Release Details
EXL Reports 2014 Third Quarter Results
"Today we announced the acquisition of
"For 2014, we are revising our revenue guidance upward to
Financial Highlights - Third Quarter 2014
Reconciliations of adjusted financial measures to GAAP are included at the end of this release.
- Revenue for the quarter ended
September 30, 2014 was$122.5 million compared to$122.3 million for the quarter endedSeptember 30, 2013 and$119.7 million for the quarter endedJune 30, 2014 . Revenue for the quarter endedSeptember 30, 2014 was reduced by approximately$9.6 million due to the reimbursement of disentanglement costs. Outsourcing services revenue for the quarter endedSeptember 30, 2014 was$91.2 million compared to$99.7 million for the quarter endedSeptember 30, 2013 and$94.3 million for the quarter endedJune 30, 2014 . Transformation services revenue for the quarter endedSeptember 30, 2014 was$31.3 million compared to$22.6 million for the quarter endedSeptember 30, 2013 and$25.4 million for the quarter endedJune 30, 2014 .
- Gross margin for the quarter ended
September 30, 2014 was 30.6% compared to 41.1% for the quarter endedSeptember 30, 2013 and 32.1% for the quarter endedJune 30, 2014 . Outsourcing services gross margin for the quarter endedSeptember 30, 2014 was 31.0% compared to 43.3% for the quarter endedSeptember 30, 2013 and 33.7% for the quarter endedJune 30, 2014 . Transformation services gross margin for the quarter endedSeptember 30, 2014 was 29.4% compared to 31.5% for the quarter endedSeptember 30, 2013 and 26.2% for the quarter endedJune 30, 2014 .
- Operating margin for the quarter ended
September 30, 2014 was 4.4% compared to 16.0% for the quarter endedSeptember 30, 2013 and 5.1% for the quarter endedJune 30, 2014 . Adjusted operating margin for the quarter endedSeptember 30, 2014 was 14.3% compared to 19.6% for the quarter endedSeptember 30, 2013 and 12.2% for the quarter endedJune 30, 2014 .
- Net income for the quarter ended
September 30, 2014 was$6.1 million compared to$13.2 million for the quarter endedSeptember 30, 2013 and$7.8 million for the quarter endedJune 30, 2014 . Adjusted EBITDA for the quarter endedSeptember 30, 2014 was$24.4 million compared to$28.4 million for the quarter endedSeptember 30, 2013 and$20.5 million for the quarter endedJune 30, 2014 .
- Diluted earnings per share for the quarter ended
September 30, 2014 were$0.18 compared to$0.39 for the quarter endedSeptember 30, 2013 and$0.23 for the quarter endedJune 30, 2014 . Adjusted diluted earnings per share for the quarter endedSeptember 30, 2014 were$0.44 compared to$0.48 for the quarter endedSeptember 30, 2013 and$0.41 for the quarter endedJune 30, 2014 .
Business Highlights
- Acquired
Overland Solutions, Inc. onOctober 24th for$53 million in cash. Overland Solutions, based inOverland Park, KS , is a leading provider of underwriting support services including premium audit, commercial and residential underwriting surveys and outsourced loss control services for the P&C industry. The transaction is expected to be immediately accretive to adjusted EPS and to contribute approximately$10 million of revenue in the fourth quarter.
- Entered into a $50 million five-year revolving credit facility with an option to increase the commitments under the credit agreement by $50 million. The credit facility is expected to be used for working capital and strategic acquisitions.
- Announced the appointment of
Henry Schweppe in the role of President, Global Business and Marketing.
- Opened a new center in Alabang,
Philippines , adding 570 workstations of additional delivery capacity and opened a new delivery center inDallas, Texas to serve our F&A clients.
- Expanded multiple outsourcing services relationships, including migrating 32 new processes in the third quarter of 2014.
- Won 7 new clients during the third quarter, including 5 transformation clients.
- Recorded headcount as of
September 30, 2014 of 23,050 (including employees under managed services), compared to 21,350 as ofSeptember 30, 2013 and 23,100 as ofJune 30, 2014 .
- Reported employee attrition for the quarter ended
September 30, 2014 of 38.0%, compared with 25.4% for the quarter endedSeptember 30, 2013 and 34.1% for the quarter endedJune 30, 2014 .
2014 Outlook
Based on current visibility and an Indian rupee to U.S. dollar exchange rate of 61, EXL is increasing its guidance for calendar year 2014. Guidance excludes the impact of the reimbursement of disentanglement costs:
- Revenue of
$514 million to$518 million .
- Adjusted diluted earnings per share, excluding the impact of stock-based compensation expense, amortization of intangibles and associated tax impacts, at the higher end of our guidance of
$1.70-$1.80 .
Conference Call
To listen to the conference call via phone, please dial 1-877-303-6384 or 1-224-357-2191 and an operator will assist you. For those who cannot access the live broadcast, a replay will be available on the EXL website (ir.exlservice.com).
About
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 EXL's operations and business environment, all of which are difficult to predict and many of which are beyond EXL's control. Forward-looking statements include information concerning EXL'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 EXL believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect EXL'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 EXL's filings with the
| CONSOLIDATED STATEMENTS OF INCOME | ||||
| (In thousands, except share and per share amounts) | ||||
| (Unaudited) | ||||
| Three months ended |
Nine months ended |
|||
| 2014 | 2013 | 2014 | 2013 | |
| Revenues | ||||
| Cost of revenues (exclusive of depreciation and amortization) | 84,983 | 72,049 | 241,164 | 218,892 |
| Gross profit | 37,474 | 50,266 | 122,828 | 135,437 |
| Operating expenses: | ||||
| General and administrative expenses | 15,952 | 15,791 | 46,992 | 44,265 |
| Selling and marketing expenses | 9,117 | 8,993 | 28,812 | 27,884 |
| Depreciation and amortization | 7,014 | 5,969 | 20,049 | 18,843 |
| Total operating expenses | 32,083 | 30,753 | 95,853 | 90,992 |
| Income from operations | 5,391 | 19,513 | 26,975 | 44,445 |
| Other income/(expense) : | ||||
| Foreign exchange income/(loss) | 642 | (2,508) | (328) | (3,126) |
| Interest and other income, net | 1,044 | 465 | 2,861 | 1,761 |
| Income before income taxes | 7,077 | 17,470 | 29,508 | 43,080 |
| Income tax provision / (benefit) | 1,002 | 4,230 | 4,523 | 10,842 |
| Net income | ||||
| Earnings per share: | ||||
| Basic | ||||
| Diluted | ||||
| Weighted-average number of shares used in computing earnings per share: | ||||
| Basic | 32,890,475 | 32,907,281 | 32,743,384 | 32,737,267 |
| Diluted | 33,676,665 | 33,955,445 | 33,594,304 | 33,859,525 |
| CONSOLIDATED BALANCE SHEETS | ||
| (In thousands, except share and per share amounts) | ||
| 2014 | 2013 | |
| (Unaudited) | ||
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | ||
| Short-term investments | 6,561 | 5,987 |
| Restricted cash | 1,082 | 423 |
| Accounts receivable, net | 75,685 | 76,121 |
| Prepaid expenses | 4,126 | 5,168 |
| Deferred tax assets, net | 4,691 | 6,958 |
| Advance income tax, net | 7,817 | 2,024 |
| Other current assets | 11,694 | 7,881 |
| Total current assets | 273,084 | 252,627 |
| Fixed assets, net | 45,307 | 34,564 |
| Restricted cash | 3,263 | 3,568 |
| Deferred tax assets, net | 11,017 | 12,254 |
| Intangible assets, net | 30,545 | 34,115 |
| Goodwill | 112,203 | 107,407 |
| Other assets | 23,139 | 18,897 |
| Total assets | ||
| Liabilities and Stockholders' Equity | ||
| Current liabilities: | ||
| Accounts payable | ||
| Deferred revenue | 8,039 | 8,618 |
| Accrued employee cost | 28,044 | 29,405 |
| Accrued expenses and other current liabilities | 33,615 | 32,219 |
| Current portion of capital lease obligations | 1,022 | 1,119 |
| Total current liabilities | 74,063 | 76,075 |
| Capital lease obligations, less current portion | 850 | 1,371 |
| Non-current liabilities | 14,530 | 19,812 |
| Total liabilities | 89,443 | 97,258 |
| Commitments and contingencies | ||
| Preferred stock, |
-- | -- |
| Stockholders' equity: | ||
| Common stock, |
34 | 33 |
| Additional paid-in-capital | 228,009 | 214,522 |
| Retained earnings | 261,964 | 236,979 |
| Accumulated other comprehensive loss | (52,928) | (60,718) |
| Total stockholders' equity including shares held in treasury | 437,079 | 390,816 |
| Less: 1,297,885 shares as of |
(27,964) | (24,642) |
| Total stockholders' equity | 409,115 | 366,174 |
| Total liabilities and stockholders' equity | ||
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 (adjusted EBITDA, adjusted net income and adjusted diluted earnings per share) that the
Additionally, EXL provides certain information on a constant currency basis, which reflects a comparison of current period results translated at the prior period currency rates. This information is provided because EXL believes that it provides useful incremental information to investors regarding EXL's operating performance.
The following table shows the reconciliation of these adjusted financial measures from GAAP measures for the quarter ended
| Reconciliation of Adjusted Operating Income and Adjusted EBITDA | |||
| (Amounts in thousands) | |||
| Three Months Ended |
Three Months Ended |
||
| 2014 | 2013 | 2014 | |
| Revenues (GAAP) | $ 122,457 | $ 122,315 | $ 119,738 |
| add: Reimbursement of transition and disentanglement costs (a) | 9,626 | -- | 5,718 |
| Revenues (Non-GAAP) | $ 132,083 | $ 122,315 | $ 125,456 |
| subtract: Cost of revenues (GAAP) | (84,983) | (72,049) | (81,259) |
| subtract: Operating expenses (GAAP) | (32,083) | (30,753) | (32,382) |
| Income from operations (Non- GAAP) | $ 15,017 | $ 19,513 | $ 11,815 |
| add: Stock-based compensation expense (b) | 2,376 | 2,967 | 1,967 |
| add: Amortization of acquisition-related intangibles (c) | 1,441 | 1,534 | 1,489 |
| Adjusted operating income (Non-GAAP) | $ 18,834 | $ 24,014 | $ 15,271 |
| Adjusted operating income margin as a % of Revenues (Non-GAAP) | 14.3% | 19.6% | 12.2% |
| add: Depreciation | 5,573 | 4,435 | 5,190 |
| Adjusted EBITDA (Non-GAAP) | $ 24,407 | $ 28,449 | $ 20,461 |
| Adjusted EBITDA margin as a % of Revenues (Non-GAAP) | 18.5% | 23.3% | 16.3% |
| (a) To exclude reimbursement of transition and disentanglement costs for a disclosed client issue. | |||
| (b) To exclude stock-based compensation expense under ASC Topic 718. | |||
| (c) To exclude amortization of acquisition-related intangibles. | |||
| Reconciliation of Adjusted Net Income and Adjusted Diluted Earnings Per Share | |||
| (Amounts in thousands, except per share data) | |||
| Three Months Ended |
Three Months Ended |
||
| 2014 | 2013 | 2014 | |
| Net income (GAAP) | $ 6,075 | $ 13,240 | $ 7,762 |
| add: Stock-based compensation expense (a) | 2,376 | 2,967 | 1,967 |
| add: Amortization of acquisition-related intangibles (b) | 1,441 | 1,534 | 1,489 |
| add: reimbursement of transition and disentanglement costs (c) | 9,626 | -- | 5,718 |
| subtract: Tax impact on stock-based compensation expense | (907) | (1,131) | (751) |
| subtract: Tax impact on amortization of acquisition-related intangibles | (191) | (170) | (170) |
| subtract: Tax impact on reimbursement of transition and disentanglement costs | (3,658) | -- | (2,173) |
| Adjusted net income (Non-GAAP) | $ 14,762 | $ 16,440 | $ 13,842 |
| Adjusted diluted earnings per share (Non-GAAP) | $ 0.44 | $ 0.48 | $ 0.41 |
| (a) To exclude stock-based compensation expense under ASC Topic 718. | |||
| (b) To exclude amortization of acquisition-related intangibles. | |||
| (c) To exclude reimbursement of transition and disentanglement costs for a disclosed client issue. | |||
CONTACT:Source:Steven N. Barlow Vice President, Investor RelationsExlService Holdings, Inc. 280 Park Avenue New York, NY 10017 (212) 624-5913 ir@exlservice.com
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