ExlService Holdings, Inc.
Oct 27, 2016

EXL Reports 2016 Third Quarter Results

 

2016 Third Quarter Revenues of $171.2 Million, up 4.7% year over year

 

Diluted EPS (GAAP) of $0.46, up from $0.44 in Q3 of 2015

 

 Adjusted Diluted EPS (Non-GAAP) of $0.61, up from $0.58 in Q3 of 2015

 

NEW YORK, Oct. 27, 2016 (GLOBE NEWSWIRE) -- ExlService Holdings, Inc. (NASDAQ:EXLS), a leading operations management and analytics company, today announced its financial results for the quarter ended September 30, 2016.

 

Rohit Kapoor, Vice Chairman and CEO, commented, "While earnings growth in the third quarter was on track, our revenues were primarily impacted by softness in our consulting and platform businesses.  Our core businesses in Operations Management and Analytics are fundamentally strong with growth in Insurance, Healthcare and Banking & Financial Services.

 

"We continue to invest in our fast growing Analytics business by expanding our capabilities and market coverage. We closed two strategic acquisitions in our Analytics segment. In September we announced the acquisition of IQR, a provider of marketing analytics solutions for the banking industry. IQR strengthens our leading position in banking analytics through its expertise and relationships with US super-regional banks and credit unions. Today, we announced the acquisition of Datasource Consulting LLC, a provider of enterprise data management and business intelligence solutions. We are excited to have both companies join EXL."

 

Our third quarter revenue was $171.2 million, an increase of 4.7% year over year and 6.2% in constant currency.  Our diluted EPS was $0.46, and our adjusted diluted EPS was $0.61, up 4.5% and 5.2%, respectively, year over year.

 

Vishal Chhibbar, CFO, commented, "We are updating our revenue guidance for 2016 from $691 million - $703 million to $680 million - $688 million.  This represents an annual revenue growth of 10%-11% on a constant currency basis. This update reflects the impact of lower discretionary spending in our consulting business and lower revenue in our platform businesses due to softness in these markets, which has been partially offset by projected revenue from recent acquisitions. We are narrowing our adjusted diluted EPS guidance for 2016 to $2.30 - $2.35 from $2.25 - $2.35. This represents an annual increase of 13% to 16%."

 

Financial Highlights: Third Quarter 2016

 

Our business is divided into two reporting segments: Operations Management and Analytics. Reconciliations of adjusted (non-GAAP) financial measures to GAAP measures are included at the end of this release.

 

 

Business Highlights: Third Quarter 2016

 

 

Post-Third Quarter Highlight

 

 

2016 Guidance

 

Based on current visibility and a U.S. dollar to Indian rupee exchange rate of 67.0, British Pound to U.S. Dollar exchange rate at 1.23, U.S. dollar to the Philippine Peso exchange rate of 48.5 and all other currencies at current exchange rates, the Company is providing the following guidance for the calendar year 2016:

 

 

Conference Call

 

ExlService Holdings, Inc. will host a conference call on Thursday, October 27, 2016 at 8:00 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.

 

About ExlService Holdings, Inc.

 

EXL (NASDAQ:EXLS) is a leading operations management and analytics company that helps businesses enhance growth and profitability in the face of relentless competition and continuous disruption. Using our proprietary award-winning Business EXLerator Framework™, which integrates analytics, automation, benchmarking, BPO, consulting, industry best practices and technology platforms, EXL looks deeper to help companies improve global operations, enhance data-driven insights, increase customer satisfaction, and manage risk and compliance. EXL serves the insurance, healthcare, banking and financial services, utilities, travel, transportation and logistics industries. Headquartered in New York, New York, EXL has more than 24,000 professionals in locations throughout the United States, Europe, Asia (primarily India and Philippines), Latin America, Australia and South Africa. For more information, visit www.exlservice.com.

 

Continuing 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 are discussed in more detail in EXL's filings with the Securities and Exchange Commission, including EXL's Annual Report on Form 10-K for the year ended December 31, 2015. 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

(In thousands, except share and per share amounts)
(Unaudited)
 
  Three months ended September 30,   Nine months ended September 30,
  2016   2015   2016   2015
Revenues, net $ 171,200     $ 163,503     $ 508,714     $ 462,634  
Cost of revenues (exclusive of depreciation and amortization) 111,767     103,198     332,172     296,801  
Gross profit 59,433     60,305     176,542     165,833  
Operating expenses:              
General and administrative expenses 21,854     18,817     63,620     57,428  
Selling and marketing expenses 11,623     12,682     37,875     35,769  
Depreciation and amortization 8,597     8,057     25,000     23,171  
Total operating expenses 42,074     39,556     126,495     116,368  
Income from operations 17,359     20,749     50,047     49,465  
Foreign exchange gain 1,741     191     3,573     2,347  
Other income, net 2,596     1,787     11,174     4,300  
Income before income taxes 21,696     22,727     64,794     56,112  
Income tax expense 5,646     7,565     18,549     19,309  
Net income $ 16,050     $ 15,162     $ 46,245     $ 36,803  
Earnings per share:              
Basic $ 0.48     $ 0.46     $ 1.38     $ 1.10  
Diluted $ 0.46     $ 0.44     $ 1.34     $ 1.08  
Weighted-average number of shares used in computing earnings per share:              
Basic 33,624,401     33,307,312     33,542,258     33,320,477  
Diluted 34,675,485     34,180,635     34,512,815     34,147,120  

 

 

 

EXLSERVICE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)
 
  September 30, 2016   December 31, 2015
  (Unaudited)    
Assets      
Current assets:      
Cash and cash equivalents $ 98,374     $ 205,323  
Short-term investments 115,637     13,676  
Restricted cash 2,256     1,872  
Accounts receivable, net 109,086     92,650  
Prepaid expenses 6,802     8,027  
Advance income tax, net 7,110     2,432  
Other current assets 18,716     15,219  
Total current assets 357,981     339,199  
Fixed assets, net 49,006     47,991  
Restricted cash 3,380     3,319  
Deferred tax assets, net 7,073     13,749  
Intangible assets, net 50,326     52,733  
Goodwill 177,093     171,535  
Other assets 24,163     22,257  
Total assets $ 669,022     $ 650,783  
Liabilities and Equity      
Current liabilities:      
Accounts payable $ 3,395     $ 6,401  
Short-term borrowings 5,000     10,000  
Deferred revenue 9,730     11,518  
Accrued employee cost 40,660     44,526  
Accrued expenses and other current liabilities 38,362     34,250  
Current portion of capital lease obligations 237     384  
Total current liabilities 97,384     107,079  
Long term borrowings 40,000     60,000  
Capital lease obligations, less current portion 214     278  
Non-current liabilities 13,205     17,655  
Total liabilities 150,803     185,012  
Commitments and contingencies      
Preferred stock, $0.001 par value; 15,000,000 shares authorized, none issued      
Stockholders' equity:      
Common stock, $0.001 par value; 100,000,000 shares authorized, 35,532,329 shares issued and 33,523,371 shares outstanding as of September 30, 2016 and 34,781,201 shares issued and 33,091,223 shares outstanding as of December 31, 2015 36     35  
Additional paid-in-capital 275,020     254,052  
Retained earnings 367,234     320,989  
Accumulated other comprehensive loss (66,924 )   (67,325 )
Total including shares held in treasury 575,366     507,751  
Less: 2,008,958 shares as of September 30, 2016 and 1,689,978 shares as of December 31, 2015, held in treasury, at cost (57,328 )   (42,159 )
ExlService Holdings, Inc. stockholders' equity $ 518,038     $ 465,592  
Non-controlling interest 181     179  
Total equity $ 518,219     $ 465,771  
Total liabilities and equity $ 669,022     $ 650,783  

 

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 adjusted financial measures (adjusted operating income, adjusted operating income margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted diluted earnings per share and information on a constant currency basis) that the Securities and Exchange Commission defines as "non-GAAP financial measures." The adjusted financial measures disclosed by EXL should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from those financial statements should be carefully evaluated. EXL believes that providing these adjusted measures may help investors better understand EXL's underlying financial performance.  Management also believes that these adjusted 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 adjusted financial measures to determine variable compensation of its employees. EXL believes that it is unreasonably difficult to provide its earnings per share financial outlook in accordance with GAAP for a number of reasons including, without limitation, EXL'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. EXL also incurs significant non-cash charges for depreciation that may not be indicative of the Company's ability to generate cash flow.

 

Additionally, EXL provides certain information on a constant currency basis, which reflects a comparison of current period results translated at the prior period currency rates. EXL 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 65.39 during the quarter ended September 30, 2015 to 66.73 during the quarter ended September 30, 2016, representing a depreciation of 2.0%. The average exchange rate of the U.S. dollar against the Philippine peso increased from 46.37 during the quarter ended September 30, 2015 to 47.40 during the quarter ended September 30, 2016, representing a depreciation of 2.2%. The average exchange rate of the British Pound against the U.S. dollar decreased from 1.54 during the quarter ended September 30, 2015 to 1.31 during the quarter ended September 30, 2016, representing a depreciation of 14.9%. This information is provided because EXL believes that it provides useful comparative incremental information to investors regarding EXL's operating performance.

 

The following table shows the reconciliation of these adjusted financial measures from GAAP measures for the three months ended September 30, 2016 and 2015 and for the three months ended June 30, 2016:

 

 

 

Reconciliation of Adjusted Operating Income and Adjusted EBITDA to Net Income

(Amounts in thousands)
 
    Three Months Ended
September 30,
Three Months Ended
June 30,
    2016   2015   2016
Net Income (GAAP)   $ 16,050     $ 15,162     $ 16,375  
add: Income tax provision     5,646       7,565       7,008  
subtract: Other income and foreign exchange gain, net     (4,337 )     (1,978 )     (7,147 )
Income from operations (GAAP)   $ 17,359     $ 20,749     $ 16,236  
add: Stock-based compensation expense (a)     4,483       4,471       4,450  
add: Amortization of acquisition-related intangibles (b)     2,848       2,642       2,717  
Adjusted operating income (Non-GAAP)   $ 24,690     $ 27,862     $ 23,403  
Adjusted operating income margin as a % of Revenues (Non-GAAP)   14.4 %   17.0 %   13.7 %
add: Depreciation     5,749       5,415       5,553  
Adjusted EBITDA (Non-GAAP)   $ 30,439     $ 33,277     $ 28,956  
Adjusted EBITDA margin as a % of Revenues (Non-GAAP)   17.8 %   20.4 %   17.0 %

 

(a)  To exclude stock-based compensation expense under ASC Topic 718.

 

(b)  To exclude amortization of acquisition-related intangibles.

 

 

 

Reconciliation of Adjusted Net Income and Adjusted Diluted Earnings Per Share to Net Income
(Amounts in thousands, except per share data)
 
    Three Months Ended
September 30,
  Three Months Ended
June 30,
      2016       2015       2016  
Net income (GAAP)   $ 16,050     $ 15,162     $ 16,375  
add: Stock-based compensation expense (a)     4,483       4,471       4,450  
add: Amortization of acquisition-related intangibles (b)     2,848       2,642       2,717  
subtract: Tax impact on stock-based compensation expense     (1,561 )     (1,704 )     (1,600 )
subtract: Tax impact on amortization of acquisition-related intangibles     (717 )     (656 )     (734 )
subtract: Changes in fair value of earn-out consideration (net of tax) ©     0       0       (2365 )
Adjusted net income (Non-GAAP)   $ 21,103     $ 19,915     $ 18,843  
Adjusted diluted earnings per share (Non-GAAP)   $ 0.61     $ 0.58     $ 0.55  
                         

 

(a)  To exclude stock-based compensation expense under ASC Topic 718.

 

(b)  To exclude amortization of acquisition-related intangibles.

 

©  To exclude change in fair value of earn-out consideration related to the RPM acquisition.

Contact: Steven N. Barlow

Vice President, Investor Relations

(212) 624-5913

ir@exlservice.com

Primary Logo

 

Source: ExlService Holdings, Inc.

 

 

News Provided by Acquire Media