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Press Releases |
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New York, NY – May 10, 2007
– ExlService Holdings, Inc. (NASDAQ: EXLS),
a recognized provider of offshore solutions, including
business process outsourcing, research and analytics
and advisory services, today announced its financial
results for the quarter ended March 31, 2007.
The Company’s highlights for the first quarter
of 2007 include:
| • |
Revenues for the quarter increased
85% to $39.9 million from $21.6 million in
the first quarter of 2006 comprised of 65%
organic revenue growth and 20% acquisition-related
revenue growth. |
| • |
Gross margin for the quarter was
38.6% compared to 35.3% in the first quarter
of 2006. |
| • |
Operating margin for the quarter
was 12.4% compared to 6.5% in the first quarter
of 2006; adjusted operating margin for the
quarter, excluding the impact of stock-based
compensation expense and amortization of intangibles,
was 15.9% compared to 7.5% in the first quarter
of 2006. |
| • |
Net income to common stockholders
for the quarter was $5.4 million compared
to $1.9 million in the first quarter of 2006;
net income to common stockholders for the
quarter includes stock-based compensation
expense and amortization of intangibles of
$1.4 million and $0.2 million in the first
quarter of 2007 and 2006, respectively. |
Reconciliations of adjusted financial measures to
GAAP are included at the end of this release.
Vikram Talwar, CEO and Vice-Chairman of EXL, commented:
“EXL delivered a strong quarter both financially
and operationally. I am enthusiastic about the continued
rapid growth in our BPO business during the quarter.
The research and analytics business experienced
a slow quarter due to a reduction in project-based
work, however we continue to succeed in cross-selling
our BPO, research and analytics and advisory services
to EXL’s clients. Our world-class research
and analytics and advisory services continue to
be strong differentiators for us in the marketplace.”
Matt Appel, CFO of EXL, commented: “EXL’s
first quarter results reflect revenue growth of
85% year over year and strong operating margins
that significantly exceeded our expectations for
the quarter. Our first quarter results were driven
by continued rapid growth and operating leverage
in our BPO and advisory business lines. Despite
the slowdown for the quarter in the research and
analytics business line, EXL delivered operating
profit margins that were almost 400 basis points
above our stated guidance.”
Rohit Kapoor, President of EXL, commented: “The
strategic investments we continue to make in our
business are expected to enable sustainable and
profitable long-term growth. Based on continuing
strong demand we are accelerating our infrastructure
planning and investment, hiring aggressively at
the middle and senior management levels in both
operations and enabling functions, and continuing
to invest in the sales and marketing and relationship
management functions. We expect these investments
to deliver attractive, sustainable returns.”
Financial Highlights – First Quarter
2007
| • |
Revenues for the quarter ended March 31,
2007 increased 85% to $39.9 million from $21.6
million in the quarter ended March 31, 2006.
BPO revenue for the quarter of $32.7 million
reflects organic growth of 67% year over year.
Research and analytics revenue for the quarter
of $4.2 million is not comparable with the
first quarter of 2006 since the size of this
business line was not significant. Advisory
revenue of $2.9 million for the quarter reflects
organic growth of 100% year over year. |
| • |
Gross margin for the quarter ended March
31, 2007 was 38.6% compared to 35.3% in the
quarter ended March 31, 2006. Gross margins
exceeded expectation primarily as a result
of continued revenue growth and strong infrastructure
utilization in our BPO business. BPO gross
margins for the quarter were 42.4%. Research
and analytics gross margins for the quarter
of 13.4% reflected the impact of lower revenues.
Advisory gross margins for the quarter were
32.3% reflecting strong growth and the impact
of costs attributable to staff and management
additions. |
| • |
Operating margin for the quarter ended
March 31, 2007 was 12.4%, compared to 6.5%
in the quarter ended March 31, 2006. Adjusted
operating margin, excluding the impact of
stock-based compensation expense and amortization
of intangibles, for the quarter ended March
31, 2007 was 15.9% compared to 7.5% in the
quarter ended March 31, 2006. Operating margin
was negatively impacted by the reduction in
gross margins in the research and analytics
business line. |
| • |
Net income to common stockholders for the
quarter ended March 31, 2007 was $5.4 million
compared to $1.9 million in the quarter ended
March 31, 2006; net income to common stockholders
for the quarter includes stock-based compensation
expense and amortization of intangibles of
$1.4 million and $0.2 million in the first
quarter of 2007 and 2006, respectively. |
| • |
Revenue generated from our largest client
was 28% of total revenues for the quarter
ended March 31, 2007 compared to 46% for the
quarter ended March 31, 2006. Revenue generated
from our three largest clients was 59% of
total revenues for the quarter ended March
31, 2007 compared to 66% for the quarter ended
March 31, 2006. |
Note: Results may not be comparable due to the inclusion
of the financial results of Inductis, Inc. in our
consolidated financial statements from July 1, 2006.
Business Highlights – First Quarter
2007
| • |
Our BPO business line continued to experience
rapid revenue growth and grew 11% compared
to the preceding quarter while maintaining
operational excellence across all major client
relationships. |
| • |
Our research and analytics business line
experienced a significant reduction in project-based
revenue from a major customer during the quarter.
However, this business line continued to win
new business involving services that are long-term
in nature. For example, we signed a three-year
agreement to provide modeling and claims analytics
services for a leading U.S. insurance company.
The research and analytics business line earned
revenue from ten new clients in the first
quarter in addition to cross-selling to three
clients that were existing BPO clients. |
| • |
Our advisory business line achieved record
quarterly revenues and successfully mitigated
the seasonality the business has historically
experienced by diversifying its service offerings.
During the quarter, our advisory business
line increased the scope of its finance and
accounting services for a leading insurance
company and expanded its compliance assistance
for a global mail management company. |
As of March 31, 2007, EXL had approximately 9,000
total employees, an increase of 45% from approximately
6,200 total employees at March 31, 2006. The Company’s
headcount during the first quarter of 2007 increased
by approximately 800 employees from the end of the
preceding quarter. The attrition rate for billable
employees during the first quarter of 2007 was 43.7%
as compared to 41.9% in the fourth quarter of 2006.
We believe that the nominal increase in attrition
is the result of an increasingly competitive environment
for our India-based employees and does not pose
a risk to service delivery quality for our clients.
2007 Outlook
Based on current visibility, the Company
is providing the following guidance:
| • |
Calendar year 2007 revenue and adjusted
operating margin guidance remain unchanged. |
| • |
Second quarter of 2007 expectation that
operating margin will be negatively impacted
by currency movement and softness in the research
and analytics business line. |
Conference Call
EXL will host a conference call on Thursday,
May 10, at 8:00 a.m. (ET) to discuss the Company’s
quarterly results and discuss the Company’s
operating performance and financial outlook. The
conference call will be available live via the
Internet by accessing the EXL web site at www.exlservice.com,
where the accompanying presentation can also be
accessed. Please go to the web site at least fifteen
minutes prior to the call to register, download
and install any necessary audio software.
To listen to the conference call via phone, please
dial +1-888-873-4896 or 1-617-213-8850 and reference
“EXLS”. For those who cannot access
the live broadcast, a replay will be available
by dialing +1-888-286-8010 or +1-617-801-6888
and entering “38402507” from two hours
after the end of the call until 11:59 p.m. (EST)
on May 24, 2007. The replay will also be available
at the EXL web site.
ExlService Holdings, Inc. (NASDAQ: EXLS), is a
recognized provider of offshore solutions including
business process outsourcing (BPO), research and
analytics and advisory services. It primarily
serves the needs of Global 1000 companies in the
banking, financial services and insurance sector.
EXL is headquartered at 350 Park Avenue, New York,
NY. Find additional information about EXL at www.exlservice.com.
This press release contains forward-looking
statements. You should not place undue reliance
on those statements because they are subject to
numerous uncertainties and factors relating to
the Company’s operations and business environment,
all of which are difficult to predict and many
of which are beyond the Company’s control.
Forward-looking statements include information
concerning the Company’s possible or assumed
future results of operations, including descriptions
of its business strategy. 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 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 the Company believes that these forward-looking
statements are based on reasonable assumptions,
you should be aware that many factors could affect
the Company’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 are discussed in more
details in the Company’s filings with the
Securities and Exchange Commission, including
the Company’s Annual Report on Form 10-K
for the year ended December 31, 2006. These risks
could cause actual results to differ materially
from those implied by forward-looking statements
in this release.
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 the Company. The Company 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)
(1) The number of shares and earnings per
share data as at March 31, 2006 has been adjusted
to reflect the stock split and conversion effected
by the Company in connection with its October
2006 initial public offering.
EXLSERVICE HOLDINGS, INC. CONSOLIDATED
BALANCE SHEETS
EXLSERVICE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Reconciliation of Adjusted Financial Measures
to GAAP Measures
To supplement the consolidated financial statements
presented in accordance with GAAP, this press
release includes the following measures defined
by the Securities and Exchange Commission as non-GAAP
financial measures: non-GAAP operating margin
and non-GAAP diluted earnings per share. These
non-GAAP measures are not based on any comprehensive
set of accounting rules or principles and should
not be considered a substitute for, or superior
to, financial measures calculated in accordance
with GAAP, and may be different from non-GAAP
measures used by other companies. In addition,
these non-GAAP measures, the financial statements
prepared in accordance with GAAP and reconciliations
of EXL’s GAAP financial statements to such
non-GAAP measures should be carefully evaluated.
For its internal management reporting and
budgeting purposes, EXL’s management uses
financial statements that do not include stock-based
compensation expense related to employee stock
options and amortization of acquisition-related
intangibles for financial and operational decision
making, to evaluate period-to-period comparisons
or for making comparisons of EXL’s operating
results to that of its competitors. Moreover,
because of varying available valuation methodologies,
subjective assumptions and the variety of award
types that companies can use when adopting FAS
123(R), EXL’s management believes that providing
a non-GAAP financial measure that excludes stock-based
compensation and amortization of acquisition-related
intangibles allows investors to make additional
comparisons between EXL’s operating results
to those of other companies. The Company also
believes that it is unreasonably difficult to
provide its financial outlook in accordance with
GAAP for a number of reasons including, without
limitation, the Company’s inability to predict
its future stock-based compensation expense under
FAS 123(R) and the amortization of intangibles
associated with further acquisitions. Accordingly,
EXL believes that the presentation of non-GAAP
operating margin and non-GAAP diluted earnings
per share, when read in conjunction with the Company’s
reported results, can provide useful supplemental
information to investors and management regarding
financial and business trends relating to its
financial condition and results of operations.
A limitation of using non-GAAP operating margin
and non-GAAP diluted earnings per share versus
operating margin and diluted earnings per share
calculated in accordance with GAAP is that non-GAAP
operating margin and non-GAAP diluted earnings
per share exclude costs, namely, stock-based compensation,
that are recurring. Stock-based compensation has
been and will continue to be a significant recurring
expense in EXL’s business for the foreseeable
future. Management compensates for this limitation
by providing specific information regarding the
GAAP amounts excluded from non-GAAP operating
margin and non-GAAP diluted earnings per share
and evaluating such non-GAAP financial measures
with financial measures calculated in accordance
with GAAP.
The following table shows the reconciliation of
these adjusted financial measures from GAAP for
the three month periods ended March 31, 2007 and
March 31, 2006:
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