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EXL achieves revenue growth of 47.7%

EXL achieves revenue growth of 47.7% and growth in net income to common stockholders of 101.2% for the year ended December 31, 2007

Source: Moneycontrol.com

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ExlService Holdings , Inc. (Nasdaq: EXLS), a recognized provider of transformation and outsourcing solutions, today announced its financial results for the fourth quarter ended December 31, 2007. The Company's full year and fourth quarter highlights include:

Full Year 2007

Revenues for the year 2007 were $179.9 million, an increase of 47.7% over the prior year.
Gross margin for the year 2007 was 36.8% compared to 39.4% in 2006.
Operating margin for the year 2007 was 9.6% compared to 12.4% in 2006; adjusted operating margin for the year 2007, excluding the impact of stock-based compensation expense and amortization of intangibles, was 12.9% compared to 15.0% in 2006.
Net income to common stockholders for the year 2007 was $27.0 million compared to $13.4 million in 2006, an increase of 101.2%.
Diluted earnings per share to common stockholders was $0.93 for the year 2007 compared to $0.58 in 2006.

Fourth Quarter of 2007

Revenues for the quarter were $50.4 million, an increase of 8.1% over the preceding quarter.
Gross margin for the quarter increased 330 basis points to 39.3% from 36.0% in the preceding quarter.
Operating margin for the quarter was 9.9% compared to 10.0% in the preceding quarter; adjusted operating margin for the quarter, excluding the impact of stock-based compensation expense and amortization of intangibles, was 12.8% compared to 13.0% in the preceding quarter.
Net income to common stockholders for the quarter was $9.8 million compared to $5.9 million in the quarter ended December 31, 2006, an increase of 64.5%.
Diluted earnings per share to common stockholders was $0.33 for the quarter compared to $0.21 in the preceding quarter and $0.22 in the quarter ended December 31, 2006.

Vikram Talwar, CEO and Vice Chairman, commented: "EXL capped off 2007 with an exceptional quarter completing a tremendous year of growth and expansion for our company. EXL won 38 new clients this year and experienced continued momentum and acceptance from our customers across all of our business segments. Our focus on tightly coupling transformation and outsourcing services is providing EXL's clients a competitive edge through enhanced efficiency and effectiveness. The demand environment remains strong and customers continue to look for ways to reduce costs in the back-office. EXL is succeeding in the marketplace, and we clearly have strong momentum as we begin 2008."

Rohit Kapoor, President and Chief Operating Officer, commented: "2007 was a year of continued operational excellence for EXL. Our customer satisfaction scores, employee satisfaction indices, operational efficiency metrics and productivity initiatives all reflect improvements that have resulted from the focus and effort invested in 2007. These achievements provided an environment for our continued growth and sustained operating profitability. We experienced our third consecutive quarter of reduced employee attrition with a fourth quarter rate of 30%, down from 42% in the same quarter last year. Furthermore, we continue to aggressively expand our footprint with a new operating center in the Philippines that will open in the second quarter of 2008 and are planning further growth-oriented investments abroad."

Matt Appel, CFO, commented: "EXL grew revenues and net income in 2007 and significantly exceeded our revenue, adjusted operating profit and earnings per share guidance. We achieved our financial objectives while simultaneously redeploying capital into critical investments in strategic account management and sales and marketing. Our results are even more impressive given the significant appreciation of the Indian rupee against the U.S. dollar during 2007."

Financial Highlights - Fourth Quarter 2007 and Year Ended December 31, 2007

Revenues for the year ended December 31, 2007 increased 47.7% to $179.9 million from $121.8 million in the year ended December 31, 2006. Revenues for the quarter ended December 31, 2007 increased 28.2% to $50.4 million from $39.3 million in the quarter ended December 31, 2006.
Gross margin for the year ended December 31, 2007 was 36.8% compared to 39.4% in the year ended December 31, 2006. Gross margin for the year decreased primarily as a result of unfavorable exchange rate movements and lower than expected revenue in our research and analytics service line. Gross margin for the quarter ended December 31, 2007 was 39.3% compared to 42.9% in the quarter ended December 31, 2006.
Operating margin for the year ended December 31, 2007 was 9.6% compared to 12.4% in the year ended December 31, 2006. Adjusted operating margin, excluding the impact of stock-based compensation expense and amortization of intangibles, for the year ended December 31, 2007 was 12.9% compared to 15.0% in the year ended December 31, 2006. Operating margin for the year decreased primarily as a result of unfavorable exchange rate movements and increased investments in sales and marketing. Operating margin for the quarter ended December 31, 2007 was 9.9%, compared to 16.4% in the quarter ended December 31, 2006. Adjusted operating margin, excluding the impact of stock-based compensation expense and amortization of intangibles, for the quarter ended December 31, 2007 was 12.8% compared to 19.7% in the quarter ended December 31, 2006.
Net income to common stockholders for the year ended December 31, 2007 was $27.0 million compared to $13.4 million in the year ended December 31, 2006.. Net income to common stockholders for the quarter ended December 31, 2007 was $9.8 million compared to $5.9 million in the quarter ended December 31, 2006. Income taxes for the quarter ended December 31, 2007 include a one-time favorable adjustment of approximately $1.7 million related to a change in the Company's transfer pricing agreement between the U.S. and India. Note: Results for the year ended December 31, 2007 are not comparable due to the inclusion of the financial results of Inductis, Inc. in our consolidated financial statements from July 1, 2006.

Recent Business Highlights

Our Business Process Outsourcing business line comprised 82.3% of our revenues for the year ended December 31, 2007 and grew 51.4% year over year. Our BPO business line migrated 23 processes for five existing clients in the quarter ended December 31, 2007 and migrated 69 processes for clients in the year ended December 31, 2007 (including 42 different processes in the insurance vertical) as compared to 47 processes in the year ended December 31, 2006.
Our Advisory business line generated revenues of $13.4 million for the year ended December 31, 2007 and growth of 48.5% year over year. Demand for governance, risk, and compliance solutions remains strong and service line expansion continues into complex accounting and financial reporting services.
Our Research and Analytics business line signed contracts with two global banking institutions that we believe will provide significant revenues in 2008.

As of December 31, 2007, EXL had a headcount of approximately 10,000 individuals (including personnel managed under structured client service agreements). The attrition rate for billable employees during the fourth quarter was 30% as compared to 39% in the third quarter of 2007 and 42% in the fourth quarter of 2006. The Company expects that quarterly attrition will continue to trend downward but will remain volatile and may increase quarter to quarter in the future as compared to the rate experienced in the fourth quarter.