• EXL Reports 2009 Second Quarter Results




EXL Reports 2009 Second Quarter Results


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Aug 06, 2009

EXL Reports 2009 Second Quarter Results

EXL Reports 2009 Second Quarter Results

EXL Reports 2009 Second Quarter Results

Second Quarter Revenues of $42.4 million; Operating Cash Flow of $7.8 million Expands Global Delivery Capability with Entry in Czech Republic and Decision to Operate from Romania

NEW YORK, Aug. 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 June 30, 2009.

Rohit Kapoor, President and CEO, commented: "After announcing our win in July with a strategic client in the transportation and logistics vertical, which will enable us to deliver services from the Czech Republic, we are now excited to announce that we will be setting up a new center in Romania. We continue to invest in our long-term growth despite the difficult economic environment and believe our expansion into Europe will benefit our Global 1000 clients by providing enhanced capabilities in finance and accounting as well as multi-lingual business process outsourcing solutions. With our recent expansion into two countries in Central and Eastern Europe, and our Philippines and India facilities already at significant operating scale, EXL is executing a key strategic objective of providing a world-class global delivery capability to our clients.

"This quarter we made the requisite investments in our outsourcing business to support the growth we anticipate in the second half of the year. Implementation and employee training for our new outsourcing clients are on schedule and we expect those efforts to be completed over the second half of 2009, driving continued sequential revenue growth. EXL's transformation business stabilized in the second quarter and we now see increased momentum and faster decision making by our clients and expect to see growth in the second half of the year."

Vishal Chhibbar, CFO, commented: "EXL's second quarter results were in line with our revenue and margin expectations. We are making prudent investments in our delivery infrastructure expansion and are pleased to announce that our Philippines center is now operationally profitable. Our new center in Pune, India, which opened this May, is ramping on schedule to accommodate our new client wins. Adjusted operating margin for the quarter was 11.3% despite incurring several one-time expense items. We generated strong cash flows of $7.8 million for the quarter and remain a secure partner for our clients with $114.3 million of cash on the balance sheet at the end of the quarter. We are maintaining our calendar year 2009 guidance for revenue and adjusted operating margin."

Financial Highlights

Financial highlights are based on continuing operations of the Company and exclude the sale of the Pune assets providing services to Aviva under the BOT arrangement, 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 quarter ended June 30, 2009 were $42.4 million
        compared to $47.0 million for the quarter ended June 30, 2008 and
        $41.0 million for the quarter ended March 31, 2009. Revenues
        attributable to outsourcing services for the quarter ended June 30,
        2009 were $34.5 million compared to $36.1 million in the quarter ended
        June 30, 2008 and $33.4 million in the quarter ended March 31, 2009.
        Transformation services revenues for the quarter ended June 30, 2009

        were $7.9 million compared to $10.9 million in the quarter ended June
        30, 2008 and $7.6 million in the quarter ended March 31, 2009.
    --  Gross margin for the quarter ended June 30, 2009 was 39.1% compared to
        35.7% for the quarter ended June 30, 2008 and 40.6% for the quarter
        ended March 31, 2009. Gross margin for outsourcing services was 41.9%
        for the quarter ended June 30, 2009 compared to 45.3% for the quarter
        ended March 31, 2009. Transformation services gross margin was 26.8%
        for the quarter ended June 30, 2009 compared to 19.7% for the quarter
        ended March 31, 2009.
    --  Operating margin for the quarter ended June 30, 2009 was 6.6%,
        compared to 5.2% for the quarter ended June 30, 2008 and 10.4% for the
        quarter ended March 31, 2009; adjusted operating margin for the
        quarter ended June 30, 2009, excluding the impact of stock-based
        compensation expense and amortization of intangibles, was 11.3%
        compared to 9.7% for the quarter ended June 30, 2008 and 14.2% for the
        quarter ended March 31, 2009.

    --  Diluted earnings per share to common stockholders for the quarter
        ended June 30, 2009 were $0.04 compared to $0.09 for the quarter ended
        June 30, 2008 and $0.10 for the quarter ended March 31, 2009.

    Business Announcements
    --  Setting up a new delivery center in Romania in the third quarter to
        deliver near-shore multi-lingual outsourcing services.
    --  Awarded a multi-year outsourcing contract in July with a leading
        transportation and logistics company to provide business process
        services from our new delivery center in the Czech Republic.
    --  New wins in annuity-based transformation work from three existing
        insurance and banking clients.
    --  Achieved operating profitability in the Philippines center fifteen
        months after commencement of operational delivery.
    --  Expanded multiple strategic outsourcing relationships with the
        migration of 20 new processes during the quarter. Migrating processes
        for four recently acquired clients.

    --  Quarterly attrition of 22.0% for billable employees compared to 30.7%
        for the second quarter of 2008 and 21.0% for the first quarter of
        2009.

    2009 Outlook
    The Company is maintaining its guidance for calendar year 2009:
    --  Revenues between $170.0 million to $175.0 million

    --  Adjusted operating margin, excluding the impact of stock-based
        compensation expense and amortization of intangibles, between 10.0%
        and 12.0%

Conference Call

EXL will host a conference call on Thursday, August 6, at 10:00 a.m. (ET) to discuss the company's quarterly results and operating performance. The conference call will be available live via the internet by accessing the investor relations section of EXL's website at www.exlservice.com, where the accompanying presentation and an investor factsheet 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 1-800-638-4817 or 1-617-614-3943 and enter "96023834." 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 "10709074" from two hours after the end of the call until 11:59 p.m. (ET) on August 13, 2009. The replay will also be available at the EXL website.

About ExlService Holdings, Inc.

ExlService Holdings, Inc. (Nasdaq: EXLS - News) 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 and logistics 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, 2008. 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)
                   (In thousands, except share and per share amounts)

                                  Three months ended       Six months ended
                                       June 30,                 June 30,
                                       --------                 --------
                                 2009         2008        2009         2008
                                 ----         ----        ----         ----

      Revenues                 $42,385      $47,015      $83,371      $91,446
      Cost of revenues
       (exclusive of
       depreciation and
       amortization)            25,827       30,222       50,183       58,856
                                ------       ------       ------       ------

      Gross profit              16,558       16,793       33,188       32,590
                                ------       ------       ------       ------

      Operating
       expenses:
         General and
          administrative
          expenses               7,634        8,470       14,367       16,844
         Selling and
          marketing
          expenses               3,340        2,911        6,524        5,285
         Depreciation and
          amortization           2,789        2,954        5,219        5,469
                                 -----        -----        -----        -----

      Total operating
       expenses                 13,763       14,335       26,110       27,598
                                ------       ------       ------       ------

      Income from
       continuing
       operations                2,795        2,458        7,078        4,992
      Other
      income/(expense):
         Foreign exchange
          gain/(loss)           (1,710)        (825)      (3,019)         790
         Interest and
          other income,
          net                      276          601          587        1,136
                                   ---          ---          ---        -----
    Income from
     continuing
     operations
     before income
     taxes                       1,361        2,234        4,646        6,918

      Income tax
      provision/(benefit)          109         (363)         372         (394)
                                   ---         ----          ---         ----
      Income from
       continuing
       operations                1,252        2,597        4,274        7,312

      Income/(loss)
       from
       discontinued
       operations, net
       of taxes                      -        2,667         (139)       4,752
                                     -        -----         ----        -----
      Net income to
       common
       stockholders             $1,252       $5,264       $4,135      $12,064
                                ======       ======       ======      =======
    Earnings per
     share (a):


      Basic:
      Continuing
       operations                $0.04        $0.09        $0.15        $0.25
      Discontinued
       operations                    -         0.09            -         0.17
                                     -         ----            -         ----
                                 $0.04        $0.18        $0.14        $0.42
                                 =====        =====        =====        =====

      Diluted:

      Continuing
       operations                $0.04        $0.09        $0.15        $0.25
      Discontinued
       operations                    -         0.09            -         0.16
                                     -         ----            -         ----
                                 $0.04        $0.18        $0.14        $0.41
                                 =====        =====        =====        =====

      Weighted-average
       number of shares
       used in computing
       earnings per
       share:

         Basic              28,906,052   28,799,510   28,874,795   28,778,337
         Diluted            29,159,547   29,351,038   29,119,785   29,321,982


     (a) Per share amounts may not foot due to rounding.





                             EXLSERVICE HOLDINGS, INC.
                            CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                 (In thousands, except share and per share amounts)


                                                       June      December
                                                        30,         31,
                                                       2009        2008
                                                       ----        ----
      Assets
      Current assets:
         Cash and cash equivalents                  $114,291     $112,174
         Short-term investments                            -          153
         Accounts receivable, net of
          allowance for doubtful accounts
          of $287 at June 30, 2009

          and $128 at December 31, 2008               31,892       33,714
         Deferred tax assets                           4,155        3,401
         Advance tax                                   2,226        2,033
         Prepaid expenses and other
          current assets                               3,614        6,402
                                                       -----        -----

      Total current assets                           156,178      157,877
                                                     -------      -------

      Fixed assets, net of accumulated
       depreciation of $33,188 at June
       30, 2009 and $27,727 at
       December 31, 2008                              22,598       24,518
      Goodwill                                        17,557       17,557
      Restricted cash                                  3,054          281
      Deferred tax assets                              2,757        3,047
      Other assets                                    10,440        8,689
                                                      ------        -----
      Total assets                                  $212,584     $211,969
                                                    ========     ========

      Liabilities and Stockholders'
       Equity
      Current liabilities:
         Accounts payable                             $1,948       $3,371
         Deferred revenue                              3,252        2,961
         Accrued employee cost                         9,623       14,725
         Accrued expenses and other
          current liabilities                         14,530       18,011
                                                      ------       ------
      Total current liabilities                       29,353       39,068
                                                      ------       ------

      Non-current liabilities                            745        1,569
                                                         ---        -----

      Total liabilities                               30,098       40,637
                                                      ------       ------

      Commitments and contingencies
      Preferred stock, $0.001 par
       value; 15,000,000 shares
       authorized, none issued                             -            -
      Stockholders' equity:
               Common stock, $0.001 par value;
                100,000,000 shares authorized,
                29,172,063 shares issued and
                outstanding as of
                June 30, 2009 and 29,054,145
                shares issued and outstanding
                as of December 31, 2008                   29           29
               Additional paid-in capital            120,394      116,676
               Retained earnings                      74,156       70,021
               Accumulated other comprehensive
                loss                                 (11,117)    (14,491)
                                                     -------      -------
                                                     183,462      172,235
                                                     -------      -------
         Less: 247,030 shares as of June
          30, 2009 and 237,080 shares as
          of December 31, 2008,
          held in treasury, at cost                     (976)        (903)
                                                     -------      -------
      Total stockholders' equity                     182,486      171,332
                                                     -------      -------
      Total liabilities and
       stockholders' equity                         $212,584     $211,969
                                                    ========     ========


    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 SFAS 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 June 30, 2009 and June 30, 2008:

    (Amounts in thousands)

    ExlService Holdings, Inc.
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


                    Three Months Ended June 30,    Three Months Ended June 30,
                    ---------------------------    ---------------------------
                      2009                2009     2008                 2008
                    US GAAP  Adjustments Non-GAAP US GAAP Adjustments Non-GAAP
                    -------      --      -------  -------      --      -------
    Revenues        $42,385      $-      $42,385  $47,015      $-      $47,015
    Cost of
     revenues
     (exclusive of
     depreciation
     and
     amortization)   25,827    (454) (a)  25,373   30,222    (455) (a)  29,768

                     ------     ---       ------   ------     ---       ------
    Gross profit     16,558     454       17,012   16,793     455       17,247
                     ======     ===       ======   ======     ===       ======
    Gross Margin %     39.1%                40.1%    35.7%               36.7%
    Selling,
     general and
     administrative
     expenses        10,974  (1,520) (a)   9,454   11,381  (1,432) (a)   9,949
    Depreciation
     and
     amortization
     expense          2,789       -  (b)   2,789    2,954    (221) (b)   2,733

                     ------  ------       ------   ------  ------       ------
    Income from
     operations      $2,795  $1,974       $4,769   $2,458  $2,107       $4,565
                     ======  ======       ======   ======  ======       ======
    Income from
     Operations
     Margin %           6.6%                11.3%     5.2%                9.7%

    (a) To exclude stock-based compensation expense under SFAS 123R.
    (b) To exclude amortization of acquisition-related intangibles.

SOURCE ExlService Holdings, Inc. CONTACT: Jean Liang, Head of Investor Relations, ExlService Holdings,
Inc.
, +1-212-277-7115,
ir@exlservice.com/
/Web Site: http://www.exlservice.com /
(EXLS)