Q2 2025 ExlService Holdings Inc Earnings Call

Rohit Kapoor: Analytics services with existing clients in the healthcare payer space fueled by demand for our data and AI-led solutions. Banking, capital markets, and diversified industries also represented nearly a quarter of our revenue, and we were able to accelerate year-over-year growth for the fourth consecutive quarter. Leveraging our full data and AI capabilities to drive end-to-end value and improve business outcomes in this segment is a tremendous opportunity. We also drove strong year-over-year and sequential growth in our international growth market segment during the quarter as we continue to diversify our business geographically. This segment grew to 18% of our total revenue in the quarter. We have immense potential to grow our client base in this segment, which is an opportunity to enhance our overall growth rate over time.

An analytic services with existing clients in the healthcare payer space fueled by demand for our data and AI Solutions.

Banking Capital markets and diversified Industries. Also represented nearly a quarter of our revenue and we were able to accelerate year-over-year growth for the fourth consecutive quarter.

Leveraging our full data and AI capabilities to drive end-to-end value and improve business outcomes in this segment is a tremendous opportunity.

We also drove strong year-over-year and sequential growth in our International growth market segments during the quarter. As we continue to diversify our business geographically,

this segment grew to 18% of our total revenue in the quarter.

We have immense potential to grow our client base in this segment, which is an opportunity to enhance our overall growth rate over time.

Rohit Kapoor: During the quarter, our data and AI-led revenue increased 17% year-over-year and grew to 54% of total revenue with strong performance across all four of our reporting segments. This demonstrates the strength of our competitive position as a recognized leader in embedding AI in the workflow and delivering superior return on investments for our clients. This strength is reflected not only in our consistent double-digit revenue growth but also in a robust double-digit expansion of our sales pipeline this past quarter, driven by large integrated deals. We have consistently delivered double-digit growth for seven of the past eight years, with 2020 being the only exception due to the pandemic. Looking ahead, we remain confident in our ability to sustain this performance. I'd like to highlight three key areas where ExlService Holdings Inc. Q2 is clearly differentiated, setting us apart in our ability to consistently drive double-digit long-term growth.

During the quarter, our Data and AI led revenue increased 17% year-over-year and grew to 54% of total revenue, with strong performance across all four of our reporting segments.

This demonstrates, the strength of our competitive position as a recognized leader in embedding AI in the workflow and delivering Superior return on investments for our clients.

This strength is reflected, not only in our consistent double-digit Revenue growth but also in a robust double digit expansion of our sales pipeline, this past quarter driven by large integrated deals.

We have consistently delivered double-digit growth for seven of the past eight years, with 2020 being the only exception due to the pandemic.

Looking ahead. We remain confident in our ability to sustain this performance.

I'd like to highlight 3 key areas.

Rohit Kapoor: First, our business model is fundamentally different from many of our peers. We've deliberately avoided low-value work, which is highly vulnerable to disruption from AI. Instead, we have always focused on serving our clients in domain-specific, complex business workflows. These workflows are mission-critical and are crucial to achieving business outcomes for our clients. Over time, we've built deep trust by continuously evolving alongside our clients, helping them drive growth and deliver measurable business outcomes. This has resulted in exceptionally high renewal rates, with over 75% of our revenue being recurring or annuity-like. This provides stability and consistency in our revenue. Second, we've spent the last 25 years continually evolving our solution portfolio with a sharp focus on building analytics, data, and AI.

Where EXL is clearly differentiated setting us apart in our ability to consistently Drive, double digit, long-term growth.

First.

Our business model is fundamentally different, from many of our peers.

We've deliberately avoided low-value work which is highly vulnerable to disruption from AI.

instead we have always focused on serving our clients in domain specific complex business workflows,

These workflows are mission critical and are crucial to achieving business outcomes for our clients.

Over time, we've built deep, trust by continuously evolving. Alongside our clients, helping them Drive growth and deliver measurable business outcomes.

this has resulted into exceptionally High, renewal rates with over 75% of our Revenue, being recurring, or annuity like

This provides stability and consistency in our Revenue.

Second.

We've spent the last 25 years continually evolving our solution portfolio.

Rohit Kapoor: As generative AI and agentic AI become central to transformation efforts, success increasingly depends on three things: deep domain expertise and a nuanced understanding of process value chain complexity; proficiency with the multimodal data generated and consumed by these processes; and the ability to orchestrate and embed advanced AI into workflows to deliver meaningful outcomes. ExlService Holdings Inc. has a unique combination of strengths across domain, data, and AI. Our decades of domain experience and early investments in data and AI allow us to help clients seamlessly embed AI into operations and achieve tangible results. The third key area where ExlService Holdings Inc. is differentiated is that data and AI now represent the majority of our revenue, 54% this quarter. This makes us one of the only few companies in our space with such a heavy concentration of revenue in these high-growth areas.

With a sharp focus on building analytics data and AI.

As generative Ai and agentic AI becomes Central to transformation efforts. Success increasingly depends on 3 things.

Deep domain expertise and a nuanced, understanding of process value chain complexity.

proficiency with the multimodal data, generated and consumed by these processes,

and,

The ability to orchestrate and embed Advanced AI into workflows to deliver meaningful outcomes.

EXL has a unique combination of strengths across domain data and AI.

Our Decades of domain experience and early investments in data and AI allow us to help clients seamlessly, embed AI into operations and Achieve tangible results.

The majority of our revenue, 54%, this quarter.

This makes us 1 of the only few companies in our space with such a heavy concentration of Revenue in these high growth areas.

Rohit Kapoor: As AI adoption accelerates, industry forecasts show AI services growing at twice the pace of overall IT, cloud, and digital services. This long-term secular trend presents a significant opportunity for ExlService Holdings Inc. In short, our differentiated business model, deep capabilities in data and AI, and strong alignment with long-term market trends position us exceptionally well. We've earned the trust of our clients by consistently helping them grow and improve performance, making ExlService Holdings Inc. the partner of choice now and into the future. We continue to invest in next-generation data and AI capabilities, solutions, and partnerships to deliver differentiated value for our clients. During the quarter, we expanded our proprietary large language model offerings. Notably, we launched our first multimodal LLM for property insurance underwriting, leveraging our proprietary survey data. This solution automates the interpretation and classification of property survey images, enhancing our property underwriting services.

As AI adoption, accelerates industry forecasts show AI Services growing at twice. The pace of overall it cloud and Digital Services,

This long-term secular Trend presents a significant opportunity for ESL.

In short, our differentiated business model deep capabilities in data, and Ai, and strong alignment with long-term market trends position as exceptionally. Well,

We've earned the trust of our clients by consistently, helping them grow and improve performance, making Excel, the partner of choice now, and into the future.

We continue to invest in Next Generation data and AI capabilities Solutions and Partnerships to deliver differentiated value for our clients.

During the quarter, we expanded our proprietary large language model offerings.

Notably. We launched our first multimodal llm for property insurance underwriting leveraging, our proprietary survey data.

Rohit Kapoor: We also introduced a finance and accounting LLM that integrates structured and unstructured data to power agentic AI across finance workflows. Built with finance-specific ontologies, it supports use cases such as invoice extraction, audit Q&A, negotiation, and forecasting. In healthcare, we unveiled a payer-focused LLM designed to automate and enhance the accuracy of medical code extraction and summarize complex clinical data from physician notes, medical records, discharge summaries, and lab reports. Our extensive domain knowledge and access to relevant training data in these specific domains uniquely positions ExlService Holdings Inc. to deliver more effective generative AI solutions at a lower cost to drive higher ROI for our clients. We also experienced growing adoption of our agentic AI platform, which enables clients to reimagine operations and deliver transformative business outcomes. For example, we partnered with a major insurance client to modernize its customer communication management.

This solution, automates the interpretation and classification of property. Survey images enhancing our property underwriting services.

We also introduced a Finance and Accounting LLM that integrates structured and unstructured data to power Agentic AI across finance workflows.

Built with Finance specific ontologies, it supports use cases such as invoice, extraction, audit Q&A, negotiation and forecasting.

In healthcare, we unveiled a pair focused, llm designed to automate and enhance the accuracy of medical code extraction. And summarize complex, clinical data from physician notes, medical records discharge summaries and lab reports.

Our extensive domain knowledge and access to relevant training data in these specific, domains uniquely positions, the Excel to deliver more effective generative, AI Solutions, at a lower cost to drive higher Roi for our clients.

We also experienced growing adoption of our e-Accelerate AI, Agentic AI platform, which enables clients to reimagine operations and deliver transformative business outcomes.

Rohit Kapoor: Handling over 4 million correspondence annually, the client faced high operational costs, inconsistent templates, and regulatory compliance risks. By deploying an agentic AI solution capable of autonomously planning, executing, and adapting complex workflows with minimal human oversight, we helped the client significantly reduce costs, improve consistency and documentation, and mitigate compliance risk. We leveraged our AI solutions to expand our client base by adding a large global bank. We partnered with them to modernize their data lineage framework. The client's legacy systems lacked transparency and were heavily reliant on manual processes. We implemented our agentic AI data harvest solution to produce a comprehensive data lineage map. Our client achieved over 98% data lineage coverage with a significantly reduced manual effort. This result exceeded the client's expectations and has enabled us to generate additional opportunities with them in other areas. These are just two examples of how ExlService Holdings Inc.

For example, we partnered with a major Insurance client to modernize its customer communication management.

Handling over 4 million correspondents annually.

The client faced High operational costs.

Inconsistent templates and Regulatory Compliance risks.

By deploying an agentic AI solution capable of autonomously planning executing and adapting complex, workflows with minimal human oversight. We help the clients significantly reduce costs improve consistency, and documentation and mitigate compliance risk.

We leveraged our AI solutions to expand our client base by adding a large global bank.

We partnered with them to modernize their data, lineage framework.

The client's Legacy systems, lacks transparency, and were heavily reliant on manual processes.

We implemented our agentic AI data Hardware solution to produce a comprehensive data lineage map.

Our client achieved over 98% data, lineage coverage with a significantly reduced manual effort.

This result exceeded the client's expectations and has enabled us to generate additional opportunities with them in other areas.

Rohit Kapoor: AI is enabling us to move into new domains, from automating customer communications to delivering full data lineage and traceability, expanding our service offerings, increasing our total addressable market, and sustaining our double-digit growth trajectory. We are also extending our reach through strategic partnerships. Most recently, we announced a collaboration with Genesys, a global cloud leader in AI-powered customer experience. This partnership combines ExlService Holdings Inc. deep data AI and domain expertise with Genesys, an industry-leading contact center as a service platform. Together, we are enabling enterprises across insurance, banking, healthcare, and retail to transform customer engagement through intelligent personalization, predictive analytics, and enhanced customer experiences. Our progress on data and AI is gaining global recognition and reinforcing ExlService Holdings Inc.'s position as a leader in AI deployment. I recently had the privilege of participating in the World Economic Forum's annual meeting of the new champions in Tianjin, China.

These are just 2 examples of how excelerate AI is enabling us to move into new domains. From automating customer Communications to delivering full data, lineage and traceability expanding our service offerings, increasing our total addressable market and sustaining our double digit growth trajectory

Most recently, we announced a collaboration with Genesis, a global cloud leader in AI-powered customer experience.

This partnership combines exl's deep data, Ai and domain expertise with Genesis industry-leading contact center as a service platform.

Together we are enabling Enterprises across Insurance banking Healthcare and Retail to transform customer engagement through intelligent personalization Predictive Analytics and enhanced customer experiences.

Our progress on data and AI is gaining Global recognition and reinforcing esl's position, as a leader, in AI deployment.

Rohit Kapoor: I addressed delegates as an industry leader at an interactive AI hub session and at a press conference where ExlService Holdings Inc. was honored as a 2025 Minds winner for our code harvest solution, an AI-powered platform for software code translation. MINDS, which stands for Meaningful, Intelligent, Novel, Deployable Solutions, was established to spotlight real-world AI applications delivering measurable impact at scale. Not pilots or prototypes, but deployed solutions already transforming industries and lives. As part of this recognition, ExlService Holdings Inc. will actively contribute insights to World Economic Forum initiatives over the next two years and collaborate with other global AI leaders working on similar challenges. We believe this collective approach is critical to unlocking AI's full potential for positive impact. In conclusion, we are excited about the expanding market opportunities in data and AI.

I recently had the privilege of participating in the world economic forum's annual meeting of the new champions in tanzin China.

I addressed delegates as an industry leader.

At an interactive AI Hub session and at a press conference, where EXL was honored as a 2025 Minds winner for our code, Harbor solution, and AI powered platform for software code translation.

Minds which stands for Meaningful intelligent novel, Deployable Solutions was established to Spotlight. Real world, AI applications, delivering measurable impact at scale.

Not Pilots or prototypes but deployed Solutions already transforming Industries and lives.

As part of this recognition EXL will actively contribute insights to World economic Forum initiatives over the next 2 years and collaborate with other Global, our leaders working on similar challenges,

We believe this Collective approach is critical to unlocking ai's full potential for positive impact.

In conclusion.

Rohit Kapoor: With our deep domain knowledge, advanced data and AI capabilities, and proven ability to embed AI into complex workflows, ExlService Holdings Inc. is uniquely positioned to deliver meaningful business outcomes and strong ROI for our clients. Our business model is well-balanced and resilient, with a strong track record of performance across economic cycles. Over 75% of our revenue is annuity-like, providing excellent visibility and stability for the remainder of the year. Coupled with the continued double-digit growth in our sales pipeline, this strong foundation gives us the confidence to raise both our revenue and EPS guidance for the full year. With that, I'll turn the call over to Maurizio Nicolelli to provide more details on our financial performance.

We are excited about the expanding Market opportunities in data and AI.

With our deep domain knowledge, Advanced Data and AI capabilities and proven ability to embed. AI into complex. Workflows Excel is uniquely positioned to deliver meaningful business outcomes and strong Roi for our clients.

Our business model is well balanced and resilient, with a strong track record of performance across economic cycles.

Over 75% of our revenue is annuity like

providing excellent visibility and stability for the remainder of the year.

Coupled with the continued double-digit growth in our sales pipeline, this strong foundation gives us confidence to raise both our revenue and EPS guidance for the full year.

Maurizio Nicolelli: Thank you, Rohit, and thanks everyone for joining us this morning. I will provide insights into our financial performance for the second quarter and our revised outlook for 2025. We delivered a strong second quarter with revenue of $514.5 million, up 14.7% year-over-year on a reported basis, and 14.6% on a constant currency basis. Sequentially, we grew 2.2% on a constant currency basis. Adjusted EPS was $0.49, a year-over-year increase of 20.3%. All revenue growth percentages mentioned hereafter are on a constant currency basis unless otherwise stated. Turning to revenue by segment in the second quarter, the insurance segment grew 8.6% year-over-year with revenue of $172.2 million. This was driven by expansion in existing client relationships and new client wins. The insurance vertical, including revenue from international growth markets, grew 9.5% year-over-year with revenue of $203.2 million.

With that, I'll turn the call over to Mauricio to provide more details on our financial performance.

Thank you, Road, and thanks everyone for joining us this morning. I will provide insights into our financial performance for the second quarter and our revised outlook for 2025.

We delivered a strong second quarter with revenue of $514.5 million, representing a 14.7% year-over-year increase on a reported basis and a 14.6% increase on a constant currency basis.

Sequentially. We grew 2.2% on a constant currency basis.

Adjusted EPS was 49 cents. A year-over-year increase of 20.3%.

all revenue, growth percentages mentioned Hereafter are on a constant currency basis, unless otherwise stated

now turning to revenue by segment in the second quarter, the insurance segment grew 8.6% year-over-year with revenue of 172.2 million. This was driven by expansion in existing client relationships and new client wins.

Maurizio Nicolelli: The healthcare and life sciences segment reported revenue of $129.5 million, representing growth of 22% year-over-year and 3.1% sequentially. The year-over-year growth was driven by higher volumes in our payment services business and expansion in existing client relationships. The healthcare and life sciences vertical, including revenue from international growth markets, grew 21.9% year-over-year with revenue of $129.7 million. In the banking, capital markets, and diversified industries segment, we reported revenue of $121.1 million, representing growth of 15.8% year-over-year and 2.7% sequentially. This growth was driven by the expansion of existing client relationships and new wins, largely in banking and capital markets clients. The banking, capital markets, and diversified industries vertical, including revenue from international growth markets, grew 15.7% year-over-year with revenue of $181.5 million. In the international growth markets segment, we generated revenue of $91.7 million, up 15% year-over-year and 4.7% sequentially.

The insurance vertical, including revenue from International growth markets through 9.5%, year-over-year with revenue of 203.2 million.

The healthcare and life scientist segment, reported revenue of 129.5 million representing growth of 22% year-over-year and 3.1% sequentially.

World was driven by higher volumes in our payment services business and expansion in existing client relationships.

The healthcare and Life Sciences vertical including revenue from International growth markets grew 21.9% year-over-year with revenue of 129.7 million.

In the banking, Capital markets and diversified industry segments. We reported revenue of 121.1 million representing growth of 15.8% year-over-year and 2.7% sequentially.

This growth was driven by the expansion of existing client relationships and new wins, largely in banking and capital markets clients.

The Banking, Capital Markets, and Diversified Industries vertical, including revenue from international growth markets, grew 15.7% year-over-year, with revenue of $181.5 million.

Maurizio Nicolelli: This growth was primarily driven by new client wins, ramp-ups, and higher volumes with existing clients across insurance and banking, capital markets, and diversified industries. SG&A expenses, as a percentage of revenue, declined 130 basis points year-over-year to 19.2%, driven by the one-time restructuring costs we had in the second quarter of last year and lower employee costs. Our adjusted operating margin for the quarter was 19.6%, down 20 basis points year-over-year, driven by investments in new solutions. Our effective tax rate for the quarter was 22.4%, down 80 basis points year-over-year, driven by higher profits in lower tax jurisdictions and reduced U.S. state taxes. Our adjusted EPS for the quarter was $0.49, up 20.3% year-over-year on a reported basis. Turning to our first-half performance, our revenue for the period was $1.015 billion, up 14.9% year-over-year on a constant currency basis.

In the international growth market segments, we generated revenue of 91.7 million oh 15% year-over-year and 4.7% sequentially.

This growth was primarily driven by new Klim wins ramp ups and higher volumes with existing clients across insurance and banking Capital markets and diversified Industries.

Sgna expenses as a percentage of Revenue declined, 130 basis points year-over-year. The 19.2% driven by the 1- time restructuring costs we had in the second quarter of last year and lower employee costs.

Our adjusted operating margin for the quarter was 19.6% down, 20 basis points. Year-over-year driven by investments in new Solutions.

Are effective tax rate for the quarter was 22.4% down, 80 basis points. Year-over-year driven by higher profits in lower tax jurisdictions and reduced US state taxes.

Our adjusted EPS for the quarter was 49, cents up 20.3% year-over-year on reported basis.

Maurizio Nicolelli: This increase was driven by double-digit growth across both our data and AI-led and digital operations services. The adjusted operating margin for the period was 19.9%, up 50 basis points year-over-year. Our first-half adjusted EPS was $0.97, up 23.5% year-over-year on a reported basis. Our balance sheet remains strong. Our cash, including short and long-term investments as of June 30th, was $356 million, and our revolvers debt was $260 million for a net cash position of $96 million. We generated cash flow from operations of $109 million in the quarter versus $75 million in the second quarter of 2024. This improvement was driven by higher profitability and improved working capital. During the first six months, we spent $27 million on capital expenditures and $50 million on share repurchases.

Turning to our first-half performance, our revenue for the period was $1.015 billion, up 14.9% year-over-year on a constant currency basis.

This increase was driven by double-digit growth across both our data and AI lead and digital operations services.

The adjusted operating margin for the period was 19.9% of 50 basis, points year-over-year.

With $0.97 of 23.5% year-over-year on a reported basis.

Our balance sheet remains strong. Our cash, including short- and long-term investments, as of June 30th, was $356 million. Our revolver debt was $260 million, resulting in a net cash position of $96 million.

We generated cash flow from operations of $109 million in the quarter, compared to $75 million. In the second quarter of 2024, this improvement was driven by higher profitability and improved working capital.

Maurizio Nicolelli: Given our confidence in the business and strong cash flow generation, we have entered into a $125 million accelerated share repurchase program under our existing $500 million board authorization. The repurchase will be funded through available cash and our credit facility. Share repurchases are a key component of our capital allocation strategy and an effective way to enhance shareholder value. Moving on to our outlook for 2025. While we remain prudent in our outlook for the year, our continued momentum and strong sales pipeline give us confidence to raise our revenue and adjusted diluted EPS guidance for the year. We now anticipate 2025 revenue to be in the range of $2.05 billion to $2.07 billion, representing year-over-year growth of 12% to 13% on a reported and constant currency basis. This is an increase of $10 million at the midpoint of our previous guidance.

During the first six months, we spent $27 million on capital expenditures and $50 million on share repurchases.

Given our confidence in the business and strong cash flow generation. We have entered into a 125 million accelerated share repurchase program under our existing 500 million board. Authorization.

The repurchase will be funded through available cash and our credit facility.

Share repurchases are a key component of our capital allocation strategy and an effective way to enhance shareholder value.

Now, moving on to our outlook for 2025.

While we remain prudent in our outlook. For the year, our continued momentum and strong sales pipeline gives us confidence to raise our revenue and adjusted diluted EPS guidance for the year. We now anticipate 2025 Revenue to be in the range of 2.05 billion, to 22.07 billion, representing year-over-year growth of 12 to 13%, on reported and constant currency basis.

Maurizio Nicolelli: We expect a foreign exchange gain of approximately $4 million to $5 million, net interest expense of approximately $1 million, and our full-year effective tax rate to be in the range of 22% to 23%. We expect capital expenditures to be in the range of $50 million to $55 million. We anticipate our adjusted EPS to be in the range of $1.86 to $1.90, representing year-over-year growth of 13% to 15%. To conclude, we delivered another exceptional quarter, demonstrating our affordable competitive position in embedding AI into the workflow. In addition, we have a highly adaptable and resilient business model and a strong sales pipeline, giving us confidence in our ability to maintain our double-digit growth momentum. With that, Rohit and I would be happy to take your questions.

This is an increase of 10 million at the midpoint of our previous guidance.

Of approximately 4 to 5 million. Next interest, expense of approximately 1 million an hour, a full year effective tax rate to be in the range of 22 to 23%. We expect Capital expenditures to be in the range of 50 million to 55 million.

We anticipate our adjusted EPS to be in the range of $1.86 to $1.90, representing year-over-year growth of 13% to 15%.

To conclude we delivered another exceptional quarter, demonstrating our vulnerable competitive position in embedding AI into the workflow. In addition we have a highly adaptable and resilient business model, and a strong sales pipeline giving us confidence in our ability to maintain our double digit growth momentum

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

John Kristoff: Thank you. At this time, 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. When it is your turn, you will receive a message on your screen from the host allowing you to talk. Then you will hear your name called. Please accept, unmute your audio, and ask your question. As a reminder, we are allowing analysts one question and one related follow-up today. We will wait one moment to allow the queue to form. Our first question comes from Bryan Bergin, with TD Cowen. Bryan, please unmute your audio and ask your question.

Thank you at this time. 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. When it is your turn, you will receive a message on your screen from the host, allowing you to talk, and then you will hear your name called. Please accept our mute, your audio and ask your question. As a reminder, we are allowing analysts 1 question and 1 related, follow-up today.

We will wait, 1 moment to allow the queue to form.

Our first question comes from Brian Bergin with TD Cohen. Brian, please unmute your audio and ask your question.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): Hi, guys. Good morning. Thank you. I wanted to start on some details within your two key sectors in insurance and healthcare. In insurance, you see growth was stable quarter on quarter. Just curious, are there any drivers weighing on that relative growth rate versus the strong growth in the other sectors? Do you see insurance accelerating as you go through the second half? On healthcare, really strong first half. Can you just give some details, though, on your underlying exposures? We have gotten some questions as it is related from risks, from bill cuts to certain programs. Just curious if you see any impacts potentially in that sector as you move ahead.

Hi guys. Good morning, thank you. I wanted to start on some details within your 2.

Conference in healthcare so an insurance. You see growth was stable quarter on quarter, just curious, are there any drivers Weighing on that relative growth rate versus the strong growth in the other sectors? And do you see Insurance accelerating as you go through the second half? And then, on Healthcare, really strong first half. Can you just give some details though on the underlying exposures? We've gotten some questions as its related for from risks, from, uh, beautiful, Bill Cuts, certain programs. So, just curious if you see any impacts potentially in that sector, As you move ahead.

Rohit Kapoor: Sure, Bryan Bergin. So look, I think first of all, the overall growth of the company is very good and healthy. As we have guided to, between 11% to 13%, that is very solid growth that we are seeing. In terms of the industry verticals, the growth rate in the insurance industry vertical is a nice healthy growth rate. The pipeline that we have in insurance is actually very strong, and it continues to be a very attractive industry vertical for us to continue to modernize, continue to embed more data and AI into the workflows, and continue to help our clients achieve and get the benefits of AI. So we feel good about the industry vertical. In terms of healthcare, we have had strong growth in the healthcare industry vertical over the last several quarters.

Sean Brian. Um, so look uh I think uh, first of all, the overall growth of the company is uh very good and healthy. And as we've guided to, you know, between 11 to 13% and that's uh, you know, very solid growth that we are seeing

in terms of the industry verticals, uh, the growth rate in the insurance industry, vertical is a nice, uh, healthy growth rate,

And the pipeline that we have in insurance is actually very strong and it continues to be a very attractive industry vertical for us to continue to modernize. Continue to embed more data and AI into the workflows and continue to help our clients achieve and, you know, get the benefits of AI. So we feel, uh, you know, good about, uh, you know, the industry vertigo.

Rohit Kapoor: The reason for that is that some of the data and AI-led solutions that we have out there, particularly around payment integrity, as well as some of the domain-specific operations that use a fair amount of data and AI-led solutions, that is resonating very strongly with the healthcare industry payers. While there have been a number of different regulations that are impacting the healthcare payers, they are constantly looking at ways to introduce more efficiency into their business operations. We are a very effective partner for them to be able to deliver that. So some of this will ebb and flow as things go along. I think some of the industries will rotate out, and some will grow faster, some will grow slower.

Uh, in terms of health care that we've had strong growth in the healthcare industry. Vertical for the last several quarters

Uh, the reason for that is that some of the data and AI solutions that we have out there, particularly around payment integrity as well as some of the domain-specific operations that use a fair amount of data and AI solutions, that's resonating very strongly with the healthcare industry pairs.

And uh, while there has been a number of different regulations that are impacting, the health care pairs. They are constantly looking at ways to introduce more efficiency, uh, into their into their business operations. And we are a very effective, uh, you know, partner for them to be able to deliver that.

Rohit Kapoor: But in general, if you take a look at our core industry verticals of insurance, healthcare and life sciences, banking, retail, diversified industries, as well as our international growth markets, there is adequate diversification that we have. In general, we see good momentum across the board, across the industries.

So some of this will will EB and flow as things go along. Uh, and I think, uh, you know, some of the industries will rotate out and uh, you know, some will grow faster, some will grow slower. But in general, if you take a look at our core industry, verticals of

insurance Healthcare and Life Sciences banking. Retail Diversified Industries as well as our International growth markets.

There is adequate diversification that we have and in general, we see good momentum across the board across the industries.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): OK, understood. Thank you. On GenAI and agentics, very active developments continue. Good to see you there. Understanding it is early, but as clients are adopting your solutions and transitioning from traditional contracting to leveraging these tools, can you share any quantitative details on how that is impacting the relative revenue and margin profiles of the engagements?

Their understanding its early as but as clients are adopting your Solutions and and transitioning from traditional Contracting to leveraging these tools. Can you share any quantitative details on how that's impacting the relative revenue and margin profiles of the engagements?

Rohit Kapoor: Sure. You are absolutely right. I think with generative and agentic AI and all of our new solutions in that area, that's something which we're very excited about because the adoption of these solutions is now taking place across the board. As we engage with our clients out here, the first and foremost objective for the company is to be able to deliver the business outcome that we are promising to these clients. Keep in mind that the traditional industry success rate in terms of deploying data and AI solutions leveraging generative AI is actually quite low at present. It's only about a 30% success rate. ExlService Holdings Inc. Q2 is operating at about a 94% success rate associated with the implementation of these data and AI solutions. That's the number one thing that we are focusing on, which is to deliver that business outcome.

Sure.

All of our new Solutions in that area that's uh something which we're very excited about because the adoption of these Solutions is now taking place uh across the board.

Uh, as we engage with our clients out here, the first and foremost, objective for the company is to be able to deliver the business outcome that we are promising to be clients.

Rohit Kapoor: In terms of the commercial model, the commercial model is shifting, and it will gravitate down towards much more usage-based metrics. That becomes a lot more on a transaction basis or an outcome basis. As that shift takes place, I think there is an opportunity for us to be able to expand margins. That's one of the levers that we have over the long term to be able to continue to deliver our EPS growth rate, which is faster than revenue. That's a long-term trend that we see, which is as we get more data and AI revenue into our portfolio, the opportunity for us to be able to manage our margins becomes a lot better. There is less sensitivity to pricing associated with this because the value that we are delivering to our clients is significantly higher.

Keep in mind that the traditional industry success rate in terms of deploying data and AI solutions leveraging generative AI is actually quite low at present. It's only about a 30% success rate. EXL is operating at about a 94% success rate associated with the implementation of these data and AI solutions. So, that's the number one thing that we are focusing on, which is to deliver that business outcome.

In terms of the commercial model commercial model is Shifting and it will gravitate down towards much, more usage based metrics. So that becomes a lot more on a transaction basis or an outcome basis. And as that shift takes place, I think there is an opportunity for us to be able to expand margins and that's 1 of the levers that we have over the long term to be able to continue to deliver

Uh, EPS growth rate which is faster than Revenue.

So that's a long-term trend that we see, which is as

An AI revenue into our portfolio.

The opportunity for us to be able to manage our margins becomes a lot better, and there is less sensitivity to pricing associated with this because of the value that we are delivering to our clients.

Rohit Kapoor: As long as we can deliver that value to our clients, I think it will afford the opportunity for us and our clients to be able to share in that benefit and continue to build and grow our margins out there.

Is significantly higher. And so as long as we can deliver that value to our clients, I think it will afford the opportunity for us and our clients to be able to share in that benefit and continue to build and grow our, our margins up there.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): Thank you.

Thank you.

John Kristoff: Our next question comes from Surinder Thind with Jeffries LLC. Please unmute your audio and ask your question.

Our next question comes from Sindh defend with Jefferies LLC. Please unmute your audio and ask your question.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): Thank you. I guess where I'd like to start with is, given that we're building all of these more proprietary type solutions, Rohit Kapoor, can you talk a little bit about the moat and your ability to protect the IP around that versus competitors acting as fast followers?

Thank you. Um, I, I guess we're, I'd like to start with is given that we're building. All of these more proprietary type Solutions route. Can you talk remote, um, and your ability to protect the IP around that versus competitors, um, you know, acting as fast followers,

Rohit Kapoor: Sure. So there are a couple of things that I would like to kind of just point out. Number one is, at ExlService Holdings Inc. Q2, we own a number of technology platforms on which we serve our clients, particularly in insurance and in healthcare, and then some of the new solutions that we have built. These platforms actually allow us access to proprietary data sets. We have used these proprietary data sets to train our models and to be able to implement differentiated solutions for our clients. Some of the LLMs that I spoke about in my prepared remarks talk about how we have trained these models on these proprietary data sets and created differentiated solutions. So one big source of differentiation and IP protection for us comes from these proprietary data assets which we have access to and others do not have access to.

Sure, so there are a couple of things that I'd like to kind of, you know, just point out to.

Uh, number 1 is, you know, yeah, EXL. We owned a number of uh, technology platforms on which we serve our clients, particularly in insurance and in healthcare. And then some of the new solutions that we've built.

These platforms actually allow us access to proprietary data sets. And we've used these proprietary data sets to train our models and to be able to implement differentiated solutions for our clients and some of the llms that I spoke about in my prepared remarks. You know, talk about how we've trained these models on these proprietary data sets and created differentiated Solutions. So 1, big source of differentiation and IP protection

Rohit Kapoor: The second part of that IP protection is you would see that the number of patents and the number of proprietary solutions that we are creating at a rapid pace, that is accelerating very, very strongly. So those areas of creation of this IP create, again, a proprietary differentiated access point for us. I think that is going to be pretty sustainable. So I would really point out those two things. One is access to data sets which are not available to others. Number two, creating proprietary IP solutions.

For us comes from these proprietary data assets, which we have access to and others do not have access.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): That's helpful. When we think about just the mix of business, obviously significant continued demand on the data and AI-led piece, the quarter-over-quarter growth in digital operations was a little bit slower than it has been historically. Can you talk a little bit about that and the pipeline of those projects? When you talk about maintaining double-digit growth, is that meant for both segments, or is that meant to be an overall firm-wide growth rate?

That's helpful. And then when we think about just the the mix of business, obviously significant continued Demand on the the data and AI lead piece.

Um, the quarter over quarter growth in digital operations was a little bit slower. Um, than it has been historically. Can you talk a little bit about that?

And the pipeline of those projects. And and, and when you talk about maintaining double digit growth,

Is that, I mean, for both segments, or is that meant to be an overall format growth rate?

Rohit Kapoor: Sure. I think that's a great question. So look, I think what we are focused on is, number one, to deliver double-digit growth overall for the company. That's most important for us. Now, the biggest pivots that we made as an organization are to continue to sharpen our focus on data and AI-led revenue. As you saw in this quarter, we grew that by about 17%. That's growing much faster than the rest of the company. That's something which we are going to be very focused on in terms of driving the growth rate, driving our acceptance with our customer base out there, improving our win rate on those solutions. Our belief is that over the next one, three, and five-year terms, those data and AI services and solutions are going to grow at twice the pace of the rest of the services that are there in the industry.

Uh, sure.

That's a great question. So, that look, I think what we are focused on is, number one, to deliver double-digit growth overall for the company. That's, you know, most important for us.

Now, the biggest pivot that we've made as an organization.

Is to continue to sharpen our focus on data and Ai and revenue. And as you saw in this quarter, we grew that by about 17%.

Uh, and that's growing much faster than the rest of the company.

And that's something which we are going to be very focused on in terms of driving the growth rate driving our, uh, acceptance with our customer base out there, improving our win rate. Uh, you know, on those Solutions because our belief is that over the next 1 3 and 5 year terms.

Rohit Kapoor: So if we can position ourselves with the majority of our portfolio being in those segments, we can actually grow faster, and we can deliver that double-digit growth rate for the overall company. Interestingly enough, the digital operations part of our business also is getting good traction, and we're seeing a fair amount of healthy demand out there as well. Our job is to take that digital operation and convert that as much as possible with data and AI-led solutions so that we are continuously embedding more and more of our solutions into the work that our clients entrust us to do.

Both data and AI services and solutions are going to grow at twice. The pace of the rest of the services that are there in the industry. So if we can position ourselves with a majority of our portfolio being in those segments, we can actually grow faster and we can deliver that double digit growth rate for the overall company.

Rohit Kapoor: Frankly, this is a shift in our business mix, but it's also a shift in terms of being able to access a lot more and expand the playing field that we have, and therefore the TAM that we kind of target and be able to sustain a double-digit growth rate.

Now, interestingly enough, the digital operations part of our business also is getting good traction and we're seeing a fair amount of healthy demand out there as well. Our job is to take that digital operation and convert that as much as possible with data and AI Solutions. So that we are continuously embedding more and more of our Solutions into the work that our clients and trust us to do. So frankly, this is uh, a shift in our business mix but it's also a, a shift in terms of being able to access a lot more and, and expand the playing field that we have. And therefore, the Tam that we can of Target and be able to uh to be able to kind of sustain a double digit growth rate.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): Thank you.

Thank you.

John Kristoff: Our next question comes from Puneet Jain with J.P. Morgan. Please unmute your audio and ask your question.

Our next question comes from penis. Jane with JP Morgan. Please unmute your audio and ask your question.

Puneet Jain: Hey, thanks for taking my question. Rohit, it seems like the AI adoption traction has increased this year. Do clients typically go with their existing vendors, like existing vendors of business classes, or existing BPO vendors when they are looking to implement AI solutions? Or are the differences across vendors high enough right now in terms of what they can offer in AI that they would be OK going with a new vendor to replace human-driven BPO services or automate human-driven BPO services?

Hey, uh, thanks for taking my question. Um, Rohit it seems like like the AI adoption traction has increased this year. Uh, do clients typically go with their like, existing vendors, like existing vendors of business process or existing BPO vendors? Uh, when they're looking uh, to implement AI solution or like the difference is across vendors, high enough, right now, in terms of what they can offer in AI,

That uh, they would be okay. Going with like a new vendor to replace.

Um uh, uh human-driven uh, BPO services.

Or automate human-driven BPO services.

Rohit Kapoor: Sure, Puneet. So you are absolutely right. The adoption of data and AI is accelerating, and it is actually playing out very, very nicely for ExlService Holdings Inc. From a client perspective, I will tell you that clients are focused on seeing where they can get the most amount of value and which service partner of theirs is going to deliver the most amount of value and help them in this journey of modernizing their operating and their business stack and being able to serve their end customers in a seamless way. We at ExlService Holdings Inc. have a distinct advantage that we understand the domain and the business of our clients. We understand the workflow. We understand how to manage, access, and use data. We know how to apply AI into the workflow.

Sharpening.

So, you're absolutely right, uh, you know, the adoption of data and AI is, uh, you know, accelerating and it's actually playing out very, very nicely for EXL. Uh, from a client perspective, I will tell you that, uh, clients are focused on seeing where they can get the most amount of value and which service partner of ours is going to deliver the most amount of value and help them in this journey of modernizing their their operating and their business stack and being able to serve their end customers in a seamless way.

Rohit Kapoor: So that unique combination of mastery of domain, data, and AI definitely creates a positive differentiation for ExlService Holdings Inc. to be the partner of choice for many of these engagements that our clients are undertaking. What we are finding is a number of newer clients are being attracted to us because of our ability to do this. Existing clients are gaining confidence in terms of entrusting us to be able to work there. The key thing for us is to be able to also access the CIO and the CTO of our client organizations. So we are building up those relationship access points so that we can serve our clients on the operating and the business side alongside with serving the clients on the technology side.

We at EXL have a distinct advantage that, we understand the domain. And The Business of our clients, we understand the workflow, we understand how to manage access and use data and we know how to apply AI into the workflow.

So, that unique combination of mastery of domain data and AI.

Definitely creates a positive differentiation for Excel. To be the partner of choice. For many of these engagements that are at our clients are undertaking.

We are gaining confidence in terms of interesting us to be able to work there.

The key thing for us is to be able to also access the CIO and the CTO, uh, you know, of our client organizations. And so we are building up those relationship, uh, access points. So that we can serve our clients on, on the operating and the business side alongside with serving the clients on the technology side.

Puneet Jain: Understood. Should we expect the growth trends across data and AI-led and digital operations to continue in the second half, especially on a sequential basis?

Understood. Should we expect the growth trends across data and digital operations to continue in the second half, especially on a sequential basis?

uh,

Rohit Kapoor: Yes. We would expect our data and AI business to continue to grow and kind of increase. You should expect a slightly lower growth rate of the digital operations business. That is something which we would see on a go-forward basis. Keep in mind one thing, that as we embed more data and AI into our existing digital operations business, that becomes a lot more valuable for us and for our clients as we go along. The primary metric to focus on is obviously the overall growth rate of the company, but also how quickly they are being able to pivot towards data and AI-led operations.

yes. So so we would expect, uh, our data and AI, uh, you know, uh, business to continue to grow and kind of, uh, increase and, uh, you should expect, uh, you know, uh, a slightly lower growth rate of the digital operations, uh, business. So that's something, uh, you know, which we would see on on, on, on a go forward basis. Keep in mind, 1 thing that as we embed more data and AI into our existing, digital operations business,

That becomes a lot more valuable for us and for our clients as we go along. So the primary metric to focus on is obviously the overall growth rate of the company. But also how quickly we being able to Pivot towards data and AI lead operations,

Puneet Jain: Got it. Thank you.

Got it. Thank you.

John Kristoff: Our next question comes from Matt Dizot with William Blair. Please unmute your audio and ask your question.

Our next question comes from Matt Dort with William Blair, please unmute audio and ask your question.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): Great. Thanks for taking our questions. This is Matt on for Maggie Nolan. Congrats on the sustainable organic growth you're enjoying. I guess, what gives you confidence that that can persist? Can you parse out the drivers across volume from existing clients versus new logo additions? How do you expect that to evolve?

Great. Thanks for taking our questions. This is Matt on for Maggie Nolan.

Congrats on uh, the sustainable organic growth. You're enjoying. I guess what gives you confidence that that can persist and and can you parse out the drivers across volume from existing clients versus new logo additions and and how do you expect that to to evolve?

Rohit Kapoor: Sure, Matt. So I think a few things really stand out for us. Number one is the work that we essentially do for our clients is mission-critical work. It's work that they need to kind of undertake no matter what the economic environment is. Therefore, despite all the geopolitical noise, despite all the uncertainty in the economic environment, our engagement with our clients, with over 75% of our business being annuity-like and recurring, is a very strong foundation for that sustainable growth rate. The second aspect of this is we've been able to shift our portfolio where 54% of our total revenue now is data and AI. That piece is accelerating in growth, and the market opportunity is actually expanding. We would say that AI has dramatically increased the TAM that we can now target.

Sure, Matt.

so I think, uh,

Things are really standing out for us. Uh, number one is...

The work that we essentially do for our clients.

Is Mission critical work. It's work that they need to kind of undertake no matter what the economic environment is. And therefore, despite all the geopolitical noise, despite all the uncertainty and the un, uh, in the economic environment.

Our engagement with our clients with over 75% of our business being annuity like, uh and recurring is a very strong foundation for that, sustainable, uh, growth rate.

Rohit Kapoor: In terms of some of these new services and solutions that we are offering to our clients, it's a gigantic opportunity that we have in front of us. We are positioned very well. The final piece is execution. I think you have to execute and deliver the business outcome for your clients in order to have sustained growth and be able to have sustained momentum. We are in a fortunate position that we've been able to do this consistently across our customer base and be able to drive that. Your last point about existing clients and new clients, I think we've got a pretty healthy mix in terms of growth coming in from our existing clients as well as our ability to add on new clients. We're very pleased with how the portfolio is progressing.

The second aspect of this is we've been able to shift our portfolio where 54% of our total revenue now is data Ai and that piece is accelerating in growth and the market opportunity is actually expanding. We would say that AI has dramatically increased the time that we can now Target. And in terms of some of these new services and solutions that we are offering to our clients, it's a gigantic opportunity that we've had have in front of us and so we have positioned very well and the final piece is execution. Uh I think uh,

You have to execute and deliver the business outcome for your clients.

And, you know, in order to have sustained growth and we have able to have sustained momentum. We are, uh, you know, in a fortunate position that we've been able to do this consistently across our customer base and be able to drive that.

Your last point about uh existing clients and new clients, I think we've got a pretty healthy mix in terms of growth coming in from our existing clients as well as our ability to add on new clients. So we're very pleased with how the portfolio is progressing.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): Thanks, Rohit. I guess to follow up, could I ask you to discuss the competitive environment? How are you seeing that evolve as clients are pressured a little bit by the macro and tariffs and the drive to adopt AI, which you seem to have an advantage in? Are you seeing sole source deals increase? Is this a mix of elements improving the competitive environment for you guys? Just talk to me about that a little bit. Thanks.

Thanks, Rohit, I guess to follow up. Could I ask you to discuss a competitive environment? How are you seeing that evolve? As clients are pressured a little bit by the macro and tariffs and and the drive to adopt AI, which you seem to have an advantage in. Are you seeing Soul Source deals? Increases is this, you know, a mix of elements, you know, improving the competitive environment for you guys. Just talk to me about that a little bit. Thanks.

Rohit Kapoor: Sure. The competitive environment has certainly changed in this kind of a backdrop. Number one, with AI coming in, there are a number of new startups. There are a number of AI-first companies and organizations that are participating. There are a number of large global consulting firms that are getting into the fray, a number of large data companies getting into the fray, a number of new AI companies kind of getting into the fray. I think clients will look at all available options that are out there. Our advantage lies in the fact that we understand the AI part of it, and we built very, very strong capability around it. We also understand the domain and the workflow.

That are getting into The Fray number of large data companies. Getting into The Fray,

A number of uh you know new AI companies, kind of getting into The Fray and I think clients will look at all available options that are out there.

Rohit Kapoor: That is something which I think some of these new companies lack, which is they don't have the same domain knowledge and business understanding of the operating processes which we have by virtue of being engaged with our clients over this long period of time. That's certainly changing in terms of the competitive landscape. To your point about geopolitical changes in terms of economic uncertainty, I think clients are gravitating towards having long-term partnerships with select strategic providers. They're choosing partners that are going to be relevant for them today and are going to be relevant for them three to five years out because these are long-term relationships that they're building. Necessarily, there is a lot of engagement that needs to take place from the client's organization and from the partner's organization. This takes a while to be able to be established.

Our advantaged lies in the fact that we understand the AI part of it. And we built very, very strong capability on it. But we also understand the domain and the workflow.

And that is something where I think some of these new companies lack which is they don't have the same domain, knowledge and business understanding of the operating processes which we have by virtue of, you know, being engaged with our clients, over this long period of time.

So that's certainly, uh, you know, uh, changing in terms of the competitive landscape.

To your point about geopolitical changes, in terms of economic uncertainty, I think clients are gravitating towards having long-term partnerships with select strategic providers.

And they're choosing partners that are going to be relevant for them today and they're going to be relevant for them 3 to 5 years out. Because these are long-term relationships that they're building.

Rohit Kapoor: They cannot really work with hundreds of different providers out here because that way the effort to transform is going to get diffused. You'll end up in different kind of architectures, and it's going to be quite messy. At the same time, going to a single partner is also problematic because the ability to access new ideas, the ability to diversify, all of those benefits go away. In general, we are seeing them gravitate down to a few strategic partners that they're going to work across the value chain. That's across business operations, across advanced analytics, around data management, around AI, and kind of pulling all of that together. We are, again, in one of those fortunate positions that we've got all the right capabilities to be that strategic partner of choice for our clients.

And, you know, necessarily there is a lot of Engagement that needs to take place from the clients or organization and from the partners organization. So this takes a while to be able to be established, they cannot really work with hundreds of different providers out here because that way they the, the the effort to transform is going to get diffused. You'll end up in different kind of architectures and and it's going to be quite messy. Uh, and at the same time going to a single uh, partner is also problematic because the ability to access new ideas, the ability to diversify uh, all of those benefits, uh, you know, go away. So in general, we are seeing them gravitate down to a few strategic partners that they're going to work the value chain. So that's across business operations across Advanced analytics around data management, around Ai and and kind of pulling all of that together.

And and we are again in 1 of those fortunate positions that we've got all the right capabilities to be that strategic partner of choice for our clients.

John Kristoff: Our next question comes from David Grossman with Stifel Europe. Please unmute your audio and ask your question.

Our next question comes from David Grossman. With stifle Europe, please unmute your audio and ask your question.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): Great. Thank you. The first question I have is just on the architecture of the guidance. It would seem your annual guide would seem to imply EPS will be down year over year in the back half of the year. I am just curious, maybe you could help us understand that dynamic given what appears to be very strong momentum in the business. Plus, you have got the share repurchase coming in at some point in the back half of the year.

Uh, great. Thank you. Uh, uh, you know, I the first question I have is just, um, on the architecture of the guidance, it it would seem to your annual guy would see to imply. EPS will be down year over year in the back half of the year. And just curious, maybe you could help us understand that Dynamic. Given you know, what appears to be very strong momentum in the business and plus you've got the shared purchase coming in at some point in the back half of the year.

Maurizio Nicolelli: Hey, David. It's Maurizio Nicolelli. That is correct. When you look at the first half of the year, we had a very strong first half of the year financially, both top line and bottom line. We continue to see that going into the second half of the year. We've always guided for our AOPM at slightly higher than what we did last year. In 2024, we had AOPM of 19.4%. We are still targeting this year to be slightly higher, 10 to 20 basis points this year. We ended the first half of the year at 19.9%. In order for us to continue this, our growth trend of growing double digits well into 2026 and thereafter, we have to continue to invest. That's what we'll be doing in the second half of the year. We still project the year to be in the mid-19% range, as we've always talked about.

Hey David, it's, uh, it's me.

that is, uh,

Look at the first half of the year. We had a very strong first half of the year, uh, financially, both top line and bottom line. Uh, and we continue to see that going into the second half of the year. Now, we've always guided up for our AAOPM at slightly higher than what we did last year. In 2024, we had an AAOPM of 19.4%, and we are still targeting this year to be slightly higher, 10 to 20 basis points this year. Uh, we ended the first half of the year at 19.9%.

Maurizio Nicolelli: Given the strong first half of the year, there's a little bit of a reflection in the EPS guidance that we will be slightly lower than the midpoint of 19% in the second half of the year, more towards the lower end of 19%. That's really for us to continue to invest in both data and AI-led solutions to really drive revenue in 2026 and thereafter.

Me in order for us to to continue this our growth trend of being uh growing double digits well into 2026 and thereafter. We have to continue to invest and that's what we'll be doing in the second half of the year. So we Still project the year to be in the mid 19% range as we've always talked about but given the strong first half of the year. There's a limit of a reflection in the EPS guidance that we will be slightly lower than the midpoint of 19% in the second half of the year more towards the lower end of 19th. And that's really for us to continue to invest in in both data and AI solutions to really Drive Revenue in 2026 and thereafter.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): Right. And you know, I guess to that point, just looking at the headcount trends versus revenue growth, last I think two, three, four quarters, your revenue growth is outpacing the headcount growth. So that, I would think, would be a positive to margins. So maybe you could reflect on what is going on in that dynamic. Is it kind of some of the AI initiatives that get you productivity gains internally and operationally? Or maybe there is something else going on that is more kind of point in time than something secular. But the fact that you are growing revenue substantially faster than headcount is an interesting dynamic. And curious of the impact going forward and the impact on margins.

Okay. And, you know, I guess.

To that point, you know, just looking at...

The headcount Trends versus Revenue growth. You know, last

I think, 2, 3, 4 quarters.

So that I would think would be a positive to margin, so maybe you could reflect on, you know, what's going on in that Dynamic? Is it, you know, kind of some of the AI initiatives that get you productivity, gains internally and operationally or maybe there's something else going on. That's more. Um,

Maurizio Nicolelli: Yeah, David, that's a great observation because that's a key metric for us is to really drive our revenue growth faster than headcount growth. If you look at it again this quarter, revenue per headcount continues to increase quarter over quarter sequentially. That's really important for us going forward. What we're doing today, as we get that benefit in our P&L, is reinvesting it back into data and AI to really drive future growth. Keep in mind, with a lot of our AI solutions that we're building today, they're still in a very young phase at the end of the day. As we continue to sell those and those get more accepted into the market and we really build on that, that's when we really get the benefit in future years.

You know, kind of point in time and something secular. But you know, the fact that you're growing revenues substantially faster than headcount is an interesting dynamic and curious of the impact, you know, kind of going forward in the impact on margins.

Yeah, David that's a that's a great observation because that's a key metric. Of course, is to really Drive our Revenue growth faster than headcount growth. And if you look at it again, this quarter, so the revenue per account, continued to increase quarter over quarter sequentially, uh, and and that's really uh, important for us going forward. What we're doing today as we get, as we get that benefit in our p&l is reinvesting it back into data and AI to really Drive future growth. Uh, and keep in mind, you know, we're a lot of our AI solutions that we're building today. They're still in the in in a very young age, at the end of the day.

Maurizio Nicolelli: It goes back to what Rohit Kapoor was talking about in that we should continue to see that benefit to margins going forward in future years. So right now, we are reinvesting that into the business and continually pushing to drive top line growth in that low double-digit range.

Uh, and those as we continue to sell those and those get more accepted into the market and we really build on that that's when we really get the benefit in in future years. And it goes back to what Robert was talking about, in that we should continue to see that benefit to margins going forward in future years. So we right now we are reinvesting that, uh, into the business and, and continually pushing the drive top top line growth, you know, in that low, double digit range.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): Right. If I could just sneak one more in, you know, obviously, one of your competitors was taken out recently. I do not know, Rohit Kapoor, if you have any thoughts on consolidation, what the implications may be for ExlService Holdings Inc. Q2, and kind of how you are viewing that dynamic.

Right. And, and if I could just, you know, sneak 1 more in, um, you know, obviously there was 1 of your competitors was taken out, you know, recently, I don't know, roadhead, if you have any, you know, thoughts on

You know, consolidation. What are the implications for Excel and how are you viewing that dynamic?

Rohit Kapoor: Sure, David. Look, first of all, the market space in which we are playing is very, very large. One of our competitors being taken out, I do not think has any real material impact on us. The real issue for us is we have to focus on our efforts to be able to be relevant for our clients. We think with our domain knowledge and understanding of our clients' business, the investments that we have made in data and AI, that is actually resonating well. We are actually very well positioned to compete against any competitor in this space to be able to continue to drive growth and be able to build margins in our business. I think how that particular transaction will play out, we will see over a period of time. As you very well know, a lot of that depends on execution and the ability to integrate.

Sure, David. So

Space in which we are playing in is very, very large and, uh, you know, 1 to 5 competitors, being taken out. Uh, I don't think has any real material impact on us? Uh, the real issue for us is, uh, we have to focus in on our efforts to be able to be relevant for our clients. And we think with our domain knowledge, and understanding of our clients business, the, uh, Investments that we've made in data, and AI that's actually resonating well, and we are actually very well positioned.

To compete against any competitor in this space, uh, to be able to continue to drive growth and uh, be able to uh, build margins in our business.

Uh, I think, uh,

you know, uh,

Rohit Kapoor: We will see how that plays out. What I would say is that the market space is so big and so large, and we have a number of competitors that we compete with, that this really should not make any difference to our competitive positioning in the market space. We are just focused on just building and growing our business and continuing to add value to our clients.

you know what, what what how how that particular transaction will pay pay out? You know, we'll see over a period of time as you very well know. A lot of that depends on execution and and the ability to integrate and uh, you know, we'll see how that plays out. But what I would say is that the market space is so big and so large and have a number of competitors that we compete with, uh, that this really should not make any difference to our competitive positioning in the market space. And and we are just focused in on just building and growing our business and continuing to add value to our clients

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): Got it. Just while I have you, sorry, Rohit, if I could just get one more. It looks like the new client adds in the first half of the year have decelerated pretty significantly from the first half last year. You obviously had a really strong first half of last year. Just wondering, is that more a reflection of the size of the clients? Is it kind of the economic backdrop? Anything you can share there since you do not really report bookings, maybe help us understand that dynamic.

Got it. Um, you know, just while I have you, sorry, Roy, if I could just get one more just, it looks like the new client adds in the first half of the year have decelerated, you know, pretty significantly from some of the first half last year. And you obviously had a really strong first half of last year. But, you know, just wondering, is that more a reflection of the size of the clients? Is that, you know, getting back up? And anything you can share there since you don't really report bookings, you know, maybe help us understand that dynamic.

Rohit Kapoor: You are right, David. I think that is a correct observation. The way we are seeing the business trends, we are seeing the demand, we are seeing a look at the pipeline. Our pipeline has actually expanded by very strong double-digit growth in the pipeline. The business opportunities for us remain good. The quality of the clients that we have signed up, we are comfortable with that. So we think the growth rate of the business continues to be sustained going forward. There is nothing that we are seeing which would cause us any concern for our growth rate for the second half of this year or going into 2026. I think there is a lot of active dialogue with new clients. As I said, these capabilities are opening up avenues for us to provide new services to existing clients and new services to new clients as well.

Yeah, uh, you're right, uh, David. I think that's, uh, that that's incorrect observation. But uh, the way we are seeing the business Trends, we're seeing the demand, we are seeing a look at the pipeline. Our pipeline is actually expanded by, you know, very, uh, strong double digit growth in the pipeline. And so the business opportunities for us, remain good, uh, the quality of the clients that we have signed up. You know, we are comfortable with that. So we think the growth rate of the business continues to be sustained going forward.

Rohit Kapoor: Frankly, it is a pretty healthy trend that we have. The opportunity set for us globally is actually huge. So frankly, there is a lot for us to do out here. There is enough demand for us to be able to target and to be able to build and grow the business.

Uh, I think, uh, you know, there there is a, a lot of active dialogue with new clients. And, uh, like I said, uh, you know, these capabilities are opening up uh, avenues for us to provide new services, to existing clients, and new services, to new clients as well. And and frankly it's a pretty healthy Trend that we have and the opportunity set for us.

You know, globally is is, uh, is is actually huge. So, frankly, uh, there's a lot for us to do out here, uh, and and there's enough demand for us to be able to Target, and to be able to build and grow the business.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): OK, very good. Thank you for taking my question.

Okay, very good. Thank you for taking my questions.

John Kristoff: Our next question comes from David Koenig with Roberts W. Baird & Co. Please unmute your line and ask your question.

Uh, next question comes from David Coney with Robert W. Baird. Can you please unmute your line and ask your question?

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): Yes, thanks, guys. Great job again. I guess, first of all, employee costs, I was just looking through the 10-Q. Employee costs were up 16% to 17% year over year. Employees themselves up about 9%. I guess, what are the dynamics? Is this partly a function of a shift to hiring higher value-add employees? Or maybe what are some of the dynamics of that?

Yes, thanks, guys. Great job again. Um, you know, I guess first of all, employee costs—I was just looking through the 10-Q—employee costs were up 16% to 17% year-over-year, and employees themselves were up about 9%. I guess, what are the dynamics there? Is this partly a function of kind of a shift to hiring higher value-add employees, or maybe what are some of the dynamics of that?

Maurizio Nicolelli: Yeah, David, the biggest driver there is really us hiring more highly skilled talent going forward overall. You're right. You do see a slower growth in terms of overall headcount and a higher percentage on employee costs. I would say the biggest driver there is as we get more and more into data and AI, there's a lot more in terms of highly technical skilled employees that we need to hire. That's really starting to get reflected in that percentage overall.

Yeah. The the the biggest driver there is is really us hiring more, uh, more uh, hi more highly skilled Talent. Uh going forward overall. You're right you do see a slower growth in terms of overall headcount and a higher percentage on employee cost. I would say, the biggest driver there is, as we get more and more into data and AI. There's a lot more in terms of technical, uh, highly technical, uh, skills employees that we need to hire. And that's really, uh,

Starting to get reflected in that percentage overall.

Rohit Kapoor: Yeah. And I would add, David, that as you know, the second quarter is when we do our salary increments. So that's also being added on to the cost of the employees in the second quarter.

Yeah, and I would add, David, that, as you know, the second quarter is when we do our salary increments. And so that's also been added on to the cost of the employees in the second quarter.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): OK, gotcha. A lot of great questions already asked. I will ask just kind of a technical 10-Q question. I saw another line called the other costs within cost of services that has been down quite a bit year to date, both in Q1 and Q2. I think it was $13 million this quarter, $17 million in the year-ago quarter. So it seems like that is helping margins. What is that? Does that sustainably help margins going forward?

Maurizio Nicolelli: Yeah, David, if you look back in the second quarter of last year, we had a one-time restructuring charge during the period. That was the biggest driver in that, and you see that fall off this year.

Okay, gotcha. And then, um, a lot of great questions already asked. So I'll ask just kind of a technical 10-Q question. I saw another line called 'Other Costs' within Cost of Services. That's been down quite a bit year to date, both in Q1 and Q2. I think it was $13 million this quarter and $17 million in the year-ago quarter. So that's, it seems like that's helping margins. What is that, and does that sustainably help margins going forward?

Yeah. Uh Dave, if you look back in the second quarter of last year, we had a a 1 time, uh uh restructuring charge during the period. So that was the biggest driver in that in that you you see that 4 off this year.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): Gotcha. That makes sense. All right. Well, thanks. Great job, guys.

Gotcha, that makes sense. All right, well thanks. Great job, guys.

Maurizio Nicolelli: Thank you.

Thank you.

John Kristoff: Our next question comes from Vincent Coluccio from Barrington Research Associates. Please unmute your line and ask your question. Apologies, there has been a technical difficulty. Bear with me one moment. Vincent, please unmute your line and ask your question. Vincent Coluccio, your line is now open. With that, we have no further questions at this time. I will turn the call back to John Kristoff for closing remarks.

Uh next question comes from Vincent kuio from bington research Associates, please mute your line and ask a question.

Apologies have been a technical difficulty bear with me 1 moment.

Listen, please unmute your line and ask your question.

Basically, your line is now open.

And with that, we have no further questions at this time. I will turn the call back to John Kristoff for closing remarks.

Analyst (multiple: Bryan Bergin, Surinder Thind, Puneet Jain, Matt Dizot for Maggie Nolan, David Grossman, David Koenig, Vincent Coluccio): Thank you, everyone, for joining us this morning. As always, if you have additional questions, please don't hesitate to reach out to me directly.

Thank you, everyone, for joining us this morning. As always, if you have additional questions, please don't hesitate to reach out to me directly.