• EXL Reports 2008 Fourth Quarter and Full Year Results and Provides Guidance for Calendar Year 2009




EXL Reports 2008 Fourth Quarter and Full Year Results and Provides Guidance for Calendar Year 2009


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Mar 11, 2009

EXL Reports 2008 Fourth Quarter and Full Year Results and Provides Guidance for Calendar Year 2009

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

NEW YORK, March 11 /PRNewswire-FirstCall/ -- ExlService Holdings, Inc. (Nasdaq: EXLS), a leading provider of outsourcing and transformation services, today announced its financial results for the fourth quarter of 2008 and the year ended December 31, 2008.

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 $170 million to $175 million, representing growth of between 5.0% and 8.0% as compared to our fourth quarter 2008 normalized revenues of $40.5 million on an annualized basis. If measured in constant currency, our year-over-year revenue growth would be even higher. We expect continued growth and expansion in outsourcing services; however, based on what we are seeing in the current economic environment, the potential for growth in transformation services will be muted. We expect to achieve adjusted operating margins of between 10.0% and 12.0% in 2009, while continuing to make necessary growth-oriented investments in our business such as expanding our geographic footprint into additional countries and selectively expanding our sales and marketing team."

    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 December 31, 2008

    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 December 31, 2008 increased 19.5% to

$181.7 million compared to $152.0 million in the year ended December

31, 2007. The depreciation of the U.K. pound relative to the U.S.

dollar during 2008 resulted in a $6.1 million, or 4.0%, impact on

year-over-year revenue growth. Revenues for the quarter ended December

31, 2008 were $43.7 million compared to $43.2 million in the quarter

ended December 31, 2007.

-- Revenues attributable to outsourcing services for the year ended

December 31, 2008 increased 14.8% to $138.8 million compared to $120.9

million in the year ended December 31, 2007. Revenues attributable to



outsourcing services for the quarter ended December 31, 2008 decreased

4.9% to $33.2 million compared to $34.9 million in the quarter ended

December 31, 2007. Revenues attributable to transformation services

for the year ended December 31, 2008 increased 38.0% to $42.9 million

        compared to $31.1 million in the year ended December 31, 2007.
        Transformation services revenues for the quarter ended December 31,
        2008 increased 27.3% to $10.5 million compared to $8.3 million in the
        quarter ended December 31, 2007.

-- Gross margin for the year ended December 31, 2008 was 38.1% compared

to 34.2% for the year ended December 31, 2007. Gross margin increased

        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 of


balance 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 December 31, 2008, EXL had a headcount of approximately

        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 on Wednesday, March 11, 2009 at 10:00 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 11:59 p.m. (ET) on March 18, 2009. The replay will also be available at the EXL web site.



About ExlService Holdings, Inc.

    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 in
New 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 the
Securities and Exchange Commission, including the Company's Annual Report on
Form 10-K for the year ended December 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   


$101,405,889

        Restricted cash                                203,262        

283,436

        Short-term investments                         153,242        

252,561

Accounts receivable, net of allowance

for doubtful accounts of $128,134 in



2008 and $85,539 in 2007 33,624,964

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

$218,361,845

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 of December 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

December 31, 2007, held in treasury,

         at cost                                      (902,697)      


(315,933)

    Total stockholders' equity                     171,331,705    

173,979,769

Total liabilities and stockholders' equity $211,968,692$218,361,845


    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 December 31, 2008 and December 31, 2007:

                             (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 December 31, 2008 and December 31, 2007:



                        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.

SOURCE  ExlService Holdings, Inc.
    -0-                           03/11/2009
    /CONTACT:  Jarrod Yahes, Head of Investor Relations of ExlService
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 --
2057 03/11/200908:00 EDThttp://www.prnewswire.com