ExlService (EXLS) 1 Aug 24 2024 Q2 Earnings call transcript

In the second quarter of 2024, EXLService Holdings, Inc. delivered strong financial results, with revenue growing by 11% year-over-year to $448 million. The company's adjusted EPS also grew by 11% to $0.40 per share, driven by the execution of its data and AI-led strategy.

Analytics Business

EXL's Analytics segment, which accounts for more than half of the company's total revenue, saw revenue growth of 6.4% year-over-year to $193.8 million. The growth was driven by higher volumes in Payment Services and Data Management, with healthcare payment services and data management being key contributors. The acquisition of ITI Data, a leading information and data management company, is expected to further bolster EXL's data management capabilities and expand its geographic and Global 1000 client footprint.

Digital Operations and Solutions

In the Digital Operations and Solutions business, EXL reported strong double-digit growth, with revenue increasing by 14% year-over-year to $255 million. This growth was driven by the insurance and emerging business segments, which grew 16% and 15%, respectively. EXL's clients continue to focus on cost efficiency and digital transformation, creating a favorable demand environment for the company.

Financial Performance

EXL's second quarter financial performance was strong, with revenue growing 10.7% year-over-year on a reported basis. The company's adjusted operating margin was 19.8%, down 20 basis points year-over-year, primarily due to increased SG&A investments. Maurizio Nicolelli, EXL's CFO, noted that the company's first half performance was strong, with revenue growing 9.8% year-over-year on a reported and constant currency basis.

Future Outlook

EXL raised its revenue guidance for the full year, anticipating revenue to be in the range of $1.805 billion to $1.83 billion, representing year-over-year growth of 11% to 12% on both a reported and constant currency basis. This guidance includes $7 million to $9 million from ITI Data for the remaining 5 months of 2024. The company expects capital expenditures to be in the range of $50 million to $55 million for the remainder of 2024.

Analyst Questions

During the Q&A session, analysts asked questions about the company's Analytics segment, particularly in terms of incremental tailwinds and headwinds by offering and vertical alignment within the Analytics segment. Rohit Kapoor, EXL's CEO, noted that healthcare payment services and data management are key growth areas within the Analytics segment, with marketing analytics being a tailwind and retail and banking being areas of encouragement.

Analysts also asked about the adjusted operating margin expansion expectations on a quarterly basis and the financial side of the ITI Data acquisition. Maurizio Nicolelli, EXL's CFO, provided details on the financial aspects of the acquisition and the expected impact on the company's adjusted EPS.

In conclusion, EXLService Holdings, Inc.'s second quarter earnings call highlighted the company's strong financial performance and strategic initiatives, particularly in the areas of data and AI. The acquisition of ITI Data is expected to further strengthen EXL's data management capabilities and expand its market presence. The company's focus on cost efficiency and digital transformation is well-aligned with the current market trends and positions it for future growth.