ExlService Holdings, Inc. (NASDAQ: EXLS), a leading data analytics
and digital operations and solutions company, today announced its
financial results for the quarter ended March 31, 2023.
Rohit Kapoor, Vice Chairman and Chief Executive
Officer, said, “We continued our strong momentum into the first
quarter, with revenue growth of 21.7% and adjusted diluted EPS
growth of 22.5%. Our data-led strategy has expanded our total
addressable market and generated a sustainable competitive
advantage for EXL. The consistent execution of this strategy
continues to fuel growth across our data analytics and digital
operations and solutions businesses.”
Maurizio Nicolelli, Chief Financial Officer,
said, “While we remain cautious on the macro-economic environment,
we are increasing our revenue guidance for the full year 2023 based
on our strong momentum in the first quarter and current visibility
for the remainder of the year. We now expect revenue to be in the
range of $1.595 billion to $1.620 billion, up from our prior
guidance of $1.560 billion to $1.600 billion. This represents 13%
to 15% year-over-year growth on both a reported and constant
currency basis. We are also increasing our adjusted diluted
earnings per share guidance for 2023 to $6.75 to $6.90, from $6.60
to $6.80, representing growth of 12% to 15% over the prior
year.”
______________________________________________________________
- Reconciliations of adjusted
(non-GAAP) financial measures to the most directly comparable GAAP
measures, where applicable, are included at the end of this release
under “Reconciliation of Adjusted Financial Measures to GAAP
Measures.” These non-GAAP measures, including adjusted diluted EPS
and constant currency measures, are not measures of financial
performance prepared in accordance with GAAP.
Financial Highlights: First Quarter
2023
- Revenue for the
quarter ended March 31, 2023 increased to $400.6 million compared
to $329.2 million for the first quarter of 2022, an increase of
21.7% on a reported basis and 23.0% on a constant currency basis.
Revenue increased by 6.9% sequentially on a reported basis and 6.6%
on a constant currency basis from the fourth quarter of 2022.
|
|
Revenue |
|
Gross Margin |
|
|
Three months ended |
|
Three months ended |
Reportable Segments |
|
March 31, 2023 |
|
March 31, 2022 |
|
March 31, 2023 |
|
March 31, 2022 |
|
|
(dollars in millions) |
|
|
|
|
Insurance |
|
$ |
125.9 |
|
$ |
103.3 |
|
34.6 |
% |
|
37.0 |
% |
Healthcare |
|
|
26.7 |
|
|
26.2 |
|
29.6 |
% |
|
32.5 |
% |
Emerging Business |
|
|
66.2 |
|
|
50.7 |
|
45.6 |
% |
|
42.4 |
% |
Analytics |
|
|
181.8 |
|
|
149.0 |
|
37.1 |
% |
|
35.9 |
% |
Total Revenue,
net |
|
$ |
400.6 |
|
$ |
329.2 |
|
37.2 |
% |
|
37.0 |
% |
- Operating income margin for the
quarter ended March 31, 2023 was 14.8%, compared to 13.4% for the
first quarter of 2022 and 13.6% for the fourth quarter of 2022.
Adjusted operating income margin for the quarter ended March 31,
2023 was 19.4% compared to 18.2% for the first quarter of 2022 and
18.0% for the fourth quarter of 2022.
- Diluted earnings per share for the
quarter ended March 31, 2023 was $1.51 compared to $1.07 for the
first quarter of 2022 and $0.94 for the fourth quarter of 2022.
Adjusted diluted earnings per share for the quarter ended March 31,
2023 was $1.74 compared to $1.42 for the first quarter of 2022 and
$1.56 for the fourth quarter of 2022.
Business Highlights: First Quarter
2023
- Won 16 new clients in the first
quarter of 2023, with 12 in our digital operations and solutions
business and 4 in analytics.
- Included in Barron’s Top 100
Sustainable Companies list for the second consecutive year.
- Earned gold medal rating for
sustainability efforts by EcoVadis.
- Elevated Anand “Andy” Logani as
Chief Digital Officer, with responsibility for EXL’s digital
business leveraging data analytics, AI and cloud.
- Recognized as a Leader in Everest
Group’s 2023 Advanced Analytics and Insights Services PEAK Matrix®
Assessment.
- Recognized as a Leader in Payer
Digital Transformation Services in ISG Provider Lens™ Healthcare
Digital Services.
2023 Guidance
Based on current visibility, and a U.S. dollar
to Indian rupee exchange rate of 82.5, U.K. pound sterling to U.S.
dollar exchange rate of 1.23, U.S. dollar to the Philippine peso
exchange rate of 56.0 and all other currencies at current exchange
rates, we are providing the following guidance for the full year
2023:
- Revenue of $1.595 billion to $1.620
billion, representing an increase of 13% to 15% on both a reported
and constant currency basis from 2022.
- Adjusted diluted earnings per share
of $6.75 to $6.90, representing an increase of 12% to 15% from
2022.
Conference Call
ExlService Holdings, Inc. will host a conference
call on Thursday, April 27, 2023 at 10:00 A.M. ET to discuss the
Company’s quarterly operating and financial results. The conference
call will be available live via the internet by accessing the
investor relations section of EXL’s website at ir.exlservice.com,
where an accompanying investor-friendly spreadsheet of historical
operating and financial data can also be accessed. Please access
the website at least fifteen minutes prior to the call to register,
download and install any necessary audio software.
Please note that there is a new system to access
the live call-in order to ask questions. To join the live call,
please register here. A dial-in and unique PIN will be provided to
join the call. For those who cannot access the live broadcast, a
replay will be available on the EXL website ir.exlservice.com for a
period of twelve months.
About ExlService Holdings,
Inc.EXL (NASDAQ: EXLS) is a leading data analytics and
digital operations and solutions company that partners with clients
to improve business outcomes and unlock growth. By bringing
together deep domain expertise with robust data, powerful
analytics, cloud, artificial intelligence (“AI”) and machine
learning (“ML”), we create agile, scalable solutions and execute
complex operations for the world’s leading corporations in
industries including insurance, healthcare, banking and financial
services, media, and retail, among others. Focused on driving
faster decision-making and transforming operating models, EXL was
founded on the core values of innovation, collaboration,
excellence, integrity and respect. Headquartered in New York, our
team is over 47,000 strong, with more than 50 offices spanning six
continents. For more information, visit www.exlservice.com.
Cautionary Statement Regarding
Forward-Looking Statements This press release 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 those statements because they are subject
to numerous uncertainties and factors relating to EXL's operations
and business environment, all of which are difficult to predict and
many of which are beyond EXL’s control. Forward-looking statements
include information concerning EXL’s possible or assumed future
results of operations, including descriptions of its business
strategy. These statements may include words such as “may,” “will,”
“should,” “believe,” “expect,” “anticipate,” “intend,” “plan,”
“estimate” or similar expressions. These statements are based on
assumptions that we have made in light of management's experience
in the industry as well as its perceptions of historical trends,
current conditions, expected future developments and other factors
it believes are appropriate under the circumstances. You should
understand that these statements are not guarantees of performance
or results. They involve known and unknown risks, uncertainties and
assumptions. Although EXL believes that these forward-looking
statements are based on reasonable assumptions, you should be aware
that many factors could affect EXL’s actual financial results or
results of operations and could cause actual results to differ
materially from those in the forward-looking statements. These
factors, which include our ability to maintain and grow client
demand, our ability to hire and retain sufficiently trained
employees, and our ability to accurately estimate and/or manage
costs, rising interest rates, rising inflation and recessionary
economic trends, are discussed in more detail in EXL’s filings with
the Securities and Exchange Commission, including EXL’s Annual
Report on Form 10-K. You should keep in mind that any
forward-looking statement made herein, or elsewhere, speaks only as
of the date on which it is made. New risks and uncertainties come
up from time to time, and it is impossible to predict these events
or how they may affect EXL. EXL has no obligation to update any
forward-looking statements after the date hereof, except as
required by federal securities laws.
EXLSERVICE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)(In thousands, except per share amount
and share count)
|
Three months ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
Revenues, net |
$ |
400,643 |
|
|
$ |
329,208 |
|
Cost of revenues(1) |
|
251,469 |
|
|
|
207,516 |
|
Gross
profit(1) |
|
149,174 |
|
|
|
121,692 |
|
Operating expenses: |
|
|
|
General and administrative expenses |
|
46,746 |
|
|
|
39,945 |
|
Selling and marketing expenses |
|
29,493 |
|
|
|
24,170 |
|
Depreciation and amortization expense |
|
13,487 |
|
|
|
13,602 |
|
Total operating expenses |
|
89,726 |
|
|
|
77,717 |
|
Income from
operations |
|
59,448 |
|
|
|
43,975 |
|
Foreign exchange gain, net |
|
105 |
|
|
|
1,756 |
|
Interest expense |
|
(3,385 |
) |
|
|
(876 |
) |
Other income, net |
|
3,155 |
|
|
|
2,411 |
|
Income before income tax
expense and earnings from equity affiliates |
|
59,323 |
|
|
|
47,266 |
|
Income tax expense |
|
8,058 |
|
|
|
11,202 |
|
Income before earnings
from equity affiliates |
|
51,265 |
|
|
|
36,064 |
|
Gain from equity-method
investment |
|
66 |
|
|
|
114 |
|
Net income attributable
to ExlService Holdings, Inc. stockholders |
$ |
51,331 |
|
|
$ |
36,178 |
|
Earnings per share attributable
to ExlService Holdings, Inc. stockholders: |
|
|
|
Basic |
$ |
1.54 |
|
|
$ |
1.08 |
|
Diluted |
$ |
1.51 |
|
|
$ |
1.07 |
|
Weighted-average number of shares
used in computing earnings per share attributable to ExlService
Holdings Inc. stockholders: |
|
|
|
Basic |
|
33,439,564 |
|
|
|
33,442,038 |
|
Diluted |
|
33,931,480 |
|
|
|
33,894,868 |
|
(1) Exclusive of depreciation and amortization
expense.
EXLSERVICE HOLDINGS,
INC.CONSOLIDATED BALANCE SHEETS
(UNAUDITED)(In thousands, except per share amount
and share count)
|
|
As of |
|
|
March 31, 2023 |
|
December 31, 2022 |
|
|
|
|
|
Assets |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
87,298 |
|
|
$ |
118,669 |
|
Short-term investments |
|
|
116,479 |
|
|
|
179,027 |
|
Restricted cash |
|
|
5,598 |
|
|
|
4,897 |
|
Accounts receivable, net |
|
|
290,512 |
|
|
|
259,222 |
|
Other current assets |
|
|
66,340 |
|
|
|
50,979 |
|
Total current
assets |
|
|
566,227 |
|
|
|
612,794 |
|
Property and equipment, net |
|
|
86,652 |
|
|
|
82,828 |
|
Operating lease right-of-use
assets |
|
|
52,782 |
|
|
|
55,347 |
|
Restricted cash |
|
|
2,069 |
|
|
|
2,055 |
|
Deferred tax assets, net |
|
|
62,252 |
|
|
|
55,791 |
|
Intangible assets, net |
|
|
60,681 |
|
|
|
64,819 |
|
Goodwill |
|
|
405,824 |
|
|
|
405,637 |
|
Long-term investments |
|
|
35,559 |
|
|
|
34,779 |
|
Other assets |
|
|
36,525 |
|
|
|
32,069 |
|
Total
assets |
|
$ |
1,308,571 |
|
|
$ |
1,346,119 |
|
Liabilities and
stockholders’ equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts payable |
|
$ |
3,384 |
|
|
$ |
7,789 |
|
Current portion of long-term borrowings |
|
|
40,000 |
|
|
|
30,000 |
|
Deferred revenue |
|
|
21,525 |
|
|
|
18,782 |
|
Accrued employee costs |
|
|
49,955 |
|
|
|
108,100 |
|
Accrued expenses and other current liabilities |
|
|
133,400 |
|
|
|
95,352 |
|
Current portion of operating lease liabilities |
|
|
14,095 |
|
|
|
14,978 |
|
Income taxes payable, net |
|
|
18,545 |
|
|
|
2,945 |
|
Total current
liabilities |
|
|
280,904 |
|
|
|
277,946 |
|
Long-term borrowings, less
current portion |
|
|
160,000 |
|
|
|
220,000 |
|
Operating lease liabilities, less
current portion |
|
|
45,655 |
|
|
|
48,155 |
|
Deferred tax liabilities,
net |
|
|
493 |
|
|
|
547 |
|
Other non-current
liabilities |
|
|
26,297 |
|
|
|
41,292 |
|
Total
liabilities |
|
|
513,349 |
|
|
|
587,940 |
|
Commitments and
contingencies |
|
|
|
|
ExlService Holdings, Inc. Stockholders’
equity: |
|
|
|
|
Preferred stock, $0.001 par value; 15,000,000 shares authorized,
none issued |
|
|
— |
|
|
|
— |
|
Common stock, $0.001 par value; 100,000,000 shares authorized,
40,334,368 shares issued and 33,321,455 shares outstanding as of
March 31, 2023 and 39,987,976 shares issued and 33,234,444 shares
outstanding as of December 31, 2022 |
|
|
40 |
|
|
|
40 |
|
Additional paid-in capital |
|
|
460,527 |
|
|
|
445,108 |
|
Retained earnings |
|
|
950,436 |
|
|
|
899,105 |
|
Accumulated other comprehensive loss |
|
|
(131,487 |
) |
|
|
(144,143 |
) |
Total including shares
held in treasury |
|
|
1,279,516 |
|
|
|
1,200,110 |
|
Less: 7,012,913 shares as of
March 31, 2023 and 6,753,532 shares as of December 31, 2022,
held in treasury, at cost |
|
|
(484,294 |
) |
|
|
(441,931 |
) |
Total Stockholders’
equity |
|
|
795,222 |
|
|
|
758,179 |
|
Total liabilities and
stockholders’ equity |
|
$ |
1,308,571 |
|
|
$ |
1,346,119 |
|
EXLSERVICE HOLDINGS, INC.
Reconciliation of Adjusted Financial
Measures to GAAP Measures
In addition to its reported operating results in
accordance with U.S. generally accepted accounting principles
(GAAP), EXL has included in this release certain financial measures
that are considered non-GAAP financial measures, including the
following:
|
(i) |
Adjusted
operating income and adjusted operating income margin; |
|
(ii) |
Adjusted EBITDA and adjusted EBITDA margin; |
|
(iii) |
Adjusted net income and adjusted diluted earnings per share;
and |
|
(iv) |
Revenue growth on an organic constant currency basis. |
These non-GAAP financial measures are not based
on any comprehensive set of accounting rules or principles, should
not be considered a substitute for, or superior to, financial
measures calculated in accordance with GAAP, and may be different
from non-GAAP financial measures used by other companies.
Accordingly, the financial results calculated in accordance with
GAAP and reconciliations from those financial statements should be
carefully evaluated. EXL believes that providing these non-GAAP
financial measures may help investors better understand EXL’s
underlying financial performance. Management also believes that
these non-GAAP financial measures, when read in conjunction with
EXL’s reported results, can provide useful supplemental information
for investors analyzing period-to-period comparisons of the
Company’s results and comparisons of the Company’s results with the
results of other companies. Additionally, management considers some
of these non-GAAP financial measures to determine variable
compensation of its employees. The Company believes that it is
unreasonably difficult to provide its earnings per share financial
guidance in accordance with GAAP, or a qualitative reconciliation
thereof, for a number of reasons, including, without limitation,
the Company’s inability to predict its future stock-based
compensation expense under ASC Topic 718, the amortization of
intangibles associated with further acquisitions and the currency
fluctuations and associated tax impacts. As such, the Company
presents guidance with respect to adjusted diluted earnings per
share. The Company also incurs significant non-cash charges for
depreciation that may not be indicative of the Company’s ability to
generate cash flow.
EXL non-GAAP financial measures exclude, where
applicable, stock-based compensation expense, amortization of
acquisition-related intangible assets, provision for litigation
settlement, impairment charges on acquired long-lived and
intangible assets including goodwill, effects of termination of
leases, certain defined social security contributions, other
acquisition-related expenses or benefits and effect of any
non-recurring tax adjustments. Acquisition-related expenses or
benefits include, changes in the fair value of contingent
consideration, external deal costs, integration expenses, direct
and incremental travel costs and non-recurring benefits or losses.
Our adjusted net income and adjusted diluted EPS also excludes the
effects of income tax on the above pre-tax items, as applicable.
The effects of income tax of each item is calculated by applying
the statutory rate of the local tax regulations in the jurisdiction
in which the item was incurred.
A limitation of using non-GAAP financial
measures versus financial measures calculated in accordance with
GAAP is that non-GAAP financial measures do not reflect all of the
amounts associated with our operating results as determined in
accordance with GAAP and exclude costs that are recurring, namely
stock-based compensation and amortization of acquisition-related
intangible assets. EXL compensates for these limitations by
providing specific information regarding the GAAP amounts excluded
from non-GAAP financial measures to allow investors to evaluate
such non-GAAP financial measures.
The information provided on an organic constant
currency basis reflects a comparison of current period results
translated at the prior period currency rates and exclude the
impact from an acquisition for a twelve-month period from the date
of the acquisition. This information is provided because EXL
believes that it provides useful comparative incremental
information to investors regarding EXL’s true operating
performance. EXL’s primary exchange rate exposure is with the
Indian rupee, the U.K. pound sterling and the Philippine peso. The
average exchange rate of the U.S. dollar against the Indian rupee
increased from 75.25 during the quarter ended March 31, 2022 to
82.25 during the quarter ended March 31, 2023, representing a
depreciation of 9.3% against the U.S. dollar. The average exchange
rate of the U.S. dollar against the Philippine peso increased from
51.32 during the quarter ended March 31, 2022 to 54.78 during the
quarter ended March 31, 2023, representing a depreciation of 6.7%
against the U.S. dollar. The average exchange rate of the U.K.
pound sterling against the U.S. dollar decreased from 1.33 during
the quarter ended March 31, 2022 to 1.23 during the quarter ended
March 31, 2023, representing a depreciation of 7.9% against the
U.S. dollar.
The following table shows the reconciliation of
these non-GAAP financial measures for the three months ended March
31, 2023 and March 31, 2022, and the three months ended December
31, 2022:
Reconciliation of Adjusted Operating
Income and Adjusted EBITDA (Amounts in thousands)
|
|
Three months ended |
|
|
March 31, |
|
December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2022 |
|
Net Income
(GAAP) |
|
$ |
51,331 |
|
|
$ |
36,178 |
|
|
$ |
31,849 |
|
add: Income tax expense |
|
|
8,058 |
|
|
|
11,202 |
|
|
|
12,791 |
|
add/(subtract): Foreign exchange gain/(loss), interest expense,
effects of equity-method investment and other income/(loss),
net |
|
|
59 |
|
|
|
(3,405 |
) |
|
|
6,355 |
|
Income from operations
(GAAP) |
|
$ |
59,448 |
|
|
$ |
43,975 |
|
|
$ |
50,995 |
|
add: Stock-based compensation expense |
|
|
14,407 |
|
|
|
11,224 |
|
|
|
12,616 |
|
add: Amortization of acquisition-related intangibles |
|
|
4,149 |
|
|
|
4,486 |
|
|
|
4,234 |
|
add/(subtract): Other expenses/(benefits) (a) |
|
|
(89 |
) |
|
|
134 |
|
|
|
(560 |
) |
Adjusted operating
income (Non-GAAP) |
|
$ |
77,915 |
|
|
$ |
59,819 |
|
|
$ |
67,285 |
|
Adjusted operating income
margin as a % of Revenue (Non-GAAP) |
|
|
19.4 |
% |
|
|
18.2 |
% |
|
|
18.0 |
% |
add: Depreciation on long-lived assets |
|
|
8,589 |
|
|
|
9,116 |
|
|
|
9,687 |
|
Adjusted EBITDA
(Non-GAAP) |
|
$ |
86,504 |
|
|
$ |
68,935 |
|
|
$ |
76,972 |
|
Adjusted EBITDA margin as a %
of revenue (Non-GAAP) |
|
|
21.6 |
% |
|
|
20.9 |
% |
|
|
20.5 |
% |
(a) To exclude effects of lease termination of
$89 and $nil during the three months ended March 31, 2023 and 2022
respectively, and $560 during the three months ended December 31,
2022, and to exclude acquisition-related expenses of $134 for the
acquisition of Clairvoyant AI, Inc. (“Clairvoyant”) during the
three months ended March 31, 2022.
Reconciliation of Adjusted Net Income and
Adjusted Diluted Earnings Per Share (Amounts in thousands,
except per share data)
|
|
Three months ended |
|
|
March 31, |
|
December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2022 |
|
Net income
(GAAP) |
|
$ |
51,331 |
|
|
$ |
36,178 |
|
|
$ |
31,849 |
|
add: Stock-based compensation
expense |
|
|
14,407 |
|
|
|
11,224 |
|
|
|
12,616 |
|
add: Amortization of
acquisition-related intangibles |
|
|
4,149 |
|
|
|
4,486 |
|
|
|
4,234 |
|
add: Effects of changes in
fair value of contingent consideration |
|
|
— |
|
|
|
— |
|
|
|
7,500 |
|
add/(subtract): Other
expenses/(benefits) (a) |
|
|
(89 |
) |
|
|
134 |
|
|
|
(560 |
) |
subtract: Tax impact on
stock-based compensation expense (b) |
|
|
(9,830 |
) |
|
|
(2,806 |
) |
|
|
(930 |
) |
subtract: Tax impact on
amortization of acquisition-related intangibles |
|
|
(1,023 |
) |
|
|
(1,052 |
) |
|
|
(1,134 |
) |
add: Tax impact on other
benefits |
|
|
22 |
|
|
|
— |
|
|
|
141 |
|
subtract: Effect of
non-recurring tax benefits (c) |
|
|
— |
|
|
|
— |
|
|
|
(1,079 |
) |
Adjusted net income (Non-GAAP) |
|
$ |
58,967 |
|
|
$ |
48,164 |
|
|
$ |
52,637 |
|
Adjusted diluted earnings per share
(Non-GAAP) |
|
$ |
1.74 |
|
|
$ |
1.42 |
|
|
$ |
1.56 |
|
(a) To exclude effects of lease termination of
$89 and $nil during the three months ended March 31, 2023 and 2022
respectively, and $560 during the three months ended December 31,
2022, and to exclude acquisition-related expenses of $134 for the
acquisition of Clairvoyant during the three months ended March 31,
2022.
(b) Tax impact includes $12,520 and $3,610
during the three months ended March 31, 2023 and 2022 respectively,
and $2,349 during the three months ended December 31, 2022, related
to discrete benefits recognized in income tax expense in accordance
with ASU No. 2016-09, Compensation - Stock Compensation.
(c) To exclude other tax expense/(benefits)
related to certain deferred tax assets and liabilities.
Contacts:Investor RelationsJohn KristoffVice
President, Investor Relations+1 212 209 4613ir@exlservice.com
Media - USKeith LittleSenior Manager, Media
Relations+1 703 598 0980 media.relations@exlservice.com
Media - UK, Europe, and APACAnna PriceFirst
Light Group+44 202 617 7240exlteam@firstlightgroup.io
Media - IndiaShailendra SinghVice President
Corporate Communications+91
9810476075shailendra.singh@exlservice.com
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