ExlService Holdings, Inc.
Feb 28, 2017

EXL Reports 2016 Fourth Quarter and Full Year Results

2016 Fourth Quarter Revenues of $177.3 Million, up 6.9% year over year
4Q Diluted EPS (GAAP) of $0.45, up from $0.43 in Q4 of 2015
 4Q Adjusted Diluted EPS (Non-GAAP) of $0.61, up from $0.56 in Q4 of 2015

2016 Revenues of $686.0 Million, up 9.1% year over year
2016 Diluted EPS (GAAP) of $1.79, up from $1.51 in 2015
2016 Adjusted Diluted EPS (Non-GAAP) of $2.33, up from $2.03 in 2015

NEW YORK, Feb. 28, 2017 (GLOBE NEWSWIRE) -- ExlService Holdings, Inc. (NASDAQ:EXLS), a leading operations management and analytics company, today announced its financial results for the quarter ended December 31, 2016 and the full year 2016.

Rohit Kapoor, Vice Chairman and CEO, commented, "Our fourth quarter 2016 revenues beat expectations, and for the full year 2016 revenues increased 9.1% year over year or 10.9% in constant currency (non-GAAP) to $686.0 million.  We achieved an 18.4% increase in diluted EPS to $1.79 and a 14.8% increase in adjusted diluted EPS to $2.33 for the full year 2016.  Our revenues growth this year was led by our Analytics segment which grew 35.7% for the full year.  Our Operations Management segment revenues growth was 2.7% for the full year driven by new and existing clients offset by weakness in our consulting business.

"Our growth was broad-based, the result of our driving superior customer experiences and our investments in automation and robotics including the Business EXLerator Framework™.  The integrated selling of our business process management and analytics solutions continues to strengthen our competitive positioning with our clients and prospects. Our three acquisitions in 2016 have been assimilated and are performing at or above expectations.  I believe our market position is strong, and we have great momentum to execute our growth plans in 2017."

Vishal Chhibbar, CFO, commented, "In 2016, we generated $100.3 million of cash flow from operations and ended the year with $226.6 million in cash and short term investments.  For 2017, we are providing revenue guidance of $735 million to $760 million, representing annual revenue growth of 8% to11% in constant currency. Our adjusted diluted earnings per share guidance is $2.50 to $2.60, representing an increase of 7% to 12%."

Financial Highlights: Fourth Quarter 2016

We have two reportable segments: Operations Management and Analytics. Reconciliations of adjusted (non-GAAP) financial measures, including those reflecting constant currency, to GAAP measures are included at the end of this release.

Financial Highlights: Full Year 2016

Business Highlights: Fourth Quarter 2016

Share Repurchase

Today, we announced that our Board of Directors authorized an additional $100 million common stock repurchase program, effective immediately. The approval increases the 2017 authorization from $20 million to $40 million and authorizes stock repurchases of up to $40 million in 2018 and 2019.  The shares may be purchased through December 31, 2019 by the Company on the open market and through private transactions as determined by EXL's management.

2017 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 1.25, U.S. Dollar to the Philippine Peso exchange rate of 50.0 and all other currencies at current exchange rates, the Company is providing the following guidance for the calendar year 2017:

Conference Call

ExlService Holdings, Inc. will host a conference call on Tuesday, February 28, 2017 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 designs and enables agile, customer-centric operating models to help clients improve their revenue growth and profitability. Our delivery model provides market-leading business outcomes using EXL's proprietary Business EXLerator Framework™, cutting-edge analytics, digital transformation and domain expertise. At EXL, we look 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 26,000 professionals in locations throughout the United States, Europe, Asia (primarily India and Philippines), South 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)
 
 Year ended December 31, Three months ended December 31
  2016   2015   2016   2015 
Revenues, net$  685,988  $  628,492  $  177,274    $  165,858 
Cost of revenues (exclusive of depreciation and amortization)   447,956     402,917     115,784       106,116 
Gross profit   238,032     225,575     61,490       59,742 
Operating expenses:         
General and administrative expenses   88,648     77,293     25,028       19,865 
Selling and marketing expenses   50,582     49,474     12,707       13,705 
Depreciation and amortization   34,580     31,465     9,580       8,294 
Total operating expenses   173,810     158,232     47,315       41,864 
Income from operations   64,222     67,343     14,175       17,878 
Foreign exchange gain/(loss), net   5,597     2,744      2,024       397 
Interest expense   (1,343)    (1,338)    (320)      (355)
Other income/(expense), net   15,408     7,027     3,211       1,744 
Income before income taxes   83,884     75,776     19,090     19,664 
Income tax expense   22,151     24,211     3,602       4,902 
Net income$   61,733  $  51,565  $  15,488    $  14,762 
Earnings per share:          
Basic$  1.84  $  1.55  $  0.46    $  0.44 
Diluted$  1.79  $  1.51  $  0.45    $  0.43 
Weighted-average number of shares used in computing earnings per share:     
Basic 33,566,367   33,298,104   33,638,170   33,231,716 
Diluted 34,563,319   34,178,340   34,714,308   34,272,731 




EXLSERVICE HOLDINGS, INC.
 
CONSOLIDATED BALANCE SHEETS
 
(In thousands, except share and per share amounts)
     
  December 31,
2016
 December 31,
 2015
     
Assets    
Current assets:    
Cash and cash equivalents $213,155  $205,323 
Short-term investments  13,491   13,676 
Restricted cash  3,846   1,872 
Accounts receivable, net  113,067   92,650 
Prepaid expenses  7,855   8,027 
Advance income tax, net   6,242   2,432 
Other current assets  21,168   15,219 
Total current assets  378,824   339,199 
Property, plant and equipment, net  49,029   47,991 
Restricted cash  3,393   3,319 
Deferred tax assets, net  14,799   13,749 
Intangible assets, net  53,770   52,733 
Goodwill  186,770   171,535 
Other assets  19,943   22,257 
Total assets $706,528  $650,783 
Liabilities and Equity    
Current liabilities:    
Accounts payable $3,288   $6,401 
Short-term borrowings  10,000   10,000 
Deferred revenue  16,615   11,518 
Accrued employee cost  50,832   44,526 
Accrued expenses and other current liabilities  43,264   34,250 
Current portion of capital lease obligations  232   384 
Total current liabilities  124,231   107,079 
Long term borrowings  35,000   60,000 
Capital lease obligations, less current portion  300   278 
Non-current liabilities  14,819   17,655 
Total liabilities   174,350   185,012 
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, 35,699,819 shares issued and 33,628,109 shares outstanding as of December 31, 2016 and 34,781,201 shares issued and 33,091,223 shares outstanding as of December 31, 2015  36   35 
Additional paid-in-capital  284,646   254,052 
Retained earnings  382,722   320,989 
Accumulated other comprehensive loss  (75,057)  (67,325)
Total including shares held in treasury  592,347   507,751 
Less: 2,071,710 shares as of December 31, 2016 and 1,689,978 shares as of December 31, 2015, held in treasury, at cost  (60,362)  (42,159)
ExlService Holdings, Inc. stockholders' equity  531,985   465,592 
Non-controlling interest  193   179 
Total equity  532,178   465,771 
Total liabilities and equity $706,528  $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 guidance 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 66.08 during the quarter ended December 31, 2015 to 67.70 during the quarter ended December 31, 2016 , representing a depreciation of 2.5%. The average exchange rate of the U.S. dollar against the Philippine peso increased from 47.01 during the quarter ended December 31, 2015 to 49.29 during the quarter ended December 31, 2016, representing a depreciation of 4.9%. The average exchange rate of the British Pound against the U.S. dollar decreased from 1.51 during the quarter ended December 31, 2015 to 1.23 during the quarter ended December 31, 2016, representing a depreciation of 18.5%. 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 year ended December 31, 2016 and December 31, 2015, the three months ended December 31, 2016 and December 31, 2015 and for the three months ended September 30, 2016:



Reconciliation of Adjusted Operating Income and Adjusted EBITDA to Net Income
 
(Amounts in thousands)
 
  Year Ended
December 31,
 Three Months Ended
December 31,
 Three Months Ended
September 30,
   2016   2015    2016   2015   2016 
Net Income (GAAP) $  61,733   $  51,565   $  15,488   $  14,762   $  16,050  
add: Income tax provision   22,151   24,211   3,602   4,902   5,646 
subtract: Other income and foreign exchange gain, net  (19,662)  (8,433)  (4,915)  (1,786)  (4,337)
Income from operations (GAAP) $  64,222   $  67,343   $  14,175   $  17,878   $  17,359  
add: Stock-based compensation expense (a)  19,770   16,047   5,027   3,768   4,483 
add: Amortization of acquisition-related intangibles (b)  11,873   10,226   3,592   2,717   2,848 
Adjusted operating income (Non-GAAP) $  95,865   $   93,616   $  22,794   $  24,363   $  24,690  
Adjusted operating income margin as a % of Revenues (Non-GAAP)  14.0%  14.9%   12.9%  14.7%  14.4%
add: Depreciation  22,707   21,239   5,988   5,577   5,749 
Adjusted EBITDA (Non-GAAP) $  118,572   $  114,855   $  28,782   $  29,940   $  30,439  
Adjusted EBITDA margin as a % of revenue  (Non-GAAP)  17.3%  18.3%  16.2%  18.1%  17.8%


(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)
 
  Year Ended
December 31,
 Three Months Ended
December 31,
 Three Months Ended
September 30,
   2016   2015   2016   2015    2016 
Net income (GAAP) $  61,733   $  51,565   $  15,488   $  14,762   $  16,050  
add: Stock-based compensation expense (a)    19,770     16,047     5,027     3,768     4,483 
add: Amortization of acquisition-related intangibles (b)    11,873      10,226     3,592     2,717      2,848 
subtract: Tax impact on stock-based compensation expense    (7,216 )    (6,081)    (1,898)    (1,431)    (1,561)
subtract: Tax impact on amortization of acquisition-related intangibles    (3,073)    (2,484)    (901)    (679)    (717)
Subtract: Changes in fair value of earn-out consideration (net of tax) (c)    (2,515)    -      -      -      -  
Adjusted net income (Non-GAAP) $  80,572   $  69,273   $  21,308   $  19,137   $  21,103  
Adjusted diluted earnings per share (Non-GAAP)  $  2.33   $  2.03   $  0.61   $  0.56   $  0.61  

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

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

(c) 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

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Source: ExlService Holdings, Inc.

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