Q3 2023 ExlService Holdings Inc Earnings Call

October 26, 2023

Yeah.

Good day, everyone and thank you for standing by and welcome to the third quarter 2023 E X L Service Holdings, Inc Earnings Conference call.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again.

Please be advised that today's conference is being recorded I would like now to hand over the conference to your first speaker today, John Kristoff, Vice President of Investor Relations John.

Thanks, Maria Hello, and thank you for joining Exl's third quarter 2023 financial results Conference call.

On the call with me today are Rohit Kapoor, Vice Chairman and Chief Executive Officer, and merits your nickel Lilly Chief Financial Officer.

We hope you've had an opportunity to review the third quarter earnings release, we issued this morning. We have also posted an earnings release slide deck and Investor fact sheet in the Investor Relations section of our website.

As a reminder, some of the matters. We will discuss this morning are forward looking please keep in mind that these forward looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

Such risks and uncertainties include but are not limited to general economic conditions. Those factors set forth in today's press release discussed in the company's periodic reports and other documents filed with the SEC from time to time.

EXL assumes no obligation to update the information presented on this conference call today.

During our call we may reference certain non-GAAP financial measures, which we believe provide useful information for investors.

Reconciliation of these measures to GAAP can be found in our press release slide deck and Investor fact sheet.

With that I'll turn the call over to Rohit.

Thanks, John Good morning, everyone welcome to Exl's third quarter 2023 earnings call.

I am pleased to be with you. This morning reporting another strong quarter.

We continued our growth momentum in the third quarter with total revenue of $411 million representing year over year growth of 14% on a reported basis.

And 13% in constant currency.

We grew adjusted diluted EPS, 21% to 37 cents per share.

Our data led strategy and balanced portfolio of businesses bolstered by our differentiated digital and AI capabilities position us well to consistently deliver superior growth and unpredictable environment.

We delivered analytics revenue of $183 million for the quarter up 10% year over year and a sequential increase from the second quarter.

As anticipated, we experienced weaker demand and lower volumes and marketing analytics.

Notwithstanding this headwind we were able to achieve double digit growth in our analytics business.

This growth was driven by strength in our payment integrity and data management service lines.

In our digital operations and solutions business, we generated third quarter revenue of $228 million growing 17% year over year and 2% sequentially.

This represents the 10th consecutive quarter of double digit growth, which demonstrates the value clients place on our data led integrated solutions.

Each of our three segments within digital operations and solutions delivered double digit year over year growth during the quarter with particularly robust performance in insurance.

The slowdown in the macroeconomic growth element is driving our clients to increase their focus on cost efficiency and improve productivity.

Operator: Good day, everyone, and thank you for standing by. Welcome to the third quarter 2023 EXL Service Holdings Inc. Earning Conference Call.

As they make this pivot towards a lower cost operating structure. They are also looking to transform their operations.

Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.

With Exl's technological capabilities of data digital and AI combined with our domain expertise, we are able to create significant impact for our clients in an accelerated manner and with much greater certainty that they can achieve on their own.

Operator: Please be advised that today's conference is being recorded.

This has led to a material increase in demand for integrated digital operations, which plays to our strengths across both our data analytics.

Operator: I would like now to hand over the conference to your first speaker today.

John Kristoff: John Kristoff, Vice President of Investor Relations. John? Thanks, Maria.

And digital operations and solutions businesses.

John Kristoff: Hello, and thank you for joining EXL's third quarter 2023 Financial Results Conference Call. On the call with me today are Rohit Kapoor, Vice Chairman and Chief Executive Officer and Maurizio Nika Lele, Chief Financial Officer. We hope you've had an opportunity to review the third quarter earnings release we issued this morning. We have also posted an earnings release slide deck and investor fact sheet in the Investor Relations section of our website. As a reminder, some of the matters we'll discuss this morning are forward-looking.

Our success pursuing large integrated deals is evident in our sales pipeline.

For the past six quarters, we have averaged 20% plus year over year pipeline growth.

And both our win rates and average deal sizes have increased.

Over the past 12 months, we have won several deals over $50 million.

Total contract value, including a few deals over $100 million of total contract value.

John Kristoff: Please keep in mind that these forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include but are not limited to general economic conditions. Those factors set forth in today's press release, discussed in the company's periodic reports and other documents filed with the SEC from time to time. EXL assumes no obligation to update the information presented on this conference call today. During our call, we may reference certain non-GAAP financial measures which we believe provide useful information for investors. Reconciliation of these measures to GAAP can be found in our press release, slide deck, and investor fact sheet.

This validates the value clients see in our end to end solutions and gives us confidence in our ability to generate sustained double digit growth going forward.

Let me share. An example of a recent win that illustrates the size scope and level of integration to unlock value for our clients.

One of the top insurance companies in the United States chose EXL as their partner to operate and transform their claims operation as part of a large multi year deal.

We are the first point of contact for all claims and responsible for moving the claim through the process.

Rohit Kapoor: With that, I'll turn the call over to Rohit. Thanks, John. Good morning, everyone.

In addition to providing a multi shore delivery model, we are transforming the operation through extensive use of analytics digital and AI.

Rohit Kapoor: Welcome to EXL's third quarter, 2023 earnings call. I'm pleased to be with you this morning reporting another strong quarter. We continued our growth momentum in the third quarter with total revenue of $411 million, representing year over year growth of 14% on a reported basis, and 13% in constant currency. We grew adjusted deluded EPS 21% to 37 cents per share. Our data led strategy and balanced portfolio of businesses, both stirred by our differentiated digital and AI capabilities, positioned us well to consistently deliver superior growth in an unpredictable environment. We delivered analytics revenue of $183 million for the quarter, up 10% year over year, and a sequential increase from the second quarter. As anticipated, we experienced weaker demand and lower volumes in marketing analytics.

For example, we are implementing an automated digital quality assistant that provide real time monitoring and dashboard reporting of all kpis.

Our solution also includes an AI based coaching module, which provides guidance to individual advisors.

We are also implementing EXL smart data signals, which enables 100% real time claim file review in a fully automated manner.

This significantly improved claims outcomes by preventing leakage, improving customer sentiment and ensuring regulatory compliance.

This is just one high level example of how we are combining all of our capabilities and analytics data management, AI and domain expertise to maximize value for our clients.

We continue to receive growing interest from our clients regarding use cases and data structure required to support generate of AI.

Rohit Kapoor: Notwithstanding this headwind, we were able to achieve double-digit growth in our analytics business This growth was driven by strength in our payment integrity and data management service lives In our digital operations and solutions business, we generated third quarter revenue of $228 million growing 17% year over year and 2% year over year sequentially This represents the tenth consecutive quarter of double-digit growth which demonstrates the value clients place on our data led integrated solutions Each of our three segments within digital operations and solutions delivered double-digit year over year growth during the quarter with particularly robust performance and insurance The slowdown in the macro economic growth environment is driving our clients to increase their focus on cost efficiency and improve productivity As they make this pivot towards a lower cost operating structure, they are also looking to transform their operations With Exls technological capabilities of data, digital and AI combined with our domain expertise, we are able to create significant impact for our clients in an accelerated manner and with much greater certainty than they can achieve on their own This has led to a material increase in demand for integrated digital operations which plays to our strengths across both our data analytics and digital operations and solutions businesses Our success pursuing large integrated deals is evident in our sales pipeline For the past six quarters, we have averaged 20% plus year over year pipeline growth and both our wind rates and average deals sizes have increased Over the past 12 months, we have won several deals over $50 million in total contract value including a few deals over $100 million of total contract value This validates the value clients see in our end-to-end solutions and gives us confidence in our ability to generate sustained double-digit growth going forward Let me share an example of a recent win that illustrates the size, scope and level of integration to unlock value for our clients One of the top insurance companies in the United States chose EXL as their partner to operate and transform their claims operations as part of a large multi-year deal We are the first point of contact for all claims and responsible for moving the claim through the process In addition to providing a multi-shore delivery model, we are transforming the operation through extensive use of analytics, digital and AI For example, we are implementing an automated digital quality assistant that provides real-time monitoring and dashboard reporting of all KPIs. Our solution also includes an AI-based coaching module which provides guidance to individual advisers. We are also implementing EXL Smart Data Signals which enables 100% real-time claim file review in a fully automated manner. This significantly improves claims outcomes by preventing leakage, improving customer sentiment and ensuring regulatory compliance.

This bolsters our confidence that generative AI provides tangible growth opportunities for both our data analytics and digital operations and solutions businesses moving forward.

We are currently in more than 200 conversations with clients regarding generative AI use cases, and we have dozens of specific projects active in the sales pipeline.

What is particularly encouraging is the diversity of use cases, which are leading us into new areas, where we previously did not play.

For example, many of our clients struggle with software core management.

And modernizing legacy cord to contemporary core languages to upscale their analytics infrastructure.

This process, often entail medical's CT management translation and testing.

We recently developed a new Gen AI based solution for CT conversion.

Leveraging our domain expertise.

Our solution automates the transformation of legacy core to contemporary languages and features a robust debugging capability to ensure accuracy and efficiency.

This significantly speeds this translation, while reducing the potential for errors.

We are currently working with a leading global bank on a proof of concept to migrate close to 1 million lines of legacy SaaS cord to Python.

It will typically take many months to accomplish this but with our solution. It can be accomplished in a few weeks, allowing our clients to focus on retiring the technical debt.

This is an example of how generative AI is helping us penetrate new buying centers as we now have several more customers interested in the solution.

As planned we have increased our investments in generative AI in the third quarter and will accelerate these investments further in the fourth quarter.

This includes developing solutions training and hiring specialists and further strengthening our generated AI center of excellence, where we currently have active gen AI engagements across all our key industry verticals.

We believe these investments will position us well to capitalize on the strong pipeline of Gen AI opportunities.

We also recently announced plans to invest in a new international operations headquarters in Dublin, Ireland.

As part of the New Center, we plan to hire up to 200, AI data engineering and other specialized technology positions over the next three years.

This builds upon our existing staff of more than 8000 data scientists globally, who are developing AI cloud enablement and data integration technologies.

As part of our investment we will also establish new centers of excellence across our operations.

To develop best practices improve efficiencies and reduce costs.

This new center will also serve as a hub for intellectual property development and future geographic market expansion.

Looking ahead, we are raising our 2023 revenue and EPS guidance, given our strong third quarter performance and current visibility for the remainder of the year.

Whereas they will walk you through the details in a few moments.

As we look forward to 2024.

Encouraged by the sustained growth in our revenue and EPS.

Rohit Kapoor: This is just one high level example of how we are combining all of our capabilities in analytics, data management, AI and domain expertise to maximize value for our clients. We continue to receive growing interest from our clients regarding use cases and data structures required to support generative AI. This bolsters our confidence that generative AI provides tangible growth opportunities for both our data analytics and digital operations and solutions businesses moving forward. We are currently in more than 200 conversations with clients regarding generative AI use cases and we have dozens of specific projects active in the sales pipeline.

The momentum in our growing sales pipeline and the underlying strength and resiliency of our business.

We are well positioned with our current generation of AI offerings, and we continue to invest further in advancing our capabilities.

This gives us confidence in our ability to sustain double digit growth.

And with that I'll turn the call over to Mauricio.

Thank you Robert and thank you everyone for joining us. This morning, I will provide insights into our financial performance for the third quarter and the first nine months of 2023, followed by our revised outlook.

We delivered a strong third quarter with revenue of $411 million up 13, 7% year over year on a reported basis.

Rohit Kapoor: What is particularly encouraging is the diversity of use cases which are leading us into new areas where we previously did not play. For example, many of our clients struggle with software code management and modernizing legacy codes to contemporary code languages to upscale their analytics infrastructure. This process often entails meticulous code management, translation and testing. We recently developed a new Gen AI-based solution for code conversion leveraging our domain expertise. Our solution automates the translation of legacy code to contemporary languages and features a robust debugging capability to ensure accuracy and efficiency.

On a constant currency basis currency basis, we grew revenue 13, 2% year over year, and one 5% sequentially.

Adjusted EPS was <unk> 37.

An increase of 21, 3% year over year.

All revenue growth percentages mentioned hereafter are on a constant currency basis.

Revenue from our digital operation solutions businesses as defined by three reportable segments, excluding analytics was $227 9 million, which represents year over year growth of 16, 4%.

Sequentially, we grew revenue two 3%.

In the insurance segment, we generated revenue of $136 4 million, an increase of 17, 6% year over year and six 3% sequentially.

Rohit Kapoor: This significantly speeds this translation while reducing the potential for errors. We are currently working with a leading global bank on a proof of concept to migrate close to 1 million lines of legacy, SAS code to Python. It would typically take many months to accomplish this but with our solution it can be accomplished in a few weeks allowing our clients to focus on retiring their technical debt. This is an example of how generative AI is helping us penetrate new buying centers as we now have several more customers interested in the solution.

This growth was driven by the expansion of existing clients and new client relationships.

Insurance vertical consisting of both our digital operations and solutions.

And analytics businesses grew 14, 4% year over year with revenue of $178 million.

In the emerging segment, we grew revenue 14, 7% year over year. This growth was driven by the expansion of existing client relationships and new client wins.

Quench, we revenue declined two 8% to $65 3 million.

Rohit Kapoor: As brand, we have increased our investments in generative AI in the third quarter and will accelerate these investments further in the fourth quarter. This includes developing solutions, training and hiring specialists and further strengthening our Generative AI Center of Excellence where we currently have active Gen AI engagements across all our key industry verticals. We believe these investments will position us well to capitalize on the strong pipeline of Gen AI opportunities.

<unk> revenue decline was driven by the bankruptcy of a client yellow Corporation.

Excluding the impact of the bankruptcy, we expect revenue would have grown sequentially.

The emerging vertical consists of both our digital operations and solutions and analytics businesses grew 4% year over year with revenue of $147 9 million.

The healthcare segment reported revenue of $26 2 million representing growth of 14, 8% year over year and a decrease of three 6% sequentially.

Rohit Kapoor: We also recently announced plans to invest in a new international operations headquarters in Dublin, Ireland. As part of the new center, we plan to hire up to 200 AI, data engineering and other specialized technology positions over the next three years. This bill is upon our existing staff of more than 8,000 data scientists globally who are developing AI, cloud enablement and data integration technologies.

The year over year growth was driven by expansion in existing client relationships there.

The healthcare vertical consisting of our digital operations and solutions and analytics businesses grew 28, 6% year over year with revenue of $92 3 million.

In the analytics segment, we generated revenue of $183 1 million up nine 4% year over year and up slightly sequentially.

Rohit Kapoor: As part of our investment, we will also establish new centers of excellence across our operations to develop best practices, improve efficiencies and reduce costs. This new center will also serve as a hub for intellectual property development and future geographic market expansion.

Our decision analytics services payment integrity and data management businesses continue to grow year on year, partially offset by the decline in marketing and analytics as our clients in insurance and banking continue to reduce their marketing spend.

SG&A expenses as a percentage of revenue were up 180 basis points year over year to 22% driven by investments in front end sales marketing digital and AI capabilities.

Rohit Kapoor: Looking ahead, we are raising our 2023 revenue and EPS guidance given our strong third-quarter performance and current visibility for the remainder of the year.

Our adjusted operating margin for the quarter was 20% up a 150 basis points year over year, driven by higher volumes and revenue.

Rohit Kapoor: Mauritia will walk you through the details in a few moments. As we look forward to 2024, we are encouraged by the sustained growth in our revenue and EPS, the momentum in our growing sales pipeline and the underlying strength and resiliency of our business. We are well positioned with our current generated AI offerings and we continue to invest further in advancing our capabilities.

Rohit Kapoor: This gives us confidence in our ability to sustain double-digit growth.

Our effective tax rate for the quarter was 23, 4% down 60 basis points year over year, driven by higher profits in lower tax jurisdictions.

Our adjusted EPS for the quarter was 37.

A 21, 3% increase year over year on a reported basis.

Turning to our nine month performance our revenue for the period was one to $1 7 billion up 17, 6% year over year on a constant currency basis. This growth was driven by both our digital operations and solutions and analytics businesses.

Maurizio Nicolelli: And with that, I'll turn the call over to Mauritia. Thank you, Robert and thank you, everyone, for joining us this morning. I will provide insights into our financial performance for the third quarter and the first nine months of 2023, followed by our revised outlook.

Our adjusted operating margin for the period was 19, 8% up 140 basis points year over year.

Maurizio Nicolelli: We delivered a strong third quarter with revenue of 411 million of 13.7% year-of-a-year on a reported basis. On a currency basis, we grew revenue 13.2% year-of-a-year and 1.5% sequentially. Adjusted EPS was 37 cents an increase of 21.3% year-of-a-year. All revenue growth percentages mentioned hereafter are on a constant currency basis. Revenue from our digital operating solutions businesses as defined by three reportable segments excluding analytics was 227.9 million which represents year-of-a-year growth of 16.4%. Sequentially, we grew revenue 2.3%.

Nine month, adjusted EPS was $1 nine.

Up 21, 8% year over year on a reported basis.

Our balance sheet remains strong our cash, including short and long term investments as of September 30 was $275 million and a revolver debt was $210 million for a net cash position of $65 million we.

We generated cash flow from operations of $132 million in the first nine months compared to $101 million for the same period in 2022. This.

This improvement was driven by the expansion in our adjusted operating margin.

During the first nine months, we spent $41 million on capital expenditures and repurchased $93 5 million of our shares at an average cost of $31 per share.

Maurizio Nicolelli: In the insurance segment, we generated revenue of $136.4 million, an increase of 17.6% year-over-year, and 6.3% sequentially. This growth was driven by the expansion of existing clients and new client relationships. The insurance vertical, consisting of both our digital operations and solutions and analytics businesses, grew 14.4% year-of-year revenue of $170.8 million. In the emerging segment, we grew revenue 14.7% year-over-year. This growth was driven by the expansion of existing client relationships and new client wins.

Now moving onto our outlook for 2023.

Based on our strong performance for the first nine months of the year and our current visibility across all verticals, we are raising our outlook for the year.

We now anticipate revenue to be in the range of 162 billion to 162 8 billion representing year over year growth of 15% on a reported basis and 15% to 16% on a constant currency basis.

This represents an increase of $9 million at the midpoint, despite a foreign exchange headwind of $2 million from previous guidance.

Maurizio Nicolelli: Sequentially, revenue declined 2.8% to 65.3 million. The sequential revenue decline was driven by the bankruptcy of a client, yellow corporation. Excluding the impact of the bankruptcy, we expect revenue would have grown sequentially. The emerging vertical consists of both our digital operations and solutions and analytics businesses grew 4% year-of-year with revenue of $147.9 million.

We expect a foreign exchange gain of approximately $1 million net interest expense to be approximately $1 million and our full year effective tax rate to be in the range of 23% to 24%.

Based on this we anticipate our adjusted EPS to be in the range of $1 40 to $1 42, representing year over year growth of 16% to 18%, which is an increase from our prior adjusted EPS guidance.

Maurizio Nicolelli: The healthcare segment, reported revenue of $26.2 million, representing growth of 14.8% year-over-year and a decrease of 3.6% sequentially. The year-over-year growth was driven by expansion in existing client relationships. The healthcare vertical, consisting of our digital operations and solutions and analytics businesses, grew 28.6% year-over-year with revenue of $92.3 million.

15% to 17% growth.

We expect capital expenditures to be in the range of $50 million to $55 million.

In summary, our data led strategy is sound and is resonating with our clients our differentiated business model remains resilient due to our substantial reoccurring revenue and a well balanced portfolio across our data analytics and digital operations and solution business.

Maurizio Nicolelli: In the analytics segment, we generated revenue of $183.1 million, up 9.4% year-over-year and up slightly sequentially. Our decision analytics services, payment integrity and data management businesses continue to grow year-on-year, partially offset by the decline in marketing analytics as our clients and insurance and banking continue to reduce their marketing. S-GNA expenses as a percentage of revenue were up 180 basis points year-over-year to 20.2% driven by investments in front-and-fails, marketing, digital and AI capabilities.

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Our strong pipeline and high percentage of annuity revenue provides us with confidence in our ability to continue to deliver double digit growth going forward.

This coupled with our expanding capabilities and data management and ongoing investments in generative AI puts us in a strong position as we look to 2024.

With that road and I would be happy to take your questions.

Thank you at this time, we will conduct a question and answer session.

A reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please.

Maurizio Nicolelli: Our adjusted operating margin for the quarter was 20% of 150 basis points year-over-year driven by higher volumes and revenue. Our effective tax rate for the quarter was 23.4% down 60 basis points year-over-year driven by higher profits in lower tax jurisdictions. Our adjusted EPS for the quarter was 37 cents, a 21.3% increase year-over-year on a reported basis.

Press Star one one again please.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of Bryan Bergin from TD Cohen, Brian go ahead.

Hi, guys. Good morning, Thank you I guess I'll start.

And here with the outlook can you just breakdown, how you are expecting digital apps and analytics to grow in four Q and then just understanding it's early here in the backdrop is quite uncertain, but we appreciate your commentary on sustaining double digit growth can you just share some qualitative commentary on how youre thinking about what's going to remain consistent in 2000.

Maurizio Nicolelli: Turning to our nine-month performance, our revenue for the period was 1.217 billion of 17.6% year-over-year on a constant currency basis. Services. This growth was driven by both our digital operations and solutions and analytics businesses. Adjusted operating margin for the period was 19.8% up 140 basis points year-to-year.

<unk> versus 'twenty, three what may not reoccur, and maybe what might be incremental.

Sure Brian.

So firstly in terms of our guidance for the year and the implied guidance for the fourth quarter.

Maurizio Nicolelli: Nine months adjusted EPS was $1.09 of 21.8% year-to-year unreported basis. Our balance sheet remains strong. Our cash, including short and long-term investments as of September 30th, was $275 million. And our revolver debt was $210 million for a net cash position of $65 million.

We have increased our guidance as we mentioned by $9 million at the midpoint. This is despite a $2 million headwind on the currency side.

And despite the fact that we have had one of our clients undergo bankruptcy and the volume has fallen off.

We expect after taking all of these things into consideration that our fourth quarter would be flattish compared to our third quarter and thats.

Maurizio Nicolelli: We generated cash flow from operations of $132 million in the first nine months compared to $101 million for the same period in 2022. This improvement was driven by the expansion in our adjusted operating margin.

Across both of our business lines and that's how we would anticipate it might play out.

Going forward in <unk>.

<unk> of our double digit growth.

What we're seeing is we're seeing a very strong demand in the pipeline we've seen our win rates increase we've seen the size of the deals increase.

Maurizio Nicolelli: During the first nine months, we spent $41 million on capital expenditures and repurchased $93.5 million of our shares at an average cost of $31 per share.

And therefore, we have confidence in terms of being able to sustain double digit growth.

Maurizio Nicolelli: Now moving on to our outlook for 2023. Based on our strong performance for the first nine months of the year and our current visibility across all verticals, we are raising our outlook for the year. We now anticipate revenue to be in the range of $1.62 billion to $1.628 billion, representing year-over-year growth of 15% on a reported basis and 15% to 16% on a constant currency basis. This represents an increase of $9 million at the midpoint despite a foreign exchange headwind of $2 million from previous guidance.

But we're not sure off at this point of time is how we're marketing analytics platform and that's something which is.

As we have shared with you previously were looking to diversify our industry verticals within marketing analytics and focusing on areas of strength, particularly around data management payment integrity and analytical services.

Our expectation is that when we think about both of our business lines on digital operations on solutions and on data analytics.

Both of these business lines should be able to provide us with great growth opportunities.

Maurizio Nicolelli: We expect a foreign exchange gain of approximately $1 million net interest expense to be approximately $1 million and our full year effective tax rate to be in the range of 23 to 24%. Based on this, we anticipate our adjusted EPS to be in the range of $1.40 to $1.42, representing year-over-year growth of 16 to 18%, which is an increase from our prior adjusted EPS guidance of 15 to 17% growth. We expect capital expenditures to be in the range of $50 million to $55 million.

We would expect.

Ada analytics business on a secular basis to give us double digit growth as such.

And at this point of time, given the deals that we have already won.

We've got to get in.

Very good position as far as digital operations is concerned as well so frankly, the portfolio seems to be performing well and it's very well balanced and we're very pleased with the way in which things are at this point of time, despite a pretty difficult macroeconomic environment.

Okay I appreciate that color and then just on the margin here as we kind of back into the implied <unk> adjusted operating margin I think it would imply 18% or below.

Is this just the timing of expenses, you mentioned and kind of talent journey II solution development or any other items to consider.

Maurizio Nicolelli: In summary, our data-led strategy is sound and is resonating with our clients. Our differentiated business model remains resilient due to our substantial reoccurring revenue and a well-balanced portfolio across our data analytics and digital operations and solutions businesses. Our strong pipeline and high percentage of a new revenue provide us with confidence in our ability to continue to deliver double-digit growth going forward. This coupled with our expanding capabilities in data management and ongoing investments in generative AI puts us in a strong position as we look to 2024.

Maurizio Nicolelli: Thank you.

Yes, Brian.

You've hit it a little bit on the head there it's a bit of timing. If you look at our <unk> four for the year for the first three quarters.

Had LTM hovering right around 19, 8% so much higher than what we talked about in our guidance at the beginning of the year and we talked about low to mid 18% range. So we performed very well on profitability in the first three quarters. We do have a number of investments that we want to make in Q4 in front end sales.

<unk> and marketing and also in our digital area, particularly in Gen AI, which we were looking to do in Q3 that some of that got postponed to Q4, and so that is reflective in that high <unk> to low 18% range of OPM in the fourth quarter and that doesn't change our outlook going.

Operator: At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, press star 11 again. Please stand by while we compile the Q&A roster.

Into 2024, it's more of a timing for Q4, and Thats still even with those percentage and that LTM in Q4 Youre still.

At a 19% plus for the year given the performance of the first three quarters.

Bryan Bergin: Our first question comes from the line of Bryan Bergin from PD Cohen. Bryan, go ahead. Hi guys, good morning. Thank you. I guess I'll start here with the outlook. Can you just break down how you're expecting digital ops and analytics to grow in 4Q? And then just understanding it's early here and in the backdrop is quite uncertain, but we appreciate your commentary on the question. Can you just share some qualitative commentary on how you're thinking about what's going to remain consistent in 24 versus 23? What may not reappear and maybe what might be incremental?

Okay understood. Thank you.

Thank you one moment for our next question.

One moment.

Our next question comes from the line of Maggie Nolan of William Blair. Maggie Your line is now open.

Thank you.

It sounds like the the recovery trajectory in marketing analytics is still a little difficult to predict in an uncertain, which I can definitely appreciate.

Appreciate but.

What about just kind of where you stand in terms of the amount of pressure that youre seeing are you expecting maybe incremental pressure or do you see any signs of stabilization, even though our recovery is still uncertain at this point.

Bryan Bergin: Sure, Bryan. So firstly, in terms of our guidance for the year and the implied guidance for the fourth quarter. We have increased our guidance as we mentioned by $9 million at the midpoint. This is despite a $2 million headwind on the currency side and despite the fact that we have had one of our clients undergo bankruptcy and the volume has fallen off. We expect after taking all of these things into consideration that our fourth quarter would be flatish compared to our third quarter.

Sure Maggie so first of all just a bit of color for us marketing analytics declined quarter on quarter. So Q3 revenue from marketing analytics was lower than our revenue from marketing analytics in Q2.

But as we have shared with you previously we have won a number of deals in other industry verticals, all marketing and analytics, particularly around healthcare. So we're going to see how that plays out in Q4 and that will give us a good sense of how that recovery will shape up going forward into 'twenty four.

Bryan Bergin: And that's across both of our business lines. And that's how we would anticipate it might play out. Going forward in terms of our double digit growth, what we are seeing is we are seeing a very strong demand in the pipeline. We've seen our wind rates increase. We've seen the size of the deals increase. And therefore, we have confidence in terms of being able to sustain double digit growth. What we are not sure of at this point of time is how would marketing analytics perform?

Okay. Thank you and then your when you were speaking about Dublin, you mentioned that this could be a hub for additional geographic expansion could you elaborate on that a little bit maybe what you're expecting over the next several years. If you think about your geographic mix and where.

Could be areas of <unk>.

Growth drivers for the business.

Bryan Bergin: And that's something which, you know, as we have shared with you previously, we're looking to diversify our industry verticals within marketing analytics and focus in on areas of strength, particularly around data management, payment integrity and analytical services. Our expectation is that when we think about both of our business lines on digital operations and solutions and on data analytics, both these business lines should be able to provide us with great growth opportunities.

Absolutely so.

So for US first of all our business in the UK has been growing very very nicely and the percentage contribution of total revenue from that market has been increasing over the last couple of quarters and we're very pleased with the progress that we're making out there.

Number two with the setting up of the office in Dublin, Ireland. It actually will open up the market for us in Continental Europe and across the EU. So we think we have an opportunity to be able to access talent access customers and be able to leverage our IP across the continent and it's a.

Bryan Bergin: We will expect the data analytics business on a secular basis to give us double digit growth as such. And at this point of time, given the deals that we have already won, we think we've got a very good position as far as digital operations is concerned as well. So frankly, the portfolio seems to be performing well and it's very well balanced and we're very pleased with the way in which things are at this point of time, despite a pretty difficult macroeconomical.

Very strategically important decision for us to be able to expand in Europe, and actually diversify our revenue base across the world.

So this is something which we are very excited about it's a subconscious and a deliberate investment that we're making and we hope that will play out nicely over the next couple of years.

Okay. Good thank you very much.

Thank you one moment for our next question.

Bryan Bergin: I appreciate that color. And then just on the margin here, as we kind of back into the implied 4Q, just the operating margin, I think it would imply 18% or below. Is this just the timing of expenses you mentioned, and kind of talent, and a high solution development, or any other op items to consider? Yeah, Bryan, you've hit it a little bit on the head there. It's a bit of timing. If you look at our AOPM for the first three quarters, we've had AOPM covering right around 19.8%.

Alright. Our next question comes from the line of Ashwin Shoemaker from Citi.

Go ahead.

Hi, Thank you and good morning.

I wanted to sort of maybe get a more granular look into.

Digital ops as I sort of look at.

Insurance.

Keep showing sequential growth.

Hence there.

Bryan Bergin: So much higher than what we talked about in our guidance at the beginning of the year, and we talked about low to mid 18% range. So we've performed very well on profitability in the first three quarters. We do have a number of investments that we want to make in Q4, in front-end sales, in marketing, and also in our digital area, particularly in Genai, which we were looking to do in Q3, that some of that got postponed to Q4.

The health care business.

Is.

It's sort of.

Sequentially static for a couple of quarters same thing with the emerging part of it if you could provide more color on what's underlying.

Bryan Bergin: And so that's reflective in that high 17 to low 18% range of AOPM in the fourth quarter. Now, that doesn't change our outlook going into 2024. It's more of a timing for Q4. And that's still even with those percentage, and that AOPM in Q4, you're still at a 19% plus for the year, given the performance of the first three quarters. Okay, understood.

Operator: Thank you. One moment for our next question. Again, one moment.

Turn the line goes to.

Pieces and any kind of breakout you could provide with regards to emerging.

That helps.

From a forward modeling perspective would be great. Thanks.

Sure.

So I'll spend the first thing is that our digital operations and solutions business is actually performing really really well and we think the big reason for that is number one the demand for clients seeking cost efficiency and productivity gains has improved in this environment.

<unk> and clients are looking at aggressively managing their cost structure and getting more efficiency and operational efficiency into that process in business.

We have seen that increase the pipeline and we have seen that our strategy of combining data digital AI and domain.

Maggie Nolan: Our next question comes from the line of Maggie Nolan of William Blair. Maggie, your line is now open. Thank you. So it sounds like the recovery trajectory in marketing analytics is still a little difficult to project and uncertain, which I can definitely appreciate. But what about just kind of where you stand in terms of the amount of pressure that you're seeing? Are you expecting maybe incremental pressure? Or do you see any signs of stabilization, even though a recovery is still uncertain at this point?

Is resonating very well so our win rates have gone up and the deal sizes that we are winning that has gone up. So frankly. These are all reasons why the digital operations and solutions business is actually growing very nicely for us within this business.

<unk> as you know is <unk>.

Industry vertical where we have a leadership position.

As a business, which.

We pride ourselves in terms of our knowledge and understanding of the marketplace. There and I think we're getting rewarded for that knowledge and expertise that we have because more and more clients are giving us larger pieces of work and that business for us is is growing very nicely.

Maggie Nolan: Sure, Maggie. So first of all, just a bit of color. For us, marketing analytics declined quarter on quarter. So Q3 revenue from marketing analytics was lower than our revenue from marketing analytics in Q2. But as we have shared with you previously, we have won a number of fields in other industry verticals for marketing analytics, particularly around healthcare. So we're going to see how that plays out in Q4. And that will give us a good sense of how that recovery will shape up going forward into 24. Okay, thank you.

We are seeing a similar kind of a trend shape up in healthcare and <unk>.

Emerging business unit, but certainly these two businesses are much smaller in size as compared to the insurance business.

The emerging business unit in this particular quarter did have one client, which transitioned out because of them filing for bankruptcy. So that it has been an impact on that but keep in mind that our emerging business unit targets actually many many sub vertical so we target clients in utilities and <unk>.

Maggie Nolan: And then you're when you were speaking about Dublin, you mentioned that this could be a hub for additional geographic expansion. Could you elaborate on that a little bit? Maybe what you're expecting over the next several years, as you think about your geographic mix and where could be areas of growth or drivers for the business?

Travel transportation and logistics and retail and therefore, we're seeing a great amount of factory.

Diversified strength coming in into the emerging business unit.

The healthcare business for us is largely driven on the operations management side around clinical operations.

Rohit Kapoor: Absolutely. So for us, first of all, our business in the UK has been growing very, very nicely and the percentage contribution of total revenue from that market has been increasing over the last couple of quarters and they're very pleased with the progress that we are making out there. So we think we do have an opportunity to be able to access talent, access customers and be able to leverage our IP across the continent and it's a very strategically important decision for us to be able to expand in Europe and actually diversify our revenue base across the world. So this is something which we are very excited about.

And there we are seeing that.

But they can be increase in volumes at sometimes and.

There can be a diversification of our customer base as well. So our hope is to continue to bear that in and bring the same kind of value that we're bringing in insurance, which is the combination of data analytics and operations and bringing that to bear in health care.

So frankly for us.

We are very very happy with the way in which the digital operations and solutions business is growing.

Understood understood and thank you for all the color.

One of the questions, we get relatively frequently nowadays from from investors is with regards to what's the normalized growth.

Rohit Kapoor: It's a conscious and a deliberate investment that we are making and we hope that will play out nicely over the next couple of years.

For a company like <unk> over time and found maybe a potential clue.

To me that given.

Operator: Very good.

Two a M.

Operator: Thank you very much.

Newspaper, where you said $2 billion in revenue by 2025.

Operator: Thank you.

Operator: One moment for our next question.

Would imply.

Somewhere in the low double digit 11, 11 and change type growth.

Ashwin Shirvaikar: All right.

If you could provide more color on.

Ashwin Shirvaikar: Our next question comes from the line of Ashwin Syrvekar from city. Go ahead.

That.

Relative to how you've grown the last three four years that seems quite modest.

Ashwin Shirvaikar: Hi, thank you and good morning. I wanted to sort of maybe get get a more granular look into digital apps as I sort of look at, you know, insurance, you know, keep showing sequential growth, good trends there. The healthcare business is sort of sequentially static for a couple of quarters, same thing with the emerging part of it. If he could provide more color on what underlying what's underlying those two pieces and, you know, any kind of a breakout you could provide with regards to emerging that helps us from a forward modeling perspective would be great.

So any color that you can provide stuff is changing if the last two or three years with just the anomaly.

How would you think of that.

Sure.

So.

I guess for the last few years, we've grown nicely, but I think the conviction that we have is twofold one.

The portfolio that we have which is a combination of the data analytics business, which represents approximately 45% of our revenue and the digital operations and solutions business, which is 55%.

Business, both these businesses for us.

Strong growth businesses.

Would expect.

On a combined basis to be able to grow double digit on a normalized growth trajectory there will be points in time, where one of these business lines might grow faster and the other one might grow a bit slower and vice versa, and we've already seen that happen. So for example in 2022 our data.

Ashwin Shirvaikar: Thanks. Sure. So Ashwin, the first thing is that our digital operations and solutions business is actually performing really, really well. And we think the big reason for that is number one, the demand for client seeking cost efficiency and productivity gains has improved in this environment and clients are looking at aggressively managing their cost structure. And getting more efficiency and operational efficiency into their process and business. We have seen that increase the pipeline and we have seen that our strategy of combining data digital AI and domain is resonating very well.

Analytics business was growing very very rapidly as such and the digital operations business was growing slightly slower at that point of time.

Right now in this current environment, we are seeing the digital operations business really grow much more strongly.

And the data analytics business has been challenged because of discretionary projects as well as the marketing analytics will be spoken about but.

But long term on a normalized basis, we expect double digit growth across both of these businesses.

Ashwin Shirvaikar: So our win rates have gone up and the deal sizes that we are winning that has gone up. So frankly, these are all reasons why the digital operations and solutions business is actually growing very nicely for us within this business insurance. As you know, is a industry vertical where we have a leadership position. It is a business which, you know, we pride ourselves in terms of our knowledge and understanding of the marketplace there.

On an organic constant currency basis.

We do think we.

Have the ability to be able to add onto this through inorganic growth.

And M&A is certainly something which we would be looking at and adding on to that you've seen us do the acquisition of clairvoyant and that was a very successful acquisition for us, which added very specific capabilities and expanded our portfolio. So we feel comfortable about growing our business double digit long term and.

Ashwin Shirvaikar: And I think we're getting rewarded for for that knowledge and expertise that we have because more and more clients are giving us larger pieces of work. And that business for us is growing very nicely. We are seeing a similar kind of a trend shape up in healthcare and EBU in our emerging business unit but certainly these two businesses are much smaller in size as compared to the insurance business. The emerging business unit in this particular quarter did have one client which transitioned out because of them filing for bankruptcy so that it has been an impact on that but keep in mind that our emerging business unit targets it's actually many, many sub vertical so we target clients in utilities in travel transportation and logistics in retail and therefore we're seeing a great amount of actually diversified strength coming in into the emerging business unit.

Normalized way and.

It's great to be able to see.

Regardless of the market environment.

Our business model is very resilient and very growth oriented and we can grow our top line and our bottom line.

Double digits.

Thank you for that.

Thank you one moment for our next question.

Okay.

Our next question comes from the line of my Aunt <unk> Tandon from Needham.

Bank.

Thank you good morning, Rohit, you talked about the Gen AI opportunities could you talk in terms of.

Is that changing the existing contract structure with your clients is that being integrated into it and how is that affecting the size and scope of the engagements with your existing client base as they incorporate <unk> into their business models.

Ashwin Shirvaikar: The healthcare business for us is largely driven on the operations management side around clinical operations and there we are seeing that they can be increasing volumes at some times and they can be a diversification of a customer base as well. So our hope is to continue to build that and and bring the same kind of value that we are bringing in insurance which is the combination of data analytics and operations and bringing that to bear in healthcare so so frankly for us we are very, very happy with the way in which the digital operations and solutions business is growing.

Sure Mike.

I think Jenny.

Is having an impact on the way in which we are growing in multiple ways, let me try and articulate <unk> number one the work that we do with our clients on our existing contracts and digital operations. We are certainly embedding a lot more gen AI into those operations and into those solutions.

Number two.

Going to clients leveraging journey, II and winning large pieces of integrated digital operations deals. So this is helping us win new business from either from existing customers or from new customers number three Gen. AI is also leading us to be able to deploy.

Rohit Kapoor: Currently frequently nowadays from from investors with regards to what's the normalized growth for a company like the excel over time and found maybe a potential clue on an interview that given to to a to any newspaper where you said $2 billion in revenue by 2025 which would imply somewhere in the you know loadable digit 11 11 and change type growth. If you could kind of provide more color on on on that because that relative to how you've grown the last three four years that seems quite modest so and any color that you can provide stuff is changing at the last two three years we're just normally how would you think of that.

Jen AI with.

With clients, which might have outsourced to work with other providers and where we may not be handling the digital operations box, but we are applying our domain knowledge and our expertise on gen AI and helping them create operational efficiency and productivity gains and number four <unk>.

<unk> is creating a huge opportunity for us on the data management side. So we all know that in order for <unk> to be effective the data is state of our clients' needs to be in order and right. Now there is a huge movement in order of our clients wanting to fix that data of state.

Most of them in the past had focused in on moving their structured data to the cloud and getting that structured data organized so that that data would be usable while what we are finding is that the unstructured data is a much bigger piece of the work that remains to be done and we can be very very helpful to our clients manage.

Rohit Kapoor: Sure so you know I guess for the last few years we've grown nicely but I think the conviction that we have is twofold one the portfolio that we have which is a combination of the data analytics business which represents approximately 45% of our revenue and the digital operations and solutions business which is 55% of our business. Both these businesses for us are strong growth businesses we would expect on a combined basis to be able to grow double digit on a normalized growth trajectory there will be points in time where one of these business lines might grow faster and the other one might grow a bit slower and vice versa and we've already seen that happen.

That unstructured datasets, so frankly.

Tremendous opportunity with existing clients and existing work that we have new business that we can win with at.

Jenny I pure Gen AI solutions and deployments that we can have and then on the data management side. So we think this is becoming a more strategic lever for growth for us going forward and Thats why we are investing more heavily in this in this particular area.

That's very helpful color it sounds like a boon not a curse.

Some people in the market.

Rohit Kapoor: So for example in 2022 our data analytics business was growing very very rapidly as such and the digital operations business was growing slightly slower at that point of time. Right now in this current environment we're seeing the digital operations business really grow much more strongly and the data analytics business has been challenged because of discretionary projects as well as you know the marketing analytics will be spoken about. But long term on a normalized basis we expect double digit growth across both these businesses on an organic constant currency basis.

<unk> believes so good to see some proof points there.

Got it.

And as my quick follow up here on margins, sorry, I did hear your comments Marty on margins, but for fiscal 'twenty I.

No youre, not giving guidance, but if you are able to grow double digits should be just expect some margin improvement, even though the 19 plus level that youre going to end up in 23, just from scale benefits.

Else really changes.

We have to we have talked about and thank you for the question. Mike. So we have talked about every year, making improvements to our to our margins going forward. We had the big Spike up from 2000 22022 went all the way up to 18, 3% from a range of 14% to <unk>.

Rohit Kapoor: We do think you know we have the ability to be able to add on to this through in organic growth and MNA is certainly something which we'd be looking at and adding on to that. You've seen us do the acquisition of clairvoyant and that was a very successful acquisition for us which added very specific capabilities and expanded our portfolio so we feel comfortable about growing our business double digit long term in a normalized way and you know it's great to be able to see that regardless of the market environment. Our business model is very resilient and very growth oriented and we can grow our top line and our bottom line at double digits.

15% and now we've talked about making improvements to margins on an annual basis marginally, meaning 10 to 20 basis points, a year and we've been very successful doing more than that but we still think in our mindset that we should continue to drive margins higher just incrementally not these larger biggs.

<unk> seen in prior years.

Got it. Thank you so much for taking my questions.

Thank you.

Thank you one moment for our next question.

Okay.

And again, just one moment.

Maurizio Nicolelli: Thank you for that. Thank you. One moment for our next question. Thank you.

Our next question comes from the line of surrender.

From Jefferies LLC.

Ed.

Thank you.

So for the first question just wanted to kind of understand.

New logo wins.

As I look across the past few quarters it seems that.

Rohit Kapoor: Good morning, Rohit. You talked about the Gen AI opportunities. Could you talk in terms of is that changing the existing contract structure with your clients? Is that being integrated into it? And how that affecting the size and scope of the engagements with your distinct client base as they incorporate Gen AI into their business models? Sure, Mike. I think Gen AI is having an impact on the way in which we are growing in multiple ways.

You started the year off really strong in digital ops and sequentially. The number of new logo wins, it's been declining.

It's the exact opposite and analytics.

Is there anything to read into that or how should we think about.

Demand dynamics between the two.

Sure so for us.

The new client wins, and the new logo wins.

I think looking at it on a quarter by quarter basis is not going to provide much help it's much more to kind of see the trend over several quarters that gives a much better understanding of the kind of wins that we're having so if you take a look at the three.

Rohit Kapoor: Let me try and articulate BCU. Number one, the work that we do with our clients on our existing contracts in digital operations, we are certainly embedding a lot more Gen AI into those operations and into those solutions. Number two, we are going to clients leveraging Gen AI and winning large pieces of integrated digital operations deals. So this is helping us win new business from either from existing customers or from new customers.

Rohit Kapoor: Number three, Gen AI is also leading us to be able to deploy Gen AI with clients which might have outsourced the work with other providers and where we may not be handling the digital operations part but we are applying our domain knowledge and all expertise on Gen AI and helping them create operational efficiency and productivity gains. And number four, Gen AI is creating a huge opportunity for us on the data management side.

Three quarters of 2023.

The number of new logos that we have signed up this year is higher than the number of logos that we signed up last year and the split between digital operations and solutions and data analytics.

Also very well balanced so we have.

26.

Clients that we have won and digital operations and solutions. This year and we have 120 clients in.

And data analytics.

We're very happy with the split in the mix as such the important part is that these are larger deals.

And we already alluded to that when we spoke about and providing some color on the size of the deals that we are winning and that is something which is very encouraging. So as the company grows and as we are kind of building up our business. The fact that we are signing up much larger deals now gives us confidence in terms of.

Rohit Kapoor: So we all know that in order for Gen AI to be effective, the data estate of our clients needs to be in order. And right now, there is a huge movement in order of our clients wanting to fix their data estate. Most of them in the past had focused in on moving their structured data to the cloud and getting their structured data organized so that that data would be usable. Well, what we are finding is that the unstructured data is a much bigger piece of the work that remains to be done and we can be very, very helpful to our clients manage their unstructured data sets.

Being able to sustain that double digit growth.

That's helpful. And then just a follow up on analytics.

Is there any color that you can provide in terms of the visibility into the pipeline that you have is there sort of like a lot of multiyear projects here, where theres a certain amount of kind of reoccurring project type revenues.

How much more do you have to do in terms of new wins to kind of your medium term targets here.

Rohit Kapoor: So frankly, there's tremendous opportunity with existing clients and existing work that we have new business that we can win with it. Gen AI pure Gen AI solutions and deployments that we can have and then on the data management side. So we think this is becoming a more strategic lever for growth for us going forward. And that's why we are investing more heavily in this in this particular area. That's a very helpful color. Sounds like a boon, not a curse as some people in the market have believed. So good to see some proof points there.

Sure.

Data analytics business for us is a business where two thirds of the business is annuity based so that means we have multiyear contracts associated with it and we have ongoing support and work that we do for clients.

Manage their existing analytical operations.

One third of the work that we do is project based and discretionary and that's the part that is volatile and that kind of moves around quarter to quarter.

Maurizio Nicolelli: Throw it and Meritio as my quick follow up here on margins. Sorry, I did hear your comments, Meritio on margins, but for fiscal 24, you're not giving guidance, but if you are able to grow double digits should be just expect some margin improvement even off. The 19 plus level that you're going to end up in 23 just from scale benefits, if nothing else really changes. We have talked about, and thank you for the question, Mike.

But keep in mind with the trends that we're seeing around generating the need for that project based.

Spend has increased.

The work that we're doing particularly around payment integrity, that's something which is growing very nicely. The work that we do around.

Data management.

Some portion of that is project based but the demand strength. Our debt is very high. So we've got great pockets of growth and opportunity and there are certainly pockets like marketing analytics, which are project base, where there is <unk>.

Maurizio Nicolelli: So we have talked about every year making improvements to our margins, you know, going forward. We had the big spike up from 2020 to 2022, where we went all the way up to 18.3% from a range of 14 to 15%. And now we talked about, you know, making improvements to margins on an annual basis marginally, meaning, you know, 10 to 20 basis points a year. And we've been very successful at doing more than that, but, you know, we still think in our mindset that we should continue to drive margins higher, just incrementally, you know, not these large of big spikes that you've seen in prior years. Got it.

Definitely a headwind for us.

Got it and then just as a final kind of a clarification here.

Just any color on what quarter over quarter growth in analytics would have looked like if you takeaway marketing so meaning if we look at the decision analytics the data management the payment integrity.

Any color there on where you are in there.

Yep.

Yes.

If you peeled out marketing analytics your growth rate would be in the mid teens.

Operator: Thank you so much for taking my questions. Thank you. One moment for our next question. Again, just one moment.

For the rest of the business. So all the other parts of the business are growing very nicely.

One piece is.

<unk> is bringing is dragging our growth rate lower but you would have seen it right around the mid teens.

Perfect. Thank you guys.

Surinder Thind: Our next question comes from the line of surrender finna from Jeffery's LLC.

Wonderful thank you.

A reminder to ask a question you can press star one on your telephone and wait for your name to be announced.

Surinder Thind: Go ahead. Thank you. So for the first question, just wanted to kind of understand the new logo wins. As I look across the past few quarters, it seems that you started a year off really strong and digital ops. And sequentially the number of new logo wins has been declining and it's the exact opposite analytics. Is there anything to read into that or how should we think about, you know, demand dynamics between the two?

One moment, while we prepare our next question.

Again, if you have a question. Please press star one on your telephone.

Our next question comes from the line of Vincent Colicchio.

Barrington Research go ahead.

Okay.

Yes curious as the yellow corp situations sort of a one off or are there any other clients.

Rohit Kapoor: Sure. So for us, you know, the new client wins and the new logo wins. You know, I think looking at it on a quarter by quarter basis is not going to provide much help. It's much more to kind of see the trend over several quarters that gives a much better understanding of the kind of wins that we're having. So if you take a look at the three quarters of 2023, the number of new logos that we have signed up this year is higher than the number of logos that we signed up last year.

Under financial distress.

Require monitoring.

Yes, Vince.

It's marcio and thanks for the question, but it's a.

This is a one off we don't have any other client in this type of a situation.

And.

When you look at our our DSO than we are.

Also we'll look at the health of our clients.

This right now really is a one off at the end of the day and we don't have any other situation thats significant like that.

Rohit Kapoor: And the split between digital operations and solutions and data analytics is, you know, also very well balanced. So we have, you know, 26 clients that we have won in digital operations and solutions this year and we won 20 clients in in data analytics. So we're very happy with the split and the mix as such. The important part is that these are larger deals. And we already alluded to that when we spoke about and provided some color on the size of the deals that we are winning.

Okay second question is.

So.

You haven't done M&A in some time.

Your business is in solid shape, I would imagine better than some others.

So is your pipeline strong and have valuations come down they can get.

The attractive time to look.

Yeah, So Vince M&A is still a significant.

<unk> opportunity for us, we do have a fairly healthy pipeline of M&A opportunities were evaluating.

And we continue to go down through that process, I think valuations have become a bit more reasonable than they had been in 2022, and so you are seeing that.

Rohit Kapoor: And that is something which is very encouraging. So as the company grows and as we are kind of building up our business, the fact that we are signing up much larger deals now gives us confidence in terms of being able to sustain that double digit growth.

Surinder Thind: That's helpful.

As we go forward and we want to add capabilities and given the amount of cash flow that we generate now.

This is an area that we truly want to focus on and it's areas within within data analytics technology digital AI, it's really adding additional capabilities to.

Surinder Thind: And then just to follow up on analytics. Is there any color that you can provide in terms of the visibility into the pipeline that you have? Is there is there like a lot of multi year projects here where there's a certain amount of kind of reoccurring project type revenues or how much more do you have to do in terms of new wins to kind of hit your medium term.

To those key core areas for us to really continue to drive the business. So going forward, we will be allocating capital between M&A and share repurchase.

And you'll start to see more of a an allocation between the two versus.

Rohit Kapoor: Sure. The data analytics business for us is a business where two-thirds of the business is annuity based. So that means we have multi-year contracts associated with it and we have ongoing support and work that we do for clients, manage their existing analytical operations. One-third of the work that we do is project based and discretionary and that's the part that is volatile and that kind of moves around quarter to quarter. But keep in mind with the trends that we are seeing around generative AI, the need for that project based spend has increased.

Q3 2023 ExlService Holdings Inc Earnings Call

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