• EXL Reports 2010 Second Quarter Results




EXL Reports 2010 Second Quarter Results


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Aug 04, 2010

EXL Reports 2010 Second Quarter Results

Aug 4, 2010 (GlobeNewswire via COMTEX News Network) --

Quarterly Revenues of $60.6 Million and 13.5% Adjusted Operating Margin


Announces Two Strategic Contract Wins With a Leading European Insurance
              Company and a Leading U.S. Insurance Company


NEW YORK, N.Y., Aug. 4, 2010 (GLOBE NEWSWIRE) -- ExlService Holdings, Inc. (Nasdaq:EXLS), a leading provider of outsourcing and transformation services, today announced its financial results for the quarter ended June 30, 2010.

Rohit Kapoor, President and CEO, commented: "EXL's deep domain knowledge and customer centric approach continues to resonate in the marketplace as exemplified by two strategic contract wins this quarter and continued broad-based business expansion. By tightly integrating EXL's transformation capabilities with our outsourcing services, we have created an attractive and differentiated proposition that is driving new business. Our wins with a leading European insurance company and a leading U.S. insurance company cement our position as the provider of choice for clients seeking a long-term partner to deliver transformation and outsourcing solutions. These wins showcase the continued demand for our solutions across geographies and the strength of our analytical services capabilities.

Based on the momentum in our core business and the demand prospects in the market, we have increased our investment in client service and enhanced our future growth prospects by hiring world-class talent, such as our recent appointment of Bill Bloom as EVP, Global Client Services. EXL remains committed to serving the growing needs of our clients and investing in our management team and operational leadership to meet anticipated demand."

Vishal Chhibbar, CFO, commented: "EXL's second quarter revenues grew 43.1% year-over-year and 11.3% sequentially. This growth was broad-based across our service lines and driven by a combination of volume expansions with new and existing clients as well as our recent acquisitions. In particular, demand for annuity-based transformation services grew at a rapid pace. Adjusted operating profit was up 71.9% year-over-year due to revenue growth combined with incremental margin expansion. As expected, adjusted operating margin for the quarter decreased sequentially to 13.5% from 15.6% in the first quarter of 2010, primarily due to annual wage increments and investments in people and infrastructure to support growth. Based on our strong year-to-date business results, we now expect to be at the top-end of our calendar year 2010 revenue guidance range and continue to expect to be at the top-end of our adjusted operating margin guidance range."

Financial Highlights

Reconciliations of adjusted financial measures to GAAP are included at the end of this release.

  --  Revenues for the quarter ended June 30, 2010 were $60.6 million compared
      to $42.4 million for the quarter ended June 30, 2009 and $54.5 million
      for the quarter ended March 31, 2010.  Outsourcing services revenues for
      the quarter ended June 30, 2010 were $46.6 million compared to $34.5
      million in the quarter ended June 30, 2009 and $41.6 million in the
      quarter ended March 31, 2010.  Transformation services revenues for the
      quarter ended June 30, 2010 were $14.1 million compared to $7.9 million
      in the quarter ended June 30, 2009 and $12.9 million in the quarter
      ended March 31, 2010.

  --  Gross margin for the quarter ended June 30, 2010 was 38.2% compared to
      39.1% for the quarter ended June 30, 2009 and 42.2% for the quarter
      ended March 31, 2010.  Outsourcing services gross margin for the quarter
      ended June 30, 2010 was 38.6% compared to 41.9% for the quarter ended
      June 30, 2009 and 43.3% for the quarter ended March 31, 2010.
      Transformation services gross margin for the quarter ended June 30, 2010
      was 37.2% compared to 26.8% for the quarter ended June 30, 2009 and
      38.7% for the quarter ended March 31, 2010.

  --  Operating margin for the quarter ended June 30, 2010 was 8.7% compared
      to 6.6% for the quarter ended June 30, 2009 and 11.9% for the quarter
      ended March 31, 2010.  Adjusted operating margin, excluding the impact
      of stock-based compensation expense and amortization of intangibles, for
      the quarter ended June 30, 2010 was 13.5% compared to 11.3% for the
      quarter ended June 30, 2009 and 15.6% for the quarter ended March 31,
      2010.  Net income for the quarter ended June 30, 2010 was $4.9 million
      compared to $1.3 million for the quarter ended June 30, 2009.  Adjusted
      EBITDA for the quarter ended June 30, 2010 was $11.5 million compared to
      $7.6 million for the quarter ended June 30, 2009.

  --  Diluted earnings per share to common stockholders for the quarter ended
      June 30, 2010 were $0.16 compared to $0.04 for the quarter ended June
      30, 2009 and $0.19 for the quarter ended March 31, 2010.


Business Announcements

  --  Awarded a five-year strategic contract with a leading European insurance
      company to provide a wide range of services across the insurance life
      cycle.

  --  Awarded a three-year strategic contract to provide a suite of
      annuity-based decision analytics services for a leading U.S. insurance
      provider.

  --  Strengthened executive leadership by appointing Bill Bloom as Executive
      Vice President, Global Client Services. Bill will lead all client-facing
      functions including sales and marketing, strategic account management
      and transformation services.

  --  Strengthened operations leadership with hiring of Jaideep Pradhan, as
      Senior Vice President and Center Head, EXL Philippines, as well as added
      operations leadership.

  --  Successfully integrated PDMA, Inc. and have commenced actively marketing
      the combined EXL LifePRO(R) solution set and capabilities.

  --  Won 1 new outsourcing services client and 6 new transformation services
      clients.

  --  Headcount for the quarter ended June 30, 2010 was approximately 12,200.
      Experienced attrition in the second quarter of 34.6% for billable
      employees compared to 22.0% in the second quarter of 2009 and 32.7% in
      the first quarter of 2010.


2010 Outlook

The Company is providing updated guidance for calendar year 2010:

  --  Revenues expected to be at the top-end of our guidance range of $235.0
      million to $240.0 million.

  --  Adjusted operating margin, excluding the impact of stock-based
      compensation expense and amortization of intangibles, is expected to be
      at the top-end of our guidance range of 12.0% to 14.0% at prevailing
      exchange rates.


Conference Call

EXL will host a conference call on Thursday, August 5, 2010 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 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 1-877-303-6384 or 1-224-357-2191. For those who cannot access the live broadcast, a replay will be available by dialing 1-800-642-1687 or 1-706-645-9291 and entering the conference identification number "82113813" from two hours after the end of the call until 11:59 p.m. (ET) on August 19, 2010. The replay will also be available on the EXL website (www.exlservice.com).

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, banking and financial services, transportation and logistics, and travel 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 detail 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, 2009. 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
                                         June 30,                  30,
                                  ----------------------  ----------------------

                                     2010        2009        2010        2009
                                  ----------  ----------  ----------  ----------
  Revenues                           $60,639     $42,385    $115,128     $83,371
  Cost of revenues (exclusive of
   depreciation and
   amortization)                      37,447      25,827      68,932      50,183
                                  ----------  ----------  ----------  ----------

  Gross profit                        23,192      16,558      46,196      33,188
                                  ----------  ----------  ----------  ----------
  Operating expenses:
   General and administrative
    expenses                           9,464       7,634      18,769      14,367
   Selling and marketing
    expenses                           4,599       3,340       8,749       6,524

   Depreciation and amortization       3,857       2,789       6,930       5,219
                                  ----------  ----------  ----------  ----------

  Total operating expenses            17,920      13,763      34,448      26,110
                                  ----------  ----------  ----------  ----------
  Income from continuing
   operations                          5,272       2,795      11,748       7,078
  Other income/(expense):
   Foreign exchange gain/(loss)          903     (1,710)       1,509     (3,019)
   Interest and other income,
    net                                  314         276         732         587
                                  ----------  ----------  ----------  ----------
  Income from continuing
   operations before income
   taxes                               6,489       1,361      13,989       4,646

  Income tax provision                 1,620         109       3,497         372
                                  ----------  ----------  ----------  ----------
  Income from continuing
   operations                          4,869       1,252      10,492       4,274
  Loss from discontinued
   operations, net of taxes               --          --          --       (139)
                                  ----------  ----------  ----------  ----------

  Net income                          $4,869      $1,252     $10,492      $4,135
                                  ==========  ==========  ==========  ==========
  Earnings per share:
   Basic                               $0.17       $0.04       $0.36       $0.14
   Diluted                             $0.16       $0.04       $0.35       $0.14
  Weighted-average number of
   shares used in computing
  earnings per share:
   Basic                          29,231,812  28,906,052  29,181,036  28,874,795
   Diluted                        30,201,092  29,159,547  30,180,283  29,119,785

                EXLSERVICE HOLDINGS, INC.
               CONSOLIDATED BALANCE SHEETS
   (In thousands, except share and per share amounts)
                                               December
                                   June 30,       31,

                                     2010        2009
                                  -----------  --------
  Assets                          (Unaudited)
  Current assets:
   Cash and cash equivalents          $88,838  $132,215
   Short-term investments               2,518     4,009
   Restricted cash                        294        65
   Accounts receivable, net of
    allowance for doubtful
    accounts of $403 at June 30,
    2010
   and $262 at December 31, 2009       41,392    34,856
   Deferred tax assets, net             5,933     4,872
   Advance income-tax, net              1,564        --
   Prepaid expenses and other
    current assets                      5,018     5,529
                                  -----------  --------

  Total current assets                145,557   181,546
                                  -----------  --------
  Fixed assets, net of
   accumulated depreciation of
   $42,526 at June 30, 2010 and
  $35,812 at December 31, 2009         28,981    23,964
  Restricted cash                       7,138     3,895
  Deferred tax assets, net              7,944     8,482
  Intangible assets, net of
   amortization                        16,615       627
  Goodwill                             48,018    19,619

  Other assets                         11,906    11,487
                                  -----------  --------

  Total assets                       $266,159  $249,620
                                  ===========  ========
  Liabilities and Stockholders'
   Equity
  Current liabilities:
   Accounts payable                    $3,663    $5,345
   Deferred revenue                     6,807     4,745
   Accrued employee cost               15,465    16,020
   Income taxes payable                    --       543
   Accrued expenses and other
    current liabilities                12,770    11,674
                                  -----------  --------

  Total current liabilities            38,705    38,327
                                  -----------  --------

  Non-current liabilities               7,167     5,575
                                  -----------  --------

  Total liabilities                    45,872    43,902
                                  -----------  --------
  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, 29,461,594
   shares issued and 29,209,092
    shares outstanding as of
    June 30, 2010 and 29,278,103

   shares issued and 29,031,073
    shares outstanding as of
    December 31, 2009                      29        29
  Additional paid-in capital          129,518   124,493
  Retained earnings                    96,166    85,674
  Accumulated other
   comprehensive loss                 (4,377)   (3,515)
                                  -----------  --------

                                      221,336   206,681
                                  -----------  --------
   Less: 252,502 shares as of
    June 30, 2010 and 247,030
    shares as of December 31,
    2009,
   held in treasury, at cost          (1,069)     (976)
                                  -----------  --------
  ExlService Holdings, Inc.
   stockholders' equity               220,267   205,705

  Noncontrolling interest                  20        13
                                  -----------  --------

  Total stockholders' equity          220,287   205,718
                                  -----------  --------
  Total liabilities and
   stockholders' equity              $266,159  $249,620
                                  ===========  ========

                        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 ASC Topic 718 and the amortization of intangibles associated with further acquisitions. The Company also incurs significant non-cash charges for depreciation that may not be indicative of our ability to generate cash flow. The Company believes that providing the measure of Adjusted EBITDA will help investors better understand the Company's underlying financial performance and ability to generate cash flow from operations. Adjusted EBITDA does not represent cash flows from operations as defined by GAAP. 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, 2010, June 30, 2009 and March 31, 2010:

                   (Amounts in thousands)

                                                    Three      Three       Three
                                                   Months     Months      Months
                                                    Ended      Ended       Ended
                                                  June 30,    June 30,   March 31,
                                                 ----------  ---------  ----------

                                                    2010        2009       2010
                                                 ----------  ---------  ----------
  Net income (GAAP)                                 $ 4,869    $ 1,252     $ 5,623
   add: Income tax provision, Other
    income/(expense)                                    403      1,543         853
  Income from continuing operations (GAAP)          $ 5,272    $ 2,795     $ 6,476
   add: Stock-based compensation expense (a)          2,404      1,974       1,828
   add: Amortization of acquisition-related
    intangibles (b)                                     520         --         181

  Adjusted operating income (Non-GAAP)              $ 8,196    $ 4,769     $ 8,485
                                                 ==========  =========  ==========
  Adjusted operating income margin %                  13.5%      11.3%       15.6%
   add: Depreciation                                  3,337      2,789       2,892

  Adjusted EBITDA (Non-GAAP)                       $ 11,533    $ 7,558    $ 11,377
                                                 ==========  =========  ==========
  Adjusted EBITDA margin %                            19.0%      17.8%       20.9%

  (a)  To exclude stock-based compensation expense under ASC Topic 718.
  (b) To exclude amortization of acquisition-related intangibles.

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: ExlService Holdings, Inc.

CONTACT:  ExlService Holdings, Inc.
Jarrod Yahes, Treasurer
(212) 277-7109
ir@exlservice.com
280 Park Avenue
New York, NY 10017

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