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Table of Contents
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 SEPTEMBER 30, 2022
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 York10022
(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 EXLSNASDAQ
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 every Interactive Data File required to be submitted 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 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.
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 October 25, 2022, there were 33,064,611 shares of the registrant’s common stock outstanding, par value $0.001 per share.



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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EXLSERVICE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except per share amount and share count)
As of
September 30, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$89,262 $135,337 
Short-term investments172,889 179,430 
Restricted cash7,013 6,174 
Accounts receivable, net256,911 194,232 
Other current assets54,509 62,971 
Total current assets580,584 578,144 
Property and equipment, net79,933 86,008 
Operating lease right-of-use assets61,966 76,692 
Restricted cash1,996 2,299 
Deferred tax assets, net54,898 21,404 
Intangible assets, net69,008 81,082 
Goodwill405,781 403,902 
Long-term investments34,724 3,190 
Other assets29,838 30,183 
Total assets$1,318,728 $1,282,904 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$3,487 $5,647 
Current portion of long-term borrowings35,000 260,016 
Deferred revenue19,279 20,000 
Accrued employee costs92,252 114,285 
Accrued expenses and other current liabilities96,800 76,350 
Current portion of operating lease liabilities16,740 18,487 
Income taxes payable, net23,410 901 
Total current liabilities286,968 495,686 
Long-term borrowings, less current portion235,000 — 
Operating lease liabilities, less current portion54,174 68,506 
Deferred tax liabilities, net759 965 
Other non-current liabilities37,243 24,591 
Total liabilities614,144 589,748 
Commitments and contingencies (Refer to Note 25)
ExlService Holdings, Inc. Stockholders’ equity:
Preferred stock, $0.001 par value; 15,000,000 shares authorized, none issued
  
Common stock, $0.001 par value; 100,000,000 shares authorized, 39,798,956 shares issued and 33,051,021 shares outstanding as of September 30, 2022 and 39,508,340 shares issued and 33,291,482 shares outstanding as of December 31, 2021
40 40 
Additional paid-in capital432,492 395,742 
Retained earnings867,256 756,137 
3


Table of Contents
Accumulated other comprehensive loss(154,203)(89,474)
Total including shares held in treasury1,145,585 1,062,445 
Less: 6,747,935 shares as of September 30, 2022 and 6,216,858 shares as of December 31, 2021, held in treasury, at cost
(441,001)(369,289)
Total stockholders’ equity704,584 693,156 
Total liabilities and stockholders’ equity $1,318,728 $1,282,904 

See accompanying notes to unaudited consolidated financial statements.
4


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

Three months ended September 30,Nine months ended September 30,
2022202120222021
Revenues, net$361,351 $290,325 $1,037,341 $826,804 
Cost of revenues(1)
230,462 177,743 659,185 507,265 
Gross profit(1)
130,889 112,582 378,156 319,539 
Operating expenses:
General and administrative expenses42,519 36,167 122,898 103,369 
Selling and marketing expenses23,879 21,672 72,034 59,631 
Depreciation and amortization expense14,380 12,305 42,057 36,716 
Total operating expenses80,778 70,144 236,989 199,716 
Income from operations50,111 42,438 141,167 119,823 
Foreign exchange gain, net1,504 1,171 4,683 2,958 
Interest expense(2,442)(1,810)(4,820)(6,804)
Other income, net2,261 1,721 4,498 5,346 
Loss on settlement of convertible notes (12,845) (12,845)
Income before income tax expense and earnings from equity affiliates51,434 30,675 145,528 108,478 
Income tax expense12,447 4,196 34,774 22,019 
Income before earnings from equity affiliates38,987 26,479 110,754 86,459 
Gain from equity-method investment108 28 365  
Net income attributable to ExlService Holdings, Inc. stockholders$39,095 $26,507 $111,119 $86,459 
Earnings per share attributable to ExlService Holdings, Inc. stockholders:
Basic$1.18 $0.79 $3.33 $2.57 
Diluted$1.16 $0.77 $3.28 $2.52 
Weighted-average number of shares used in computing earnings per share attributable to ExlService Holdings Inc. stockholders:
Basic33,237,833 33,449,31133,360,346 33,583,791
Diluted33,777,749 34,305,89333,833,637 34,336,950

(1) Exclusive of depreciation and amortization expense.



See accompanying notes to unaudited consolidated financial statements.
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EXLSERVICE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(In thousands)
Three months ended September 30,Nine months ended September 30,
2022202120222021
Net income$39,095 $26,507 $111,119 $86,459 
 Other comprehensive income/(loss):
Unrealized gain/(loss) on cash flow hedges(13,489)261 (28,638)(42)
Loss on net investment hedges   (1,134)
Foreign currency translation loss(19,144)(3,789)(49,371)(10,475)
Reclassification adjustments
(Gain)/loss on cash flow hedges(1)
1,567 (2,150)(1,881)(7,845)
Retirement benefits(2)
147 178 451 533 
Income tax effects relating to above(3)
10,090 (12)14,710 1,690 
  Total other comprehensive loss(20,829)(5,512)(64,729)(17,273)
Total comprehensive income$18,266 $20,995 $46,390 $69,186 


(1)These are reclassified to net income and are included in cost of revenues, operating expenses and interest expense, as applicable in the unaudited consolidated statements of income. Refer to Note 17 - Derivatives and Hedge Accounting 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 20 - Employee Benefit Plans to the unaudited consolidated financial statements.

(3)These are income tax effects recognized on cash flow hedges, retirement benefits and foreign currency translation loss. Refer to Note 22 - Income Taxes to the unaudited consolidated financial statements.








See accompanying notes to unaudited consolidated financial statements.
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EXLSERVICE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
For the three months ended September 30, 2022 and 2021
(In thousands, except share count)


Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal Equity
SharesAmountSharesAmount
Balance as of June 30, 202239,795,161 $40 $420,306 $828,161 $(133,374)(6,671,126)$(429,480)$685,653 
Stock issued against stock-based compensation plans3,795 — — — — — —  
Stock-based compensation— — 12,186 — — — — 12,186 
Acquisition of treasury stock— — — — — (76,809)(11,521)(11,521)
Other comprehensive loss— — — — (20,829)— — (20,829)
Net income— — — 39,095 — — — 39,095 
Balance as of September 30, 202239,798,956 $40 $432,492 $867,256 $(154,203)(6,747,935)$(441,001)$704,584 


Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal Equity
SharesAmountSharesAmount
Balance as of June 30, 202139,283,853 $39 $439,051 $701,331 $(86,745)(6,034,144)$(325,662)$728,014 
Stock issued against stock-based compensation plans28,372 — 536 — — — — 536 
Stock-based compensation— — 10,894 — — — — 10,894 
Acquisition of treasury stock— — — — — (244,580)(28,196)(28,196)
Issuance of treasury stock— — 19,436 — — 310,394 17,306 36,742 
Settlement of convertible notes— — (84,000)— — — — (84,000)
Other comprehensive loss— — — — (5,512)— — (5,512)
Net income— — — 26,507 — — — 26,507 
Balance as of September 30, 202139,312,225 $39 $385,917 $727,838 $(92,257)(5,968,330)$(336,552)$684,985 
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EXLSERVICE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
For the nine months ended September 30, 2022 and 2021
(In thousands, except share count)

Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal Equity
SharesAmountSharesAmount
Balance as of January 1, 202239,508,340 $40 $395,742 $756,137 $(89,474)(6,216,858)$(369,289)$693,156 
Stock issued against stock-based compensation plans290,616 — — — — — —  
Stock-based compensation— — 36,750 — — — — 36,750 
Acquisition of treasury stock— — — — — (531,077)(71,712)(71,712)
Other comprehensive loss— — — — (64,729)— — (64,729)
Net income— — — 111,119 — — — 111,119 
Balance as of September 30, 202239,798,956 $40 $432,492 $867,256 $(154,203)(6,747,935)$(441,001)$704,584 


Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal Equity
SharesAmountSharesAmount
Balance as of January 1, 202138,968,052 $39 $420,976 $641,379 $(74,984)(5,408,618)$(268,238)$719,172 
Stock issued against stock-based compensation plans344,173 — 709 — — — — 709 
Stock-based compensation— — 28,796 — — — — 28,796 
Acquisition of treasury stock— — — — — (870,106)(85,620)(85,620)
Issuance of treasury stock— — 19,436 — — 310,394 17,306 36,742 
Settlement of convertible notes— — (84,000)— — — — (84,000)
Other comprehensive loss— — — — (17,273)— — (17,273)
Net income— — — 86,459 — — — 86,459 
Balance as of September 30, 202139,312,225 $39 $385,917 $727,838 $(92,257)(5,968,330)$(336,552)$684,985 


See accompanying notes to unaudited consolidated financial statements.
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EXLSERVICE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Nine months ended September 30,
20222021
Cash flows from operating activities:
Net income$111,119 $86,459 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense41,993 37,159 
Stock-based compensation expense36,750 28,796 
Amortization of operating lease right-of-use assets17,365 20,012 
Unrealized (gain)/loss on investments(475)5,987 
Unrealized foreign currency exchange gain, net(16,813)(3,799)
Deferred income tax benefit(5,621)(17,374)
Allowance / (reversal) of expected credit losses177 (405)
Fair value changes in contingent consideration1,000  
Loss on settlement of convertible notes 12,845 
Amortization of non-cash interest expense related to convertible senior notes 1,795 
Others, net1,240 590 
Change in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable(68,066)(44,871)
Other current assets2,553 3,033 
Income taxes payable, net4,043 (5,685)
Other assets(8,428)2,485 
Accounts payable(1,927)(2,333)
Deferred revenue 2,103 (21,196)
Accrued employee costs(11,778)26,664 
Accrued expenses and other liabilities13,685 3,254 
Operating lease liabilities(17,831)(19,654)
Net cash provided by operating activities101,089 113,762 
Cash flows from investing activities:
Purchases of property and equipment(32,099)(29,026)
Proceeds from sale of property and equipment197 825 
Business acquisition (net of cash and cash equivalents acquired)(3,322) 
Purchases of investments(164,313)(76,500)
Proceeds from redemption of investments124,355 83,183 
Net cash used for investing activities(75,182)(21,518)
Cash flows from financing activities:
Principal payments of finance lease liabilities(108)(157)
Proceeds from borrowings35,000 225,000 
Repayments of borrowings(25,000)(329,000)
Acquisition of treasury stock(71,712)(85,620)
Proceeds from exercise of stock options 710 
Net cash used for financing activities(61,820)(189,067)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(9,626)(5,003)
Net decrease in cash, cash equivalents and restricted cash(45,539)(101,826)
Cash, cash equivalents and restricted cash at the beginning of the period143,810 225,519 
Cash, cash equivalents and restricted cash at the end of the period$98,271 $123,693 
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest$4,982 $5,833 
Income taxes, net of refunds$35,192 $31,087 
Supplemental disclosure of non-cash investing and financing activities:
Settlement of portion of convertible notes through issuance of treasury stock$ $36,742 
Assets acquired under finance lease$218 $79 
See accompanying notes to unaudited consolidated financial statements.
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EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(In thousands, except per share amount and share count)
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”), is a leading data analytics and digital operations and solutions company that partners with clients to improve business outcomes and unlock growth. By bringing together deep domain expertise with robust data, powerful analytics, cloud, artificial intelligence and machine learning, the Company creates agile, scalable solutions and executes complex operations for the world’s leading corporations in industries including insurance, healthcare, banking and financial services, media, and retail, among others. The Company’s data-led value creation framework enables better and faster decision making, leveraging its end-to-end data and analytics capabilities to drive improved business outcomes, and re-designing of operating models to integrate advanced technology into operational workflows. The Company embeds digital operations and solutions into clients’ businesses and introduces its data led approach to transform operations. Accordingly, as the Company’s operations management services are now a part of its digital operations and solutions, they are referred to as “digital operations and solutions” herein; however, the Company has not changed the way in which it manages its business or its operating segments or segment reporting structure.

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, 2021.

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 consolidated 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 purchase consideration paid 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 after its acquisition is recognized in the unaudited consolidated statements of income.

For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation in accordance with U.S. GAAP.


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EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
September 30, 2022
(In thousands, except per share amount and share count)
(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 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, estimates of the fair value of the identifiable intangible assets and contingent consideration, purchase price allocation, including revenue projections and discount rate applied within the discounted cash flow model for business acquisitions, allowance for expected credit losses, the nature and timing of the satisfaction of performance obligations, the standalone selling price of performance obligations, and variable consideration in a customer contract, expected recoverability from customers with contingent fee arrangements, estimated costs to complete fixed price contracts, 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 amortization of ROU, depreciation and amortization periods, and recoverability of long-lived assets, goodwill and intangibles.

(c)Investments

The Company’s short-term investments consist of investments in mutual funds and those term deposits with more than three months of original maturity and less than twelve months of remaining maturity as of the reporting date, while long-term investments consist of term deposits with more than twelve months of remaining maturity as of the reporting date.

The Company’s investments in term deposits with financial institutions are measured and recognized at amortized cost. Interest earned on such investments is included in other income, net.

The Company’s mutual fund investments are in debt funds in India. These investments are accounted for in accordance with the fair value option under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 825, Financial Instruments. The fair value is represented by original cost on the acquisition date and the net asset value (“NAV”) as quoted, at each reporting period and any changes in fair value are included in other income, net. Gain or loss on the disposal of these investments is calculated using the weighted average cost of the investments sold and is included in other income, net.

(d)Derivative Financial Instruments

In the normal course of business, the Company uses derivative instruments to mitigate the exposure from risk of foreign currency and interest rate fluctuations. The Company enters into foreign currency forward contracts to hedge cash flow risks from forecasted transactions denominated in certain foreign currencies, and interest rate swaps to hedge cash flow risks from its revolving credit facility having variable interest rate obligations. These contracts adhere to the Company’s treasury operations’ objectives and policies to qualify as cash flow hedges, and are with counterparties that are highly rated financial institutions.

Changes in the fair value of these cash flow hedges are recorded as a component of accumulated other comprehensive income/(loss) (“AOCI”), net of tax. The resultant foreign exchange gain/(loss) upon settlement of cash flow hedges of a forecast transaction are recorded in the unaudited consolidated statements of income along with the underlying hedged item in the same line as part of “Cost of revenues,” “General and administrative expenses,” “Selling and marketing expenses,” and “Depreciation and amortization expense,” as applicable. The accumulated changes in the fair value of interest rate swaps recognized in AOCI are reclassed to the unaudited consolidated statements of income and are presented as a part of “Interest expense” over the term of the contract.

The Company evaluates hedge effectiveness of cash flow hedges at the time a contract is entered into as well as on an ongoing basis. For hedge relationships that are discontinued because the forecasted transaction is not expected to occur by the end of the originally specified period, any related derivative amounts recorded in AOCI are reclassified to earnings.

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EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
September 30, 2022
(In thousands, except per share amount and share count)
The Company also uses derivatives instruments consisting of foreign currency forward contracts to economically hedge intercompany balances and other monetary assets or liabilities denominated in currencies other than the functional currency, against the risk of foreign currency fluctuations associated with remeasurement of such assets and liabilities to functional currency. These derivatives do not qualify as fair value hedges under ASC 815. Changes in the fair value of these derivatives are recognized in the unaudited consolidated statements of income and are included in foreign exchange gain/(loss).

The Company also uses foreign currency forward contracts designated as net investment hedges to hedge the foreign currency risks related to the Company's investment in foreign subsidiaries. Gains and losses on these forward contracts are recognized in AOCI as part of the foreign currency translation adjustment. All of the assets and liabilities related to the Company’s forward contracts are subject to master netting arrangements with each individual counterparty. These master netting arrangements generally provide for net settlement of all outstanding contracts with the counterparty in the case of an event of default or a termination event. The Company has presented all of the assets and liabilities related to these contracts on a gross basis, with no offsets, in its consolidated statements of financial position. There is no financial collateral (including cash collateral) provided or received by the Company related to these contracts.

(e)Recent Accounting Pronouncements    

In October 2021, FASB issued Accounting Standard Update (“ASU”) No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU provides guidance in Topic 805 to require the acquirer entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers, as if it had originated the contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements, if the acquiree prepared financial statements in accordance with U.S. GAAP. The ASU is effective for fiscal years beginning after December 15, 2022. An entity may early adopt the ASU including adoption in an interim period, with retrospective application to all business combinations within the fiscal year that includes such interim period. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.

(f)Recently adopted Accounting Pronouncements

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 interbank offered rates and London Inter-Bank Offered Rate (“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 adoption of this ASU did not have a material impact on the Company’s unaudited consolidated financial statements.
3. Segment and Geographical Information

The Company is a provider of data analytics and digital operations and solutions.

The Company manages and reports financial information through its four reportable segments: Insurance, Healthcare, Analytics and Emerging Business, which reflects how management reviews financial information and makes operating decisions. These business units develop client-specific solutions, build capabilities, maintain a unified go-to-market approach and are integrally responsible for service delivery, customer satisfaction, growth and profitability.

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.

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EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
September 30, 2022
(In thousands, except per share amount and share count)
The December 2021 and June 2022 acquisition of Clairvoyant AI Inc. (“Clairvoyant”) and Inbound Media Group, LLC (“Inbound”), respectively, are both included in the Analytics reportable segment. Refer to Note 10 - Business Combinations, Goodwill and Intangible Assets to the unaudited consolidated financial statements for further details.

Revenues and cost of revenues for the three months ended September 30, 2022 and 2021, respectively, for each of the reportable segments, are as follows:
Three months ended September 30, 2022
InsuranceHealthcareEmerging BusinessAnalyticsTotal
Revenues, net$116,198 $22,820 $56,035 $166,298 $361,351 
Cost of revenues(1)
75,041 17,119 32,363 105,939 230,462 
Gross profit(1)
$41,157 $5,701 $23,672 $60,359 $130,889 
Operating expenses80,778 
Foreign exchange gain, interest expense and other income, net1,323 
Income tax expense12,447 
Gain from equity-method investment108 
Net income$39,095 
(1) Exclusive of depreciation and amortization expense.
Three months ended September 30, 2021
InsuranceHealthcareEmerging BusinessAnalyticsTotal
Revenues, net$98,008 $27,341 $44,513 $120,463 $290,325 
Cost of revenues(1)
61,490 17,057 23,660 75,536 177,743 
Gross profit(1)
$36,518 $10,284 $20,853 $44,927 $112,582 
Operating expenses70,144 
Loss on settlement of convertible notes, foreign exchange gain, interest expense and other income, net(11,763)
Income tax expense4,196 
Gain from equity-method investment28 
Net income$26,507 

(1) Exclusive of depreciation and amortization expense.

Revenues and cost of revenues for the nine months ended September 30, 2022 and 2021, respectively, for each of the reportable segments, are as follows:

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EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
September 30, 2022
(In thousands, except per share amount and share count)
Nine months ended September 30, 2022
InsuranceHealthcareEmerging BusinessAnalyticsTotal
Revenues, net$328,021 $72,027 $160,655 $476,638 $1,037,341 
Cost of revenues(1)
210,768 52,464 92,790 303,163 659,185 
Gross profit(1)
$117,253 $19,563 $67,865 $173,475 $378,156 
Operating expenses236,989 
Foreign exchange gain, interest expense and other income, net4,361 
Income tax expense34,774 
Gain from equity-method investment365 
Net income$111,119 

(1) Exclusive of depreciation and amortization expense.

Nine months ended September 30, 2021
InsuranceHealthcareEmerging BusinessAnalyticsTotal
Revenues, net$283,887 $85,856 $122,871 $334,190 $826,804 
Cost of revenues(1)
176,942 52,133 66,850 211,340 507,265 
Gross profit(1)
$106,945 $33,723 $56,021 $122,850 $319,539 
Operating expenses199,716 
Loss on settlement of convertible notes, foreign exchange gain, interest expense and other income, net(11,345)
Income tax expense22,019 
Net income$86,459 

(1) Exclusive of depreciation and amortization expense.

Revenues, net by service type, were as follows:
Three months ended September 30,Nine months ended September 30,
2022202120222021
Digital operations and solutions(1)
$195,053 $169,862 $560,703 $492,614 
Analytics services166,298