EXL Reports 2008 Third Quarter Results
Key New Client Wins in Insurance and Utilities Highlight Continued Business Momentum Third Quarter Revenues Grew 18% Year-Over-Year Third Quarter Operating Margin of 11.3%; Adjusted Operating Margin of 14.7%
NEW YORK, Nov. 6 /PRNewswire-FirstCall/ -- ExlService Holdings, Inc. (Nasdaq: EXLS), a leading provider of Outsourcing and Transformation Services, today announced its financial results for the quarter ended September 30, 2008.
Rohit Kapoor, President and CEO of EXL, commented: "In the most challenging economic environment in recent history, our business model continues to demonstrate resilience and renewed growth momentum. Our clients and prospects have become aggressive in cutting their costs and we therefore expect them to increase their usage of EXL's Outsourcing and Transformation services. In addition, the slowdown of the GDP growth rate in India and the Philippines has enhanced our ability to hire, train and retain talent in our principal delivery locations. While currency volatility creates interim challenges for us, in the longer term it should allow us to offer an effective lower price to our customers. All of these trends are positively impacting our pipeline, our business with current clients and employee base.
For the third quarter, EXL had success in terms of both new client wins and expansions with our existing strategic clients. Our performance this quarter was again led by rapid growth in our Transformation business across an increasingly diversified base of client relationships. Importantly, our pipeline of Transformation clients that may evolve into Outsourcing clients is strong and our overall vision and business strategy is aligned with the market. With the continued expansion of our pipeline and some key client wins and expansions that we are announcing in the third quarter, our Outsourcing business is well positioned to meet our long-term growth objectives. Our strong balance sheet as well as our generation of free cash flow from operations positions us as a financially secure partner for our clients and allows us to maintain our focus on growth oriented investments during these turbulent times."
Matt Appel, CFO of EXL, commented: "EXL's third quarter financial results reflect a 17.8% year-over-year increase in revenue from our continuing operations, net of a 4.3% impact related to the depreciation of the U.K. pound. Our gross margin increased to 39.8% from 34.3% a year earlier and adjusted operating profit increased to 14.7% from 7.9% a year earlier -- despite the exercise of the Aviva BOT call option during the third quarter -- due to improvements in operating efficiency and the continued depreciation of the Indian rupee. Cash flow from operations for the quarter was $9.8 million, and we ended the quarter with $101.8 million of cash and no debt. Due to the extremely volatile currency environment, earnings per share for the third quarter were negatively impacted by significant foreign exchange losses. Effective in the fourth quarter, we are now hedging a substantial portion of our balance sheet foreign exchange risk and therefore expect the negative impact of translation losses to be significantly lower in the future. Based on our confidence in our current business outlook as well as our strong balance sheet and cash flows, we are announcing a $10 million share repurchase program that we intend to execute over the next twelve months."
Financial Highlights -- Third Quarter 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.
Business Announcements -- Third Quarter 2008
Fourth Quarter of 2008 Outlook
Based on current visibility, the Company is providing the following guidance for the fourth quarter of 2008 based on current exchange rates:
EXL will host a conference call on Thursday, November 6, at 8:00 a.m. (ET) to discuss the Company's quarterly 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 +1-800-291-5365 or 1-617-614-3922 and enter "74033241." 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 "68590148" from two hours after the end of the call until 11:59 p.m. (EST) on November 13, 2008. 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 Six Sigma process improvement, research & analytics and risk advisory services. Headquartered in New York, EXL primarily serves the needs of Global 1000 companies in the insurance, utilities, financial services, healthcare 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 (UNAUDITED) Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 Revenues $46,354,247 $38,993,700 $137,572,110 $107,612,586 Revenues (from related parties) 218,655 538,750 447,285 1,262,785 Total revenues 46,572,902 39,532,450 138,019,395 108,875,371 Cost of revenues (exclusive of depreciation and amortization) 28,046,252 25,975,507 86,902,523 72,792,231 Gross profit 18,526,650 13,556,943 51,116,872 36,083,140 Operating expenses: General and administrative expenses 7,348,869 6,873,549 24,193,187 19,456,574 Selling and marketing expenses 3,081,174 2,556,621 8,365,991 6,547,878 Depreciation and amortization 2,832,082 2,368,489 8,301,254 6,700,667 Total operating expenses 13,262,125 11,798,659 40,860,432 32,705,119 Income from continuing operations 5,264,525 1,758,284 10,256,440 3,378,021 Other income/ (expense): Foreign exchange gain/(loss) (6,636,434) 2,118,766 (5,846,928) 5,002,224 Interest and other income 1,173,444 1,018,015 2,351,680 3,035,481 Interest expense (16,512) (12,834) (58,330) (39,848) Income/(loss) from continuing operations before income taxes (214,977) 4,882,231 6,702,862 11,375,878 Income tax provision/ (benefit) (589,309) 870,792 (983,498) 891,539 Income from continuing operations 374,332 4,011,439 7,686,360 10,484,339 Income/(loss) from discontinued operations, net of taxes (1,449,594) 2,228,001 3,302,262 6,783,775 Net income/ (loss) to common stockholders $(1,075,262) $6,239,440 $10,988,622 $17,268,114 Earnings/(loss) per share: Basic: Continuing operations $0.01 $0.14 $0.27 $0.37 Discontinued operations (0.05) 0.08 0.11 0.24 Net income/(loss) to common stockholders $(0.04) $0.22 $0.38 $0.61 Diluted: Continuing operations $0.01 $0.14 $0.26 $0.36 Discontinued operations (0.05) 0.08 0.11 0.23 Net income/(loss) to common stockholders $(0.04) $0.21 $0.38 $0.59 Weighted-average number of shares used in computing earnings per share: Basic 28,846,137 28,644,120 28,801,102 28,387,242 Diluted 29,127,304 29,115,603 29,257,254 29,096,915 Note: Amounts may not foot due to rounding. EXLSERVICE HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) September 30, December 31, 2008 2007 Assets Current assets: Cash and cash equivalents $101,753,142 $101,405,889 Restricted cash 237,811 283,436 Short-term investments 153,242 252,561 Accounts receivable, net of allowance for doubtful accounts of $136,711 at September 30, 2008 and $85,539 at December 31, 2007 41,795,992 38,513,774 Accounts receivable from related parties 85,840 338,629 Employee receivables 483,092 225,278 Prepaid expenses 1,730,423 2,426,242 Deferred tax assets 2,383,034 3,091,961 Prepaid income tax 1,497,225 - Other current assets 2,939,275 7,190,909 Current assets of discontinued operations - 9,412,814 Total current assets 153,059,076 163,141,493 Fixed assets, net 24,112,708 24,142,470 Intangibles, net of amortization 50,622 340,000 Goodwill 17,703,020 16,785,487 Restricted cash 247,312 244,121 Deferred tax assets 3,441,351 3,403,563 Other assets 8,504,777 7,631,029 Non-current assets of discontinued operations - 2,673,682 Total assets $207,118,866 $218,361,845 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $2,152,052 $6,389,272 Deferred revenue 1,968,409 4,440,261 Accrued employee cost 11,909,302 12,893,462 Other accrued expenses and current liabilities 23,599,512 17,103,150 Income taxes payable - 725,622 Current portion of capital lease obligation 141,435 125,960 Current liabilities of discontinued operations - 1,893,265 Total current liabilities 39,770,710 43,570,992 Capital lease obligations, less current portion 212,216 258,399 Other non-current liabilities 3,236,837 471,042 Non-current liabilities of discontinued operations - 81,643 Total liabilities 43,219,763 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, 29,026,695 shares issued and outstanding as of September 30, 2008 and 28,891,043 shares issued and outstanding as of December 31, 2007 29,027 28,891 Additional paid-in capital 115,976,713 110,988,552 Retained earnings 66,601,804 55,708,233 Accumulated other comprehensive income/(loss) (18,154,747) 7,570,026 164,452,797 174,295,702 Less: 179,027 shares as of September 30, 2008 and 163,690 shares as of December 31, 2007, held in treasury, at cost (553,694) (315,933) Total stockholders' equity 163,899,103 173,979,769 Total liabilities and stockholders' equity $207,118,866 $218,361,845 Note: Amounts may not foot due to rounding. EXLSERVICE HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) 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 September 30, 2008, September 30, 2007 and June 30, 2008:
(Numbers in thousands) Three Months Ended Three Months Ended September 30, September 30, 2008 2008 2007 2007 US GAAP Adjustments Non-GAAP US GAAP Adjustments Non-GAAP Revenues $46,573 $- $46,573 $39,532 $- $39,532 Cost of revenues (exclusive of depreciation and amortization) 28,046 (396)(a) 27,650 25,976 (313)(a) 25,662 Gross profit 18,527 396 18,923 13,557 313 13,870 Gross Margin % 39.8% 40.6% 34.3% 35.1% Selling, general and administrative expenses 10,430 (1,155)(a) 9,275 9,430 (846)(a) 8,584 Depreciation and amortization expense 2,832 (51)(b) 2,781 2,368 (225)(b) 2,143 Income from operations $5,265 $1,602 $6,866 $1,758 $1,384 $3,142 Income from Operations Margin % 11.3% 14.7% 4.4% 7.9% (a) To exclude stock-based compensation expense under FAS 123R. (b) To exclude amortization of acquisition-related intangibles. Three Months Ended June 30, 2008 2008 US GAAP Adjustments Non-GAAP Revenues $47,015 $- $47,015 Cost of revenues (exclusive of depreciation and amortization) 30,222 (455)(a) 29,768 Gross profit 16,793 455 17,247 Gross Margin % 35.7% 36.7% Selling, general and administrative expenses 11,381 (1,432)(a) 9,949 Depreciation and amortization expense 2,954 (221)(b) 2,733 Income from operations $2,458 $2,107 $4,565 Income from Operations Margin % 5.2% 9.7% (a) To exclude stock-based compensation expense under FAS 123R. (b) To exclude amortization of acquisition-related intangibles.
SOURCE ExlService Holdings, Inc.
CONTACT: Jarrod Yahes, Head of Investor Relations of ExlService
Holdings, Inc., +1-212-277-7109, firstname.lastname@example.org/
/Web Site: http://www.exlservice.com /