities insurers which includes a robust suite of automation and configuration tools.

-- Released LifePRO 20, EXLs innovative digital policy administration platform that supports end-to-end digital insurance policy administration lifecycle.

-- Recognized as a Visionary in the February 2021 Gartner Magic Quadrant for Data and Analytics Service Providers(2)

-- Included in The Booming 15 lists in the ISG Index, for the 13th quarter in a row.

Post-First Quarter Highlight

-- As previously announced, subsequent to the first quarter of 2021, on April 19, 2021, Pavan Bagai, President and Chief Operating Officer, notified us that he will retire from the company effective October 1, 2021. Mr. Bagais responsibilities will be transitioned in an orderly manner to other members of EXLs executive team over the course of the next several months.

2021 Guidance

Based on current visibility, and a U.S. Dollar to Indian Rupee exchange rate of 74.50, British Pound to U.S. Dollar exchange rate of 1.38, U.S. Dollar to the Philippine Peso exchange rate of 48.50 and all other currencies at current exchange rates, we are providing the following 2021 guidance:

-- Revenue of $1.04 billion to $1.07 billion, representing an increase of 9% to 12% on a reported basis, and 8% to 11% on a constant currency basis, from 2020.

-- Adjusted diluted earnings per share of $4.00 to $4.30, representing an increase of 13% to 22% from 2020.

Conference Call

ExlService Holdings, Inc. will host a conference call on Thursday, April 29, 2021 at 10:00 A.M. ET to discuss the Companys quarterly operating and financial results. The conference call will be available live via the internet by accessing the investor relations section of EXLs 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.

(2)Disclaimer: Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartners research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

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 31,600 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 StatementsThis 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 EXLs control. Forward-looking statements include information concerning EXLs 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 EXLs 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 EXLs filings with the Securities and Exchange Commission, including EXLs 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 March 31, 2021 2020Revenues, net $ 261,415 $ 245,990 Cost of revenues^(1) 158,821 162,656 Gross profit^(1) 102,594 83,334 Operating expenses: General and administrative expenses 30,703 28,941 Selling and marketing expenses 18,235 14,456 Depreciation and amortization expense 12,101 12,450 Total operating expenses 61,039 55,847 Income from operations 41,555 27,487 Foreign exchange gain, net 434 1,377 Interest expense (2,474 ) (3,072 )Other income, net 1,410 2,529 Income before income tax expense and earnings 40,925 28,321 from equity affiliatesIncome tax expense 8,958 5,855 Income before earnings from equity affiliates 31,967 22,466 Loss from equity-method investment 36 55 Net income attributable to ExlService $ 31,931 $ 22,411 Holdings, Inc. stockholdersEarnings per share attributable to ExlService Holdings, Inc. stockholders:Basic $ 0.95 $ 0.65 Diluted $ 0.93 $ 0.65 Weighted-average number of shares used incomputing earnings per share attributable to ExlService Holdings Inc. stockholders:Basic 33,734,118 34,401,565 Diluted 34,318,318 34,720,603

(1) Exclusive of depreciation and amortization expense.

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

As of March 31, December 31, 2021 2020 Assets Current assets: Cash and cash equivalents $ 177,121 $ 218,530 Short-term investments 198,721 184,286 Restricted cash 5,295 4,690 Accounts receivable, net 159,296 147,635 Prepaid expenses 12,709 11,344 Advance income tax, net 7,580 5,684 Other current assets 35,828 37,109 Total current assets 596,550 609,278 Property and equipment, net 90,153 92,875 Operating lease right-of-use assets 88,777 91,918 Restricted cash 2,298 2,299 Deferred tax assets, net 10,657 7,749 Intangible assets, net 56,243 59,594 Goodwill 349,098 349,088 Other assets 29,669 32,099 Investment in equity affiliate 2,921 2,957 Total assets $ 1,226,366 $ 1,247,857 Liabilities and stockholders? equity Current liabilities: Accounts payable $ 8,304 $ 6,992 Current portion of long-term borrowings 25,000 25,000 Deferred revenue 14,764 32,649 Accrued employee costs 43,492 67,645 Accrued expenses and other current liabilities 73,241 66,410 Current portion of operating lease liabilities 18,476 18,894 Income taxes payable, net 14,443 3,488 Total current liabilities 197,720 221,078 Long-term borrowings, less current portion 202,687 201,961 Operating lease liabilities, less current 81,948 84,874 portionIncome taxes payable 1,790 1,790 Deferred tax liabilities, net 877 847 Other non-current liabilities 15,119 18,135 Total liabilities 500,141 528,685 Commitments and contingencies Preferred stock, $0.001 par value; 15,000,000 ? ? shares authorized, none issuedExlService Holdings, Inc. Stockholders? equity: Common stock, $0.001 par value; 100,000,000shares authorized, 39,273,989 shares issued and33,526,889 shares outstanding as of March 31, 39 39 2021 and 38,968,052 shares issued and33,559,434 shares outstanding as of December31, 2020Additional paid-in capital 428,882 420,976 Retained earnings 673,310 641,379 Accumulated other comprehensive loss (78,753 ) (74,984 )Total including shares held in treasury 1,023,478 987,410 Less: 5,747,100 shares as of March 31, 2021 and5,408,618 shares as of December 31, 2020, (297,253 ) (268,238 )heldin treasury, at costStockholders? equity 726,225 719,172 Total equity 726,225 719,172 Total liabilities and stockholders? equity $ 1,226,366 $ 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 EXLs underlying financial performance. Management also believes that these non-GAAP financial measures, when read in conjunction with EXLs reported results, can provide useful supplemental information for investors analyzing period-to-period comparisons of the Companys results and comparisons of the Companys 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 Companys 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 Companys 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 any non-recurring 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 EXLs true operating performance. EXLs 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 increased from 73.08 during the quarter ended March 31, 2020 to 73.17 during the quarter ended March 31, 2021, representing an appreciation of 0.1%. The average exchange rate of the U.S. Dollar against the Philippine Peso decreased from 50.83 during the quarter ended March 31, 2020 to 48.39 during the quarter ended March 31, 2021, representing a depreciation of 4.8%. The average exchange rate of the British Pound against the U.S. Dollar increased from 1.28 during the quarter ended March 31, 2020 to 1.38 during the quarter ended March 31, 2021, representing a depreciation of 8.2%.

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

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

Three months ended March 31, December 31, 2021 2020 2020Net Income (GAAP) $ 31,931 $ 22,411 $ 32,218 add: Income tax expense 8,958 5,855 7,209 add/(subtract): Interest expense,foreign exchange gain, net, loss 666 (779 ) (1,164 )from equity-method investment andother income, netIncome from operations (GAAP) $ 41,555 $ 27,487 $ 38,263 add: Stock-based compensation 7,832 4,778 7,385 expenseadd: Amortization of 3,361 4,154 3,415 acquisition-related intangiblesAdjusted operating income $ 52,748 $ 36,419 $ 49,063 (Non-GAAP)Adjusted operating income margin 20.2 % 14.8 % 19.7 %as a % of Revenues (Non-GAAP)add: Depreciation 8,740 8,296 9,767 Adjusted EBITDA (Non-GAAP) $ 61,488 $ 44,715 $ 58,830 Adjusted EBITDA margin as a % of 23.5 % 18.2 % 23.6 %revenue (Non-GAAP)

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

Three months ended March 31, December 31, 2021 2020 2020Net income (GAAP) $ 31,931 $ 22,411 $ 32,218 add: Stock-based compensation expense 7,832 4,778 7,385 add: Amortization of acquisition-related 3,361 4,154 3,415 intangiblesadd: Non-cash interest expense related 673 635 673 to convertible senior notessubtract: Effect of non-recurring tax ? ? (1,340 )benefits (a)subtract: Tax impact on stock-based (2,358 ) (2,733 ) (2,099 )compensation expense (b)subtract: Tax impact on amortization of (758 ) (897 ) (798 )acquisition-related intangiblessubtract: Tax impact on non-cashinterest expense related to convertible (162 ) (156 ) (168 )senior notesAdjusted net income (Non-GAAP) $ 40,519 $ 28,192 $ 39,286 Adjusted diluted earnings per share $ 1.18 $ 0.81 $ 1.14 (Non-GAAP)

(a) To exclude non-recurring tax benefits related to certain deferred tax assets and liabilities. Tax impact includes $931 and $1,799 during the three months ended March 31,(b) 2021 and 2020 respectively, and $504 during the three months ended December 31, 2020, related to discrete benefits recognized in income tax expense on adoption of ASU No. 2016-09, Compensation - Stock Compensation.

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