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New York, NY - August 6, 2008 -
ExlService Holdings, Inc. (NASDAQ: EXLS), a leading
provider of Outsourcing and Transformation Services,
today announced its financial results for the
quarter ended June 30, 2008.
The Company's financial highlights for the second
quarter of 2008 include:
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Revenues for the quarter increased
25.1% to $53.8 million from $43.0 million
in the quarter ended June 30, 2007.. |
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Gross margin for the quarter was
37.0% compared to 33.1% in the quarter ended
June 30, 2007. |
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Operating margin for the quarter
was 9.8% compared to 6.1% in the quarter ended
June 30, 2007; adjusted operating margin for
the quarter, excluding the impact of stock-based
compensation expense and amortization of intangibles,
was 13.7% compared to 10.0% in the quarter
ended June 30, 2007. |
| • |
Income from operations for the quarter
was $5.3 million compared to $2.6 million
for the quarter ended June 30, 2007; adjusted
income from operations, excluding the impact
of stock-based compensation expense and amortization
of intangibles, for the quarter was $7.4 million
compared to $4.3 million for the quarter ended
June 30, 2007. |
| • |
Net income to common stockholders
for the quarter was $5.3 million compared
to $5.6 million in the quarter ended June
30, 2007. |
| • |
Diluted GAAP earnings per share
to common stockholders was $0.18 for the quarter
compared to $0.19 in the quarter ended June
30, 2007; adjusted earnings per share on a
diluted basis, excluding the impact of stock-based
compensation expense and amortization of intangibles,
was $0.23 for the quarter compared to $0.24
in the quarter ended June 30, 2007. |
Reconciliations of adjusted financial measures to
GAAP are included at the end of this release. Effective
April 1, 2008 the Company has revised its three
previous reporting segments into two segments, Outsourcing
Services and Transformation Services, to match the
way our business now operates and markets its products.
Rohit Kapoor, President and CEO of EXL, commented: “As the economic environment in the US, UK and Europe continues to become more challenging, our clients are actively seeking strategic cost management solutions. We are pleased that EXL’s vision of delivering both Outsourcing and Transformation services is playing well to this market trend. Our performance this quarter was led by rapid growth in our Transformation business across a well diversified base of client relationships. From an operational perspective, this quarter we are proud to have achieved record low attrition levels and at the same time we have improved our margins. With the resolution of Aviva’s strategic review process and the extension of our contract with two of our largest customers, EXL is now fully focused on adding new client relationships and growing our business. We have an extremely strong balance sheet and are well positioned to execute strategic acquisitions and continue to make growth-oriented investments.”
Matt Appel, CFO of EXL, commented: “EXL’s second
quarter financial results reflect strong profitability
performance. Our adjusted operating margins for
the second quarter of 2008 expanded to 13.7% from
10.0% a year earlier despite the annual wage increases
granted during the quarter as well as the headwind
related to the opening of our Philippines facility
in April 2008. We are particularly pleased with
the growth in our adjusted operating margin which
reflects the operating performance of our business.
As a result of one time charges related to the transfer
of the Aviva Pune BOT, the volatile foreign exchange
environment and lower volumes expected at select
clients in the second half of 2008 we are adjusting
our guidance for 2008. We continue to believe that
the fundamentals of our business model, including
our long term growth rate and adjusted operating
margins, are intact.”
Financial Highlights – Second Quarter 2008
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Revenues for the quarter ended June 30,
2008 increased 25.1% to $53.8 million from
$43.0 million in the quarter ended June 30,
2007. Second quarter revenues grew by 5.6%
as compared to the quarter ended March 31,
2008 due to sequential revenue growth of 14.3%
in Transformation Services and 3.6% in Outsourcing
Services. |
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Gross margin for the quarter ended June
30, 2008 was 37.0% compared to 33.1% for the
quarter ended June 30, 2007 and 36.5% for
the quarter ended March 31, 2008. Second quarter
2008 gross margin increased as compared to
the previous quarter due to the positive impact
of exchange rates during the quarter offset
by company-wide annual wage increases and
costs associated with the opening of our new
Philippines facility. |
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Operating margin for the quarter ended
June 30, 2008 was 9.8%, compared to 6.1% for
the quarter ended June 30, 2007 and 9.9% for
the quarter ended March 31, 2008. Second quarter
2008 operating margin remained equal with
the previous quarter as a result of increased
gross margins and favorable exchange rate
movements offset by increased stock-compensation
expense for 2008 grants and costs related
to the opening of our new Philippines facility.
Adjusted operating margin, excluding the impact
of stock-based compensation expense and amortization
of intangibles, for the quarter ended June
30, 2008 was 13.7% compared to 10.0% for the
quarter ended June 30, 2007 and 12.3% for
the quarter ended March 31, 2008. |
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Net income to common stockholders for the
quarter ended June 30, 2008 was $5.3 million
compared to $5.6 million for the quarter ended
June 30, 2007 and $6.8 million for the quarter
ended March 31, 2008. Net income for the second
quarter of 2008 was negatively impacted as
compared to the quarter ended March 31, 2008
by foreign exchange losses (on hedge contracts
and non-cash balance sheet revaluation) related
to the significant depreciation of the Indian
rupee and Philippine peso during the second
quarter. |
| • |
Adjusted earnings per share, excluding
the impact of stock-based compensation expense
and amortization of intangibles, for the quarter
ended June 30, 2008 was $0.23 as compared
to $0.24 for the quarter ended June 30, 2007
and $0.26 for the quarter ended March 31,
2008. |
| • |
Revenues generated from our largest client
represented 22.3% of total revenues for the
quarter ended June 30, 2008 as compared to
28.8% for the quarter ended June 30, 2007.
Revenues generated from our three largest
clients represented 51.5% of total revenues
for the quarter ended June 30, 2008 as compared
to 59.4% for the quarter ended June 30, 2007.
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Business Highlights – Second Quarter 2008
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We experienced record low quarterly attrition
of 29% compared to 32% for the first quarter
of 2008 and 42% for the second quarter of
2007. As of June 30, 2008, EXL had a headcount
of approximately 10,600 individuals (including
personnel managed under structured client
service agreements) representing an increase
of approximately 100 from the first quarter
of 2008. |
| • |
In an environment where new customer contracts
have been delayed and ramp ups on existing
clients have been slower than anticipated,
we have:
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Signed two new Outsourcing Services
clients and three new Transformation
Services clients. |
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Signed contracts with two additional
existing insurance clients to deliver
Outsourcing Services from our new Philippines
facility. |
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Entered into contract extensions with
our two largest clients: Aviva through
February 2012 and Centrica through January
2010. |
|
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Appointed Kiran Karnik as an independent
director on EXL’s board with effect
from September 25, 2008. Mr. Karnik was the
immediate past President of NASSCOM, India’s
industry body representing companies in the
information technology (IT) and IT-enabled
services sectors. |
2008 Outlook
Based on current visibility, the Company is providing
the following guidance for calendar year 2008 based
on current exchange rates:
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Revenues of $200 to $205 million. Adjustment
to our previous guidance is due to lower volumes
expected at select clients during the second
half of 2008. |
| • |
Maintaining guidance for adjusted operating
margin, excluding the impact of stock-based
compensation expense and amortization of intangibles,
at 12.0% |
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GAAP EPS of $0.65 per diluted share. The
change in GAAP EPS guidance is primarily attributable
to:
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One-time charges of $0.09 comprised
of:
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Capital gains and dividend
distribution taxes arising from
the transfer of the Aviva Pune
BOT of $0.07. Indian tax law imposes
a capital gains tax on the difference
between the value of an entity
calculated pursuant to certain
government regulations and the
original investment and a separate
tax on dividends paid by a subsidiary
to its parent company. |
| • |
Transaction costs of $0.02 related
to the recent sale of Aviva’s
offshore business. |
|
| • |
Losses on foreign exchange hedge contracts
and non-cash balance sheet revaluation
of $0.03 due to timing and volume mismatches
for the various currencies in which
we conduct our business. |
| • |
Lower volumes at select clients of
$0.03. |
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Timing of revenues and higher costs
associated with the opening of our Philippines
facility of $0.03. |
|
| • |
Calendar year guidance includes approximately
$16 million of revenue, and $0.06 of GAAP
EPS related to the Aviva Pune BOT. The subsidiary
that operates the Aviva Pune BOT is expected
to transfer on August 11, 2008. |
Conference Call
EXL will host a conference call on Thursday, August
7, at 10:00 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 website 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 +1-800-573-4840 or 1-617-224-4326 and enter
“80598656”. 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 enter
“47181985” from two hours after the
end of the call until 11:59 p.m. (EST) on August
14, 2008. The replay will also be available at the
EXL web site.
ExlService Holdings, Inc. (Nasdaq: EXLS - News)
is a leading provider of Outsourcing and Transformation
Services. EXL’s Outsourcing Services include
a full spectrum of business process outsourcing
services from offshore delivery centers requiring
ongoing process management skills. Transformation
Services enable continuous improvement of client
processes by bringing together EXL’s capabilities
in reengineering including Six Sigma process improvement,
research & analytics, and risk advisory services.
Headquartered in New York, EXL primarily serves
the needs of Global 1000 companies in the insurance,
utilities, financial services, healthcare, telecommunications
and transportation sectors. 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, 2007. 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)
Note: Amounts may not foot due to rounding.
EXLSERVICE HOLDINGS, INC. CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
Note: Amounts may not foot due to rounding.
EXLSERVICE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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
adjusted financial measures that the Securities
and Exchange Commission defines as “non-GAAP
financial measures.” Management believes that
these adjusted financial measures, when read in
conjunction with the Company’s reported results,
can provide useful supplemental information for
investors analyzing period to period comparisons
of the Company’s results because the adjustments
eliminate the impact of the following two items
which do not directly link to the Company’s
ongoing performance: (i) differences in stock compensation
accounting policies between periods and (ii) expenses
associated with the amortization of acquisition-related
intangibles. 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 123R and the amortization of intangibles
associated with further acquisitions. The adjusted
financial measures disclosed by the Company should
not be considered a substitute for, or superior
to, financial measures calculated in accordance
with GAAP, and the financial results calculated
in accordance with GAAP and reconciliations from
those financial statements should be carefully evaluated.
The following table shows the reconciliation of
these adjusted financial measures from GAAP measures
for the three month and six month periods ended
June 30, 2008 and June 30, 2007 and the three months
ended March 31, 2008:
(Numbers in thousands except share data)
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