Document
false--12-31Q120200001297989400000000000.0010.001100000000100000000384806543881377534185241343159960.0133333000P6Y131300013130004610001500000000.0010.001150000001500000000P8YP8YP5YP5YP5YP3YP3YP3YP3YP2Y16727042954134497779 0001297989 2020-01-01 2020-03-31 0001297989 2020-05-04 0001297989 2020-03-31 0001297989 2019-12-31 0001297989 2019-01-01 2019-03-31 0001297989 us-gaap:CommonStockMember 2018-12-31 0001297989 us-gaap:RetainedEarningsMember 2018-12-31 0001297989 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0001297989 us-gaap:TreasuryStockMember 2019-03-31 0001297989 us-gaap:NoncontrollingInterestMember 2018-12-31 0001297989 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0001297989 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001297989 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001297989 us-gaap:NoncontrollingInterestMember 2019-03-31 0001297989 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0001297989 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001297989 us-gaap:TreasuryStockMember 2019-01-01 2019-03-31 0001297989 us-gaap:CommonStockMember 2019-03-31 0001297989 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0001297989 2019-03-31 0001297989 2018-12-31 0001297989 us-gaap:RetainedEarningsMember 2019-03-31 0001297989 us-gaap:CommonStockMember 2019-01-01 2019-03-31 0001297989 us-gaap:TreasuryStockMember 2018-12-31 0001297989 us-gaap:NoncontrollingInterestMember 2019-01-01 2019-03-31 0001297989 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0001297989 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001297989 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001297989 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001297989 us-gaap:TreasuryStockMember 2019-12-31 0001297989 us-gaap:TreasuryStockMember 2020-03-31 0001297989 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001297989 us-gaap:CommonStockMember 2020-03-31 0001297989 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0001297989 us-gaap:TreasuryStockMember 2020-01-01 2020-03-31 0001297989 us-gaap:RetainedEarningsMember 2020-03-31 0001297989 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001297989 us-gaap:RetainedEarningsMember 2019-12-31 0001297989 us-gaap:CommonStockMember 2019-12-31 0001297989 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0001297989 us-gaap:AccountingStandardsUpdate201602Member 2019-01-01 0001297989 country:IN 2019-12-31 0001297989 country:PH 2019-12-31 0001297989 country:US 2020-03-31 0001297989 exls:RestOfWorldMember 2019-12-31 0001297989 country:PH 2020-03-31 0001297989 exls:RestOfWorldMember 2020-03-31 0001297989 country:US 2019-12-31 0001297989 country:IN 2020-03-31 0001297989 exls:AnalyticsServicesMember 2020-01-01 2020-03-31 0001297989 exls:BPMandRelatedServicesMember 2020-01-01 2020-03-31 0001297989 exls:AnalyticsServicesMember 2019-01-01 2019-03-31 0001297989 exls:BPMandRelatedServicesMember 2019-01-01 2019-03-31 0001297989 country:GB 2020-01-01 2020-03-31 0001297989 exls:RestOfWorldMember 2019-01-01 2019-03-31 0001297989 country:US 2019-01-01 2019-03-31 0001297989 country:US 2020-01-01 2020-03-31 0001297989 country:GB 2019-01-01 2019-03-31 0001297989 us-gaap:NonUsMember 2020-01-01 2020-03-31 0001297989 exls:RestOfWorldMember 2020-01-01 2020-03-31 0001297989 us-gaap:NonUsMember 2019-01-01 2019-03-31 0001297989 us-gaap:OperatingSegmentsMember exls:AnalyticsMember 2020-01-01 2020-03-31 0001297989 us-gaap:OperatingSegmentsMember us-gaap:HealthCareMember 2020-01-01 2020-03-31 0001297989 us-gaap:OperatingSegmentsMember exls:InsuranceMember 2020-01-01 2020-03-31 0001297989 us-gaap:OperatingSegmentsMember exls:EmergingBusinessMember 2020-01-01 2020-03-31 0001297989 us-gaap:OperatingSegmentsMember exls:EmergingBusinessMember 2019-01-01 2019-03-31 0001297989 us-gaap:OperatingSegmentsMember us-gaap:HealthCareMember 2019-01-01 2019-03-31 0001297989 us-gaap:OperatingSegmentsMember exls:InsuranceMember 2019-01-01 2019-03-31 0001297989 us-gaap:OperatingSegmentsMember exls:AnalyticsMember 2019-01-01 2019-03-31 0001297989 2019-01-01 2019-12-31 0001297989 2020-01-01 0001297989 us-gaap:PreviousAccountingGuidanceMember 2020-01-01 0001297989 exls:ContractAcquisitionCostsMember 2020-01-01 2020-03-31 0001297989 exls:ContractFulfillmentCostsMember 2019-12-31 0001297989 exls:ContractFulfillmentCostsMember 2020-01-01 2020-03-31 0001297989 exls:ContractFulfillmentCostsMember 2019-03-31 0001297989 exls:ContractAcquisitionCostsMember 2020-03-31 0001297989 exls:ContractAcquisitionCostsMember 2019-12-31 0001297989 exls:ContractFulfillmentCostsMember 2019-01-01 2019-12-31 0001297989 exls:ContractFulfillmentCostsMember 2018-12-31 0001297989 exls:ContractAcquisitionCostsMember 2019-01-01 2019-12-31 0001297989 exls:ContractAcquisitionCostsMember 2019-01-01 2019-03-31 0001297989 exls:ContractAcquisitionCostsMember 2018-12-31 0001297989 exls:ContractAcquisitionCostsMember 2019-03-31 0001297989 exls:ContractFulfillmentCostsMember 2019-01-01 2019-03-31 0001297989 exls:ContractFulfillmentCostsMember 2020-03-31 0001297989 exls:DepreciationAndAmortizationMember 2020-01-01 2020-03-31 0001297989 exls:DepreciationAndAmortizationMember 2019-01-01 2019-03-31 0001297989 us-gaap:BuildingMember 2020-01-01 2020-03-31 0001297989 us-gaap:VehiclesMember 2020-03-31 0001297989 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2020-03-31 0001297989 us-gaap:FurnitureAndFixturesMember 2020-03-31 0001297989 us-gaap:LandMember 2019-12-31 0001297989 us-gaap:LeaseholdImprovementsMember 2020-03-31 0001297989 us-gaap:FurnitureAndFixturesMember 2019-12-31 0001297989 us-gaap:ConstructionInProgressMember 2019-12-31 0001297989 us-gaap:ConstructionInProgressMember 2020-03-31 0001297989 us-gaap:TechnologyEquipmentMember 2019-12-31 0001297989 us-gaap:LandMember 2020-03-31 0001297989 us-gaap:TechnologyEquipmentMember 2020-03-31 0001297989 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2019-12-31 0001297989 us-gaap:LeaseholdImprovementsMember 2019-12-31 0001297989 us-gaap:BuildingMember 2020-03-31 0001297989 us-gaap:VehiclesMember 2019-12-31 0001297989 us-gaap:BuildingMember 2019-12-31 0001297989 srt:MaximumMember us-gaap:LeaseholdImprovementsMember 2020-01-01 2020-03-31 0001297989 srt:MaximumMember us-gaap:VehiclesMember 2020-01-01 2020-03-31 0001297989 srt:MinimumMember us-gaap:VehiclesMember 2020-01-01 2020-03-31 0001297989 srt:MaximumMember us-gaap:TechnologyEquipmentMember 2020-01-01 2020-03-31 0001297989 srt:MinimumMember us-gaap:TechnologyEquipmentMember 2020-01-01 2020-03-31 0001297989 srt:MinimumMember us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2020-01-01 2020-03-31 0001297989 srt:MinimumMember us-gaap:LeaseholdImprovementsMember 2020-01-01 2020-03-31 0001297989 srt:MinimumMember us-gaap:FurnitureAndFixturesMember 2020-01-01 2020-03-31 0001297989 srt:MaximumMember us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2020-01-01 2020-03-31 0001297989 srt:MaximumMember us-gaap:FurnitureAndFixturesMember 2020-01-01 2020-03-31 0001297989 us-gaap:DevelopedTechnologyRightsMember 2020-01-01 2020-03-31 0001297989 us-gaap:TrademarksAndTradeNamesMember 2020-01-01 2020-03-31 0001297989 us-gaap:CustomerRelationshipsMember 2020-01-01 2020-03-31 0001297989 exls:EmergingBusinessMember 2020-01-01 2020-03-31 0001297989 us-gaap:HealthCareMember 2018-12-31 0001297989 us-gaap:HealthCareMember 2019-12-31 0001297989 exls:AnalyticsMember 2018-12-31 0001297989 exls:InsuranceMember 2020-01-01 2020-03-31 0001297989 exls:FinanceandAccountingMember 2020-03-31 0001297989 exls:TravelTransportationandLogisticsMember 2020-01-01 2020-03-31 0001297989 exls:OtherOperationsManagementMember 2019-12-31 0001297989 exls:FinanceandAccountingMember 2020-01-01 2020-03-31 0001297989 exls:OtherOperationsManagementMember 2019-01-01 2019-12-31 0001297989 exls:AnalyticsMember 2019-12-31 0001297989 exls:InsuranceMember 2020-03-31 0001297989 us-gaap:HealthCareMember 2019-01-01 2019-12-31 0001297989 exls:InsuranceMember 2018-12-31 0001297989 exls:InsuranceMember 2019-12-31 0001297989 exls:AnalyticsMember 2019-01-01 2019-12-31 0001297989 exls:EmergingBusinessMember 2019-12-31 0001297989 exls:TravelTransportationandLogisticsMember 2019-12-31 0001297989 exls:TravelTransportationandLogisticsMember 2018-12-31 0001297989 us-gaap:HealthCareMember 2020-03-31 0001297989 us-gaap:HealthCareMember 2020-01-01 2020-03-31 0001297989 exls:FinanceandAccountingMember 2019-01-01 2019-12-31 0001297989 exls:TravelTransportationandLogisticsMember 2019-01-01 2019-12-31 0001297989 exls:EmergingBusinessMember 2019-01-01 2019-12-31 0001297989 exls:AnalyticsMember 2020-01-01 2020-03-31 0001297989 exls:OtherOperationsManagementMember 2020-03-31 0001297989 exls:EmergingBusinessMember 2018-12-31 0001297989 exls:OtherOperationsManagementMember 2020-01-01 2020-03-31 0001297989 exls:AnalyticsMember 2020-03-31 0001297989 exls:InsuranceMember 2019-01-01 2019-12-31 0001297989 exls:TravelTransportationandLogisticsMember 2020-03-31 0001297989 exls:OtherOperationsManagementMember 2018-12-31 0001297989 exls:EmergingBusinessMember 2020-03-31 0001297989 exls:FinanceandAccountingMember 2019-12-31 0001297989 exls:FinanceandAccountingMember 2018-12-31 0001297989 us-gaap:CustomerRelationshipsMember 2019-12-31 0001297989 us-gaap:DevelopedTechnologyRightsMember 2019-12-31 0001297989 us-gaap:TrademarksAndTradeNamesMember 2019-12-31 0001297989 us-gaap:TrademarksAndTradeNamesMember 2019-12-31 0001297989 exls:HealthcareAnalyticsMember 2020-03-31 0001297989 srt:ProFormaMember us-gaap:MeasurementInputDiscountRateMember 2020-03-31 0001297989 us-gaap:MeasurementInputLongTermRevenueGrowthRateMember 2020-03-31 0001297989 srt:MinimumMember us-gaap:MeasurementInputDiscountRateMember 2020-03-31 0001297989 srt:ProFormaMember 2020-03-31 0001297989 srt:MaximumMember us-gaap:MeasurementInputDiscountRateMember 2020-03-31 0001297989 us-gaap:CustomerRelationshipsMember 2020-03-31 0001297989 us-gaap:DevelopedTechnologyRightsMember 2020-03-31 0001297989 us-gaap:TrademarksAndTradeNamesMember 2020-03-31 0001297989 us-gaap:TrademarksAndTradeNamesMember 2020-03-31 0001297989 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-12-31 0001297989 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-03-31 0001297989 us-gaap:AccumulatedTranslationAdjustmentMember 2020-03-31 0001297989 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2020-03-31 0001297989 us-gaap:AccumulatedTranslationAdjustmentMember 2019-12-31 0001297989 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2019-12-31 0001297989 us-gaap:FairValueInputsLevel2Member 2020-03-31 0001297989 us-gaap:FairValueInputsLevel2Member 2019-12-31 0001297989 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0001297989 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0001297989 us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001297989 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001297989 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001297989 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0001297989 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0001297989 us-gaap:FairValueMeasurementsRecurringMember 2020-03-31 0001297989 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2019-12-31 0001297989 us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-03-31 0001297989 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2020-03-31 0001297989 us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001297989 us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:ForwardContractsMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-03-31 0001297989 us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:ForwardContractsMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001297989 us-gaap:OtherNoncurrentLiabilitiesMember us-gaap:ForeignExchangeContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-03-31 0001297989 us-gaap:OtherAssetsMember us-gaap:ForeignExchangeContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001297989 us-gaap:OtherCurrentAssetsMember us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2019-12-31 0001297989 exls:AccruedExpensesAndOtherCurrentLiabilitiesMember us-gaap:ForeignExchangeContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-03-31 0001297989 exls:AccruedExpensesAndOtherCurrentLiabilitiesMember us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2020-03-31 0001297989 us-gaap:OtherNoncurrentLiabilitiesMember us-gaap:ForeignExchangeContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001297989 us-gaap:OtherCurrentAssetsMember us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2020-03-31 0001297989 us-gaap:OtherAssetsMember us-gaap:ForeignExchangeContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-03-31 0001297989 us-gaap:OtherCurrentAssetsMember us-gaap:ForeignExchangeContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-03-31 0001297989 exls:AccruedExpensesAndOtherCurrentLiabilitiesMember us-gaap:ForeignExchangeContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001297989 us-gaap:OtherCurrentAssetsMember us-gaap:ForeignExchangeContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001297989 exls:AccruedExpensesAndOtherCurrentLiabilitiesMember us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2019-12-31 0001297989 us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-01-01 2019-03-31 0001297989 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0001297989 us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-01-01 2020-03-31 0001297989 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0001297989 us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0001297989 us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0001297989 us-gaap:RevolvingCreditFacilityMember 2020-03-31 0001297989 exls:A3.50ConvertibleSeniorNotesdueOctober12024Member us-gaap:ConvertibleNotesPayableMember 2020-03-31 0001297989 us-gaap:NotesPayableOtherPayablesMember 2020-03-31 0001297989 us-gaap:RevolvingCreditFacilityMember 2019-12-31 0001297989 exls:A3.50ConvertibleSeniorNotesdueOctober12024Member us-gaap:ConvertibleNotesPayableMember 2018-10-01 2018-10-01 0001297989 exls:A3.50ConvertibleSeniorNotesdueOctober12024Member us-gaap:ConvertibleNotesPayableMember 2018-10-01 0001297989 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember exls:NewCreditAgreementMember us-gaap:LondonInterbankOfferedRateLIBORMember 2017-11-21 2017-11-21 0001297989 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember exls:NewCreditAgreementMember 2017-11-21 2017-11-21 0001297989 exls:SCIOMember us-gaap:RevolvingCreditFacilityMember exls:NewCreditAgreementMember 2018-07-02 0001297989 exls:A3.50ConvertibleSeniorNotesdueOctober12024Member us-gaap:ConvertibleNotesPayableMember 2020-01-01 2020-03-31 0001297989 us-gaap:NotesPayableOtherPayablesMember 2019-12-31 0001297989 us-gaap:RevolvingCreditFacilityMember exls:NewCreditAgreementMember 2019-01-01 2019-03-31 0001297989 us-gaap:RevolvingCreditFacilityMember exls:NewCreditAgreementMember 2020-03-31 0001297989 exls:A3.50ConvertibleSeniorNotesdueOctober12024Member us-gaap:ConvertibleNotesPayableMember 2019-01-01 2019-03-31 0001297989 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember exls:NewCreditAgreementMember 2017-11-21 2017-11-21 0001297989 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember exls:NewCreditAgreementMember us-gaap:PrimeRateMember 2017-11-21 2017-11-21 0001297989 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember exls:NewCreditAgreementMember us-gaap:PrimeRateMember 2017-11-21 2017-11-21 0001297989 us-gaap:RevolvingCreditFacilityMember 2018-10-01 2018-10-01 0001297989 us-gaap:RevolvingCreditFacilityMember exls:NewCreditAgreementMember 2020-01-01 2020-03-31 0001297989 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember exls:NewCreditAgreementMember us-gaap:LondonInterbankOfferedRateLIBORMember 2017-11-21 2017-11-21 0001297989 us-gaap:RevolvingCreditFacilityMember exls:NewCreditAgreementMember 2017-11-21 0001297989 exls:A3.50ConvertibleSeniorNotesdueOctober12024Member us-gaap:ConvertibleNotesPayableMember 2019-12-31 0001297989 srt:MaximumMember exls:SCIOMember us-gaap:RevolvingCreditFacilityMember exls:NewCreditAgreementMember 2017-11-21 0001297989 exls:TwoThousandSeventeenRepurchaseProgramMember 2020-01-01 2020-03-31 0001297989 srt:MinimumMember exls:TwoThousandSeventeenRepurchaseProgramMember 2017-02-28 0001297989 exls:TwoThousandSeventeenRepurchaseProgramMember 2019-01-01 2019-03-31 0001297989 srt:MaximumMember exls:TwoThousandSeventeenRepurchaseProgramMember 2017-02-28 0001297989 exls:TwoThousandNineteenRepurchaseProgramMember 2019-12-16 0001297989 exls:TwoThousandSeventeenRepurchaseProgramMember 2017-02-28 0001297989 us-gaap:SellingAndMarketingExpenseMember 2020-01-01 2020-03-31 0001297989 us-gaap:SellingAndMarketingExpenseMember 2019-01-01 2019-03-31 0001297989 us-gaap:GeneralAndAdministrativeExpenseMember 2020-01-01 2020-03-31 0001297989 us-gaap:GeneralAndAdministrativeExpenseMember 2019-01-01 2019-03-31 0001297989 us-gaap:CostOfSalesMember 2019-01-01 2019-03-31 0001297989 us-gaap:CostOfSalesMember 2020-01-01 2020-03-31 0001297989 us-gaap:RestrictedStockUnitsRSUMember 2020-03-31 0001297989 exls:RestrictedStockandRestrictedStockUnitsMember 2020-03-31 0001297989 exls:PerformanceBasedStockAwardsMember 2020-03-31 0001297989 exls:RestrictedStockandRestrictedStockUnitsMember 2020-01-01 2020-03-31 0001297989 exls:PerformanceBasedStockAwardsMember 2020-01-01 2020-03-31 0001297989 us-gaap:EmployeeStockOptionMember 2020-03-31 0001297989 us-gaap:RestrictedStockMember 2020-01-01 2020-03-31 0001297989 us-gaap:RestrictedStockMember 2019-12-31 0001297989 us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-03-31 0001297989 us-gaap:RestrictedStockMember 2020-03-31 0001297989 us-gaap:RestrictedStockUnitsRSUMember 2019-12-31 0001297989 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-12-31 0001297989 us-gaap:EmployeeStockOptionMember 2020-01-01 2020-03-31 0001297989 us-gaap:EmployeeStockOptionMember 2019-12-31 0001297989 exls:RevenueBasedPerformanceRestrictedStockUnitsMember 2020-01-01 2020-03-31 0001297989 exls:MarketConditionBasedPerformanceRestrictedStockUnitsMember 2019-12-31 0001297989 exls:MarketConditionBasedPerformanceRestrictedStockUnitsMember 2020-01-01 2020-03-31 0001297989 exls:RevenueBasedPerformanceRestrictedStockUnitsMember 2020-03-31 0001297989 exls:RevenueBasedPerformanceRestrictedStockUnitsMember 2019-12-31 0001297989 exls:MarketConditionBasedPerformanceRestrictedStockUnitsMember 2020-03-31 iso4217:USD iso4217:USD xbrli:shares xbrli:shares xbrli:pure exls:operating_segment iso4217:EUR iso4217:GBP exls:class_of_common_stock


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________________________
FORM 10-Q
_________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                      TO                     
COMMISSION FILE NUMBER 001-33089
_________________________________________________________
EXLSERVICE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
_________________________________________________________
Delaware
 
82-0572194
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
320 Park Avenue,
29th Floor,
 

New York,
New York
 
10022
(Address of principal executive offices)
 
(Zip code)
(212) 277-7100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class:
Trading symbol(s)
Name of Each Exchange on Which Registered:
Common Stock, par value $0.001 per share
 EXLS
NASDAQ
Securities registered pursuant to Section 12(g) of the Act:
None
________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer
 
  
Accelerated filer
 
 
 
 
 
 
Non-accelerated filer
 
  
Smaller reporting company
 
 
 
 
 
 
 
 
Emerging growth company
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  

As of May 4, 2020, there were 34,316,121 shares of the registrant’s common stock outstanding, par value $0.001 per share.
 




TABLE OF CONTENTS
 
 
 
 
 
 
 
PAGE
ITEM
 
 
 
 
 
 
 
 
 
1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.
 
 
 
 
 
3.
 
 
 
 
 
4.
 
 
 
 
 
 
 
 
 
 
 
1.
 
 
 
 
 
1A.
 
 
 
 
 
2.
 
 
 
 
 
3.
 
 
 
 
 
4.
 
 
 
 
 
5.
 
 
 
 
 
6.
 
 
 

2



PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EXLSERVICE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 
 
As of
 
 
March 31, 2020
 
December 31, 2019
 
 
(Unaudited)
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
224,874

 
$
119,165

Short-term investments
 
142,539

 
202,238

Restricted cash
 
6,369

 
5,453

Accounts receivable, net
 
187,137

 
171,864

Prepaid expenses
 
11,776

 
13,246

Advance income tax, net
 
6,024

 
4,698

Other current assets
 
26,173

 
24,594

Total current assets
 
604,892

 
541,258

Property and equipment, net
 
90,513

 
79,142

Operating lease right-of-use assets
 
99,940

 
86,396

Restricted cash
 
2,291

 
2,426

Deferred tax assets, net
 
16,640

 
11,855

Intangible assets, net
 
69,734

 
73,982

Goodwill
 
348,076

 
349,529

Other assets
 
32,045

 
36,016

Investment in equity affiliate
 
3,128

 
2,484

Total assets
 
$
1,267,259

 
$
1,183,088

Liabilities and stockholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
8,048

 
$
6,564

Current portion of long-term borrowings
 
100,666

 
40,867

Deferred revenue
 
16,038

 
13,436

Accrued employee costs
 
28,937

 
71,626

Accrued expenses and other current liabilities
 
84,495

 
71,023

Current portion of operating lease liabilities
 
18,236

 
24,148

Income taxes payable, net
 
1,692

 
1,432

Current portion of finance lease liabilities
 
252

 
253

Total current liabilities
 
258,364

 
229,349

Long-term borrowings, less current portion
 
234,820

 
194,131

Operating lease liabilities, less current portion
 
93,707

 
74,709

Income taxes payable
 
1,790

 
1,790

Deferred tax liabilities, net
 
773

 
966

Finance lease liabilities, less current portion
 
380

 
430

Other non-current liabilities
 
21,521

 
11,712

Total liabilities
 
611,355

 
513,087

Commitments and contingencies (Refer to Note 24)
 

 

Preferred stock, $0.001 par value; 15,000,000 shares authorized, none issued
 

 

ExlService Holdings, Inc. Stockholders’ equity:
 
 
 
 
Common stock, $0.001 par value; 100,000,000 shares authorized, 38,813,775 shares issued and 34,315,996 shares outstanding as of March 31, 2020 and 38,480,654 shares issued and 34,185,241 shares outstanding as of December 31, 2019
 
39

 
39

Additional paid-in capital
 
396,939

 
391,240

Retained earnings
 
574,314

 
551,903

Accumulated other comprehensive loss
 
(113,104
)
 
(84,892
)
Total including shares held in treasury
 
858,188

 
858,290

Less: 4,497,779 shares as of March 31, 2020 and 4,295,413 shares as of December 31, 2019, held in treasury, at cost
 
(202,284
)
 
(188,289
)
Stockholders’ equity
 
655,904

 
670,001

 
 
 
 
 
Total equity
 
655,904

 
670,001

Total liabilities and stockholders’ equity
 
$
1,267,259

 
$
1,183,088

See accompanying notes to unaudited consolidated financial statements.

3



EXLSERVICE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except share and per share amounts)

 
 
Three months ended March 31,
 
 
2020
 
2019
Revenues, net
 
$
245,990

   
$
239,573

Cost of revenues(1)
 
162,656

   
157,240

Gross profit(1)
 
83,334

 
82,333

Operating expenses:
 

   

General and administrative expenses
 
28,941

 
32,531

Selling and marketing expenses
 
14,456

 
18,047

Depreciation and amortization expense
 
12,450

 
13,667

Impairment and restructuring charges
 

 
1,227

Total operating expenses
 
55,847

 
65,472

Income from operations
 
27,487

   
16,861

Foreign exchange gain, net
 
1,377

   
1,260

Interest expense
 
(3,072
)
 
(3,582
)
Other income, net
 
2,529

   
4,423

Income before income tax expense and earnings from equity affiliates
 
28,321

 
18,962

Income tax expense
 
5,855

 
4,200

Income before earnings from equity affiliates
 
22,466

 
14,762

Loss from equity-method investment
 
55

 
67

Net income attributable to ExlService Holdings, Inc. stockholders
 
$
22,411

 
$
14,695

Earnings per share attributable to ExlService Holdings, Inc. stockholders:
 
 
 
 
Basic
 
$
0.65

 
$
0.43

Diluted
 
$
0.65

 
$
0.42

Weighted-average number of shares used in computing earnings per share attributable to ExlService Holdings Inc. stockholders:
 
 
   
 
Basic
 
34,401,565

   
34,374,815

Diluted
 
34,720,603

 
34,833,435


(1) Exclusive of depreciation and amortization expense.



See accompanying notes to unaudited consolidated financial statements.

4



EXLSERVICE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME (UNAUDITED)
(In thousands)
 
 
Three months ended March 31,
 
 
2020

2019
Net income
 
$
22,411

 
$
14,695

 Other comprehensive (loss)/income:
 
 
 
 
Unrealized (loss)/gain on cash flow hedges
 
(14,846
)
 
5,937

Foreign currency translation (loss)/gain
 
(17,337
)
 
2,680

Reclassification adjustments
 

 

Gain on cash flow hedges(1)
 
(929
)
 
(671
)
Retirement benefits(2)
 
101

 
(39
)
Income tax benefit/(expense) relating to above(3)
 
4,799

 
(1,652
)
  Total other comprehensive (loss)/income
 
$
(28,212
)
 
$
6,255

Total comprehensive (loss)/income
 
$
(5,801
)
 
$
20,950


(1)
These are reclassified to net income and are included either in cost of revenues or operating expenses, as applicable in the unaudited consolidated statements of income. Refer to Note 16 to the unaudited consolidated financial statements.

(2)
These are reclassified to net income and are included in other income, net in the unaudited consolidated statements of income. Refer to Note 19 to the unaudited consolidated financial statements.

(3)
These are income tax benefit/(expense) recognized on cash flow hedges and retirement benefits. Refer to Note 21 to the unaudited consolidated financial statements.







See accompanying notes to unaudited consolidated financial statements.

5



EXLSERVICE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
For the three months ended March 31, 2020 and 2019
(In thousands, except share and per share amounts)
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Treasury Stock
 
Total Equity
 
 
 
 
 
 
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
Balance as of January 1, 2020
38,480,654

 
$
39

 
$
391,240

 
$
551,903

 
$
(84,892
)
 
(4,295,413
)
 
$
(188,289
)
 
$
670,001

Stock issued against stock-based compensation plans
333,121

 

 
921

 

 

 

 

 
921

Stock-based compensation

 

 
4,778

 

 

 

 

 
4,778

Acquisition of treasury stock

 

 

 

 

 
(202,366
)
 
(13,995
)
 
(13,995
)
Other comprehensive loss

 

 

 

 
(28,212
)
 

 

 
(28,212
)
Net income

 

 

 
22,411

 

 

 

 
22,411

Balance as of March 31, 2020
38,813,775

 
$
39

 
$
396,939

 
$
574,314

 
$
(113,104
)
 
(4,497,779
)
 
$
(202,284
)
 
$
655,904




 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Treasury Stock
 
Non - Controlling Interest
 
Total Equity
 
 
 
 
 
 
 
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
 
Balance as of January 1, 2019
37,850,544

 
$
38

 
$
364,179

 
$
484,244

 
$
(83,467
)
 
(3,628,068
)
 
$
(146,925
)
 
$
250

 
$
618,319

Stock issued against stock-based compensation plans
405,492

 

 
22

 

 

 

 

 

 
22

Stock-based compensation

 

 
6,956

 

 

 

 

 

 
6,956

Acquisition of treasury stock

 

 

 

 

 
(262,531
)
 
(15,408
)
 

 
(15,408
)
Allocation of equity component related to issuance costs on convertible notes

 

 
(13
)
 

 

 

 

 

 
(13
)
Non-controlling interest

 

 

 

 

 

 

 
9

 
9

Other comprehensive loss

 

 

 

 
6,255

 

 

 

 
6,255

Net income

 

 

 
14,695

 

 

 

 

 
14,695

Balance as of March 31, 2019
38,256,036

 
$
38

 
$
371,144

 
$
498,939

 
$
(77,212
)
 
(3,890,599
)
 
$
(162,333
)
 
$
259

 
$
630,835


See accompanying notes to unaudited consolidated financial statements.


6



EXLSERVICE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
 
Three months ended March 31,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net income
$
22,411

 
$
14,695

Adjustments to reconcile net income to net cash (used for)/provided by operating activities:
 
 
 
Depreciation and amortization expense
12,472

 
13,724

Stock-based compensation expense
4,778

 
6,956

Amortization of operating lease right-of-use assets
6,853

 
7,017

Unrealized gain on short term investments
267

 
(3,185
)
Unrealized foreign exchange (gain)/loss, net
(5,112
)
 
127

Deferred income tax expense
3,539

 
1,049

Allowance for expected credit losses
195

 
298

Loss from equity-method investment
55

 
67

Amortization of non-cash interest expense related to convertible senior notes
635

 
600

Impairment charges

 
1,227

Others, net
(26
)
 
(1,401
)
Change in operating assets and liabilities:
 
 
 
Accounts receivable
(17,518
)
 
(12,016
)
Prepaid expenses and other current assets
(3,249
)
 
591

Advance income tax, net
(1,109
)
 
(2,099
)
Other assets
925

 
388

Accounts payable
1,400

 
(1,159
)
Deferred revenue
2,579

 
3,262

Accrued employee costs
(37,046
)
 
(22,436
)
Accrued expenses and other liabilities
972

 
5,837

Operating lease liabilities
(6,576
)
 
(5,199
)
Net cash (used for)/provided by operating activities
(13,555
)
 
8,343

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(12,274
)
 
(10,878
)
Investment in equity affiliate
(700
)
 

Purchase of investments
(23,830
)
 
(47,683
)
Proceeds from redemption of investments
72,844

 
21,361

Net cash provided by/(used for) investing activities
36,040

 
(37,200
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Principal payments of finance lease liabilities
(67
)
 
(137
)
Proceeds from borrowings
110,000

 
46,000

Repayments of borrowings
(10,201
)
 
(10,572
)
Payment of debt issuance costs

 
(97
)
Acquisition of treasury stock
(13,995
)
 
(15,408
)
Proceeds from exercise of stock options
921

 
22

Net cash provided by financing activities
86,658

 
19,808

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(2,653
)
 
(455
)
Net increase/(decrease) in cash, cash equivalents and restricted cash
106,490

 
(9,504
)
Cash, cash equivalents and restricted cash at the beginning of the period
127,044

 
104,131

Cash, cash equivalents and restricted cash at the end of the period
$
233,534

 
$
94,627

 
 
 
 

See accompanying notes to unaudited consolidated financial statements.

7



EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(In thousands, except share and per share amounts)
1. Organization

ExlService Holdings, Inc. (“ExlService Holdings”) is organized as a corporation under the laws of the state of Delaware. ExlService Holdings, together with its subsidiaries and affiliates (collectively, the “Company”), operates in the Business Process Management (“BPM”) industry providing operations management services and analytics services that helps its clients build and grow sustainable businesses. By orchestrating its domain expertise, data, analytics and digital technology, the Company looks deeper to design and manage agile, customer-centric operating models to improve global operations, drive profitability, enhance customer satisfaction, increase data-driven insights, and manage risk and compliance. The Company’s clients are located principally in the United States of America (“U.S.”) and the United Kingdom (“U.K”).
2. Summary of Significant Accounting Policies
(a) Basis of Preparation and Principles of Consolidation

The unaudited consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements and therefore should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The unaudited consolidated financial statements reflect all adjustments (of a normal and recurring nature) that management considers necessary for a fair presentation of such statements for the interim periods presented. The unaudited consolidated statements of income for the interim periods presented are not necessarily indicative of the results for the full year or for any subsequent period.
    
The accompanying unaudited consolidated financial statements include the financial statements of ExlService Holdings and all of its subsidiaries. The standalone financial statements of subsidiaries are fully consolidated on a line-by-line basis. Intra-group balances and transactions, and gains and losses arising from intra-group transactions, are eliminated while preparing those financial statements.

Accounting policies of the respective individual subsidiary and associate are aligned wherever necessary, so as to ensure consistency with the accounting policies that are adopted by the Company under U.S. GAAP.

The Company’s investments in equity affiliates are initially recorded at cost and any excess cost over proportionate share of the fair value of the net assets of the investee at the acquisition date is recognized as goodwill. The proportionate share of net income or loss of the investee is recognized in the unaudited consolidated statements of income.

Effective January 1, 2020, the Company made certain operational and structural changes to more closely integrate the Company’s businesses and to simplify its organizational structure. Under the new structure, the Company reports its financial performance based on new segments described in Note 3 - Segment and Geographical Information to the unaudited consolidated financial statements. In conjunction with the new reporting structure, the Company has recast certain prior period amounts, wherever applicable, to conform to the way the Company internally manages and monitors segment performance. This change primarily impacted Note 3 - Segment and Geographical Information and Note 9 - Goodwill to the unaudited consolidated financial statements, with no impact on the unaudited consolidated balance sheets, statements of income, comprehensive (loss)/income, equity and cash flows.
(b) Use of Estimates
The preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the unaudited consolidated statements of income during the reporting period. Although these estimates are based on management’s best assessment of the current business

8

EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
March 31, 2020
(In thousands, except share and per share amounts)

environment, actual results may be different from those estimates. The significant estimates and assumptions that affect the unaudited consolidated financial statements include, but are not limited to, allowance for expected credit losses, expected recoverability from customers with contingent fee arrangements, recoverability of dues from statutory authorities, assets and obligations related to employee benefit plans, deferred tax valuation allowances, income-tax uncertainties and other contingencies, valuation of derivative financial instruments, assumptions used to calculate stock-based compensation expense, assumptions used to determine the incremental borrowing rate to calculate lease liabilities and right-of-use (“ROU”) assets, lease term to calculate lease cost, depreciation and amortization periods, purchase price allocation, recoverability of long-lived assets including goodwill and intangibles, and estimated costs to complete fixed price contracts.

(c) Leases

The Company determines if an arrangement is a lease at inception of the contract. Operating leases are recorded in "operating lease right-of-use ("ROU") assets", "current portion of operating lease liabilities" and "operating lease liabilities, less current portion" in the Company's unaudited consolidated balance sheets. Finance leases are recorded in "property and equipment", "current portion of finance lease liabilities" and "finance lease liabilities, less current portion" in the Company's unaudited consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. For leases in which the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date for determining the present value of lease payments. Lease terms includes the effects of options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating lease arrangements is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for separately.

The Company accounts for a modification as a separate contract when it grants an additional right of use not included in the original lease and the increase is commensurate with the standalone price for the additional right of use, adjusted for the circumstances of the particular contract. Modifications which are not accounted for as a separate contract are reassessed as of the effective date of the modification based on its modified terms and conditions and the facts and circumstances as of that date.

On January 1, 2019, the date of initial application, the Company adopted Leases (Topic 842) using the modified retrospective method. The modified retrospective method provides a method of recognizing those leases which had not expired as of the date of adoption of January 1, 2019.

The adoption resulted in the recognition of ROU assets of $80,328 (net of deferred rent of $8,626) and lease liabilities of $88,954 for operating leases as of January 1, 2019. The Company's accounting for finance leases remained substantially unchanged. The adoption had no impact on opening balance of retained earnings. Refer to Note 20 to the unaudited consolidated financial statements for details.

(d) Recent Accounting Pronouncements    

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (("Subtopic 715-20")): Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this ASU remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in this ASU are effective for fiscal years beginning after December 15, 2020. Early adoption is permitted. The adoption of this ASU is not expected to have any material effect on the Company’s consolidated financial statements.

In March 2020, FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as

9

EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
March 31, 2020
(In thousands, except share and per share amounts)

interbank offered rates and LIBOR. The ASU provides practical expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments are elective and are effective upon issuance for all entities through December 31, 2022. The Company is currently evaluating the impact of this ASU.

(e) Recently Adopted Accounting Pronouncements

In June 2016, FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The new guidance replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. These changes will result in earlier recognition of credit losses. The allowance for credit losses is a valuation account that is to be deducted from the amortized cost of the financial asset(s) so as to present the net carrying value at the amount expected to be collected on the financial asset. The Company adopted Topic 326 as of January 1, 2020 using a modified retrospective approach through a cumulative-effect adjustment to its retained earnings. The adoption of the ASU had no impact to equity as of January 1, 2020 with a corresponding offset to accounts receivable. Further, the impact of adoption of this guidance did not have a material effect on the Company's accounting policies, processes, and systems. Refer to Note 4 to the unaudited consolidated financial statements for details.

In August 2018, FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements on fair value measurements in Topic 820, by prescribing new disclosure requirements, and the elimination and modification of disclosure requirements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. An entity was permitted to early adopt either the entire standard or only the provisions that eliminate or modify requirements. The early adoption of this ASU, effective January 1, 2020, did not have any material effect on the Company’s disclosures in the unaudited consolidated financial statements.

In August 2018, FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software ("Subtopic 350-40"): This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the ASU requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in FASB Accounting Standard Codification Subtopic 350-40 on internal-use software to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The ASU 2018-15 also provides guidance on amortization and impairment of any costs capitalized, along with new presentation and disclosure requirements. The new guidance is effective for fiscal years beginning after December 15, 2019 and adoption was allowed prospectively. The adoption of this ASU effective January 1, 2020 did not have any material effect on the Company’s unaudited consolidated financial statements.

In April 2019, FASB issued ASU No. 2019-04, Codification Improvements to Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Financial Instruments: Targeted Transition Relief (Topic 825). The amendments clarify the scope of the credit losses standard and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. With respect to hedge accounting, the amendments address partial-term fair value hedges, fair value hedge basis adjustments, and certain transition requirements, among other things. With respect to recognizing and measuring financial instruments, the amendment in the ASU address the scope of the guidance, the requirement for remeasurement under ASC 820 when using the measurement alternative, certain disclosure requirements and which equity securities have to be remeasured at historical exchange rates. This ASU is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption was permitted. The adoption of this ASU did not have any material effect on the Company’s unaudited consolidated financial statements.

In May 2019, FASB issued ASU No. 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief. This ASU provides entities with the option to irrevocably elect the fair value option, on an instrument-by-instrument

10

EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
March 31, 2020
(In thousands, except share and per share amounts)

basis in accordance with Subtopic 825-10, for certain financial instruments that are within the scope of Subtopic 326-20, upon adopting Topic 326. The fair value option election does not apply to held-to-maturity debt securities. The amendments in this ASU provide entities with targeted transition relief that is intended to increase comparability of financial statement information for some entities that otherwise would have measured similar financial instruments using different measurement methodologies. The Company adopted Topic 326 as of January 1, 2020, whereby no such fair value election was made, accordingly, the adoption of this ASU did not have any material effect on the Company’s unaudited consolidated financial statements.

3. Segment and Geographical Information

The Company operates in the BPM industry and is a provider of operations management and analytics services.

Effective January 1, 2020, the Company made certain operational and structural changes to more closely integrate its businesses and to simplify its organizational structure. The Company now manages and reports financial information through its four strategic business units: Insurance, Healthcare, Analytics and Emerging Business, which reflects how management will review financial information and make operating decisions. These business units will develop client-specific solutions, build capabilities, maintain a unified go-to-market approach and be integrally responsible for service delivery, customer satisfaction, growth and profitability. In line with the Company’s strategy of vertical integration and focus on domain expertise, the Company has integrated its Finance & Accounting and Consulting operating segments within each of the Insurance and Healthcare operating segments based on the corresponding industry-specific clients to whom those services are provided. Finance & Accounting and Consulting services to clients outside of the Insurance and Healthcare industries will now be part of the Company’s newly formed business unit and reportable segment Emerging Business. In addition, the Company integrated its former Travel, Transportation and Logistics, Banking and Financial Services, and Utilities operating segments under the Emerging Business unit to further leverage and optimize the operating scale in providing operations management services.

The Company’s new reportable segments effective January 1, 2020 are as follows:

Insurance,
Healthcare,
Emerging Business, and
Analytics

In conjunction with the new reporting structure, the Company has recasted its segment disclosures for prior periods presented to conform to the way the Company internally manages and monitors segment performance.

The chief operating decision maker (“CODM”) generally reviews financial information such as revenues, cost of revenues and gross profit, disaggregated by the operating segments to allocate an overall budget among the operating segments.
 
The Company does not allocate and therefore the CODM does not evaluate, certain operating expenses, interest expense or income taxes by segment. Many of the Company’s assets are shared by multiple operating segments. The Company manages these assets on a total Company basis, not by operating segment, and therefore asset information and capital expenditures by operating segment are not presented.

    

11

EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
March 31, 2020
(In thousands, except share and per share amounts)

Revenues and cost of revenues for the three months ended March 31, 2020 and 2019, respectively, for each of the reportable segments, are as follows:
 
 
Three months ended March 31, 2020
 
Insurance
 
Healthcare
 
Emerging Business
 
Analytics
 
Total
 
 
Revenues, net
$
83,739

 
$
27,029

 
$
42,791

 
$
92,431

 
$
245,990

 
Cost of revenues(1)
58,965

 
19,593

 
25,482

 
58,616

 
162,656

 
Gross profit(1)
$
24,774

 
$
7,436

 
$
17,309

 
$
33,815

 
$
83,334

 
Operating expenses
 
 
 
 
 
 
 
 
55,847

 
Foreign exchange gain, interest expense and other income, net
 
 
 
 
 
 
 
 
834

 
Income tax expense
 
 
 
 
 
 
 
 
5,855

 
Loss from equity-method investment
 
 
 
 
 
 
 
 
55

 
Net income
 
 
 
 
 
 
 
 
$
22,411


 
 
Three months ended March 31, 2019
 
Insurance
 
Healthcare
 
Emerging Business
 
Analytics
 
Total
 
 
Revenues, net
$
81,286

 
$
22,248

 
$
49,078

 
$
86,961

 
$
239,573

 
Cost of revenues(1)
55,243

 
17,802

 
27,293

 
56,902

 
157,240

 
Gross profit(1)
$
26,043

 
$
4,446

 
$
21,785

 
$
30,059

 
$
82,333

 
Operating expenses
 
 
 
 
 
 
 
 
65,472

 
Foreign exchange gain, interest expense and other income, net
 
 
 
 
 
 
 
 
2,101

 
Income tax expense
 
 
 
 
 
 
 
 
4,200

 
Loss from equity-method investment
 
 
 
 
 
 
 
 
67

 
Net income
 
 
 
 
 
 
 
 
$
14,695


(1) Exclusive of depreciation and amortization expense.

Revenues, net by service type, were as follows:
 
Three months ended March 31,
 
2020
 
2019
BPM and related services(1)
$
153,559

 
$
152,612

Analytics services
92,431

 
86,961

Revenues, net
$
245,990

 
$
239,573


(1) BPM and related services include revenues of the Company's Insurance, Healthcare and Emerging Business operating segments. Refer to the reportable segment disclosure above.


12

EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
March 31, 2020
(In thousands, except share and per share amounts)

The Company attributes the revenues to regions based upon the location of its customers.
 
Three months ended March 31,
 
2020
 
2019
Revenues, net
 
 
 
United States
$
207,880

 
$
196,104

Non-United States
 
 
 
United Kingdom
23,278

 
29,101

Rest of World
14,832

 
14,368

Total Non-United States
38,110

 
43,469

Revenues, net
$
245,990

 
$
239,573



Long-lived assets by geographic area, which consist of property and equipment, net and operating lease right-of-use assets were as follows:
 
As of
 
March 31, 2020
 
December 31, 2019
Long-lived assets
 
 
 
India
$
99,385

 
$
78,244

United States
52,772

 
52,375

Philippines
27,350

 
26,006

Rest of World
10,946

 
8,913

Long-lived assets
$
190,453

 
$
165,538



4. Revenues, net

Refer to Note 3 to the unaudited consolidated financial statements for revenues disaggregated by reportable segments and geography.

Contract balances

The following table provides information about accounts receivable, contract assets and contract liabilities from contracts with customers:

 
As of

March 31, 2020
 
December 31, 2019
Accounts receivable, net
$
187,137

 
$
171,864

Contract assets
$
5,518

 
$
5,391

Contract liabilities


 


   Deferred revenue (consideration received in advance)
$
14,136

 
$
11,259

 Consideration received for process transition activities
$
2,877

 
$
3,036


Accounts receivable includes $74,386 and $73,920 as of March 31, 2020 and December 31, 2019, respectively, representing unbilled receivables. The Company has accrued the unbilled receivables for work performed in accordance with the terms of contracts with customers and considers no significant performance risk associated with its unbilled receivables.


13

EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
March 31, 2020
(In thousands, except share and per share amounts)

Contract assets represent upfront payments such as deal signing discounts or deal signing bonuses made to customers. These costs are amortized over the expected period of the benefit and are recorded as an adjustment to transaction price and reduced from revenues. The Company’s assessment did not indicate any impairment losses on its contract assets for the periods presented.

Contract liabilities represent that portion of deferred revenue for which payments have been received in advance from customers. This may also include revenues deferred for certain contracts where services have been rendered but other conditions for revenue recognition have not been met for example, where a legally enforceable contract is not executed. The Company also defers revenues attributable to certain process transition activities for which costs have been capitalized by the Company as contract fulfillment costs. Consideration received from customers, if any, relating to such transition activities are classified under contract liabilities and are included within “Deferred revenues” and “other non-current liabilities” in the unaudited consolidated balance sheets. The revenues are recognized as (or when) the performance obligation is fulfilled under the contract with customer.

Revenue recognized during the three months ended March 31, 2020 and 2019 that was included in the contract liabilities balance at the beginning of the period was $5,968 and $2,777, respectively.
Contract acquisition and fulfillment costs
 
Contract Acquisition Costs
 
Contract Fulfillment Costs
 
Quarter Ended
 
Year Ended
 
Quarter Ended
 
Year Ended
 
March 31, 2020
 
March 31, 2019
 
December 31, 2019
 
March 31, 2020
 
March 31, 2019
 
December 31, 2019
 
 
 
 
 
(Audited)
 
 
 
 
 
(Audited)
Opening Balance
$
1,307

 
$
713

 
$
713

 
$
7,255

 
$
4,051

 
$
4,051

Addition

 

 
1,222

 
284

 
726

 
4,652

Amortization
(92
)
 
(200
)
 
(628
)
 
(623
)
 
(305
)
 
(1,448
)
Closing Balance
$
1,215

 
$
513

 
$
1,307

 
$
6,916

 
$
4,472

 
$
7,255



There was no impairment for contract acquisition and contract fulfillment costs as of March 31, 2020 and December 31, 2019. The capitalized costs are amortized on a straight line basis over the life of the contract.

Allowance for expected credit losses

On January 1, 2020, the Company adopted ASC Topic 326, Financial Instruments-Credit Losses. Accounts receivable and contract assets are in the scope for which assessment is made. In compliance with the guidance, the allowance for credit losses recognized based on historical loss experience is adjusted to reflect current and estimated future economic conditions. The Company considered current and anticipated future economic conditions relating to the industries of the Company’s customers and the countries where it operates. In calculating expected credit loss, the Company also considered past payment trends, credit rating and other related credit information for its significant customers to estimate the probability of default in the future and estimates relating to the possible effects resulting from global Coronavirus Disease 2019 pandemic (“COVID-19”).

The Company applied the expected credit loss model to assess any required allowance; and used a provision matrix devised based on historical trends of losses across aging categories to calculate the expected credit loss allowance for trade receivables and unbilled receivables. This matrix takes into account available external and internal credit risk information such as ratings from international credit rating agencies and the Company's historical collection experience from customers.


14

EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
March 31, 2020
(In thousands, except share and per share amounts)

As of January 1, 2020 the Company’s provision for doubtful receivables was $1,163, which was based on previous U.S. GAAP standards. There was no material impact on provision when calculated by applying Topic ASC 326 guidelines.

 
As of
 
March 31, 2020
 
January 1, 2020
Accounts receivable, including unbilled receivables
$
188,483

 
$
173,027

Less: Allowance for lifetime expected credit loss
(1,346
)
 
(1,163
)
Accounts receivable, net
$
187,137

 
$
171,864


The movement in allowance for lifetime expected credit loss on customer balances for the quarters ended March 31, 2020 and December 31, 2019 was as follows:

 
As of
 
March 31, 2020
 
December 31, 2019
Balance at the beginning of the period
$
1,163

 
$
1,113

Additions during the period, net
195

 
184

Charged against allowance

 
(139
)
Translation adjustment, if any
(12
)
 
5

Balance at the end of the period
$
1,346

 
$
1,163



5. Earnings Per Share

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding, adjusted for outstanding shares that are subject to repurchase during each period. Diluted earnings per share is computed using the weighted average number of common shares plus the potentially dilutive effect of common stock equivalents (outstanding stock options, restricted stock and restricted stock units) issued and outstanding at the reporting date, using the treasury stock method. Common stock equivalents that are anti-dilutive are excluded from the computation of weighted average shares outstanding. The Company includes performance stock unit awards in dilutive potential common shares when they become contingently issuable and have a dilutive impact per authoritative guidance and excludes such awards when they are not contingently issuable.

The following table sets forth the computation of basic and diluted earnings per share:

15

EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
March 31, 2020
(In thousands, except share and per share amounts)

 
Three months ended March 31,
 
2020
 
2019
Numerators:
 
 
 
Net income
$
22,411

 
$
14,695

Denominators:
 
 
 
Basic weighted average common shares outstanding
34,401,565

 
34,374,815

Dilutive effect of share-based awards
319,038

 
458,620

Diluted weighted average common shares outstanding
34,720,603

 
34,833,435

Earnings per share attributable to ExlService Holdings Inc. stockholders:
 
 
 
Basic
$
0.65

 
$
0.43

Diluted
$
0.65

 
$
0.42

Weighted average potentially dilutive shares considered anti-dilutive and not included in computing diluted earnings per share
170,313

 
425,432


6. Cash, Cash Equivalents and Restricted Cash

For the purpose of unaudited statements of cash flows, cash, cash equivalents and restricted cash comprise of the following:
 
As of
 
March 31, 2020
 
March 31, 2019
Cash and cash equivalents
$
224,874

 
$
86,688

Restricted cash (current)
6,369

 
5,364

Restricted cash (non-current)
2,291

 
2,575

Cash, cash equivalents and restricted cash
$
233,534

 
$
94,627



7. Other Income, net
Other income, net consists of the following:
 
Three months ended March 31,
 
2020
 
2019
Gain on sale and mark-to-market of mutual funds, net
$
2,056

 
$
3,526

Interest income
532

 
796

Others, net
(59
)
 
101

Other income, net
$
2,529

 
$
4,423



16

EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
March 31, 2020
(In thousands, except share and per share amounts)


8. Property and Equipment, net
Property and equipment, net consists of the following:

Estimated useful lives
 
As of
 
(Years)
 
March 31, 2020
 
December 31, 2019
Owned Assets:
 
 
 
 
 
Network equipment and computers
3-5
 
$
96,669

 
$
98,309

Software
3-5
 
88,813

 
79,746

Leasehold improvements
3-8
 
43,896

 
44,982

Office furniture and equipment
3-8
 
21,038

 
22,046

Motor vehicles
2-5
 
575

 
601

Buildings
30
 
1,051

 
1,114

Land
 
688

 
729

Capital work in progress
 
14,381

 
10,309

 
 
 
267,111

 
257,836

Less: Accumulated depreciation and amortization
 
 
(177,192
)
 
(179,331
)
 
 
 
$
89,919

 
$
78,505

Right-of-use assets under finance leases:
 
 
 
 
 
Leasehold improvements
 
 
$
640

 
$
738

Office furniture and equipment
 
 
238

 
308

Motor vehicles
 
 
689

 
711

 
 
 
1,567

 
1,757

Less: Accumulated depreciation and amortization
 
 
(973
)
 
(1,120
)
 
 
 
$
594

 
$
637

Property and equipment, net
 
 
$
90,513

 
$
79,142



Capital work in progress represents advances paid towards acquisition of property and equipment and costs incurred on internally developed software not yet ready to be placed in service.

During the three months ended March 31, 2020, there were no changes in estimated useful lives of property and equipment.

The depreciation and amortization expense, excluding amortization of acquisition-related intangibles, recognized in the unaudited consolidated statements of income was as follows:
 
Three months ended March 31,
 
2020
 
2019
Depreciation and amortization expense
$
8,297

 
$
8,139



The depreciation and amortization set forth above includes the effect of foreign exchange gain upon settlement of cash flow hedges, amounting to $22 and $57 for the three months ended March 31, 2020 and 2019, respectively. Refer to Note 16 to the unaudited consolidated financial statements for further details.


17

EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
March 31, 2020
(In thousands, except share and per share amounts)

Internally developed software costs, included under Software, was as follows:

 
As of
 
March 31, 2020
 
December 31, 2019
Cost
$
16,147

 
$
15,784

Less : Accumulated amortization
(5,812
)
 
(4,989
)
Internally developed software, net
$
10,335

 
$
10,795



The amortization expense on internally developed software recognized in the unaudited consolidated statements of income was as follows: