EXL reports 2008 second quarter results

Aug. 7, 2008 - PRLog -- Mumbai – ExlService Holdings, Inc. , 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:
·Revenues for the quarter increased 25.1% to $53.8 million from $43.0 million in the quarter ended June 30, 2007.
·Gross margin for the quarter was 37.0% compared to 33.1% in the quarter ended June 30, 2007.
·Operating margin for the quarter was 9.8% compared to 6.1% 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
·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.

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
·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
·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.
·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.
·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.

Business Highlights – Second Quarter 2008
·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.
·In an environment where new customer contracts have been delayed and ramp ups on existing clients have been slower than anticipated, we have:
oSigned two new Outsourcing Services clients and three new Transformation Services clients.
oSigned contracts with two additional existing insurance clients to deliver Outsourcing Services from our new Philippines facility.
oEntered into contract extensions with our two largest clients: Aviva through February 2012 and Centrica through January 2010.
·Appointed Kiran Karnik as an independent director on EXL’s board with effect from September 25, 2008.
2008 Outlook
Based on current visibility, the Company is providing the following guidance for calendar year 2008 based on current exchange rates:
·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%
·GAAP EPS of $0.65 per diluted share.  The change in GAAP EPS guidance is primarily attributable to:
§ One-time charges of $0.09 comprised of:
§ 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.
§ 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.

About ExlService Holdings, Inc.
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. 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.