Q4 2024 ExlService Holdings Inc Earnings Call
Hello and welcome to the EXL Service Holdings Inc 4th Quarter 2024 Year End Earnings Conference Call.
Those factors set forth in today's press release discussed in the company's periodic reports.
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The SEC from time to time.
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Right.
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During our call we may reference certain non-GAAP financial measures, which we believe provide useful information faster reckon.
A reconciliation of these measures to GAAP can be found in our press release slide deck and Investor fact sheet.
Rohit: With that I'll turn the call over to Rohit.
Rohit: Thanks, John Good morning, everyone.
Rohit: Exl's fourth quarter 'twenty 'twenty four obstacles.
Rohit: But did he used to be when reviewing our strong financial results.
Rohit: In the fourth.
Rohit: Revenue of $481 million.
Rohit: An increase of 16% year over year.
Rohit: And we grew fourth quarter adjusted EPS by 26% to.
Rohit: 244 cents per share.
Rohit: We were able to maintain our strong growth momentum across both our analytics and digital operations and solutions businesses during the quarter.
Rohit: As we continue to successfully execute on our data and our strategy.
Rohit: In analytics, we delivered revenue of $208 million for the quarter.
Rohit: 2% sequentially.
Rohit: And 14% year over year.
Rohit: This acceleration of growth was driven by an improvement in the analytic services growth rate.
Rohit: Continued strong performance in healthcare payment services.
Rohit: And the contribution from <unk>.
Rohit: Right.
Rohit: Yes.
Rohit:
Rohit: Uh huh.
Rohit: Okay.
Rohit: Yeah.
Rohit: And AI adoption across the enterprise.
Rohit: These trends will continue to drive demand.
Rohit: So.
Rohit: In our digital operations and solutions business during the fourth quarter, we delivered strong growth as we leverage our domain data and AI capabilities to win new clients and expand our business with existing clients.
We grew revenue, 2% sequentially and 18% year over year to two.
Timothy Boyd: Timothy Boyd.
Timothy Boyd: This is the result of strong growth across all three industry verticals that make up our digital operations.
Timothy Boyd: We remain bullish on our digital operations business as clients continue to focus on re imagining that operating model to drive greater efficiency.
Timothy Boyd: Better customer experience and accelerated growth.
Timothy Boyd: To accelerate the execution of our data and AI strategy.
Timothy Boyd: After a greater share of the growing <unk> market.
Timothy Boyd: Yeah.
Timothy Boyd: Tom.
Timothy Boyd: Yeah, I have changed our operating model.
Timothy Boyd: The new model is comprised of industry market units.
Timothy Boyd: Hum.
Timothy Boyd: Higher value to clients.
Timothy Boyd: Leveraging our full suite of capabilities.
Timothy Boyd: And strategic growth units focused on rapidly advancing our operational analytics.
Timothy Boyd: Data engineering and AI capabilities.
Speaker Change: I think Bob chosen industries.
Speaker Change: This new operating model allows us to deepen our industry expertise and brings us closer to our clients.
Speaker Change: This enables us to anticipate and solve their challenges.
Speaker Change: With greater agility and bring to bear the full suite of <unk>.
Speaker Change: Capabilities.
Speaker Change: It will foster collaboration.
Speaker Change: Enable more efficient resource utilization.
Speaker Change: Our data AI and analytics capabilities are driving all of our solutions and our embedded across the business.
Speaker Change: Uh huh.
Speaker Change: But it does not.
Speaker Change: It will be included in our financial reporting for each segment.
Speaker Change: In order to provide greater.
Speaker Change: Since.
Speaker Change: We report all of our data and AI revenue alongside our new segments, beginning with the first quarter of 25.
Speaker Change: This shift will provide a more comprehensive representation.
Speaker Change: If the performance and quality of our business as we continue executing on our data and growth strategy.
Speaker Change: It is an exciting time for EXL as we accelerate archives.
Speaker Change: A journey that is not only redefining our company, but also reshaping the way our clients and their industries operate globally.
Speaker Change: We made a strategic pivot towards a data and growth strategy.
Speaker Change: Decades.
Speaker Change: Deep domain expertise mastery of data and proven capabilities and leveraging yeah.
Speaker Change: As we execute this strategy.
Speaker Change: We are.
Speaker Change: We achieved several significant milestones in 2024.
Speaker Change: With the acquisition of a kind of data.
Speaker Change: We enhanced our data.
Speaker Change: But it is to enable the cio's and Cdos to drive data and platform modernization mandates.
Speaker Change: Okay existing Brian Yeah solution does.
Speaker Change: Cause extract full payment.
Speaker Change: Payment or smart agent assist cord harbour.
Speaker Change: And this is real and suites.
Speaker Change: And we found several new countries.
Speaker Change: We also launched our domain specific insurance large language model, which leverages, our proprietary data and.
Speaker Change: Over 15 years of claim processing experience.
Speaker Change: To continue innovating and leading in the air space, we have expanded our partnerships with Nvidia data breaks.
Speaker Change: AWS, Microsoft and Google with a focus on leveraging best scalable and secure infrastructure agenda AI development toolkit.
Speaker Change: And engineering innovation.
Speaker Change: Let me share with you a few examples illustrating the depth and breadth of our AI implementation.
Speaker Change: The broad customer base in the industry.
Speaker Change: In which we are deploying yeah.
Speaker Change: We built and deployed and enterprise Ginyard basketball.
Scott: Hello, Scott.
Speaker Change: We have thus far implemented or use cases on this journey I platform, resulting in $10 million of operational savings.
Speaker Change: We will continue to leverage this platform to deploy more use cases, but the clients going forward.
Speaker Change: We implemented our domain specific other than for a large U S insurance company to automate the claims adjudication process.
Speaker Change: And provide improved negotiations and resolutions for insurance casualty claim.
Speaker Change: This has facilitated better decision, making improved indemnity.
Speaker Change: <unk> lowered the cost of claim handling and uncertain time.
Speaker Change: We have launched and agenda.
Speaker Change: Climbing, but one of the largest UK utility providers increase.
Speaker Change: Increasing.
Speaker Change: Great.
Speaker Change: But 45%, while improving resiliency and customer experience.
Speaker Change: We have deployed an agent to gas solution for a large consumer products company with multiple agents across the source to contract and invoice to pay cycles.
Speaker Change: This has resulted in a 75% reduction in manual effort.
Speaker Change: Improving adherence to quality and compliance standards.
Speaker Change: Data and AI at the core of our business and accounted for 53% of our revenue in 'twenty 'twenty, four making EXL a more strategic partner for our clients.
Speaker Change: This is facilitating more complex engagements and leading to more integrated deals, resulting in a stickier business with higher growth potential.
Speaker Change: Looking towards 2025, we expect AI adoption.
Speaker Change: Okay.
Speaker Change: Oh sure Yeah conversation.
Speaker Change: On supply side, it'll be I E.
Speaker Change: <unk> is uniquely positioned to capitalize.
Speaker Change: Growing demand for data and AI services.
Speaker Change: First we possess a comprehensive suite of assets, including our own IP with over 100 people axle ratios.
Speaker Change: Second.
Speaker Change: We offer an open cloud agnostic modular architecture that enables us to walk across various legacy tech stacks and data streams and access third party assets.
Speaker Change: And finally.
Speaker Change: We have extensive data management capabilities and decades of experience in domains specific workflow complexities leading to larger integrated deals.
Speaker Change: That creates substantial value for clients.
Speaker Change: This fusion domain data and yeah expertise is.
Speaker Change: Our core competitive differentiator.
Speaker Change: Alright.
Speaker Change: About this opportunity.
Speaker Change: Yesterday, we announced EXL Ridge got AI on Agentic, AI platform, which enables clients to re imagine their workflows by embedding EXL or third party AI agents into their business operations.
Speaker Change: The platform leads to greater efficiency increased accuracy and scalability across operations.
Resulting in substantial return on investment.
Speaker Change: Excellent.
Speaker Change: It is an open and modular orchestration platform.
Speaker Change: Allowing for fast implementation in all client environments.
Speaker Change: It includes more than 10 industry specific EXL built AI agents already in use across insurance.
Speaker Change: Get retail utilities and financial services.
Speaker Change: Exl's deep domain expertise AI capabilities and strong partner ecosystem.
Speaker Change: Allow us to collaborate closely with our clients to re imagine their workflows at speed.
Speaker Change: We've received feedback in our most recent Investor survey that it would be helpful for us to communicate more details about our AI solutions, including.
Speaker Change: Including specific use cases.
Speaker Change: I'd like to call your attention to two upcoming events, which may be helpful.
Speaker Change: We will be hosting our annual AI inaction virtual event on March five where we will feature clients discussing their shift to scalable AI as well as conducting demos of our solutions.
Speaker Change: Details are available on our website.
Speaker Change: We will also be holding an investor strategy update on May six in New York, where we will be providing a deeper dive on the progression of our data and AI strategy.
Speaker Change: And discuss our new operating model and reporting segments.
Speaker Change: <unk> will be announced soon.
Speaker Change: We encourage you to attend both events.
Speaker Change: Thank you all for your time and continued support we look forward to working together to shape the future of data and AI.
Speaker Change: With that.
Speaker Change: I will turn the call over to Joe to discuss our financial results in more detail.
Thank you Robin and thanks, everyone for joining us this morning, I will provide insights into our financial performance for the fourth.
Speaker Change: 24.
Speaker Change: Well.
Speaker Change: 2019.
Speaker Change: Our growth momentum in the fourth quarter with revenue of 481 million.
Speaker Change: Oh 16, 3% year over year.
Speaker Change: Reported and constant currency basis.
Speaker Change: Sequentially, we grew two 4% on a constant currency basis.
Speaker Change: Adjusted EPS was <unk> 44 cents.
Speaker Change: A year over year increase of 26, 1%.
Speaker Change: All revenue growth challenges mentioned, you're at or are on a constant currency basis.
Speaker Change: Revenue from our digital.
Speaker Change: <unk> said solutions businesses as defined by the river.
Speaker Change: All segments.
Speaker Change: And the Olympics.
Speaker Change: $273 7 million representing year over year growth of 18, 1%.
Speaker Change: Second we grew two 7%.
Speaker Change: In the insurance segment, we generated revenue of $162 million, an increase of 16, 6% year over year at three 2% sequentially.
Speaker Change: This growth was driven by the expansion of existing client relationships and new client wins.
Speaker Change: The insurance vertical consisting of both our digital operations and solutions and analytics businesses.
Speaker Change: 15, 8% year over year with revenue of 201.
Speaker Change: The emerging segment, we reported revenue of $80 2 million a growth of 19, 7% year over year and one 2% sequentially.
Speaker Change: This growth was driven by the expansion of existing client relationships and new client wins.
Speaker Change: The emerging vertical.
Speaker Change: Okay.
Speaker Change: Our digital operations and solutions and analytics businesses grew 16, 6% year over year with revenue of $170 1 million.
Speaker Change: The health care segment reported revenue of $31 6 billion, representing growth of 21, 6% year over year, and three 5% sequentially. The year over year growth was driven by higher volumes and expansion in existing client relationships.
Speaker Change: The health care vertical consisting of our digital operations and solutions and analytics businesses grew 17% year over year with revenue of $109 7 billion.
Speaker Change: In the analytics segment, we generated revenue of 207 7 billion up 14, 2% year over year.
Speaker Change: Growth in analytics was driven by higher volumes in payment services expansion of existing client relationships and new client wins and analytics services.
Speaker Change: SG&A expenses as a percentage of revenue were down 70 basis points year over year to 19, 9% driven by operating leverage and partially offset by investments in AI digital solutions front end sales and marketing.
Speaker Change: Our adjusted operating margin for the quarter was 18, 8% up 100 basis points year over year, driven by improved gross margin.
Speaker Change: And SG&A operating leverage or.
Our adjusted EPS for the quarter was <unk> 44 up 26, 1% year over year on a reported basis.
Speaker Change: Turning to our full year 2024 performance our revenue for the period was 1.838 billion up 12, 7% year over year.
Speaker Change: Revenue from our digital operations and solutions businesses was 1.042 billion.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Our insurance emerging and healthcare segments generated year over year growth of 15 point.
Speaker Change: Per cent 17, 1% and nine 8% respectively.
Speaker Change: Our analytics business business generated revenue of $796 2 million up nine 1% year over year.
Speaker Change: Adjusted operating margin for the year was 19, 4% up 10 basis points year over year.
Speaker Change: Our effective tax rate for the year was 22, 3% down 90 basis points year over year, driven by higher profit in lower tax jurisdictions.
Speaker Change: Our adjusted EPS for the year was $1 65 up 15, 4% year over year on a reported basis.
Speaker Change: Our balance sheet remains strong our cash, including short and long term investments out of the September 30 was $350 million and a revolver debt was $288 million.
Speaker Change: Net cash position of $62 million we.
Speaker Change: We generated cash flow from operations of $269 million in 2024 up 27% year over year, driven by improved profitability and working capital management.
Speaker Change: During the year, we spent 46 million on capital expenditures and $196 $5 million on repurchasing six 3 million shares at an average price of $31 30 sites.
Speaker Change: Now moving onto our outlook for 2025.
Speaker Change: Based on our growth momentum current visibility and strong pipeline, we anticipate 2025 revenue to be in the range of 2.025 billion to 2.06 billion. This represents year over year growth.
Speaker Change: 10% to 12% on a reported basis and 11% to 13% on a constant currency basis.
Speaker Change: With a forecasted foreign exchange headwind of $10 million.
Speaker Change: We expect a foreign exchange gain of approximately $1 million net interest expense of approximately $1 million and our full year effective tax rate to be in the range of 22% to 23%.
Speaker Change: We anticipate our adjusted EPS to be in the range of $1 83 to $1 89, representing a year over year growth of 11% to 14%.
Speaker Change: We expect capital expenditures to be in the range of $50 million to $55 million.
Speaker Change: To conclude we are proud of our industry, leading financial performance, we delivered in 2024, which demonstrates our unique competitive position are leading indicators remain positive setting us up for a solid start to 2025.
Speaker Change: With that road and I would be happy to take your questions.
Speaker Change: Okay.
Speaker Change: Time, if you'd like to ask a question. Please click on the race hands button, which can be found on the black bar at the bottom. If you will screen. When it is your turn you will receive a message on your screen from the house, allowing you to talk and then you will hear your name code. Please accept our mutual audio and ask you a question as a reminder, we are allowing analysts to one question and one really.
Speaker Change: Two follow up today, we would wait till they makes two and now the key to phone.
Speaker Change: Yes.
Bryan Bergin: Our first question will be from Bryan Bergin with P. D Cohen piece on the Tonight and ask a question.
Bryan Bergin: Hi, Good morning. Thank you wanted to ask on the 2025 growth outlook. So Mers you heard the last comment you made there as far as forward indicators, but I'm curious.
Bryan Bergin: Can you comment on just how client spending sentiment progress through <unk> and whether you've seen really any changes year to date through February just submit the pickup in macro volatility.
Speaker Change: Hi, Brian This is arrowhead.
Speaker Change: So for us.
Bryan Bergin: The demand environment continues to be strong we saw that in.
Speaker Change: The fourth quarter of the year.
Speaker Change: And we continue to see that that you know leading into the first quarter of this year as well.
Speaker Change: The big shift towards.
Speaker Change: And that some of the spending shifting towards data and AI that continues to play out.
Speaker Change: I think clients are looking to embed AI into the workflow and that plays to our strengths and our capabilities and so we see good demand signals on that.
Speaker Change: The pipeline for US continues to kind of develop a well so all in all that you know I think it's a good progression.
Speaker Change: Our 2020 or you would have seen that we continue to drive strong growth rate in our business and our analytics business also picked up a you know through the year. So we feel we're in a good position from a demand environment standpoint, and from an execution standpoint.
Speaker Change: Okay, Okay, that's clear.
Speaker Change: Well my follow up here, so I wanted to dig into the operating model change so kind of a bit of a combo question, but can you give.
Speaker Change: Whats really changing on the ground and maybe is there any relevant leadership and sales structure changes, you've obviously been executing well on the existing structure. So I'm just curious what guardrails are in place to just to avoid any potential early friction of a change in the model and understanding the reporting structure will change going forward can you.
Speaker Change: Just unpack how twenty-five growth may be expected you've talked in the past about obviously digital apps and analytics is there any way you can share how you maybe expect the growth in the data and AI portion of the business to grow in 'twenty five relative to what may have been the remaining digital ops across the various market units.
Speaker Change: Sure.
Speaker Change: So first off.
Speaker Change: We're all aware of the rapidly changing market environment with technological change coming in at a very very fast pace.
Speaker Change: What they wanted to know is to be a lot closer to our clients. So that we could listen to some of their properties and their objectives.
Speaker Change: And also be able to come up with ideas and ways in which we can improve operational efficiency dry pasta business and improve the customer experience.
Speaker Change: So that's the fundamental reason for making a change to our operating model. Our operating model allows us two things number one maybe much closer to our customers and be able to get much more engaged with them in a much deeper relationships with them offer them the.
Speaker Change: Old suite of EXL capabilities.
Speaker Change: And the second part of it is it allows us to be able to develop and deploy new capabilities at a much faster pace. So those are the fundamental drivers of the change in operating model.
Speaker Change: Leadership.
Speaker Change: In fact is not base significantly you basically have reallocated the portfolios amongst our existing leadership talent.
Speaker Change: And we're fortunate that we've got a good bench of leaders that are able to pick up this new operating model in that right from a client perspective, there's not much change because of that.
Speaker Change: Find executives of the account managers and the service delivery leaders essentially remains the same however, the groupings are gonna be a lot different.
Speaker Change: And then finally in terms of.
Speaker Change: The growth in the guidance.
Speaker Change: We're going to share more details of that at our Investor day.
Speaker Change: On May six and we will talk a little bit more in detail about the new segment reporting as.
Speaker Change: As well as how we are running and managing the business and so we hope to provide you with additional color at that point in time.
Speaker Change: Okay understood. Thank you.
Speaker Change: Our next question comes from Surinder <unk> with Jefferies LLC. Please on mute your line and ask your question.
Speaker Change: Thank you.
Speaker Change: Ruth I I'd like to start with a higher level more strategic question it sounds like from the commentary.
Speaker Change: That perhaps there is a bit more emphasis on that.
Speaker Change: Development of <unk>.
Speaker Change: Correct.
Speaker Change: Okay.
Speaker Change: At this point relative to maybe how business is conducted let's say the pandemic or during the early days of the rise of cloud.
Speaker Change: It just seems that theres a lot more emphasis there and that that's the point of differentiation.
Speaker Change: So you're absolutely right.
Speaker Change: All of these changes taking place.
Speaker Change: Innovation is going to have a much more strategic importance.
Speaker Change: Development.
Speaker Change: He is going to be critical.
Speaker Change: Access.
Speaker Change: Data assets.
So I think very strong value enabler. So there is a big shift that's taking place.
Speaker Change: And we wanted to position ourselves to be in it.
Speaker Change: All I can tell the market and be able to implement that into the wall.
Speaker Change: Perfect.
Speaker Change: There is a fundamental shift that's also taking place such as.
Speaker Change: I do spend.
Speaker Change: And shifting over.
Speaker Change: Got it.
Speaker Change: And then shifting over to AI enablement and goodwill.
Speaker Change: And so we want to be able to participate in that.
Speaker Change: Tam, which we weren't addressing.
Speaker Change: Thank you.
Speaker Change: And then position ourselves on that.
Speaker Change: You're absolutely right I think that the.
Speaker Change: <unk> of IP and the innovation engine. These are all going to become critical attributes of successful and sustainable growth oriented companies.
Speaker Change: That's helpful and then as a related follow up.
Speaker Change: One of the challenges from an industry perspective has been just.
Speaker Change: Our client's readiness from an infrastructure.
Speaker Change: Okay.
I have two.
Speaker Change: Thank you.
Speaker Change: Fully benefit from some solutions that are being developed.
Speaker Change: It sounds like you guys are.
Speaker Change: Maybe not senior similar do you guys is it more like point solutions that you guys are implementing to work pools at this point or how should we think about that part of the overall.
Speaker Change: And that what you are seeing concepts, allowing you to do maybe a bit more and perhaps what might be going on at competitors.
Yeah.
Speaker Change: So think of it.
Speaker Change: We break up the readiness of infrastructure client organizations into three parts.
Speaker Change: Number one is the shift to the cloud.
Speaker Change: Number two is the modernization.
Speaker Change: Legacy technology platforms.
Speaker Change: Three is the available data.
Speaker Change: Data assets, so that you can leverage.
Speaker Change: In a much more meaningful way.
Speaker Change: We are now playing in all three of these.
Speaker Change: Sex ethane.
Speaker Change: Go ahead.
Speaker Change: And then that will make it much more usable.
Yeah.
Speaker Change: But having them modernize their legacy technology platforms, we have.
Speaker Change: <unk> announced a CT harbor, which is called conversion capability leveraging that.
Speaker Change: That allows us to be able to change some of the.
Legacy models and some of the software that goes into modern core.
Speaker Change: And then we're continuing to invest in our data management capabilities. So that we can help our clients what that data is state and all the particularly around unstructured data, which has been the piece that has been.
Speaker Change: Missing in that it was a heavy lift and I think all these three different elements allow our clients to be able to benefit from the use of technology and the use of that going forward.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Maggie Nolan with William Blair. Please on mute your line and ask a question.
Maggie Nolan: Hi, Thank you.
Maggie Nolan: I wanted to ask about I think Rohit, you referred to them as 100 data assets, including accelerators or maybe correct me if I misheard that but I just wanted to try to get a sense for how widely used those are across your customer base and in particular, if you've been able to apply them to some of your larger.
Maggie Nolan: Our client relationships as well.
Maggie Nolan: Sure.
Maggie Nolan: So maybe one of the big advantages that EXL had is that we invested in analytics are way ahead of the curve and we started to build a number of these accelerators using machine learning and using advanced analytics so that.
Maggie Nolan: 100 accelerators that we've got.
Maggie Nolan: It's actually a very modern.
Maggie Nolan: Tech stack that we've got these are all you know.
Maggie Nolan: And these have all been augment clients. So they are all being tested out and they are now.
Maggie Nolan: In a practical work both situations and these are not.
Maggie Nolan: New ideas that needs to be experimented with.
Maggie Nolan: We find that the ability to kind of leverage this across multiple clients. It gives us an ability to implement with speed and implement with certainty which is why.
Maggie Nolan: Execution on AI is such a high level.
Maggie Nolan: I would say that.
Maggie Nolan: In terms of the application of these bundled accelerators.
Maggie Nolan: The integration of this is still a very very low so it's still not a you know applied.
Maggie Nolan: Applied across all of our clients and there's a lot of opportunity for us to continue to embed into client workflows and meet with the new EXL rate AI platform that we just announced yesterday.
Maggie Nolan: Can actually leverage that in a much much more agile flexible and moving with speed and scale. So that that gives us a distinct advantage.
Speaker Change: Thank you and then Mauricio maybe for 2025 can you give us a sense for.
Speaker Change: Margin expectations.
Speaker Change: You know both at the gross margin and operating level and in sort of the puts and takes that you're considering over the course of the year.
Maggie Nolan: Sure Maggie.
Maggie Nolan: You look at when you kind of look at the progression of the year in terms of gross margins. We have been we have been doing well in terms of increasing our gross margins I mean, if you look at 2023 versus 2024, we increased our gross margin by 30 basis points to 37, 6% and yogurt Q.
Maggie Nolan: It's even higher than that but that's going to be critical for us going forward as we do more and more investments in AI, we're going to need to really drive our gross margin and really get paid for that higher valued service that we're driving now.
Maggie Nolan: Going forward and so what you will see in 2025 is that progression of higher <unk>.
Maggie Nolan: Increase in our gross margins on an annual basis, it will still be choppy between the quarters, but in overall.
Maggie Nolan: Annual comparison, you'll continue to see gross margins increase where we need to spend a bit more now on investments.
Maggie Nolan: In R&D and development of our solutions. So the net of all of that will continue to be similar to what you've seen in 2024 with that 10 to 20 basis point increase in our overall margin for.
Maggie Nolan: For the year.
Very clear, thank you and great to see that continued strong gross congrats.
Maggie Nolan: Thank you.
Speaker Change: Our next question comes from Puneet Jain with J P. Morgan. Please on mute your line and ask a question.
Maggie Nolan: Okay.
Maggie Nolan: Hey.
Maggie Nolan: Thanks for taking my question.
Maggie Nolan: When you've been.
AI engine to a client.
Maggie Nolan: Can they handle it themselves like me here all the times like that.
Maggie Nolan: It sounds like they are investing a lot in there in the whole population.
Maggie Nolan: So why this tactic.
Maggie Nolan: We cannot implement some of the.
Maggie Nolan: Solutions samples or maybe broadly if you can talk about competitors backing them.
Maggie Nolan: When you.
Maggie Nolan: Deploy AI solutions in New York.
Maggie Nolan: Okay.
Maggie Nolan: Sure so.
Maggie Nolan: You know from us on that.
Maggie Nolan: And a couple of things, which are really important for us.
Maggie Nolan: <unk> agents to be effectively deployed in our client organization.
Maggie Nolan: The number one issue is.
Maggie Nolan: The option of these agents.
Speaker Change: And there are a couple of things that are necessary to ensure that you have higher adoption number one is easy.
Maggie Nolan: Our agents need to be embedded into the workflow.
Speaker Change: Actually quite useless on a standalone basis.
Maggie Nolan: Unless and until they become an integral part of the world.
Speaker Change: Hum.
Speaker Change: E efficacy and their usefulness.
<unk> is very low.
Speaker Change: Number two is that agents necessarily need to be able to talk to the data I said from the data the state of our clients.
Speaker Change: And stitching that together is another thing, which is really really important to create value from their agents and increase the adoption of it.
Speaker Change: And then finally this has to be done in a hybrid environment, which the client has so whether they use the cloud over that they have an on premise capability. It has to be kind of stretched in in that hybrid environment.
Speaker Change: Our.
Speaker Change: Expertise is not only building the agents, which has a functional capability.
Speaker Change: Actually integrating that into the workflow and combining it with their data assets.
Speaker Change: Therefore, the adoption date.
Speaker Change: It is much higher and that's something which our clients struggle with Boeing themselves.
Speaker Change: That's something which they struggled with other.
Speaker Change: Partners that they work with.
Speaker Change: We are in that sweet spot, where we understand the demand we understand the workflow we have got mastering O'hare.
Speaker Change: Clients organize their data assets.
Speaker Change: We've got deep expertise in terms of being able to fine tune those AI models and embedded into the workflow and that's what our clients really love about us and that's why they're engaging with us.
Speaker Change: Okay, that's very helpful.
Speaker Change: And then.
Speaker Change: New financial.
Speaker Change: Financial model operating model I think it makes sense to combine data.
Speaker Change: AI.
Speaker Change: And then analytics.
Speaker Change: Those capabilities in digital operations, but how should we think about.
Speaker Change: Stand alone analytics services like the marketing analytics as to why they took some extra time.
Speaker Change: So how what are you going to ensure that there is.
Speaker Change: Accountability lack the visibility on some of those services and those services continue to grow at the same rate.
Speaker Change: A new operating model.
Speaker Change: Sure.
Speaker Change: So firstly you're right.
Speaker Change: Analytics business.
Speaker Change: <unk> has really grown and become one of the largest analytics business, but there is on a standalone basis, and I think last year. It was close to about $800 million of revenue.
Speaker Change: And that is now tightly.
Speaker Change: Tightly integrated and with each of the industry verticals, where we serve our clients and and therefore are we going to have it be part of the.
Speaker Change: Reporting segments in the industry market units that we have as we go to market.
Speaker Change: We are going to provide you with greater transparency on data and AI and and that's something which we will provide to you on a quarterly basis.
Speaker Change: I said in my prepared remarks.
Speaker Change: Our current penetration of data and AI at the end of 'twenty 'twenty four stands at 53%.
Speaker Change: So that's something which we believe is a you know one of the most mature levels of data and AI.
Speaker Change: Our capabilities and keep in mind, this data and AI and metrics that we're reporting out.
Speaker Change: Is stand alone capability.
Speaker Change: And therefore, this is something which we will continue to report on a on a on a quarterly basis.
Speaker Change: Unpack this for your home and in a much more meaningful way at our Investor day on May six so that you'll be able to practice and be able to get.
Speaker Change: A much more confidence in terms of the progression of that.
Speaker Change: Flexibility of our business as well as some of the progress that we're making into data and AI and and how that is evolving as well.
Speaker Change: Okay. Thank you.
Speaker Change: Tim.
Speaker Change: Our next question comes from Jacob pockets. He was bad piece of mute your line and ask a question.
Jacob Pockets: Hi, guys. Thanks for taking my question could you just go over really quick for Q4 and expected 2025 acquisition contribution could you quantify that for us. Please.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: So during the <unk> so.
Speaker Change: During the year.
Speaker Change: We purchased the ITI back in the third quarter of 'twenty 'twenty four.
Speaker Change: And if you look at just the overall growth growth of the year.
Speaker Change: Overall.
Speaker Change: Yeah.
Speaker Change: Overall, we grew 12, 7% on a reported basis and on an organic basis, we could call point.
Speaker Change: Four 1% so it was right around $9 million of contributions during the year.
Speaker Change: Thank you and then just wanted to touch on kind of dynamics with the analytics businesses across the three vertical so.
Speaker Change: It looks like an emerging analytics, you had a nice acceleration or deceleration in health.
Speaker Change: Insurance can you guys just kind of.
Speaker Change: Explain some of the dynamics that are happening there and if you expect it to continue in a similar manner into 2025.
Speaker Change: No.
Speaker Change: If you look at just the year over year growth rate on a constant currency basis. If you look at health care emerging and insurance just a growth rate growth rates with analytics embedded it's actually fairly consistent on a constant currency basis.
Speaker Change: Variation there is only between 13% and 15%.
Speaker Change: So it's.
Speaker Change: It's there is theres some theres some puts and takes here and there within each of the segments. When we embed analytics, but it's still very consistent overall.
Speaker Change: Yeah, I would just add that.
Speaker Change: On a quarter on quarter.
Speaker Change: There will be variation in there is.
Speaker Change: Divergence between the three industry vertical.
Speaker Change: Year on year basis actually the progression is pretty much the same level.
Speaker Change: As a reminder, if you would like to ask a question. Please click on the raise hand button, which can be found on the black bar at the bottom of your screen. Our next question comes from David Grossman with Stifel. Europe. Please on mute your line and ask a question.
David Grossman: Good morning, Thank you.
David Grossman: Rohit, maybe you could go back to just the operating model change.
David Grossman: And maybe you could just go into a little more detail in terms of what were the fundamental business reasons, what where you're seeing that really motivated to make this change with it.
David Grossman: I need to.
David Grossman: Provide one point of contact and responsibility for really managing the relationship on an industry level and offering the entire service offering or is it something more than us.
David Grossman: Sure David So if you take a look at.
David Grossman: Our operating model previously.
David Grossman: We were structured by three industry verticals insurance health care and our emerging business unit.
David Grossman: And one horizontal capability, which was analytics. So we had three in our.
David Grossman: Industry verticals and one horizontal.
David Grossman: But analytics now we wanted to keep it that way because.
David Grossman: Analytics was a business that we wanted to really develop and mature we wanted to be able to monetize that.
David Grossman: Not only the revenue progression, but also the margin progression of that business and we wanted to ensure that it got the attention of.
David Grossman: The team in terms of the development of that project.
David Grossman: We now believe that the analytics vertical.
David Grossman: Outside of the analytics business unit is a mature business youre right. It's like I said $800 million of revenue, it's one of the largest and most powerful.
David Grossman: Our service offerings that we have in the marketplace.
David Grossman: And it's embedded in every single thing that we do now with our clients across the board.
David Grossman: And the cross penetration between digital operations clients in analytics.
David Grossman: Increased quite significantly.
David Grossman: Going forward, because it will be much better for us all.
David Grossman: Being able to focusing on our clients and be much closer to them. We also wanted to make sure that the international markets.
David Grossman: A space that we start to focus in on and start to give additional attention on you will have seen that.
David Grossman: The national growth pockets for us.
David Grossman: The penetration has increased.
Speaker Change: Over the last three years I believe in 2022 International markets contributed about 14% of our revenue we took it up to 16% and 23 and in granite point has expanded to 18%.
Speaker Change: That is something which we are going to continue to drive that going forward and that becomes an important priority for us. So the new operating model that we now have.
Speaker Change: As Bob insurance, It's Scott Health care.
Banking and capital markets and diversified industries together and then it's got all of the international growth markets.
Speaker Change: Now, where we wanted to kind of pay special attention to so this allows us to kind of manage the business in a way that we can be closer to our customers give much more focus on it.
Speaker Change: And then every single client of ours can.
Speaker Change: Available all the service offerings that we've got in place. We believe there are two fundamental auto market motions that this will be particularly helpful. In number one.
Oh power ability to cross sell everything.
Speaker Change: And we think that there are cross sell penetration is still very low and therefore, we can cross sell services into this into the same client base.
Speaker Change: Number two.
Speaker Change: Integrated deals become much more important and we are already seeing that trend. We can combine all of the capabilities of our domain operations Black box data management capabilities.
Speaker Change: Services analytics services, and solutions and bundle that together and be able to handle that.
Speaker Change: So these two go to market motions and become much more pronounced as we go forward and the new operating model.
Speaker Change: Okay got it thanks for that.
Speaker Change: There was one other question I think it may have come up on a previous question or you've talked about this historically is the.
Speaker Change: The use of automation to convert or to migrate your customers legacy applications to more modern colored.
Speaker Change: And I'm, just using that capability as backdrop, just wondering if you could update us on how G&A AI is impacting your delivery of service beyond.
Speaker Change: Kind of what you've already talked about historically in that quote conversion.
Speaker Change: How pervasive is that and what other use cases for <unk>.
Speaker Change: Are you seeing in the delivery.
Speaker Change: The service offering and what impacts.
Speaker Change: Do you think that's going to have on your margins over time as royalty revenue growth.
Speaker Change: Sure.
Speaker Change: As we've stated previously.
Speaker Change: Three fundamental areas, where we are leveraging <unk> one is a power conversion ambev embolic capability called up for Alba.
Speaker Change: The second is around our customer service the ability to be able to provide the automated content.
Speaker Change: And streamline and create greater efficiency and customer service and the third is around the data extraction and our ability to Oh unstructured data and bring it into the workflow and create additional value.
Speaker Change: Our focus a little bit more on the court all of our solutions that we have which.
Speaker Change: Allows us to be able to use Jenny I.
Speaker Change: To modernize our clients on legacy platforms and legacy corn into more modern day call. So think about it as a Prime example is clients wanting to convert their SaaS models.
Speaker Change: Into modern day, Python or our newer call that that is much more flexible and much more a function of useful for them.
Speaker Change: In the past that product taken us a number of nine months and years to be able to convert the fast called into Python.
Speaker Change: And they were able to create a chunk of that cold and break it into different elements. We are able to document that you know what the court actually means and then we are able to convert it again.
Speaker Change: Again using journey II in a very efficient format. So what it does is it brings down the time and the cost of that called conversion base significantly.
Speaker Change: And therefore, our clients are embracing this and moving forward on this core conversion very very rapidly. We've got a number of our clients that have chosen to partner with us on this.
Speaker Change: And because we understand that.
That business models, they're very familiar with this core conversion factory, we're able to kind of get them to a new core.
Speaker Change: Very very quick timeframe and help them modernize their platforms. So I hope that's helpful. A little bit in terms of the understanding we are going to be showcasing CT harbor as part of our March.
Speaker Change: Yeah in action.
Speaker Change: Now that we have so that that will provide additional color on that as well.
Speaker Change: Yeah, but just from a financial perspective, how.
Speaker Change: How should we think about these three elements.
Speaker Change: Whether it's a headwind or a tailwind to revenue growth and margin.
Speaker Change: Well for us.
Speaker Change: So it's it's actually turning out to be a tailwind because what we're finding is that we can work on a much bigger piece of our opportunity at our clients and therefore, the workers are limited to a process or a part of our process and our task is actually is the customer journey.
Speaker Change: A complete integrated deal.
Speaker Change: <unk> too because we have this capability, we're getting access to a number of different initiatives at the client organization that typically we won't have heightened the bus and lastly, our buying centers have also expanded and now the CIO and the C. D. O are engaged with us directly on this previously.
Speaker Change: We were the only Boston D C O. So it actually expands our expands the Tam it expands the size of the engagement and it is it is a tailwind and you can see that in the growth rate of our digital operations, our revenue growth, which is growing very nicely.
Speaker Change: Q4, it grew at 18% so that's been a very very nice.
Speaker Change: Nice uptick for us.
Speaker Change: Alright, great. Thank you.
Speaker Change: We have no further questions at this time I will turn the call back to John Kristoff for closing remarks.
John Kristoff: Yes, I'd like to thank everyone for joining us this morning, and as always for additional questions. Please feel free to reach out to me directly. Thank you.