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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________________________    
FORM 10-K
_________________________________________________________
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes  ý No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  ¨    No  ý
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  ý    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  ý    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 filerý  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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.



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Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

As of June 30, 2023, the aggregate market value of common stock held by non-affiliates was approximately $4,872,965,018.

As of February 27, 2024, there were 165,783,820 shares of the registrant’s common stock outstanding, par value $0.001 per share.

DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information from certain portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the fiscal year ended December 31, 2023.



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ITEM 1.     Business
ExlService Holdings, Inc. (“EXL,” “we,” “us,” “our” or the “Company”), incorporated in Delaware in 2002, is a leading data analytics and digital operations and solutions company. We partner with clients using a data and AI-led approach to reinvent business models, drive better business outcomes and unlock growth with speed. EXL harnesses the power of data, analytics, artificial intelligence (“AI”), and deep industry knowledge to transform operations for the world’s leading corporations in industries including insurance, healthcare, banking and financial services, media and retail, among others. EXL was founded in 1999 with the core values of innovation, collaboration, excellence, integrity and respect. We are headquartered in New York and have approximately 54,000 employees spanning six continents.
We deliver data analytics and digital operations and solutions to our clients, driving enterprise-scale business transformation initiatives that leverage our deep expertise in advanced analytics, AI, generative AI and cloud technology. Data, AI, analytics and digital have become core to virtually every significant move a business makes to serve customers, optimize business processes, stay competitive and grow. Our vision of being an indispensable partner for data and AI-led businesses reflects the long-term priorities of our clients' businesses across industry sectors, and we continue to evolve our offerings to drive business outcomes through advanced analytics and AI-powered solutions on the cloud. Our data and AI-led value creation framework enables better and faster decision making, leveraging our end-to-end data, analytics, AI capabilities and deep industry knowledge to drive improved business outcomes, and re-designing of operating models to integrate advanced technology into operational workflows. We embed digital operations and solutions into clients’ businesses and introduce our data and AI-led approach to transform operations with every new engagement, which helps our clients achieve better customer experience, higher productivity, cost efficiency and improved business outcomes.

We manage and report financial information through our four reportable segments or strategic business units: Insurance, Healthcare, Analytics and Emerging Business, which reflects how management reviews financial information and makes operating decisions. Our strategic business units align our products and services with how we manage our business, approach our key markets and interact with our clients. 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. By integrating data and analytics directly into our client workflows, we drive more intelligence into our clients’ increasingly digital operations that drive superior customer outcomes, optimize costs and power resilient and agile business models.
Digital Operations and Solutions
Our digital operations and solutions, which we deploy for our clients from our Insurance, Healthcare and Emerging Business strategic business units, are focused on solving complex industry challenges. We use a focused industry vertical approach, and our solutions are designed to help our clients realize their business and innovation goals and improve their strategic competitive position.

Some of our data and AI-led digital operations and solutions include: a) multi-modal data ingestion using AI, and converting unstructured content into curated and usable data, b) real-time and comprehensive data insights, including end-to-end data management and building a 360-degree view of our clients’ customers, c) omni-channel and frictionless customer experience including self-service, conversational AI and smart agent assist, d) intelligent and AI-powered redesign and automation of transaction processing and e) automated quality, compliance and audit. Some of our clients’ operations that we have transformed using the above solutions include underwriting operations, claims processing, accounts payables processing, utilization management, member and provider contact center services and collections and accounts receivables. We either manage and digitally transform these operations for our clients by deploying our solutions through a software-as-a-service (“SaaS”) model via our partners’ cloud network or a client’s on-cloud deployment model, to digitally transform their retained operations.

The key digital and AI capabilities that allow us to drive data and technology-led transformation for our clients include generative AI, reinforcement learning, hyper-automation, cloud data management, conversational AI, robotics, enterprise architecture development, integration platform as a service and AI for Operations. Some of our key solutions are:
Generative AI platform for the development and deployment of our proprietary solutions, including, among others, Smart Agent Assist, Claims Assist, Conversational Business Intelligence and Code Harbor.
Xtrakto.AI is a patented and AI-powered solution designed to alleviate the challenges of managing unstructured data.
PayMentor is an AI-powered collections and receivables management solution designed to enhance the debt collection process.
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Digital Finance Suite automates and streamlines financial processes and key finance and accounting tasks, which helps customers gain real-time visibility into financial operations leading to faster decision making and reduced risks, among others.
Data and AI-led Customer Experience: Delivers AI-infused customer experiences across multiple customer journeys and touchpoints.
Digital Lending and Embedded Financing: AI-powered financing solution that reimagines and delivers a seamless and end-to-end origination, service and payments journeys for multiple credit and loan products across industries.
Data and AI-led Automation Solution eliminates friction and fragmentation in transaction processing using some of our proprietary workflow solutions.

We use AI, data, and cloud technology, including our suite of solutions and accelerators, in a standardized, reusable and shared engineering and delivery infrastructure, enabling us to leverage our investments across multiple clients.
Our strategic business units, through which we provide digital operations and solutions, are described below:
Our Insurance strategic business unit serves property and casualty insurance, life insurance, disability insurance, insurance brokers, reinsurers, annuity and retirement services and insurtech companies. We provide end-to-end digital transformation solutions and data and AI-led operations services across the insurance industry in areas such as claims processing, premium and benefit administration, agency management, account reconciliation, policy research, underwriting support, new business acquisition, policy servicing, premium audit, surveys, billing and collection, commercial and residential survey and customer service using digital technology, AI, including generative AI, ML and advanced automation. We provide end-to-end third-party administration for life and annuity insurance policies, which includes digital customer acquisition services using a SaaS delivery model through our LifePRO® and Life Digital Suite platforms that help clients administer life insurance, annuities and credit life and disability insurance policies. We also provide subrogation services to property and casualty insurers using a business process-as-a-service delivery model and our proprietary Subrosource® software platform, the largest commercial end-to-end subrogation platform. Subrosource® integrates with client systems, manages recovery workflow, increases recoveries and reduces costs. We provide a suite of data and AI-led finance and accounting services that include financial planning and analysis, decision support, GAAP and statutory reporting and compliance services in addition to core finance operations. We bring a data and AI-led and practical digital approach to finance and accounting, enabling our clients to simplify and scale their finance and accounting processes, drive stakeholder centricity, improve controls and compliance, reduce operating costs and deliver rich data and AI-led insights to our clients’ businesses.
Our Healthcare strategic business unit primarily serves U.S.-based healthcare payers, providers and pharmacy benefit managers organizations. We combine deep healthcare domain expertise with data and AI-led insights and technology-enabled services to transform how care is delivered, managed and paid. We provide services related to care management, utilization management, disease management, payment integrity, revenue optimization and customer engagement directly addressing the market need for improved healthcare outcomes, patient and provider experience and access to the healthcare system in the healthcare market and optimized healthcare spend.

We offer digital operations, SaaS and platform services designed to serve the healthcare industry. Our integrated care management offering, including our proprietary clinical data, connects payers, providers and members to increase efficiencies and effectiveness across all aspects of care management, including medical, pharmacy and behavioral health. Our data and AI-led digital operations and solutions infuse advanced analytics, AI, generative AI, cloud, ML and robotics capabilities to improve efficiency, business outcomes and the consumer experience in healthcare across patient/member management, contracting and network management, health and care management, claims administration and business operations.

Similar to our Insurance strategic business unit, we also provide finance and accounting services, digital transformation and advisory/consulting services for our clients in the healthcare industry.
Our Emerging Business strategic business unit provides data and AI-led enterprise solutions in the areas of finance and accounting, customer experience management and revenue enhancement to clients primarily in the banking and capital markets, utilities, retail and consumer packaged goods, technology, media, and telecom, travel and leisure, manufacturing, transportation and logistics and business services industries. These enterprise solutions complement our domain-specific industry solutions enabling our clients to deliver superior performance.
Our data and AI-led finance and accounting services include high-end analytical services, including financial planning and analysis, management reporting, advanced forecasting and decision support, data management, regulatory reporting and risk and compliance services in addition to core transactional finance operations. Our Digital Finance Suite, which is
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powered by our integrated cloud-based hyper-automation and insights platform, helps chief financial officers transform finance into a digitally enabled, scalable data and AI-led function with lower cost to serve, superior business outcomes and improved stakeholder experience.

Our client experience management solutions that run on our proprietary EXL CONNECXTM platform, help our clients improve their end-customer experience across the front, middle and back-office, integrating data flows, redesigning customer service processes and leveraging digital omni-channel platforms. To deliver these solutions, we combine our deep industry knowledge with advanced analytics and digital capabilities, including robotics, proprietary and partner-driven AI and ML solutions.

Our revenue enhancement solutions include lead generation, inside sales and digital marketing, pricing, customer and marketing analytics, billing and proprietary revenue assurance solutions, which helps deliver direct topline and margin impact to our clients’ business.

We also provide industry-specific digital operations and solutions. For our clients in the banking and financial services sector, we provide a range of digital solutions, including residential mortgage lending, title verification and validation, retail banking and credit cards, trust verification, commercial banking and investment management. In the retail and consumer packaged goods sector, we provide supply chain management services and analytical services including merchandising, pricing and demand forecasting. For our clients in the utilities sector, we offer digital operations and solutions related to end-to-end customer life cycle management including onboarding and terminations, engineering field services, customer service, billing and debt management and collections. In the technology, media, and telecom sector, we manage media and advertising reconciliations, order entry, fulfillment and licensing management operations. For our clients in the travel and leisure sector, we provide corporate and leisure travel services, including, reservations, customer service and fulfilment services. In the transportation and logistics sector, we provide our clients with freight billing, collections, claims management, freight audit, freight scheduling, supply chain management and revenue assurance services.
Analytics
Our Analytics strategic business unit helps clients build data-led businesses using AI, generative AI, advanced analytics solutions and services, and cloud technology. By leveraging our suite of end-to-end analytics capabilities, we aim to drive better business outcomes for our clients by unlocking deep insights from data and creating data and AI-led solutions across all parts of clients’ businesses.
Our Analytics teams deliver predictive and prescriptive analytics in the areas of customer acquisition and life cycle management, risk underwriting and pricing, operational effectiveness, credit and operational risk monitoring and governance, regulatory reporting, and data management.

We enhance, modernize and enrich structured and unstructured data and use a spectrum of advanced analytical tools and techniques, including our in-house and third-party AI, generative AI, and ML capabilities and proprietary solutions, to create insights, improve decision making for our clients and address a range of complex industry-wide priorities, including:

•    Superior customer experience, driving engagement, loyalty and increasing cross-sell through a deeper understanding of consumer behavior;

•    Solutions for risk models, stress testing, Basel risk-weighted assets, reserves, and economic capital calculation;

•    ML models for fraud monitoring, loss mitigation, and implementation and execution of fraud strategies;

•    Enhanced decision-making in underwriting, claims processing and policy renewal through cognitive image analytics; and

•    Payment integrity services in the U.S. healthcare industry ensuring accurate reimbursement and help prevent fraud, denials, and revenue leakage.

Our Analytics team is comprised of approximately 9,100 professionals, including data scientists, data architects, business analysts, statisticians, modelers and industry domain specialists.

We help our clients leverage internal and external data sources, enhance their data assets, identify and visualize data patterns, and utilize data and AI-led insights to improve their effectiveness. Our Analytics services for our clients include:

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•    Identification, cleansing, matching and use of structured, semi-structured and unstructured data, available internally to our client’s organization and also externally;

•    Integration of data insights and predictive models into real-time, decision-making processes to drive measurable business impact;

•    Design and implementation of services that enable data visualization and management reporting enabling business users to segment, drill down, and filter data;

•    Deployment of analytics professionals and data scientists who utilize analytics tools, cutting edge statistical techniques and methodologies in ways designed to help customers better understand their data to generate actionable business insights; and

•    Harnessing the power of AI, including generative AI to elevate decision-making paradigms, enabling our clients to achieve a sustainable competitive advantage amid rapid technological innovation.

Our Analytics engagements span both project work and longer-term arrangements where we provide ongoing analytics modeling and services for a year or longer. We utilize our deep industry knowledge to drive these engagements across our various competencies, including, data management and cloud enablement, AI, generative AI, ML, advanced analytics and insights, data-enabled marketing solutions and strategic data assets.

Our Analytics services support: (1) retail banking, commercial banking and investment banking and management for the banking and financial services industries; (2) marketing analytics, clinical analytics, patient engagement, pharmaco-economics outcomes and cost optimization solution in the healthcare industry; (3) marketing and agency analytics, actuarial, servicing and operations, customer management and claims and money movement in the insurance industry; and (4) marketing analytics, supply chain, logistics and digital operations and solutions in the retail and consumer packaged goods, media and telecom and utilities and manufacturing industries.

We have seen a significant acceleration in the shift to digital and cloud-based solutions across all our target markets over the past few years. Capturing data and enriching data has become a key differentiator for clients and their speed of decision making necessitating the adoption of AI, including generative AI and ML techniques. The accelerated adoption of cloud-based solutions has increased our clients’ needs for a suite of cloud migration and enablement capabilities.

We expect the trend in increased demand for analytics solutions to continue, and to capture these new opportunities, we have built a scalable and customizable multi-cloud cross-sector generative AI platform with pre-built accelerators and packaged solutions. Our AI and analytics solutions include Bank Transaction Insights, which provides insights from bank data and Customer 360 Insights, which provides agent and customer relationship insights.

Our EXLClarityTM platform supports risk adjustment and quality management for payers and providers and helps to optimize their revenue. Our payment services support payment integrity and maximize performance and financial-related results by leveraging our multi-payer dataset and applying digital solutions, such as AI, natural language processing and robotics. These services involve verifying the correct party pays the claim, membership eligibility, contractual adherence, and detecting and preventing fraud, waste, and abuse. Our EXLVantageTM platform offers population health analytics for enhanced care and network optimization. These analytics models integrate with campaign management and marketing analytics to support member acquisition and clinical program interventions.

We offer end-to-end data management services to support data strategy, ingestion, normalization, quality, security, governance, visualization and data architecture development and deployment via agnostic tools and flexible delivery models. We continue to strengthen our expertise in data and product engineering, ML operations, cloud enablement and managed services. We have expanded our footprint within our existing clients in the insurance, healthcare, banking and financial services, retail and consumer packaged goods, media and telecom, utilities and manufacturing industries by cross-selling our enhanced data management and cloud enablement offerings.
Business Strategy
EXL is a leading data analytics and digital operations and solutions company and is a key strategic partner for data and AI-led businesses. We reinvent business models, drive better business outcomes and unlock growth with speed for our clients through advanced analytics and AI -powered digital solutions on the cloud. We do this through our data and AI-led value creation framework to enable better and faster decision making, leveraging our end-to-end data and analytics
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capabilities to drive improved business outcomes, and we re-design operating models to integrate advanced technology into operational workflows. Below are some of our strategically focused considerations:
Expanding our Services in Large Addressable Markets

We continue to focus on the insurance, healthcare, banking and financial services, retail, media and technology industries, among others, which are large markets with high demand, as well as pursuing opportunities in emerging industries. We also continue to build our client portfolio in finance and accounting and consulting services in all our business segments. We are strategically equipped to help clients apply relevant digital technologies to enterprise processes and business priorities at every step of the digital transformation journey, by bringing together domain expertise with data, advanced analytics, cloud, AI and ML. Demand for our services is expected to continue to exhibit growth in the next several years.

Integrating our Data and AI-Led and Domain Capabilities

The combination of our data and AI-led capabilities and domain expertise has been central to our market differentiation. We are also well-positioned with our suite of advanced analytics, data and AI-powered digital solutions on the cloud to create integrated services and solutions under one brand.

Cultivating Long-term Relationships and Expanding our Client Base

We continue to maintain our focus on cultivating long-term client relationships as well as attracting new clients. We believe there are significant opportunities for additional growth within our existing clients, and we seek to expand these relationships by:

•    Increasing the depth and breadth of the services we provide across our clients’ value chains and geographies;

•    Offering the full suite of EXL services, which includes AI-powered digital operations and solutions, consulting and data analytics services; and

•    Supporting our clients’ geographic expansions by leveraging our global footprint.

We intend to continue building a portfolio of Fortune 500 and Forbes Global 2000 companies in our focus industries that have complex and diverse data-led processes and, accordingly, stand to benefit significantly from our services. We also intend to cultivate long-term relationships with medium-sized companies in our focus industries by leveraging our data analytics, and digital operations and solutions offerings.

Optimizing our Global Delivery Footprint and Operational Infrastructure in the Countries and Regions where we Operate

Our network of delivery centers and operational footprint is designed to serve the needs of our business, including delivering for our clients, driving efficiencies and adapting to hybrid working model. As part of our ongoing evaluation of facilities usage and business needs, we continually optimize our network and footprint.

Pursuing Strategic Acquisitions and Relationships

We intend to continue making selective acquisitions in our focus industry verticals that enhance our competitive differentiation and that meet our strategic and financial criteria. We consider selective strategic relationships with industry leaders that add new long-term client relationships, enhance the depth and breadth of our services and solutions and complement our business strategy. Through our Connected Intelligence Partnership programs, we expand our technology and innovation ecosystem with select partnerships, alliances or investments. We expect that the digital assets and intellectual property this ecosystem provides will enhance our go-to-market opportunities, expand the scope and effectiveness of our services and solutions, help us to win new clients, and allow us to enter new industry verticals and geographic markets.
Our Industry
Digital operations and solutions
As a provider of digital operations and solutions, we work with clients to execute enterprise-scale business transformation initiatives that enable improved customer experience, revenue growth, operational efficiency and reduced
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risk. Our asset-based operations services combine the industry-specific knowledge of our global workforce with an ecosystem of partner and proprietary digital solutions. These digital solutions help clients achieve their desired outcomes in three key ways: 1) leveraging advanced analytics that combine publicly available data, proprietary data sets and clients’ own data to help power faster, more strategic decision making, 2) integrating AI/ML-driven natural language processing to help streamline manual, labor-intensive workflows and improve end-customer engagement and experience, and 3) implementing AI/ML-powered operating models that help our clients transition from legacy business operations and get to value faster.

This comprehensive approach acknowledges the critical role that digital capabilities play in both the operational business process and consumer-facing customer engagement and user experience, as our clients’ customer touch points, interactions and experiences have increasingly shifted to digital channels.

Digital transformation is a long-term strategic commitment for a company that, once begun, is generally not subject to cyclical spending or information technology budget fluctuations. Increased global demand, cost improvements in international communications and the automation of many business services have created opportunities for digital operations providers with offshore delivery capabilities, and many companies are moving select office processes to providers with the capacity to perform these functions from overseas locations.

Data Analytics

As a provider of advanced analytics, AI and data services, we help companies access and deliver real-time data and insights at multiple points in their overall workflows so that all parts of the organization are working from the same data pool. Leveraging a large number of high-frequency, granular, non-traditional data elements aggregated across proprietary data sets, client data and publicly available sources, advanced analytics enables clients to deliver personalized customer experiences at scale, settle consumer issues efficiently and rapidly adapt their business strategies in response to market changes.

The enhanced generation of business data across multiple formats, substantial reduction in data storage costs, growing enterprise demand for data and AI-led decision making and availability of sophisticated analytics tools, have enabled companies to make better decisions. By leveraging our end-to-end service offerings, we develop industry-specific AI and advanced analytics solutions and generate data insights, which makes us well-positioned to benefit from this global trend.

Sales, Marketing and Client Management

We market our services to our existing and prospective clients through our sales and client management teams, which are aligned by industry verticals and cross-industry domains such as digital solutions, finance and accounting and consulting. Our sales and client management teams operate from the U.S., Europe, Australia and South Africa are supported by our business development teams.
Our sales, marketing and business development teams are responsible for new client acquisitions, public relations, relations with outsourcing advisory companies, analyst relations, lead generation, knowledge management, content development, campaign management, digital or web presence, brand awareness and participation in industry forums and conferences. As of December 31, 2023, we employed approximately 250 sales, marketing, business development and client management professionals, with the majority of these employees based in either the U.S. or India. Our professionals generally have significant experience in consulting, analytics, digital operations and solutions services and digital technology within our focus industries.
Clients
EXL generated revenues from approximately 560 clients and 550 clients in 2023 and 2022, respectively (with annual revenue exceeding $50,000 per client). We won 63 and 59 new clients during 2023 and 2022, respectively.
Our top three, five and ten clients generated 16.4%, 22.9% and 34.0% of our revenues, respectively, in 2023. Our top three, five and ten clients generated 16.3%, 22.9% and 34.9% of our revenues, respectively, in 2022. No client accounted for more than 10% of our total revenues in 2023 or 2022. Our revenue concentration with our top clients remains consistent year-over-year and we continue to develop relationships with new clients to diversify our client base. We believe that the loss of any of our ten largest clients could have a material adverse effect on our financial performance. See Part I, Item 1A, “Risk Factors” under “Risks Related to Our Business––We earn a substantial portion of our revenues from a limited number of clients.”
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Our long-term relationships with our clients typically evolve from providing a single, discrete service or process into providing a series of complex, integrated processes across multiple business lines. For digital operations and solutions other than consulting, we generally enter into long-term agreements with our clients with typical initial terms between three to five years. Consulting engagements have typical terms of six to twelve months. Agreements for our analytics services are either project based or have shorter initial terms, which are typically between one to three years. However, each agreement is individually negotiated with the client.
Competition
Competition in the data analytics and digital operations and solutions industry is intense and growing. See Part I, Item 1A, “Risk Factors” under “Risks Related to Our Business––We face competition globally from other providers and from our clients, who may build shared services centers to perform digital operations and solutions and analytics services themselves, either in-house or other arrangements.” Many companies, including certain of our clients, choose to perform some or all of their front-, middle- and back-office analytics and processes internally, utilizing their own employees and digital applications to provide these services as part of their regular business operations. We believe our key advantage over in-house business processes and analytics management is our ability to orchestrate relevant domain, data, digital, advanced analytics and human design expertise to enable delivery of sustainable outcomes that allow companies to focus on their customers, core products and markets. We compete primarily against:
•    large global companies with digital operations and solutions and operations capabilities, such as Accenture, Cognizant Technology Solutions, Genpact Limited, IBM, Infosys, NTT DATA, Tata Consultancy Services, and WNS (Holdings);

•    niche industry-specific digital operations and solutions providers such as Cotiviti and Optum Health;
•    niche analytics services and digital platform providers; and

•    leading accounting and management consulting firms.

We compete against these entities by working to differentiate ourselves as a strategic partner for businesses with deep industry expertise, sophisticated data and analytics capabilities, innovative digital operations and solutions and technology strong client relationships, leading industry talent, superior process capabilities and differentiated technology, which enable us to respond rapidly to market trends and the evolving needs of our clients.

Intellectual Property

Our intellectual property consists of proprietary platforms, software, data, databases, models, methodologies, know-how, names, designs, domains, user interfaces, applications and operating procedures among other materials. We consider many of our business processes and implementation methodologies to be trade secrets or proprietary know-how and confidential information. We seek to protect our intellectual property through a combination of patent, trademark, copyright and trade secret laws, as well as through confidentiality procedures and contractual provisions. Clients and business partners typically agree in writing to confidential treatment of our information. Our employees and independent contractors are required to sign work-for-hire agreements containing confidentiality covenants as a condition to their employment and engagement, respectively. We also have policies requiring our employees, independent contractors, and associates to respect the intellectual property rights of others, including obtaining appropriate licenses when using, selling or distributing third-party materials.

The solutions we offer our clients often include our software, data and other intellectual property assets developed by our data scientists and engineers, combined with software and data licensed by us or by clients from third parties. We also leverage strategic partnerships with third parties to facilitate our solution offerings to clients, including, among others, robotics and process automation software providers, financing platform providers, and AI solutions providers. We typically retain ownership of any pre-existing proprietary intellectual property assets, including modifications or enhancements to such pre-existing proprietary assets developed while providing client services. Independently or while working on client engagements, we also often develop new tools, methodologies and models, including AI and ML models that can be leveraged for various use cases. We endeavor to negotiate contracts that give us ownership or broad licenses to use, develop, demonstrate and offer such newly developed intellectual property assets to or for other clients.

We operate in a highly competitive and rapidly evolving global market. We seek to continue providing value to our clients with our deep industry knowledge, ability to advise clients on how to transform their processes and deliver transformation that drives business value, and ability to provide innovative services and solutions, including digital offerings
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that incorporate AI and ML capabilities. We also rely on our reputation, client references, ability to sustain long-term client relationships, as well as our global reach and scale, and competitive pricing to maintain our competitiveness in our industry. While our proprietary intellectual property assets are important to our business, we believe EXL as a whole is not materially dependent on any particular intellectual property, other than our EXL brand. Our intellectual property portfolio is comprised of patents, trademarks, copyrights, and domain names to protect our brands, including our EXL brand, which is one of our most valuable assets.
Human Capital Management
At EXL, our organizational ethos is distinctly shaped by five core values: innovation, collaboration, excellence, integrity and respect. In line with our core values, we recognize our workforce’s pivotal role in driving our success. We prioritize the ongoing development and progression of our employees, because we believe it to be critical to our sustained performance and longevity.
As of December 31, 2023, our team is approximately 54,000 strong, with more than 50 offices spanning across six continents. This encompasses approximately 34,900 employees located in India, 10,700 in the Philippines, 2,600 in the United States, 4,300 in South Africa and 1,500 employees are based in other locations in which we operate.
As part of our expansion into Ireland in 2023, we formed a new collaboration with University College Dublin, one of Europe’s leading research-intensive universities, as part of the Irish government’s Human Capital Initiative, which aims to strengthen ties between higher education and enterprises to address future skills needs.
To date, our operations have remained uninterrupted by labor-related issues, a testament to our favorable employee relations within our organization.
Diversity, Equity and Inclusion
Our diversity, equity and inclusion philosophy aims to create a fair and inclusive work environment that harnesses the power of diversity to drive organizational success. We recognize that the world we live and work in is diverse and fueled by innovation. To thrive in this environment, we foster a culture that values diverse perspectives, embraces differences and promotes leadership opportunities in a way that reflects the communities in which we operate.
We consider diversity, equity and inclusion to be a key factor in our recruiting and retention goals and overall business growth strategy. As of December 31, 2023, our United States reporting workforce comprised approximately 16.2% underrepresented minorities and our global workforce was approximately 43% women.
EXL is committed to providing a supportive working environment and career opportunities for our employees. Our Diversity and Inclusion Council consists of a global, diverse mix of leaders and oversees our diversity, equity and inclusion program. We provide trainings to our employees on topics aimed at improving diversity, equity and inclusion, such as managing unconscious bias, and have formed employee resource groups for select employee communities that are aimed at supporting diverse groups and interests. EXL has several programs to promote career advancement for women, including leadership development for women at the mid- to senior- levels, a separate program to improve the retention and engagement of new mothers through employee friendly parental leave and similar policies, and our WE (Women at EXL) platform, which is designed to enable women at EXL advance their career and achieve professional growth through discussion, collaboration, networking, training, development and mentorship opportunities. We believe that maintaining diversity in our leadership is one of the most important gateways to build an inclusive business. In recent years, we have placed a special focus on women leadership development from mid to senior levels through actively developing women leaders. We also rigorously track attrition risks of women at the rank of Vice President and above and work at minimizing attrition through diversity, equity and inclusion initiatives and benefits.
We actively work to foster the representation of underrepresented groups as well as promoting the inclusion of lesbian, gay, bisexual, transgender, and queer (or questioning) (“LGBTQ+”) employees at all levels of the organization. In addition to EXL’s employee resource groups, we maintain “The Umbrella Project,” an initiative for allyship and inclusion alongside our LGBTQ+ colleagues.

We maintain a supplier diversity program in the United States designed to provide opportunities for qualified diverse businesses.
Recruiting, Developing and Engaging our Employees
We have an integrated talent management framework that employs active collaboration between our recruitment, capability development and business human resource functions. We deploy innovative methods to recruit, train and retain
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our skilled employees. We focus on recruiting the right talent and developing them further on relevant competencies through our learning academies, rigorous promotion standards, client and industry-specific training and competitive compensation packages, which include incentive-based compensation.
Our talent strategy is a key driver for EXL’s long-term business strategy of turning data into a sustainable competitive advantage for our clients. To deliver on this complex work, we focus on identifying the critical skills and roles necessary to our business so that we can attract and retain the talent needed.

We leverage shared resources across our services through personnel who have skill sets applicable to a wide variety of data, digital, cloud and AI/ML services. We also have specialized experts in various domains, in our chosen industries and subject matters through our training academies. We have established a comprehensive set of practices, processes and programs, which have made learning easily accessible, collaborative and embedded in workflows. Our employees participate in trainings and upskilling virtually. Our employee relations function helps us understand our employees’ needs, concerns and interests, so that we can respond to specific needs and concerns as they arise.

We focus on recruiting, training and retaining our professionals. Our talent acquisition strategy framework revolves around a “Build, Acquire, and Partner” approach. We have developed effective strategies that enable an efficient recruitment process. The recruitment and training process evolved to an online model in 2020, which we have since adopted as our permanent model. Some of the strategies we have adopted to increase efficiency in our hiring practices include AI/ML-based intelligent screening mechanisms, remotely proctored online techniques and automated trainings. Our hiring policies focus on identifying high-quality employees who demonstrate a propensity for learning, contribution to client services and growth. In certain circumstances, we use an AI-driven infrastructure to enable our human resources function anticipate and find critical talent when and where we need them. Candidates must undergo numerous tests and video interviews before we extend offers for employment. We also conduct background checks on candidates, including criminal background checks where permitted and as required by clients.

We have adopted a hybrid working model, which we refer to as our “future operating model,” that provides our employees with a degree of additional flexibility. We continue to use and improve digital-first and multi-channel approaches to keep our employees across the globe informed and engaged and moved from an enterprise-centric approach to human capital management to one that is employee-centric.
Employee Benefits and Experience
We offer our employees competitive compensation packages that include incentive-based compensation and offer a variety of benefits that vary by facility, including free transport to and from home in certain circumstances, subsidized meals and free access to recreational facilities located within some of our operations centers.
In addition, we maintain several geographic specific employee health and wellness offerings, including an internal helpline with a central information hub for resource availability, enhanced insurance coverage including parental insurance for our employees in India, among others.
Capability Development
We continue to promote opportunities for large-scale upskilling and reskilling of our employees, while also fostering a learning environment conducive to individual skill-building and career advancement. In 2022, we implemented a fundamental shift in our capability development approach, transitioning from a corporate-driven model to an ecosystem of democratized self-learning, where our employees have access to our digital learning ecosystem. This enables our employees self-driven learning and growth experiences based on their personal goals and skills by using AI to anticipate and build market-relevant skills and capabilities, curated libraries and intelligent web-sourced content. Our employees are supplied with specialized learning pathways to build digital capabilities, skill mapping to direct them to courses as needed, chat groups where they can collaborate and discuss the latest trends, practice questions, practice labs for real-world and hands-on experience, supervisor dashboards and leaderboards, and learning on the go.
Our talent development strategy is comprehensive and aligned to EXL’s overall business strategy. We aim for our employees to develop expertise around the specific technologies, tools and frameworks required to successfully execute projects for our clients, as well as a mindset focused on agility, speed, creativity, innovation and collaboration. We create thought leaders with high industry acumen who are better able to address our clients’ business priorities. We also provide a career-linked learning path to our employees from new hires to tenured employees to senior levels of leadership.

Our domain academies focus on building domain expertise through certifications and specialization. These include our Insurance Academy, Travel Academy, Finance and Accounting Academy, Healthcare Academy, Analytics Academy,
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Utilities Academy, Consulting Academy, Sales Academy and Digital Academy. These academies focus on achieving excellence and developing skill sets that can be used across the different domains. Our training includes behavioral and functional components to enhance and ensure job readiness as well as also boosting ongoing productivity and effectiveness. We also focus on promoting better diversity, equity and inclusion through our training programs. We have a global presence catering to the specific learning requirements of each geography. We provide learning through our blended learning methodology comprising of virtual, classroom, on the job coaching and technology-led learning.

Our talent, training and development objectives focus on “addressing roles critical to strategy,” “placing the right people for the right roles,” “creating a future ready workforce” and “raising EXL’s baseline” by continuously building EXL-wide culture around a strong understanding of digital technologies.
Employee Retention
Our attrition rate for employees who had been with EXL for more than 180 days was 25.8% and 31.6% for the years ended December 31, 2023 and 2022, respectively. The attrition rate in 2023 decreased from 2022, which we believe reflects better employee engagement. As competition in our industry increases, our turnover rate could increase. See Part I, Item 1A, “Risk Factors” under “Risks Related to Our Business––We may fail to attract and retain enough sufficiently trained employees to support our operations or professionals with sufficient leadership capabilities, which may result in loss of revenue and an inability to expand our business” and “Employee wage increases may prevent us from sustaining our competitive advantage and may reduce our profit margin.”
Sustainability Strategy
The world we work and live in is powered by innovation. We believe success in such a world will come through passing along social goods to the communities in which we operate, and ensuring that we conduct our operations in a sustainable and safe manner. These initiatives reflect our core values and will make us a stronger, more impactful organization to work for and allow us to deliver exceptional results for our clients, employees, communities and stockholders.
Our most recent Sustainability Report is available on our website. The information contained on our website is not included in, or incorporated by reference into, this Annual Report on Form 10-K.
Community Activities
EXL finds meaningful ways to help the communities in which we operate. Our community activities focus on passing along the skills that our employees use in our operations to members of the communities in which we operate to help transform lives. On our own, with outside partners and in partnership with our clients, we support market-relevant technical and life skill development and education initiatives, disaster relief efforts and global health initiatives. These programs align with the expectations clients have of service providers and benefit our other stakeholders. In 2023, we continued many of these activities in hybrid and virtual formats. Examples of our programs include:
•    Skills to Win Initiative: This skill development initiative provides participants from communities in which we operate in the United States, the United Kingdom, the Philippines, India and South Africa with market-relevant skills for the digital economy. In 2022, we added a coding skills focus to the Skills to Win Initiative, aimed at elevating women and non-binary members of our communities in technology in the United Kingdom, the United States and South Africa, which was further expanded to the Philippines and India in 2023.

•    Education as a Foundation Initiative: This classroom-based initiative currently delivered through online and offline learning platforms provides school-aged students from communities in which we operate with data and analytics skills, language learning and career guidance.
Environmental, Health and Safety
We strive to continuously improve our environmental, health and safety initiatives (“EHS”), with a focus on reducing our carbon footprint, energy conservation, waste minimization, green infrastructure and operations. Our EHS team tracks and assesses our progress with respect to key performance indicators for energy, greenhouse gas emissions and water and waste generation targets annually. We have also established Company-wide and worksite-specific workplace safety objectives that are integrated into our EHS Management System. Where practical, we seek to integrate EHS with our business activities, focusing on conducting our activities in an environmentally responsible manner and ensuring the health and safety of our employees, contractors, customers, visitors and the communities in which we operate. In addition, we seek to maintain a responsible supply chain by stating our expectations for all our vendors in our Supplier Standards of Conduct
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and by collecting information from our new suppliers with respect to policies and performance on human rights, labor rights and environmental issues.
All our delivery centers worldwide are currently ISO 45001:2018 certified, meeting international standards for occupational health and safety, and ISO 14001:2015 certified, meeting international standards for effective environmental management systems. In 2023, we received a five star rating from the British Safety Council for best practices in occupational safety for our operations centers in the United Kingdom and India. While we expect to maintain these certifications and standards, there may be changes to our delivery centers or applicable rules or standards that could affect such certifications and standards.
Regulation
Our operations are subject to rules, regulations and statutes in the countries where we have operations and where we deliver services as a result of the diverse and complex nature of our service offerings. More often, however, our clients contractually require that we comply with certain rules and regulations applicable to us in delivering our services to them.
We provide third-party administrator insurance services from India and the Philippines and are currently able to provide these services in the United States for 49 states (and the District of Columbia) and 48 states (and the District of Columbia), respectively by location. Additionally, our subsidiary in the Philippines is able to provide utilization review services in the United States for 48 states (and the District of Columbia). Further, through domestic subsidiaries, we are licensed or otherwise eligible to provide third-party administrator services in all states within the United States, as well as utilization review, claims adjuster and insurance producer services in select states. We maintain licenses in various jurisdictions (or require certain categories of our professionals to be individually licensed, as applicable) in service areas such as debt collection, utilization review, workers’ compensation utilization review, claims adjuster, mortgage loan processing and underwriting and telemarketing services. Our facilities in the Philippines, as well as one domestic subsidiary, are accredited by the Utilization Review Accreditation Commission (URAC) and National Committee for Quality Assurance (NCQA), the leading healthcare and education accreditation organizations. We continue to obtain licenses and accreditations required from time to time by our business operations.

Our operations are also subject to compliance with a variety of other laws, including tax laws in the countries where we conduct our business. See Part I, Item 1A, “Risk Factors” under “Risks Related to the International Nature of Our Business––Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements, including, accreditation or licensing standards that govern our business, and violations of these requirements could harm our business.”

We currently benefit from certain corporate tax holidays for our operations located in qualified Philippines Economic Zone Authority units. We are managing our business in accordance with the guidelines issued in 2022 by the Philippines Fiscal Incentives Review Board to continue availing the tax holidays.

We have established a headquarters for international business in Dublin, Ireland, and qualify for a reduced tax rate subject to certain conditions. We continuously monitor our operations to ensure we continue to qualify for the reduced rate.

We currently operate in the Philippines and Ireland where we will be subject to a minimum tax rate pursuant to the Pillar Two Framework prescribed by Organization for Economic Co-operation and Development (“OECD”). The OECD continues to release additional guidance on the Pillar Two Framework, with implementation generally effective for 2024. We will continue to evaluate any potential impact on our operations.

See Part I, Item 1A, “Risk Factors” under “Risks Related to the International Nature of Our Business––Our financial condition could be negatively affected if governments in the countries we operate in introduce new unfavorable tax legislation, including legal restrictions for repatriation of our earnings.”
Available Information    
We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically through the EDGAR System. You may access the information filed by us with the SEC by visiting its website.
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We also maintain a website at http://ir.exlservice.com. Information on our website does not constitute a part of, nor is it incorporated in any way, into this Annual Report on Form 10-K or any other report we file with or furnish to the SEC. We make available, free of charge, on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, proxy statements, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. Our website also includes announcements of investor conferences and events, information on our business strategies and results, sustainability efforts, corporate governance information, and other news and announcements that investors might find useful or interesting.
In this Annual Report on Form 10-K, we use the terms “EXL,” “we,” “us,” “our” or the “Company” to refer to ExlService Holdings, Inc. and its subsidiaries.


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ITEM 1A.    Risk Factors
Risks Related to Our Business
Our business depends on maintaining and growing client demand for our services and solutions, including by anticipating and incorporating the latest technology into our offerings, and a significant reduction in such demand, a failure to respond to the evolving technological environment or a change in our service or solution delivery could materially affect our results of operations.

Our success depends in part on the demand for our services and solutions, which could be negatively affected by a number of factors that may be outside of our control, including, for example, economic and political volatility or changed market conditions. Our ability to maintain and grow demand for our services and solutions requires that we continue to develop and implement offerings that keep pace with changes in the industry and anticipate and respond to rapidly evolving technology and our clients’ evolving needs in areas such as AI, including generative AI, digital transformation and solutions, advanced analytics, cloud based solutions, data management, robotics and process automation, and data engineering, among others. AI technologies are complex and are rapidly evolving, and we face significant competition, including from our own clients, who may potentially develop their own internal, or acquire from third parties, which in each case, can lead to reduced demand for our services and solutions. As these technologies evolve, some services and tasks currently performed by our employees may be replaced by automation and AI technologies. We may not be successful in addressing these changes on a timely basis, or at all, or successfully marketing any changes that we implement. In addition, products or technologies developed by others may render our services uncompetitive or obsolete. If we do not sufficiently invest in new technologies, adapt to industry developments, evolve and expand our business at sufficient speed and scale and successfully drive innovation, our ability to develop and maintain a competitive advantage, our growth strategy and our results of operations could be adversely affected. If we are successful in responding to these developments, as we expand our services and solutions into these new areas, we may be exposed to operational, legal, regulatory, ethical, technological and other risks specific to such new areas, which may negatively affect our reputation and demand for our services and solutions.

Technological developments may materially affect the cost and use of technology by our clients and, in the case of cloud and as-a-service solutions, could affect the nature of how we generate revenue. Some of these technological developments have reduced and replaced some of our historical services and solutions and may continue to do so in the future. This has caused, and may in the future cause, clients to delay spending under existing contracts and engagements and to delay entering into new contracts while they evaluate new technologies. Such technological developments and spending delays can negatively impact our results of operations if we are unable to introduce new pricing or commercial models that reflect the value of these technological developments or if the pace and level of spending on new technologies are not sufficient to make up for any shortfall. Developments in the industries we serve, which may be rapid, also could shift demand to new services and solutions. If, as a result of new technologies or developments in the industries we serve, our clients demand new services and solutions, we may be less competitive in these new areas or need to make significant investment to meet that demand. Our growth strategy focuses on responding to these types of developments by driving innovation that will enable us to expand our business into new growth areas.

Our growing use of AI, including generative AI and ML, in our offerings presents additional risks. AI algorithms may be flawed, and datasets may be insufficient or contain biased information. Inappropriate or controversial data practices by us or others could impair the acceptance of AI solutions or subject us to lawsuits and regulatory investigations. These deficiencies could undermine the decisions, predictions or analysis AI applications produce, or lead to unintentional bias and discrimination, subjecting us to competitive harm, legal liability, and brand or reputational harm.

Client demand may be impacted by the selling cycle and terms of our client contracts.

Client demand may be impacted by the selling cycle and terms of our client contracts. Consistent with industry practice, most of our client contracts may be terminated by our clients without cause and do not commit our clients to provide us with a specific volume of business. Any failure to meet a client’s expectations or a change in a client’s strategic direction could result in the cancellation or non-renewal of a contract or a decrease in the scope of services and solutions that we are able to provide to such client. We may not be able to cover our costs or replace the associated revenues from such lost services or solutions, which could impact our results of operations in subsequent periods.

The terms of our project-based analytics and consulting services contracts generally do not exceed one year and may not produce ongoing or recurring business for us once the project is completed, and these contracts typically permit a client to terminate the agreement with shorter term notice. The majority of our digital operations and solutions contracts have longer terms, typically ranging from three to five years, and generally require a longer notice period for termination and may include an early termination fee to be paid to us, but this might not be sufficient to cover our costs or make up for the loss of revenues
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and profit upon termination of the contract. In addition, the selling cycle for such contracts, which generally ranges from six to eighteen months, and the implementation and initial transformation processes, which could take up to an additional six to twelve months, are subject to many risks and delays over which we have little or no control, including our clients’ decisions to choose alternatives to our services and solutions (such as other providers or in-house offshore resources) and the timing of our clients’ budget cycles and approval processes, or subsequent changes in technology and offerings, could result in changed demand. Our clients and future clients may not be willing or able to invest the time and resources necessary to implement our services, and we may fail to close sales with potential clients to which we have devoted significant time and resources.

We may fail to attract and retain enough sufficiently trained employees to support our operations or professionals with sufficient leadership capabilities, which may result in loss of revenue and an inability to expand our business.

Our success depends to a significant extent on our ability to attract, hire, train and retain qualified employees, including our ability to attract employees with needed skills in the geographies where we operate. Our industry, including us, experiences high employee turnover due to significant competition for professionals with skills necessary to perform the services we offer to our clients. A significant increase in the turnover rate among our employees, particularly among our highly skilled workforce, would impact our operating efficiency, productivity and cost of revenues and eventually impact our profit margins due to higher recruitment, training and retention costs and maintaining larger hiring, training and human resources departments.

If we are unable to invest in reskilling and upskilling our employees in the areas and skills that strategically important to our business, our ability to effectively lead our current projects and develop new business could be jeopardized, and our business, results of operations and financial condition could be adversely affected.

Our future success also depends substantially on the continued services and performance of the members of our management team and other key employees in leadership positions that possess technical and business capabilities, including industry expertise, and are difficult to replace. Specifically, the loss of the services of our Vice Chairman and Chief Executive Officer could seriously impair our ability to continue to manage and expand our business. Although we have entered into employment and non-competition agreements with all of our executive officers, certain terms of those agreements may not be enforceable, particularly in light of recent regulatory scrutiny from the U.S. Federal Trade Commission and others, and in any event these agreements do not ensure the continued service of these executive officers. We currently do not maintain “key person” insurance covering any member of our management team. The loss of any of our key management personnel, particularly to competitors, could have a material adverse effect on our business, results of operations, financial condition and cash flows.

If we are unable to accurately estimate the resources and time for a project, adjust our pricing terms or effectively manage our asset utilization levels to meet the changing demands of our clients and potential clients, our business, results of operations, financial condition and cash flows may be adversely affected.

Our profitability is, in part, a function of the efficiency with which we utilize our assets, in particular our people and our operations centers, and the price we can charge for our services. Our asset utilization levels are affected by a number of factors, including our ability to transition employees from completed projects to new assignments, attract, train and retain employees, forecast demand for our services (including potential client terminations or reductions in required resources) and maintain an appropriate headcount in each of our locations, as well as our need to dedicate resources for employee training and development, other typically non-chargeable activities and optimizing our operational infrastructure. If we fail to estimate accurately the resources and time required for a contract, or manage our asset utilization levels, future attrition rates, potential productivity benefits over time, future wage inflation rates or currency exchange rates (or fail to accurately hedge our currency exchange rate exposure) or if we fail to complete our contractual obligations within the contracted timeframe, our revenues, cash flows and profitability may be negatively affected.

In many of our digital operations and solutions contracts we commit to long-term and other pricing structures (such as full-time equivalent-based pricing, fixed-price arrangements, transaction-based and outcome-based pricing) with our clients and therefore bear the risk of cost overruns, completion delays, resource requirements, wage inflation and adverse movements in exchange rates in connection with these contracts. Industry pricing models are evolving, and clients increasingly request alternative pricing models, rather than annual or hourly billing rates. If we make inaccurate assumptions for contracts with such alternative pricing models including pricing for our digital capabilities and complex transformation services or are unable to offer competitive pricing, our profitability may be negatively affected.

Unauthorized disclosure of sensitive or confidential client and employee data, whether through breach of our computer systems or otherwise, could cause us significant reputational damage, expose us to protracted and costly litigation, and cause us to lose clients.

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We are typically required to process, and sometimes collect and/or store sensitive data, including data regulated by the U.S. Health Insurance Portability and Accountability Act of 1996, as amended, of our clients’ customers in connection with our services, including names, addresses, social security numbers, personal health information, credit card account numbers, checking and savings account numbers and payment history records, such as account closures and returned checks. In addition, we collect and store data regarding our employees. In the United States, several states have enacted or are considering enacting privacy regulations, including, the California Consumer Privacy Act, as amended; and there are several privacy regulations in other jurisdictions, such as the General Data Protection Regulation in the European Union, the International Data Transfer Agreement in the United Kingdom and the Digital Personal Data Protection Act, 2023 in India. These privacy regulations impose privacy and data security compliance obligations and significant penalties for noncompliance. Other countries have enacted or are considering enacting data localization laws that require certain data to stay within their borders. We may also face audits or investigations by one or more domestic or foreign government agencies or our clients pursuant to our contractual obligations relating to our compliance with these regulations. Complying with changing regulatory requirements requires us to incur substantial costs, exposes us to potential regulatory action or litigation, and may require changes to our business practices in certain jurisdictions. As a result, we are subject to various data protection and privacy laws in the countries where we operate, and the failure to comply with such laws could result in significant fines and penalties. In addition, we may not be able to limit our liability to our clients with respect to breaches of our obligation to keep the information we receive from them confidential.

Although we devote substantial resources to protect our information assets and our clients’ confidential information, any network infrastructure is to some extent vulnerable due to rapidly evolving cyberattacks, employee error, malfeasance, or a combination of the foregoing. The remote work solutions that we employ in our hybrid working model may also be limited in their ability to replicate the operational oversight and security controls of our office environments and may pose a higher risk of operational and information security failures. Outside parties may attempt to fraudulently induce employees, users, or clients to disclose sensitive information in order to gain access to our data or our users’ or clients’ data. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently or may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of our security occurs (or a breach of a client’s security that can be attributed to our fault or is perceived to be our fault), the market perception of the effectiveness of our security measures could be harmed and we could lose users and clients.

Security breaches expose us to a risk of loss of sensitive information, lawsuits from our employees, clients or their customers for breaching contractual confidentiality provisions or privacy laws, or investigations and penalties from regulators or criminal prosecution, remediation costs, increased costs for security measures, loss of revenue, damage to our reputation, and potential liability.

Further, growth in state sponsored cyber activity, including the increased rate of cyberattacks arising from the Russia-Ukraine conflict and the risk that these cyberattacks could spread globally, showcases the increasing sophistication of cyber threats and could dramatically expand the global threat landscape. If a material security breach or incident occurs with respect to a cloud services provider, our clients and potential clients may lose trust in cloud solutions generally, and with respect to security in particular. This could adversely impact our ability to retain existing clients or attract new clients, which, in turn, could have a serious impact on our reputation. Although we have not experienced a material incident to date, there can be no assurance that these measures will prevent or limit the impact of a future incident. We may incur significant costs in protecting against or remediating cyberattacks or other cyber incidents.

We rely on third party vendors and partners to deliver services and components for client critical services, which exposes us to a variety of risks that could have a material adverse effect on our business.

The services we provide are often critical to our clients’ businesses, and any failure to provide those services could result in a reduction in revenues or a claim for substantial damages against us, regardless of whether we are responsible for that failure.

We depend on certain significant vendors and partners for software, technology and data communications, related equipment and its maintenance, and third party components that we use to deliver our services, including cloud services. Our offshore operations centers require us to maintain active voice and data communications among our operations centers, our technology and data hubs and our clients’ offices. Although we maintain our facilities and communications links with business continuity and disaster recovery plans, disruptions could result from, among other things, technical breakdowns, computer glitches and viruses and weather conditions. Any performance failure on the part of our vendors or partners, or the discontinuance by such vendors or partners of services that we rely on them to perform, could delay our performance, or require us to engage alternative third parties to perform the services at our cost or to perform the services ourselves, any of which could result in a negative impact on our reputation, a loss of revenue or adversely impact our cash flows and profitability.

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Employee wage increases may prevent us from sustaining our competitive advantage and may reduce our profit margin.

Our most significant costs are the salaries and related benefits of our operations staff and other employees. For example, wage costs in India and the Philippines have historically been significantly lower than wage costs in the United States, the United Kingdom and Europe for comparably skilled professionals, and having a significant number of our employees in those lower wage costs countries has been one of our competitive advantages. However, because of economic growth in India and the Philippines, increased demand for competitive services from such countries and increased competition for skilled employees, wages for comparably skilled employees are increasing at a faster rate than in the United States, the United Kingdom and Europe. This may reduce our competitive advantage. We also may need to increase the levels of employee compensation more rapidly than in the past to remain competitive in attracting and retaining the quality and number of employees that our business requires. Wages are generally higher for employees performing AI, analytics and digital transformation services than for employees performing digital operations and solutions. As the scale of such services increases, wages as a percentage of revenues may increase. In addition, changes to the labor laws in the countries where we operate may also lead to a substantial increase in our wage costs. To the extent that we are not able to control such costs by our efforts to add capacity in lower wage costs countries or share wage increases with our clients, wage increases may reduce our margins and cash flows.

Our business could be materially and adversely affected if we do not protect our intellectual property or if our services are found to infringe on the intellectual property of others.

Our success depends in part on certain methodologies, practices, tools and technical expertise we utilize in providing our services and solutions. Our intellectual property consists of proprietary and licensed platforms, software, data, databases, methodologies, models, know-how, names, designs, domains, user interfaces, applications and operating procedures, among other materials. We consider many of our business processes and implementation methodologies to be trade secrets or proprietary know-how and confidential information. We seek to protect our intellectual property through a combination of patent, trademark, copyright and trade secret laws, as well as through confidentiality procedures and contractual provisions. Clients and business partners typically agree in writing to confidential treatment of our information. Our employees and independent contractors are required to sign work-for-hire and confidentiality covenants as a condition to their employment and engagement, respectively. We also have policies requiring our employees, independent contractors, and associates to respect the intellectual property rights of others, including obtaining appropriate licenses when using, selling or distributing third party materials. However, these measures may not prevent misappropriation or infringement of our intellectual property or proprietary information and a resulting loss of competitive advantage. Additionally, we may not be successful in obtaining or maintaining patents, trademarks or other intellectual property rights protections for which we have applied or may in the future apply.

We may be unable to protect our intellectual property and proprietary technology effectively, which may allow competitors to duplicate our technology and products and may adversely affect our ability to compete with them. To the extent that we do not protect our intellectual property effectively through contractual provisions, confidentiality procedures, patents, trade secret laws or other means including those set forth above, other parties, including former employees, with knowledge of our intellectual property may leave and seek to exploit our intellectual property for their own or others’ advantage. We may not be able to detect unauthorized use and take appropriate steps to enforce our rights, and any such steps may not be successful. Infringement by others of our intellectual property, including the costs of enforcing our intellectual property rights, may have a material adverse effect on our business, results of operations, financial condition and cash flows.

In addition, competitors or others may allege that our systems, processes, marketing, data usage or technologies infringe on their intellectual property rights, including patents. Non-practicing entities may also bring baseless, but nonetheless costly to defend, infringement claims. We could be required to indemnify our clients if they are sued by a third party for intellectual property infringement arising from materials that we have provided to the clients in connection with our services and solutions. We may not be successful in defending against such intellectual property claims or in obtaining licenses or an agreement to resolve any intellectual property disputes. Given the complex, rapidly changing and competitive technological and business environment in which we operate, and the potential risks and uncertainties of intellectual property-related litigation, we cannot provide assurances that a future assertion of an infringement claim against us or our clients will not cause us to alter our business practices, lose significant revenue, incur significant license, royalty or technology development expenses, or pay significant monetary damages or legal fees and costs. Any such claim for intellectual property infringement may have a material adverse effect on our business, results of operations, financial condition and cash flows.

We earn a substantial portion of our revenues from a limited number of clients.

We have earned and believe that we will continue to earn in the near or foreseeable future a substantial portion of our total revenues from a limited number of large clients. Any change in demand from any of our large clients for any reason could have
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a material adverse effect on our business, results of operations, financial condition and cash flows. Moreover, the loss of a major client could also impact our reputation in the market, making it more difficult to attract and retain clients more generally.

Our inability to manage our rapid infrastructure and personnel growth across countries and changes to our operating model effectively could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We have operations centers across India, the United States, the Philippines, South Africa, Colombia, Bulgaria, Romania, the United Kingdom, the Czech Republic, Mexico and the Republic of Ireland. Our headcount has increased significantly over the past several years. We expect to develop and improve our internal systems in the locations in which we operate in order to address the anticipated continued growth of our business. We continue to look for operations centers at locations outside of our current operating geographies. We have also made changes to our operating model driven by delivery of a significant portion of our services from a hybrid working model, which has led to contraction of our operation centers. Changes in our operating model, such as the foregoing, or other changes to our infrastructure facilities or how we are organized, as the needs and size of our business change, limit our ability to forecast the need to hire additional skilled employees as and when they are required to meet the ongoing needs of our clients, and we may not be able to develop and improve our internal systems. We may not be able to maintain our culture and effectively communicate our core values, policies and procedures, strategies and goals, particularly given our world-wide operations, rate of new hires, and significant percentage of our employees who have the option to work remotely. We also need to manage cultural differences among our employee populations and varying legal and regulatory regimes across jurisdictions, and that may create a risk for employment claims. Our inability to execute our growth strategy, to ensure the continued adequacy of our current systems or to manage our expansion effectively could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We may engage in strategic acquisitions or transactions, which could have a material adverse effect on our business, results of operations, financial condition and cash flows, including the impact from the impairment of goodwill and other intangible assets, if any.

As part of our business strategy, we intend to continue to selectively consider acquisitions or investments, some of which may be material. Through the acquisitions we pursue, we may seek opportunities to expand the scope of our existing services, add new clients or enter new geographic markets. There can be no assurance that we will successfully identify suitable candidates in the future for strategic transactions at acceptable prices, have sufficient capital resources to finance potential acquisitions or be able to consummate any desired transactions. Our failure to identify suitable candidates or close transactions with potential acquisition targets for which we have invested significant time and resources could have a material adverse effect on our financial condition and cash flows.

Acquisitions, including completed acquisitions, involve a number of risks, including diversion of management’s attention, ability to finance the acquisition on attractive terms, failure to retain key personnel or valuable clients, legal liabilities and the need to amortize acquired intangible assets, any of which could have a material adverse effect on our business, results of operations, financial condition and cash flows. Future acquisitions may also result in the incurrence of indebtedness or the issuance of additional equity securities.

The intellectual property of an acquired business may be an important component of the value that we agree to pay for such a business. Although we conduct due diligence in connection with each of our acquisitions, such acquisitions are subject to the risks that the acquired business may not own the intellectual property that we believe we are acquiring, that the intellectual property is dependent upon licenses from third parties, that the acquired business infringes upon the intellectual property rights of others or that the technology does not have the acceptance in the marketplace that we anticipated.

We could also experience financial or other setbacks if transactions encounter unanticipated problems, including problems related to execution, integration or underperformance relative to prior expectations. Our management may not be able to successfully integrate any acquired business into our operations or maintain our standards, controls and policies, which could have a material adverse effect on our business, results of operations and financial condition. Consequently, any acquisition we complete may not result in long-term benefits to us or we may not be able to further develop the acquired business in the manner we anticipated.

In the event that the carrying amount of goodwill and other intangible assets are impaired, as determined by impairment testing that we conduct on at least an annual basis, any such impairment would be charged to earnings in the period of impairment. Because this involves the use of critical accounting estimates, we cannot assure you that future impairment of goodwill and other intangible assets will not have a material adverse effect on our business, financial condition or results of operations.

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Our business could be negatively affected if we incur financial penalties or legal liability, including with respect to our contractual obligations, in connection with providing our solutions and services.

Most of our agreements with clients contain service level and performance requirements, including requirements relating to the quality of our services. Failure to consistently meet the service requirements of a client or errors made by our employees in the course of delivering services to our clients could disrupt the client’s business and result in a reduction in revenues or a claim for damages against us.

If we fail to meet our contractual obligations or otherwise breach obligations to our clients or vendors, we could be subject to legal liability. We may enter into non-standard agreements because we perceive an important economic opportunity by doing so or because our personnel did not adequately adhere to our guidelines. In addition, with respect to our client contracts, the contracting practices of our competitors may cause contract terms and conditions that are unfavorable to us to become standard in the marketplace. If we cannot, or do not, meet our contractual obligations to provide solutions and services to clients, and if our exposure is not adequately limited through the enforceable terms of our agreements, we might face significant legal liability and our business could be adversely affected. Similarly, if we cannot, or do not, meet our contractual obligations with vendors, such as licensors, the vendors may have the right to terminate the contract, in which case we may not be able to provide client solutions and services dependent on the products or services provided to us by such contracts.

We face competition globally from other providers and from our clients, who may build shared services centers to perform digital operations and solutions and analytics services themselves, either in-house or other arrangements.

The market for our services is highly competitive, and we expect competition to intensify and increase in the future as more companies enter the market. We face competition globally from other providers. We believe that the principal competitive factors in our markets are breadth and depth of process expertise, offerings, knowledge of industries served, service quality, compliance rigor, global delivery capabilities, pricing, sales and client management capabilities. Further, a client may choose to use its own internal resources rather than engage an outside firm to perform the types of services we provide. In addition, the trend toward offshore outsourcing, international expansion by foreign and domestic competitors and continuing technological changes, such as cloud computing, will result in new and different competition for our services.

These competitors may include entrants from the communications, software and data networking industries or entrants in geographic locations with lower costs than those in which we operate. Some of these existing and potential competitors may have greater financial, personnel and other resources, a broader range of service offerings, greater technological expertise, more recognizable brand names and more established relationships in industries that we currently serve or may serve in the future. In addition, some of our competitors may enter into strategic relationships or mergers or acquisitions with larger, more established companies in order to increase their ability to address client needs, or enter into similar arrangements with potential clients. The trend in multi-vendor relationships has been growing, which could reduce our revenues to the extent that we are required to modify the terms of our relationship with clients or that clients obtain services from other vendors. Increased competition, our inability to compete successfully against competitors, pricing pressures or loss of market share could impact our business, results of operations, financial condition and cash flows.

We are vulnerable to natural disasters, technical disruptions, pandemics and societally created events that could severely disrupt the normal operations of our business and if our risk management, business continuity and disaster recovery plans are not effective, it may adversely affect our business, results of operations, financial condition and cash flows.

Our operations centers and our data and voice communications, particularly in India, the Philippines and South Africa, may be damaged or disrupted as a result of natural disasters such as earthquakes, floods, volcano eruptions, heavy rains, drought, extreme heat, epidemics or pandemics, such as COVID-19, tsunamis and cyclones, technical disruptions such as electricity or infrastructure breakdowns, including damage to telecommunications cables, computer glitches and electronic viruses or man-made events such as political unrest, terrorist attacks, other acts of violence or war, protests, riots and labor unrest. Such events may lead to the disruption of information systems and telecommunication services or our supply chain for sustained periods. They also may make it difficult or impossible for employees to reach our business locations and for us to deliver our solutions and services.

In particular, a local or global outbreak of a pandemic, such as the COVID-19 pandemic, may have widespread and unpredictable impacts on global societies, economies, financial markets and business practices. Any pandemic may in the future materially adversely affect us, our clients, employees, contractors, suppliers and business partners, all of may be prevented from conducting business activities as usual, including due to the many and varying health and safety measures in response to such pandemic, including travel restrictions, quarantines, curfews, shelter in place and safer-at-home orders. Measures taken by governmental authorities may in the future disrupt the continuity of our provision of services to our clients and adversely impacted our business, results of operations and financial condition.
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Our risk management, business continuity and disaster recovery plans may not be effective at preventing or mitigating the effects of such disruptions, particularly in the case of a catastrophic event. Damage or destruction that interrupts our provision of services could adversely affect our reputation, our relationships with and liability to our clients, our leadership team’s ability to administer and supervise our business or it may cause us to incur substantial additional expenditure to repair or replace damaged equipment or delivery centers. While we currently have commercial liability insurance, our insurance coverage may not be sufficient to cover any such liability or other related costs. Furthermore, we may be unable to secure such insurance coverage at premiums acceptable to us in the future or at all. Prolonged disruption of our services would also entitle our clients to terminate their contracts with us. Any of the above factors may adversely affect our business, results of operations, financial condition and cash flows.
Risks Related to the International Nature of Our Business
If the transfer pricing arrangements we have for controlled intercompany transactions among our subsidiaries are determined to be inappropriate, our tax liability may increase.

The transfer pricing regulations in the countries we operate in require that controlled intercompany transactions be at arm’s-length. Accordingly, we determine and document pricing for controlled intercompany transactions based on an economic analysis as prescribed in the respective regulations. The tax authorities have jurisdiction to review our transfer pricing. If our transfer pricing is challenged by the authorities, they could assess additional tax, interest and penalties, thereby impacting our profitability and cash flows.

Our financial condition could be negatively affected if governments in the countries we operate in introduce new unfavorable tax legislation, including legal restrictions for repatriation of our earnings.

We are subject to taxes in the countries we operate in. Our future tax liabilities could be adversely affected by any new unfavorable tax legislative changes in the countries we operate in. We continuously monitor such changes to assess and quantify the potential impacts on our consolidated financial statements.

We currently benefit from corporate tax holidays in our qualified Philippines Economic Zone Authority operations centers in the Philippines. Our ability to utilize these tax holidays could be adversely affected by any new unfavorable tax legislative changes. We continuously monitor such changes to assess and quantify the potential impacts on our consolidated financial statements.

We have established a headquarters for international business in Dublin, Ireland, and qualify for a reduced tax rate subject to certain conditions. We continuously monitor our operations to ensure we continue to qualify for the reduced rate.

We currently operate in the Philippines and Ireland where we will be subject to a minimum tax rate pursuant to the Pillar Two Framework prescribed by Organization for Economic Co-operation and Development (“OECD”). The OECD continues to release additional guidance on the Pillar Two Framework, with implementation generally effective for 2024. We do not anticipate any significant Pillar Two impacts, but will continue to evaluate any changes and potential impact on our consolidated financial statements.

We earn a significant amount of our earnings in countries outside of the United States and we periodically evaluate opportunities to repatriate these earnings to fund our global operations, including acquisitions and debt management. Not all of the undistributed earnings may be available for repatriation due to foreign legal restrictions that require minimum reserves to be maintained in those countries, which may limit our ability to use such earnings across our global operations in the United States or other geographies, where needed. Additionally, as and when we decide to repatriate such earnings, we may have to accrue further taxes associated with such earnings in accordance with local tax laws, rules and regulations in the relevant jurisdictions, which are subject to change from time to time. All of these risks and uncertainties could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Currency exchange rate fluctuations in the various currencies in which we do business, or the failure of our hedging strategies to mitigate such fluctuations, could have a material adverse effect on our results of operations.

We report our operating results in U.S. dollars, yet a portion of our revenues and expenses are denominated in currencies other than the U.S. dollar. Accordingly, we must translate such revenues and expenses, as well as corresponding assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period, as applicable. As a result, fluctuations in foreign currency exchange rates can adversely affect our results of operations. The exchange rates among the Indian rupee, the Philippine peso, the U.K pound sterling, the South African rand and other currencies in which we incur costs
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or earn revenues and the U.S. dollar have changed substantially in recent years and may fluctuate substantially in the future. See Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk.” Additionally, because a majority of our employees are based in India, Philippines and South Africa and paid in Indian rupee or Philippine peso or South African rand, while our revenues are primarily reported in U.S. dollars and U.K. pound sterling, our employee costs as a percentage of revenues may increase or decrease significantly if the exchange rates among the Indian rupee, the Philippine peso, the U.K pound sterling, the South African rand and the U.S. dollar fluctuate significantly.

In addition, conflicts between Russia and Ukraine, and Israel and Hamas, coupled with high inflationary pressures and interest rates, have led the International Monetary Fund to downgrade its outlook for the world economy for 2024. This has led to and may continue to lead to uncertainty over global economic conditions and unpredictable fluctuations in foreign currency exchange rates, and in particular, has impacted and may continue to impact the Indian rupee, the Philippine peso, the U.K pound sterling, the South African rand and other currencies in which we incur expenses.

Although we take steps to hedge a substantial portion of our Indian rupee/U.S. dollar, U.K pound sterling/U.S. dollar, Philippine peso/U.S. dollar and South African rand/U.S. dollar foreign currency exposures, there is no assurance that our hedging strategy will be successful or that the hedging markets will have sufficient liquidity or depth to allow us to implement our hedging strategy in a cost-effective manner. Any failure by our hedging counterparties to meet their contractual obligations could materially and adversely affect our profitability, business, results of operations, financial condition and cash flows.

Restrictions on visas and work permits may affect our ability to compete for and provide services to clients in the United States and other countries, which could make it more difficult to staff engagements and could increase our costs, which could have an adverse effect on our net income.

Immigration and work permit laws and regulations in the countries where we have clients are subject to legislative and administrative changes as well as changes in the application of standards and enforcement.

The ability of some of our executives and employees based in India and other foreign locations to work with and meet clients in the United States and other countries depends on their ability to obtain the necessary visas and work permits. In recent years, immigration authorities, in the United States as well as other countries where our clients are based, have increased the level of scrutiny in granting such visas and work permits, which may be affected by changes in legislation and enforcement due to political and other factors which may be difficult to predict. The ability to move our employees around the world as necessary to meet client demands is important to our business. If we are unable to efficiently deploy talent because of increased regulation of immigration or work visas, including limitations placed on the number of visas granted, limitations on the type of work performed or location in which the work can be performed, and new or higher minimum salary requirements, it could be more difficult to staff our employees on client engagements and could increase our costs and have an adverse effect on our net income and cash flows.

Investors may have difficulty effecting service of process or enforcing judgments obtained in the United States against our foreign subsidiaries or our executive officers.

Our primary operating subsidiaries are organized outside the United States and some of our executive officers may reside outside of the United States. A substantial portion of our assets are located in India and the Philippines. As a result, you may be unable to effect service of process upon our affiliates who reside in India and the Philippines outside their jurisdiction of residence. In addition, you may be unable to enforce against these persons outside the jurisdiction of their residence judgments obtained in courts of the United States, including judgments predicated solely upon the federal securities laws of the United States.

Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements, including, accreditation or licensing standards that govern our business, and violations of these requirements could harm our business.

We provide services to clients throughout the world, therefore we and our clients (who sometimes impose those requirements on us) are subject to numerous, and sometimes conflicting, changing and evolving laws and regulations on matters as diverse as import/export controls, content requirements, trade restrictions, tariffs, taxation, sanctions, government affairs, internal and disclosure control obligations, securities regulation, including anti-competition, anti-money-laundering and anti-corruption laws (including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act), data privacy and protection, government compliance, wage-and-hour standards, employment and labor relations, health and safety, environmental and human rights, state laws on third party administration services, utilization review services, telemarketing services or state laws on debt collection in the United States and the Financial Services Act in the United Kingdom as well as similar consumer
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protection laws in other countries where our clients’ customers are based. The global nature of our operations increases the difficulty of compliance. In addition, we are required under various laws to obtain and maintain accreditations, permits and/or licenses for the conduct of our business in all jurisdictions where we have operations, and, in some cases where our clients receive our services to enable them to comply with applicable regulations or accreditations or licensing standards. Compliance with diverse legal requirements is costly, time-consuming and requires significant resources. Violations of any of these laws or regulations in the conduct of our business, including being unable to maintain our accreditations, licenses or other qualifications while working for our clients, could result in fines, criminal sanctions against us or our officers, prohibitions on doing business or suspension or disqualification from government contracting or contracting with private entities in certain highly regulated industries, damage to our reputation and other unintended consequences such as liability for monetary damages, fines and/or criminal prosecution including in the form of successor liability in certain circumstances for companies we invest in or acquire, unfavorable publicity, or restrictions on our ability to process information and allegations by our clients that we have not performed our contractual obligations and loss of clients.
Risks Related to Our Indebtedness
We may not be able to service our debt or obtain additional financing on competitive terms.

We are party to a credit agreement for our bank debt facility that contains covenants, among other things, requiring maintenance of certain financial ratios and restricting our ability to incur additional indebtedness, create liens, make certain investments and acquisitions, pay dividends, repurchase common shares and make other restricted payments or undertake certain fundamental changes (including, consolidations, liquidations or disposal of certain assets or subsidiaries). The credit agreement provides for a $400 million revolving credit facility including a letter of credit sub-facility and is guaranteed by certain subsidiaries. If we breach any of these covenants and do not cure such breach within the applicable cure periods or obtain a waiver from the lenders, the outstanding indebtedness could be declared immediately due and payable and such acceleration could adversely affect our liquidity and financial condition.

Our cash flow from operations provides the primary source of funds for our debt service payments. Given the uncertainty over global economic conditions and regulatory, competitive or other factors outside of our control, including but not limited to conflicts between Russia and Ukraine, and Israel and Hamas, there can be no assurance that business activity will be maintained at our expected level in order to generate the anticipated cash flows from operations. If our cash flow from operations declines, we may not be able to service or refinance our current debt or obtain financing on favorable terms to us or at all, which could adversely affect our business and financial condition. A substantial portion of our floating rate indebtedness is exposed to interest rate fluctuations as only a portion is hedged through interest rate swaps. Accordingly, any adverse change in interest rates due to market conditions or otherwise could increase our cost of funding substantially.

We may in the future require additional financing to fund one or more acquisitions and may not be able to obtain such additional financing on competitive terms or at all, which could restrict our ability to complete such transactions.
Risks Related to Our Common Stock
Our stock price continues to be volatile.

The market price of our common stock has at times experienced or may experience substantial price volatility as a result of, among other reasons, variations between our actual and anticipated financial results, announcements by us and our competitors, terrorist attacks, natural disasters, epidemics or pandemics, or other such events impacting countries where we or our clients have operations, loss of one or more significant clients, announcements of technological developments, projections or speculation about our business or that of our competitors by the media or investment analysts, the effect of any stock split, or uncertainty about current global economic conditions. The stock market, as a whole, experiences extreme price and volume fluctuations that affect the market price of many companies, including technology companies, in ways that may have been unrelated to these companies’ operating performance. The global stock markets have experienced, and may continue to experience, significant volatility from inflation and high interest rates, which could result in a material adverse effect on our stock price. Furthermore, if we fail to meet expectations relating to future growth and profitability, this may have a materially adverse effect on the trading price of our common stock.

Delaware law and our restated certificate of incorporation and sixth amended and restated by-laws contain certain anti-takeover provisions that could delay or discourage business combinations and takeover attempts that stockholders may consider favorable.

Our restated certificate of incorporation and sixth amended and restated by-laws (the “by-laws”) contain provisions that may make it more difficult, expensive or otherwise discourage a tender offer or a change in control or takeover attempt by a
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third-party that is opposed by our board of directors. These provisions include provisions permitting the board of directors to fill vacancies created by its expansion, provisions requiring the vote of holders of two thirds of our common stock for certain amendments to our organizational documents, provisions barring stockholders from calling a special meeting of stockholders or requiring one to be called or from taking action by written consent and provisions that set forth advance notice procedures for stockholders’ nominations of directors and proposals for consideration at meetings of stockholders. These provisions may have the effect of delaying or preventing a change of control or changes in management that stockholders consider favorable. Additionally, because we are incorporated in Delaware, we are subject to Section 203 of the Delaware General Corporation Law (the “DGCL”). Section 203 of the DGCL may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us. These provisions of our restated certificate of incorporation, by-laws and Delaware law could discourage potential takeover attempts and reduce the price that investors might be willing to pay for shares of our common stock in the future which could reduce the market price of our stock.

We do not intend to pay dividends in the foreseeable future, and, because we are also a holding company, we may be unable to pay dividends.

For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of our board of directors and will be dependent on then-existing conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, including restrictions under our credit agreement, business prospects and other factors that our board of directors considers relevant. Furthermore, because we are also a holding company, any dividend payments would also depend on the cash flow from our subsidiaries. Accordingly, under certain circumstances, we may not be able to pay dividends even if our board of directors would otherwise deem it appropriate.
Risks Related to Our Industry
Our industry may not develop in ways that we currently anticipate due to negative public reaction in the United States and elsewhere to offshore outsourcing, anti-outsourcing legislation or otherwise.

Offshore outsourcing is a politically sensitive topic in the United States and elsewhere, and many organizations and public figures have publicly expressed concern about a perceived association between offshore outsourcing providers and the loss of jobs in the United States, where the majority of our clients are located, and elsewhere. Current or prospective clients may elect to perform such services themselves or may be discouraged from transferring these services to offshore providers to avoid any negative perception that may be associated with using an offshore provider. Measures aimed at limiting or restricting outsourcing by U.S. companies have been put forward by the U.S. Congress and in state legislatures to address these concerns. If any such measure is enacted, our ability to do business with U.S. clients through our non-U.S. affiliates could be negatively impacted.
General Risk Factors
Our results of operations could be adversely affected by economic and political conditions globally and the effects of these conditions on our clients’ businesses and levels of business activity.

Global economic and political conditions affect our clients’ businesses and the markets they serve, which are increasingly becoming more interdependent. The domestic and international capital and credit markets have in the past, and may in the future, experience volatility and disruption and uncertainty from geopolitical tensions, inflation, economic tensions, changes in legislation in the various jurisdictions in which we and our clients operate, changes in global trade policies, or global health emergencies or pandemics, which may affect our clients, us directly, or our client industries, and could result in changing demand patterns. Our business largely depends on continued demand for our services. Weakness in the global labor market could also adversely affect the demand for our services and impact our ability to recruit, train and retain qualified employees, resulting in a significant negative impact on our business and results of operations.

Market disruptions may limit our ability to access financing or increase our cost of financing to meet liquidity needs, and affect the ability of our clients to use credit to purchase our services or to make timely payments to us.

We make estimates and assumptions in connection with the preparation of our consolidated financial statements, and any changes to those estimates and assumptions could adversely affect our financial results.

Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The application of U.S. GAAP requires us to make estimates and assumptions about certain items and future events
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that affect our reported financial condition, and our accompanying disclosure. Our most critical accounting estimates are described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Critical Accounting Policies and Estimates.” We base our estimates on historical experience, contractual commitments and on various other assumptions that we believe to be reasonable under the circumstances and at the time they are made. These estimates and assumptions involve the use of judgment and are subject to significant uncertainties, some of which are beyond our control. If our estimates, or the assumptions underlying such estimates, are not correct, actual results may differ materially from our estimates, and we may need to, among other things, adjust revenues or accrue additional charges that could adversely affect our results of operations.

We are exposed to credit risk and fluctuations in the market values of our investment and derivatives portfolios.

Any deterioration of the credit and capital markets in the United States, the United Kingdom, Europe, Asia or other regions of the world could result in volatility of our investment earnings and impairments to our investment portfolio, which could negatively impact our financial condition and reported income. Changes in economic conditions could adversely affect the ability of counterparties, including counterparties to our foreign exchange forward contracts, to meet their obligations to us, which could materially affect our positions and investments.

We may not be fully insured for all losses we may incur.

We could be sued directly for claims that could be significant, such as claims related to breaches of privacy or network security, infringement of intellectual property rights, violation of wage and hour laws, or systemic discrimination, and our liability under our contracts may not fully limit or insulate us from those liabilities. Although we have general liability insurance coverage, including coverage for errors or omissions, cyber security incidents, property damage or loss and breaches of privacy and network security, that coverage may not continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims, and our insurers may disclaim coverage as to any future claim. Insurance is not available for certain types of claims, including patent infringement, violation of wage and hour laws, failure to provide equal pay in the United States, and our indemnification obligations to our clients based on employment law. The successful assertion of one or more large claims against us that are excluded from our insurance coverage or exceed available insurance coverage, or changes in our insurance policies (including premium increases, the imposition of large deductible or co-insurance requirements, or our insurers’ disclaimer of coverage as to future claims), could have a material adverse effect on our business, results of operations, financial condition and cash flows.

New and changing laws, corporate governance and public disclosure requirements add uncertainty to our compliance policies and increase our costs of compliance.

New and changing laws, regulations and standards relating to accounting, corporate governance, sustainability and public disclosure, other SEC regulations, rules and regulations of the Consumer Financial Protection Bureau, the Nasdaq Stock Market LLC (or equivalent or other exchange on which our common stock may be listed), the Public Company Accounting Oversight Board, generally accepted accounting principles issued by Financial Accounting Standard Board, and state law can create uncertainty for companies like ours. These laws, regulations and standards may lack specificity and are subject to varying interpretations. Their application in practice may evolve over time, as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such corporate governance standards.

In particular, federal securities laws require us to maintain internal controls over financial reporting. Effective internal controls are necessary for us to provide reliable and accurate financial information and to effectively prevent fraud. We devote significant financial and managerial resources and time to comply with the internal control over financial reporting requirements and continue to enhance our controls. Internal control over financial reporting has inherent limitations, including human error, sample-based testing, the possibility that controls could be circumvented or become inadequate because of changed conditions, unidentified controls, and fraud, which might not prevent or detect all misstatements or fraud, and could result in adverse consequences to us, including, but not limited to, a loss of investor confidence in the reliability of our financial results, which could cause the market price of our stock to decline. While we do not anticipate any material weaknesses in our internal controls framework, we cannot be certain that we will be able to prevent future significant deficiencies or material weaknesses.

Our sustainability commitments and disclosures may expose us to reputational risks and legal liability.

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Our brand and reputation are also associated with our public commitments to various corporate sustainability initiatives. Our disclosures on these matters and any failure or perceived failure to achieve or accurately report on our commitments, could harm our reputation. In addition, positions we take or do not take on social issues may be unpopular with some of our employees, our existing and potential clients and investors, governments, media or advocacy groups, which may impact our ability to attract or retain employees or the demand for our services. We also may choose not to conduct business with potential clients or discontinue or not expand business with existing clients due to these positions.

Increasing focus on sustainability matters has resulted in, and is expected to continue to result in, the adoption of new laws and regulations and reporting requirements and if these are more stringent than the current requirements, we may experience increased compliance burdens and costs to meet such obligations. In addition, our selection of voluntary disclosure frameworks and standards, and the interpretation or application of those frameworks and standards, may change from time to time or may not meet the expectations of investors or other stakeholders. Our ability to achieve our sustainability commitments, including our goals relating to sustainability, inclusion and diversity, is subject to numerous risks, many of which are outside of our control.

In addition, standards for tracking and reporting on sustainability matters have not been harmonized and continue to evolve. Methodologies for reporting sustainability data may be updated and previously reported sustainability data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations and other changes in circumstances. Our processes and controls for reporting sustainability matters across our operations and supply chain are evolving along with multiple disparate standards for identifying, measuring, and reporting sustainability metrics, including sustainability-related disclosures that may be required by the SEC and other regulators, including state, and such standards may change over time, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future.

ITEM 1B.    Unresolved Staff Comments
None.

ITEM 1C.    Cybersecurity

We maintain a comprehensive information and cybersecurity and data privacy program to safeguard the security, confidentiality, integrity, availability and protection of the Company’s and our clients’ information. We aim to continually strengthen our cybersecurity posture and protocols. We have invested in people, processes and technology intended to protect information throughout the business life cycle and to manage cybersecurity risk, and we intend to continue to do so as cybersecurity risks and methods for preventing against them evolve. We provide no assurance that the policies and procedures outlined below will be properly followed in every instance or that they will be effective in safeguarding against every possible cybersecurity threat.

We describe how cybersecurity threats are likely to materially affect our business, results of operations, and financial conditions in Part I, Item 1A, “Risk Factors.We believe that these risks have not materially affected our business to date, but we can provide no assurance that they will not affect us in the future. Although we maintain cybersecurity insurance to manage potential liabilities resulting from specific cybersecurity incidents, there is no guarantee that our insurance coverage limits will protect against any future claims or that such insurance proceeds will be paid to us in a timely manner. See “Risks Related to Our Business-Unauthorized disclosure of sensitive or confidential client and employee data, whether through breach of our computer systems or otherwise, could cause us significant reputational damage, expose us to protracted and costly litigation, and cause us to lose clients.”

Cybersecurity Strategy and Risk Management

Our cybersecurity strategy is founded on policies, processes and practices that are integrated into our overall risk management system. These policies, processes and practices are aimed at building a cyber-resilient organization by implementing and operationalizing cybersecurity capabilities to identify, protect, detect, respond and recover from cybersecurity threats and incidents and are guided by relevant regulatory and governance bodies, including but not limited to the Cyber Security Framework of the National Institute of Standards and Technology. We have undertaken measures designed to comply with applicable privacy laws and regulations that are applicable to our services. These security capabilities are designed to mitigate material vulnerabilities and the impact of cyber incidents.

We regularly conduct cybersecurity and other risk assessments and compliance audits both internally and through third party auditors that we independently engage or that we engage in connection with our certification to certain international standards, such as the ISO 27001:2013 standard for information security management systems, the ISO 22301:2012 for business continuity management systems, the ISO 9001:2008 standard for quality management systems, among others. We also
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regularly assess and deploy technical safeguards and conduct vulnerability assessment and penetration testing of our technology environment independently and through third parties. We use the outcome of these assessments to align our cybersecurity program and technical safeguards with the evolving cybersecurity threat landscape and adjust and augment our security controls environment as required.

We have implemented a third-party risk management program to proactively identify and mitigate any potential risks that emerge from our supplier and partner ecosystem. There are processes in place to restrict and provide need-based access to sensitive or confidential data for third parties. We conduct periodic evaluations of key suppliers and partners for ongoing monitoring of the risk environment.

Incident Response and Recovery Planning

While processes are in place to minimize the occurrence of a successful cyberattack, we have institutionalized detailed incident response procedures to address a cyber threat that may occur despite these safeguards. The response procedures are designed to identify, analyze, isolate and contain, remediate, and, if applicable, report any such material cyber incidents that occur. We have developed a materiality assessment approach for cyber and a cyber crisis communication methodology for structured and timely notification to internal and external stakeholders. Further, we have empaneled specialized cyber partners to provide advanced investigation capabilities and response management support in case of a real cyber incident.

Training and Awareness

We maintain a comprehensive information and cybersecurity awareness and training program for all employees and contracted resources. This includes a mandatory annual information security training, periodic simulations such as red teaming and tabletops, regular communications on relevant topics and policies related to data privacy, phishing, email security best practices, among others. We provide specialized security training for certain roles with access to sensitive data, including human resources or employees who regularly handle personal or sensitive information.

Governance (Management Oversight and Engagement with the Board of Directors)

Cybersecurity is governed by our cross-functional apex body, the Management Security, Continuity and Privacy Forum (“MSCPF”), comprised of management representatives across all of our business units and enterprise functions such as Legal, Human Resource, Growth and Strategy, Compliance, Technology and Information Security. The MSCPF periodically reviews the strategy, policy, program effectiveness, standards development, cybersecurity risks, incident, and response preparedness.

The Audit Committee of our board of directors provides primary oversight and strategic guidance on Cybersecurity. The Audit Committee receives reports from management, typically on a quarterly basis, regarding our security risk management, including cybersecurity-related risks, vulnerabilities, policies, practices, and strategic initiatives. Annually, our board of directors receives a report from management on our cybersecurity posture, our readiness and our capability to reduce the risk of, detect and respond to a cyberattack. In 2022 and 2023, our senior management and board of directors completed cyber tabletop exercises to further enhance our preparedness in the event of an actual incident.
ITEM 2.    Properties
Our corporate headquarters are located in New York, New York. We have multiple operations centers spread across India, the Philippines, South Africa, Columbia, Bulgaria, Romania, the United Kingdom, the Czech Republic, Mexico and the Republic of Ireland with an aggregate area of approximately 1,579,000 square feet and a current installed capacity of approximately 24,800 workstations, including workstations for training and our employees in enabling functions. We also have multiple operations centers and regional offices in the United States.
Our corporate headquarters and all of our operations centers are leased under long-term leases with varying expiration dates, except for an operations center in Pune, India with an area of 86,361 sq. ft. and containing approximately 1,670 agent workstations, which we own. Substantially all of our owned and leased property is used to service all of our reporting segments.
We believe that our current facilities are adequate to support our existing operations, however we continue to optimize our existing network of operations centers to service our client, drive efficiencies and adapting the hybrid working model. We also believe that we will be able to obtain suitable additional facilities on commercially reasonable terms on an “as needed basis.”


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ITEM 3.    Legal Proceedings
In the course of our normal business activities, various lawsuits, claims and proceedings may be instituted or asserted against us. Although there can be no assurance, we believe that the disposition of matters currently instituted or asserted will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. See Note 25 - Commitments and Contingencies to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data” for details regarding our tax proceedings.

ITEM 4.    Mine Safety Disclosures
Not applicable.
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PART II.
 
ITEM 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock trades on the Nasdaq Global Select Market under the symbol “EXLS.”
As of February 27, 2024, there were 9 holders of record of our outstanding common stock. A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions.
Dividend Policy
We do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will be dependent on then-existing conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, including restrictions under our credit agreement, business prospects and other factors that our board of directors considers relevant.
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities
On October 5, 2021, our board of directors authorized a $300 million (excluding excise tax) common stock repurchase program beginning January 1, 2022 (the “2022 Repurchase Program”).

Under the 2022 Repurchase Program, shares may be purchased by us from time to time from the open market and through private transactions, or otherwise, as determined by our management as market conditions warrant. We have structured open market purchases under the 2022 Repurchase Program to comply with Rule 10b-18 under the Exchange Act. Repurchases may be discontinued at any time by our management.
Repurchased shares are recorded as treasury shares and are held until our board of directors designates that these shares be retired or used for other purposes.
During the three months ended December 31, 2023, purchases of common stock were as follows:
Shares Purchased from Employees in connection with satisfaction of Withholding Tax ObligationsShares Purchased as Part of Publicly Announced ProgramsTotal Number of Shares PurchasedApproximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
PeriodNumber of
Shares Purchased
Average Price
Paid per share
Number of
Shares Purchased
Average Price
Paid per share
October 1, 2023 through October 31, 2023— $— 227,287 $28.00 227,287 $131,632,598 
November 1, 2023 through November 30, 2023— — 533,050 27.42 533,050 $117,014,194 
December 1, 2023 through December 31, 2023
  — — 365,495 29.96 365,495 $106,063,003 
Total  — $— 1,125,832 $28.36 1,125,832 — 
During the year ended December 31, 2023, we purchased 4,127,451 shares of our common stock for an aggregate purchase consideration of $125.4 million, including commission and excluding excise tax, representing an average purchase price per share of $30.39.
During the year ended December 31, 2023, we purchased 237,047 shares from employees in connection with withholding tax payments related to the vesting of restricted stock units for an aggregate purchase consideration of $7.9 million. The weighted average purchase price of $33.13 was the closing price of our shares of our common stock on the Nasdaq Global Select Market on the trading day prior to the vesting date of the restricted stock units.
Pursuant to the Inflation Reduction Act, effective January 1, 2023, we are required to pay a 1% excise tax on the fair market value of each share of common stock repurchased, net of stock issuances.
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Equity Compensation Plan Information
The following table provides information as of December 31, 2023 with respect to the shares of our common stock that may be issued under our existing equity compensation plans. For a description of our equity compensation plans, see Note 23 - Stock-Based Compensation to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data.”
Plan CategoryNumber of Securities
to be Issued Upon
Exercise/Vesting of
Outstanding
Options, Warrants and Rights*
Weighted
Average Exercise
Price of
Outstanding
Options, Warrants and Rights
Number of Securities
Remaining Available for Future
Issuance Under Equity
Compensation Plans (Excluding Securities
Reflected in Column 1)
Equity compensation plans approved by security holders5,367,317 $30.14    3,249,875 
Equity compensation plans not approved by security holders— — — 
Total5,367,317 $30.14 3,249,875 
*This includes outstanding options and unvested restricted stock units, which include time-based restricted stock units and performance-based restricted stock units. See Note 23 - Stock-Based Compensation to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data” for further details.
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Performance Graph
The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return of the Nasdaq 100 Index (capitalization weighted) and our peer group of companies for the period beginning December 31, 2018. Our peer group of companies is comprised of two companies that we believe are our closest reporting issuer competitors: Genpact Limited and WNS (Holdings) Limited. The returns of the component entities of our peer group index are weighted according to the market capitalization of each company as of the beginning of each period for which a return is presented. The returns assume that $100 was invested on December 31, 2018 and that all dividends were reinvested. The stock performance shown on the graph below is not indicative of future price performance.
This graph will not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. This graph will not be deemed to be incorporated by reference into any prior or subsequent filing under the Securities Act, or the Exchange Act.
https://cdn.kscope.io/89e90e204914e81f4f7f2182949ae14e-Stock Chart FY23_v1.jpg

ITEM 6.    [Reserved]













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ITEM 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in connection with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. Some of the statements in the following discussion are forward looking statements.
All references to years, unless otherwise noted, refer to our fiscal year, which ends on December 31. For example, a reference to “2023” or “fiscal 2023” means the 12-month period that ended on December 31, 2023. All references to quarters, unless otherwise noted, refer to the quarters of our fiscal year.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. You should not place undue reliance on these statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. These statements often include words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. These statements are based on assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this Annual Report on Form 10-K, you should understand that these statements are not guarantees of performance or results. They involve known and unknown risks, uncertainties and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. These factors include but are not limited to:
our ability to maintain and grow client demand for our services and solutions, including anticipating and incorporating the latest technologies, for instance, artificial intelligence (“AI”), including generative AI into our offerings;
impact on client demand by the selling cycle and terms of our client contracts;
fluctuations in our earnings;
our ability to hire and retain enough sufficiently trained employees to support our operations or any changes in the senior management team;
our ability to accurately estimate and/or manage costs;
our ability to adjust our pricing terms or effectively manage our asset utilization levels to meet the changing demands of our clients and potential clients;
cyber security incidents, data breaches, or other unauthorized disclosure of sensitive or confidential client and employee data;
reliance on third parties to deliver services and infrastructure for client critical services;
employee wage increases;
failure to protect our intellectual property;
our dependence on a limited number of clients in a limited number of industries and our ability to withstand the loss of a significant client;
our ability to grow our business or effectively manage growth and international operations;
our ability to successfully consummate or integrate strategic acquisitions including the impact from the impairment of goodwill and other intangible assets, if any;
legal liability arising out of customer and third party contracts;
increasing competition in our industry;
telecommunications or technology disruptions or breaches, natural or other disasters, medical epidemics or pandemics, such as COVID-19, or acts of violence or war;
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operational and information security failures arising as a result of remote work solutions adopted due to COVID-19;
adverse outcome of our disputes with the tax authorities in the geographies where we operate;
the introduction of new or unfavorable tax legislation, including legal restrictions on repatriation of funds held abroad;
exposure to currency exchange rate fluctuations in the various currencies in which we do business including the potential effects of Russian-Ukraine and Israel-Hamas conflicts, rising inflation, high interest rates and economic recessionary trends on currency exchange rates;
restrictions on immigration;
regulatory, legislative and judicial developments, including our ability to adhere to regulations or accreditation or licensing standards that govern our business;
our ability to service debt or obtain additional financing on favorable terms. Inception of interest rate swaps to hedge interest rate risk;
negative public reaction in the U.S. or elsewhere to offshore outsourcing;
effects of political and economic conditions globally, particularly in the geographies where we operate;
our ability to make accurate estimates and assumptions in connection with the preparation of our consolidated financial statements;
credit risk fluctuations in the market values of our investment and derivatives portfolios; and
our ability to meet our sustainability-related goals and targets.
In particular, you should consider the numerous risks outlined in Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K. These and other risks could cause actual results to differ materially from those implied by forward-looking statements in this Annual Report on Form 10-K.
The forward-looking statements made by us in this Annual Report on Form 10-K, or elsewhere, speak only as of the date on which they were made. New risks and uncertainties may occur from time to time, and it is impossible for us to predict those events or how they may affect us. We have no obligation to update any forward-looking statements in this Annual Report on Form 10-K after the date of this Annual Report on Form 10-K, except as required by federal securities laws.
Executive Overview
We are a leading data analytics and digital operations and solutions company. We partner with clients using a data and AI-led approach to reinvent business models, drive better business outcomes and unlock growth with speed. We harness the power of data, analytics, AI, and deep industry knowledge to transform operations for the world’s leading corporations in industries including insurance, healthcare, banking and financial services, media and retail, among others.

We deliver data analytics and digital operations and solutions to our clients, driving enterprise-scale business transformation initiatives that leverage our deep expertise in advanced analytics, AI, generative AI and cloud technology. We manage and report financial information through our four strategic business units: Insurance, Healthcare, Analytics and Emerging Business, which reflects how management reviews financial information and makes operating decisions.
Our reportable segments are as follows:
Insurance,
Healthcare,
Analytics, and
Emerging Business
Our global delivery network, which includes highly trained industry and process specialists across the United States, the United Kingdom, Latin America, South Africa, Europe and Asia (primarily India and the Philippines), is a key asset. We have operations centers in India, the United States, the Philippines, South Africa, Colombia, Bulgaria, Romania, the United Kingdom, the Czech Republic, Mexico and the Republic of Ireland.
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Revenues
For fiscal 2023, we generated revenues of $1,630.7 million compared to revenues of $1,412.0 million for fiscal 2022, an increase of $218.7 million, or 15.5%.
We serve clients mainly in the United States and the United Kingdom, with these two regions generating 84.1% and 10.9%, respectively, of our total revenues for fiscal 2023 and 85.9% and 9.5%, respectively, of our revenues for fiscal 2022.
For fiscal 2023 and 2022, our total revenues from our top ten clients accounted for 34.0% and 34.9% of our total revenues, respectively. Although we continue to develop relationships with new clients to diversify our client base, we believe that the loss of any of our top ten clients could have a material adverse effect on our financial performance.
Our Business
We provide data analytics and digital operations and solutions to our clients. We market our services to our existing and prospective clients through our sales and client management teams, which are aligned by key industry verticals and cross-industry domains such as finance and accounting. Our sales and client management teams operate primarily from the United States, Europe and Australia.
Digital Operations and Solutions: We provide our clients with a range of data and AI-led digital operations and solutions from our Insurance, Healthcare and Emerging Business strategic business units, which are focused on solving complex industry challenges, which include: a) multi-modal data ingestion using AI, and converting unstructured content into curated and usable data, b) real-time and comprehensive data insights including end-to-end data management and building a 360-degree view of our clients’ customers, c) omni-channel and frictionless customer experience including self-service, conversational AI and smart agent assist, d) intelligent and AI-powered redesign and automation of transaction processing and e) automated quality, compliance and audit. Some of our clients’ operations that we have transformed using the above solutions include underwriting operations, claims processing, accounts payables processing, utilization management, member and provider contact center services and collections and accounts receivables. We either manage and digitally transform these operations for our clients by deploying our solutions through a software-as-a-service model via our partners’ cloud network or a client’s on-cloud deployment model, to digitally transform their retained operations. For a portion of our digital operations and solutions, we hire and train employees to work at our operations centers on the relevant business operations, implement a process migration to these operations centers and then provide services either to the client or directly to the client’s customers. Each client contract has different terms based on the scope, deliverables and complexity of the engagement. We also provide consulting services related to digital operations and solutions that include industry-specific digital transformational services as well as cross-industry finance and accounting services as part of the Emerging Business strategic business unit.
We provide our services under contracts with our clients, which typically have terms of three or more years, with some being contracts with no end dates. These contracts provide us with a relatively predictable revenue base for a substantial portion of our digital operations and solutions business. However, our clients can typically terminate these contracts with or without cause and with short notice periods. We have a long selling cycle for our services and the budget and approval processes of prospective clients make it difficult to predict the timing of entering into definitive agreements with new clients. Similarly, new license sales and implementation projects for our technology service platforms and other software-based services have a long selling cycle, however ongoing annual maintenance and support contracts for existing arrangements provide us with a relatively predictable revenue base.
We charge for our services using various pricing models like time-and-material pricing, full-time-equivalent pricing, transaction-based pricing, outcome-based pricing, subscription-based pricing and other alternative pricing models. Outcome-based pricing arrangements are examples of non-linear pricing models where clients link revenues from platforms and solutions and the services we provide to usage or savings rather than the efforts deployed to provide these services. We continue to observe a shift in the industry pricing models toward transaction-based pricing, outcome-based pricing and other alternative pricing models. We believe this trend will continue and we use such alternative pricing models with some of our current clients and are seeking to move certain other clients from a full-time-equivalent pricing model to a transaction-based or other alternative pricing model. These alternative pricing models place the focus on operating efficiency in order to maintain or improve our gross margins.
We have also observed that prospective larger clients are entering into multi-vendor relationships with regard to their digital operations and solutions needs to seek more favorable contract terms and diversification of the risk of concentration on a few vendors. We believe that the trend toward multi-vendor relationships will continue. A multi-vendor relationship allows a client to seek more favorable pricing and other contract terms from each vendor, which can result in significantly reduced gross margins from the provision of services to such client for each vendor. To the extent our large clients expand their use of multi-vendor relationships and are able to extract more favorable contract terms from other vendors, our gross margins and revenues
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may be reduced with regard to such clients if we are required to modify the terms of our relationships with such clients to meet competition.
Analytics: Our analytics services aim to drive better business outcomes for our clients by unlocking deep insights from data and creating data and AI-led solutions across all parts of our clients’ business. We provide care optimization and reimbursement optimization services for our clients through our healthcare analytics solutions and services. We also offer integrated solutions to help our clients in cost containment by leveraging technology platforms, customizable and configurable analytics and expertise in healthcare reimbursements to help clients enhance their claim payment accuracy. Our Analytics teams deliver predictive and prescriptive analytics in the areas of customer acquisition and life cycle management, risk underwriting and pricing, operational effectiveness, credit and operational risk monitoring and governance, regulatory reporting and data management. We enhance, modernize and enrich structured and unstructured data and use a spectrum of advanced analytical tools and techniques, including our in-house and third-party AI, generative AI, and ML capabilities and proprietary solutions to create insights, improve decision making for our clients and address a range of complex industry-wide priorities. We actively cross-sell and, where appropriate, integrate our analytics services with other digital operations and solutions as part of a comprehensive offering for our clients. Our project-based analytics services are cyclical and can be significantly affected by variations in business cycles. In addition, our project-based analytics services are documented in contracts with terms generally not exceeding one year and may not produce ongoing or recurring business for us once the project is completed. These contracts also usually contain provisions permitting termination of the contract after a short notice period. The short-term nature and specificity of these projects could lead to fluctuations and uncertainties in the revenues generated from providing analytics services.
We anticipate that revenues from our analytics services will grow as we expand our service offerings and client base, both organically and through acquisitions.
Cost of Revenues
Our cost of revenues primarily consists of:
employee costs, which include salary, bonus and other compensation expenses; retirement benefits, recruitment and training costs; employee health and life insurance; transport; rewards and recognition for certain employees; and non-cash stock-based compensation expense;
costs relating to our facilities and communications network, which include telecommunication and IT costs; facilities and customer management support; operational expenses for our operations centers; lease cost;
Outsourced/subcontractors and professional services costs;
travel and other billable costs to our clients; and
costs relating to our direct mail operations and other digital operations and solutions.
The most significant components of our cost of revenues are salaries and benefits (including stock-based compensation), retirement benefits, recruitment, training, transport, meals, rewards and recognition and employee health and life insurance. Salary levels, employee turnover rates and our ability to efficiently manage and utilize our employees significantly affect our cost of revenues. We make every effort to manage employee and capacity utilization and continuously monitor service levels and staffing requirements. Although we generally have been able to reallocate our employees as client demand has fluctuated, a contract termination or significant reduction in work assigned to us by a major client could cause us to experience a higher-than-expected number of unassigned employees, which would increase our cost of revenues as a percentage of revenues until we are able to reduce or reallocate our headcount. A significant increase in the turnover rate among our employees, particularly among the highly skilled workforce needed to execute certain services, would increase our recruiting and training costs and decrease our operating efficiency, productivity and profit margins. In addition, cost of revenues also includes non-cash amortization of stock-based compensation expense related to the grant of our equity awards to employees directly involved in providing services to our clients.
We expect our cost of revenues to continue to increase as we continue to add professionals in our operations centers globally to service additional business and as wages continue to increase globally. In particular, we expect recruitment and training costs to continue to increase as we hire additional staff to service new clients and train existing staff to provide them with evolving skill sets. There is significant competition for professionals with skills necessary to perform the services we offer to our clients. As our existing competitors continue to grow, and as new competitors enter the market, we expect competition for skilled professionals in each of these areas to continue to increase, with corresponding increases in our cost of revenues to reflect increased compensation levels for such professionals. We also expect that we will continue to incur additional costs to monitor and improve operational efficiency of our hybrid working model, invest in information technology solutions, including adaption to evolving modes of seeking such solutions through cloud-based hosting arrangements and security measures to
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safeguard against information security risks and costs to protect the health and safety of our employees as they gradually return to the office. See Part I, Item 1A, “Risk Factors” under “Risks Related to Our Business––Employee wage increases may prevent us from sustaining our competitive advantage and may reduce our profit margin.” However, a significant portion of our client contracts include inflation-based adjustments to our billing rates year over year which partially offset such increase in cost of revenues.
We generally experience a higher cost of revenues as a percentage of revenues during the initial 12 to 18 months in a long-term digital operations and solutions contract due to upfront investments in infrastructure, resource hiring and training during migration. The cost of revenues as a percentage of revenues improves as we scale up, achieve operational efficiencies and complete the migration.
Operating expenses
Selling, General and Administrative Expenses ("SG&A")
Our General and Administrative expenses (“G&A”) comprise of expenses relating to salaries and benefits (including stock-based compensation), retirement benefits as well as costs related to recruitment, training and retention of senior management and other support personnel in enabling functions, telecommunications, utilities, travel and other miscellaneous administrative costs. G&A expenses also include acquisition-related costs, legal and professional fees (which represent the costs of third party legal, tax, accounting, immigration and other advisors), litigation claims, cost of technology solutions sought through evolving modes of cloud-based hosting arrangements, investment in product development, digital technology, advanced automation and robotics, cloud, AI and ML, bad debt allowance and stock-based compensation expenses related to grant of our equity awards to members of our board of directors. We expect our G&A costs to increase as we continue to strengthen our support and enabling functions and invest in leadership development, performance management and training programs.
Selling and marketing expenses primarily consist of salaries and benefits (including stock-based compensation), retirement benefits and other compensation expenses of sales and marketing and client management personnel, sales commission, travel and brand building, client events and conferences. We expect that sales and marketing expenses will continue to increase as we invest in our sales and client management functions to better serve our clients and in our branding.
Depreciation and Amortization Expense
Depreciation and amortization pertains to depreciation of our property and equipment, including network equipment, cabling, computers, office furniture and equipment, motor vehicles and leasehold improvements and amortization of intangible assets acquired in business combinations. As part of our ongoing evaluation of our business needs, we continually optimize our operations centers and expect depreciation to decrease on assets related to operations centers, such as office furniture and equipment and leasehold improvements. As our business continues to expand we expect additional investments in digital technologies and equipment, including laptops, desktop computers, servers and other infrastructure, and increased reliance on hybrid working model, we expect increases in depreciation on assets-related to such investments. Property and equipment, if evaluated as being used differently than as originally intended are assessed for revision of their useful life, thereby revising their future depreciation to reflect the actual use of such property and equipment over the remaining shortened life. We expect amortization of intangible assets to increase further as we pursue strategic relationships and acquisitions.
Foreign Exchange gain, net
We report our financial results in U.S. dollars.
Our revenues are primarily denominated in the U.S. dollar, however, a portion of our revenues are earned in the U.K. pound sterling representing 10.1% and 8.6% of our total revenues in fiscal 2023 and 2022, respectively. We also incur a significant portion of our expenses in the Indian rupee, the Philippine peso and the U.K. pound sterling, representing 28.5%, 8.2% and 3.1%, respectively, of our total expenses in fiscal 2023, compared to 29.1%, 8.2% and 3.0%, respectively, of our total expenses in fiscal 2022. The exchange rates among the Indian rupee, the Philippine peso, the U.K. pound sterling and the U.S. dollar have changed substantially in recent years and may fluctuate substantially in the future as well. The results of our operations could be substantially impacted as the Indian rupee, the Philippine peso and the U.K. pound sterling appreciate or depreciate against the U.S. dollar. See Part I, Item 1A, “Risk Factors” under “Risks Related to the International Nature of Our Business––Currency exchange rate fluctuations in the various currencies in which we do business, or the failure of our hedging strategies to mitigate such fluctuations, could have a material adverse effect on our results of operations,” as well as Note 2 - Summary of Significant Accounting Policies and Note 17 - Derivatives and Hedge Accounting to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data” and Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk-Components of Market Risk-Foreign Currency Risk.”
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Interest Expense
Interest expense primarily consist of interest on our borrowings under our revolving credit facility and convertible senior notes, finance leases and notional interest implicit in the purchase of property and equipment.
Other Income/(Expense), net
Other income/(expense), net primarily consists of gain/(loss) on sale, mark to market, dividend income and interest income on our short-term and long-term investments, cash equivalents, as applicable. Other income/(expense), net also consists of changes in fair value of contingent consideration related to business combinations, interest on refunds received from income tax authorities in India on completion of tax assessments, profit or loss on disposal of long-lived assets and components of net periodic benefit cost such as interest cost, expected return on plan assets and amortization of actuarial gain or loss.
Income Taxes
We are subject to taxes in the countries we operate in. Our future tax liabilities could be adversely affected by any new unfavorable tax legislative and other changes in such countries. We continuously monitor such changes to assess and quantify the potential impacts on our consolidated financial statements.
We periodically evaluate opportunities to distribute cash among our group entities to fund our operations in the United States and other countries, and as and when we decide to distribute, we may have to accrue additional taxes in accordance with local tax laws, rules and regulations in the relevant foreign jurisdictions. These distributions do not constitute a change in our permanent reinvestment assertion.
We recognize deferred tax assets and liabilities for temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry forwards. We determine if a valuation allowance is required on the basis of an assessment of whether it is more likely than not that a deferred tax asset will be realized.
We currently benefit from corporate tax holidays in our qualified Philippines Economic Zone Authority operations centers in the Philippines. Our ability to utilize these tax holidays could be adversely affected by any new unfavorable tax legislative changes. We continuously monitor such changes to assess and quantify any potential impacts on our consolidated financial statements.
During 2023, we established a headquarters for international business in Dublin, the Republic of Ireland qualifying for the reduced tax rate of 12.5%, resulting in a nominal reduction in our effective tax rate for 2023. We anticipate that Ireland’s business and related tax rate benefit, net of Pillar Two impact discussed below, will increase in the future.
In October 2021, more than 130 countries tentatively signed on to the Organization for Economic Co-operation and Development (“OECD”) Pillar Two Framework that imposes a minimum tax rate of 15%, among other provisions. The OECD continues to release additional guidance on the Pillar Two Framework, with implementation generally effective for 2024. The countries where we do business impacted by the Pillar Two Framework are the Philippines and the Republic of Ireland. We do not anticipate any significant impact attributable to the Philippines, and any unfavorable impact attributable to the Republic of Ireland will be offset against the reduced Ireland tax rate benefit discussed above. We continue to evaluate the potential impact of the Pillar Two Framework on our consolidated financial statements.
Forward Stock Split
On June 20, 2023, subsequent to the approval and recommendation of our board of directors, our stockholders approved an amendment to our amended and restated certificate of incorporation, which upon filing with the Secretary of State of the State of Delaware on August 1, 2023, and effectiveness thereof, effected a 5-for-1 forward stock split of our common stock and an increase in the number of authorized shares of our common stock from 100,000,000 shares to 400,000,000 shares. The par value of each share of common stock, $0.001, remained unchanged. See Note 19 - Capital Structure to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data” for further details. All prior period information has been adjusted to reflect the forward stock split.
Subsequent Event
On February 26, 2024, our board of directors authorized a $500 million common stock repurchase program (the “2024 Repurchase Program”), effective March 1, 2024, for a two-year period, in line with our capital allocation strategy. Under the 2024 Repurchase Program, shares may be purchased by us from time to time from the open market and through private transactions, or otherwise, as determined by our management as market conditions warrant. Repurchases may be discontinued
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at any time by the management. The 2024 Repurchase Program replaces the prior $300 million stock repurchase program, which was terminated effective February 29, 2024.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon the financial statements included in this Annual Report on Form 10-K, which have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). A summary of our significant accounting policies is included in Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data.”
We consider the policies discussed below to be critical to an understanding of our consolidated financial statements, as their application places the most significant demands on management’s judgment regarding matters that are inherently uncertain at the time an estimate is made.
These policies include revenue recognition, allowance for expected credit losses, business combinations, goodwill, stock-based compensation, employee benefits, leases and income taxes.
The significant estimates and assumptions that affect the consolidated financial statements include, but are not limited to, estimates of the fair value of stock-based awards, identifiable intangible assets and contingent consideration, assumptions related to 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, assets and obligations related to employee benefit plans, determination of incremental borrowing for measuring lease liabilities, deferred tax assets and liabilities, deferred tax valuation allowances, income-tax contingencies, purchase price allocation, revenue projections and discount rate applied within the discounted cash flow model for business acquisitions.
These accounting policies, estimates and the associated risks are set out below. Future events may not develop exactly as forecasted and estimates routinely require adjustment.
Revenue Recognition
Revenue is recognized when services are provided to our customers, in an amount that reflects the consideration which we expect to be entitled to in exchange for the services provided. We recognize revenue when we satisfy a performance obligation by providing services to a customer.
Revenue is measured based on consideration specified in a contract with a customer and excludes value added tax, business tax, any applicable discounts and amounts collected on behalf of third parties. Reimbursements of out-of-pocket expenses are included as a part of revenue.
Significant judgments
Arrangements with Multiple Performance Obligations
We sometimes enter into contracts with our customers which include promises to transfer multiple products and services to the customer. Determining whether products and services are considered as distinct performance obligations that should be accounted for separately rather than as one performance obligation may require significant judgment. The transaction price is allocated to performance obligations on relative standalone selling price basis.
Judgment is also required to determine the standalone selling price for each distinct performance obligation. In instances where the standalone selling price is not directly observable, it is determined using information that may include market conditions and other observable inputs.
The contracts with our customers may be modified to add, remove or change existing performance obligations, which requires judgment to evaluate and determine whether such performance obligations are to be accounted for on a prospective basis as a separate contract or as a termination of an existing contract and creation of a new contract.
Variable Consideration
Variability in the transaction price arises primarily due to service level agreements, volume discounts entailing variability in revenue earned, and contracts under our reimbursement optimization services whereby variability in revenue is attributable to the amount we enable our customers to recover.
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We consider our historical experience, including trends with similar transactions and expectations regarding the contract in estimating the amount of variable consideration that should be recognized during a period.
We believe that the expected value method is most appropriate for determining the variable consideration since we have a large number of contracts with similar nature of transactions/services.
Type of Contracts Requiring Judgment
a.Revenues for our fixed-price contracts are recognized using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, which corresponds with, and thereby reasonably reflects transfer of control to the customer. The use of this method requires significant judgment to estimate the cost required to complete the contracted scope of work, including assumptions and estimates relative to the length of time to complete the project and the nature and complexity of the work to be performed and resources engaged. We regularly monitor these estimates throughout the execution of the project and record changes in the period in which a change in an estimate is determined. If a change in an estimate results in a projected loss on a project, such loss is recognized in the period in which it is first identified.
b.Revenues from reimbursement optimization services having contingent fee arrangements are recognized by us at the point in time when a performance obligation is satisfied, which is when we identify an overpayment claim. In such contracts, our consideration is contingent upon the actual collections made by our customers and net of any subsequent retraction claims. Based on guidance on “variable consideration” in Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”), we use our historical experience and projections to determine the expected recoveries from our customers and recognize revenue based upon such expected recoveries. Any adjustment required due to change in estimates are recorded in the period in which such change is identified.
Unbilled Receivables
Unbilled receivables represent revenues recognized for services rendered between the last billing date and the balance sheet date. Unbilled receivables also include revenues recognized from reimbursement optimization services where we identify an overpayment claim. In such contracts, our consideration is contingent upon and collectable only when the actual collections are made by our customers. Based on guidance on “variable consideration” in ASC Topic 606, we use our historical experience and projections to determine the expected recoveries from our customers and recognize revenue and receivables based upon such expected recoveries.
Allowance for Expected Credit Losses
We record accounts receivable net of allowances for expected credit losses. Allowances for credit losses are established through the evaluation of aging of accounts receivables, prior collection experience, current market conditions, forecasts about future economic conditions, customers’ financial condition and the amount of accounts receivable in dispute to estimate the collectability of these accounts receivable. Accounts receivable balances are written-off against the allowance for expected credit losses after all means of collection have been exhausted and the potential for recovery is considered remote.
Business Combinations
We account for all business combinations using the acquisition method of accounting as prescribed by ASC Topic 805, Business Combinations. The guidance requires the use of significant estimates and assumptions in determining the fair value of identifiable assets acquired and liabilities assumed, including intangible assets and contingent consideration, and allocation of purchase price over such assets and liabilities on the acquisition date. The significant estimates and assumptions include, but are not limited to, the timing and amount of future revenue and cash flows based on, among other things, discount rate reflecting the risk inherent in future cash flows, customer attrition rates and the long-term growth rate applied within the discounted cash flow model. This requires a high degree of our judgment and the need to involve fair value specialists to evaluate the reasonableness of our valuation methodology and the selection of inputs to the valuation.
In addition, assets acquired and liabilities assumed including uncertain tax positions and tax-related valuation allowances in connection with business combinations are initially estimated as of the acquisition date. We subsequently re-evaluate the assets acquired and liabilities assumed, including additional assets and liabilities identified subsequent to acquisition date, with any adjustments to our preliminary estimates being recorded to goodwill within the measurement period (up to one year from the acquisition date).


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Goodwill
Goodwill represents the cost of the acquired businesses in excess of the fair value of identifiable tangible and intangible net assets purchased in a business combination. We undertake studies to determine the fair values of assets and liabilities acquired and allocate purchase consideration to assets and liabilities, including property and equipment, goodwill and other identifiable intangibles. Goodwill is not amortized but is tested for impairment at least on an annual basis, relying on a number of factors including operating results, business plans and estimated future cash flows of the reporting units to which it is assigned. We examine the carrying value and fair value of the reporting unit that includes goodwill as and when the circumstances warrant, to determine whether there are any impairment losses.
We perform an assessment of qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on the assessment of events or circumstances, we perform a quantitative assessment of goodwill impairment if we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, based on the quantitative impairment analysis, the carrying value of the goodwill of a reporting unit exceeds the fair value of such goodwill, an impairment loss is recognized in an amount equal to the excess, limited to the total amount of goodwill allocated to that reporting unit. In addition, we perform a quantitative assessment of goodwill impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
Stock-based Compensation
Under the fair value recognition provisions of ASC Topic 718, Compensation-Stock Compensation, cost is measured at the grant date based on the fair value of the award and is amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.
Determining the fair value of stock-based awards at the grant date requires significant judgment, including estimating the expected term over which the stock awards will be outstanding before they are exercised and the expected volatility of our stock.
We grant performance-based restricted stock units (“PRSUs”) to executive officers and other specified employees. Generally, we grant PRSUs cliff vest based on an aggregated revenue target (“PUs”) for a three-year period, while grants based on market conditions (“MUs”) are contingent on meeting or exceeding the total shareholder return relative to a group of peer companies specified under our 2018 Omnibus Incentive Plan (the “2018 Plan”), and are measured over a three-year performance period.
The fair value of each PU is determined based on the market price of one share of our common stock on the day prior to the date of grant. The grant date fair value for the MUs is determined using a Monte Carlo simulation model. The Monte Carlo simulation model simulates a range of possible future stock prices and estimates the probabilities of the potential payouts. The Monte Carlo simulation model also involves the use of additional key assumptions, including dividend yield and risk-free interest rate. We periodically assess the reasonableness of our assumptions and update our estimates as required. If actual results differ significantly from our estimates, stock-based compensation expense and our results of operations could be materially affected.
Stock-based compensation expense associated with our 2022 Employee Stock Purchase Plan is measured at fair-value using a Black-Scholes option-pricing model at commencement of each offering period and recognized over that offering period.
Income Taxes
We account for income tax using the asset and liability method. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized in respect of future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases and operating losses carried forward, if any. Deferred tax assets and liabilities are measured using the anticipated tax rates for the years in which such temporary differences are expected to be recovered or settled. We recognize the effect of a change in tax rates on deferred tax assets and liabilities during the period in which the new tax rate was enacted or the change in tax status was filed or approved. Deferred tax assets are recognized in full, subject to a valuation allowance that reduces the amount recognized to that which is more likely than not to be realized. In assessing the likelihood of realization, we consider all available evidence for each jurisdiction including past operating results, estimates of future taxable income and the feasibility of tax planning strategies. With respect to any entity that benefits from a corporate tax holiday, deferred tax assets or liabilities for existing temporary differences are recorded only to the extent such temporary differences are expected to reverse following the expiration of the tax holiday.
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We also evaluate potential exposures related to tax contingencies or claims made by the tax authorities in various jurisdictions in order to determine whether a reserve may be required. A reserve is recorded if we believe that a loss is more likely than not, and if the amount of such loss can be reasonably estimated. Such reserves are based on estimates and, consequently, are subject to changing facts and circumstances, including the progress of ongoing audits, changes in case law and the passage of new legislation. We have established adequate reserves to cover any potential tax contingencies or claims.
Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, requires companies to recognize, measure, present and disclose uncertain tax positions. We employ a two-step process for recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining, based on the technical merits, that the position will, more likely than not, be sustained upon examination. The second step is to measure the tax benefit as the largest amount of the tax benefit that is more likely than not to be realized upon settlement. We have established adequate reserves to cover all uncertain tax positions.
Employee Benefits
We record contributions to defined contribution plans in our consolidated statements of income in the period in which services are rendered by the covered employees. Current service costs for defined benefit plans are recognized in the period to which they relate. The liability in respect of defined benefit plans is calculated annually by using the projected unit credit method and various actuarial assumptions including discount rates, mortality, expected return on assets, expected increase in the compensation rates and attrition rates. We evaluate these critical assumptions at least annually. If actual results differ significantly from our estimates, current service costs for defined benefit plans and our results of operations could be materially impacted.
Leases
We account for a lease at the inception of the contract. Our assessment is based on whether: (1) the contract involves the use of a distinct identified asset, (2) we obtain the right to substantially all the economic benefits from the use of the asset throughout the term of the contract, and (3) we have the right to direct the use of the asset. A lease is classified as a finance lease if any one of the following criteria are met: (1) the lease transfers ownership of the asset by the end of the lease term, (2) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (3) the lease term is for a major part of the remaining useful life of the asset or (4) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset.
Right-of-use (“ROU”) assets represent our right to use an underlying asset during the lease term and lease liabilities represent our obligation to make lease payments arising from the lease arrangement. Lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease ROU assets are recognized at commencement date in an amount equal to lease liability, adjusted for any lease prepayments, initial direct costs and lease incentives. For leases in which the rate implicit in the lease is not readily determinable, we use our incremental borrowing rate at commencement date. We determine the incremental borrowing rate by adjusting the benchmark reference rates with appropriate financing spreads applicable to the respective geographies where we entered into leases and lease specific adjustments for the effects of collateral, if applicable.
Lease terms includes our assessment for the effects of options to extend or terminate the lease. We consider the extension option as part of our lease term for those lease arrangements where we are reasonably certain at commencement of the lease that we will exercise that option. Lease expense for operating lease arrangements is recognized on a straight-line basis over the lease term reflecting single operating lease cost. We evaluate lease agreements to determine lease and non-lease components, which are accounted for separately.
We review the ROU assets for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable.
Contingencies
Loss contingencies are recorded as liabilities when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, we do not record a liability, but instead disclose the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Significant judgment is required in the determination of probability and whether an exposure is reasonably estimable, both. Our judgments are subjective and based on the information available from the status of the legal or regulatory proceedings, the merits of our defenses and consultation with in-house and outside legal counsel. As additional information becomes available, we reassess any potential liability related to any pending litigation and may revise our estimates. Such revisions in estimates of any potential liabilities could have a material impact on our results of operations, financial position and cash flows.
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Results of Operations
For a discussion of our results of operations for fiscal 2021, including a year-to-year comparison between fiscal 2022 and 2021, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for fiscal 2022, filed with the SEC on February 23, 2023.
The following table summarizes our results of operations:
(dollars in millions)
Fiscal
2023
Percentage of Revenues, netFiscal
2022
Percentage of Revenues, netChange in percentage of Revenues, netDollar Change
(A)(B)(C=A-B)
Revenues, net$1,630.7 100.0 %$1,412.0 100.0 %— %$218.7 
Cost of revenues (1)
1,022.9 62.7 %896.6 63.5 %(0.8)%126.3
Gross profit (1)
607.8 37.3 %515.4 36.5 %0.8 %92.4
Operating expenses:
General and administrative expenses198.3 12.2 %169.0 12.0 %0.2 %29.3
Selling and marketing expenses120.2 7.3 %98.0 6.9 %0.4 %22.2
Depreciation and amortization expense50.5 3.1 %56.3 4.0 %(0.9)%(5.8)
Total operating expenses369.0 22.6 %323.3 22.9 %(0.3)%45.7
Income from operations238.8 14.6 %192.1 13.6 %1.0 %46.7
Foreign exchange gain, net1.5 0.1 %6.2 0.4 %(0.3)%(4.7)
Interest expense(13.2)(0.8)%(8.2)(0.6)%(0.2)%(5.0)
Other income, net10.8 0.7 %— — %0.7 %10.8
Income before income tax expense and earnings from equity affiliates237.9 14.6 %190.1 13.5 %1.1 %47.8
Income tax expense53.5 3.3 %47.5 3.4 %(0.1)%6.0
Income before earnings from equity affiliates184.4 11.3 %142.6 10.1 %1.2 %41.8
Gain from equity-method investment0.2 — %0.4 — %— %(0.2)
Net income attributable to ExlService Holdings, Inc. stockholders$184.6 11.3 %$143.0 10.1 %1.2 %$41.6 
(1) Exclusive of depreciation and amortization expense.
Due to rounding, the numbers presented in the tables included in this Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” may not add up precisely to the totals provided.

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Fiscal 2023 Compared to Fiscal 2022
Revenues.
The following table summarizes our revenues by reportable segments:
 FiscalDollar ChangePercentage
change
Percentage of Total Revenues for Fiscal
2023202220232022
 (dollars in millions) 
Insurance$529.9 $448.7 $81.2 18.1 %32.5 %31.8 %
Healthcare106.0 97.4 8.6 8.9 %6.5 %6.9 %
Emerging Business265.7 218.6 47.1 21.5 %16.3 %15.5 %
Analytics729.1 647.3 81.8 12.6 %44.7 %45.8 %
Total revenues, net$1,630.7 $1,412.0 $218.7 15.5 %100.0 %100.0 %
Revenues for fiscal 2023 were up by $218.7 million, or 15.5%, compared to fiscal 2022, driven primarily by revenue growth from our new and existing clients in all of our reportable segments.
Revenue growth in Insurance of $81.2 million was primarily driven by expansion of business from our new and existing clients of $83.9 million. This was partially offset by a loss of $2.7 million, mainly attributable to the depreciation of the Australian dollar, the Indian rupee and the South African rand against the U.S. dollar during fiscal 2023, compared to fiscal 2022.
Revenue growth in Healthcare of $8.6 million was primarily driven by expansion of business from our new and existing clients during fiscal 2023.
Revenue growth in Emerging Business of $47.1 million was primarily driven by expansion of business from our new and existing clients of $47.4 million. This was partially offset by a loss of $0.3 million, net mainly attributable to the depreciation of the Indian rupee against the U.S. dollar during fiscal 2023, compared to fiscal 2022.
Revenue growth in Analytics of $81.8 million was primarily driven by higher volumes in our annuity and project-based engagements from our new and existing clients of $80.8 million and an increase in revenues of $1.0 million, mainly attributable to the appreciation of the U.K. pound sterling against the U.S. dollar during fiscal 2023, compared to fiscal 2022.
Cost of Revenues and Gross Margin: The following table sets forth cost of revenues and gross margin of our reportable segments:
Cost of RevenuesGross Margin (%)
 FiscalDollar ChangePercentage
change
FiscalPercentage
change
 2023202220232022
 (dollars in millions) 
Insurance$341.8 $287.7 $54.1 18.8 %35.5 %35.9 %(0.4)%
Healthcare69.3 71.0 (1.7)(2.4)%34.6 %27.1 %7.5 %
Emerging Business150.9 128.0 22.9 17.9 %43.2 %41.4 %1.8 %
Analytics460.9 409.9 51.0 12.4 %36.8 %36.7 %0.1 %
Total$1,022.9 $896.6 $126.3 14.1 %37.3 %36.5 %0.8 %
Cost of revenues for fiscal 2023 increased by $126.3 million, or 14.1% compared to fiscal 2022. The increase in cost of revenues was primarily due to increases in employee-related costs and technology costs, partially offset by foreign exchange gain, net of hedging. Our gross margin for fiscal 2023 was 37.3% compared to 36.5% for fiscal 2022, an increase of 80 basis points ("bps") primarily driven by higher revenues, operational efficiencies and foreign exchange gain, net of hedging during fiscal 2023, compared to fiscal 2022.
The increase in cost of revenues in Insurance of $54.1 million for fiscal 2023 was primarily due to increases in employee-related costs of $52.2 million on account of higher headcount and wage inflation, higher technology costs of $8.5 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model and higher other operating costs of $2.9 million, partially offset by foreign exchange gain, net of hedging of $7.5 million and lower travel costs
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of $2.0 million. Gross margin in Insurance decreased by 40 bps during fiscal 2023, compared to fiscal 2022, primarily due to lower margins associated with higher costs during ramp-ups in certain existing and new clients during fiscal 2023, compared to fiscal 2022.
The decrease in cost of revenues in Healthcare of $1.7 million for fiscal 2023 was primarily due to foreign exchange gain, net of hedging of $1.9 million, lower facilities costs of $1.5 million resulting from optimization of office space, lower other operating costs of $0.2 million, partially offset by increases in employee-related costs of $1.9 million on account of wage inflation. Gross margin in Healthcare increased by 750 bps during fiscal 2023, compared to fiscal 2022, primarily due to higher revenues and operational efficiencies during fiscal 2023, compared to fiscal 2022.

The increase in cost of revenues in Emerging Business of $22.9 million for fiscal 2023 was primarily due to increases in employee-related costs of $23.5 million on account of higher headcount and wage inflation, higher technology costs of $3.5 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model and higher other operating costs $1.5 million, partially offset by foreign exchange gain, net of hedging of $3.8 million and lower travel costs of $1.8 million. Gross margin in Emerging Business increased by 180 bps during fiscal 2023, compared to fiscal 2022, primarily due to higher revenues and foreign exchange gain, net of hedging during fiscal 2023, compared to fiscal 2022.

The increase in cost of revenues in Analytics of $51.0 million for fiscal 2023 was primarily due to increases in employee-related costs of $55.3 million on account of higher headcount and wage inflation, higher technology costs of $1.6 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model and higher other operating costs $4.0 million, partially offset by foreign exchange gain, net of hedging of $6.4 million and lower travel costs of $3.5 million. Gross margin in Analytics increased by 10 bps during fiscal 2023, compared to fiscal 2022, primarily due to higher revenues, partially offset by increases in employee-related costs during fiscal 2023, compared to fiscal 2022.

Selling, General and Administrative (“SG&A”) Expenses.
 FiscalDollar ChangePercentage
change
 20232022
 (dollars in millions) 
General and administrative expenses$198.3 $169.0 $29.3 17.3 %
Selling and marketing expenses120.2 98.0 22.2 22.7 %
Selling, general and administrative expenses$318.5 $267.0 $51.5 19.3 %

The increase in SG&A expenses of $51.5 million was primarily due to higher employee-related costs of $27.0 million on account of higher headcount and wage inflation, higher investments in digital and generative AI capabilities of $10.4 million, higher sales and marketing spend of $4.6 million, higher travel costs of $3.8 million, higher allowance for expected credit losses of $1.7 million, primarily related to a customer bankruptcy event, and higher other operating costs of $6.6 million. This was partially offset by foreign exchange gain, net of hedging of $2.6 million during fiscal 2023, compared to fiscal 2022.
Depreciation and Amortization.
 FiscalDollar ChangePercentage change
 20232022
 (dollars in millions) 
Depreciation expense$35.8 $39.2 $(3.4)(8.6)%
Intangible amortization expense14.7 17.1 (2.4)(14.2)%
Depreciation and amortization expense$50.5 $56.3 $(5.8)(10.3)%
The decrease in depreciation expense of $3.4 million was primarily due to lower depreciation of $2.4 million on assets related to operations centers closed as a result of optimization of office space, increased use of the hybrid working model and foreign exchange gain, net of hedging of $1.0 million during fiscal 2023, compared to fiscal 2022. The decrease in intangibles amortization expense of $2.4 million during fiscal 2023, compared to fiscal 2022 was primarily due to end of useful lives for certain intangible assets.
Income from Operations. Income from operations increased by $46.7 million, or 24.2%, from $192.1 million for fiscal 2022 to $238.8 million for fiscal 2023, primarily due to higher revenues and higher gross margins, partially offset by higher SG&A expenses during fiscal 2023.
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Foreign Exchange Gain, net. Foreign exchange gains and losses are primarily attributable to the movement of the U.S. dollar against the Indian rupee, the Philippine peso, the U.K. pound sterling and the South African rand during fiscal 2023, compared to fiscal 2022. The average exchange rate of the U.S. dollar against the Indian rupee increased from 78.81 during fiscal 2022 to 82.60 during fiscal 2023. The average exchange rate of the U.S. dollar against the Philippine peso increased from 54.47 during fiscal 2022 to 55.56 during fiscal 2023. The average exchange rate of the U.K. pound sterling against the U.S. dollar increased from 1.23 during fiscal 2022 to 1.25 during fiscal 2023. The average exchange rate of the U.S. dollar against the South African rand increased from 16.44 during fiscal 2022 to 18.51 during fiscal 2023.
We recorded a foreign exchange gain, net of $6.2 million for fiscal 2022 compared to a foreign exchange gain, net of $1.5 million for fiscal 2023.
Interest expense. Interest expense increased from $8.2 million for fiscal 2022 to $13.2 million for fiscal 2023, primarily due to a higher effective interest rate of 6.3% during fiscal 2023, compared to 2.9% during fiscal 2022, partially offset by a lower average outstanding balance under our revolving credit facility during fiscal 2023, compared to fiscal 2022.
Other Income, net.
 FiscalDollar ChangePercentage
change
 20232022
 (dollars in millions) 
Gain on sale and fair value mark-to-market on investments$5.0 $4.9 $0.1 2.2 %
Interest and dividend income8.0 5.2 2.8 53.5 %
Fair value changes of contingent consideration(1.9)(8.3)6.4 (77.0)%
Others, net(0.3)(1.8)1.5 (83.9)%
Other income, net$10.8 $— $10.8 (100.0)%
Other income, net increased by $10.8 million, from $nil for fiscal 2022 to $10.8 million for fiscal 2023. The increase is primarily due to a decrease of $6.4 million in contingent consideration liability related to our acquisitions as a result of fair value adjustment, higher interest and dividend income on our investments of $2.8 million and lower other expenses of $1.5 million during fiscal 2023, compared to fiscal 2022.
Income Tax Expense. The effective tax rate decreased from 25.0% during fiscal 2022 to 22.5% during fiscal 2023. We recorded income tax expense of $53.5 million and $47.5 million for fiscal 2023 and 2022, respectively. While the effective tax rate decreased in 2023, the amount of income tax expense increased primarily as a result of higher profit during fiscal 2023, compared to fiscal 2022, and an increase in non-deductible expenses, partially offset by higher excess tax benefits related to stock-based compensation during fiscal 2023, compared to fiscal 2022.
Net Income. Net income increased from $143.0 million for fiscal 2022 to $184.6 million for fiscal 2023, primarily due to increase in income from operations of $46.7 million and higher other income, net of $10.8 million, partially offset by higher interest expense of $5.0 million, lower foreign exchange gain, net of $4.7 million and higher income tax expense of $6.0 million.
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Liquidity and Capital Resources
 FiscalDollar Change
 20232022Percentage Change
 (dollars in millions)
Opening cash, cash equivalents and restricted cash$125.6 $143.8 $(18.2)(12.6)%
Net cash provided by operating activities211.2 166.1 45.1 27.1 %
Net cash used for investing activities(12.0)(96.5)84.5 (87.6)%
Net cash used for financing activities(181.4)(81.7)(99.7)122.0 %
Effect of exchange rate changes2.0 (6.1)8.1 (133.5)%
Closing cash, cash equivalents and restricted cash$145.4 $125.6 $19.8 15.7 %

As of December 31, 2023 and 2022, we had $290.8 million and $297.7 million, respectively, in cash, cash equivalents and short-term investments, of which $237.7 million and $260.0 million, respectively, is located in foreign jurisdictions that upon distribution may be subject to withholding and other taxes. We periodically evaluate opportunities to distribute cash among our group entities to fund our operations, expand our business and make strategic acquisitions in the United States and other geographies, and as and when we decide to distribute, we may have to accrue additional taxes in accordance with local tax laws, rules and regulations in the relevant foreign jurisdictions. For fiscal 2023, our foreign subsidiaries in India, the United Kingdom, Australia, Bulgaria and the Czech Republic repatriated an aggregate amount of $136.4 million (net of $5.9 million withholding taxes) to the United States. These distributions do not constitute a change in our permanent reinvestment assertion.
Operating Activities:
Net cash provided by operating activities was $211.2 million for fiscal 2023, compared to $166.1 million for fiscal 2022, reflecting higher cash earnings, partially offset by higher working capital needs. The major drivers contributing to the increase of $45.1 million year-over-year included the following:
Increase in cash earnings, including adjustments for non-cash and other items contributed higher cash flow of $60.4 million for fiscal 2023, compared to fiscal 2022. These adjustments include fair value changes in investments, unrealized foreign currency exchange gain, deferred tax effects, stock-based employee compensation, fair value changes in contingent consideration, depreciation and amortization of long-lived assets and intangibles acquired in business combinations, among others.
Changes in accounts receivable, including advance billings, contributed higher cash flow of $15.5 million for fiscal 2023, compared to fiscal 2022. Collections in accounts receivable, including advance billings was driven by revenue growth for fiscal 2023. This was partially offset by increase in our days sales outstanding which was 64 days as of December 31, 2023, compared to 61 days as of December 31, 2022.
Higher income tax payments, net of refunds, contributed higher cash payouts of $47.7 million, partially offset by provision for income tax and changes in deferred tax assets and liabilities of $20.6 million for fiscal 2023, compared to fiscal 2022.
Changes in other assets, accounts payables including other liabilities contributed higher cash payouts of $3.7 million for fiscal 2023, compared to fiscal 2022.
Investing Activities: Cash used for investing activities were $12.0 million for fiscal 2023, compared to $96.5 million for fiscal 2022. The decrease in cash used for investing activities of $84.5 million year-over-year is primarily due to net redemption of investments of $40.7 million for fiscal 2023, compared to net purchase of investments of $48.1 million for fiscal 2022. The decrease was also due to acquisition-related payouts of $3.9 million for fiscal 2022 with no corresponding payouts for fiscal 2023. This was partially offset by higher capital expenditures in infrastructure, technology assets, software and product developments of $8.0 million for fiscal 2023, compared to fiscal 2022.

Financing Activities: Cash used for financing activities were $181.4 million for fiscal 2023, compared to $81.7 million for fiscal 2022. The increase in cash used for financing activities of $99.7 million year-over-year was primarily due to net repayment of our borrowings under our revolving credit facility of $50.0 million for fiscal 2023, compared to $10.0 million for fiscal 2022. The increase was also due to higher purchases of treasury stock of $59.2 million under our share repurchase program for fiscal 2023, compared to fiscal 2022.
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We expect to use cash from operating activities to maintain and expand our business by making investments, primarily related to building new digital capabilities, including generative AI and purchase telecommunications equipment and computer hardware and software in connection with managing client operations.
We incurred $52.8 million of capital expenditures during fiscal 2023. We expect to incur total capital expenditures of between $50 million to $55 million in fiscal 2024, primarily to meet our growth requirements, including additions to our facilities as well as investments in technology applications, product development, digital technology, advanced automation, robotics and infrastructure.
In connection with any tax assessment orders that have been issued, or may be issued against us or our subsidiaries, we may be required to deposit additional amounts with the relevant authorities with respect to such assessment orders. See Note 25 - Commitments and Contingencies to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data” for further details.
We believe that our existing cash, cash equivalents and short-term investments and sources of liquidity will be sufficient to satisfy our cash requirements over the next 12 months. Our future cash requirements will depend on many factors, including our rate of revenue growth, our investments in strategic initiatives, applications or technologies, operation centers and acquisition of complementary businesses, continued stock repurchases under our board-authorized stock repurchase program, which may require the use of significant cash resources and/or additional financing. We anticipate that we will continue to rely upon cash from operating activities to finance most of our above mentioned requirements, although if we have significant growth through acquisitions, we may need to obtain additional financing.

In the ordinary course of business, we enter into contracts and commitments that obligate us to make payments in the future. These obligations include borrowings, including interest obligations, purchase commitments, operating and finance lease commitments, employee benefit payments under gratuity plans, payments for contingent consideration and uncertain tax positions. See Note 16 - Fair Value Measurements - Fair Value of Contingent Consideration, Note 18- Borrowings, Note 20- Employee Benefit Plans, Note 21- Leases, Note 22- Income Taxes and Note 25- Commitments and Contingencies to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data” for further information on material cash requirements from known contractual and other obligations.

In the ordinary course of business, we provide standby letters of credit to third parties primarily for facility leases. As of December 31, 2023 and 2022, we had outstanding letters of credit of $0.5 million, each, that were not recognized in our consolidated balance sheets. These are unlikely to have, a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. We had no other off-balance sheet arrangements or obligations.
Financing Arrangements
The following table summarizes our debt position:
As of December 31
20232022
  (dollars in millions)
Revolving credit facility
Current portion of long-term borrowings$65.0 $30.0 
Long-term borrowings135.0 220.0 
Total borrowings$200.0 $250.0 
Credit Agreement
We held a $300.0 million revolving credit facility pursuant to our credit agreement (the “Credit Agreement”), dated as of November 21, 2017, with certain lenders and Citibank N.A. as Administrative Agent. The revolving credit facility originally had a maturity date of November 21, 2022 and was voluntarily pre-payable from time to time without premium or penalty.

On April 18, 2022, we and each of our wholly owned material domestic subsidiaries entered into an Amendment and Restatement Agreement with Citibank, N.A., as Administrative Agent, and certain lenders (the “2022 Credit Agreement”), pursuant to which the parties thereto amended and restated the Credit Agreement. Among other things, the 2022 Credit Agreement (a) provides for the issuance of new revolving credit commitments such that the aggregate amount of revolving credit commitments available is equal to $400.0 million; (b) extends the maturity date of the revolving credit facility from
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November 21, 2022 to April 18, 2027; and (c) replaces London Inter-Bank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”) as the reference rate for the U.S. dollar borrowings.

The 2022 Credit Agreement provides an option to increase the commitments by up to $200.0 million, subject to certain approvals and conditions. The 2022 Credit Agreement includes a letter of credit sub facility and is voluntarily pre-payable from time to time without premium or penalty. Borrowings under the 2022 Credit Agreement can be used for working capital and general corporate purposes, including permitted acquisitions.

Obligations under the 2022 Credit Agreement are guaranteed by our material domestic subsidiaries and are secured by all or substantially all of our and our material domestic subsidiaries’ assets. The 2022 Credit Agreement contains customary affirmative and negative covenants, including, but not limited to, restrictions on the ability to incur indebtedness, create liens, make certain investments, make certain dividends and related distributions, enter into, or undertake, certain liquidations, mergers, consolidations or acquisitions and dispose of assets or subsidiaries. In addition, the 2022 Credit Agreement contains a covenant to not permit the interest coverage ratio or the total net leverage ratio, both, as defined, for the four consecutive quarter period ending on the last day of each fiscal quarter, to be less than 3.0 to 1.0 or more than 3.5 to 1.0, respectively.
The 2022 Credit Agreement bears interest at a rate equal to specified prime rate (alternate base rate) or adjusted SOFR, plus, in each case, an applicable margin. The applicable margin is tied to our total net leverage ratio and ranges from 0% to 0.75% per annum on loans pegged to the specified prime rate, and 0.88% to 1.75% per annum on loans pegged to the adjusted SOFR. The revolving credit commitments under the 2022 Credit Agreement are subject to a commitment fee which is also tied to our total net leverage ratio, and ranges from 0.13% to 0.28% per annum on the average daily amount by which the aggregate revolving commitments exceed the sum of outstanding revolving loans and letter of credit obligations.
The revolving credit facility carried an effective interest rate as shown below:-
Fiscal
20232022
Effective interest rate6.3 %2.9 %
As of December 31, 2023 and 2022, we were in compliance with all financial and non-financial covenants under the 2022 Credit Agreement.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, see Note 2 - Summary of Significant Accounting Policies - Recent Accounting Pronouncements to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data.”
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ITEM 7A.    Quantitative and Qualitative Disclosures About Market Risk
General
Market risk is the volatility of future earnings and cash flows that may result from changes in interest rates and foreign currency exchange rates. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market sensitive financial instruments including foreign currency receivables and payables.
Our exposure to market risk is a function of our expenses and revenue generating activities in foreign currencies. The objective of market risk management is to avoid excessive exposure to our earnings and equity of such market driven losses. We manage market risk through our treasury operations using financial instruments. Our senior management and our board of directors approve our treasury operations’ objectives and policies. The responsibilities of our treasury operations include management of cash resources, including borrowing strategies, implementing hedging strategies for foreign currency exposures, and ensuring compliance with market risk limits and policies.
Components of Market Risk
Foreign Currency Risk. We are exposed to foreign currency exchange rate risk. Our revenues are primarily denominated in the U.S. dollar representing 86.2% of our total revenues and the U.K. pound sterling representing 10.1% of our total revenues for fiscal 2023. A significant portion of our expenses are incurred in the Indian rupee, the Philippine peso and the U.K. pound sterling, representing 28.5%, 8.2% and 3.1%, respectively, of our total expenses for fiscal 2023. We also incur expenses in the U.S. dollar and currencies of other countries where we have operations. The exchange rates among the Indian rupee, the Philippine peso, the U.K. pound sterling and the U.S. dollar have fluctuated within the fiscal 2023, over the recent years and may fluctuate in the future.
Our foreign currency exchange rate risk primarily arises from our foreign currency revenues, expenses incurred by our subsidiaries, including foreign subsidiaries in foreign currencies and foreign currency accounts receivable and payable. The average exchange rate of the U.S dollar against the Indian rupee increased from 78.81 for fiscal 2022 to 82.60 for fiscal 2023, representing a depreciation of 4.8% against the U.S dollar. The average exchange rate of the U.S dollar against the Philippine peso increased from 54.47 for fiscal 2022 to 55.56 for fiscal 2023, representing a depreciation of 2.0% against the U.S dollar. The average exchange rate of the U.K. pound sterling against the U.S. dollar increased from 1.23 for fiscal 2022 to 1.25 for fiscal 2023, representing an appreciation of 1.3% against the U.S dollar. Based upon our level of operations for fiscal 2023 and excluding any hedging arrangements that we had in place during that period, a 10% appreciation/depreciation in the Indian rupee, the Philippine peso and the U.K. pound sterling against the U.S. dollar would have increased/decreased our revenues by approximately $7.4 million, $0.6 million and $9.3 million, respectively and increased/decreased our expenses incurred by approximately $39.7 million, $11.4 million and $4.3 million, respectively for fiscal 2023.
In order to mitigate our exposure to foreign currency fluctuation risks and minimize the earnings and cash flow volatility associated with forecasted transactions denominated in certain foreign currencies, we enter into foreign currency forward contracts designated as cash flow hedges. These contracts must be settled on the day of maturity or may be canceled subject to the receipts or payments of any gains or losses respectively, equal to the difference between the contract exchange rate and the market exchange rate on the date of cancellation. We do not enter into foreign currency forward contracts for speculative or trading purposes. As such, we may not purchase adequate contracts to insulate ourselves from the foreign exchange currency risks. In addition, any such contracts may not perform effectively as a hedging mechanism. We may, in the future, make changes to our hedging policies, and have done so in the past. The principal foreign currencies that are hedged are the Indian rupee and the Philippine peso.
The impact related to these foreign currency forward contracts on earnings and/or cash flows is immaterial as the impact of the maturing cash flow hedges in respective periods are intended to primarily offset the foreign currency impact on the related expenses. Further, some of our client contracts include protection against foreign currency exchange rate fluctuations which minimizes the impact of volatility in the exchange rates on our operating results.
As of December 31, 2023 and 2022, we had outstanding cash flow hedges with notional amounts of $722.8 million and $841.6 million, respectively, with the maximum outstanding term of approximately 42 months and 45 months, respectively. The mark-to-market gain/(loss), net upon fair valuation of outstanding cash flow hedges as of December 31, 2023 and 2022 was $5.4 million and $(14.2) million, respectively, and is included in “Accumulated other comprehensive income/(loss)” on our consolidated balance sheets. For fiscal 2023 and 2022, we recognized $5.7 million and $4.3 million, respectively, as foreign exchange loss from maturing cash flow hedges, which was largely offset by the foreign exchange translation gain on the related expenses.
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We also enter into foreign currency forward contracts from time to time to hedge our intercompany balances and other monetary assets and liabilities denominated in currencies other than functional currencies, against the risk of fluctuations in foreign currency exchange rates associated with remeasurement of such assets and liabilities to functional currency. These foreign currency forward contracts do not qualify as fair value hedges under ASC Topic 815, Derivatives and Hedging. Changes in the fair value of these financial instruments are recognized in our consolidated statements of income and are included in “Foreign exchange gain, net.” These financial instruments mitigate balance sheet risk due to foreign currency exchange rate movements as gains and losses on the settlement of these financial instruments are intended to offset the revaluation gains and losses on the foreign currency denominated monetary assets and monetary liabilities being hedged. Foreign currency forward contracts with notional amounts of the U. S. dollar (USD) 170.5 million, the U.K. pound sterling (GBP) 14.5 million, the Euro (EUR) 5.2 million, South African rand (ZAR) 150.2 million and the Australian dollar (AUD) 3.5 million were outstanding as of December 31, 2023 compared to USD 164.0 million, GBP 8.4 million, EUR 2.0 million and AUD 2.0 million outstanding as of December 31, 2022. The fair values of these financial instruments as of December 31, 2023 and 2022 were insignificant and are included in the “Foreign exchange gain, net” in our consolidated statements of income. As of December 31, 2023 and 2022, the outstanding derivative instruments had maturities of a maximum of 31 days, each.
Interest Rate Risk. We are also exposed to interest rate risk arising from our indebtedness. In order to mitigate our exposure to fluctuations in interest rates and minimize the earnings and cash flow volatility associated with floating rate indebtedness, we enter into interest rate swaps to hedge cash flow risks on our revolving credit facility having floating interest rate obligations. The swap transaction involves the exchange of fixed for floating interest payments. However, in circumstances where we believe additional fixed-rate debt would be beneficial, we may choose to terminate a previously executed swap, or swap certain floating interest payments to fixed.
As described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we held our $300.0 million revolving credit facility and a letter of credit sub-facility pursuant to our Credit Agreement dated November 21, 2017. The revolving credit facility originally had a maturity date of November 21, 2022 and was voluntarily pre-payable from time to time without premium or penalty. On April 18, 2022, we entered into the 2022 Credit Agreement, that provides for a $400.0 million revolving credit facility and a letter of credit sub-facility. We have an option to increase the commitments under the 2022 Credit Agreement by up to an additional $200.0 million. The revolving credit facility has a maturity date of April 18, 2027 and is voluntarily pre-payable from time to time without premium or penalty.
The 2022 Credit Agreement bears interest at a rate equal to specified prime rate (alternate base rate) or adjusted SOFR plus, in each case, an applicable margin. The applicable margin is tied to our total net leverage ratio and ranges from 0% to 0.75% per annum on loans pegged to the specified prime rate, and 0.88% to 1.75% per annum on loans pegged to the adjusted SOFR. The revolving credit commitments under 2022 Credit Agreement are subject to a commitment fee which is also tied to our total net leverage ratio, and ranges from 0.13% to 0.28% per annum on the average daily amount by which the aggregate revolving commitments exceed the sum of outstanding revolving loans and letter of credit obligations. A 50 basis point increase or decrease in interest rates would have impacted our interest expense for fiscal 2023 by approximately $1.1 million.
We manage a portion of our interest rate risk related to our revolving credit facility having variable interest rate obligations by entering into interest rate swaps under which we receive floating rate payments based on SOFR and make payments based on a fixed rate. As of December 31, 2023 and 2022, we had outstanding interest rate swaps having a notional amount of $75.0 million, each.
We had cash, cash equivalents and short-term investments totaling $290.8 million and $297.7 million as of December 31, 2023 and 2022, respectively. These amounts were invested principally in a short-term investment portfolio primarily comprised of highly-rated debt mutual funds, money market funds and time deposits. We do not make such investments for trading or speculative purposes. The cash and cash equivalents are held for potential acquisitions of complementary businesses or assets, capital expenditures, working capital requirements and general corporate purposes. We believe that we have no material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. The interest income from these funds is subject to fluctuations due to changes in interest rates. Declines in interest rates would reduce our future investment income. A 50 basis point increase or decrease in short term rates would have impacted our interest and dividend income for fiscal 2023 by approximately $0.9 million.
Credit Risk. As of December 31, 2023 and 2022, we have accounts receivable, net $308.1 million and $259.2 million, respectively. We believe that our credit policies reflect normal industry terms and business risk. We do not anticipate non-performance by the counterparties and, accordingly, do not require collateral. Credit losses and write-offs of accounts receivable balances historically have not been material. No single client owed more than 10% of our accounts receivable, net as on December 31, 2023 and 2022.



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ITEM 8.    Financial Statements and Supplementary Data

The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. A list of the financial statements filed herewith can be found at Part IV, Item 15, “Exhibits and Financial Statement Schedules.”

ITEM 9.    Changes in and Disagreement with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A.    Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), to allow timely decisions regarding required disclosure. In connection with the preparation of this Annual Report on Form 10-K, our management carried out an evaluation, under the supervision and with the participation of the CEO and CFO, of the effectiveness and operation of our disclosure controls and procedures as of December 31, 2023. Based upon that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures, as of December 31, 2023, were effective.
Management’s Responsibility for Financial Statements
Responsibility for the objectivity, integrity and presentation of the accompanying financial statements and other financial information presented in this report rests with our management. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). The financial statements include amounts that are based on estimates and judgments which management believes are reasonable under the circumstances.
Deloitte & Touche LLP, an independent registered public accounting firm, has been retained to audit our consolidated financial statements and the effectiveness of our internal control over financial reporting. Its accompanying reports are based on audits conducted in accordance with the standards of the Public Company Accounting Oversight Board.
The Audit Committee of the board of directors is composed solely of independent directors and is responsible for recommending to the board of directors the independent public accounting firm to be retained for the coming year. The Audit Committee meets regularly and privately with the independent public accountants, with our internal auditors and with management to review accounting, auditing, internal control and financial reporting matters.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act. Those rules define internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the U.S. The Company’s internal control over financial reporting includes those policies and procedures that:
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP;
provide reasonable assurance that receipts and expenditures are being made only in accordance with the authorization of our management and our board of directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Our management, under the supervision and with the participation of the CEO and CFO, assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria described in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of the board of directors. Based on this assessment and those criteria, management concluded that we maintained effective internal control over financial reporting as of December 31, 2023. See Deloitte & Touche LLP’s accompanying attestation report on their audit of our internal controls over financial reporting.
Changes in Internal Control over Financial Reporting
During the three months ended December 31, 2023, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.    Other Information
Rule 10b5-1 Trading Plans

During the three months ended December 31, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

ITEM 9C.    Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.

PART III.
 
ITEM 10.    Directors, Executive Officers and Corporate Governance
Code of Ethics.
We have adopted a code of conduct and ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. Our code of conduct and ethics can be found posted in the investor relations section on our website at http://ir.exlservice.com/corporate-governance. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of our code of conduct and ethics by posting such information on our website at the address and the location specified above.
The additional information required by this Item 10 will be set forth in the definitive proxy statement for our 2024 Annual Meeting of Stockholders (the “Proxy Statement”), including under the headings “Our board of directors,” “Our executive officers” and “Corporate governance — Committees — Audit Committee,” “— Committees — Nominating and Governance Committee” and, to the extent included, “— Delinquent Section 16(a) Reports,” and is incorporated herein by reference. We intend to file the Proxy Statement with the SEC within 120 days after the fiscal year ended December 31, 2023.

ITEM 11.    Executive Compensation
We incorporate by reference the information responsive to this Item appearing in our Proxy Statement, including under the headings “Executive Compensation — Compensation Discussion and Analysis,” “— Compensation and Talent Management Committee Report,” “— Summary Compensation Table for Fiscal Year 2023,” “— Grants of Plan-Based Awards Table for Fiscal Year 2023,” “Outstanding Equity Awards at Fiscal 2023 Year-End,” “Option Exercises and Stock Vested During Fiscal Year 2023,” “— Pension Benefits for Fiscal Year 2023,” “— Potential Payments upon Termination or Change in Control at Fiscal 2023 Year-End,” “— Director Compensation for Fiscal Year 2023,” “— Risk and Compensation Policies” and “Corporate Governance — Compensation and Talent Management Committee Interlocks and Insider Participation.”


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ITEM 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
We incorporate by reference the information responsive to this Item appearing in our Proxy Statement, including under the heading “Principal Stockholders.”

ITEM 13.    Certain Relationships and Related Transactions, and Director Independence
We incorporate by reference the information responsive to this Item appearing in our Proxy Statement, including under the headings “Certain Relationships and Related Person Transactions” and “Corporate Governance — Director Independence.”

ITEM 14.    Principal Accountant Fees and Services
We incorporate by reference the information responsive to this Item appearing in our Proxy Statement, including under the heading “Ratification of the Appointment of Independent Registered Public Accounting Firm — Audit and Non-Audit Fees.”

PART IV.
 
ITEM 15.    Exhibits and Financial Statement Schedules
(a)1.    Consolidated Financial Statements.
The consolidated financial statements required to be filed in the Annual Report on Form 10-K are listed on page F-1 hereof. The required financial statements appear on pages F-5 through F-58 hereof.
2.Financial Statement Schedules.
Financial statement schedules have been omitted since they are either not required, not material or the information is otherwise included in our consolidated financial statements or the notes to our consolidated financial statements.
3.Exhibits.
The Exhibits filed as part of this Annual Report on Form 10-K are listed on the Exhibit Index immediately preceding such Exhibits, which Exhibit Index is incorporated in this Annual Report on Form 10-K by reference.
(b)Exhibits. See Item 15(a)(3) above.
(c)Financial Statement Schedules. See Item 15(a)(2) above.

ITEM 16.    Form 10-K Summary

Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned hereunto duly authorized.
Date: February 29, 2024EXLSERVICE HOLDINGS, INC.
By: /S/ MAURIZIO NICOLELLI
 MAURIZIO NICOLELLI
Chief Financial Officer
(Duly Authorized Signatory, Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature  Title Date
/S/    ROHIT KAPOOR 
  Chief Executive Officer, Vice-Chairman and Director (Principal Executive Officer) February 29, 2024
Rohit Kapoor
/S/    MAURIZIO NICOLELLI
  Chief Financial Officer (Principal Financial and Accounting Officer) February 29, 2024
Maurizio Nicolelli
/S/    VIKRAM S. PANDIT
Chairman of the BoardFebruary 29, 2024
Vikram S. Pandit
/S/    ANDREAS FIBIG
DirectorFebruary 29, 2024
Andreas Fibig
/S/    SOM MITTAL
  Director February 29, 2024
Som Mittal
/S/    KRISTY PIPES
DirectorFebruary 29, 2024
Kristy Pipes
/S/    NITIN SAHNEY
  Director February 29, 2024
Nitin Sahney
/S/    JAYNIE M. STUDENMUND
  Director February 29, 2024
Jaynie M. Studenmund
/S/    SARAH K. WILLIAMSON
  Director February 29, 2024
Sarah K. Williamson
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INDEX TO EXHIBITS
The following exhibits are being filed as part of this report or incorporated by reference as indicated therein:
3.1
3.2
4.1
4.2
10.1+
10.2+
10.3+
10.4+
10.5+
10.6+
10.7+
10.8+
10.9+
10.10+
10.11+
10.12+
10.13+
10.14+
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10.15+
10.16+
10.17+
10.18+
10.19+
10.20+
10.21+
10.22+
10.23+
10.24+
10.25
21.1
23.1
31.1
31.2
32.1
32.2
97
101.INSInline XBRL Instance Document*
101.SCHInline XBRL Taxonomy Extension Schema*
101.CALInline XBRL Taxonomy Extension Calculation Linkbase*
101.DEFInline XBRL Taxonomy Extension Definition Linkbase*
101.LABInline XBRL Taxonomy Extension Label Linkbase*
101.PREInline XBRL Extension Presentation Linkbase*
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104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*This exhibit will not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.
+Indicates management contract or compensatory plan required to be filed as an Exhibit.
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EXLSERVICE HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Page
F-2
F-5
F-7
F-8
F-9
F-10
F-11

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of ExlService Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of ExlService Holdings, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenues - Refer to Notes 2 and 4 to the financial statements
Critical Audit Matter Description
Revenue is recognized when services are provided to the Company’s customers, in an amount that reflects the consideration which the Company expects to be entitled to in exchange for the services provided. Revenue is measured based on consideration specified in a contract with a customer and excludes discounts and amounts collected on behalf of third parties. Revenues under time-and-material, transaction and outcome-based contracts are recognized as the services are performed.
At the inception of a new contract with a customer, the Company evaluates the revenue recognition principles, including judgments in identifying performance obligations in a contract and determining the timing of revenue recognition. The Company’s contracts may be modified to add, remove or change existing performance obligations, which require judgment to evaluate and determine whether they are to be accounted for on a prospective basis either as a separate contract, or as a termination of existing contract and creation of a new contract.

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Auditing revenue recognition requires significant audit effort resulting from the number of customers and related contracts that require evaluation and auditor judgment as to whether revenue was recorded in accordance with the terms of the contracts and revenue recognition principles under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”).
______________________________________________________________________________________________________
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to whether revenue was recorded in accordance with the terms of the contracts with the Company’s customers and met the criteria for revenue recognition in accordance with ASC Topic 606 included the following, among others:
We tested the effectiveness of internal controls over revenue, specifically management’s controls over the identification of performance obligations within the customer contracts and determining timing of revenue recognition for new customer contracts and contracts with significant scope modifications.
We selected a sample of recorded revenue transactions from new customer contracts and evaluated the appropriateness of the performance obligations identified within the customer contracts and assessed if the revenue recognition principles applied are in accordance with ASC Topic 606.
We selected a sample of recorded revenue transactions related to the Company’s contracts that were modified to add, remove or change existing performance obligations and (1) assessed whether the services added to an existing contract are distinct and whether the pricing is at a standalone selling price; and (2) services added that are distinct and at standalone selling price are accounted for on a prospective basis either as a separate contract, or as a termination of existing contract and creation of a new contract.

/s/ Deloitte & Touche LLP

New York, New York
February 29, 2024
We have served as the Company's auditor since 2018.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of ExlService Holdings, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of ExlService Holdings, Inc. (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 29, 2024, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP
New York, New York
February 29, 2024
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EXLSERVICE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amount and share count)
As of
NotesDecember 31, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents7$136,953 $118,669 
Short-term investments8153,881 179,027 
Restricted cash74,062 4,897 
Accounts receivable, net 4308,108 259,222 
Other current assets1176,669 50,979 
Total current assets679,673 612,794 
Property and equipment, net 9100,373 82,828 
Operating lease right-of-use assets2164,856 55,347 
Restricted cash74,386 2,055 
Deferred tax assets, net2282,927 55,791 
Goodwill10405,639 405,637 
Other intangible assets, net 1050,164 64,819 
Long-term investments84,430 34,779 
Other assets1249,524 32,069 
Total assets$1,441,972 $1,346,119 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$5,055 $7,789 
Current portion of long-term borrowings1865,000 30,000 
Deferred revenue12,318 18,782 
Accrued employee costs117,137 108,100 
Accrued expenses and other current liabilities13112,900 95,352 
Current portion of operating lease liabilities2112,780 14,978 
Income taxes payable, net221,213 2,945 
Total current liabilities326,403 277,946 
Long-term borrowings, less current portion18135,000 220,000 
Operating lease liabilities, less current portion2158,175 48,155 
Deferred tax liabilities, net221,495 547 
Other non-current liabilities1431,462 41,292 
Total liabilities552,535 587,940 
Commitments and contingencies25
ExlService Holdings, Inc. Stockholders’ equity:
Preferred stock, $0.001 par value; 15,000,000 shares authorized, none issued
  
Common stock, $0.001 par value; 400,000,000 shares authorized, 203,410,038 shares issued and 165,277,880 shares outstanding as of December 31, 2023 and 199,939,880 shares issued and 166,172,220 shares outstanding as of December 31, 2022 (1)
19203 200 
Additional paid-in capital (1)
508,028 444,948 
Retained earnings1,083,663 899,105 
Accumulated other comprehensive loss15(127,040)(144,143)
Total including shares held in treasury1,464,854 1,200,110 
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Less: 38,132,158 shares as of December 31, 2023 and 33,767,660 shares as of December 31, 2022, held in treasury, at cost (1)
19(575,417)(441,931)
Total stockholders’ equity889,437 758,179 
Total liabilities and stockholders’ equity $1,441,972 $1,346,119 

(1) Prior period information has been adjusted to reflect the 5-for-1 forward stock split of the Company’s common stock effected in August 2023. Refer to Note 19 – Capital Structure to the consolidated financial statements for further details.



See accompanying notes to consolidated financial statements.
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EXLSERVICE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amount and share count)

Year ended December 31,
Notes