• EXL Reports 2009 Third Quarter Results




EXL Reports 2009 Third Quarter Results


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Nov 06, 2009

EXL Reports 2009 Third Quarter Results

EXL Reports 2009 Third Quarter Results

EXL Reports 2009 Third Quarter Results

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, 2009.

Rohit Kapoor, President and CEO, commented: "We experienced strong revenue growth this quarter and continued momentum in the market place. Our results reflect the investments and efforts that we have directed to execution and client centricity. In our outsourcing business, our team ensured a smooth ramp-up and efficient employee on-boarding for our recently acquired clients. In transformation services, we expanded our existing client relationships while increasing the annuity-based percentage of the business.

We are also pleased to announce a new eight-year agreement to service the back-office operations of American Express Business Travel and the associated acquisition of American Express' Global Travel Service Center operations in Gurgaon, India. We estimate achieving more than $160 million in revenues over the life of the contract. Through this transaction, we will deepen our relationship with one of our key clients as well as expand our capability set in analytics, exception processing, and transaction processing. This acquisition also adds an experienced management team and an additional delivery center to EXL. We expect the transaction to close first quarter next year."

Vishal Chhibbar, CFO, commented: "The investments we made in expanding our delivery infrastructure in the first half of this year are paying off. Sequential revenue growth was 13.7% quarter on quarter. We delivered outsourcing revenues of $37.7 million and transformation revenues of $10.5 million. We generated $9.7 million in operating cash flows and ended the quarter with a cash balance of $117.5 million versus $114.3 million last quarter. Adjusted operating margin for the quarter increased to 14.8% due to higher utilization of our physical infrastructure and people as well as strong execution across business lines. We are pleased to increase our calendar year 2009 guidance for revenue to $178.0 million - $180.0 million from $170.0 million - $175.0 million and our adjusted operating margin to 13.0% - 13.5% from 10.0% - 12.0%."

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 September 30, 2009 were $48.2 million

        compared to $46.6 million for the quarter ended September 30, 2008 and
        $42.4 million for the quarter ended June 30, 2009. Revenues attributable
        to outsourcing services for the quarter ended September 30, 2009 were
        $37.7 million compared to $34.5 million in the quarter ended September
        30, 2008 and $34.5 million in the quarter ended June 30, 2009.
        Transformation services revenues for the quarter ended September 30,
        2009 were $10.5 million compared to $12.0 million in the quarter ended
        September 30, 2008 and $7.9 million in the quarter ended June 30, 2009.

    --  Gross margin for the quarter ended September 30, 2009 was 40.2% compared
        to 39.8% for the quarter ended September 30, 2008 and 39.1% for the
        quarter ended June 30, 2009. Gross margin for outsourcing services was
        41.0% for the quarter ended September 30, 2009 compared to 41.9% for the
        quarter ended June 30, 2009. Transformation services gross margin was
        37.5% for the quarter ended September 30, 2009 compared to 26.8% for the
        quarter ended June 30, 2009.

    --  Operating margin for the quarter ended September 30, 2009 was 10.7%
        compared to 11.3% for the quarter ended September 30, 2008 and 6.6% for
        the quarter ended June 30, 2009; adjusted operating margin for the
        quarter ended September 30, 2009, excluding the impact of stock-based
        compensation expense and amortization of intangibles, was 14.8% compared
        to 14.7% for the quarter ended September 30, 2008 and 11.3% for the
        quarter ended June 30, 2009.

    --  Diluted earnings per share to common stockholders for the quarter ended
        September 30, 2009 were $0.14 compared to $0.01 for the quarter ended
        September 30, 2008 and $0.04 for the quarter ended June 30, 2009.

Business Announcements

    --  Signed eight-year agreement with American Express to provide business
        process services in conjunction with the acquisition of American
        Express' Global Travel Service Center operations in Gurgaon, India. The
        purchase price for this transaction will be approximately $30.0 million

        net of working capital adjustments at closing.
    --  Awarded a five-year outsourcing contract with a global P&C and
        reinsurance company to provide business process services from both our
        India facilities and our new Romanian facility currently in development.
    --  Increased annuity-based transformation revenues to comprise of
        approximately one-third of total transformation.
    --  Reduced days sales outstanding in the third quarter of 2009 to 59 days
        from 68 days in the second quarter of 2009 and 76 days in the third
        quarter of 2008.

    --  Experienced quarterly attrition in the third quarter of 22.0% for
        billable employees compared to 22.0% in the second quarter 2009 and
        37.3% for the third quarter of 2008.

2009 Outlook

The Company is increasing its guidance for calendar year 2009:

    --  Revenues of $178.0 million to $180.0 million from $170.0 million to
        $175.0 million.

    --  Adjusted operating margin, excluding the impact of stock-based
        compensation expense and amortization of intangibles, of 13.0% and 13.5%
        from 10.0% and 12.0%.

Conference Call

EXL will host a conference call on Friday, November 6, at 8:00 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 1-800-884-5695 or 1-617-786-2960 and enter "73278987." 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 "85132426" from two hours after the end of the call until 11:59 p.m. (ET) on November 13, 2009. The replay will also be available on the EXL website (www.exlservice.com).

EXL will host its First Annual Investor Day on Friday, November 6, 2009 at 9:30 a.m. (ET) in New York City at the NASDAQ MarketSite in Times Square. To listen to the investor day events via phone, please dial 1-888-452-4007 or 1-719-325-2481 and reference "EXLService Investor Day 2009." The event will also be made available via live audio webcast on the investor relations section of EXL's website at www.exlservice.com. Slides will be made available. For those who cannot access the live broadcast, an archived webcast of the presentations will be available on the EXL website (www.exlservice.com) after the end of the event.

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 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         Nine months ended
                                  September 30,             September 30,
                                  -------------             -------------
                                2009         2008         2009         2008
                                ----         ----         ----         ----

     Revenues                  $48,186      $46,573     $131,557     $138,019
     Cost of revenues
      (exclusive of
      depreciation and
      amortization)             28,803       28,046       78,986       86,902
                                ------       ------       ------       ------

     Gross profit               19,383       18,527       52,571       51,117
                                ------       ------       ------       ------

     Operating expenses:
        General and
         administrative
         expenses                7,770        7,349       22,137       24,193
        Selling and marketing
         expenses                3,516        3,081       10,040        8,366
        Depreciation and
         amortization            2,918        2,832        8,137        8,302
                                 -----        -----        -----        -----

     Total operating expenses   14,204       13,262       40,314       40,861
                                ------       ------       ------       ------

     Income from continuing
      operations                 5,179        5,265       12,257       10,256
     Other income/(expense):
        Foreign exchange
         gain/(loss)            (1,995)      (6,637)      (5,014)      (5,847)
        Interest and other
         income, net               269        1,157          856        2,294
                                   ---        -----          ---        -----

     Income/(loss) from
      continuing operations
      before income taxes        3,453         (215)       8,099        6,703
     Income tax provision/
      (benefit)                   (541)        (589)        (169)        (984)
                                  ----         ----         ----         ----

     Income from continuing
      operations                 3,994          374        8,268        7,687
     Income/(loss) from
      discontinued operations,
      net of taxes                   -       (1,449)        (139)       3,302
                                     -       ------         ----        -----

     Net income/(loss) to
      common stockholders       $3,994      $(1,075)      $8,129      $10,989
                                ======      =======       ======      =======

     Earnings/(loss) per share(a):
     Basic:
     Continuing operations       $0.14        $0.01        $0.29        $0.27
     Discontinued operations        -         (0.05)           -         0.11
                                    -         -----            -         ----

                                 $0.14       $(0.04)       $0.28        $0.38
                                 =====       ======        =====        =====

     Diluted:
     Continuing operations       $0.14        $0.01        $0.28        $0.26
     Discontinued operations         -        (0.05)           -         0.11
                                     -        -----            -         ----

                                 $0.14       $(0.04)       $0.28        $0.38
                                 =====       ======        =====        =====

     Weighted-average number
      of shares used in
      computing earnings
      per share:
        Basic               28,930,344   28,846,137   28,893,515   28,801,102
        Diluted             29,368,390   29,127,304   29,202,856   29,257,254

    (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)


                                                September 30, December 31,
                                                     2009         2008
                                                     ----         ----
      Assets
      Current assets:
         Cash and cash equivalents                 $117,510     $112,174
         Short-term investments                         816          153
         Restricted cash                              1,311          203
         Accounts receivable, net of allowance
          for doubtful accounts of $259 at
          September 30, 2009 and $128 at
          December 31, 2008                          31,578       33,714
         Deferred tax assets                          4,490        3,401
         Advance income-tax, net                        101        2,033
         Prepaid expenses and other current assets    3,546        6,199
                                                      -----        -----

      Total current assets                          159,352      157,877
                                                    -------      -------

      Fixed assets, net of accumulated
       depreciation of $35,787 at
       September 30, 2009 and $27,727 at
       December 31, 2008                             22,702       24,518
      Goodwill                                       19,595       17,557
      Intangible assets                                 710            -
      Restricted cash                                 3,744          281
      Deferred tax assets, net                        7,735        3,047
      Other assets                                   10,500        8,689
                                                     ------        -----

      Total assets                                 $224,338     $211,969
                                                   ========     ========

    Liabilities and Stockholders' Equity
      Current liabilities:
         Accounts payable                            $2,254       $3,371
         Deferred revenue                             3,379        2,961
         Accrued employee cost                       12,176       14,725
         Accrued expenses and other current
          liabilities                                12,157       18,011
                                                     ------       ------

      Total current liabilities                      29,966       39,068
                                                     ------       ------

      Non-current liabilities                         3,433        1,569
                                                      -----        -----

      Total liabilities                              33,399       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,
          29,179,013 shares issued and outstanding
          as of September 30, 2009 and 29,054,145
          shares issued and outstanding as of
          December 31, 2008                              29           29
         Additional paid-in capital                 122,308      116,676
         Retained earnings                           78,150       70,021
         Accumulated other comprehensive loss        (8,572)     (14,491)
                                                     ------      -------

                                                    191,915      172,235
                                                    -------      -------

         Less: 247,030 shares as of September 30,
               2009 and 237,080 shares as of
               December 31, 2008, held in
               treasury, at cost                       (976)        (903)
                                                       ----         ----

      Total stockholders' equity                    190,939      171,332
                                                    -------      -------

      Total liabilities and stockholders' equity   $224,338     $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 September 30, 2009, September 30, 2008 and June 30, 2009:

(Amounts in thousands)



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

                         Three Months Ended          Three Months Ended
                            September 30,                September 30,
                     ---------------------------- ----------------------------
                      2009                 2009    2008                 2008

                     US GAAP Adjustments Non-GAAP US GAAP Adjustments Non-GAAP
                     ------- ----------- -------- ------- ----------- --------
    Revenues         $48,186      $-     $48,186  $46,573      $-     $46,573
    Cost of revenues
     (exclusive of
     depreciation and
     amortization)    28,803    (341)(a)  28,462   28,046    (396)(a)  27,650

                      ------     ---      ------   ------     ---      ------
    Gross profit      19,383     341      19,724   18,527     396      18,923
                      ======     ===      ======   ======     ===      ======
    Gross Margin %      40.2%               40.9%    39.8%               40.6%
    Selling, general
     and
     administrative
     expenses         11,286  (1,535)(a)   9,751   10,430  (1,155)(a)   9,275
    Depreciation and
     amortization
     expense           2,918     (84)(b)   2,834    2,832     (51)(b)   2,781

                      ------  ------      ------   ------  ------      ------
    Income from
     operations       $5,179  $1,960      $7,139   $5,265  $1,602      $6,866
                      ======  ======      ======   ======  ======      ======
    Income from
    Operations
    Margin %            10.7%               14.8%    11.3%               14.7%


                                                  Three Months Ended June 30,
                                                  ----------------------------
                                                   2009                 2009

                                                  US GAAP Adjustments Non-GAAP
                                                  ------- ----------- --------
    Revenues                                      $42,385      $-     $42,385
    Cost of revenues (exclusive of depreciation
     and amortization)                             25,827    (454)(a)  25,373

                                                   ------     ---      ------
    Gross profit                                   16,558     454      17,012
                                                   ======     ===      ======
    Gross Margin %                                   39.1%              40.1%
    Selling, general and administrative expenses   10,974  (1,520)(a)   9,454
    Depreciation and amortization expense           2,789       - (b)   2,789

                                                   ------  ------      ------
    Income from operations                         $2,795  $1,974      $4,769
                                                   ======  ======      ======
    Income from Operations Margin %                   6.6%               11.3%

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

SOURCE ExlService Holdings, Inc.

Jean Liang, Head of Investor Relations of ExlService Holdings, Inc., +1-212-277-7115, ir@exlservice.com