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

July 29, 2021

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 endedReportable June June March June 30, June 30, March 31,Segments 30, 2021 30, 31, 2021 2020 2021 2020 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 40.7 34.5 37.7 45.1 % 35.1 % 44.7 %BusinessAnalytics 111.4 81.7 102.3 36.0 % 29.9 % 37.0 %TotalRevenues, $ 275.1 $ 222.5 $ 261.4 37.9 % 28.8 % 39.2 %net

-- 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 GuidanceBased 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 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.

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 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 June 30, Six months ended June 30, 2021 2020 2021 2020Revenues, net $ 275,064 $ 222,473 $ 536,479 $ 468,463 Cost of revenues 170,701 158,401 329,522 321,057 (1)Gross profit(1) 104,363 64,072 206,957 147,406 Operating expenses:General andadministrative 36,499 28,750 67,202 57,691 expensesSelling andmarketing 19,724 13,051 37,959 27,507 expensesDepreciation andamortization 12,310 12,405 24,411 24,855 expenseTotal operating 68,533 54,206 129,572 110,053 expensesIncome from 35,830 9,866 77,385 37,353 operationsForeign exchange 1,353 1,359 1,787 2,736 gain, netInterest expense (2,520 ) (2,883 ) (4,994 ) (5,955 )Other income, 2,215 4,225 3,625 6,754 netIncome beforeincome taxexpense and 36,878 12,567 77,803 40,888 earnings fromequityaffiliatesIncome tax 8,865 4,072 17,823 9,927 expenseIncome beforeearnings from 28,013 8,495 59,980 30,961 equityaffiliatesGain / (Loss)from 8 (66 ) (28 ) (121 )equity-methodinvestmentNet incomeattributable toExlService $ 28,021 $ 8,429 $ 59,952 $ 30,840 Holdings, Inc.stockholdersEarnings pershareattributable to ExlServiceHoldings, Inc.stockholders:Basic $ 0.83 $ 0.24 $ 1.78 $ 0.90 Diluted $ 0.81 $ 0.24 $ 1.75 $ 0.89 Weighted-averagenumber of sharesused incomputingearnings per shareattributable toExlServiceHoldings 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 76,518 84,874 portionIncome 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 issuedExlService Holdings, Inc. Stockholders? equity: Common stock, $0.001 par value; 100,000,000shares authorized, 39,283,853 shares issued and33,249,709 shares outstanding as of June 30, 39 39 2021 and 38,968,052 shares issued and33,559,434 shares outstanding as of December31, 2020Additional 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 and5,408,618 shares as of December 31, 2020, (325,662 ) (268,238 )heldin treasury, at costStockholders? 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 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 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 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 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 2021Net Income (GAAP) $ 28,021 $ 8,429 $ 31,931 add: Income tax expense 8,865 4,072 8,958 add/(subtract): Interestexpense, foreign exchange gain, (1,056 ) (2,635 ) 666 net, loss from equity-methodinvestment and other income, netIncome from operations (GAAP) $ 35,830 $ 9,866 $ 41,555 add: Stock-based compensation 10,070 7,726 7,832 expenseadd: Amortization of 3,397 3,430 3,361 acquisition-related intangiblesAdjusted operating income $ 49,297 $ 21,022 $ 52,748 (Non-GAAP)Adjusted operating income margin 17.9 % 9.4 % 20.2 %as a % of Revenues (Non-GAAP)add: Depreciation 8,913 8,975 8,740 Adjusted EBITDA (Non-GAAP) $ 58,210 $ 29,997 $ 61,488 Adjusted EBITDA margin as a % of 21.2 % 13.5 % 23.5 %revenue (Non-GAAP)

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

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