Release Details
EXL Reports 2008 Fourth Quarter and Full Year Results and Provides Guidance for Calendar Year 2009
2008 Revenues Grew 19.5% Year-Over-Year 2008 Adjusted Operating Margin of 11.8% 2008 Cash Flow from Operations of $30.3 million
Rohit Kapoor, President and CEO, commented: "2008 was a year of transition for EXL. Despite the difficult economic climate, we added significant new client business in the second half of the year and have further diversified our customer base. We recently added another new strategic client for the outsourcing business in the insurance industry vertical as well as several new relationships within the transformation business. We are now one of the strongest offshore players in our core industry verticals of insurance and utilities. At the same time, our pipeline for our outsourcing business remains healthy, and we continue to focus on adding more new names to our client portfolio.
For 2009, we are providing revenue guidance of between
Matt Appel , CFO, commented: "EXL's 2008 financial results reflected strong
19.5% year-over-year growth in revenue, despite a 4.0% negative impact related
to the depreciation of the U.K. pound against the U.S. dollar. Our fourth
quarter revenues of $43.7 million exceeded our quarterly guidance of $41.0
million . Fourth quarter 2008 adjusted operating margin of 14.4% significantly
exceeded our guidance of 7.0% and reflects the continued results of our
efforts to improve operating efficiency and control costs. For the full year,
EXL's gross margins expanded approximately 400 basis points in 2008 to 38.1%
from 34.2% in 2007; our adjusted income from operations approximately doubled
to $21.5 million in 2008 from $10.8 million in 2007. Cash flow from operations
was exceptionally strong in 2008 at $30.3 million , reflecting improved
collections, and resulted in an ending cash balance of $112.2 million . Our
balance sheet positions us as a financially secure partner for our clients and
allows us the flexibility to maintain our focus on growth-oriented investments
during these uncertain times."
Financial Highlights - Fourth Quarter 2008 and Year Ended
Financial highlights are based on continuing operations of the Company and exclude the Aviva BOT, which is treated as a discontinued operation as of the third quarter of 2008. Reconciliations of adjusted financial measures to GAAP are included at the end of this release.
-- Revenues for the year ended
31, 2007. The depreciation of the U.K. pound relative to the U.S.
dollar during 2008 resulted in a
year-over-year revenue growth. Revenues for the quarter ended December
31, 2008 were
ended
-- Revenues attributable to outsourcing services for the year ended
million in the year ended
outsourcing services for the quarter ended
4.9% to
for the year ended
compared to$31.1 million in the year endedDecember 31, 2007 . Transformation services revenues for the quarter endedDecember 31, 2008 increased 27.3% to$10.5 million compared to$8.3 million in the quarter endedDecember 31, 2007 .
-- Gross margin for the year ended
to 34.2% for the year ended
in 2008 compared to the previous year due to the favorable impact of
exchange rates, productivity improvements in outsourcing services and
improved utilization of personnel in transformation services. Gross
margin for the quarter ended December 31, 2008 was 41.6% compared to
36.7% for the quarter ended December 31, 2007 .
-- Operating margin for the year ended December 31, 2008 was 8.6%
compared to 3.2% for the year ended December 31, 2007 . Operating
margin for the quarter ended December 31, 2008 was 12.4% compared to
3.3% for the quarter ended December 31, 2007 . Adjusted operating
margin, excluding the impact of stock-based compensation expense and
amortization of intangibles, for the year ended December 31, 2008 was
11.8% compared to 7.1% for the year ended December 31, 2007 ; 180 basis
points of this improvement are attributable to decreases in our
general and administrative expenses. Adjusted operating margin for the
quarter ended December 31, 2008 was 14.4% compared to 6.7% for the
quarter ended December 31, 2007 .
-- Diluted earnings per share from continuing operations for the year
ended December 31, 2008 was $0.38 compared to $0.60 for the year ended
December 31, 2007 . This decline is attributable to foreign exchange
losses incurred during the year ended December 31, 2008 of $9.3
million , of which $5.7 million are net losses on translation ofbalance sheet assets and liabilities into their respective functional
currency. Effective in the fourth quarter of 2008, we commenced
hedging a substantial portion of our balance sheet foreign exchange
risk. Diluted earnings per share from continuing operations for the
quarter ended December 31, 2008 was $0.12 compared to $0.24 in the
quarter ended December 31, 2007 .-- EXL's customer concentration declined significantly in 2008 compared
to 2007. Revenues generated from our largest client represented 23.3%
of total revenues for the year ended December 31, 2008 compared to
29.2% for the year ended December 31, 2007 . Revenues generated from
our three largest clients represented 43.1% of total revenues for the
year ended December 31, 2008 compared to 49.2% for the year ended
December 31, 2007 . Revenues generated from our largest client
represented 18.2% of total revenues for the quarter ended December 31,
2008 compared to 27.9% for the quarter ended December 31, 2007 .
Revenues generated from our three largest clients represented 39.7% of
total revenues for the quarter ended December 31, 2008 compared to
47.3% for the quarter ended December 31, 2007 .
-- We experienced annual attrition for billable employees in 2008 of
34.0% compared to 41.0% in 2007 reflecting a continuing trend of
decreasing attrition in our business.. We experienced attrition of
33.8% for billable employees in the fourth quarter of 2008 compared to
30.6% in the fourth quarter of 2007 and 36.5% in the third quarter of 2008. As of
9,500 individuals (including personnel managed under structured client
service agreements) compared to 8,500 as of December 31, 2007 .
Business Announcements - Fourth Quarter 2008 and Full Year 2008
-- Won an additional strategic Outsourcing client in the insurance
vertical capping a year of record new client acquisitions across our
outsourcing and transformation services at 23
-- Grew our Philippines facility to 375 employees in its first full year
of operation
-- Progressed with process migrations and implementations for the
strategic Outsourcing wins announced in the third quarter of 2008
-- Improved our Employee Commitment Index for the third consecutive year
(as measured by an independent advisory firm) resulting in a decrease
in employee attrition for the year
Other Business Announcements
-- Announced that Matt Appel , our Chief Financial Officer, will now
depart from the Company effective May 15, 2009 instead of March 16,
2009 in order to assist us in filing our first quarter 2009 Form 10-Q
2009 Outlook
Based on current visibility, the Company is providing the following guidance for calendar year 2009 based on current exchange rates:
-- Revenues of between$170 million to $175 million -- Adjusted operating margin, excluding the impact of stock-based compensation expense and amortization of intangibles, of between 10.0% and 12.0% Conference Call EXL will host a conference call onWednesday, March 11, 2009 at10:00 a.m. (ET) to discuss the Company's quarterly and annual results and discuss the Company's operating performance and financial outlook. The conference call will be available live via the internet by accessing the EXL web site at www.exlservice.com, where the accompanying presentation can also be accessed. Please go to 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 1-800-901-5213 or
1-617-786-2962 and enter "58667015." For those who cannot access the live
broadcast, a replay will be available by dialing 1-888-286-8010 or
1-617-801-6888 and entering "85041529" from two hours after the end of the
call until
About
ExlService Holdings, Inc. (Nasdaq: EXLS) is a leading provider of outsourcing and transformation services. EXL's outsourcing services include a full spectrum of business process outsourcing services from offshore delivery centers requiring ongoing process management skills. Transformation services enable continuous improvement of client processes by bringing together EXL's capabilities in reengineering including decision analytics, risk and financial management and operations and process excellence services. Headquartered inNew York , EXL primarily serves the needs of Global 1000 companies in the insurance, utilities, financial services and transportation sectors. Find additional information about EXL at www.exlservice.com. 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 the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the Company's control. Forward-looking statements include information concerning the Company'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 the Company believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect the Company'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 details in the Company's filings with theSecurities and Exchange Commission , including the Company's Annual Report on Form 10-K for the year endedDecember 31, 2007 . 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 the Company. The Company 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 (Audited) (Unaudited) Year ended Three months ended December 31, December 31, 2008 2007 2008 2007 Revenues $181,085,673 $150,401,512 $43,513,563 $42,788,926 Revenues (from related parties) 628,090 1,631,021 180,805 368,236 Total revenues 181,713,763 152,032,533 43,694,368 43,157,162 Cost of revenues (exclusive of depreciation and amortization) 112,436,276 100,111,986 25,533,753 27,319,755 Gross profit 69,277,487 51,920,547 18,160,615 15,837,407 Operating expenses: General and administrative expenses 31,112,703 28,723,594 6,919,516 9,267,020 Selling and marketing expenses 11,344,267 9,171,240 2,978,276 2,623,362 Depreciation and amortization 11,155,933 9,211,851 2,854,679 2,511,184 Total operating expenses 53,612,903 47,106,685 12,752,471 14,401,566
Income from continuing
operations 15,664,584 4,813,862 5,408,144
1,435,841
Other income/(expense):
Foreign exchange
gain/(loss) (9,275,725) 7,584,096 (3,428,797) 2,581,873
Interest and other
income 3,478,741 4,258,162 1,127,061 1,222,681
Interest expense (70,708) (55,355) (12,378) (15,508)
Income from continuing
operations before
income taxes 9,796,892 16,600,765 3,094,030 5,224,887
Income tax benefit (1,339,741) (973,787) (356,243) (1,865,326)
Income from continuing
operations 11,136,633 17,574,552 3,450,273
7,090,213
Income/(loss) from
discontinued
operations, net of
taxes 3,271,034 9,469,034 (31,228)
2,685,259
Net income to common
stockholders $14,407,667 $27,043,586 $3,419,045 $9,775,472
Earnings per share:
Basic:
Continuing operations $0.39 $0.62 $0.12 $0.25
Discontinued operations 0.11 0.33 - 0.09
$0.50 $0.95 $0.12 $0.34
Diluted:
Continuing operations $0.38 $0.60 $0.12 $0.24
Discontinued operations 0.11 0.32 - 0.09
$0.49 $0.93 $0.12 $0.33
Weighted-average number
of shares used in
computing earnings
per share:
Basic 28,811,040 28,480,033 28,839,729 28,698,379
Diluted 29,212,045 29,191,199 29,075,293 29,414,025
Note: Earnings per share amounts may not foot due to rounding.
EXLSERVICE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Audited)
December 31, December 31,
2008 2007
Assets
Current assets:
Cash and cash equivalents $112,174,054 Restricted cash 203,262
283,436
Short-term investments 153,242
252,561
Accounts receivable, net of allowance
for doubtful accounts of
2008 and
38,513,774
Accounts receivable from related parties 88,790 338,629
Employee receivables 202,644 225,278
Prepaid expenses 2,634,516 2,426,242
Deferred tax assets 3,400,557 3,091,961
Prepaid income tax 2,033,057 -
Other current assets 3,361,863 7,190,909
Current assets of discontinued operations -
9,412,814
Total current assets 157,876,949 163,141,493
Fixed assets, net 24,518,112 24,142,470
Intangibles, net of amortization - 340,000
Goodwill 17,557,333 16,785,487
Restricted cash 280,911 244,121
Deferred tax assets 3,047,192 3,403,563
Other assets 8,688,195 7,631,029
Non-current assets of discontinued operations -
2,673,682
Total assets$211,968,692
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $3,370,788 $6,389,272
Deferred revenue 2,961,336 4,440,261
Accrued employee cost 14,725,094
12,893,462
Other accrued expenses and current
liabilities 17,890,094
17,103,150
Income taxes payable -
725,622
Current portion of capital lease obligation 120,697 125,960
Current liabilities of discontinued
operations -
1,893,265
Total current liabilities 39,068,009
43,570,992
Capital lease obligations, less current portion 178,940 258,399
Other non-current liabilities 1,390,038
471,042
Non-current liabilities of discontinued
operations -
81,643
Total liabilities 40,636,987
44,382,076
Preferred stock,$0.001 par value; 15,000,000 shares authorized - - Stockholders' equity: Common stock,$0.001 par value; 100,000,000 shares authorized, 29,054,145 shares issued and outstanding as ofDecember 31, 2008 and 28,891,043 shares issued and outstanding as of December 31, 2007 29,054 28,891 Additional paid-in capital 116,675,603
110,988,552
Retained earnings 70,020,849
55,708,233
Accumulated other comprehensive
income/(loss) (14,491,104)
7,570,026
172,234,402
174,295,702
Less: 237,080 shares as of December 31,
2008 and 163,690 shares as of
at cost (902,697)
(315,933)
Total stockholders' equity 171,331,705
173,979,769
Total liabilities and stockholders' equity
EXLSERVICE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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 that the Securities and Exchange
Commission defines as "non-GAAP financial measures." Management believes that
these adjusted financial measures, when read in conjunction with the Company's
reported results, can provide useful supplemental information for investors
analyzing period to period comparisons of the Company's results because the
adjustments eliminate the impact of the following two items which do not
directly link to the Company's ongoing performance: (i) stock compensation and
(ii) expenses associated with the amortization of acquisition-related
intangibles. The Company also believes that it is unreasonably difficult to
provide its financial outlook in accordance with GAAP for a number of reasons
including, without limitation, the Company's inability to predict its future
stock-based compensation expense under FAS 123R and the amortization of
intangibles associated with further acquisitions. The adjusted financial
measures disclosed by the Company 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.
The following table shows the reconciliation of these adjusted financial measures from GAAP measures for the three month periods ended
(Amounts in thousands)
ExlService Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Three Months
Ended December 31 , Ended December 31 ,
----------------------------
----------------------------
2008 2008 2007 2007
US GAAP Adjustments Non-GAAP US GAAP Adjustments Non-GAAP
------- ----------- -------- ------- ----------- --------
Revenues $43,694 $- $43,694 $43,157 $- $43,157
Cost of revenues
(exclusive of
depreciation and
amortization) 25,534 (129)(a) 25,405 27,320 (303)(a) 27,017
------ ---- ------ ------ ---- ------
Gross profit 18,161 129 18,290 15,837 303 16,141
------ --- ------ ------ --- ------
Gross Margin % 41.6% 41.9% 36.7% 37.4%
Selling, general
and administrative
expenses 9,898 (723)(a) 9,175 11,890 (925) 10,965
Depreciation and
amortization
expense 2,855 (51)(b) 2,804 2,511 (225)(b) 2,286
----- --- ----- ----- ---- -----
Income from
operations $5,408 $903 $6,311 $1,436 $1,454 $2,889
------ ---- ------ ------ ------ ------
Income from
Operations
Margin % 12.4% 14.4% 3.3% 6.7%
(a) To exclude stock-based compensation expense under FAS 123R.
(b) To exclude amortization of acquisition-related intangibles.
The following table shows the reconciliation of these adjusted financial measures from GAAP for the years ended
Year Ended December 31 , Year Ended December 31 ,
----------------------------
----------------------------
2008 2008 2007 2007
US GAAP Adjustments Non-GAAP US GAAP Adjustments Non-GAAP
------- ----------- -------- ------- ----------- --------
Revenues $181,714 $- $181,714 $152,033 $- $152,033
Cost of revenues
(exclusive of
depreciation and
amortization) 112,436 (1,112)(a) 111,324 100,112 (1,118)(a) 98,994
------- ------ ------- ------- ------ ------
Gross profit 69,277 1,112 70,390 51,921 1,118 53,038
------ ----- ------ ------ ----- ------
Gross Margin % 38.1% 38.7% 34.2% 34.9%Selling, general
and administrative
expenses 42,457 (4,166)(a) 38,291 37,895 (3,189)(a) 34,706
Depreciation and
amortization
expense 11,156 (534)(b) 10,622 9,212 (1,630)(b) 7,582
------ ---- ------ ----- ------ -----
Income from
operations $15,665 $5,812 $21,477 $4,814 $5,937 $10,751
------- ------ ------- ------ ------ -------
Income from
Operations
Margin % 8.6% 11.8% 3.2% 7.1%
(a) To exclude stock-based compensation expense under FAS 123R.
(b) To exclude amortization of acquisition-related intangibles.
Note: Amounts may not foot due to rounding.
SOURCEExlService Holdings, Inc. -0-03/11/2009 /CONTACT: Jarrod Yahes, Head of Investor Relations ofExlService Holdings, Inc. , +1-212-277-7109, ir@exlservice.com/ /Web Site: http://www.exlservice.com/ / (EXLS) CO:ExlService Holdings, Inc. ; EXL ST: New York IN: INS UTI FIN OIL TRN SU: ERN ERP CCA PR -- NY82057 -- 205703/11/2009 08:00 EDT http://www.prnewswire.com