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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 JUNE 30, 2023
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 July 25, 2023, there were 33,144,409 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
June 30, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents$93,960 $118,669 
Short-term investments156,098 179,027 
Restricted cash4,628 4,897 
Accounts receivable, net288,305 259,222 
Other current assets70,186 50,979 
Total current assets613,177 612,794 
Property and equipment, net93,688 82,828 
Operating lease right-of-use assets58,423 55,347 
Restricted cash2,072 2,055 
Deferred tax assets, net68,612 55,791 
Intangible assets, net56,487 64,819 
Goodwill405,903 405,637 
Long-term investments16,085 34,779 
Other assets48,255 32,069 
Total assets$1,362,702 $1,346,119 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$3,019 $7,789 
Current portion of long-term borrowings30,000 30,000 
Deferred revenue20,755 18,782 
Accrued employee costs82,044 108,100 
Accrued expenses and other current liabilities104,480 95,352 
Current portion of operating lease liabilities14,482 14,978 
Income taxes payable, net4,283 2,945 
Total current liabilities259,063 277,946 
Long-term borrowings, less current portion190,000 220,000 
Operating lease liabilities, less current portion50,575 48,155 
Deferred tax liabilities, net507 547 
Other non-current liabilities28,343 41,292 
Total liabilities528,488 587,940 
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, 40,349,727 shares issued and 33,152,670 shares outstanding as of June 30, 2023 and 39,987,976 shares issued and 33,234,444 shares outstanding as of December 31, 2022
40 40 
Additional paid-in capital472,124 445,108 
Retained earnings999,504 899,105 
Accumulated other comprehensive loss(124,147)(144,143)
Total including shares held in treasury1,347,521 1,200,110 
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Less: 7,197,057 shares as of June 30, 2023 and 6,753,532 shares as of December 31, 2022, held in treasury, at cost
(513,307)(441,931)
Total stockholders’ equity834,214 758,179 
Total liabilities and stockholders’ equity $1,362,702 $1,346,119 

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 June 30,Six months ended June 30,
2023202220232022
Revenues, net$404,996 $346,782 $805,639 $675,990 
Cost of revenues (1)
253,220 221,207 504,689 428,723 
Gross profit (1)
151,776 125,575 300,950 247,267 
Operating expenses:
General and administrative expenses45,605 40,434 92,351 80,379 
Selling and marketing expenses28,238 23,985 57,731 48,155 
Depreciation and amortization expense13,122 14,075 26,609 27,677 
Total operating expenses86,965 78,494 176,691 156,211 
Income from operations64,811 47,081 124,259 91,056 
Foreign exchange gain, net324 1,423 429 3,179 
Interest expense(3,240)(1,502)(6,625)(2,378)
Other income/(loss), net2,661 (174)5,816 2,237 
Income before income tax expense and earnings from equity affiliates64,556 46,828 123,879 94,094 
Income tax expense15,554 11,125 23,612 22,327 
Income before earnings from equity affiliates49,002 35,703 100,267 71,767 
Gain from equity-method investment66 143 132 257 
Net income attributable to ExlService Holdings, Inc. stockholders$49,068 $35,846 $100,399 $72,024 
Earnings per share attributable to ExlService Holdings, Inc. stockholders:
Basic$1.47 $1.07 $3.01 $2.15 
Diluted$1.46 $1.06 $2.97 $2.13 
Weighted average number of shares used in computing earnings per share attributable to ExlService Holdings, Inc. stockholders:
Basic33,355,354 33,403,41133,397,226 33,422,618
Diluted33,688,449 33,830,53933,809,555 33,862,597

(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 June 30,Six months ended June 30,
2023202220232022
Net income$49,068 $35,846 $100,399 $72,024 
 Other comprehensive income/(loss):
Unrealized gain/(loss) on cash flow hedges8,851 (14,632)16,145 (15,149)
Foreign currency translation gain/(loss)(136)(22,782)5,177 (30,227)
Reclassification adjustments
(Gain)/loss on cash flow hedges(1)
1,164 (1,459)4,229 (3,448)
Retirement benefits(2)
(23)149 (48)304 
Income tax effects relating to above(3)
(2,516)3,656 (5,507)4,620 
  Total other comprehensive income/(loss)$7,340 $(35,068)$19,996 $(43,900)
Total comprehensive income$56,408 $778 $120,395 $28,124 


(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/(loss), 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 gain/(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 STOCKHOLDERS’ EQUITY (UNAUDITED)
For the three months ended June 30, 2023 and 2022
(In thousands, except share count)


Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income/(loss)Treasury StockTotal
SharesAmountSharesAmount
Balance as of March 31, 202340,334,368 $40 $460,527 $950,436 $(131,487)(7,012,913)$(484,294)$795,222 
Stock issued against stock-based compensation plans15,359 — 86 — — — — 86 
Stock-based compensation— — 11,511 — — — — 11,511 
Acquisition of treasury stock— — — — — (184,144)(29,013)(29,013)
Other comprehensive income— — — — 7,340 — — 7,340 
Net income— — — 49,068 — — — 49,068 
Balance as of June 30, 202340,349,727 $40 $472,124 $999,504 $(124,147)(7,197,057)$(513,307)$834,214 


Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal
SharesAmountSharesAmount
Balance as of March 31, 202239,794,154 $40 $406,966 $792,315 $(98,306)(6,465,410)$(400,674)$700,341 
Stock issued against stock-based compensation plans1,007 — — — — — —  
Stock-based compensation— — 13,340 — — — — 13,340 
Acquisition of treasury stock— — — — — (205,716)(28,806)(28,806)
Other comprehensive loss— — — — (35,068)— — (35,068)
Net income— — — 35,846 — — — 35,846 
Balance as of June 30, 202239,795,161 $40 $420,306 $828,161 $(133,374)(6,671,126)$(429,480)$685,653 
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EXLSERVICE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
For the six months ended June 30, 2023 and 2022
(In thousands, except share count)

Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income/(loss)Treasury StockTotal
SharesAmountSharesAmount
January 1, 202339,987,976 $40 $445,108 $899,105 $(144,143)(6,753,532)$(441,931)$758,179 
Stock issued against stock-based compensation plans361,751 — 1,098 — — — — 1,098 
Stock-based compensation— — 25,918 — — — — 25,918 
Acquisition of treasury stock— — — — — (443,525)(71,376)(71,376)
Other comprehensive income— — — — 19,996 — — 19,996 
Net income— — — 100,399 — — — 100,399 
Balance as of June 30, 202340,349,727 $40 $472,124 $999,504 $(124,147)(7,197,057)$(513,307)$834,214 


Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal
SharesAmountSharesAmount
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 plans286,821 — — — — — —  
Stock-based compensation— — 24,564 — — — — 24,564 
Acquisition of treasury stock— — — — — (454,268)(60,191)(60,191)
Other comprehensive loss— — — — (43,900)— — (43,900)
Net income— — — 72,024 — — — 72,024 
Balance as of June 30, 202239,795,161 $40 $420,306 $828,161 $(133,374)(6,671,126)$(429,480)$685,653 


See accompanying notes to unaudited consolidated financial statements.
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EXLSERVICE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Six months ended June 30,
20232022
Cash flows from operating activities:
Net income$100,399 $72,024 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense26,464 27,739 
Stock-based compensation expense25,918 24,564 
Amortization of operating lease right-of-use assets10,332 12,005 
Unrealized (gain)/loss on investments7,222 (275)
Unrealized foreign currency exchange (gain)/loss, net1,288 (10,280)
Deferred income tax benefit(18,283)(1,462)
Allowance for expected credit losses479 170 
Fair value changes in contingent consideration 1,000 
Others, net1,202 526 
Change in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable(28,375)(46,385)
Other current assets(4,387)2,861 
Income taxes payable, net(10,610)8,684 
Other assets(12,772)(6,584)
Accounts payable(4,796)(1,107)
Deferred revenue 5,380 4,276 
Accrued employee costs(24,331)(34,016)
Accrued expenses and other liabilities(742)11,190 
Operating lease liabilities(10,829)(11,922)
Net cash provided by operating activities63,559 53,008 
Cash flows from investing activities:
Purchases of property and equipment(26,113)(25,054)
Proceeds from sale of property and equipment547 154 
Business acquisition (net of cash and cash equivalents acquired) (2,572)
Purchases of investments(113,823)(96,082)
Proceeds from redemption of investments151,178 82,567 
Net cash provided by/(used for) investing activities11,789 (40,987)
Cash flows from financing activities:
Principal payments of finance lease liabilities(80)(75)
Proceeds from borrowings70,000 35,000 
Repayments of borrowings(100,000)(10,000)
Acquisition of treasury stock(70,638)(60,191)
Payment of contingent consideration(5,000) 
Proceeds from ESPP contribution3,800  
Proceeds from exercise of stock options85  
Net cash used for financing activities(101,833)(35,266)
Effect of exchange rate changes on cash, cash equivalents and restricted cash1,524 (5,365)
Net decrease in cash, cash equivalents and restricted cash(24,961)(28,610)
Cash, cash equivalents and restricted cash at the beginning of the period125,621 143,810 
Cash, cash equivalents and restricted cash at the end of the period$100,660 $115,200 
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest$6,914 $2,694 
Income taxes, net of refunds$53,299 $14,301 
Supplemental disclosure of non-cash investing and financing activities:
Assets acquired under finance lease$91 $118 
See accompanying notes to unaudited consolidated financial statements.
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EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(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.

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, 2022.

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.

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.

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

(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
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EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
June 30, 2023
(In thousands, except per share amount and share count)
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 the discount rate applied within the discounted cash flow model for business acquisitions, credit risk of customers, 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, stock-based awards, and debt 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)Recent Accounting Pronouncements

In March 2023, the Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-01, Leases (“ASC Topic 842”): Common Control Arrangements. This ASU provides guidance in ASC Topic 842 that leasehold improvements associated with common control leases should be (i) amortized by the lessee over the useful life of the leasehold improvements to the common control group, regardless of the lease term, as long as the lessee controls the use of the underlying asset through a lease, and (ii) accounted for as a transfer between entities under common control through an adjustment to equity if and when the lessee no longer controls the use of the underlying asset. The ASU is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted for both interim and annual financial statements that have not yet been issued. When adopted in an interim period, it must be adopted from the beginning of the year that includes that interim period. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
    
(d)Recently adopted Accounting Pronouncements

In October 2021, FASB issued ASU No. 2021-08, Business Combinations (“ASC Topic 805”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU provides guidance in ASC Topic 805 to require the acquirer entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contract 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 adoption of this ASU is applicable for future business combinations.
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.

Revenues and cost of revenues for the three months ended June 30, 2023 and 2022, respectively, for each of the reportable segments, are as follows:
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EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
June 30, 2023
(In thousands, except per share amount and share count)
Three months ended June 30, 2023
InsuranceHealthcareEmerging BusinessAnalyticsTotal
Revenues, net$128,457 $27,156 $67,200 $182,183 $404,996 
Cost of revenues(1)
84,322 17,540 37,845 113,513 253,220 
Gross profit(1)
$44,135 $9,616 $29,355 $68,670 $151,776 
Operating expenses86,965 
Foreign exchange gain, net, interest expense and other income, net(255)
Income tax expense15,554 
Gain from equity-method investment66 
Net income$49,068 
(1) Exclusive of depreciation and amortization expense.

Three months ended June 30, 2022
InsuranceHealthcareEmerging BusinessAnalyticsTotal
Revenues, net$108,557 $23,051 $53,873 $161,301 $346,782 
Cost of revenues(1)
70,645 17,694 31,214 101,654 221,207 
Gross profit(1)
$37,912 $5,357 $22,659 $59,647 $125,575 
Operating expenses78,494 
Foreign exchange gain, net, interest expense and other loss, net(253)
Income tax expense11,125 
Gain from equity-method investment143 
Net income$35,846 
(1) Exclusive of depreciation and amortization expense.

Revenues and cost of revenues for the six months ended June 30, 2023 and 2022, respectively, for each of the reportable segments, are as follows:

Six months ended June 30, 2023
InsuranceHealthcareEmerging BusinessAnalyticsTotal
Revenues, net$254,393 $53,859 $133,361 $364,026 $805,639 
Cost of revenues(1)
166,646 36,349 73,815 227,879 504,689 
Gross profit(1)
$87,747 $17,510 $59,546 $136,147 $300,950 
Operating expenses176,691 
Foreign exchange gain, net, interest expense and other income, net(380)
Income tax expense23,612 
Gain from equity-method investment132 
Net income$100,399 
(1) Exclusive of depreciation and amortization expense.

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EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
June 30, 2023
(In thousands, except per share amount and share count)
Six months ended June 30, 2022
InsuranceHealthcareEmerging BusinessAnalyticsTotal
Revenues, net$211,823 $49,207 $104,620 $310,340 $675,990 
Cost of revenues(1)
135,727 35,345 60,427 197,224 428,723 
Gross profit(1)
$76,096 $13,862 $44,193 $113,116 $247,267 
Operating expenses156,211 
Foreign exchange gain, net, interest expense and other income, net3,038 
Income tax expense22,327 
Gain from equity-method investment257 
Net income$72,024 
(1) Exclusive of depreciation and amortization expense.

Revenues, net by service type, were as follows:
Three months ended June 30,Six months ended June 30,
2023202220232022
Digital operations and solutions(1)
$222,813 $185,481 $441,613 $365,650 
Analytics services182,183 161,301 364,026 310,340 
Revenues, net$404,996 $346,782 $805,639 $675,990 
(1) Digital operations and solutions include revenues of the Company’s Insurance, Healthcare and Emerging Business reportable segments. Refer to the reportable segment disclosure above.

The Company attributes the revenues to regions based upon the location of its customers.
 Three months ended June 30,Six months ended June 30,
 2023202220232022
Revenues, net
United States$340,675 $298,520 $679,748 $580,899 
Non-United States
United Kingdom43,648 32,090 85,222 64,863 
Rest of World20,673 16,172 40,669 30,228 
Total Non-United States64,321 48,262 125,891 95,091 
Revenues, net$404,996 $346,782 $805,639 $675,990 

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
June 30, 2023December 31, 2022
Long-lived assets
United States$62,181 $60,709 
India45,769 50,118 
Philippines23,983 18,406 
Rest of World20,178 8,942 
Long-lived assets$152,111 $138,175 

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EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
June 30, 2023
(In thousands, except per share amount and share count)
4. Revenues, net

Refer to Note 3 - Segment and Geographical Information 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
June 30, 2023December 31, 2022
Accounts receivable, net$288,305 $259,222 
Contract assets$7,632 $2,768 
Contract liabilities:
Deferred revenue (consideration received in advance)$18,909 $17,079 
Consideration received for process transition activities$9,122 $5,423 

Accounts receivable includes $148,370 and $126,027 as of June 30, 2023 and December 31, 2022, 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.

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. 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 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 and six months ended June 30, 2023 and 2022, which was included in the contract liabilities balance at the beginning of the respective periods:

Three months ended June 30,Six months ended June 30,
2023202220232022
Deferred revenue (consideration received in advance)$2,990 $4,306 $15,992 $13,870 
Consideration received for process transition activities$305 $298 $1,008 $664 













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EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
June 30, 2023
(In thousands, except per share amount and share count)
Contract acquisition and fulfillment costs

The following table provides details of the Company’s contract acquisition and fulfillment costs:
Contract Acquisition Costs
Three months endedSix months endedYear ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022December 31, 2022
Opening Balance$1,994 $927 $1,095 $511 $511 
Additions397 180 1,476 727 1,014 
Amortization(208)(124)(388)(255)(430)
Closing Balance$2,183 $983 $2,183 $983 $1,095 

Contract Fulfillment Costs
Three months endedSix months endedYear ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022December 31, 2022
Opening Balance$17,873 $7,435 $13,871 $5,795 $5,795 
Additions4,225 3,308 8,843 5,485 15,509 
Amortization(653)(576)(1,269)(1,113)(7,433)
Closing Balance$21,445 $10,167 $21,445 $10,167 $13,871 

There was no impairment for contract acquisition and contract fulfillment costs as of June 30, 2023 and December 31, 2022. The capitalized costs are amortized over the expected period of benefit of the contract.

Allowance for expected credit losses

The Company evaluates the credit risk of its customers based on a combination of various financial and qualitative factors that may affect the ability of each customer to pay. 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.

As of
June 30, 2023December 31, 2022
Accounts receivable, including unbilled receivables$290,105 $260,554 
Less: Allowance for expected credit losses(1,800)(1,332)
Accounts receivable, net$288,305 $259,222 









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EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
June 30, 2023
(In thousands, except per share amount and share count)
The movement in “Allowance for expected credit losses” on customer balances was as follows:

Three months endedSix months endedYear ended
June 30, 2023June 30, 2022June 30, 2023June 30, 2022December 31, 2022
Opening Balance$1,671 $588 $1,332 $573 $573 
Additions134 571 477 743 815 
Reductions due to write-off of Accounts Receivables(5)(314)(8)(472)(60)
Currency translation adjustments (1)(1) 4 
Closing Balance$1,800 $844 $1,800 $844 $1,332 

Concentration of credit risk
To reduce credit risk, the Company conducts ongoing credit evaluations of its customers. No customer accounted for more than 10% of accounts receivable, net, as of June 30, 2023 and December 31, 2022.

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, restricted stock units and employee stock purchase plans) 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 following table sets forth the computation of basic and diluted earnings per share:
 Three months ended June 30,Six months ended June 30,
 2023202220232022
Numerators:
Net income$49,068 $35,846 $100,399 $72,024 
Denominators:
Basic weighted average common shares outstanding33,355,354 33,403,411 33,397,226 33,422,618 
Dilutive effect of share-based awards333,095 427,128 412,329 439,979 
Diluted weighted average common shares outstanding33,688,449 33,830,539 33,809,555 33,862,597 
Earnings per share attributable to ExlService Holdings, Inc. stockholders:
Basic$1.47 $1.07 $3.01 $2.15 
Diluted$1.46 $1.06 $2.97 $2.13 
Weighted average potentially dilutive shares considered anti-dilutive and not included in computing diluted earnings per share249,831 — 179,550 541 




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EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
June 30, 2023
(In thousands, except per share amount and share count)
6. Other Income/(Loss), net
Other income/(loss), net consists of the following:
Three months ended June 30,Six months ended June 30,
2023202220232022
Gain on sale and mark-to-market on investments$1,095 $634 $2,739 $1,870 
Interest and dividend income1,653 847 3,374 2,217 
Others, net(87)(1,655)(297)(1,850)
Other income/(loss), net$2,661 $(174)$5,816 $2,237 
7. Cash, Cash Equivalents and Restricted Cash

For the purposes of unaudited statements of cash flows, cash, cash equivalents and restricted cash consist of the following:
 As of
 June 30, 2023June 30, 2022December 31, 2022
Cash and cash equivalents$93,960 $106,304 $118,669 
Restricted cash (current)4,628 6,840 4,897 
Restricted cash (non-current)2,072 2,056 2,055 
Cash, cash equivalents and restricted cash$100,660 $115,200 $125,621 
Restricted cash (current) primarily represents funds held on behalf of clients in dedicated bank accounts. The corresponding liability against the same is included under “Accrued Expenses and other current liabilities.” Restricted cash (non-current) represents amounts on deposit with banks against bank guarantees issued through banks in favor of relevant statutory authorities for equipment imports, deposits for obtaining indirect tax registrations and for demands against pending income tax assessments. These deposits with banks will mature one year after the balance sheet date.
8. Investments

Investments consist of the following:
 As of
 June 30, 2023December 31, 2022
Short-term investments
Mutual funds$68,891 $110,964 
Term deposits87,207 68,063 
Total Short-term investments$156,098 $179,027 
Long-term investments
Term deposits$12,515 $31,341 
Investment in equity affiliate3,570 3,438 
Total Long-term investments$16,085 $34,779 
Refer to Note 16 - Fair Value Measurements to the unaudited consolidated financial statements for further details.

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EXLSERVICE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
June 30, 2023
(In thousands, except per share amount and share count)
9. Property and Equipment, net
Property and equipment, net consists of the following:
As of
Estimated useful lives (Years)June 30, 2023December 31, 2022
Owned Assets:
Network equipment and computers
3-5
$141,728 $130,218 
Software
2-5
99,828 88,487 
Leasehold improvements
3-8
40,566 42,890 
Office furniture and equipment
3-8
19,938 20,211 
Motor vehicles
2-5
738 605 
Buildings30970 961 
Land634 629 
Capital work in progress13,532 14,459 
317,934 298,460 
Less: Accumulated depreciation and amortization(224,764)(216,132)
93,170 82,328 
Right-of-use assets under finance leases*:
Network equipment and computers58 82 
Leasehold improvements611 1,013 
Office furniture and equipment435 662 
Motor vehicles802 742 
1,906 2,499 
Less: Accumulated depreciation and amortization(1,388)(1,999)
518 500 
Property and equipment, net$93,688 $82,828 

*Depreciation on assets held under finance leases are computed using the straight-line method over the shorter of the assets estimated useful lives or the lease term.

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 and six months ended June 30, 2023, there were no material changes in estimated useful lives of property and equipment during the ordinary course of operations.

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 June 30,Six months ended June 30,
2023202220232022
Depreciation and amortization expense$