ExlService Holdings, Inc.
May 2, 2017

Exl Reports 2017 First Quarter Results

2017 First Quarter Revenues of $183.0 Million, up 9.6% year over year
Q1 Diluted EPS (GAAP) of $0.48, up from $0.40 in Q1 of 2016
 Q1 Adjusted Diluted EPS (Non-GAAP) of $0.60, up from $0.56 in Q1 of 2016

NEW YORK, May 02, 2017 (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, 2017.

Rohit Kapoor, Vice Chairman and CEO, commented, "Our first quarter 2017 revenues increased 9.6% year-over-year, or 9.9% on a constant currency basis (non-GAAP), to $183.0 million.  Our revenue growth was led by our Analytics segment which grew 25.8% year-over-year, or 26.4% on a constant currency basis.  Our operations management businesses, which consist of our Insurance, Healthcare, Travel Transportation and Logistics, Finance and Accounting and All Other (Banking and Financial Services, Utilities and Consulting) reportable segments, grew 4.7% year-over-year, or 4.9% on a constant currency basis.

"Our competitive positioning with our integrated solutions across operations management and analytics continues to be well received in the marketplace.  Our demand pipeline is strong and the ramp-ups of 2016 new business wins are tracking to plan, giving us confidence that we will achieve our 2017 goals."

Vishal Chhibbar, CFO, commented, "We have updated our revenue guidance for 2017 to $740 million - $760 million from $735 million - $760 million to reflect better performance in the first quarter and favorable exchange rates versus the U.S. dollar.  Our guidance represents annual revenue growth of 8% to 11% on a constant currency basis. Our adjusted diluted EPS guidance for 2017 is unchanged.   Our balance sheet remains strong with cash and short-term investments of $218 million."

Financial Highlights: First Quarter 2017

We have six reportable segments: Insurance, Healthcare, Travel Transportation and Logistics, Finance and Accounting, All Other (Banking and Financial Services, Utilities and Consulting) 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.

     
   Revenues Gross Margin
Reportable Segments Three months ended March 31 Three months ended March 31
  2017 2016 2017 2016
Insurance $  55.9 $  48.3 31.5% 29.0%
Healthcare  18.9  16.4 35.6% 35.7%
Travel, Transportation and Logistics  17.1  17.5 40.0% 40.4%
Finance and Accounting   21.0  19.8 38.6% 42.3%
All Other  21.1  26.0 31.6% 35.1%
         
Analytics  49.0  39.0 34.6% 36.4%
Total $  183.0  $  167.0  34.4% 35.1%
 

Business Highlights: First Quarter 2017

2017 Guidance

Based on current visibility and a U.S. Dollar to Indian rupee exchange rate of 66.0, British Pound to U.S. Dollar exchange rate at 1.28, 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, May 2, 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 for a period of at least twelve months.

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, 2016. 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 March 31,
  2017   2016 
Revenues, net$  183,033  $  167,036 
Cost of revenues (exclusive of depreciation and amortization)   120,119     108,379 
Gross profit   62,914     58,657 
Operating expenses:   
General and administrative expenses   24,224      20,618 
Selling and marketing expenses   13,362     13,454 
Depreciation and amortization   9,426     8,133 
Total operating expenses   47,012     42,205 
Income from operations   15,902     16,452 
Foreign exchange gain, net   1,568     469 
Interest expense   (432)    (385)
Other income, net   3,310     3,179 
Income before income tax expense   20,348     19,715 
Income tax expense   3,560     5,895 
Net income$  16,788  $  13,820 
Earnings per share:   
Basic$  0.50  $  0.41 
Diluted$  0.48  $  0.40 
Weighted-average number of shares used in computing earnings per share:   
Basic   33,845,560     33,380,028 
Diluted   35,108,882     34,351,657 


EXLSERVICE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 
 March 31, 2017 December 31, 2016
 (Unaudited)  
Assets   
Current assets:   
Cash and cash equivalents$91,700   $213,155 
Short-term investments 126,472   13,491 
Restricted cash 2,691   3,846 
Accounts receivable, net 119,811   113,067 
Prepaid expenses 9,596   7,855 
Advance income tax, net 7,687   6,242 
Other current assets 25,541   21,168 
Total current assets 383,498   378,824 
Property, plant and equipment, net 59,220   49,029 
Restricted cash 3,657   3,393 
Deferred taxes, net 16,392   14,799 
Intangible assets, net 50,356   53,770 
Goodwill 187,952   186,770 
Other assets 25,618   19,943 
Total assets$726,693   $706,528 
Liabilities and Equity   
Current liabilities:   
Accounts payable$5,286  $3,288 
Short-term borrowings 10,000   10,000 
Deferred revenue 17,968   16,615 
Accrued employee cost 29,830   50,832 
Accrued expenses and other current liabilities 47,670   43,264 
Current portion of capital lease obligations 216   232 
Total current liabilities 110,970   124,231 
Long term borrowings 35,000   35,000 
Capital lease obligations, less current portion 285   300 
Non-current liabilities 17,729   14,819 
Total liabilities 163,984   174,350 
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, 36,100,622 shares issued and 33,772,166 shares outstanding as of March 31, 2017 and 35,699,819 shares issued and 33,628,109 shares outstanding as of December 31, 2016 36   36 
Additional paid-in-capital 296,792   284,646 
Retained earnings 394,964   382,722 
Accumulated other comprehensive loss (57,013)  (75,057)
Total including shares held in treasury 634,779   592,347 
Less: 2,328,456 shares as of March 31, 2017 and 2,071,710 shares as of December 31, 2016, held in treasury, at cost (72,275)  (60,362)
ExlService Holdings, Inc. stockholders' equity$562,504  $531,985 
Non-controlling interest 205   193 
Total equity$562,709  $532,178 
Total liabilities and equity$726,693  $706,528 
 

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 (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 non-GAAP 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 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. 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.

The information provided on a constant currency basis reflects a comparison of current period results translated at the prior period currency rates. 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 67.51 during the quarter ended March 31, 2016 to 66.46 during the quarter ended March 31, 2017, representing an appreciation of 1.6%. The average exchange rate of the U.S. Dollar against the Philippine peso increased from 47.09 during the quarter ended March 31, 2016 to 50.05 during the quarter ended March 31, 2017, representing a depreciation of 5.9%. The average exchange rate of the British Pound against the U.S. Dollar decreased from 1.42 during the quarter ended March 31, 2016 to 1.24 during the quarter ended March 31, 2017, representing a depreciation of 13.9%. 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 non-GAAP financial measures from GAAP measures for the three months ended March 31, 2017 and 2016 and the three months ended December 31, 2016.

Reconciliation of Adjusted Operating Income and Adjusted EBITDA to Net Income
(Amounts in thousands)    
      
 Three months ended
March 31,
 Three months ended
December 31,
 2017 2016 2016
Net Income (GAAP)$  16,788   $  13,820    $  15,488  
add: Income tax expense 3,560   5,895   3,602 
subtract: Other income and foreign exchange gain, net (4,446)  (3,263)  (4,915)
Income from operations (GAAP)$  15,902   $  16,452   $  14,175  
add: Stock-based compensation expense (a) 5,956   5,809   5,027 
add: Amortization of acquisition-related intangibles (b) 3,498   2,715   3,592 
Adjusted operating income (Non-GAAP)$  25,356   $   24,976   $  22,794  
Adjusted operating income margin as a % of revenues (Non-GAAP) 13.9%  15.0%  12.9%
add: Depreciation 5,928   5,418   5,988 
Adjusted EBITDA (Non-GAAP)$  31,284    $  30,394   $  28,782  
Adjusted EBITDA margin as a % of revenues  (Non-GAAP) 17.1%  18.2 %  16.2%
 
(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
March 31,
 Three months ended
December 31,
  2017   2016   2016 
Net income (GAAP)$16,788   $ 13,820   $15,488  
add: Stock-based compensation expense (a) 5,956   5,809   5,027 
add: Amortization of acquisition-related intangibles (b) 3,498    2,715   3,592 
subtract: Tax impact on stock-based compensation expense (c) (4,260)  (2,156)  (1,898)
subtract: Tax impact on amortization of acquisition-related intangibles (951)  (720)  (901)
Subtract: Changes in fair value of earn-out consideration (net of tax) (d) -   (150 )  - 
Adjusted net income (Non-GAAP)$21,031   $19,318   $21,308  
Adjusted diluted earnings per share (Non-GAAP)$0.60   $0.56   $0.61  
 
(a) To exclude stock-based compensation expense under ASC Topic 718.
(b) To exclude amortization of acquisition-related intangibles.
(c) Tax impact include $2,057 related to a discrete benefit recognized in income tax expense on adoption of ASU No. 2016-09, Compensation - Stock Compensation.
(d) 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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